ITEM 1.	BUSINESS 	FlightSafety International, Inc., a New York corporation (the "Company"), was organized in 1951. The Company is engaged in the business of providing high technology training to operators of aircraft and ships. The Company owns and operates the largest civil aviation simulator fleet in the world, consisting of more than 165 simulators and training devices. 	The Company operates primarily in one industry segment which is training. The Company is also engaged in the design, manufacture and sale of full-motion flight simulators and other training equipment through its Simulation Systems Division (the "Simulation Division") and visual displays and systems for flight simulators through its Visual Simulation Systems Division (the "Visual Division"). The Company's Instructional Systems Division (the "Instructional Division") develops classroom presentation systems, interactive computer-based software, courseware and manuals primarily for the Company's educational and training activities and is not considered an industry segment. 	Training revenues amounted to 90% of operating revenues in 1994, 82% in 1993 and 86% in 1992, while product sales by the Simulation Division and Visual Division (for 1994 and 1993 only) to unaffiliated customers were 10% of operating revenues in 1994, 18% in 1993 and 14% in 1992. Sales of products to unaffiliated customers developed by the Instructional Division were not material for these periods and were included in the Company's training revenues. Further financial information regarding the Company's industry segments (including identifiable assets by segment) can be found in the Company's consolidated financial statements (and notes thereto) which are incorporated by reference in Part II of this Form 10-K. 	The Company's activities include (a) advanced pilot training in the operation of aircraft and air traffic control procedures, (b) air crew training for military and other governmental personnel, (c) aircraft maintenance technician training, (d) ab-initio (primary) pilot training to qualify individuals for private or commercial pilot licenses, (e) ship handling and related training through the Company's wholly-owned subsidiary, MarineSafety International, Inc. ("MarineSafety"), (f) the design and manufacture of full-motion flight simulators and other training equipment through the Company's Simulation Division, (g) the design and manufacture of visual displays and systems used for flight simulators through the Company's Visual Division and (h) the development of instructional methods and materials through its Instructional Division.
	Much of the Company's training is conducted on simulators, which incorporate advanced computer-based technology to replicate, with a high degree of accuracy, certain sights, sounds, movements and control responses in order to reproduce the total environment experienced by the operator of a particular aircraft or ocean-going vessel. Such simulators are used in the Company's aviation and marine training programs. Through the Simulation Division, the Company manufactures training equip -ment, including flight simulators, and is complemented by the Visual Division which produces visual systems for flight simulators, both of which are primarily for use in the Company's training operations and for sale to unaffiliated parties. 	Advanced pilot training accounted for 65% of the Company's operating revenues in 1994 and 61% in 1993 and 1992; government crew training accounted for 18% of the Company's operating revenues in 1994, 16% in 1993 and 17% in 1992. 	The Company's training activities are conducted primarily in the United States. The Company also maintains two learning centers in Canada, one learning center in Paris, France and one learning and research center in Rotterdam, the Netherlands. Many foreign aircraft operators use the Company's U.S. learning centers to train their crews. Export product sales, consisting of simulators and visuals, were four percent of operating revenues in 1994, 12% in 1993 and 10% in 1992. Further information regarding the Company's export sales can be found in the Company's consolidated financial statements (and notes thereto) which are incorporated by reference in Part II of this Form 10-K.
