UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
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14a-6(e)(2))
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[_] Soliciting Material Pursuant to ss.240.14a-12
FIRST AVIATION SERVICES INC.
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(Name of Registrant as Specified In Its Charter)
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FIRST AVIATION SERVICES INC.
15 RIVERSIDE AVENUE
WESTPORT, CONNECTICUT 06880
_______________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
_________________
The 2005 Annual Meeting of Stockholders of First Aviation Services Inc. (the
"Annual Meeting") will be held at the offices of Aerospace Products
International, Inc., 3778 Distriplex Drive North, Memphis, TN 38118 on Tuesday,
June 7, 2005 at 8:00 a.m. local time for the following purposes:
1. To elect one director for a term to expire at the Annual Meeting
of Stockholders in the year 2008 (Class III).
2. To consider and vote upon a proposal to ratify the appointment of
Ernst & Young LLP as the Company's independent registered public
accounting firm for the year ending January 31, 2006.
3. To consider and vote upon a stockholder proposal regarding
cumulative voting for director elections, if properly presented
at the Annual Meeting.
4. To 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 May 3,
2005, 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 a proxy issued in your name from the record holder.
Regardless of how many shares you own, your vote is very important, and we
encourage you to exercise your right to vote. Please COMPLETE, SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD TODAY.
By order of the Board of Directors,
/s/ Robert G. Costantini
Robert G. Costantini
Secretary
Westport, Connecticut
May 10, 2005
FIRST AVIATION SERVICES INC.
15 RIVERSIDE AVENUE
WESTPORT, CONNECTICUT 06880
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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 (the
"Board") for use at the Company's 2005 Annual Meeting of Stockholders, which is
scheduled to be held on Tuesday, June 7, 2005, at 8:00 a.m. local time at the
offices of Aerospace Products International, Inc., 3778 Distriplex Drive North,
Memphis, TN 38118, and at any adjournment or postponement thereof (the "Annual
Meeting"). The Notice of Annual Meeting, this proxy statement, the accompanying
proxy, the Company's Annual Report on Form 10-K for the year ended January 31,
2005, and the Company's Annual Report are first being furnished to stockholders
on or about May 11, 2005.
The Company's principal executive offices are located at 15 Riverside Avenue,
Westport, Connecticut 06880. Additional information about the Company can be
found on the Company's worldwide web site at www.favs.com, or www.apiparts.com.
RECORD DATE
The Board of Directors has fixed the close of business on May 3, 2005 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 on the Record Date, and may vote in person or by
proxy authorized in writing. On the Record Date, there were 7,332,882 shares of
Common Stock issued and outstanding.
MATTERS TO BE CONSIDERED
At the Annual Meeting, stockholders will be asked to consider and vote upon: (1)
the election of one director for a term to expire at the Annual Meeting of
Stockholders in the year 2008 (Class III), and until his successor is duly
elected and qualified; (2) the ratification of the appointment of Ernst & Young
LLP as the Company's independent registered public accounting firm for the year
ending January 31, 2006; and (3) a stockholder proposal regarding cumulative
voting for director elections, if properly presented at the Annual Meeting. The
Board of Directors 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
In order to transact business at the Annual Meeting, a majority of the shares of
Common Stock issued and outstanding on the Record Date must be present in person
or represented by proxy at the Annual Meeting. Shares that are voted "FOR",
"AGAINST", or "WITHHOLD" on 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.
The affirmative vote of a plurality of the votes cast at the Annual Meeting is
required for the election of 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 nominee 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 a nominee's achievement of a plurality.
The affirmative vote of the holders of a majority of the voting power of the
issued and outstanding 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 registered public accounting firm for the year ending January 31,
2006, and for the approval of the stockholder proposal regarding cumulative
voting for director elections. 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.
Abstentions will count towards the determination of a quorum at the Annual
Meeting but will have the effect of votes "Against" a proposal, and will have no
effect on votes counted in connection with director elections.
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, "FOR" the ratification of the appointment of Ernst & Young LLP as
the Company's independent registered public accounting firm for the year ending
January 31, 2006, and "AGAINST" the stockholder proposal regarding cumulative
voting for director elections. If other matters are properly presented at the
Annual Meeting, the proxy holders named in the accompanying form of proxy will
vote your shares at their discretion.
If your shares of Common Stock are held in the name of your broker, a bank, or
other nominee (sometimes referred to as being held in "street name"), only your
broker, bank or other nominee may execute a proxy and vote your shares. Your
broker, bank or other nominee will be unable to vote your shares at the Annual
Meeting regarding the stockholder proposal unless they receive your specific
voting instructions. Please sign, date and promptly return the voting
instruction form you receive from your broker, bank or other nominee, in
accordance with the instructions on the form. If you wish to vote your "street
name" shares directly, you will need to obtain a document known as a "legal
proxy" from your broker, bank or other nominee. Please contact your bank, broker
or other nominee if you wish to do so.
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, 59 Maiden Lane, New York, New York 10038, 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.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE AGAINST THE STOCKHOLDER PROPOSAL.
YOU CAN VOTE YOUR SHARES AGAINST THE STOCKHOLDER PROPOSAL BY SIGNING AND DATING
THE ENCLOSED PROXY CARD OR VOTING INSTRUCTION FORM AND RETURNING IT IN THE
POSTAGE-PAID RETURN ENVELOPE. If you receive this proxy statement with a voting
instruction form from your broker, bank or other nominee, please vote in
accordance with the Board's recommendations, and sign, date and mail the
enclosed voting instruction form in the postage-paid envelope provided. Your
broker will not be able to vote your shares at the Annual Meeting regarding the
stockholder proposal unless it receives your specific voting instructions - so
please have your vote counted.
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If you have any questions or require voting assistance, please call D. F. King &
Co., Inc., which is assisting the Company, toll free at 1-800-949-2583.
1. ELECTION OF DIRECTOR (PROPOSAL NO. 1)
BOARD'S NOMINEE FOR ELECTION TO THE BOARD OF DIRECTORS FOR A TERM EXPIRING AT
THE ANNUAL MEETING OF STOCKHOLDERS IN THE YEAR 2008 - CLASS III DIRECTORS.
Joseph J. Lhota
The nominee for director is Joseph J. Lhota. The Company's Restated Certificate
of Incorporation provides for a Board of Directors composed of 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 five directors, two directors each in Class I and Class II, and one in Class
III, and there are no vacancies. The classes distinguish term of office only. If
elected, the nominee for Class III will serve for a term to expire at the Annual
Meeting of Stockholders in the year 2008, or until his successor is duly elected
and qualified.
The accompanying proxy will be voted for the election of the Board's nominee
unless contrary instructions are given. The nominee at present is available for
election as a member of the Board of Directors. If the nominee is unable to
serve, the persons named as proxies intend to vote for such other person as the
Board of Directors may designate.
Background information for the nominee as well as the four directors continuing
in office can be found under the caption "Directors" below.
Directors will be elected by a plurality of the votes cast. If you do not wish
your shares to be voted for the nominee, please select "withhold authority for
the nominee" in the appropriate space provided on the enclosed proxy card.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF JOSEPH J. LHOTA.
Members of the Board of Directors Continuing in Office:
TERMS EXPIRE AT THE 2006 ANNUAL MEETING OF STOCKHOLDERS - CLASS I DIRECTORS
Stanley J. Hill
Aaron P. Hollander
TERMS EXPIRE AT THE 2007 ANNUAL MEETING OF STOCKHOLDERS - CLASS II DIRECTORS
Michael C. Culver
Robert L. Kirk
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DIRECTORS
The directors of the Company are as follows:
NAME AGE POSITIONS
- ---- --- ---------
Aaron P. Hollander 48 Chairman of the Board
Michael C. Culver 54 President, Chief Executive Officer and Director
Stanley J. Hill 63 Director
Robert L. Kirk 76 Director
Joseph J. Lhota 50 Director
Aaron P. Hollander co-founded and has served as Chairman of the Board
of Directors of the Company since March 1995. In 1985, Mr. Hollander, along with
Mr. Culver, co-founded First Equity Group Inc. ("First Equity Group"), and has
served as its President and Co-Chief Executive Officer since that time. First
Equity Group's ownership interests, in addition to the Company, include First
Equity Development Inc., an aerospace investment and advisory firm, ("First
Equity"), Skip Barber Racing School, LLC ("Skip Barber") and Imtek, Inc.
