SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to 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 |_|
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|_| Preliminary Proxy Statement
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(as permitted by Rule 14a-6(e)(z))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
FIRST AVIATION SERVICES INC.
...............................................................................
(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.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined.):
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|_| 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
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<PAGE>
FIRST AVIATION SERVICES INC.
15 Riverside Avenue
Westport, Connecticut 06880
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
-----------------
The 1999 Annual Meeting of Stockholders (the "Annual Meeting") of First Aviation
Services Inc. will be held at the offices of Aerospace Products International
Inc., 3778 Distriplex Drive North, Memphis, Tennessee on Thursday, July 15, 1999
at 9:30 a.m. for the following purposes:
1. To elect two directors for a term to expire at the Annual
Meeting of Stockholders in the year 2002.
2. To consider and vote upon a proposal to ratify the
appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending January 31,
2000.
3. To act upon any and all matters incident to the foregoing
and transact such other business as may properly come before
the Annual Meeting and any and all adjournments or
postponements thereof.
The Board of Directors, by resolution, has fixed the close of business on June
1, 1999 as the record date for the determination of the stockholders entitled to
notice of and to vote at the Annual Meeting and at any adjournment or
postponement thereof.
Stockholders are invited to attend the Annual Meeting. Whether or not you expect
to attend, WE URGE YOU TO SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD
IN THE ENCLOSED POSTAGE PREPAID ENVELOPE. If you attend the Annual Meeting, you
may vote your shares in person, which will revoke any previously executed proxy.
If your shares are held of record by a broker, bank or other nominee and you
wish to attend the Annual Meeting, you must obtain a letter from the broker,
bank or other nominee confirming your beneficial ownership of the shares and
bring it to the Annual Meeting. In order to vote your shares at the Annual
Meeting, you must obtain from the record holder a proxy issued in your name.
Regardless of how many shares you own, your vote is very important. Please
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD TODAY.
By order of the Board of Directors,
John A. Marsalisi
Secretary
Westport, Connecticut
June 9, 1999
<PAGE>
FIRST AVIATION SERVICES INC.
15 Riverside Avenue
Westport, Connecticut 06880
---------------
PROXY STATEMENT
-----------------
Introduction
This proxy statement is furnished to the holders of common stock, par value $.01
per share (the "Common Stock"), of First Aviation Services Inc., a Delaware
Corporation ("First Aviation" or the "Company"), in connection with the
solicitation of proxies on behalf of the Board of Directors of the Company for
use at the Company's 1999 Annual Meeting of Stockholders to be held on July 15,
1999, and at any adjournment thereof (the "Annual Meeting"). The Notice of
Annual Meeting, this proxy statement, the accompanying proxy, the Company's Form
10-K/A and Annual Report are first being mailed to Stockholders on or about June
9, 1999.
The Company's principal executive offices are located at 15 Riverside Avenue,
Westport, Connecticut 06880.
Record Date
The Board of Directors has fixed the close of business on June 1, 1999 as the
record date (the "Record Date") for the determination of stockholders entitled
to notice of, and to vote at, the Annual Meeting. Each such stockholder will be
entitled to one vote on all matters to come before the Annual Meeting for each
share of Common Stock held and may vote in person or by proxy authorized in
writing. At the Record Date, there were 9,004,834 shares of Common Stock issued
and outstanding.
Matters to Be Considered
At the Annual Meeting, stockholders will be asked to consider and vote upon the
election of two directors for a term to expire at the Annual Meeting of
Stockholders in the year 2002, and to ratify the appointment of Ernst & Young
LLP as the Company's independent auditors for the fiscal year ending January 31,
2000. The Board of Directors has received timely notice and does not know of any
other matter to be brought before the Annual Meeting. If any other matter
properly comes before the Annual Meeting, the persons named in the enclosed form
of proxy or their substitutes will vote in accordance with their best judgment
on such matters.
Quorum; Required Votes
The required quorum for the transaction of business at the Annual Meeting is a
majority of the shares of Common Stock issued and outstanding on the Record Date
and present in person or represented by proxy at the Annual Meeting. Shares that
are voted "FOR", "AGAINST", or "WITHHELD FROM" a matter are treated as being
present at the Annual Meeting for purposes of establishing a quorum and will be
included in determining the number of shares that are represented and voted at
the Annual Meeting with respect to such matter.