1.	Advanced Pilot Training 	The Company's advanced pilot training consists of initial and recurrent courses in the operation and performance of various aircraft. A majority of this training is provided to pilots employed by corporations and in general business aviation. Such training includes ground school instruction in air traffic control and international flight procedures, navigation, meteorology, crew resource management, Federal Aviation Administration ("FAA") regulations and aircraft performance and systems. Training is also conducted on full-motion simulators, which replicate the in-flight performance and characteristics of a particular aircraft, and on training devices, including cockpit systems simulators and cockpit procedures trainers, which familiarize the student with general flight procedures and cockpit instruments. In-flight instruction is normally provided in the customer's own aircraft, although the Company occasionally leases aircraft for this purpose. The Company uses its own aircraft when providing primary pilot training. 	The most significant aspect of the Company's advanced pilot training program is the training conducted on sophisticated simulators. Such simulators recreate the pilot's total cockpit environment, including all flight instrumentation. The cockpit section of the simulator is connected to computers which reproduce the conditions and movements of actual flight for the trainee who sits at the controls within the cockpit. A large hydraulically powered platform, together with the instruments within the cockpit, is connected to complex digital computer systems which move the cockpit and adjust the instrument readings in response to either the actions of the trainee or those of the instructor at a separate control station. The instructor may program the computers to change flight conditions, aircraft performance and airport approaches as desired. Training in a simulator enables a pilot to practice and perfect procedures and techniques (including emergency maneuvers which would be hazardous to attempt in actual flight) in a controlled environment, eliminating the danger of using the aircraft itself and at a substantial cost reduction. In addition, Federal Aviation Administration ("FAA") regulations related to certain sophisticated simulators (Level "C" and Level "D") have expanded the permissible use of such simulators in pilot evaluation and certification such that many certifications can be achieved without flying the actual aircraft. 	The Company maintains agreements with more than 20 aircraft manufacturers pursuant to which the manufacturer has designated the Company as its authorized training organization. Under these agreements, the Company provides initial training to crews of aircraft purchased from the manufacturer at a fixed fee per aircraft paid by the manufacturer. Many of the Company's learning centers are located near a manufacturer's factory or service center which facilitates access to technical information provided during training. This decentralized system is also designed to locate learning centers near actual and potential customers. 	Advanced pilot training is offered to flight crews (pilots, co- pilots and engineers) in order to (i) instruct such crews in the operation of new or different types of aircraft thereby enabling them to obtain "type ratings", where applicable, on their pilots' licenses and (ii) keep such crews proficient by providing recurrent training courses in the latest safety and flight procedures relating to such aircraft. Pursuant to certain FAA regulations for pilot checking, testing and certification, no person may act as a pilot-in-command of an aircraft unless such person has accomplished a flight review within the preceding 24 months and, if the aircraft is type certificated for more than one required pilot, such person must have satisfactorily completed prescribed proficiency checks within the preceding 12 months. At the pilot's option, both the 12-month and 24-month proficiency checks can be accomplished in an FAA Level "C" or Level "D" approved simulator. In addition, depending on the type of operation, the flight crewmember may be required to complete periodic recurrent training. All of this recurrent training can also be accomplished in an FAA-approved Level "C" or Level "D" simulator. 	In addition to training provided pursuant to agreements with aircraft manufacturers, the Company provides training for type-ratings and recurrent training courses pursuant to agreements with the air crew member's employer. Under such agreements, the customer pays an annual course fee which provides for training to proficiency of up to two different types of aircraft and incorporates training in simulators. Alternatively, the customer may elect to pay for each course or training as taken rather than enter into such agreements. 	The Company also expanded its training of pilots employed by some domestic and foreign commercial air carriers (both regional and major carriers) with the addition of new concept air carriers and continues to provide access to its training equipment to pilots employed by other air carriers in which they provide their own instruction. FAA regulations require all pilots employed by domestic commercial carriers flying aircraft above a certain weight to pass examinations with respect to their proficiency in handling the type of aircraft which they fly and to undergo recurrent training every six months. While the majority of air carriers, particularly the major airlines, provide all training (including simulator-based training) necessary to enable their pilots to comply with FAA requirements, certain major airlines have used the Company's Airbus A-310, Fokker 100, McDonnell Douglas ("MD") DC-9, MD-80 and MD-88/87 and Boeing 727, 737, 757 and 767-300ER simulators for this purpose. Foreign air carriers, while not subject to the same FAA regulations, also engage the Company to provide their pilots with initial training and recurrent courses in various types of aircraft. In addition, regional airlines utilize the Company's Piper Navajo, Fairchild Metro II, III, and 23 de Havilland Twin Otter, Dash 7 and Dash 8, Embraer 120, Saab-340, ATR 42/72, Beech 1900, Shorts 360 and BAe Jetstream 31/32 simulators to provide required training for their pilots. The Company owns and operates 26 major and 30 regional airline flight simulators for these purposes. 	In 1994, the Company completed construction of a new 45,000 square foot Learjet learning center in Tucson, Arizona which will have more than triples the capacity of the center it replaces. The Company also added three business and four regional airline simulator to its other learning centers.
