SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Check the appropriate box:
[ ] Preliminary proxy statement.
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(2)).
[ ] Definitive proxy statement.
[ X ] Definitive additional materials.
[ ] Soliciting material under Rule 14a-12.
FIRST AVIATION SERVICES INC.
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(Name of Registrant as Specified in its Charter)
WYNNEFIELD PARTNERS SMALL CAP VALUE, L.P.
WYNNEFIELD PARTNERS SMALL CAP VALUE, L.P. I
WYNNEFIELD SMALL CAP VALUE OFFSHORE FUND, LTD.
WYNNEFIELD CAPITAL MANAGEMENT, LLC
WYNNEFIELD CAPITAL, INC.
NELSON OBUS
JOSHUA H. LANDES
WYNNEFIELD CAPITAL, INC. PROFIT SHARING PLAN
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
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The following press release was issued June 1, 2004, and posted on the website
www.rescuefavs.com:
CONTACT:
Eric Berman
Joseph Kuo
of Kekst and Company
212-521-4800
or:
Nelson Obus
of Wynnefield Capital
212-760-0134
WYNNEFIELD GROUP REITERATES COMMITMENT TO
VALUE FOR ALL SHAREHOLDERS
-- RESPONDS TO FIRST AVIATION SERVICES BOARD --
NEW YORK, NY, June 1, 2004 - The Wynnefield Group, the largest minority
shareholder in First Aviation Services Inc. (NASDAQ: FAVS), today released the
following letter in response to the letter to shareholders from the FAvS Board
of Directors dated May 26, 2004:
Dear Members of the Board of Directors:
As long-time shareholders in First Aviation Services (FAvS), we were
disappointed to see your recent letter to shareholders. Please know that we
undertake this proxy contest as a matter of principle on behalf of ALL minority
shareholders. Your allegation that Wynnefield is seeking to pressure the board
to buy back our shares at a premium is completely untrue and is completely
contrary to the investment philosophy of Wynnefield. A review of our eleven-year
history of investing in public companies would confirm that Wynnefield has NEVER
accepted a premium price for its shares alone. Wynnefield would only sell its
shares at a price that was available to all other shareholders.
We have launched this proxy contest as a last resort. Management and the board
have rejected our plea to develop and execute within a board-agreed time frame
something that this company has never had: a business plan that delivers
consistent profits and value to ALL shareholders. Our focus here is to bring
fresh thinking to the board and enlist its commitment to developing and
implementing a business plan that delivers consistent profitability and
shareholder value within a specified period of time. If - and only if - this
fails, we would ask the board's commitment to engage in a value-releasing
transaction for all shareholders.
We are compelled to respond to several inaccurate assertions in your letter to
shareholders. This is not an issue of personal rhetoric; the fact of the matter
is that, while using the investing public's money, the board and management of
FAvS have failed to create value over their many years of stewardship. Your
characterization of the company's performance under your stewardship ignores the
facts, including:
o FAvS stock trades near net/net working capital (liquidation value) per
share - indicating that the market assigns its existing business little
value.
o FAvS has reported average annual losses from continuing operations of
$(0.12) per share for the past four fiscal years; and
Wynnefield Group Responds -- continued 2
o FAvS stock traded below book value for more than three years.
You asked shareholders not to be fooled by Wynnefield. In truth, it is the board
that is attempting to fool FAvS shareholders, not Wynnefield. Management boasts
that it is achieving "record sales," but has repeatedly refused to disclose
whether its sales are attributable to its low-margin parts distribution
operations, or its potentially more profitable supply-chain management (or
logistics) operations, which management has described as the "rationale for this
Company being public." With no segment disclosure, understanding the "success"
of the logistics business is problematic. We cannot know whether the company's
refusal to separately report logistics sales is an attempt to obscure a lack of
progress in the logistics sector from FAvS shareholders.
While FAvS management continues to blame a post-9/11 industry downturn for the
company's weak performance, the facts demonstrate that FAvS' closest competitor
(Aviall, Inc.) has consistently outperformed FAvS since that time, and that the
industry has been recovering:
o Since 2001, Aviall's share price has increased by more than 225%, while
FAvS' has remained essentially flat (see www.rescuefavs.com for chart);
o In 1999, FAvS sold its aircraft/engine overhaul subsidiary, whose primary
customers were military, and has failed to make use of the proceeds to
grow FAvS' business, while Aviall entered the military market with
significant positive results;
o FAvS' paid a $7.251 million special one-time dividend, the majority of
which went to First Equity, the holding company and investment banking
firm owned 100% by FAvS' Chairman and its CEO, instead of using this cash
to invest in the growth of FAvS to replace business lost from the
disposition of its lucrative aircraft/engine overhaul operations;
o The general aviation industry improved significantly from the first
quarter of 2003 to the first quarter of 2004 - with parts shipments up
9.7% and total billings up 21.1% -- according to the General Aviation
Manufacturers Association.
We believe FAvS' continued underperformance results from the company's failure
to articulate and execute a consistently profitable business plan and a lack of
investment in the growth of the business - strategies it had outlined in its
1997 Initial Public Offering prospectus and subsequent communications to
shareholders. Although that growth strategy included, among other things,
acquisition of complementary businesses, as noted above, FAvS SOLD its primary
subsidiary for net cash of $44 million in 1999, and with that cash has only made
one small ($4.6 million) acquisition.
Moreover, there are important issues at stake in this contest involving minority
shareholders' rights and corporate governance. As you know, FAvS is controlled
by First Equity, a holding company and investment banking firm that is itself
owned entirely by FAvS' Chairman and its CEO. First Equity, owning just 51% of
the company, has had complete control over director elections and business
strategies.