("Imtek"), a specialty marketing and fulfillment company. Mr. Hollander is a
director and serves as the President and Chief Executive Officer of Skip Barber,
and is the Chairman of the Board of Directors of Imtek.
Michael C. Culver co-founded and has served as President, Chief
Executive Officer and Director of the Company since March 1995. Mr. Culver also
serves as Chairman of the Board of the Company's majority owned subsidiary,
Aerospace Products International, Inc. ("API"). Mr. Culver co-founded First
Equity Group, along with Mr. Hollander, and has served as Co-Chief Executive
Officer of First Equity Group since that time. Mr. Culver also serves as
Chairman of the Board of Directors of Skip Barber and is a director and Vice
President of Imtek.
Stanley J. Hill has served as a Director since December 2000. In 2000,
Mr. Hill retired as the President, Chief Executive Officer and Chairman of
Kaiser Aerospace and Electronics Corporation and its parent, K Systems, Inc.
(collectively, "Kaiser Aerospace"). Mr. Hill had been associated with Kaiser
Aerospace for nearly 30 years. Mr. Hill is a director of Intevac Inc., which is
based in Santa Clara, CA, and has its stock traded on the NASDAQ national
market.
Robert L. Kirk has served as a Director since March 1997. In 1998, Mr.
Kirk retired as the Chairman of British Aerospace Holdings, Inc., an
international aerospace corporation. Mr. Kirk had been Chairman since 1992. 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.
Joseph J. Lhota became a Director in April 2002. Mr. Lhota currently
serves as Executive Vice President of Cablevision Systems Corporation. Prior to
joining Cablevision, Mr. Lhota served various positions on former New York City
Mayor Rudolph W. Giuliani's senior management team. From 1998 to 2001, he was
New York's Deputy Mayor for Operations, overseeing the day-to-day operations of
city government. Prior to his government service, Mr. Lhota spent 15 years in
investment banking specializing in public finance. He served as director of
public finance at CS First Boston Corporation and as a member of its Public
Finance Management Committee. He also has been a managing director at Paine
Webber Incorporated.
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INFORMATION REGARDING THE BOARD OF DIRECTORS AND ITS COMMITTEES
Director Independence
The Board of Directors has determined that each of Messrs. Hill, Kirk and Lhota,
constituting a majority of the Board, is an "independent director" in accordance
with the rules and regulations of The Nasdaq Stock Market, Inc. ("Nasdaq").
Committees of the Board
The Board currently has, and appoints the members of, standing Executive, Audit,
Nominating and Corporate Governance, and Compensation Committees. Each member of
the Audit, Nominating and Corporate Governance, and Compensation Committees is
an "independent director" in accordance with the rules and regulations of
Nasdaq. The members of each of the committees of the Board are as follows:
NOMINATING AND
CORPORATE GOVERNANCE COMPENSATION
EXECUTIVE COMMITTEE AUDIT COMMITTEE COMMITTEE COMMITTEE
- ------------------- --------------- --------- ---------
Michael C. Culver Stanley J. Hill Stanley J. Hill Stanley J. Hill
Aaron P. Hollander Robert L. Kirk Robert L. Kirk Robert L. Kirk
Joseph J. Lhota Joseph J. Lhota Joseph J. Lhota
Executive Committee
The Executive Committee consists of two directors of the Company, Messrs. Culver
and Hollander. 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 Bylaws of the
Company; (ii) adopt an agreement of merger or consolidation, or to recommend to
the 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.
Audit Committee
The Audit Committee assists the Board of Directors in fulfilling its
responsibility to oversee management regarding: (i) the conduct and integrity of
the Company's financial reporting; (ii) the Company's systems of internal
accounting and financial and disclosure controls; (iii) the qualifications,
engagement, compensation, independence and performance of the Company's
independent registered public accounting firm, their conduct of the annual
audit, and their engagement for any other services; (iv) the Company's legal and
regulatory compliance; (v) the Company's codes of ethics as established by
management and the Board; and (vi) the preparation of the audit committee report
for inclusion in the Company's annual proxy statement. The Audit Committee also
reviews and approves transactions or courses of dealing with related parties.
The Audit Committee may also perform such other tasks as are assigned to it from
time to time by the Board of Directors. The Audit Committee has the power to
retain outside counsel, independent auditors or other advisors to assist it in
carrying out its activities.
The Audit Committee met eight times during the fiscal year ended January 31,
2005.
The Audit Committee is governed by a written charter approved by the Board of
Directors. The charter is available on the Company's website at www.favs.com and
is attached as Annex A to this Proxy Statement.
The Board of Directors has determined that each of the members of the Audit
Committee is "independent" under the listing standards of Nasdaq and under the
independence criteria established by the SEC for audit committee members.
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The Board of Directors has also determined that Mr. Lhota is an "audit committee
financial expert" as defined in Item 401(h)(2) of Regulation S-K of the Exchange
Act and is independent as that term is used in Item 7(d)(3)(iv) of Schedule 14A
of the Exchange Act.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee assists the Board of Directors
in: (i) identifying, screening and reviewing individuals qualified to serve as
directors and recommending to the Board candidates for nomination for election
at the annual meeting of stockholders or to fill Board vacancies; (ii)
overseeing the Company's policies and procedures for the receipt of stockholder
suggestions regarding Board composition and recommendations of candidates for
nomination by the Board; (iii) overseeing implementation of the Company's
Corporate Governance Guidelines and Principles; and (iv) reviewing the overall
corporate governance of the Company and recommending changes when necessary or
desirable.
The Committee may also perform such other tasks as are assigned to it from time
to time by the Board of Directors. The Committee has the power to retain outside
counsel or other advisors to assist it in carrying out its activities.
The Committee is governed by a written charter approved by the Board of
Directors. The charter is available on the Company's website at www.favs.com.
The Committee was constituted in March 2004 and consists entirely of independent
directors. The Committee met three time during the fiscal year ended January 31,
2005.
The Nominating and Corporate Governance Committee is responsible for reviewing
with the Board, on an annual basis, the appropriate skills and characteristics
required of directors in the context of the current make-up of the Board. This
assessment by which the Committee considers candidates for director is based
upon various criteria, including their integrity, independence, ability to
exercise sound business judgment, demonstrated leadership ability, breadth of
knowledge about issues affecting the Company and business experience and
technical skills, in particular the extent to which they possess experience and
skills relevant to the Company's business which would be helpful to the Board in
determining and executing the Company's strategies.
In the case of incumbent directors whose terms of office are set to expire, the
Committee reviews such directors' overall service to the Company during their
terms, including the number of meetings attended, level of participation and
quality of performance.
Consideration of new director nominee candidates typically involves a series of
internal discussions, review of information concerning candidates and interviews
with selected candidates. The Committee identifies potential new director
candidates by recommendations from its members, other Board members, Company
management and stockholders, and may, if necessary or appropriate, utilize the
services of a professional search firm.
The Committee considers recommendations for Board candidates submitted by
stockholders using the same criteria (described above) that it applies to
recommendations from the Committee, directors and members of management. In
order to be considered, a recommendation from a stockholder must be received by
the Committee no later than the 120th calendar day before the date of the
Company's proxy statement released to stockholders in connection with the
previous year's annual meeting, and must include the stockholder's name and
contact information, the candidate's name and contact information, a description
of any relationship between the stockholder and the candidate, a description of
the candidate's qualifications, and a signed statement from the candidate that
he or she is willing and able to serve on the Board. Stockholders must submit
recommendations in writing to the Nominating and Corporate Governance Committee
at c/o Corporate Secretary, First Aviation Services Inc., 15 Riverside Avenue,
Westport, Connecticut 06880.
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The Committee received a recommendation from Nelson Obus of Wynnefield Capital,
Inc. to nominate himself as a candidate for election as director at the Annual
Meeting. After consideration, the Committee decided not to recommend Mr. Obus to
the Board as a nominee for election as a director at the Annual Meeting.
