PRELIMINARY COPIESSECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant Toto Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X][ ] Preliminary Proxy Statement [ ] Confidential, forFor Use of the
Commission only (as permitted by
Rule 14a-6(e)(2))
[ ][X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule l4a-12
INTERACTIVE FLIGHT14a-12
GLOBAL TECHNOLOGIES, INC.
------------------------------------------------LTD.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box): [ ][X] No fee required.
[X][ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1)1) Title of each class of securities to which transaction applies:
Class A Common Stock
(2)- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
5,729,699
(3)- --------------------------------------------------------------------------------
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):
$3.66
(4)- --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
$20,970,698
(5)- --------------------------------------------------------------------------------
5) Total fee paid:
$4,194- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.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 Formform or Scheduleschedule and the date of its filing.
(1)1) Amount Previously Paid:
(2)previously paid:
------------------------------------------
2) Form, Schedule or Registration Statement No.:
(3)--------------------
3) Filing Party:
(4)----------------------------------------------------
4) Date Filed:
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INTERACTIVE FLIGHT TECHNOLOGIES, INC.
222 N. 44th[LOGO]
1811 CHESTNUT STREET, PHOENIX, ARIZONA 85034
August 23, 1999SUITE 120
PHILADELPHIA, PENNSYLVANIA 19103
April 17, 2000
Dear Fellow Stockholder:
You are cordially invited to attend the SpecialAnnual Meeting of Stockholders
of Interactive FlightGlobal Technologies, Inc.Ltd. (the "Company"), to be held at the Metropolitan Club,Rihga Royal
Hotel, located at One East 60th151 West 54th Street, New York, NY,New York, on Thursday September 30, 1999May 11,
2000, at 10:3000 a.m., local time.
At the Special Meeting, you will be asked to consider and approve the
Company's reincorporation by means of a mergerThe official notice of the Companymeeting together with a proxy statement and
into
Global Technologies, Ltd., a Delaware corporation, for purposesform of (a) changing
the Company's name and (b) electing not to be governed by Section 203 of the
General Corporation Law of Delaware, thereby permitting the Company to engage in
business combinations with Irwin L. Gross and his affiliates and associates
without requiring the affirmative vote of at least 66-2/3% of the outstanding
voting stock which is not owned by Mr. Gross or his affiliates and associates.
The enclosed Proxy Statement contains important information concerning the
proposal to be considered at the Special Meeting.proxy are enclosed. We hope you will take the time to study itthis
information carefully. Your vote is very important, regardless of how many
shares you own. EvenTo assure your representation at the meeting, even if you
currentlypresently plan to attend, the Special Meeting in
person, 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 SpecialAnnual Meeting and wish to vote in person, you may
revoke your proxy at that time.
Your copy of the Company's Annual Report for the transition period
ended June 30, 1999 and Letter to Stockholders are also enclosed. We appreciate
your interest in the Company and thank you for your attention to this important
matter.
Sincerely,
/s/ JAMES W. FOX
-------------------------------
James W. Fox, PresidentIRWIN L. GROSS
Irwin L. Gross
Chairman of the Board and
Chief Executive Officer
YOUR VOTE IS IMPORTANT.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 SPECIALANNUAL MEETING.
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INTERACTIVE FLIGHTGLOBAL TECHNOLOGIES, INC.
222 N. 44th STREET
PHOENIX, ARIZONA 85034
--------------------------------------------------------LTD.
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NOTICE OF SPECIALANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 30, 1999
--------------------------------------------------------MAY 11, 2000
-------------------------------------------------------
TO THE STOCKHOLDERS OF INTERACTIVE FLIGHT TECHNOLOGIES, INC.:
NOTICE IS HEREBY GIVEN that a SpecialOUR STOCKHOLDERS:
The 2000 Annual Meeting of Stockholders (the "Special
Meeting") of Interactive FlightGlobal Technologies, Inc.Ltd., a
Delaware corporation (the "Company"), will be held at the Metropolitan Club,Rihga Royal Hotel,
located at One East 60th151 West 54th Street, New York, NY,New York, on Thursday September 30, 1999,May 11, 2000,
at 10:3000 a.m., local time, for the following purposes, all as more fully
described in the attached Proxy Statement:
1. To approveelect directors;
2. To vote on the proposal to ratify the grant of options to purchase
1,500,000 shares of the Company's reincorporation by means of a merger of the
Company with and into Global Technologies, Ltd., a Delaware corporation, for
purposes of (a) changing the Company's name and (b) electing notClass A Common Stock to be governed
by Section 203 of the General Corporation Law of Delaware, thereby permitting
the Company to engage in business combinations with Irwin L. Gross,
and his
affiliates and associates without requiring the affirmative vote of at least
66-2/3%Chairman of the outstanding voting stock which is not owned by Mr. Gross or his
affiliatesBoard and associates (the "Reincorporation Proposal").
2.Chief Executive Officer of the Company;
3. To vote on the proposal to ratify the appointment of KPMG LLP,
certified public accountants, as the Company's independent auditors for the
fiscal year ending June 30, 2000; and
4. To transact such other business as may properly come before the
SpecialAnnual Meeting and any and all postponements or adjournments thereof.
The Board of Directors has fixed the close of business on August 17, 1999March 16,
2000 as the record date for the determination of stockholders entitled to notice
of, and to vote at, the SpecialAnnual Meeting orand any postponementpostponements or adjournment
thereof.
YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
SHARES CAN BE VOTED AT THE SPECIALANNUAL 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(WHICH REQUIRES NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED
STATES) WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIALANNUAL 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 SPECIAL
MEETING.ATTEND. THE PROMPT RETURN OF THE
PROXY WILL BE OF ASSISTANCE IN PREPARING FOR THE SPECIALANNUAL MEETING AND YOUR
COOPERATION IN THIS RESPECT IS GREATLY APPRECIATED.
April 17, 2000 By Order of the Board of Directors
August 23, 1999 /s/ DAVID N. SHEVRIN
---------------------------
David N. Shevrin
Secretary
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INTERACTIVE FLIGHTGLOBAL TECHNOLOGIES, INC.
222 N. 44thLTD.
1811 CHESTNUT STREET, PHOENIX, ARIZONA 85034
--------------------------------------------------------------SUITE 120
PHILADELPHIA, PENNSYLVANIA 19103
-------------------------------------
PROXY STATEMENT
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 30, 1999
------------------------------------------------------------
This Proxy Statement and the accompanying proxy card are being
furnished to stockholders of Interactive FlightGlobal Technologies, Inc.Ltd., 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 Special2000 Annual Meeting of
Stockholders, towhich will be held at the Metropolitan Club,Rihga Royal Hotel, located at One East 60th151 West
54th Street, New York, NY,New York, on Thursday September 30, 1999,May 11, 2000, at 10:3000 a.m., local
time, and at any and all postponements or adjournments thereof (the "Special"Annual Meeting").
This Proxy Statement and the accompanying proxy card, together with a copy of
the Annual Report of the Company for the transition period ended June 30, 1999
and Letter to Stockholders, are first being mailed or delivered to stockholders
of the Company on or about August 23, 1999.April 17, 2000.
At the SpecialAnnual Meeting, stockholders will be asked to consider and vote
upon the following proposals:
1. To approveelect five directors to hold office as follows: two Class I
directors to serve until the 2001 annual meeting, two Class II directors to
serve until the 2002 annual meeting and one Class III director to serve until
the 2003 annual meeting, and each until their respective successors have been
duly elected and qualified;
2. To vote on the proposal to ratify the grant of options to purchase
1,500,000 shares of the Company's reincorporation by means of a merger (the
"Merger") of the Company with and into Global Technologies, Ltd., a Delaware
corporation ("GTL"), for purposes of (a) changing the Company's name and (b)
electing notClass A Common Stock to be governed by Section 203 of the General Corporation Law of
Delaware ("Delaware Law"), thereby permitting the Company to engage in business
combinations with Irwin L. Gross,
and his affiliates and associates without
requiring the affirmative vote of at least 66-2/3%Chairman of the outstanding voting
stock which is not owned by Mr. Gross or his affiliates or associates (the
"Reincorporation Proposal").
2.Board and Chief Executive Officer of the Company;
3. To vote on the proposal to ratify the appointment of KPMG LLP,
certified public accountants, as the Company's independent auditors for the
fiscal year ending June 30, 2000; and
4. To transact such other business as may properly come before the
SpecialAnnual Meeting and any and all postponements or adjournments thereof.
VOTE REQUIRED AND PROXY INFORMATION
The enclosed proxy provides that each stockholderyou may specify that his or
heryour shares be
voted "For" or, "Against", or "Abstain" from voting with respect to each of the
Reincorporation Proposal.proposals. If the enclosed proxy is properly executed, duly returned to the
Company in time for the SpecialAnnual Meeting and not revoked, theyour shares represented by the proxy will be
voted in accordance with the instructions contained thereon. Where a signed
proxy is returned, but no specific instructions are indicated, theyour shares represented by the proxy will
be voted FOR"FOR" each of the Reincorporation Proposal.proposals. Proxies marked as abstaining will be
treated as present for purposes of determining a quorum for the SpecialAnnual Meeting,
but will not be counted as voting in respect of any matter as to which
abstinence is indicated. Any stockholder who executesIf a broker indicates on the proxy that
it does not have discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered present and returns aentitled to
vote with respect to that matter.