Wynnefield Group Responds -- continued 3
In fact, even as the company's performance continues to suffer, these management
insiders continue to reap financial rewards:
o First Equity has received fees of more than $1.4 million over the past
four years for "advisory services relating to potential acquisitions and
other financial transactions" - even though only one small $4.6 million
acquisition was completed during that time;
o First Equity has received annual lease and expense-sharing payments -
including $140,000 this past year - to maintain headquarters in Westport,
CT - even though there is ample space at the company's central Memphis
facilities; and
o First Equity's co-owner (who also serves as FAvS' CEO) receives
significant bonuses and salary - including a discretionary cash bonus of
$200,000 for the fiscal year ended January 31, 2004 - even though a
significant portion of his compensation was supposed to be "at risk,"
based upon the Company's performance and achievement of objectives
compared to the performance of the company's successful competitors,
according to FAvS' proxy statement.
The board's efforts - under the control of the 51% owner (the investment banking
firm First Equity) - have been unsuccessful in improving returns to outside
shareholders or addressing financial rewards to insiders. We have therefore
pursued the election to the board of a representative of minority shareholders,
who would bring fresh ideas and help to develop and execute a plan that creates
value for ALL shareholders. GIVEN THE PERFORMANCE OF THE COMPANY, IT IS HARD TO
UNDERSTAND MANAGEMENT'S OPPOSITION TO THE ELECTION OF A SINGLE DIRECTOR OF THE
MINORITY SHAREHOLDERS' CHOOSING. There is no denying that the true public
shareholders of FAvS have had no practical opportunity to elect a director of
their choosing.
In this contest, we are proposing that minority shareholders - who represent a
combined total of more than 48% of the company - have ONE representative on its
board of directors. Why is FAvS afraid of only one board member elected by
minority shareholders? Why is FAvS averse to the possibility of fresh ideas?
We have proposed Nelson Obus as a candidate for the board because he is a highly
experienced, long-term value investor, who currently serves on the boards of two
other public companies. In fact, he serves on the audit committees of these
companies and additionally the compensation committee of one of them, and has
helped to guide them to improved equity value for ALL shareholders.
We first proposed Mr. Obus as a candidate for the FAvS board last year. In 2003,
Mr. Obus received more than 66% of the votes cast excluding shares controlled by
First Equity and executive management, despite ONLY TWO DAYS to solicit
shareholders.
If elected this year, Mr. Obus will focus the board of directors through
concrete suggestions for the development of a consistently profitable business
plan that benefits ALL shareholders of the company. ONLY ABSENT DISCERNIBLE
PROGRESS TOWARD PROFITABILITY AND GROWTH WITHIN A REASONABLE TIME FRAME WILL HE
RECOMMEND TRANSACTIONS TO RELEASE VALUE FOR ALL SHAREHOLDERS. AND EVEN THEN HE
WOULD BE ONLY ONE VOICE AMONG FIVE DIRECTORS.
We are also proposing the implementation of cumulative voting of directors.
Cumulative voting would allow holders of 33.4% of FAvS stock to elect a single
director of their own choosing (when two directors are up for election).
Wynnefield Group Responds -- continued 4
Rather than continue to falsely impugn our motives and make personal assaults on
Mr. Obus' character, the board should focus on its responsibilities to its
minority shareholders.
Sincerely,
/s/
Nelson Obus
On behalf of The Wynnefield Group
ADDITIONAL INFORMATION:
Shareholders are advised to read the Wynnefield Group's definitive proxy
statement, which contains important information. Shareholders may obtain a free
copy of the proxy statement and other documents filed by the Wynnefield Group
with the SEC at the SEC's internet website at www.sec.gov. The proxy statement,
a proxy card, and other documents may also be obtained free of charge from the
Wynnefield Group's proxy solicitor or from the Wynnefield Group by request to:
Lawrence E. Dennedy or Nelson Obus
Daniel M. Sullivan The Wynnefield Group
MacKenzie Partners, Inc. 450 Seventh Avenue, Suite 509
105 Madison Avenue Phone: (212) 760-0134
New York, NY 10016
Phone: (800) 322-2885
If you have lost your proxy card from the Wynnefield Group, or did not receive
one, you may obtain another proxy statement and card by contacting MacKenzie
Partners, Inc. or The Wynnefield Group at the phone numbers listed above.
ABOUT THE WYNNEFIELD GROUP:
The Wynnefield Group is First Aviation's largest outside shareholder, holding
29.7% of the company's outstanding common stock. Wynnefield is a long-term
investor in FAvS, having first invested in the company shortly after its initial
public offering more than six years ago.
The Wynnefield Group includes several affiliates of Wynnefield Capital, Inc.
(WCI), a value investor, specializing in U.S. small cap situations that have
company- or industry-specific catalysts. WCI was established in 1992. Its
founding partners, Nelson Obus and Joshua Landes, held senior research and
institutional equity positions at Lazard Freres & Co. during the 1980s, and the
initial Wynnefield investors included many of their colleagues at Lazard. The
fund has grown to approximately $200 million under management. Nelson Obus
currently serves on the boards of directors of two publicly traded companies,
Layne Christensen Company (NASDAQ: LAYN) and Sylvan Inc. (NASDAQ: SYLN) and
additionally serves on the audit committees of both companies and the
compensation committee of Layne.
More information about the Wynnefield Group's efforts to help provide value to
all FAvS shareholders can be found at www.rescuefavs.com.
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