Compensation Committee
The Compensation Committee assists the Board in overseeing the Company's
management compensation policies and practices, including: (i) determining and
approving the compensation of the CEO; (ii) reviewing and approving compensation
levels for the Company's other executive officers; (iii) reviewing and approving
management incentive compensation policies and programs; (iv) reviewing and
approving equity compensation programs for employees, and exercising discretion
in the administration of such programs; and (v) producing an annual report on
executive compensation for inclusion in the proxy statement.
The Committee may also perform such other tasks as are assigned to it from time
to time by the Board of Directors. The Committee has the power to retain outside
counsel or other advisors to assist it in carrying out its activities.
The Committee is governed by a written charter approved by the Board of
Directors. The charter is available on the Company's website at www.favs.com.
The Compensation Committee met three times during the year ended January 31,
2005.
Directors' Attendance at Meetings of the Board of Directors
The Board of Directors held a total of six meetings during the fiscal year ended
January 31, 2005, which does not include actions by written consent or committee
meetings. Each director attended 100% of the Board Meetings, and at least 95% of
the aggregate of the total number of meetings of the Board and the total number
of meetings held by all committees of the Board on which he served.
Directors' Attendance at Annual Meetings of Stockholders
The Board of Directors encourages all of its members to attend the Company's
annual meeting of stockholders. All members of the Board serving as directors
during the fiscal year ended January 31, 2005 attended the 2004 Annual Meeting
of Stockholders.
Stockholder Communications with the Board
A stockholder who wishes to communicate with the Board or with specific
individual directors may send written communications by mail addressed to the
Board of Directors generally, or to such specific director or directors
individually, at c/o Corporate Secretary, First Aviation Services Inc., 15
Riverside Avenue, Westport, Connecticut 06880. All communications so addressed
will be forwarded to the Board of Directors or the individual director or
directors, as applicable.
CODES OF BUSINESS CONDUCT AND ETHICS
The Board of Directors has adopted a Code of Business Conduct and Ethics
applicable to all directors, officers and employees of the Company and a
Supplemental Code of Ethics for the CEO, CFO and other senior financial
officers. These Codes of Business Conduct and Ethics are available on the
Company's website at www.favs.com. The Company may disclose certain amendments
to, or waivers from, these Codes of Business Conduct and Ethics by posting such
information on its website.
REPORT OF THE AUDIT COMMITTEE
The following is a report of the Audit Committee with respect to the Company's
audited consolidated financial statements for the fiscal year ended January 31,
2005:
o The Audit Committee has reviewed and discussed the audited
consolidated financial statements with management;
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o The Audit Committee has discussed with the Company's independent
registered public accounting firm the matters required to be discussed
by Statement of Auditing Standards No. 61, "Communications with Audit
Committees", as amended; and
o The Audit Committee has received the written disclosures and the
letter from the Company's independent registered public accounting
firm as required by Independence Standards Board Standard No. 1,
"Independence Discussions with Audit Committees", as may be modified
or supplemented, and has discussed with the independent registered
public accounting firm their independence.
Based on the review and discussions with the Company's management and
independent registered public accounting firm, as set forth above, the Audit
Committee recommended to the Board of Directors that the audited consolidated
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended January 31, 2005, for filing with the SEC.
Respectfully submitted by the members of the Audit Committee of the Board of
Directors,
Stanley J. Hill
Robert L. Kirk
Joseph J. Lhota
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 May 3, 2005 (unless otherwise
indicated) by (i) each person who is known by the Company to own beneficially
more than 5% of the outstanding shares of Common Stock, (ii) each of the
Company's directors and nominees, (iii) each of the executive officers named in
the Summary Compensation Table (included in this Proxy Statement below), and
(iv) all directors and current 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 who beneficially own more
than 5% of the outstanding shares of Common Stock maintains an address at 15
Riverside Avenue, Westport, Connecticut 06880, unless otherwise indicated.
AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
---------------- -------------------- ----------------
First Equity Group Inc. (1) 3,785,562 51.6%
Aaron P. Hollander (1)(2) 3,785,562 51.6%
Michael C. Culver (1)(3) 3,785,562 51.6%
The Wynnefield Group (4) 2,174,144 29.7%
450 Seventh Avenue, Suite 509
New York, NY 10123
Paul J. Fanelli (5) 8,334 *
Robert G. Costantini (6) 19,333 *
Gerald E. Schlesinger (7) 2,700 *
Stanley J. Hill 34,909 *
Robert L. Kirk 50,733 *
Joseph J. Lhota 25,402 *
All directors and current executive officers
as a group (7 persons) 3,933,508 53.4%
- -----------------------
* 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. First Equity Group Inc. has
pledged 500,000 shares of the Company's Common Stock to Hudson United Bank
as collateral for a loan.
(2) Includes 300 shares held as custodian for his minor children.
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(3) Includes 200 shares held as custodian for his minor children.
(4) Based upon a Schedule 13D, amendment No. 13, filed with the SEC on January
14, 2005, the members of the "group" (as the term is used in Section
13(d)(3) of the Securities Exchange Act of 1934) consists of Wynnefield
Partners Small Cap Value, L.P. ("Partners"), Wynnefield Partners Small Cap
Value, L.P. I ("Partners I"), Wynnefield Partners Small Cap Value Offshore
Fund, Ltd. ("Offshore"), Nelson Obus ("Obus"), Joshua H. Landes ("Landes"),
Wynnefield Capital Management, LLC ("Capital Management"), Wynnefield
Capital Inc. ("Capital"), and Wynnefield Capital, Inc. Profit Sharing &
Money Purchase Plan ("Capital Plan"). Each member of the group may be
deemed to each share voting and dispositive power with respect to the
Common Stock directly owned by any member. Partners owns 749,958 shares
directly, and Partners I owns 910,834 shares directly. Capital Management
has an indirect beneficial ownership interest in shares of Common Stock
owned by Partners and Partners I. Landes and Obus are co-managing members
of Capital Management. Offshore owns 405,852 shares directly. Capital has
an indirect beneficial ownership interest in the shares of Common Stock
owned by Offshore through its status as investment manager of Offshore.
Obus and Landes are the principal executive officers of Capital. Capital
Plan owns 7,500 shares directly. Obus and Landes share the power to vote
and dispose of those shares. Obus owns 100,000 shares directly.
(5) Consists of options exercisable within 60 days.
(6) Consists of options exercisable within 60 days.
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 quarterly in cash or stock. In addition, each director
receives $1,000 for attendance at meetings of the Board of Directors or
committees thereof (but not more than $1,000 for all board and committee
meetings that occur on the same day). Members of the Board of Directors receive
reimbursement for actual expenses of attendance at meetings. All of the
non-employee directors have elected to have their compensation paid in the form
of Company stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended January 31, 2005, the Compensation Committee
consisted of Messrs. Hill, Kirk and Lhota, each an independent director, and
neither of such members is a current or former officer of the Company or any of
its subsidiaries or was a party to any disclosable related party transaction
involving the Company.
REPORT FROM THE COMPENSATION COMMITTEE REGARDING EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
developing the executive compensation philosophy of the Company and
administering such with respect to the compensation paid to the Chief Executive
Officer and each of the other executive officers.
The basic philosophy behind executive compensation is to award executive
compensation as an incentive to create long-term shareholder value. Salary
increases, bonuses and long-term incentive grants are reviewed annually to
ensure consistency with this philosophy. The compensation of the Company's
executive officers is determined solely by the Compensation Committee.
Base Salary
Decisions regarding base salary are made based upon an analysis of competitive
industry compensation levels. Base salaries are generally 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 the Company.
9
Bonus
Decisions regarding bonuses are made based upon achievement of the Company's
objectives, upon compensation levels paid to officers of other companies in the
same sector as the Company, upon the performance of those companies compared to
the Company, and a upon the performance review of the individual executive.
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.
CEO Compensation
Mr. Culver's base salary during the year ended January 31, 2005 was determined
as described above. Mr. Culver also received a discretionary cash bonus of
$75,000. In determining this bonus amount, which represented approximately 21%
of his total cash compensation from the Company for the fiscal year, the
Committee considered, among other things, the increase in the Company's revenue,
the extra-ordinary costs incurred during the fiscal year ended January 31, 2005,
the magnitude of the operating loss, and information concerning compensation
levels at other companies in the industry. Mr. Culver was not granted any stock
option or award.