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<PAGE>
The affirmative vote of a plurality of the votes cast at the Annual Meeting is
required for the election of the nominated directors. Only shares of Common
Stock that are voted in favor of a nominee will be counted toward that nominee's
achievement of a plurality. Shares of Common Stock held by stockholders present
in person at the Annual Meeting that are not voted for the nominees or shares
held by stockholders represented at the Annual Meeting by proxy from which
authority to vote for a nominee has been properly withheld (including broker
non-votes) will not be counted towards the nominee's achievement of a plurality.
The affirmative vote of the holders of a majority of the shares of Common Stock
present in person or represented by proxy at the Annual Meeting and entitled to
vote on such matters is required for the ratification of the appointment of
Ernst & Young LLP as the Company's independent auditors for the fiscal year
ending January 31, 2000. With respect to broker non-votes, the shares will be
counted for purposes of determining the presence or absence of a quorum, but
will not be considered entitled to vote at the Annual Meeting for such matter
and thus broker non-voters will have the practical effect of reducing the number
of affirmative votes required to achieve a majority vote for such matters by
reducing the total number of shares from which the majority is calculated.
Voting and Revocation of Proxies
Stockholders are requested to complete, date, sign and promptly return the
accompanying form of proxy in the enclosed envelope. Common Stock represented by
properly executed proxies received by the Company's Transfer Agent and not
revoked will be voted at the Annual Meeting in accordance with the instructions
contained therein. If instructions are not given, shares represented by properly
executed proxies will be voted "FOR" the election of the nominees for director
named herein, and "FOR" the approval of the proposed appointment of Ernst &
Young LLP as the Company's independent auditors for the fiscal year ending
January 31, 2000.
Any proxy signed and returned by a stockholder may be revoked at any time before
it is voted by filing with the Company's Transfer Agent, American Stock Transfer
& Trust Company, 40 Wall Street, New York, New York 10005, written notice of
such revocation or a duly executed proxy bearing a later date, or by attending
the Annual Meeting and voting in person. Attendance at the Annual Meeting will
not in and of itself constitute a revocation of a proxy.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of April 23, 1999 by (i) each person
who is known by the Company to own beneficially 5% or more of the outstanding
shares of Common Stock, (ii) each of the Company's directors, (iii) each of the
officers named in the Summary Compensation Table, and (iv) all directors and
executive officers as a group. Except as indicated in the footnotes to the
table, the persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable. Each of the persons listed
in the table maintains an address at 15 Riverside Avenue Westport, Connecticut
06880, unless otherwise indicated.
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<PAGE>
<TABLE>
<CAPTION>
Name and Address Amount and Nature of
of Beneficial Owner Beneficial Ownership Percent of Class
- -------------------- -------------------- ----------------
<S> <C> <C>
First Equity Group Inc. (1) 3,747,018 41.6%
Aaron P. Hollander (1) 3,747,018 41.6%
Michael C. Culver (1) 3,747,018 41.6%
The Wynnefield Group (2)
One Penn Plaza, Suite 4720
New York, NY 10119 1,586,792 17.6%
Canpartners Investments IV, LLC (3)
9665 Wilshire Boulevard
Suite 200
Beverly Hills, California 90212 1,293,335 14.4%
Wellington Management Company, LLP (4)
75 State Street
Boston, MA 02109 882,000 9.8%
John A. Marsalisi 8,062 *
Gerald E. Schlesinger 983 *
Aerospace Products International Inc.
3778 Distriplex Drive North
Memphis, TN 38118
Philip C. Botana
Aerospace Products International Inc.
3778 Distriplex Drive North
Memphis, TN 38118 1,000 *
Joshua S. Friedman (5) -- *
Robert L. Kirk 10,803 *
Charles B. Ryan 45,353 *
All directors and executive
officers as a group (9 persons) 3,809,849 42.4%
</TABLE>
- -----------------------------------
* less than 1%
(1) Aaron P. Hollander and Michael C. Culver own, in the aggregate, all of
the outstanding shares of First Equity Group Inc.
(2) Based upon a Schedule 13D dated April 15, 1999 and the Company's
knowledge, The Wynnefield Group is composed of the Wynnefield Partners
Small Cap Value, L.P., Channel Partnership II L.P., Wynnefield Small
Cap Value Offshore Fund, Ltd., and the Wynnefield Small Cap Value,
L.P. I.
(3) Based upon a Schedule 13G dated February 12,1998 and the Company's
knowledge, Canpartners Incorporated is a Managing Member of
Canpartners. Mr. Friedman, Mitchell R. Julis and R. Christian B.