A proxy given pursuant to this solicitation may revoke it in writingbe revoked at any time
before it is voted at the Special MeetingAnnual Meeting. Proxies may be revoked by: (i) filing
with the Assistant Secretary of the Company, at or before the above address, (A)Annual Meeting, a
written notice of such revocation bearing a later date than the proxy bears or (B)proxy; (ii) duly
executing a subsequent proxy relating to the same shares;shares and delivering it to
the Assistant Secretary of the Company at or (ii)before the Annual Meeting; or (iii)
attending the SpecialAnnual Meeting and voting in person (although attendance at the
SpecialAnnual Meeting will not in and of itself constitute revocation of a proxy). 1
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VOTING RIGHTS AND VOTING SECURITIESAny
written notice revoking a proxy should be delivered to S. Lance Silver,
Assistant Secretary, Global Technologies, Ltd., 1811 Chestnut Street, Suite 120,
Philadelphia, Pennsylvania 19103.
All shares of the Company's capital stock present in person or
represented by proxy and entitled to vote at the meeting, no matter how they are
voted or whether they abstain from voting, will be counted in determining the
presence of a quorum for each of the matters on which stockholders will vote at
the Annual Meeting. If the Annual Meeting is adjourned because of the absence of
a quorum, those stockholders entitled to vote who attend the adjourned meeting,
although constituting less than a quorum as provided herein, shall nevertheless
constitute a quorum for the purpose of electing directors.
The Board has fixedpresence or representation by proxy of a majority of the shares
entitled to vote at the Annual Meeting will constitute a quorum. In all matters
other that the election of directors, the affirmative vote of the majority of
shares present in person or represented by proxy at the Annual Meeting and
entitled to vote on the subject matter will be required for approval of such
subject matter. Directors will be elected by a plurality of the votes of the
shares present in person or represented by proxy at the Annual Meeting.
At the close of business on August 17, 1999 asMarch 16, 2000, the record date for the
determination of stockholders entitled to receive notice of, and to vote at, the
SpecialAnnual Meeting, (the "Record Date"). Only stockholdersthe Company's outstanding securities consisted of record at the
close of business on the Record Date will be entitled to vote at the Special
Meeting and at any and all postponements or adjournments thereof. On the Record
Date, the Company had 5,729,69910,498,488
shares of Class A Common Stock, par value $0.01 per share (the "Class A Common Stock" or the "Common Stock") and 3,000 shares of
Series A Preferred Stock, Stated Value $1,000 per share issued and outstanding.share. Each holdershare of Class A
Common Stock will beis entitled to one vote per share, and
each holder of Series A Preferred Stock will be entitled to approximately 333
votes per share, either in person or by proxy, on each matter presented to the
stockholders of the Company at the Special Meeting.
The holders of a majority of the voting power of the outstanding shares of
Common Stock entitled to vote at the Special Meeting constitute a quorum at the
Special Meeting. The affirmative vote of the holders of at least 66-2/3% of the
votes entitled to be cast at the Special Meeting (whether or not represented in
person or by proxy at the Special Meeting), excluding shares owned by Mr. Gross
or his affiliates or associates, is required to approve the Reincorporation
Proposal.
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
("Section 203"). Pursuant to an Agreement and Plan of Merger dated as of August
1, 1999 between the Company and GTL (the "Merger Agreement"), the Company will
be merged with and into GTL (the "Merger"). Pursuant to the Merger Agreement,
stockholders will exchange their shares of Common Stock for an equal number and
class of shares of GTL.
GTL 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, GTL will own all assets currently owned by the Company, will be subject
to all of the liabilities of the Company, and will conduct all of the business
operations currently conducted by the Company. Management does not anticipate
that any 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 GTL. The officers and directors of the
Company immediately prior to the Merger will be the officers and directors of
GTL, respectively, immediately after the Merger. The complete mailing address
and telephone number of the Company, which is 222 N. 44th Street, Phoenix, AZ
85034, 602-200-8900, will be the mailing address and telephone number of GTL
after the Merger.
The Certificate of Incorporation of GTL is substantively identical to the
Amended and Restated Certificate of Incorporation of the Company, except that
the Certificate of Incorporation of GTL contains a provision electing not to be
governed by Section 203 and except for the name of the corporation. All benefit
plans of the Company will be adopted by GTL. The Merger will become effective
upon the filing of a Certificate of
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Merger with the Secretary of State of Delaware. Except as discussed below, the
Merger will have no effect on the rights of the stockholders of the Company.
The following discussion summarizes certain aspects of the Reincorporation
Proposal. 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"), a
company controlled by Mr. Gross, 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
of Directors and to select a slate of directors proposed by Ocean Partners. At
that time, Ocean Partners was a 33.9% beneficial owner of the voting power of
the Company pursuant to a Proxy Agreement entered into on August 13, 1998
between Ocean Partners and three stockholders of the Company (the "Proxy
Agreement"). On September 2, 1998, Ocean Partners filed preliminary consent
solicitation/proxy material with the Securities and Exchange Commission to elect
its slate of directors 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) to
require the Board's unanimous approval of certain transactions, including those
relating to the acquisition, merger or consolidation or sales of assets of the
Company to any person or entity, or any issuance of stock which represents more
than 20% of the outstanding stock of the Company, and (iii) to require the
Company to obtain an outside fairness opinion if it undertakes any transaction
which involves consideration in excess of $6.25 million. At the Annual Meeting
of Stockholders on October 30, 1998, the current Board was elected to staggered
terms.
Section 203, the complete text of which is attached as Appendix B to this
Proxy Statement, defines "interested stockholder" as any person that (a) owns,
or has the right to acquire, 15% or more of a corporation's outstanding voting
stock or (b) is an affiliate or associate of such corporation and was the owner
of 15% or more of the outstanding voting stock of the corporation at any time
within the three-year period immediately prior to the date on which the
determination of whether a person is an "interested stockholder" is made; and
the affiliates and associates of such person. Because Mr. Gross is a director
and the Chief Executive Officer of the Company, he is an affiliate of the
Company; and because he controls Ocean Partners, he "owned" (indirectly, but
within the meaning of Section 203) more than 15% of the outstanding voting stock
of the Company within the past three years. Accordingly, Mr. Gross and his
affiliates (including, in particular, Ocean Partners) and associates are
"interested stockholders." 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 of Directors
gives prior approval to such transaction or unless the business combination is
approved by the Board of Directors and by holders of at least 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
of
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Directors. Accordingly, pursuant to Section 203, Mr. Gross and his affiliates
and associates are prohibited, for a three-year period ending on August 13,
2001, from engaging in any "business combination" with the Company, unless such
business combination is approved by the affirmative vote of the holders of at
least 66-2/3% of the outstanding voting stock of the Company not owned by Mr.
Gross or his affiliates or associates. 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 such
subsidiary; certain other transactions resulting in an increase in the
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. Although 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 Mr. Gross or his affiliates or associates on the
one hand and the Company on the other hand could be beneficial to both the
Company and its stockholders (other than Mr. Gross or its affiliates or
associates) 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 business 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.
The Reincorporation Proposal provides for the merger of the Company with
and into GTL. GTL's Certificate of Incorporation contains a provision
specifically electing not to be governed by Section 203. Accordingly, if the
Reincorporation Proposal is approved, GTL, as successor to the Company, will be
able to enter into business combinations with Mr. Gross or his affiliates or
associates 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 and
changing the name of the Company, 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.
Reasons for the Reincorporation Proposal; Recommendation of the Board
The entire Board of Directors (with Mr. Gross abstaining) determined the
Reincorporation Proposal to be in the best interests of the Company and its
stockholders
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(without regard to Mr. Gross or any of his affiliates or associates owning
shares). 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 Mr.
Gross and Ocean Partners and their experience in developing and implementing
business strategies.
(ii) The Board views it as undesirable repeatedly to seek 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
possible business opportunities to which Mr. Gross may be privy.
(iii) 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.
(iv) The supermajority disinterested voting requirement of Section 203 will
expire automatically with respect to transactions with Mr. Gross and 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 Mr. Gross and Ocean Partners would be beneficial.
(v) In evaluating whether to eliminate Section 203 with respect to Mr.
Gross and Ocean Partners only or with respect to any other stockholder that
might become an interested stockholder in the future as well, 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.
Effect of the Reincorporation Proposal on the Rights of the Company's
Stockholders
The Certificate of Incorporation of GTL will be substantively 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 (and other than the name of the corporation). As a
result, stockholders of the Company will not have the right to a vote in
connection with transactions between Mr. Gross or any of his affiliates
(including Ocean Partners) or associates, on the one hand and GTL on the other
hand, unless the requirement of stockholder approval is imposed by another
provision of Delaware Law or the rules of NASDAQ or any exchange on which the
Company's shares are then listed. In addition, if any other person or entity
becomes an interested stockholder in the future, such person or entity will
similarly 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 at least 66-2/3% of
the outstanding voting stock not owned by Mr. Gross or any of his affiliates or
associates.