Respectfully submitted by the members of the Compensation Committee of the Board
of Directors,
Robert L. Kirk
Stanley J. Hill
Joseph J. Lhota
10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain compensation information 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 (collectively, the "Named Executive Officers"),
for the fiscal years ended January 31, 2005, 2004, and 2003, respectively.
Long -Term All Other
Annual Compensation Compensation Compensation
------------------- --------------- -------------
Awards
Securities
Underlying
Name and Principal Position Year ended January Salary Bonus Options (#)
- --------------------------- ------------------ ------- ------- ------------ ------------
Michael C. Culver 2005 $275,000 $75,000 - -
President and Chief 2004 $275,000 $200,000 - -
Executive Officer 2003 $250,000 $175,000 - -
Gerald E. Schlesinger (1) 2005 $107,884 $34,285 - -
Senior Vice President 2004 $275,000 $175,000 50,000 -
2003 $250,000 $175,000 100,000 -
Paul J. Fanelli (2) 2005 $205,962 $65,000 (3) 25,000 $23,151(4)
President and Chief
Executive Officer,
Aerospace Products
International, Inc.
Robert G. Costantini (5) 2005 $200,000 $30,000 8,000 -
Chief Financial Officer 2004 $50,000 $40,000 (6) 50,000 -
and Secretary
(1) Mr. Schlesinger ceased to be employed by the Company on April 16, 2004.
(2) Mr. Fanelli's employment commenced February 16, 2004.
(3) Includes a signing bonus of $15,000 upon commencement of employment.
(4) Consists of relocation expenses provided in Mr. Fanelli's relocation
expenses agreement, dated February 16, 2004.
(5) Mr. Costantini's employment commenced October 27, 2003.
(6) Includes a signing bonus of $20,000 upon commencement of employment.
11
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth information for each of the Named Executive
Officers regarding stock options that were granted during the fiscal year ended
January 31, 2005. No SARs were granted.
Individual Grants (1)
---------------------------------------------------------------------------------
Number of Percent of
Securities Total Options
Underlying Granted to
Options Employees in Exercise or Grant Date
Name Granted (#) Fiscal Year Base Price Expiration Date Value (2)
---- ----------- ----------- ---------- --------------- ---------
Michael C. Culver - - - - -
Gerald E. Schlesinger - - - - -
Paul J. Fanelli 25,000 25% $4.55 2/16/2014 $37,250
Robert G. Costantini 8,000 8% $4.55 4/26/2014 $11,600
(1) Each option was granted under First Aviation's Stock Incentive Plan at
the closing price on the date of grant and, in general, would vest in
three equal annual installments, subject to acceleration in the event
of a change in control.
(2) The grant date value 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 3.6%, (ii) a dividend yield of 0%,
(iii) an average volatility factor of 0.321 and (iv) an expected life
of five years. 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 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.
12
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information with respect to aggregate
positions in stock options at January 31, 2005, held by each of the Named
Executive Officers. No stock options were exercised during the fiscal year.
Value of
Number of Securities Unexercised
Underlying In-The-Money
Unexercised Options Options at Fiscal
at Fiscal Year End Year-End ($)
(#) Exercisable/ Exercisable/
Name Unexercisable Unexercisable (1)
---- ------------- -----------------
Michael C. Culver - -
Gerald E. Schlesinger - -
Paul J. Fanelli -/25,000 $-/$1,250
Robert G. Costantini 16,666/33,334 $12,832/$25,668
(1) Based on the positive difference between the $4.60 closing price of the
Company's Common Stock on January 31, 2005, and the applicable exercise price of
the options.
EMPLOYMENT AND OTHER AGREEMENTS
Agreements with Robert Costantini
Employment Agreement
On October 7, 2003, the Company entered into an employment agreement with Robert
G. Costantini, who became Chief Financial Officer and Secretary, effective as of
October 27, 2003, for a term of three years (unless terminated earlier pursuant
to the agreement) at an annual base salary of $200,000.
Under the agreement, Mr. Costantini received a signing bonus of $20,000 and is
permitted to participate in any performance bonus, profit sharing or other
compensation plans available to all executives of the Company, subject to
meeting applicable eligibility requirements. On March 21, 2005, the Compensation
Committee awarded Mr. Costantini a cash bonus of $30,000 for his performance
during the fiscal year ended January 31, 2005.
If Mr. Costantini's employment is terminated for cause, he is entitled to
receive his base salary through the end of the month in which his employment was
terminated. If his employment is terminated without cause or as a result of a
disability, he is entitled to receive an amount equal to six months of base
salary. If Mr. Costantini's employment is terminated due to death, his primary
beneficiary is entitled to receive bi-weekly payments of Mr. Costantini's base
salary until the earlier of the beneficiary's receipt of life insurance benefits
provided pursuant to a Company benefit plan or 180 days after the date of death.
Stock Option Award Agreement
In connection with joining the Company, on October 27, 2003, Mr. Costantini was
granted options to purchase 50,000 shares of Common Stock under the Company's
Stock Incentive Plan, at an exercise price of $3.83 per share. One-third of the
options vest on each of the first, second, and third anniversaries of the grant
date, respectively, and all of the options are immediately exercisable in full
upon a Change of Control Event (as defined in the Stock Incentive Plan). In
addition, on April 26, 2004, Mr. Costantini was granted options to purchase
8,000 shares at an exercise price of $4.55 per share for his performance during
the fiscal year ended January 31, 2005, which had a vesting schedule that was
consistent with the October 27, 2003 option grant. If Mr. Costantini's
13
employment is terminated otherwise than by retirement, death, disability or a
Change of Control Event (as described above), Mr. Costantini will have forfeited
his options and they will not be exercisable after the date of such termination.
Otherwise, the options will remain exercisable after vesting until the tenth
anniversary of the date of grant.
Agreements with Paul Fanelli
Employment Agreement
On February 2, 2004, the Company's subsidiary, API, entered into an employment
agreement with Paul J. Fanelli, effective as of February 16, 2004, to serve as
Senior Vice President and Chief Operating Officer of API for a term of three
years (unless terminated earlier pursuant to the agreement). Effective April 5,
2004, the agreement was amended to reflect Mr. Fanelli's position as President
of API.
Mr. Fanelli's employment agreement, as amended, provides for an annual base
salary of $225,000, which was increased by the Compensation Committee to
$250,000, effective February 1, 2005. Additionally, Mr. Fanelli received a
signing bonus of $15,000, and was eligible to receive an interim bonus in the
first year of the agreement of up to $10,000 based on meeting the Company's
normal performance-based criteria pursuant to a review of Mr. Fanelli's
performance during his first year of employment. On March 21, 2005, the
Compensation Committee awarded Mr. Fanelli a cash bonus of $50,000 for his
performance during the fiscal year ended January 31, 2005.
Mr. Fanelli is permitted to participate in any performance bonus, profit sharing
or other compensation plans available to all executives of the Company, subject
to meeting applicable eligibility requirements. Specifically, Mr. Fanelli is
eligible to participate in API's annual incentive compensation bonus plan,
except that he is eligible to receive a maximum bonus of 75% of his annual base
salary under the plan (as opposed to any maximum bonus otherwise provided in
such plan). Mr. Fanelli is also reimbursed for expenses related to his
relocation in connection with his employment (pursuant to a separate relocation
expenses agreement).
If Mr. Fanelli's employment is terminated for cause, he is entitled to receive
his base salary through the end of the month in which his employment was
terminated. If his employment is terminated without cause or as a result of a
disability, he is entitled to receive an amount equal to six months of base
salary. If Mr. Fanelli's employment is terminated due to death, his primary
beneficiary is entitled to receive bi-weekly payments of Mr. Fanelli's base
salary until the earlier of the beneficiary's receipt of life insurance benefits
provided pursuant to a Company benefit plan or 180 days after the date of death.