Evenson are the sole shareholders and directors of Canpartners
Incorporated and such individuals may be deemed to share beneficial
ownership of the shares shown as owned by Canpartners. Such persons
disclaim beneficial ownership of such shares.
(4) Based upon a Schedule 13G dated January 13, 1998 and the Company's
knowledge.
(5) Excludes 1,293,335 shares shown as owned by Canpartners. Mr. Friedman
is a Vice-President of Canpartners and is a shareholder and director of
Canpartners Incorporated, a Managing Member of Canpartners, and as such
may be deemed to have voting and investment power over such shares. Mr.
Friedman disclaims any beneficial ownership of such shares.
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<PAGE>
Section 16 (a) Beneficial Ownership Reporting Compliance
Section 16 (a) of the Exchange Act requires the Company's directors and
executive officers to file initial reports of ownership and reports of changes
in ownership of the Company's Common Stock with the Securities and Exchange
Commission. Directors and executive officers are required to furnish the Company
with copies of all Section 16 (a) forms that they file. Based upon a review of
these filings, the Company believes that all such filings were made on a timely
basis for the fiscal year ended January 31, 1999.
Section 16 (a) of the Exchange Act also requires ten percent shareholders to
file initial reports of ownership and reports of changes in ownership of the
Company's Common Stock with the Securities and Exchange Commission. Ten percent
shareholders are required to furnish the Company with copies of all Section 16
(a) forms that they file. Based upon a review of copies of filings submitted to
the Company, the Company believes that all filings were made on a timely basis
for the fiscal year ended January 31, 1999, except that two reports for six
transactions were filed late by The Wynnefield Group.
1. Election of Directors (Proposal No. 1)
The nominees for director are John A. Marsalisi and Charles B. Ryan. The
Company's Certificate of Incorporation provides for a Board of Directors
classified into three classes, each with a term of office of three years,
expiring sequentially at successive annual meetings of stockholders. The Board
of Directors currently is comprised of six directors, two directors each in
Class I, Class II and Class III. The classes distinguish term of office only. If
elected, the two nominees will serve for a term to expire at the Annual Meeting
of Stockholders in the year 2002.
The accompanying proxy will be voted for the election of the Board's nominees
unless contrary instructions are given. The nominees at present are available
for election as members of the Board of Directors. If the nominees are unable to
serve, the persons named as proxies intend to vote for such other person or
persons as the Board of Directors may designate.
The Board of Directors recommends a vote FOR the election of John A. Marsalisi
and Charles B. Ryan.
Nominees for election to the Board of Directors for a term expiring at the
Annual Meeting of Stockholders in the year 2002.
John A. Marsalisi, 43, has served as a Director and Chief Financial Officer and
Secretary of the Company since March 1995. He has been an officer of First
Equity since 1996. From 1991 to May 1996, Mr. Marsalisi was Director of Taxes
for Omega Engineering. Prior to joining Omega Engineering, Mr. Marsalisi was
Director of Taxes for the Entrepreneurial Services Group of Ernst & Young's
Stamford, Connecticut office. Mr. Marsalisi is a Certified Public Accountant.
Charles B. Ryan, 48, became a Director in March 1997. Since 1986, Mr. Ryan has
been the President and Chief Operating Officer of Nordam Group Inc., a
manufacturer and overhaul agency of airframe components, nacelles and thrust
reversers. Mr. Ryan has been associated with Nordam Group Inc. since 1976. Mr.
Ryan is also a Director of F&M Bank & Trust Company.
5
<PAGE>
Members of the Board of Directors Continuing in Office;
Terms Expire at the 2000 Annual Meeting of Stockholders
Joshua S. Friedman, 43, became a Director in March 1997. Mr. Friedman has been
an executive officer of Canyon Capital Advisors LLP and various related or
predecessor entities ("Canyon Capital") since their inception in 1990. Canyon
Capital is a merchant banking and money management firm which Mr. Friedman
co-founded and which is an affiliate of Canpartners, a former subordinated
creditor and warrant holder of the Company. From 1984 to 1990, Mr. Friedman was
an Executive Vice President and Co-Director of Capital Markets of Drexel Burnham
Lambert Incorporated. Mr. Friedman currently serves as a member of the Board of
Directors of Sunterra Resorts, Inc., a publicly traded developer and operator of
timeshare resorts, and several privately held companies and charitable
organizations.
Aaron P. Hollander, 42, has served as Chairman of the Company since March 1995.