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Appraisal Rights
Section 262 of Delaware Law provides in part that "no appraisal
rights...shall be available for the shares of any class or series of stock,
which stock...at the record date fixed to determine the stockholders entitled
to notice of and to vote at the meeting of stockholders to act upon the
agreement of merger or consolidation were...designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc..."
Because the Company's Class A Common Stock is designated as a national
market system security by NASD, this limitation on appraisal rights applies.
Because the Company's Series A Preferred Stock is not so designated, the holder
of such stock would be entitled to exercise its appraisal rights if it complied
with the requirements of Section 262; however, such holder has waived its
appraisal rights with regard to the Series A Preferred Stock. Consequently, none
of the stockholders of the Company will be entitled to appraisal rights even if
the Merger is approved.
Federal Income Tax Consequences of the Merger
The Merger will qualify as a non-taxable reorganization under Internal
Revenue Code Section 368(a)(1)(F). Therefore, all tax attributes of the Company
will continue to exist as tax attributes of GTL after the merger. Stockholders
of the Company will have neither gain nor loss for Federal income tax purposes
as a result of the Merger.
Accounting Treatment Of The Merger and Financial Information
The Merger will be accounted for as a reverse merger whereby, for
accounting purposes, the Company will be considered the accounting acquiror and
GTL will be treated as the successor to the historical operations of the
Company. Accordingly, the historical financial statements of the Company, which
previously have been reported to the Securities and Exchange Commission ("SEC")
on Forms 10-KSB and 10-QSB, among others, as of and for all periods through
April 30, 1999, will be treated as the financial statements of GTL.
Vote Required
Under Delaware Law, the affirmative vote of the holders of at least 66-2/3%
of the outstanding voting stock of the Company, excluding shares beneficially
owned by Mr. Gross and his affiliates (including Ocean Partners) 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 (WITH MR. GROSS ABSTAINING) BELIEVES THAT
THE REINCORPORATION PROPOSAL IS IN THE BEST INTERESTS OF THE COMPANY AND ITS
STOCKHOLDERS AND RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF THE
PROPOSAL.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of July __, 1999
regarding the ownership of Class A Common Stock and Series A Preferred Stock by
(i) each person known by the Company to own beneficially more than five percent
of any class of the Company's voting securities, (ii) each director of the
Company, (iii) each executive officer of the Company and (iv) all executive
officers and directors of the Company as a group.
Class A Series A Percent of
Common Stock Preferred Stock Total
-------------------------- --------------------- ----------
Number Percent Number Percent Voting
Name and Address of Beneficial Owner(1) of Shares of Class(2) of Shares of Class Power(3)
- --------------------------------------- --------- ----------- --------- -------- --------
Irwin L. Gross 456,691(4) 7.9% -- -- 6.8%
Ocean Castle Partners, LLC
Charles T. Condy -- -- -- -- --
Stephen M. Schachman -- -- -- -- --
M. Moshe Porat 2,400 * -- -- *
David N. Shevrin -- -- -- -- --
Morris C. Aaron 14,100(5) * -- -- *
James W. Fox -- -- -- -- --
The Shaar Fund, Ltd. 87,500(6) 1.5% 3,000 100% 16.0%
Ruki Renov(7) 343,698 6.0% -- -- 5.1%
Esther Stahler(8) 294,465 5.1% -- -- 4.4%
All executive officers and directors
of the Company as a group (7 persons) 473,191(4)(5) 8.2% -- -- 7.0%
- ----------
* Less than 1%.
(1) Unless otherwise noted, all persons named in the table have sole voting and
investment power with respect to all shares beneficially owned by them.
Except as otherwise indicated below, the address of each beneficial owner
is c/o Interactive Flight Technologies, Inc., 222 N. 44th Street, Phoenix,
Arizona 85034. Ocean Castle Partners, LLC's address is 1811 Chestnut
Street, Philadelphia, Pennsylvania, 19103.
(2) Based on 5,729,699 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.
(3) Based on 5,729,699 shares of Class A Common Stock outstanding and 3,000
shares of Series A Preferred Stock outstanding, such Series A Preferred
Stock having an aggregate of 1,000,000 votes, 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 of total voting power of the holder(s) of such options and
warrants.
(4) Includes 222,207 shares owned by Ocean Castle Partners, LLC, an entity
controlled by Mr. Gross, and 118,518 shares owned by third parties and over
which Mr. Gross retains voting power pursuant to a Proxy Agreement.
(5) Includes 10,000 shares issuable to Morris C. Aaron upon exercise of options
exercisable within 60 days.
7
PRELIMINARY COPIES
(6) Represents 87,500 shares issuable to The Shaar Fund, Ltd. upon exercise of
a Warrant exercisable within 60 days.
(7) According to Amendment No. 1 to Schedule 13G dated May 31, 1999 filed by
Ruki Renov, Mrs. Renov's address is 172 Broadway, Lawrence, NY 11559. Mrs.
Renov has sole voting power over 9,000 shares owned directly by her, and
options to purchase 86,333 additional shares, which options are exercisable
within 60 days. She has shared voting power over an additional 167,133
shares, and is a principal of an entity that owns options to purchase an
additional 37,333 shares, which options are exercisable within 60 days. Mr.
Renov may also be deemed to be the beneficial owner of 9,333 shares owned
by her spouse and an additional 34,566 shares owned by a family limited
partnership controlled by her.
(8) According to Schedule 13G dated May 31, 1999 filed by Esther Stahler, Mrs.
Stahler's address is 10 Lakeside Drive West, Lawrence, NY 11559. Mrs.
Stahler has sole voting power over 3,666 shares owned directly by her, and
options to purchase 86,333 additional shares, which options are exercisable
within 60 days. She has shared voting power over an additional 167,133
shares (which are believed to be the same shares over which Mrs. Renov has
shared voting power), and is a principal of an entity that owns options to
purchase an additional 37,333 shares, which options are exercisable within
60 days.
STOCKHOLDER PROPOSALS
For stockholder proposals for the next Annual Meeting of Stockholders to be
eligible for inclusion in the Company's Proxy Statement for such meeting, they
must be received by the Company at its principal executive offices on or prior
to October 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 Proxy Statement for such
Annual Meeting.
OTHER MATTERS
The Board of Directors does not know of any other matters that are to be
presented for consideration at the Special Meeting. Should any other matters
properly come before the Special 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 PROXIESvote.
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]. The Company has also
agreed to reimburse the solicitor for its$6,000 plus customary and reasonable
expenses. The Company has
additionally agreed to indemnify D.F. King & Co., Inc. under certain
circumstances. The Company will, on request, reimburse American Stock Transfer &
Trust Company and stockholders of record who are brokers, dealers, banks or
voting trustees, or their nominees, for forwardingtheir reasonable expenses in sending
proxy materials and annual reports to the beneficial owners.owners of the shares they
hold of record. The total estimated cost for this solicitation of proxies is
[$20,000.]approximately $20,000.
2
ELECTION OF DIRECTORS
(PROPOSAL NO. 1 ON THE PROXY CARD)
The Board of Directors currently consists of five members. The Company
amended its Certificate of Incorporation in August 1999. 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). This is
the first annual meeting since the foregoing amendment to the Company's
Certificate of Incorporation, so each director will stand for election as
required therein. At the Annual Meeting or any adjournments or postponements
thereof, the Class I directors will be elected to hold office for a term
expiring at the next succeeding annual meeting (2001), the Class II directors
will be elected to hold office for a term expiring at the second succeeding
annual meeting (2002), and the Class III director will be elected to hold office
for a term expiring at the third succeeding annual meeting (2003).
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 of Directors 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 of Directors may recommend.
Each of the nominees for election as director is now a director of the
Company. Each has served as a director of the Company since September 1998 and
was re-elected to the Board of Directors at the 1998 Annual Meeting held on
October 30, 1998.
The following information about the Company's nominees for election as
directors is based, in part, on information furnished by the nominees.
NAME CLASS AGE TITLE
- ---- ----- --- -----
M. Moshe Porat I 52 Director
James W. Fox I 49 Director, President and Chief
Operating Officer
Charles T. Condy II 59 Director
Stephen Schachman II 55 Director
Irwin L. Gross III 56 Chairman of the Board and Chief
Executive Officer
M. MOSHE PORAT has been a Director of the Company since September 1998
and a Director of The Network Connection, a majority owned operating subsidiary
of the Company, since May 18, 1999. Since September 1996, Dr. Porat has served
as the Dean of the School of Business and Management at Temple University. From
1988 to 1996 he was Chairman of the Risk Management, Insurance and Actuarial
Science Department at Temple University. Dr. Porat received his undergraduate
degree in economics and statistics (with distinction) from Tel Aviv
3
University, his M.B.A. (Magna Cum Laude) from the Recanati Graduate School of
Management at Tel Aviv University, and completed his doctoral work at Temple
University. Dr. Porat holds the Chair of the Joseph E. Boettner Professorship in
Risk Management and Insurance and has won several awards in the insurance field.