Stock Option Award Agreement
On February 16, 2004, Mr. Fanelli was granted options to purchase 25,000 shares
of Common Stock under the Company's Stock Incentive Plan, at an exercise price
of $4.55 per share. One-third of the options vest on each of the first, second,
and third anniversaries of the grant date, respectively, and all of the options
are immediately exercisable upon a Change of Control Event (as defined in the
Stock Incentive Plan). If Mr. Fanelli's employment is terminated otherwise than
by retirement, death, disability or a Change of Control Event (as described
above), Mr. Fanelli will have forfeited his options and they will not be
exercisable after the date of such termination. Otherwise, the options will
remain exercisable after vesting until the tenth anniversary of the date of
grant.
14
STOCK PERFORMANCE GRAPH
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 composed of the following companies: Aviall,
Inc., Satair A/S and AAR Corp. The comparison assumes $100 was invested as of
January 31, 2000, and the reinvestment of all dividends.
[Graphic Omitted]
January 31, January 31, January 31, January 31, January 31, January 31,
2000 2001 2002 2003 2004 2005
---- ---- ---- ---- ---- ----
Peer Group $100.00 $93.67 $64.41 $48.10 $108.79 $143.97
First Aviation $100.00 $92.35 $97.78 $91.60 $116.05 $113.58
Russell 2000 $100.00 $102.44 $97.35 $75.00 $117.03 $125.75
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company and First Equity Development Inc. ("First Equity"), the wholly-owned
subsidiary of First Equity Group, Inc., the majority stockholder of the Company,
have an agreement relating to the allocation of potential investment and
acquisition opportunities in the aerospace parts distribution and logistics
businesses. The agreement was approved by the independent members of the Board
of Directors on a month-to-month basis effective February 1, 2004. First Equity
Group, Inc. is beneficially owned by Mr. Aaron P. Hollander and Mr. Michael C.
Culver, respectively chairman of the board and chief executive officer of the
Company. Pursuant to the agreement, neither First Equity nor any of its
majority-owned subsidiaries will consummate any acquisition of a majority
interest in any business anywhere in the world (a "Covered Acquisition"),
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 independent members of the Board of Directors of the Company. The
agreement can be terminated by either party upon 30 days written notice to the
other party. 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 aerospace parts distribution or logistics, or to any advisory services
performed by First Equity on behalf of third parties.
15
The Company and First Equity also had an advisory agreement, approved by the
independent members of the Board of Directors on a month-to-month basis
effective February 1, 2004. Pursuant to the terms of this agreement, First
Equity provided the Company with investment and financial advisory services
relating to potential acquisitions and other financial transactions. The
agreement could be terminated by either party upon 30 days' written notice to
the other party. The Company paid First Equity a $30,000 monthly retainer, and
reimbursed First Equity for its out-of-pocket expenses. In addition, upon the
successful completion of certain transactions, the Company would pay a fee to
First Equity (the "Success Fee"). The amount of any Success Fee would be
established by the independent members of the Board of Directors and would be
dependent upon a variety of factors, including, but not limited to, the services
provided and the size and the type of transaction. Up to one year's worth of
retainer fees paid could be applied as a credit against any Success Fee, subject
to certain limitations. During each of the years ended January 31, 2005, 2004,
and 2003 respectively, the Company paid First Equity retainer fees of $360,000,
and no Success Fee. The advisory agreement terminated on January 31, 2005.
The Company and First Equity had entered into an arrangement whereby First
Equity provided the Company with various additional services to assist the
Company. These services were not part of the advisory agreement, described
above, but derived from the work First Equity performed under the agreement.
Therefore, First Equity did not charge the Company additional fees in connection
with the provision of such services under the advisory agreement because the
services which derived from the work First Equity performs under the advisory
agreement consistent with their role as financial advisor. The advisory
agreement expired on January 31, 2005. These services included: (i) detailed
financial modeling for new business proposals, (ii) Board of Directors
presentation analyses, (iii) investor relations marketing and presentations,
(iv) various analyses for API, including benchmarking, financial analysis, and
competitive market analysis, and (v) other financial analyses for the Company,
including stock buy-back, valuations, and capital structure analysis. The
Company's CEO and CFO had unlimited access to these resources when requested.
These services were also terminated with the expiration of the advisory
agreement on January 31, 2005, as described above.
The Company subleases from First Equity approximately 3,000 square feet of
office space in Westport, Connecticut. The leased space is utilized by the
Company as its corporate headquarters. First Equity also utilizes space in the
same premises. 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 $84,000,
$80,000, and $83,000, for the years ended January 31, 2005, 2004, and 2003,
respectively.
The Company and First Equity share certain common expenses that arise from
sharing office space in Westport, CT. The Company reimburses First Equity and
vice versa, for expenses each entity incurs related to the common usage of the
office space. The amounts are included in the Company's corporate expenses, and
include expenses such as telephone, computer consulting, office cleaning, office
supplies and utilities. The expenses are allocated based on base salaries of the
Company and First Equity's personnel working in the shared space. Common
expenses are approved by the Company and First Equity, prior to expenditure,
when not of a recurring nature. The allocations are reviewed by the Company's
CFO and the Controller of First Equity each month. In addition, a member of the
Company's Audit Committee reviews the allocation of expenses quarterly. Some
business development expenses, such as joint marketing expenses and business
organizational dues, are shared on an equal basis. Management believes this
method of allocation is reasonable. In addition, the amounts of expenses
reimbursed by the Company are the actual costs incurred for the expense. These
expenses average approximately $5,000 per month.
In order to simplify the administration of payroll, certain employees of the
Company who are authorized to perform services for both the Company and First
Equity are paid through the payroll of First Equity. Employees of the Company
who work exclusively for the Company by agreement are paid through the payroll
of API, the Company's principal subsidiary.
16
The Company paid Imtek, an affiliate of First Equity, approximately $29,000 and
$37,000 in each of the years ended January 31, 2004 and 2003, respectively, for
printing, insertion and mailing services, and reimbursed Imtek for actual
expenses incurred. These services were cancelled during the year ended January
31, 2004.
The Company paid an employee of Skip Barber, an affiliate of First Equity,
during the year ended January 31, 2004, $22,000 to reimburse such affiliate for
the use of the affiliates' in-house counsel, for services performed exclusively
for the Company.
During the fiscal years ended January 31, 2004, and January 31, 2005 the spouse
of Mr. Schlesinger, a former executive of the Company, was paid salary and bonus
of approximately $110,000 and $59,000, respectively, as an employee of a
subsidiary of the Company.
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(PROPOSAL NO. 2)
The Audit Committee of the Board of Directors has appointed Ernst & Young LLP as
the Company's independent registered public accounting firm for the year ended
January 31, 2006, subject to ratification by our stockholders. Ernst & Young LLP
has audited the Company's consolidated financial statements since 1995.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting, where they will have the opportunity to make a statement if they desire
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 2005 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 Audit Committee, then in any such case, the Audit Committee
will appoint another independent registered public accounting firm whose
engagement for any period subsequent to the 2005 Annual Meeting will be subject
to ratification by the Stockholders at the 2006 Annual Meeting of Stockholders.
The affirmative vote of a majority of the voting power of the issued and
outstanding shares of Common Stock present in person or represented by proxy at
the Annual Meeting and entitled to vote is required to ratify the appointment of
Ernst & Young LLP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF ERNST & YOUNG
LLP AS THE COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR
ENDED JANUARY 31, 2006.
FEES BILLED BY INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The following table sets forth the aggregate fees billed by Ernst & Young LLP
for professional services in each of the fiscal years ended January 31, 2005 and
2004:
Fiscal Year Ending Fiscal Year Ending
-------------------- ------------------
January 31, 2005 January 31, 2004
Audit Fees $338,000 $324,005
Audit Related Fees (1) $ 17,500 $ 16,000
Tax Fees - -
All Other Fees (2) $ 1,500 $ 1,500
(1) Audit related fees consisted of work performed in connection with auditing
the API employee benefit plans.
(2) All other fees consisted of access to online reference materials.
17
The Audit Committee has a policy requiring pre-approval of audit and non-audit
services. The Audit Committee approved all audit and non-audit services provided
by Ernst & Young LLP during the fiscal year ended January 31, 2005.