Mr. Hollander became a director of the Company's wholly owned subsidiary,
National Airmotive Corporation ("NAC") in June 1995. In 1985, Mr. Hollander
co-founded First Equity Development Inc. ("First Equity"), an aerospace
investment and advisory firm, and has served as Co-Managing Director since that
time.
Members of the Board of Directors Continuing in Office;
Terms Expire at the 2001 Annual Meeting of Stockholders
Michael C. Culver, 48, has been a Director and Chief Executive Officer of the
Company since March 1995. Mr. Culver became a director of NAC in June 1995,
Chairman in August 1996 and Chief Executive Officer in June 1997. Mr. Culver
also serves as Chairman of the Company's majority owned subsidiary, Aerospace
Products International Inc. In 1985, Mr. Culver co-founded First Equity and has
served as Co-Managing Director since that time.
Robert L. Kirk, 69, has been a Director since March 1997. Mr. Kirk recently
retired as Chairman of British Aerospace Holdings, Inc., an international
aerospace corporation. Mr. Kirk served as Chairman and Chief Executive Officer
of CSX Transportation, Inc., the railroad subsidiary of CSX Corporation, from
1990 to 1992, and was Chairman and Chief Executive Officer of Allied-Signal
Aerospace Co. from 1986 to 1989.
Committees of the Board of Directors and Meeting Attendance
During the fiscal year ended January 31, 1999, the Company's Board of Directors
was comprised of Messrs. Culver, Friedman, Hollander, Kirk, Marsalisi and Ryan.
The Board of Directors held four regularly scheduled meetings during the fiscal
year ended January 31, 1999. Each director attended at least 75% of the
aggregate number of meetings of the Board of Directors and at least a majority
of the meetings of committees on which he served while a member thereof.
The Board of Directors has the following standing committees, which were first
established in March, 1997.
Executive Committee
The Executive Committee consists of two directors of the Company, Messrs.
Hollander and Culver. The Executive Committee has the power and authority to
exercise all of the powers and authority of the Board of Directors in managing
the business affairs of the Company, except that it does not have the power and
authority to: (i) amend the Certificate of Incorporation or By-laws of the
Company; (ii) adopt an agreement of merger or consolidation or to recommend to
stockholders the sale, lease or exchange of all or substantially all of the
Company's property and assets; (iii) recommend to stockholders a dissolution of
the Company or a revocation of the dissolution; or (iv) declare a dividend or
authorize the issuance of stock of the Company unless expressly authorized by a
resolution of the Board of Directors.
6
<PAGE>
Audit Committee
The Audit Committee consists of two independent directors of the Company,
Messrs. Hollander and Ryan. The Audit Committee is responsible for engaging the
Company's independent auditors and reviewing with them the scope and timing of
their audit services, any other services which they are asked to perform, their
report on the Company's accounts following completion of the annual audit and
the Company's policies and procedures with respect to internal accounting and
financial control. The Audit Committee met three times during the fiscal year
ended January 31, 1999.
Compensation Committee
The Compensation Committee consists of two independent directors of the Company,
Messrs. Hollander and Kirk. The Compensation Committee is responsible for making
recommendations to the Board of Directors with respect to compensation and
benefit levels of executive officers of the Company. During the fiscal year
ended January 31, 1999, the Compensation Committee met twice.
Compensation of Directors and Executive Officers
Board of Directors Compensation
Each of the Company's non-employee directors receives an annual director's fee
of $20,000, payable in cash or stock. No director of the Company receives any
additional fees for attendance at meetings of the Board of Directors or
committees thereof. Members of the Board of Directors receive reimbursement for
actual expenses of attendance at meetings.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee is or has been an employee of the
Company.
Report from the Compensation Committee Regarding Executive Compensation
The Compensation Committee (the "Committee") of the Board of Directors is
responsible for developing the executive compensation philosophy of First
Aviation and administering this philosophy and its relationship with the
compensation paid to the Chief Executive Officer and each of the other executive
officers.
The basic philosophy behind executive compensation at First Aviation is to
reward the executive's performance so as to create long-term shareholder value.
This pay-for-performance tenet is embedded in most aspects of an executive's
total compensation package. Salary increases, bonuses and long-term incentive
grants are reviewed annually to ensure consistency with the Company's overall
compensation philosophy.