Prior to his academic work, Dr. Porat served as deputy general manager of a
large international. He holds the CPCU professional designation and is a member
of ARIA (American 25 Risk and Insurance Association), IIS (International
Insurance Society), RIMS (Risk and Insurance Management Society) and Society of
CPCU. 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.
JAMES W. FOX has been a Director of the Company since September 1998.
Mr. Fox is the President and Chief Operating Officer of the Company. He was
formerly the Managing Partner of First Lawrence Capital Corp., 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.
CHARLES T. CONDY has been a Director of the Company since September
1998. Mr. Condy was a director of Rare Medium, Inc. from 1996 to 1999. 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 Development, and the U.S. Asian Environmental Partnership on
energy efficiency technology transfer and related funding to developing
economies.
STEPHEN SCHACHMAN has been a Director of the Company since September
1998 and a Director of The Network Connection since May 18, 1999. Since 1995,
Mr. Schachman has been the owner of his own consulting firm, Public Affairs
Management, which is 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 Dilworth, Paxson, Kalish & Kaufman. Mr. Schachman
was also an Executive Vice President of Bell Atlantic Mobile System and prior
4
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 Juris Doctor degree from the Georgetown
University Law School.
IRWIN L. GROSS has been the Chairman of the Board of Directors and
Chief Executive Officer of the Company since September 1998 and Chairman of the
Board of Directors and Chief Executive Officer of The Network Connection since
May 18, 1999. Mr. Gross also currently sits on the Board of Directors of U.S.
Wireless Corporation, a publicly-held company listed on the Nasdaq Small Cap
Market. Mr. Gross is a founder of Rare Medium, Inc., a publicly held company
listed on the Nasdaq National Market, and was Chairman and a Director of Rare
Medium from 1984 to 1998. In addition, Mr. Gross served as the Chief Executive
Officer of Engelhard/ICC, a joint venture between Rare Medium and Engelhard. Mr.
Gross has served as a consultant to, investor in and director of, numerous
publicly-held and private companies and 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.
None of the nominees has any family relationship to any other director,
executive officer of nominee.
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 of Directors 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.
The entire Board of Directors was replaced with the current Board of
Directors in September 1998. Each member of the current Board was re-elected at
the 1998 Annual Meeting on October 30, 1998. From October 30, 1998 through the
end of the transition period ended June 30, 1999, the Company's Board of
Directors held nine (9) meetings. No director attended fewer than 75% of the
meetings held during that period.
BOARD COMMITTEES
The Board of Directors does not have a nominating committee.
The Board of Directors has 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
5
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 one Audit Committee meeting during the period from
October 1998 through June 1999, and all were present.
The Board of Directors 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 the period from October 1998 through
June 1999.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ELECTION OF EACH OF THE NOMINEES
FOR ELECTION TO THE BOARD OF DIRECTORS.
GRANT OF OPTIONS TO IRWIN L. GROSS
(PROPOSAL NO. 2 ON THE PROXY CARD)
The stockholders are being asked to approve the grant by the Board of
Directors on October 8, 1999, with Irwin L. Gross abstaining, of options to
Irwin L. Gross, Chairman and Chief Executive Officer of the Company, to purchase
1,000,000 shares of Class A Common Stock at the closing market price of the
common stock on the day prior to the grant, pursuant to a separate option
agreement with Mr. Gross. As a result of the three-for-two stock split of the
Company on February 15, 2000, the options currently entitle Mr. Gross to
1,500,000 shares upon exercise. One quarter of these options vested immediately
and one quarter vest, subject to certain conditions, over three years beginning
October 8, 2000. The remaining 750,000 options vest on the sixth anniversary of
the date of grant, subject to accelerated vesting pursuant to a three-year
vesting schedule in the event of the achievement of certain performance
milestones and other conditions. The exercise price of the options is $1.83
(split-adjusted). The options expire in October 2009. The Board of Directors,
with Mr. Gross abstaining, has approved such grant.
The option granted to Mr. Gross, as approved by the Board, is not by
its terms subject to stockholder approval. Nasdaq has advised the Company that
it is Nasdaq's view that such grant did require approval of the stockholders
pursuant to Marketplace Rule 4460(i)(1)(A). Rule 4460(i)(1)(A) provides in
pertinent part that when a stock option (other than an option granted pursuant
to a broadly based plan) is granted to an officer or director, the issuer shall
require stockholder approval prior to such grant; provided, however, that in the
case of a grant to a person not previously employed by the Company, as an
inducement essential to the individual's entering into an employment contract
with the Company, stockholder approval will generally not be required. While the
Company originally granted the option based upon a belief that such rule did not
apply to the grant, because it viewed the grant as an inducement essential to
Mr. Gross's entering into an employment contract with the Company on October 1,
1999, the Company has determined to seek stockholder approval to comply with
Nasdaq's request. If the stockholders do not ratify the grant of these options
at the Annual Meeting, the Company may be in violation of the Nasdaq rules and
could be subject to delisting.
6
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 be able to participate in such enhancement of shareholder value. The
market price per share increased over 350% in 1999 and continues to increase in
2000. The Class A Common Stock of the Company traded for approximately $1.50 per
share (split-adjusted) on September 15, 1998 and traded for approximately $15.75
on March 22, 2000.
THE BOARD OF DIRECTORS BELIEVES THAT THE GRANT OF OPTIONS TO MR. GROSS IS IN THE
BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR"
RATIFICATION OF THE GRANT.
APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL NO. 3 ON THE PROXY CARD)
The Board of Directors has renewed the Company's arrangement for KPMG
LLP ("KPMG") to act as its independent accountants for the fiscal year ending
June 30, 2000. KPMG has acted as the Company's independent accountants since
1996.
The stockholders are being asked to approve the appointment of KPMG by
the Board of Directors for the fiscal year ending June 30, 2000. 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.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF KPMG LLP AS
THE INDEPENDANT AUDITORS OF THE COMPANY.
7
EXECUTIVE COMPENSATION
ON JANUARY 5, 2000, THE BOARD OF DIRECTORS APPROVED A THREE-FOR-TWO
STOCK SPLIT TO BE EFFECTED BY WAY OF A STOCK DIVIDEND OF ONE SHARE FOR EACH TWO
SHARES OF COMMON STOCK HELD BY STOCKHOLDERS OF RECORD AS OF THE CLOSE OF
BUSINESS FEBRUARY 15, 2000. THE DIVIDEND WAS PAYABLE ON FEBRUARY 29, 2000;
FRACTIONAL SHARES WERE PAID OUT IN CASH. THE FIGURES DISCLOSED HEREIN HAVE BEEN
ADJUSTED TO REFLECT THE EFFECT OF THIS STOCK DIVIDEND.
In August 1999, the Company changed its fiscal year-end from October 31
to June 30. The summary compensation table below sets forth the aggregate
compensation paid or accrued by the Company for the transition period ended June
30, 1999 and the Company's prior three fiscal years ended October 31, 1998, 1997
and 1996 to the Chief Executive Officer and the Company's other executive
officers who were serving as executive officers at June 30, 1999 and whose total
annual salary and bonus exceeded $100,000 (collectively, the "Named
Executives").
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL ANNUAL COMPENSATION
NAME AND FISCAL COMPENSATION COMPENSATION STOCK OPTION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) AWARDS (#)
- ------------------ ---- ---------- --------- ----------
Irwin L. Gross, Chief 1999 -- -- --
Executive Officer 1998 -- -- --
1997 -- -- --
1996 -- -- --
James W. Fox, President (1) 1999 104,718 -- 105,000
1998 -- -- 45,000
1997 -- -- --
1996 -- -- --
Morris C. Aaron, Chief 1999 130,289 -- 75,000
Financial Officer (2) 1998 18,590 -- --
1997 -- -- --
1996 -- -- --
David Shevrin, Secretary (3) 1999 71,924 -- 75,000
1998 8,462 -- --
1997 -- -- --
1996 -- -- --
Frank Gomer, President and 1999 101,042 43,797 --
Chief Operating Officer of 1998 153,686 54,445 7,667
The Network Connection (4) 1997 90,658 20,000 9,000
1996 -- -- --
- ----------
(1) Mr. Fox started employment with the Company on January 1, 1999.
(2) Mr. Aaron is currently the Executive Vice President and Chief Financial
Officer of The Network Connection. At the end of the transition period
ended June 30, 1999 and until December 15, 1999, Mr. Aaron was the Chief
Financial Officer of the Company. On December 15, 1999, the Company hired
Patrick J. Fodale, Vice President and Chief Financial Officer of the
Company.
(3) Mr. Shevrin started employment with the Company on September 15, 1998.
(4) Dr. Gomer is currently President of the Systems Group for The Network
Connection. At the end of the transition period ended June 30, 1999 and
until March 6, 2000, Dr. Gomer was President and Chief Operating Officer of
The Network Connection. On March 6, 2000, Robert Pringle was hired as the
President and Chief Operating Officer of The Network Connection.