3. STOCKHOLDER PROPOSAL (PROPOSAL NO. 3)
A group of stockholders, consisting of Wynnefield Partners Small Cap Value, LP,
Wynnefield Partners Small Cap Value, LP I, Wynnefield Small Cap Value Offshore
Fund, Ltd., Wynnefield Capital, Inc., Profit Sharing Plan and Nelson Obus in his
individual capacity, owning 749,958 shares, 910,834 shares, 405,852 shares,
7,500 shares and 100,000 shares of Common Stock, respectively, and having an
address at 450 7th Avenue, Suite 509, New York, NY 10123, has notified the
Company of its intention to propose a resolution at the Annual Meeting (the
"Stockholder Proposal").
In accordance with SEC regulations, the Company has included the Stockholder
Proposal and the stockholders' supporting statement as set forth below. However,
the Company is not responsible for the contents of the proposal or the
supporting statement, nor has it opined on, or made any independent verification
with respect to, any facts purported by the proponent therein and, after
reviewing the proposal, management of the Company and the Board of Directors
have concluded that they cannot support the proposal for the reasons stated
hereinafter.
PROPOSAL:
- ---------
The Company's stockholders recommend that the board of directors take steps to
provide for cumulative voting for directors.
SUPPORTING STATEMENT:
- ---------------------
Who's proposing this? Wynnefield Capital, Inc., and affiliates, beneficial
owners of 2,174,144 shares (29.7 percent) of Company common stock. Our similar
proposal at last year's annual meeting received 73 percent of votes cast by
stockholders unaffiliated with either the Company's management or Wynnefield.
Why? The Company's CEO and Chairman, who beneficially own 51 percent of Company
stock, elect the entire board of directors. Wynnefield and other minority
stockholders have no opportunity to elect a single director of their choosing.
At the 2004 annual meeting, we nominated Nelson Obus for election to the board,
and he received 60 percent of votes cast by stockholders unaffiliated with
either the Company's management or Wynnefield. But under the Company's current
voting system, our candidate could not be elected to the board without the CEO
and Chairman's support.
The wrong direction. Management described supply-chain/logistics as its best
high-margin growth opportunity. But for the nine months ended October 31, 2004,
the Company reported:
o A net loss of $1,374,000 (compared to $82,000 for the comparable
period last year) despite a 19 percent increase in net sales.
o An 85 percent reduction in net cash from operating activities.
Management refuses to provide segment reporting on supply-chain/logistics;
however deepening losses despite increased sales indicate lower margins.
Stockholders need vigilant outside directors. We were disappointed that the
Company's outside directors did not initiate an encouraging development this
past year - termination of the Company's consulting agreement with First Equity
Development, Inc. (owned entirely by the Company's CEO and Chairman), under
which the Company paid over $1.3 million in fees for advice on transactions
during fiscal '01 through '04 while completing only one small acquisition.
18
Last year, Institutional Shareholder Services (ISS) described these fees as a
"conflict of interest" due to the CEO and Chairman's ownership of First Equity.
The Company's press release reveals that First Equity, not the Company's outside
directors (who are charged with protecting all stockholders), terminated this
agreement.
We believe all stockholders would be better represented by a board with at least
one director elected by stockholders other than the Company's CEO and Chairman.
A board representative elected by outside stockholders could evaluate the
Company's progress in executing its stated business plan and facilitate a
value-releasing transaction if appropriate.
What is cumulative voting? It gives outside stockholders the potential to elect
a director of their choosing.
Cumulative voting allows each stockholder to cast a number of votes equal to the
number of shares held multiplied by the number of directors being elected. A
stockholder may direct all its votes to one nominee or split its votes among
several nominees. (For example, 1,000 shares times two directors provides 2,000
votes that can be cast for one nominee.)
Will cumulative voting help? Under cumulative voting, 33.4 percent of the
Company's stock could elect a nominee in years when two directors are up for
election.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THE STOCKHOLDER
PROPOSAL.
The Board of Directors has carefully considered the merits of cumulative voting
and has concluded that it is not in the best interest of all of the Company's
stockholders.
In its "supporting statement," the proponent cites purported problems related to
the Company's performance and yet, in the Board of Directors' judgment, the
proponent fails to offer any reasons why cumulative voting would address these
supposed problems.
The Company's present method for electing directors is similar to that of most
publicly-traded corporations. To be elected by stockholders to serve on the
Board of Directors, a nominee must receive a plurality of the votes cast. The
present board consists of three directors, constituting a majority of the board,
who are independent (under Nasdaq's governance rules) and two directors who are
affiliated with the majority stockholder of the Company.
We believe the current method of electing directors is the most likely to
produce a Board of Directors that will diligently and effectively represent the
interests of all of the Company's stockholders. Cumulative voting, on the other
hand, would permit a relatively small group of stockholders devoted to a special
interest or narrow point of view to elect a director in order to represent their
particular interests or point of view. It is possible that such a director would
feel compelled to serve the interests of the group responsible for his or her
election rather than the best interests of the stockholders as a whole. Each
director, of course, no matter how elected, has a fiduciary duty to represent
all of the Company's stockholders and to advance the best interests of the
Company.
We see no advantage to be gained to change from the present method of electing
directors to cumulative voting nor any improvement cumulative voting would bring
to the composition of the Company's board. Indeed, we believe that a Board of
Directors must work together toward the common objective of advancing the best
interests of the Company without being burdened with factionalism and partisan
behavior, which could potentially occur if the Company switches to cumulative
voting.
19
In summary, your Board of Directors believes that the Company's current method
of electing directors is the fairest and most efficient way to ensure that each
director serves the interests of the Company and all its stockholders rather
than the interests of special interest groups. Accordingly, the Board of
Directors urges you to vote against this proposal.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information as of January 31, 2005 regarding
shares of the Company's common stock to be issued upon exercise and the
weighted-average exercise price of all outstanding options, warrants and rights
granted under the Company's equity compensation plan as well as the number of
shares available for issuance under such plans.
Number of
securities
remaining
available for
future issuance
under equity
compensation
Number of securities Weighted average plans
to be issued upon exercise price of (excluding
exercise of outstanding securities
outstanding options, options, warrants reflected in
Plan Category warrants and rights and rights column (a))
------------------------------- ----------------------- ------------------- -----------------
(a) (b) (c)
Equity compensation plans
approved by security holders 223,350 $4.41 815,850 (1)
Equity compensation plans not
approved by security holders -- -- --
TOTAL 223,350 $4.41 815,850
========= ========= =========
(1) In addition to stock options, the Company may make a variety of other
types of stock awards under its Stock Incentive Plan, including
restricted stock and performance share awards.
SECTION 16 (A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and any persons who own more than ten percent of the
Company's Common Stock to file reports of initial ownership of the Company's
Common Stock and subsequent changes in that ownership with the Securities and
Exchange Commission. Officers, directors and greater than ten-percent beneficial
owners are also required to furnish the Company with copies of all Section 16(a)
forms they file. Based solely upon a review of the copies of the forms furnished
to the Company, or written representations from certain reporting persons, the
Company believes that all Section 16(a) filing requirements were complied with
for the Company's fiscal year ended January 31, 2005.
METHOD AND COST OF PROXY SOLICITATION
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, facsimile, telecopy, telegram, telephone and electronic
mail. You may also be solicited by means of press releases issued by the Company
or postings on our corporate website, www.favs.com. 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. The Company will
also use the services of D.F. King & Co., Inc. to assist in soliciting proxies,
and expects to pay a fee of $ 7,500 for such services, plus reasonable
20
out-of-pocket expenses. Arrangements will be made with brokerage houses and
other custodians, nominees and fiduciaries to send proxies and proxy material to
their beneficial owners. 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,
facsimile, telegram, electronic mail or in person.
STOCKHOLDER PROPOSALS AND NOMINATIONS OF BOARD MEMBERS
If a stockholder intends to present a proposal for action at the 2006 Annual
Meeting of Stockholders and wishes to have such proposal considered for
inclusion in the Company's proxy materials in reliance on Rule 14a-8 under the
Securities Exchange Act of 1934, the proposal must be submitted in writing and
received by the Secretary of the Company on or before January 11, 2006. Such
proposal also must meet the other requirements of the rules of the SEC relating
to stockholder proposals.