2.	Government Pilot and Crew Training 	The Company provides training for pilots and other crew members operating aircraft for agencies of the United States government at substantially all of its learning centers. In addition, the Company has several learning centers, including its Dothan and Daleville learning centers, which are primarily dedicated to military training. The Company's customers include the U.S. Air Force, Army, Navy, Marine Corps and Coast Guard, and pilots employed by the National Aeronautics and Space Administration, the FAA, the U.S. Customs Service, the Drug Enforcement Administration and various other government agencies. 	The Dothan, Alabama learning center is located near the United States Army Aviation Center at Fort Rucker. Hangars are located at this facility to house classroom and repair facilities for a fleet of fixed- wing aircraft which are used to train Army helicopter pilots to become fixed-wing pilots. The U. S. Army has renewed its existing contract that will total $31 million in revenue over a five-year period. 	The Company was also awarded a five-year contract for C-12C/D/F pilot training to be provided at its Daleville, Alabama learning center which houses five simulators for training military personnel on these versions of the King Air 200 business aircraft. 	FlightSafety Services Corporation, a subsidiary of the Company ("Services Corporation"), received a five-year, two-phase contract in support of the U.S. Joint Surveillance Target Attach Radar System (Joint STARS) which involves highly sophisticated aerial surveillance and communications systems intended to provide real-time information about ground personnel movements deep within hostile territory. Services Corporation also has two significant contracts, renewable annually at the government's option through 1999 and 2007, respectively, pursuant to which Services Corporation operates seven government-owned C-5A/B simulators and provides instructors and technicians at four U.S. Air Force bases for training of U.S. Air Force C-5A/B transport crews. 	The other contract is for training of U.S. Air Force C-135 cargo aircraft pilots and flight engineers and for Air Force KC-135 aerial refueling aircraft flight crew training. The 19 simulators are used for training at 11 U.S. Air Force bases for aerial refueling and low-level flight training and permit many flight training maneuvers currently performed in the aircraft to be more economically accomplished in the simulator. In addition, the Company provides computer-based training at three U.S. Air Force Reserve bases. 	 The U.S. Air Force and the Navy awarded contracts to the Company in 1994 for the training of C-20H (Gulfstream) pilots and flight engineers. Additionally contracts were awarded in 1994 by NASA for pilot and technician training of Gulfstream, Learjet and King Air aircraft and by the FAA for various aircraft. 	As noted earlier, 18% of the Company's 1994 operating revenues (16% in 1993 and 17% in 1992) were attributed to U.S. Government pilot and crew training. In general, contracts with agencies of the U.S. Government are subject to renewal, renegotiation and termination at the election of the U.S. Government.
3.	Maintenance Technician Training 	The Company provides maintenance training to aircraft technicians for a wide range of aircraft at most of its learning centers and at customer locations around the world. In addition, the Company maintains four learning centers dedicated to maintenance technician training. Two of these centers are located in Wichita, Kansas and provide training for Beech and Cessna aircraft technicians; a third center is located in Savannah, Georgia and provides training for Gulfstream aircraft technicians; and a fourth center is located in Little Rock, Arkansas and provides Falcon Jet technician training. In addition, the Company continues to add additional maintenance courses and programs at its other learning centers. The Company now offers more than 150 maintenance training courses. Maintenance technicians can choose from a type-specific core curriculum, supplemented by additional courses, including troubleshooting training programs that use computer graphics to provide high fidelity training environments for technicians to practice and enhance troubleshooting skills using manufacturer's data rather than the actual equipment.
4.	Primary Pilot Training 	The Company provides primary pilot training necessary to enable qualified individuals to obtain private, commercial or airline transport licenses with single-engine, multi-engine and instrument fixed-wing and rotary-wing ratings. Such training is conducted in the classroom, in electronic trainers and in aircraft owned by the Company, but does not involve the use of sophisticated simulators. The Company currently conducts most of its primary training operations, except helicopter training, at the FlightSafety Academy in Vero Beach, Florida. The FlightSafety Academy currently provides training programs for several international and domestic airlines, including Olympic Airways, Swissair, Asiana Airlines, Air China, Royal Air Maroc, Chicago Express and other airlines. The Company maintains facilities at Vero Beach, Florida for fueling, maintenance and storage of its own light fixed-wing aircraft as well as dormitories for its students. The Company has developed the FlightSafety Academy into a training facility where only students planning a career in professional flying are enrolled providing an environment where airline-sponsored "ab-initio" (primary) and self-funded students are given instruction devoted solely to preparing them for a career in flying. 	The Company has two other primary learning centers at Lakeland, Florida and Alliance Airport in Fort Worth, Texas. The Lakeland learning center provides full-service flight training for fixed-wing student pilots and the Fort Worth Learning center provides full-service training for rotary and fixed-wing student pilots. The helicopter training complements training services provided at the Company's nearby simulator- equipped Bell Helicopter Learning Center.