8
OPTION GRANTS IN FISCAL YEAR
The following table sets forth the grant of stock options made during
the 1998 fiscal year and the transition period ended June 30, 1999 to the Named
Executives:
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS OPTIONS GRANTED TO EXERCISE PRICE
NAME GRANTED (#) EMPLOYEES (1) ($/SHARE) EXPIRATION DATE
---- ----------- ------------- --------- ---------------
Irwin L. Gross -- -- -- --
James W. Fox (2) 105,000 33.2% 1.67 01/01/2009
Morris C. Aaron (3) 75,000 23.7% 1.13 12/12/2008
David Shevrin (4) 75,000 23.7% 1.13 12/12/2008
Frank Gomer (5) 6,750 2.2% 1.75 02/19/2008
- ----------
(1) Based on a total of 316,047 options granted to employees during the 1998
fiscal year and the transition period ended June 30, 1999.
(2) 42,000 options are currently exercisable, and 4,000 become exercisable on
each of December 31, 2000, January 1, 2002 and December 31, 2002.
(3) 15,000 options are immediately exercisable, and 15,000 become exercisable
on each of December 12, 1999, 2000, 2001 and 2002.
(4) 25,667 options become exercisable on each of December 12, 1999, 2000 and
2001.
(5) Represents 3,000 and 3,750 options repriced from $14.63 and $9.00,
respectively, on April 10, 1999.
STOCK OPTION REPRICINGS
On February 10, 1998, the Company's former Board of Directors adopted a
plan to reduce the exercise price on the stock options under the 1994 Plan and
the 1997 Plan. The exercise price on one-half of each outstanding option was
reduced to $1.75 per share (the split-adjusted closing price for the Company's
stock on February 10, 1998) on October 10, 1998, and on the other half of each
outstanding option on April 10, 1999, provided the option holder was still
employed by the Company on such dates. The plan amendment was approved by the
Board of Directors to retain key employees, retain appropriate levels of
incentive and maintain competitive compensation levels.
As a result of this action, 6,000 options and 7,500 options held by Dr.
Gomer with exercise prices of $14.626 and $9.00, respectively, were repriced to
$1.75.
9
OPTION EXERCISES AND YEAR-END VALUES
The following table provides certain information regarding the number
of exercisable and unexercisable options held by the Named Executives as of June
30, 1999 (none of these persons exercised any options during the 1998 fiscal
year or the transition period ended June 30, 1999):
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
AT JUNE 30, 1999(#) JUNE 30, 1999($)
NAME EXERCISABLE/UNEXERCISABLE (1) EXERCISABLE/UNEXERCISABLE
---- ----------------------------- -------------------------
Irwin L. Gross --/-- --/--
James W. Fox 21,000/129,000 24,500/172,750
Morris C. Aaron 10,000/40,000 25,620/102,480
David Shevrin --/50,000 --/128,100
Frank Gomer 7,065/9,102 11,481/18,541
- ----------
(1) 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
$2.83 at June 30, 1999.
DIRECTOR COMPENSATION
Outside directors receive $1,000 for each meeting of the Board of
Directors, and $500 for each committee meeting, attended in person or by
telephone. 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.
The Company's 1994 Stock Option Plan (the "1994 Plan") provides for the
automatic grant of non-qualified stock options to directors of the Company who
are not employees or principal stockholders of the Company ("Eligible
Directors") to purchase shares of common stock ("Director Options"). On the date
an Eligible Director becomes a director of the Company, he or she is granted
Director Options to purchase 1,000 shares of the Company's Class A Common Stock
(the "Initial Director Options"). On the day immediately following the date of
the annual meeting of stockholders for the Company for each fiscal year, each
Eligible Director, other than directors who received Initial Director Options
since the Company's prior annual meeting, is granted Director Options to
purchase 1,000 shares of the Company's Class A Common Stock (each an "Automatic
Grant"), as long as such director is a member of the Board of Directors on such
day. 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
10
and the Company's 1997 Stock Option Plan (the "1997 Plan") also allow grants to
directors in addition to or in lieu of an Automatic Grant.
EMPLOYMENT AND SEVERANCE AGREEMENTS
Irwin L. Gross serves as Chief Executive Officer pursuant to the terms
of an employment agreement that terminates on September 30, 2002. Mr. Gross
receives a minimum annual base salary of $250,000 and, subject to the
achievement of assigned goals, bonuses of not less than 20% of his annual
salary. Mr. Gross also received 1,500,000 10-year options, 25% of which vested
immediately, 25% of which vest, subject to certain conditions, in three annual
increments beginning on October 8, 2000, and the balance of which vest on the
sixth anniversary of the date of grant, subject to accelerated vesting pursuant
to a three-year vesting schedule in the event of the achievement of certain
performance milestones and other conditions. The employment agreement provides
for a severance payment in the event that the Company terminates Mr. Gross other
than for "cause" as defined in the employment agreement. The severance payment
would be equal to two times the remaining balance of his base salary for the
remainder of the then current term. The employment agreement also provides a
payment in the event the Company terminates Mr. Gross due to a termination of
the Company's business as defined in the employment agreement. In the event of
the termination of the Company's business, Mr. Gross would receive an amount
equal to two times his remaining base salary for the then current term, but not
less than his annual base salary for one year. The employment agreement also
provides that the company may pay other incentive compensation as may be set by
the Board of Directors from time to time, and for such other fringe benefits as
are paid to other executive officers of the Company. Such fringe benefits take
the form of medical and dental coverage and an automobile allowance of $1,000
per month.
Dr. Frank Gomer currently serves as President of the Systems Group for
The Network Connection pursuant to the terms of an employment agreement that
terminates on June 10, 2001. Dr. Gomer receives a minimum annual base salary of
$215,000. Beginning June 11, 1999 and ending June 11, 2003, Dr. Gomer also
receives 75,000 10-year options under the Company's Stock Option Plan, which
vest in increments of 15,000 options per year pursuant to the terms and
conditions of the employment agreement. The employment agreement also provides
for a severance payment in the event that the Company terminates Dr. Gomer other
than for "cause" as defined in the employment agreement. The severance payment
would be equal to two times the remaining balance of his base salary for the
remainder of the then current term. The employment agreement also provides a
payment in the event the Company terminates Dr. Gomer due to a termination of
the Company's business as defined in the employment agreement or upon
termination without cause following a change in control. In either such event,
Dr. Gomer would receive an amount equal to two times his remaining base salary
for the then current term, but not less than his annual base salary for one
year. The employment agreement also provides that the company may pay other
incentive compensation as may be set by the Board of Directors from time to
time, and for such other fringe benefits as are paid to other executive officers
of the Company. Such fringe benefits take the form of medical and dental
coverage and an automobile allowance of $500 per month.
11
Morris C. Aaron serves as Executive Vice President and Chief Financial
Officer of TNCi pursuant to the terms of an employment agreement that terminates
on June 10, 2001. Mr. Aaron receives a minimum annual base salary of $215,000.
Beginning June 11, 1999 and ending June 11, 2003, Mr. Aaron also receives 75,000
10-year options under the Company's Stock Option Plan, which vest in increments
of 15,000 options per year pursuant to the terms of the employment agreement.
The employment agreement provides for a severance payment in the event that the
Company terminates Mr. Aaron other than for "cause" as defined in the employment
agreement. The severance payment would be equal to two times the remaining
balance of his base salary for the remainder of the then current term. The
employment agreement also provides a payment in the event the Company terminates
Mr. Aaron due to a termination of the Company's business as defined in the
employment agreement. In the event of the termination of the Company's business,
Mr. Aaron would receive an amount equal to two times his remaining base salary
for the then current term, but not less than his annual base salary for one
year. The employment agreement also provides that the company may pay other
incentive compensation as may be set by the Board of Directors from time to
time, and for such other fringe benefits as are paid to other executive officers
of the Company. Such fringe benefits take the form of medical and dental
coverage and an automobile allowance of $500 per month.
James W. Fox serves as President and Chief Operating Officer pursuant
to the terms of an employment agreement that terminates on December 31, 2000.
Mr. Fox receives a minimum annual base salary of $225,000 and, subject to the
achievement of assigned goals, bonuses of not less than 20% of his annual
salary. Mr. Fox also received 105,000 10-year options under the Company's 1997
Stock Option Plan, which vest in increments of 21,000 options per year pursuant
to the terms of the employment agreement. The employment agreement provides for
a severance payment in the event that the Company terminates Mr. Fox other than
for "cause" as defined in the employment agreement. The severance payment would
be equal to two times the remaining balance of his base salary for the remainder
of the then current term. The employment agreement also provides a payment in
the event the Company terminates Mr. Fox due to a termination of the Company's
business as defined in the employment agreement. In the event of the termination
of the Company's business, Mr. Fox would receive an amount equal to two times
his remaining base salary for the then current term, but not less than his
annual base salary for one year. The employment agreement also provides that the
company may pay other incentive compensation as may be set by the Board of
Directors from time to time, and for such other fringe benefits as are paid to
other executive officers of the Company. Such fringe benefits take the form of
medical and dental coverage and an automobile allowance of $450 per month.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CONSULTING ARRANGEMENTS
The Company's Chief Executive Officer is a principal of Ocean Castle
Partners, LLC which maintains administrative offices for the Company's Chief
Executive Officer, Corporate Secretary and certain other employees. During the
year ended October 31, 1998, Ocean Castle executed consulting agreements with
two principal stockholders of the Company, Don Goldman and Yuri Itkis. The
rights and obligations of Ocean Castle under the agreements were assumed
12
by The Network Connection in connection with the sale of the Company's
Interactive Entertainment Division to The Network Connection. The consulting
agreements require payments aggregating $1,000,000 to each of the consultants
through December 2003 in exchange for advisory services. Each of the consultants
also received stock options to purchase 50,000 (split-adjusted) shares of the
Company's Class A Common Stock at an exercise price of $3.00 (split-adjusted).