The Company's By-laws establish an advance notice procedure with regard to
certain matters, including stockholder proposals and nominations for individuals
for election to the Board of Directors. In general, written notice of a
stockholder proposal or a director nomination for the 2006 Annual Meeting must
be received by the Secretary of the Company not later than the close of business
on the 60th day nor earlier than the close of business on the 90th day prior to
the 2006 Annual Meeting (or, if less than 70 days' notice of the date of the
meeting is given by the Company, notice by the stockholder to be timely must be
received by the Secretary of the Company no later than the 10th day following
the day on which public announcement of the date of the meeting is first made by
the Company), and must contain specified information and conform to certain
requirements, as set forth in the By-laws. If the chairman at any meeting of
stockholders determines that a stockholder proposal or director nomination was
not made in accordance with the By-laws, the Company may disregard such proposal
or nomination.
In addition, if a stockholder submits a proposal outside of Rule 14a-8 for the
2006 Annual Meeting, and the proposal fails to comply with the advance notice
procedures described by the By-laws, then the Company's proxy may confer
discretionary authority on the persons being appointed as proxies on behalf of
the Board of Directors to vote on the proposal.
Proposals and nominations should be addressed to the Secretary of the Company,
Robert G. Costantini, First Aviation Services Inc., 15 Riverside Avenue,
Westport, Connecticut 06880-4214.
By order of the Board of Directors,
/s/ Robert G. Costantini
Robert G. Costantini
Secretary
Dated: May 10, 2005
21
FIRST AVIATION SERVICES INC.
AUDIT COMMITTEE CHARTER
This Audit Committee Charter, adopted by the Board of Directors (the "Board") of
First Aviation Services Inc. (the "Company"), is intended as a component of the
flexible governance framework within which the Board, assisted by its
committees, directs the affairs of the Company.
I. PURPOSES
The Audit Committee (the "Committee") shall assist the Board of Directors (the
"Board") in fulfilling its responsibility to oversee management regarding: (i)
the conduct and integrity of the Company's financial reporting to any
governmental or regulatory body, the public or other users thereof; (ii) the
Company's systems of internal accounting and financial and disclosure controls;
(iii) the qualifications, engagement, compensation, independence and performance
of the Company's independent auditors, their conduct of the annual audit, and
their engagement for any other services; (iv) the Company's legal and regulatory
compliance; (v) the Company's codes of ethics as established by management and
the Board; and (vi) the preparation of the audit committee report required by
the Securities and Exchange Commission ("SEC") rules to be included in the
Company's annual proxy statement.
In discharging its role, the Committee is empowered to inquire into any matter
it considers appropriate to carry out its responsibilities, with access to all
books, records, facilities and personnel of the Company. The Committee has the
power to retain outside counsel, independent auditors or other advisors to
assist it in carrying out its activities. The Company shall provide adequate
resources to support the Committee's activities, including compensation of the
Committee's counsel, independent auditors and other advisors. The Committee
shall have the sole authority to retain, compensate, direct, oversee and
terminate counsel, independent auditors, and other advisors hired to assist the
Committee, who shall be accountable ultimately to the Committee.
II. COMMITTEE MEMBERSHIP
The Committee shall consist of three or more members of the Board, each of whom
the Board has selected and determined to be "independent" in accordance with
applicable rules of the SEC and The Nasdaq Stock Market. All members of the
Committee shall meet the financial literacy requirements of The Nasdaq Stock
Market. At least one member shall be an "audit committee financial expert" as
such term is defined under applicable SEC rules, as and when required by The
Nasdaq Stock Market.
Committee members shall continue to be members until their successors are
elected and qualified or until their earlier resignation or removal. Any member
may be removed by the Board, with or without cause, at any time. The Chairman of
the Committee shall be appointed from among the Committee members by, and serve
at the pleasure of, the Board to convene and chair meetings of the Committee,
set agendas for meetings, and determine the Committee's information needs. In
the absence of the Chairman at a duly convened meeting, the Committee shall
select from among its members an acting chairman for purposes of the meeting.
III. COMMITTEE MEETINGS
The Committee shall meet at least four times per year. The Committee shall meet
at least annually with the independent auditor in separate executive sessions to
provide the opportunity for full and frank discussion without members of senior
management present.
The Committee shall establish its own schedule and rules of procedure. Meetings
of the Committee may be held telephonically. A majority of the members of the
Committee shall constitute a quorum sufficient for the taking of any action by
the Committee. The Committee may also take action by unanimous written consent.
A-1
IV. KEY RESPONSIBILITIES
The Committee's role is one of oversight. The Company's management is
responsible for preparing the Company's financial statements and the independent
auditors are responsible for auditing those financial statements. The Committee
recognizes that Company management and the independent auditors have more time,
knowledge and detailed information about the Company than do Committee members.
Consequently, in carrying out its oversight responsibilities, the Committee is
not providing any expert or special assurance as to the Company's financial
statements or any professional certification as to the independent auditor's
work.
The following responsibilities are set forth as a guide for fulfilling the
Committee's purposes, with the understanding that the Committee's activities may
diverge as appropriate given the circumstances. The Committee is authorized to
carry out these activities and other actions reasonably related to the
Committee's purposes or assigned by the Board from time to time.
The Committee may form, and delegate any of its responsibilities to, a
subcommittee so long as such subcommittee is solely comprised of one or more
members of the Committee.
To fulfill its purposes, the Committee shall:
A. Supervise the Independent Audit
-------------------------------
1. appoint, evaluate, compensate, oversee the work of, and if
appropriate terminate, the independent auditor, who shall report
directly to the Committee;
2. review and approve the terms of the independent auditor's
retention, engagement and scope of the annual audit, and
pre-approve any audit-related and permitted non-audit services
(including the fees and terms thereof) to be provided by the
independent auditor (with pre-approvals disclosed as appropriate
in the Company's periodic public filings);
3. on an annual basis, review a formal written statement from the
independent auditor delineating all relationships between the
independent auditor and the Company, consistent with Independence
Standards Board Standard No. 1 (as modified or supplemented),
actively engage in a dialogue with the independent auditor with
respect to any disclosed relationships or services that may
impact the objectivity and independence of the independent
auditor and take appropriate action in response to the
independent auditor's report to satisfy itself of the auditor's
independence;
4. review and resolve any disagreements between management and the
independent auditor concerning financial reporting, or relating
to any audit report or other audit, review or attest services
provided by the independent auditor.