Base Salary
All decisions regarding base salary are made based upon individual performance
as measured against pre-established individual objectives and competitive
practice as measured by periodic compensation surveys. Base salaries are
targeted at the median of a comparative group that includes peer group
companies, similar to those reflected in the proxy performance graph, and
general industry companies similar in size to First Aviation.
Long-Term Incentive Grants
Long-term incentive grants are considered for each executive. The grants are
usually made in the form of incentive stock options. Aggregate stock holdings of
the executives have no bearing on the size of long-term incentive grants.
Restricted stock may be granted for specific reasons, such as (i) rewarding
individual performance, (ii) recognizing company performance, (iii)
accommodating special situations, such as promotions, (iv) in lieu of other
benefits or (v) in an effort to remain market competitive.
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<PAGE>
Total Compensation
Approximately 50% of the total compensation of the Company's most senior
executives is "at risk", based strictly upon the performance of the Company and
the return to the stockholders. In addition, certain elements of the employee
benefit package, such as the Employee Stock Purchase Plan are driven by
increasing shareholder value.
Inherent in this "at risk" component is a heavy weighting toward long-term
performance. At First Aviation, long-term incentives for the most senior
executives can make up to half of the total amount of a senior executive's
annual compensation. We believe this feature provides management with a
long-term strategic incentive that will encourage the continued creation of
shareholder value.
The Committee has access to national compensation surveys and the financial
records of the Company. The Committee reviews each element of compensation to
ensure that the total compensation delivered is reflective of the company's
performance with input on market competitiveness. The executive compensation
program is designed to provide compensation for performance. In the last review,
the Committee confirmed that the executive compensation program was meeting the
targeted objective.
Mr. Culver's base salary during the fiscal year ended January 31, 1999 was paid
in accordance with his employment agreement of December 20, 1996. During such
period Mr. Culver did not receive a cash bonus or stock award under the
Company's plans.
Summary
Executive compensation at First Aviation is considered very seriously by the
Committee, the Board of Directors and senior management. The Committee believes
there should be a strong link between the financial rewards of the executives
and the success of the shareholder. The success of the shareholder is measured
by the increase in shareholder value. The Committee believes that with the
present plans in place management will continue to strive to increase
shareholder value.
Compensation Committee
Aaron P. Hollander
Robert L. Kirk
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<PAGE>
Summary Compensation Tables
The following table sets forth certain information for the fiscal years ended
January 31, 1999, 1998 and 1997, regarding compensation awarded to, earned by,
or paid to the Company's Chief Executive Officer and each of the other executive
officers of the Company whose compensation exceeded $100,000.
Annual Compensation
-------------------
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
---------------------------------- ------------
Securities
Underlying
Name and Principal Position Year Salary Bonus Options
- ------------------------------ ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Philip C. Botana FYE 1/31/99 $87,500 25,000
Vice President FYE 1/31/98 N/A
FYE 1/31/97 N/A
Michael C. Culver FYE 1/31/99 $180,000
Chief Executive Officer FYE 1/31/98 $180,000
FYE 1/31/97 $23,000
John A. Marsalisi FYE 1/31/99 $155,000
Chief Financial Officer FYE 1/31/98 $155,000 $20,000 5,000
FYE 1/31/97 $20,000 40,000
Gerald E. Schlesinger FYE 1/31/99 $190,000
Senior Vice President FYE 1/31/98 $99,167 $40,000 60,000
FYE 1/31/97 N/A
</TABLE>
Option Grants in Last Fiscal Year
The following table sets forth information regarding the stock options that were
granted during the last fiscal year to each of the officers named in the Annual
Compensation Table.