As of June 30, 1999, The Network Connection determined that the consulting
agreements had no future value due to The Network Connection's shift away from
in-flight entertainment into alternative markets such as leisure cruise and
passenger rail transport. Only limited services were provided in 1999 and no
future services will by utilized. Accordingly, The Network Connection recorded a
charge to general and administrative expenses in the transition period ended
June 30, 1999 of $1.6 million representing the balance due under such contracts.
The Company has entered into a consulting agreement with First Lawrence
Capital Corp. to perform various financial advisory services related to ongoing
business development and management. The former managing director of First
Lawrence is also a director of the Company. The Company retained, on a full time
basis as President and Chief Operating Officer, the services of the former
managing director of First Lawrence effective December 12, 1998. Accordingly,
the Company has entered into an employment contract with such individual. During
the year ended October 31, 1998, the Company paid $11,846 under the First
Lawrence consulting agreement. The Company executed a consulting agreement with
the Whitestone Group, LLC, a shareholder of First Lawrence. Pursuant to the
agreement, the Company paid $250,000 for consulting services received during
fiscal 1998.
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 paid 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.
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. 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 25,000 (split-adjusted) shares of Class A Common Stock at a
price of $19.50 (split-adjusted) per share, which was repriced on January 6,
1997 to $16.00 (split-adjusted) per share. Under the FortuNet License, an
aggregate of $100,000
13
was paid to FortuNet in fiscal 1998. Subsequent to June 30, 1999, the Company
agreed to a termination of this agreement and paid FortuNet $100,000 plus legal
fees. During the Transition Period ended June 30, 1999, the Company had revised
its estimated accrual to $200,000 which is included in accrued liabilities in
the consolidated balance sheet at June 30, 1999. Additionally, the Company
repriced the exercise price of the stock purchase warrants to $3.00
(split-adjusted) per share.
Yuri Itkis, a former director 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.
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 Barrington Capital Group, L.P. ("Barrington") against the Company,
Ocean Castle and others, Ocean Castle purchased from Barrington 149,313
(split-adjusted) shares of Class A Common Stock of the Company at $3.00
(split-adjusted) per share on October 21, 1998. The Company temporarily loaned
the funds to Ocean Castle to effectuate such purchase and Ocean Castle has
subsequently repaid such loan.
B.H.G. FLIGHT, LLC
The Company has agreed to reimburse B.H.G. Flight, LLC ("BHG") for
costs and expenses associated with its use for corporate purposes of an airplane
leased by BHG. Irwin L.
14
Gross, Chairman of the Board and Chief Executive Officer of the Company, owns
50% of the interests in BHG. To date, the Company has reimbursed BHG just under
$60,000.
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 "Employment and Severance Agreements" on page 11).
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 31, 2000
regarding the ownership of the Company's Class A Common Stock and of The Network
Connection's common stock by (i) each person known by the Company to own
beneficially more than five percent of any class of the Company's voting
securities, (ii) each director of the Company, (iii) each executive officer of
the Company and (iv) all executive officers and directors of the Company as a
group.
Class A The Network Connection
Common Stock Common Stock
------------------------------- --------------------------------
Name and Address of Percent of Percent of
Beneficial Owner (1) Number of Shares Class (2) Number of Shares Class (3)
-------------------- ---------------- --------- ---------------- ---------
Irwin L. Gross
Ocean Castle Partners, LLC 2,283,108 (4) 21.0% 211,667 (5) 1.6%
Charles T. Condy 32,025 (6) * -- --
Stephen Schachman 26,400 (7) * -- --
M. Moshe Porat 405,000 (8) 3.9% -- --
David N. Shevrin 27,250 (9) * -- --
Morris C. Aaron 24,148 (10) * 10,000 (11) *
James W. Fox 62,700 (12) * -- --
Frank Gomer 6,592 (13) * 10,000 (14) *
Ruki Renov 646,521 (15) 6.2% -- --
Esther Stahler 572,671 (16) 5.5% -- --
All executive officers and
directors of the Company
as a group (8 persons) 2,867,223 (17) 26.0% 231,667 (18) 1.8%
- ----------
* Less than 1%.
(1) Except as otherwise indicated below, the address of each beneficial owner
is c/o Global Technologies, Ltd., 1811 Chestnut Street, Philadelphia,
Pennsylvania 19103.
(2) Based on 10,498,488 shares of Class A Common Stock outstanding.
(3) Based on 12,790,046 shares of The Network Connection Common Stock
outstanding.
(4) Includes 50,949 shares owned by trusts for the benefit of Mr. Gross'
children as to which Mr. Gross disclaims beneficial ownership. Also
includes 375,000 shares issuable to Mr. Gross upon exercise of options
exercisable within 60 days.
(5) Includes 125,000 shares which may be acquired upon exercise of vested
options.
15
(6) Includes 15,000 shares issuable to Mr. Condy upon exercise of options
exercisable within 60 days.
(7) Includes 15,000 shares issuable to Mr. Schachman upon exercise of options
exercisable within 60 days.
(8) Includes 375,000 shares owned by First Lawrence Corp. over which Mr. Porat
retains voting power pursuant to a certain proxy agreement, and 15,000
shares issuable to Mr. Porat upon exercise of options exercisable within 60
days.
(9) Includes 25,000 shares issuable to Mr. Shevrin upon exercise of options
exercisable within 60 days.
(10) Includes 15,000 shares issuable to Mr. Aaron upon exercise of options
exercisable within 60 days.
(11) Represents 10,000 shares issuable to Mr. Aaron upon exercise of options
exercisable within 60 days.
(12) Includes 36,000 shares issuable to Mr. Fox upon exercise of options
exercisable within 60 days.
(13) Includes 3,592 shares issuable to Mr. Gomer upon exercise of options
exercisable within 60 days.
(14) Represents 10,000 shares issuable to Mr. Gomer upon exercise of options
exercisable within 60 days.
(15) According to Amendment No. 2 to Schedule 13G dated October 25, 1999 filed
by Ruki Renov, as adjusted for the 2:3 stock split on February 15, 2000.
Mrs. Renov's address is 172 Broadway, Lawrence, NY 11559.
(16) According to Amendment No. 1 to Schedule 13G dated October 25, 1999 filed
by Esther Stahler, as adjusted for the 2:3 stock split on February 15,
2000. Mrs. Stahler's address is 10 Lakeside Drive, Lawrence, NY 11559.
(17) See footnotes 4, 6, 7, 8, 9, 10, 12 and 13.
(18) See footnotes 5, 11 and 14.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of the Company's common stock (collectively, "Reporting Persons"), to
file with the Securities and Exchange Commission ("SEC") reports about their
beneficial ownership of the Company's securities. All Reporting Persons are
required by the SEC to furnish the Company with copies of all reports that they
file. Based solely on a review of Section 16 reports received by the Company
from Reporting Persons, the Company believes that each of Condy, Porat,
Schachman, Fox, Aaron and Shevrin have failed to file a Form 5 on a timely basis
reporting the options granted to them during the transition period ended June
30, 1999.
2001 STOCKHOLDER PROPOSALS
In order for stockholder proposals for the 2001 Annual Meeting of
Stockholders to be eligible for inclusion in the Company's 2001 Proxy Statement,
they must be received by the Company at its principal executive offices, (Attn:
Secretary), on or prior to November 30, 2000. 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 2001
Proxy Statement for the Annual Meeting.
OTHER MATTERS
The Company currently knows of no other business that will be presented
for consideration at the 2000 Annual Meeting. If any other business is properly
brought before the meeting, it is intended that proxies in the enclosed form
will be voted in respect thereof in accordance with the judgment of the persons
voting the proxies. If any such matters are
16
presented at the meeting, then the proxy agents named in the enclosed proxy card
will vote in accordance with their judgment.
THE COMPANY SHALL PROVIDE TO ANY STOCKHOLDER, WITHOUT CHARGE, A COPY OF THE
COMPANY'S ANNUALTRANSITION REPORT ON FORM 10-KSB FOR THE FISCAL YEARTRANSITION PERIOD ENDED OCTOBER 31,
1998,JUNE
30, 1999, UPON THE WRITTEN REQUEST THEREFOR TO INTERACTIVE FLIGHTGLOBAL TECHNOLOGIES, INC.LTD., 222 NORTH 44TH1811
CHESTNUT STREET, PHOENIX, AZ 85034,SUITE 120, PHILADELPHIA, PENNSYLVANIA 19103, ATTENTION: DAVID N. SHEVRIN,S.
LANCE SILVER, ASSISTANT SECRETARY.
8/s/ IRWIN L. GROSS
Irwin L. Gross, Chairman of the Board and
Chief Executive Officer
April 17, 2000
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APPENDIXPROXY
GLOBAL TECHNOLOGIES, LTD.