5.	Maritime Training and Research 	Through MarineSafety, the Company provides training to crews of large ocean- going vessels owned by business concerns, as well as the United States Navy, Coast Guard and Merchant Marine Academy. Simulation research studies are also performed by MarineSafety, including studies to assist in determining channel dredging requirements and waterway and port improvements. 	In 1987, the U.S. Department of Transportation ( the "DOT") assigned the management and operations of its Computer Aided Operations Research Facility (CAORF) at Kings Point, New York to MarineSafety. A full-mission ship simulator at Kings Point simulates the control bridge of large ocean going vessels and, through advanced engineering techniques, simulates the actual operating conditions experienced by the crews of such vessels. The shiphandling training simulator thus provides training in a controlled environment without the potential hazard and expense of using an actual ship. At Kings Point, MarineSafety also operates two restricted visibility bridge simulators, devoted exclusively to training deck officers in vessel maneuvers and navigation, which use automated collision avoidance systems during conditions of restricted visibility. 	In 1994 MarineSafety entered into an agreement with the California Maritime Academy to provide two simulators at the Academy's installation in Valejo, California. Operation of the simulators is scheduled to begin in April 1995 and the simulators will be available to MarineSafety for training of its customers. MarineSafety also provides ship-handling simulator training for the U.S. Navy at MarineSafety's facilities in Newport, Rhode Island and San Diego, California. The Newport facility houses four ship-handling simulators that are used to train approximately 800 Naval officers each year, many from the Navy's nearby Surface Warfare Officers' School, in handling combat or support ships under many operating and environmental conditions. The U.S. Navy may renew this contract each year through 1996. 	The San Diego facility provides training to U.S. Navy deck officers for approximately 50 surface ships operated by the U.S. Navy. The contract is renewable annually at the U.S. Navy's option through 1998. The center has a full-mission bridge simulator and a bridge wing simulator, and is used to perform commercial training when not in use by the Navy. 	In 1994, MarineSafety International Rotterdam, B.V. in Rotterdam, the Netherlands, began operations in a new maritime research and training center that houses six simulators for the training of ship's officers, harbor pilots, cadets and vessel traffic controllers and conducts maritime research projects. North Sea Ferries has signed an agreement to train its Masters and chief officers at the Rotterdam facility. A contract was also signed to train captains and crews of the new 900-ft. high-speed container ships. MarineSafety is the majority shareholder of MarineSafety International Rotterdam B.V.
6.	Manufacture of Training Equipment 	The Simulation Division manufactures flight simulators and other advanced training devices, including cockpit systems simulators and cockpit procedures trainers, for installation at the Company's learning centers and for sale by the Company to unaffiliated parties. The Simulation Division delivered eight simulators in 1994. Seven simulators were installed at the Company's learning centers and one simulator was shipped to the U.S. Government. The Simulation Division also delivered five OH-58D Helicopter Cockpit Procedure Trainers to Fort Rucker, Alabama for U.S. Army combat training. The Simulation Division also provides maintenance support for the Company's simulators and other training equipment. 	In 1995, the Simulation Division plans to deliver nine flight simulators, of which seven are for Company use, one for the U.S. Government and one for an overseas customer. Five helicopter training devices for the U.S. Army are also currently being manufactured. The Company requires cash deposits, progress payments and/or letters of credit for the simulators which the Simulation Division manufactures for export in order to ensure that it receives timely collection of the related account receivable. 	The Company's Visual Simulation Systems Division designs, develops and manufactures, under the trade name VITAL, computer-generated visual systems and display equipment that are installed on flight simulators. Approximately 360 VITAL visual systems have been delivered to customers around the world. The new generation VITAL VIII ChromaView visual system creates more realistic scenes through a photo-imagery-based technology. Three Vital VIII visual systems were shipped in 1994 to an overseas customer.
7.	Design and Development of Training Systems 	The Instructional Division provides the initial analysis of system training and performance requirements and designs and develops classroom presentation systems, courseware, interactive computer-based software and manuals primarily for use in the Company's educational and training activities. The Instructional Division also produces training manuals and other instructional materials for the U.S. military and the FAA. Many of the Instructional Division's training systems use high technology applications and task performance requirements.