Individual Grants
-----------------
<TABLE>
<CAPTION>
Number of Percent of
Securities Total Options
Underlying Granted to Grant Date
Options Employees in Exercise or Present Value
Name Granted Fiscal year Base Price Expiration date Per Share (1)
- ----------------- -------------- ---------------- ---------------- ---------------- -------------------
<S> <C> <C> <C> <C> <C>
Philip C. Botana 25,000 28.3% $6 2008 $1.90
Michael C. Culver None N/A N/A N/A N/A
John A. Marsalisi 5,000 5.7% $6 2008 $1.90
Gerald E. Schlesinger 10,000 11.3% $6 2008 $1.90
</TABLE>
(1) Present value on the grant date was determined by using the
Black-Scholes option-pricing model. The model as applied used the
applicable grant date, the exercise price as shown in the table and the
fair market value of the Company's Common Stock on the grant date. The
model assumed (i) a risk-free return of 6.0%, (ii) a dividend yield of
0%, (iii) an average volatility factor of 0.516 and (iv) the exercise
of all options on the final day of their 10-year terms. No discount
from the theoretical value was taken to reflect the waiting period
prior to vesting, the limited transferability of the options, and the
likelihood of the options being exercised in advance of the final day
of their terms. There is no assurance that the values actually realized
upon the exercise of these options will be at or near the present
values shown in the tables as of the date of grant. The Black-Scholes
option pricing model is a widely used mathematical formula for
estimating option values that incorporates various
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<PAGE>
assumptions that may not hold true over the 10-year life of these
options. For example, assumptions are required about the risk-free rate
of return as well as the dividend yield and the volatility of the
Common Stock over the 10-year period. Also, the Black-Scholes model
assumes that an option holder can sell the option at any time at a fair
price that includes a premium for the remaining time value of the
option. However, an optionee can realize an option's value before
maturity only by exercising and thereby sacrificing the option's
remaining time value. Although the negative impact of this and other
restrictions on the value of this type of option is well recognized,
there is no accepted method for adjusting the theoretical option value
for them. The values set forth in the table should not be viewed in any
way as a forecast of performance of the Company's Common Stock, which
will be influenced by future events and unknown factors.
Aggregated Option Exercises in the Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth the aggregate positions in stock options at
January 31, 1999 held by each of the officers named in the Annual Compensation
Table.
<TABLE>
<CAPTION>
Number of Securities Value of Unexcercised
Underlying Unexercised In-The-Money Options
Options at Fiscal Year End at Fiscal Year End
Name Exercisable/Unexercisable Excercisable/Unexcercisable
- -------------------------- ----------------------------- -----------------------------
<S> <C> <C>
Philip C. Botana None/25,000 N/A
Michael C. Culver None/None N/A
John A. Marsalisi 20,000/25,000 N/A
Gerald E. Schlesinger 12,500/47,500 N/A
Employment Contracts
</TABLE>
In December 1996, First Aviation entered into employment agreements with Michael
C. Culver and John A. Marsalisi. Mr. Culver's and Mr. Marsalisi's employment
agreements are each for terms of three years which expire on December 31, 1999,
and provide for an annual base salary of $180,000 and $155,000, respectively. In
July 1997, First Aviation entered into a three-year employment agreement with
Gerald E. Schlesinger with a base salary of $170,000. On June 1, 1998, the
Company entered into a three year employment agreement with Philip C. Botana
with a base salary of $150,000. Each agreement provides for base salaries to be
adjusted at the discretion of the Board of Directors. Each of the employment
agreements provides for: (i) benefits which are also generally available to
other employees of First Aviation in similar employment positions, (ii)
reimbursement of reasonable business related expenses, (iii) three weeks paid
vacation a year, and (iv) a severance payment, upon termination without cause or
for death or disability, equal to six months base salary. Each of the agreements
may be terminated by First Aviation without cause at any time upon 30 days
notice or by the executive for any reason upon 30 days notice.
Mr. Culver, Mr. Marsalisi, Mr. Schlesinger and Mr. Botana each have, as part of
their respective employment agreements, agreed not to compete with First
Aviation for a period of six months following the end of his employment by First
Aviation and not to solicit employees or customers of First Aviation for a
period of six months following the end of his employment with First Aviation.
Stock Performance
The following graph compares the cumulative stockholder return on First Aviation
Common Stock with The Russell 2000 Stock Index and a peer group index selected
by the Company. The peer group is comprised of the following companies: AVTEAM,
Inc., Kellstrom Industries, Inc., Satair A/S, and Vector Aerospace Corporation.
The comparison assumes $100 was invested as of February 28, 1997 (the date on
which shares of common stock began trading on a "when issued" basis) and the
reinvestment of all dividends.
10
<PAGE>
In the prior year the cumulative stockholder return on First Aviation Common
Stock was compared to the S&P 500 Stock Index and a peer group index which
consisted of Aviall, Inc., AAR Corporation, Aviation Sales Corporation, Triumph
Group, Kellstrom, Inc. and Banner Aerospace, Inc. AAR Corporation, Aviation
Sales Corporation and Triumph Group were eliminated from the peer group because
their market capitalization is substantially greater than that of the Company.
Aviall was eliminated because recently received segment data shows that the
company derives approximately half of its income from the operation of a
business that is not comparable to the operations of First Aviation. Banner was
eliminated because it is no longer a publicly traded company. The prior indices
were weighted towards companies with a much larger capitalization than that of
the Company. The Company changed the stock index and peer group in order to
reflect the performance of companies, such as First Aviation, with a smaller
capitalization.