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 Class A AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (hereinafter calledCommon
Stock of the "Merger
Agreement") is made as of August 1, 1999, by and between Interactive Flight
Technologies, Inc., a Delaware corporation ("Oldco"), andundersigned in Global Technologies, Ltd., 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 with and 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 with and 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 Internal Revenue Code Qualifications. For Federal income tax purposes,
it is intended that the Merger shall qualify as a reorganization within the
meaning of Section 368(a)(1)(F) of the Internal Revenue Code, as amended.
1.3 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 the General Corporation Law of the State of Delaware
(the "DGCL").
1.4 Common Stock of Oldco and Newco. On 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 Class A 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 Class A 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.
1.5 Preferred Stock of Oldco. On 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 of Series A Preferred Stock of
Oldco, issued and outstanding immediately prior thereto shall be changed and
converted into one fully paid and nonassessable share of Series A Preferred
Stock of Newco.
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1.6 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.
1.7 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 and kind
of shares of Newco Stock with no other changes in the terms and conditions of
such options, warrants or rights to acquire, including 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").
2.2 By-laws. The By-laws of Newco in effect on the Effective Date shall 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 be the directors of the
Surviving Corporation.
3.2 Officers. The officers of Oldco shall be the officers of the Surviving
Corporation to serve at the pleasure of its Board of Directors.
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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/ James W. Fox
------------------------------------
GLOBAL TECHNOLOGIES, LTD.
By: /s/ James W. Fox
------------------------------------
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APPENDIX B
DELAWARE GENERAL CORPORATE LAW
SECTION 203 BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS.
(a) Notwithstanding any other provisions of this chapter, a corporation shall
not engage in any business combination with any interested stockholder for a
period of 3 years following the time that such stockholder became an interested
stockholder, unless:
(1) Prior to such time the board of directors of the corporation approved either
the business combination or the transaction which resulted in the stockholder
becoming an interested stockholder;
(2) Upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned (i) by persons who are directors and also
officers and (ii) employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or
(3) At or subsequent to such time the business combination is approved by the
board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66-2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
(b) The restrictions contained in this section shall not apply if:
(1) The corporation's original certificate of incorporation contains a provision
expressly electing not to be governed by this section;
(2) The corporation, by action of its board of directors, adopts an amendment to
its bylaws within 90 days of February 2, 1988, expressly electing not to be
governed by this section, which amendment shall not be further amended by the
board of directors;
(3) The corporation, by action of its stockholders, adopts an amendment to its
certificate of incorporation or bylaws expressly electing not to be governed by
this section; provided that, in addition to any other vote required by law, such
amendment to the certificate of incorporation or bylaws must be approved by the
affirmative vote of a majority of the shares entitled to vote. An amendment
adopted pursuant to this paragraph shall be effective immediately in the case of
a corporation that both (i) has never had a class of voting stock that falls
within any of the 3 categories set out in subsection (b)(4) hereof, and (ii) has
not elected by a provision in its original certificate of incorporation or any
amendment thereto to be governed by this section. In all other cases, an
amendment adopted pursuant to this paragraph shall not be effective until 12
months after the adoption of such amendment and shall not apply to any business
combination between such corporation and any person who became an interested
stockholder of such corporation on or prior to such adoption. A bylaw amendment
adopted pursuant to this paragraph shall not be further amended by the board of
directors;
(4) The corporation does not have a class of voting stock that is: (i) Listed on
a national securities exchange; (ii) authorized for quotation on The NASDAQ
Stock Market; or (iii) held of record by more than 2,000 stockholders, unless
any of the foregoing results from action taken, directly or indirectly, by an
interested stockholder or from a transaction in which a person becomes an
interested stockholder;
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(5) A stockholder becomes an interested stockholder inadvertently and (i) as
soon as practicable divests itself of ownership of sufficient shares so that the
stockholder ceases to be an interested stockholder; and
(ii) would not, at any time within the 3-year period immediately prior to a
business combination between the corporation and such stockholder, have been an
interested stockholder but for the inadvertent acquisition of ownership;
(6) The business combination is proposed prior to the consummation or
abandonment of and subsequent to the earlier of the public announcement or the
notice required hereunder of a proposed transaction which (i) constitutes one of
the transactions described in the 2nd sentence of this paragraph; (ii) is with
or by a person who either was not an interested stockholder during the previous
3 years or who became an interested stockholder with the approval of the
corporation's board of directors or during the period described in paragraph (7)
of this subsection (b); and (iii) is approved or not opposed by a majority of
the members of the board of directors then in office (but not less than 1) who
were directors prior to any person becoming an interested stockholder during the
previous 3 years or were recommended for election or elected to succeed such
directors by a majority of such directors. The proposed transactions referred to
in the preceding sentence are limited to (x) a merger or consolidation of the
corporation (except for a merger in respect of which, pursuant to ss. 251(f) of
this title, no vote of the stockholders of the corporation is required); (y) a
sale, lease, exchange, mortgage, pledge, transfer or other disposition (in 1
transaction or a series of transactions), whether as part of a dissolution or
otherwise, of assets of the corporation or of any direct or indirect
majority-owned subsidiary of the corporation (other than to any direct or
indirect wholly-owned subsidiary or to the corporation) having an aggregate
market value equal to 50% or more of either that aggregate market value of all
of the assets of the corporation determined on a consolidated basis or the
aggregate market value of all the outstanding stock of the corporation; or (z) a
proposed tender or exchange offer for 50% or more of the outstanding voting
stock of the corporation. The corporation shall give not less than 20 days'
notice to all interested stockholders prior to the consummation of any of the
transactions described in clause (x) or (y) of the 2nd sentence of this
paragraph; or
(7) The business combination is with an interested stockholder who became an
interested stockholder at a time when the restrictions contained in this section
did not apply by reason of any of paragraphs (1) through (4) of this subsection
(b), provided, however, that this paragraph (7) shall not apply if, at the time
such interested stockholder became an interested stockholder, the corporation's
certificate of incorporation contained a provision authorized by the last
sentence of this subsection (b). Notwithstanding paragraphs (1), (2), (3) and
(4) of this subsection, a corporation may elect by a provision of its original
certificate of incorporation or any amendment thereto to be governed by this
section; provided that any such amendment to the certificate of incorporation
shall not apply to restrict a business combination between the corporation and
an interested stockholder of the corporation if the interested stockholder
became such prior to the effective date of the amendment.
(c) As used in this section only, the term:
(1) "Affiliate" means a person that directly, or indirectly through 1 or more
intermediaries, controls, or is controlled by, or is under common control with,
another person.
(2) "Associate," when used to indicate a relationship with any person, means:
(i) Any corporation, partnership, unincorporated association or other entity of
which such person is a director, officer or partner or is, directly or
indirectly, the owner of 20% or more of any class of voting stock; (ii) any
trust or other estate in which such person has at least a 20% beneficial
interest or as to which such person serves as trustee or in a similar fiduciary
capacity; and (iii) any relative or spouse of such person, or any relative of
such spouse, who has the same residence as such person.
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(3) "Business combination," when used in reference to any corporation and any
interested stockholder of such corporation, means:
(i) Any merger or consolidation of the corporation or any direct or indirect
majority-owned subsidiary of the corporation with (A) the interested
stockholder, or (B) with any other corporation, partnership, unincorporated
association or other entity if the merger or consolidation is caused by the
interested stockholder and as a result of such merger or consolidation
subsection (a) of this section is not applicable to the surviving entity;
(ii) Any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in 1 transaction or a series of transactions), except
proportionately as a stockholder of such corporation, to or with the interested
stockholder, whether as part of a dissolution or otherwise, of assets of the
corporation or of any direct or indirect majority-owned subsidiary of the
corporation which assets have an aggregate market value equal to 10% or more of
either the aggregate market value of all the assets of the corporation
determined on a consolidated basis or the aggregate market value of all the
outstanding stock of the corporation;
(iii) Any transaction which results in the issuance or transfer by the
corporation or by any direct or indirect majority-owned subsidiary of the
corporation of any stock of the corporation or of such subsidiary to the
interested stockholder, except: (A) Pursuant to the exercise, exchange or
conversion of securities exercisable for, exchangeable for or convertible into
stock of such corporation or any such subsidiary which securities were
outstanding prior to the time that the interested stockholder became such; (B)
pursuant to a merger under ss. 251(g) of this title; (C) pursuant to a dividend
or distribution paid or made, or the exercise, exchange or conversion of
securities exercisable for, exchangeable for or convertible into stock of such
corporation or any such subsidiary which security is distributed, pro rata to
all holders of a class or series of stock of such corporation subsequent to the
time the interested stockholder became such; (D) pursuant to an exchange offer
by the corporation to purchase stock made on the same terms to all holders of
said stock; or (E) any issuance or transfer of stock by the corporation;
provided however, that in no case under items (C)-(E) of this subparagraph shall
there be an increase in the interested stockholder's proportionate share of the
stock of any class or series of the corporation or of the voting stock of the
corporation;
(iv) Any transaction involving the corporation or any direct or indirect
majority-owned subsidiary of the corporation which has the effect, directly or
indirectly, of increasing the proportionate share of the stock of any class or
series, or securities convertible into the stock of any class or series, of the
corporation or of any such subsidiary which is owned by the interested
stockholder, except as a result of immaterial changes due to fractional share
adjustments or as a result of any purchase or redemption of any shares of stock
not caused, directly or indirectly, by the interested stockholder; or
(v) Any receipt by the interested stockholder of the benefit, directly or
indirectly (except proportionately as a stockholder of such corporation), of any
loans, advances, guarantees, pledges or other financial benefits (other than
those expressly permitted in subparagraphs (i)-(iv) of this paragraph) provided
by or through the corporation or any direct or indirect majority-owned
subsidiary.