8.	Competition 	The Company faces competition in each of its training services. There are numerous training organizations located throughout the United States which provide primary flight training to the public. In the area of advanced pilot training, the customers served by the Company are also served by the larger airlines (which often train their own pilots and provide training to pilots of other airlines), by government agencies (which often train their own flight personnel) and by other commercial training organizations. The Company also faces competition from numerous training organizations that do not use simulators in their training programs. In addition, there are many organizations that provide training and may operate simulators for aircraft for which the Company also provides simulator-based flight training. The Company is also aware of a number of domestic and foreign-based organizations and corporations which provide shiphandling training. 	The Company competes principally by attempting to provide the best, most accessible and reasonably priced training service available. The Company is continually improving the quality of its services for business and commercial aviation and developing new and innovative products for its customers. In 1994, seven new simulators were added to the Company's fleet. The products manufactured by the Simulation Division and Visual Division are at the leading edge of aircraft simulation, employing such features as digital control loading and weather radar; digitized sound and automated voice systems; automatic testing features and advanced hydrostatic motion systems and touch-screen instructor stations. The Company also attempts to conveniently locate its training facilities near existing and potential customers. 	In addition, the Company has designed new programs to support a renewed emphasis on total quality in all areas of training development and delivery. All of the Company's instructors participate in programs designed to maintain and upgrade their teaching skills on a continuing basis. Other programs have been designed to better meet the specific requirements of individual customers and to deliver a broader range of services and support. 	The Company believes that the growing complexity and operating cost of the new generation of aircraft make training with simulators highly desirable. Moreover, the substantial capital costs and long lead time involved in obtaining appropriate simulators suggest that certain commercial airlines might prefer to use flight training programs utilizing simulators offered by independent contractors rather than maintain and operate the training equipment themselves. There can be no assurance, however, that these commercial airlines will continue to use training programs offered by independent contractors such as the Company. 	The sale of products, including simulators and visual systems, is a competitive industry both domestically and internationally. There are several manufacturing companies worldwide that have the same ability as the Company to design and manufacture a complete flight simulator, including a visual system. There are also a number of companies that can manufacture either a simulator or a visual system, but do not have the capability to do both. 	The Company competes in the sale of products primarily by offering training devices and visual systems that are reasonably priced, easily maintained and delivered on a timely basis. The 1993 acquisition of the Visual Division enhanced the Company's ability to manufacture and sell a complete simulator or total training system.
9.	Number of Persons Employed 	As of December 31, 1994, the Company and its subsidiaries had 2,246 full-time employees. Of these, 858 were instructors in ground school, simulator or in-flight training, 848 were administrative, clerical and maintenance personnel, 392 were employees of the Simulation Division, 88 were employees of the Visual Division and 60 were employees of the Instructional Division.
10.	Executive Officers 	Each executive officer of the Company serves at the pleasure of the Company's Board of Directors and, subject to removal, holds office until the regular meeting of the Board of Directors which follows the annual meeting of shareholders and until his successor has been appointed and qualified. The following table sets forth certain information with respect to the executive officers of the Company. 				Years 				Position 	Name	Age	Position with Company	 Held
Albert L. Ueltschi	77	President and Chairman of the Board	44 years
Bruce N. Whitman	61	Executive Vice President and Director	33 years
Elmer G. Gleske	64	Vice President - Government Affairs	18 years
Dennis Gulasy(1)	52	Vice President - Simulation Systems	 3 years
Kenneth W. Motschwiller(2)	38	Vice President - Treasurer	4 years
James S. Waugh	47	Vice President - Marketing	15 years
Mario D'Angelo(3)	42	Controller	4 years 	______________________
(1)	Mr. Gulasy was elected Vice President-Simulation Systems of the Company in September 1992. Mr. Gulasy has also been General Manager of the Company's Simulation Division since 1985. Prior thereto, Mr. Gulasy held various positions with the Company.
(2)	Prior to becoming Vice President-Treasurer, Mr. Motschwiller was Controller of the Company from December 1983 until July 1991.
(3)	Prior to becoming Controller, Mr. D'Angelo was Assistant Controller of the Company from September 1988 until July 1991. Prior thereto, Mr. D'Angelo held various positions with the Company.
ITEM 2.
ITEM 2.	PROPERTIES 	The Company's corporate offices are located at the Marine Air Terminal, La Guardia Airport, Flushing, New York 11371. In addition, there are four flight simulators, and related training facilities, located at the La Guardia Airport facility. Including this facility, the Company currently operates 32 advanced and maintenance technician learning centers and two primary learning centers in various cities throughout the United States, one advanced learning center in France, two advanced learning centers in Canada and one marine training and research center in the Netherlands. FlightSafety Services Corporation provides training at U.S. Air Force bases in facilities furnished by the U.S. government and maintains its administrative office in Littleton, Colorado. The Simulation Division maintains its offices and plant in Broken Arrow, Oklahoma. The Visual Division maintains its offices and plant in St. Louis, Missouri. The Instructional Division maintains its general offices in Hurst, Texas. 	In the aggregate, the Company occupies approximately 1,233,000 square feet of building space which is devoted to office and administrative purposes, classrooms, repair service, maintenance facilities, the housing of simulators and aircraft, the design and manufacturing of simulators, visual displays and systems and other training equipment, the development of classroom presentation systems, manuals, interactive computer-based programs and the design and production of instructional systems. Approximately 93% of the facilities owned or leased by the Company are presently utilized for these purposes. The remaining space is being put to various temporary uses and is potentially available for expansion of the Company's operations. The Company considers its facilities well maintained, in good operating condition, adequately insured and satisfactory for their various uses. 	