[Tabular Representation of Line Chart]
<TABLE>
<CAPTION>
February 28, 1997 January 31, 1998 January 31, 1999
----------------- ---------------- ----------------
<S> <C> <C> <C>
Prior Peer Group $100 $145.68 $134.78
S&P 500 $100 $124.00 $161.80
First Aviation $100 $ 67.50 $ 45.00
Peer Group $100 $141.44 $108.32
Russell 2000 $100 $119.40 $118.60
</TABLE>
Certain Relationships and Related Transactions
In March 1999, the jury decided in favor of the Company in litigation
brought by John F. Risko, a former director and manager, initiated in June 1997
against the Company, National Airmotive Corporation, Aaron P. Hollander, Michael
C. Culver, First Equity Development Inc. and First Equity Group Inc. The
Plaintiff's allegations of wrongful termination, breach of contract, and various
actions of fraud, deceit and misrepresentation were dismissed. The plaintiff had
sought various damages as well as common shares of the Company. On a separate
count, the jury, in a split decision, awarded the plaintiff a cash bonus of
$200,000. During the quarter ended January 31, 1999, the Company, accrued $3.1
million for the costs of defending itself and its Directors against these
claims. The accrual includes legal fees incurred through January 31, 1999,
completion of the trial, expert testimony, out-of-pocket costs, and the costs of
an appeal. The Company is pursuing recovery of these costs in accordance with
the terms of a Directors and Officers Insurance Policy. The amount of recovery,
if any, is not ascertainable at this time. Any recovery will be reflected in
future periods.
On December 20, 1996, the Company and First Equity, an affiliate of
First Equity Group, entered into an agreement allocating potential investment
and acquisition opportunities in the global aircraft engine repair and overhaul
market. Pursuant to the agreement, First Equity agreed that commencing with the
consummation of the Offering, neither First Equity nor any of its majority-owned
subsidiaries will, as a principal, consummate any acquisition of a majority
interest in any business that is engaged in the repair and overhaul of military
and commercial aircraft engines anywhere in the world (a "Covered Acquisition"),
11
<PAGE>
without first notifying the Company and providing the Company with the
opportunity to choose to effect the Covered Acquisition for its own account. The
Company's decision as to whether to effect the Covered Acquisition will be made
by the directors of the Company that have no affiliation with First Equity. The
agreement will remain in effect for a five-year term, subject to earlier
termination in the event First Equity reduces its ownership interest in the
Company to less than 10% of the Company's outstanding voting securities. The
agreement does not apply to any proposed acquisition by First Equity of any
business that generates less than 15% of its aggregate net sales from the repair
and overhaul of military and commercial aircraft engines, nor to any advisory
services performed by First Equity on behalf of third parties.
During the quarter ended October 31, 1998, the Company, upon the
authorization of the independent members of the Board of Directors, entered into
an advisory agreement with a related party, First Equity. Pursuant to the
agreement, First Equity is to provide the Company investment and financial
advisory services relating to potential acquisitions and other financial
transactions. The agreement runs through February 1, 2000 but may be terminated
by either party upon 30-days written notice to the other. Under the terms of the
agreement, the Company will pay a fee to First Equity for the successful
completion of certain transactions (the "Success Fee"), and will reimburse First
Equity for its out-of-pocket expenses. The amount of the Success Fee will be
established by the independent members of the Board of Directors and will be
dependent upon a variety of factors, including, but not limited to, the scope of
the services to be provided, the size and type of acquisition, and the
successful completion of a transaction. The agreement requires the Company to
pay First Equity a $30,000 monthly retainer effective February 1, 1998, which
can be applied as a credit against the Success Fee, subject to certain
limitations. During the year ended January 31, 1999, the Company paid First
Equity retainer fees totaling $360,000, all of which can be applied against the
Success Fee.
The Company subleases from First Equity approximately 3,000 square feet
of office space in Westport, Connecticut. The sublease, which became effective
April 21, 1997, is for a period of ten years, and is cancelable by either party
with six months notice. The Company has the option to renew the sublease for two
additional five-year periods. Lease payments under this sublease totaled
approximately $98,000 and $50,000 respectively, for the fiscal years ended
January 31, 1999 and 1998.