(4) "Control," including the terms "controlling," "controlled by" and "under
common control with," means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a person,
whether through the ownership of voting stock, by contract or otherwise. A
person who is the owner of 20% or more of the outstanding voting stock of any
corporation, partnership, unincorporated association or other entity shall be
presumed to have control of such entity, in the absence of proof by a
preponderance of the evidence to the contrary; Notwithstanding the foregoing, a
presumption of control shall not apply where such person holds voting stock, in
good faith and not for the purpose of circumventing this section, as an agent,
bank, broker, nominee, custodian or trustee for 1 or more owners who do not
individually or as a group have control of such entity.
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(5) "Interested stockholder" means any person (other than the corporation and
any direct or indirect majority-owned subsidiary of the corporation) that (i) is
the owner of 15% or more of the outstanding voting stock of the corporation, or
(ii) is an affiliate or associate of the corporation and was the owner of 15% or
more of the outstanding voting stock of the corporation at any time within the
3-year period immediately prior to the date on which it is sought to be
determined whether such person is an interested stockholder; and the affiliates
and associates of such person; provided, however, that the term "interested
stockholder" shall not include (x) any person who (A) owned shares in excess of
the 15% limitation set forth herein as of, or acquired such shares pursuant to a
tender offer commenced prior to, December 23, 1987, or pursuant to an exchange
offer announced prior to the aforesaid date and commenced within 90 days
thereafter and either (I) continued to own shares in excess of such 15%
limitation or would have but for action by the corporation or (II) is an
affiliate or associate of the corporation and so continued (or so would have
continued but for action by the corporation) to be the owner of 15% or more of
the outstanding voting stock of the corporation at any time within the 3-year
period immediately prior to the date on which it is sought to be determined
whether such a person is an interested stockholder or (B) acquired said shares
from a person described in item (A) of this paragraph by gift, inheritance or in
a transaction in which no consideration was exchanged; or (y) any person whose
ownership of shares in excess of the 15% limitation set forth herein is the
result of action taken solely by the corporation; provided that such person
shall be an interested stockholder if thereafter such person acquires additional
shares of voting stock of the corporation, except as a result of further
corporate action not caused, directly or indirectly, by such person. For the
purpose of determining whether a person is an interested stockholder, the voting
stock of the corporation deemed to be outstanding shall include stock deemed to
be owned by the person through application of paragraph (8) of this subsection
but shall not include any other unissued stock of such corporation which may be
issuable pursuant to any agreement, arrangement or understanding, or upon
exercise of conversion rights, warrants or options, or otherwise.
(6) "Person" means any individual, corporation, partnership, unincorporated
association or other entity.
(7) "Stock" means, with respect to any corporation, capital stock and, with
respect to any other entity, any equity interest.
(8) "Voting stock" means, with respect to any corporation, stock of any class or
series entitled to vote generally in the election of directors and, with respect
to any entity that is not a corporation, any equity interest entitled to vote
generally in the election of the governing body of such entity.
(9) "Owner," including the terms "own" and "owned," when used with respect to
any stock, means a person that individually or with or through any of its
affiliates or associates:
(i) Beneficially owns such stock, directly or indirectly; or
(ii) Has (A) the right to acquire such stock (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding, or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise; provided, however, that a
person shall not be deemed the owner of stock tendered pursuant to a tender or
exchange offer made by such person or any of such person's affiliates or
associates until such tendered stock is accepted for purchase or exchange; or
(B) the right to vote such stock pursuant to any agreement, arrangement or
understanding; provided, however, that a person shall not be deemed the owner of
any stock because of such person's right to vote such stock if the agreement,
arrangement or understanding to vote such stock arises solely from a revocable
proxy or consent given in response to a proxy or consent solicitation made to 10
or more persons; or
(iii) Has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting (except voting pursuant to a revocable proxy or
consent as described in item (B) of subparagraph (ii) of this paragraph), or
disposing of such stock with any other person that beneficially owns, or whose
affiliates or associates beneficially own, directly or indirectly, such stock.
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(d) No provision of a certificate of incorporation or bylaw shall require, for
any vote of stockholders required by this section, a greater vote of
stockholders than that specified in this section.
(e) The Court of Chancery is hereby vested with exclusive jurisdiction to hear
and determine all matters with respect to this section.
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PROXY
INTERACTIVE FLIGHT TECHNOLOGIES, INC.
Special Meeting of Stockholders - September 30, 1999
The undersigned stockholder(s) of Interactive Flight Technologies, Inc. (the "Company") hereby nominate(s), constitute(s) and appoint(s) Charles C. Condy
and Stephen M. Schachman, and each of them, the attorney, agent and proxy of
the undersigned, with full power of substitution, to vote all stock of
Interactive Flight Technologies, Inc., which the undersigned iswould be entitled to vote at the SpecialAnnual
Meeting of Stockholders (the "Meeting") of the Company to be held at the Metropolitan Club, One East 60thRihga Royal Hotel,
located at 151 West 54th Street, New York, NYNew York, on Thursday May 11, 2000,
at 10:3000 a.m., on Thursday, September 30, 1999,local time, and at any and allpostponement or adjournments or
postponements thereof, with respect to the matters described in the accompanying Proxy Statement,manner indicated below and in their discretion, on such other matters
which properly come before the Meeting, as fully and with the same force and
effect as the undersigned might or could do if personally present thereat, as
follows:
1. Proposal to merge the Company with and into Global Technologies, Ltd.
[_] FOR [_] AGAINST [_] ABSTAIN
(Continued, and to be completed and signed on the reverse side)
(Continued fromside
hereof.
The undersigned hereby acknowledges receipt of the other side)Notice of Annual
Meeting of Stockholders to be held on May 11, 2000 and the Proxy Statement of
the Company, each dated April 17, 2000, and the Company's Annual Report for the
transition period ended June 30, 1999 and Letter to Stockholders.
The undersigned hereby revokes any proxy to vote shares of Class A
Common Stock of the Company heretofore given by the undersigned.
Please complete, sign on the reverse side and return promptly in the
enclosed envelope.
THE SHARES OF CLASS A COMMON STOCK REPRESENTED BY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE
REVOKED PRIOR TO ITS EXERCISE. PLEASE SIGN AND DATE BELOW.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO MERGE THE
COMPANY WITH AND INTO GLOBAL TECHNOLOGIES, LTD. (THE "MERGER"). THIS PROXY
CONFERS AUTHORITY TO AND SHALL BE VOTED "FOR" THE MERGER UNLESS OTHER
INSTRUCTIONS ARE INDICATED, IN WHICH CASE THE PROXY SHALL BE VOTED IN ACCORDANCE
WITH SUCH INSTRUCTIONS.
IF ANY OTHER BUSINESS IS PRESENTED AT THE MEETING, THIS PROXY SHALLWILL BE VOTED IN
ACCORDANCE WITH THE RECOMMENDATIONSINSTRUCTIONS SET FORTH BELOW AND ON THE REVERSE SIDE HEREOF.
IN THE ABSENCE OF ANY INSTRUCTIONS, SUCH SHARES WILL BE VOTED "FOR" THE BOARDELECTION
OF DIRECTORS.
Dated:ALL NOMINEES LISTED IN PROPOSAL 1 AND "FOR" THE APPROVAL OF PROPOSALS 2, 3
AND 4.
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
Charles T. Condy, Class II
Stephen Schachman, Class II
Irwin L. Gross, Class III
2. Proposal to ratify the grant of options to purchase 1,500,000 shares of the
Company's Class A Common Stock to Irwin L. Gross, Chairman of the Board and
Chief Executive Officer of the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to ratify the appointment of KPMG LLP, certified public
accountants, as independent auditors of the Company for the fiscal year
ending June 30, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion such other business as may properly come before the
meeting and any and all adjournments thereof.
Dated
-----------------------------------
(Please print name)
-----------------------
(Signature of Stockholder)
----------------
(Please print name)
------------------------
(Signature of Stockholder)
---------------------------------------------------------
Signature
----------------------------------------
Signatures, if held jointly
----------------------------------------
Title ( if applicable)
Please date this Proxy and sign your
name(s)exactly as it/they appear(s)name
appears on your
stock certificates. Executors,
administrators, trustees, etc. shouldthis 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 their full titles. (Alltitle. 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 owners should sign).
I do [_] do not [_] expect to attend the Meeting.
Number of Persons:
-------------------------
PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY.
ownership,
each joint owner must sign.