	The following table sets forth more detailed information related to the facilities of the Company:
	Approximate	Lease Location	Square Feet	Expiration Date	 Principal Activities La Guardia Airport	36,000	2000	Corporate offices and advanced Flushing, New York			pilot learning center
4619 Le Bourget Drive	25,700	(1)	Advanced learning center Berkeley, Missouri
Wiley Post Airport	10,100	1996(2)	Advanced learning center 7310 N.W. 50th Street Bethany, Oklahoma
1804 Hyannis Court	27,300	1997(3)	Advanced learning center College Park, Georgia
24 Industrial Boulevard	16,500	(4)	Advanced learning center Daleville, Alabama
Dothan/Houston County Airport 	30,300	2001(5)	Advanced learning center 600 FlightSafety Drive Dothan, Alabama
1600 Dolwick Drive	7,700	1997(6)	Advanced learning center Erlanger, Kentucky
2250 Alliance Blvd.	10,700	1995(7)	Primary learning center Fort Worth, Texas
9601 Trinity Boulevard	16,500	2004(8)	Advanced learning center Fort Worth, Texas
8900 Trinity Boulevard	23,000	(9)	Offices of the Instructional Hurst, Texas			Division
Lakeland Airport	17,700	2009(10)	Advanced and primary learning 2949 Medulla Road			center Lakeland, Florida
Lambert-St. Louis	12,100	1996(11)	Advanced learning center International Airport 6185 Aviation Drive St. Louis, Missouri
Le Bourget Airport	36,900	2001(12)	Advanced learning center BP25 Zone d'Aviation d'Affaires Building 404 Aeroport Le Bourget, France
Adams Field	725	1995(13)	 Maintenance learning center Little Rock, Arkansas
4900 E. Conant Street	11,700	1995(14)	Advanced learning center Long Beach, California
Long Beach Municipal Airport	27,100	1997(15)	Advanced learning center 4330 Donald Douglas Drive Long Beach, California
4800 NW 36th Street	62,000	1998(16)	Advanced learning center Miami, Florida
Dorval International Airport	19,100	1999(17)	Advanced learning center 9555 Ryan Avenue Dorval, Montreal Quebec, Canada
Salt Lake City	23,600	2016(18)	Advanced learning center International Airport 201 N. 2200 W. Salt Lake City, Utah
San Antonio International Airport	18,000	2000(19)	Advanced learning center 9027 Airport Boulevard San Antonio, Texas
1505 South 192nd Street	68,600	(20)	Advanced learning center Seattle, Washington
Teterboro Airport	25,400	(21)	Advanced learning center 100 Moonachie Avenue Moonachie, New Jersey
Toledo Express Airport	16,500	2000(22)	Advanced learning center 11600 West Airport Road Swanton, Ohio
95 Garratt Boulevard	18,000	2005(23)	Advanced learning center Downsview, Toronto Ontario, Canada
Travis Field 	43,900	2004(24)	Advanced and maintenance Savannah, Georgia			learning centers
Tucson International Airport	45,000	2006(25)	Advanced learning center 1071 E. Aero Park Blvd. Tucson, Arizona
Vero Beach Municipal Airport	50,900	2006(26)	Primary learning center 2805 Airport Drive Vero Beach, Florida
Palm Beach International Airport	38,000	2004(27)	Advanced learning center 3887 Southern Boulevard West Palm Beach, Florida
Wichita Mid-Continent Airport	18,000	2006(28)	Advanced learning center 2 Learjet Way Wichita, Kansas
Wichita Mid-Continent Airport	25,700	2006(29)	Advanced learning center 1951 Airport Road Wichita, Kansas
Wichita Mid-Continent Airport	30,300	2006(30)	Advanced learning center 1851 Airport Road Wichita, Kansas
9720 East Central Avenue	63,000	2015(31)	Advanced learning center Wichita, Kansas
9525 East Central Avenue	17,900	(32)	Maintenance learning center Wichita, Kansas
1962 Midfield Road 	17,000	2020(33)	 Maintenance learning center Wichita, Kansas
William B. Hobby Airport	36,600	(34)	Advanced learning center 7525 Fauna Street Houston, Texas
New Castle County Airport	39,500	2010(35)	Advanced learning center 155 N. duPont Highway New Castle, Delaware
2700 North Hemlock Circle	101,200	(36)	Offices and plant of the Broken Arrow, Oklahoma			Simulation Division, 			manufacturing facility 			for training equipment
5695 Campus Parkway	30,000	(37)	Offices and plant of the St. Louis, Missouri 		Visual Division, manufacturing 			facility for visual systems
7700 East 38th Street	25,000	(38)	Former manufacturing facilities Tulsa, Oklahoma			now used for Company 			storage