The Company believes that the terms of the advisory agreement and the
sublease agreement between the Company and First Equity are at least as
favorable as the terms which would have been obtained by the Company from an
unaffiliated third-party.
12
<PAGE>
2. Appointment of Auditors (Proposal No. 2)
On the recommendation of the Audit Committee of the Board of Directors, the
Board has appointed Ernst & Young LLP as auditors for the fiscal year ended
January 31, 2000, subject to ratification by stockholders. Ernst & Young LLP has
audited the Company's financial statements since 1995.
Representatives of Ernst & Young are expected to attend the Annual Meeting,
where they will have the opportunity to make a statement if they wish to do so,
and will be available to answer appropriate questions from stockholders.
If the foregoing proposal is not approved at the Annual Meeting, or if prior to
the 2000 Annual Meeting of Stockholders, Ernst & Young LLP shall decline to act
or otherwise become incapable of acting, or if its engagement shall otherwise be
discontinued by the Board of Directors, then in any such case, the Board of
Directors will appoint other independent auditors whose engagement for any
period subsequent to the 1999 Annual Meeting will be subject to ratification by
the Stockholders at the 2000 Annual Meeting of Stockholders.
Solicitation of Proxies
The cost of soliciting proxies for the Annual Meeting will be borne by the
Company. In addition to solicitation by mail, solicitations also may be made by
personal interview, telecopier, telegram and telephone. The Company will use the
services of American Stock Transfer & Trust Company to assist in soliciting
proxies, and expects to pay a nominal fee for such services. Arrangements will
be made with brokerage houses and other custodians, nominees and fiduciaries to
send proxies and proxy material to their principals. Consistent with the
Company's confidential voting procedure, directors, officers and other regular
employees of the Company, as yet undesignated, also may request the return of
proxies by telephone, telecopier, telegram or in person.
Stockholder Proposals
All proposals from stockholders to be included in the proxy materials to be
distributed by the Company in connection with the next Annual Meeting must be
received by the Secretary of the Company, 15 Riverside Avenue, Westport,
Connecticut 06880, not later than the close of business on February 9, 2000.
In addition, as more fully explained in the Company's By-laws, in order to be
properly brought before the next Annual Meeting of Stockholders, proposals,
including proposals for the nomination of directors, the removal of directors,
amendments to the Company's Certificate of Incorporation or By-laws, or the
repeal of a by-law, must be received in writing by the Company's Secretary no
earlier than 90 days and no later than 60 days in advance of the next Annual
Meeting of Stockholders, or, if fewer than 70 days notice or prior public
disclosure of the meeting date is given or made by the Company, not later than
the 10th day after which notice was mailed or such public disclosure was made.
By order of the Board of Directors
John A. Marsalisi
Secretary
13
<PAGE>
PROXY
FIRST AVIATION SERVICES INC.
15 Riverside Ave., Westport, Connecticut 06880
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Aaron P. Hollander and John A. Marsalisi as
proxies, each with the power to appoint his or her substitute and hereby
authorizes each of them to vote, as designated on the reverse side, all the
shares of Common Stock of First Aviation Services Inc. held of record by the
undersigned on June 1, 1999 at the Annual Meeting of Stockholders to be held on
July 15, 1999 or any adjournment thereof.
(To be Signed on Reverse Side)
<PAGE>
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
FIRST AVIATION SERVICES INC.
July 15, 1999
[arrow graphic] Please Detach and Mail in the Envelope Provided [arrow graphic]
Please mark you
A [X] votes as in this
example.
FOR nominees
listed at right WITHHOLD AUTHORITY
(except as marked) to vote for nominees
to the contrary below) listed at right
1. Election of
Directors for a [ ] [ ]
term to expire
at the Annual Meeting of Shareholders in the year 2002.
Nominees: John A. Marsalisi
Charles B. Ryan
(INSTRUCTION: To withhold authority to vote for any
individual nominee, strike a line through the nominee's
name in the list at right.)
2. Proposal to ratify the appointment of Ernst FOR AGAINST ABSTAIN
& Young LLP as the Independent auditors [ ] [ ] [ ]
of First Aviation Services Inc.
3. In their discretion; the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2 AND 3.
PLEASE VOTE, SIGN, DATE AND RETURN THE PROXY CARD USING THE ENCLOSED ENVELOPE.
SIGNATURE DATED: DATED:
---------------- --------- ----------------- ---------
(SIGNATURE IF
HELD JOINTLY)
Note: Please sign exactly as name appears above. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