B. Oversee Internal Controls and Risk Management
---------------------------------------------
5. review and discuss with management and the independent auditor:
(i) the adequacy of the Company's internal and disclosure
controls and procedures, (including computerized information
system disclosure controls and security), including whether such
controls and procedures are designed to provide reasonable
assurance that transactions entered into by the Company are
properly authorized, assets are safeguarded from unauthorized or
improper use, and transactions by the Company are properly
recorded and reported; (ii) any significant deficiencies in the
design or operation of the Company's internal controls which
could adversely affect the Company's ability to record, process,
summarize and report financial data; (iii) any fraud, whether or
not material, that involves management or other employees who
have a significant role in the Company's internal controls; and
(iv) related findings and recommendations of management together
with the independent auditor's attestation report;
6. review and discuss with management and the independent auditor
any significant risks or exposures and assess the steps
management has taken to minimize such risks; and discuss with
management and the independent auditor, and oversee the Company's
underlying policies with respect to, risk assessment and risk
management;
A-2
7. establish and oversee procedures for the receipt, retention and
treatment of complaints regarding accounting, internal accounting
controls or auditing matters, and the confidential, anonymous
submission by employees of concerns regarding questionable
accounting or auditing matters;
C. Oversee Financial Reporting
---------------------------
8. review and discuss with management and the independent auditor:
(i) all critical accounting policies and practices used by the
Company; (ii) any significant changes in Company accounting
policies; (iii) any material alternative accounting treatments
within GAAP that have been discussed with management, including
the ramifications of the use of the alternative treatments and
the treatment preferred by the accounting firm; and (iv) any
accounting and financial reporting proposals that may have a
significant impact on the Company's financial reports;
9. inquire as to the independent auditor's view of the accounting
treatment related to significant new transactions or other
significant matters or events not in the ordinary course of
business;
10. review and discuss with the independent auditor the matters
required to be discussed with the independent auditor by: (i)
Statement of Auditing Standards No. 61, including the auditor's
responsibility under generally accepted auditing standards, the
significant accounting policies used by the Company, accounting
estimates used by the Company and the process used by management
in formulating them, any consultation with other accountants and
any major issues discussed with management prior to its
retention; (ii) Statement of Auditing Standards No. 90, including
whether Company accounting principles as applied are
conservative, moderate, or aggressive from the perspective of
income, asset, and liability recognition, and whether or not
those principles reflect common or minority practices; and (iii)
Statement of Auditing Standards No. 100, including the review of
the interim financial information of the Company and any material
modifications that need to be made to the interim financial
information for it to conform with GAAP;
11. review and discuss with management and the independent auditor
any material financial or non-financial arrangements that do not
appear on the financial statements of the Company;
12. review and discuss with the independent auditor: (i) any
significant accounting adjustments that were noted or proposed by
the auditors but were "passed"; (ii) any communications between
the audit team and the audit firm's national office respecting
auditing or accounting issues presented by the engagement; and
(iii) any "management" or "internal control" letter issued, or
proposed to be issued, by the independent auditors to the Company
or any other material written communications between the
accounting firm and management, such as any management letter or
schedule of "unadjusted differences;"
13. review the Company's financial statements, including: (i) prior
to public release, review and discuss with management and the
independent auditor the Company's annual and quarterly financial
statements to be filed with the SEC (including the Company's
disclosures under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and any
certifications regarding the financial statements or the
Company's internal accounting and financial controls and
procedures and disclosure controls or procedures filed with the
SEC by the Company's senior executive and financial officers);
and (ii) with respect to the independent auditor's annual audit
report and certification, before release of the annual audited
financial statements, meet with the independent auditor without
any management member present to discuss the adequacy of the
Company's system of internal accounting and financial controls,
the appropriateness of the accounting principles used and
judgments made in the preparation of the Company's audited
financial statements, and the quality of the Company's financial
reports; (iii) meeting separately and periodically, with
management and the independent auditor; and (iv) recommend to the
Board whether to include the audited annual financial statements
in the Company's Annual Report on Form 10-K to be filed with the
SEC;
A-3
14. at least annually, review a report by the independent auditor
describing any material issues raised by the most recent internal
quality-control review of the firm, or by any review, inquiry or
investigation by governmental or professional authorities
(including the Public Company Accounting Oversight Board), within
the preceding five years, regarding one or more independent
audits carried out by the firm, and any steps taken to deal with
any such issues;
D. Oversee Legal and Ethical Compliance
------------------------------------
15. review periodically: (i) with the General Counsel or outside
legal counsel, as appropriate, legal and regulatory matters that
may have a material impact on the Company's financial statement;
and (ii) the scope and effectiveness of compliance policies and
programs;
16. review at least annually with management, compliance with, the
adequacy of and any requests for waivers under the Company's
code(s) of business conduct and ethics (including codes that
apply to all employees as well as those applicable to directors,
senior officers and financial officers and the Company's policies
and procedures concerning trading in Company securities and use
in trading of proprietary or confidential information); any
waiver to any executive officer or director granted by the
Committee shall be reported by the Committee to the Board;
17. review and address conflicts of interest of directors and
executive officers;
18. review, discuss with management and the independent auditor, and
approve any transactions or courses of dealing with related
parties (e.g., including significant shareholders of the Company,
directors, corporate officers or other members of senior
management or their family members) that are significant in size
or involve terms or other aspects that differ from those that
would likely be negotiated with independent parties and, in any
event, any transactions required to be disclosed pursuant to Item
404 of Regulation S-K;
E. Report
------
19. oversee the preparation and approve all reports required by the
Committee, including the report for inclusion in the Company's
annual proxy statement, stating whether the Committee: (i) has
reviewed and discussed the audited financial statements with
management; (ii) has discussed with the independent auditors the
matters required to be discussed by SAS Nos. 61, as amended;
(iii) has received the written disclosure and letter from the
independent auditors (describing their relationships with the
Company) and has discussed with them their independence; and (iv)
based on the review and discussions referred to above, the
members of the Committee recommended to the Board that the
audited financials be included in the Company's Annual Report on
Form 10-K for filing with the SEC;
20. review and reassess the adequacy of this Charter, and recommend
to the Board amendments as the Committee deems appropriate; and
21. report regularly to the Board on Committee findings and
recommendations (including on any issues that arise with respect
to the quality or integrity of the Company's financial
statements, the Company's compliance with legal or regulatory
requirements or the performance and independence of the
independent auditors) and any other matters the Committee deems
appropriate or the Board requests, and maintain minutes or other
records of Committee meetings and activities.
A-4
IMPORTANT
- --------------------------------------------------------------------------------
THE BOARD URGES STOCKHOLDERS TO VOTE AGAINST THE STOCKHOLDER PROPOSAL. YOU CAN
VOTE YOUR SHARES AGAINST THE STOCKHOLDER PROPOSAL BY SIGNING AND DATING THE
ENCLOSED PROXY CARD OR VOTING INSTRUCTION FORM AND RETURNING IT IN THE
POSTAGE-PAID RETURN ENVELOPE. If you receive this proxy statement with a voting
instruction form from your broker, bank or other nominee, please vote in
accordance with the Board's recommendations, and sign, date and mail the
enclosed voting instruction form in the postage-paid envelope provided. Your
broker will not be able to vote your shares at the Annual Meeting regarding the
stockholder proposal unless it receives your specific voting instructions - so
please have your vote counted.
IF YOU HAVE ANY QUESTIONS OR REQUIRE VOTING ASSISTANCE, PLEASE CALL D.
F. KING & CO., INC., WHICH IS ASSISTING THE BOARD, TOLL FREE AT
1-800-949-2583.
YOUR VOTE IS IMPORTANT. Please take a moment to SIGN, DATE and PROMPTLY RETURN
your proxy card or voting instruction form in the postage-paid envelope
provided.
- --------------------------------------------------------------------------------
[First Aviation Services logo]
15 Riverside Avenue
Westport, Connecticut 06880
www.favs.com
ANNUAL MEETING OF STOCKHOLDERS OF
FIRST AVIATION SERVICES INC.
June 7, 2005
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
| |
| |
\|/ Please detach and mail in the envelope provided. \|/
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEE LISTED BELOW, "FOR"
PROPOSAL 2, AND "AGAINST" PROPOSAL 3. PLEASE SIGN, DATE AND RETURN PROMPTLY IN
THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
x
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
1. Election of one Director for
a term to expire at the Annual
Meeting of Stockholders in the 2. Ratification of the appointment of Ernst & |_| |_| |_|
year 2008 (Class III). Young LLP as the independent registered
NOMINEE: public accounting firm of First Aviation
|_| FOR THE NOMINEE JOSEPH J. LHOTA Services Inc. for the year ending January 31,
2006.
|_| WITHHOLD AUTHORITY
FOR THE NOMINEE 3. Stockholder proposal regarding |_| |_| |_|
cumulative voting for director elections.
4. 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 THE NOMINEE LISTED ABOVE, FOR
PROPOSAL 2, AND AGAINST PROPOSAL 3.
PLEASE VOTE, SIGN, DATE AND RETURN THE PROXY CARD USING THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that changes
to the registered name(s) on the account may not be submitted via this method
|_|
- ------------------------------------------------------------------------------------------------------------------------------------
Signature of Stockholder ____________________ Date: _________ Signature of Stockholder ____________________ Date: _________
Note: Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give
full title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as such.
If signer is a partnership, please sign in partnership name by
authorized person.
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 Michael C.
Culver as proxies, each with the power to appoint his 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 May 3, 2005 at the First Aviation Services Inc. Annual Meeting of
Stockholders to be held on June 7, 2005 or any adjournment thereof.
(Continued and to be signed on the reverse side)