U.S. Merchant Marine Academy	22,000	(39)	MarineSafety Computer Aided Operations			Research and marine Research Facility			learning center Steamboat Road Kings Point, New York
344 Aquidneck Avenue	17,400	(40)	MarineSafety Middletown, Rhode Island			Marine learning center
32nd Street Naval Station	4,800	(41)	MarineSafety Building 3149			Marine learning center San Diego, California
Wilhelminakade 701	34,000	(42)	MarineSafety 3OO7 GG Rotterdam			Research and Netherlands			Marine learning center
10184 West Bellview Avenue 	11,700	1997	Services Corporation Littleton, Colorado			Administrative offices 	 _________________________
(1)	This building was constructed by the Company on land owned by the Company and currently houses McDonnell Douglas MD-80 and DC-9 simulators, Boeing 727 simulators, Metro II and III simulators, a Jetstream 31/32 simulator and a SAAB-340 simulator. (2)	This building was constructed by the Company on land leased from the Oklahoma County Industrial Authority to house the Company's Commander aircraft learning center. (3)	The Company leases space to house its JetStar, King Air and Embraer 120 simulators. (4)	This building, constructed on land owned by the Company, houses C-12 and U-21 simulators. (5)	The Company constructed hangars on land leased from the Dothan/Houston County Airport Authority. A fleet of fixed-wing aircraft is maintained at this facility. (6)	The Company leases space to house its Boeing 727-200 and Embraer 120 simulators. (7)	The Company leases space to house fixed-wing and rotary-wing aircraft and provides primary flight training. (8)	This building was constructed by the Company on land leased from Bell Helicopter Textron to house the Company's Bell Helicopter learning center. (9)	This building was purchased to house the offices of the Company's Instructional Systems Division. (10)	This building was constructed by the Company on land leased from the City of Lakeland, Florida to house the Company's Piper Aircraft learning center and also provides non-career primary aviation training. (11)	This facility is on land leased from the City of St. Louis and houses the Company's Sabreliner learning center. (12)	The Company constructed a building on land leased from Aeroport de Paris. This building houses Falcon 10, 20, 50 and 900, King Air, Citation V, Embraer 120 and Dash-8 simulators. (13)	The Company leases space to house its Falcon Maintenance learning center. (14)	These premises, leased from McDonnell Douglas Corporation, house an MD-80 learning center. (15)	This building was constructed by the Company on land leased from the City of Long Beach to house the Company's Boeing 737-300, McDonnell Douglas MD 88/87, Cessna 300/400 series, Citation, King Air, and Gulfstream II simulators. (16)	The Company leases space from the Dade County Airport to house simulators for the Airbus A-310, Citation, Boeing 727 and 757 and McDonnell Douglas DC-9 and MD-88. (17)	This building was constructed by the Company to house its Challenger learning center. It is located on premises leased from the City of Dorval for a term expiring in May 1999, renewable at the Company's option for up to four additional five-year terms. (18)	This building was constructed by the Company on property leased from Salt Lake City and houses a Boeing 737 simulator. (19)	This building was constructed on land leased from the San Antonio Airport Authority and houses regional airline simulators. (20)	The Company purchased this land and building which houses eight major and regional airline simulators. The Company is using 34,000 square feet and leasing the remaining space to third parties. (21)	This building was constructed on land owned by the Company, is adjacent to Teterboro Airport and houses the Company's Falcon Jet learning center. (22)	This building, which houses Citation and King Air simulators, was constructed by the Company on property leased from the Toledo Express Airport Authority. (23)	The Company constructed a building on land leased from de Havilland Inc. and houses simulators for such manufacturer's aircraft.
(24)	Two buildings were constructed by the Company on property leased from Gulfstream American Corporation to house the Company's Gulfstream pilot and maintenance learning centers. (25)	The Company constructed a building on land leased from Learjet Corporation for housing its Tucson Learning Center. The Company can extend the lease at its option to 2048. (26)	Three buildings, containing a total of 28,500 square feet of space and the land on which they are situated, are owned by the Company. The remaining property is held under a lease expiring in 2006. A fleet of light-fixed wing aircraft is maintained here to provide primary pilot training. (27)	This building was constructed by the Company on land leased from Palm Beach County to house Sikorsky helicopter and Learjet simulators. (28)	This building was constructed by the Company on land leased from the Wichita Airport Authority to house the Company's Wichita Learjet learning center. (29)	This building, which houses the Company's Cessna learning center, is located on approximately one acre of land leased from the Wichita Airport Authority. (30)	This building was constructed by the Company on land leased from the Wichita Airport Authority to house the Company's Cessna Citation learning center. (31)	The Company leases space from the Beech Aircraft Corporation to house its Beech learning center. (32)	This building was constructed by the Company on land owned by the Company to house the Company's Beech Maintenance learning center. (33)	This building was constructed by the Company on land leased from the Wichita Airport Authority to house the Company's Cessna Maintenance learning center. (34)	This building is located on two acres of land owned by the Company and houses the Company's Houston learning center at which simulator training for several types of aircraft is conducted. (35)	This building is located on land leased from the New Castle County Airport and houses both business and regional aircraft simulators. (36)	Seven acres of land and a building are owned by the Company in Broken Arrow. This building houses the Company's Simulation Division which manufactures training equipment. (37)	This building and land is owned by the Company and houses the Visual Division which manufacturers visual systems. (38)	This building and land is owned by the Company and is used primarily for storage. (39)	This facility is leased under a cooperative agreement with the U.S. Maritime Administration to provide marine simulation research and training. (40)	This building, constructed on five acres of land owned by the Company, houses four marine simulators. (41)	The Company houses two marine simulators at this facility in space provided by the U.S. Navy. (42)	This building is leased from the municipality of Rotterdam and houses six marine simulators. 	____________________________
	The Company's rent expense for 1994 was $1,811,000.
ITEM 3.
ITEM 3.	LEGAL PROCEEDINGS 	The Company is involved in litigation relating to claims arising out of its operations in the normal course of business. Such claims against the Company are generally covered by insurance. It is the opinion of management that uninsured liability, if any, resulting from existing litigation and claims will not have a material adverse effect on the Company's business or financial position.
ITEM 4.
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 	None.
	PART II ITEM 5.
ITEM 5.	MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
	The information set forth under the caption "Common Stock Price Range and Dividend Information" on page 1 of the Company's Annual Report to Shareholders for the Fiscal Year Ended December 31, 1994 (the "1994 Annual Report") is incorporated herein by reference. No other information contained in the 1994 Annual Report shall be deemed to be filed with the Commission, except as expressly stated herein. 	On February 19, 1993, the Board of Directors authorized a stock repurchase program for up to three million shares of the Company's common stock. On December 3, 1993, the Board of Directors authorized an increase in the stock repurchase program to four million shares. As of March 13, 1995, 3,291,700 shares of the Company's Common Stock had been repurchased pursuant to this program.
ITEM 6.
ITEM 6.	SELECTED FINANCIAL DATA
	The information set forth under the caption "Five Year Financial Highlights" on page 1 of the 1994 Annual Report is incorporated herein by reference .
ITEM 7.
ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION 	The information set forth under the caption "Management's Discussion and Analysis of Results of Operations and Financial Condition" on page 14 of the 1994 Annual Report is incorporated herein by reference
ITEM 8.
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
	The consolidated financial statements and notes thereto, together with the report thereon of Price Waterhouse LLP, independent accountants, dated January 31, 1995, appearing on pages 15 to 25 of the 1994 Annual Report are incorporated herein by reference. With the exception of the information incorporated by reference in Items 5, 6 and 7 and this Item 8 of this Form 10-K, the 1994 Annual Report is not to be deemed filed as part of this Form 10-K.
ITEM 9.
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
	None.
	PART III ITEM 10.
ITEM 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY 	The information concerning the directors of the Company set forth on page 2 of the Proxy Statement dated March 24, 1995 relating to the Company's Annual Meeting of Shareholders scheduled to be held on April 26, 1995 (the "1995 Proxy Statement") under the caption "Election of Directors," and the information concerning compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended, set forth on pages 11 and 12 of the 1995 Proxy Statement under the caption "Compliance With Section 16(a) of the Exchange Act" are incorporated herein by reference. No other information contained in the 1995 Proxy Statement shall be deemed to be filed with the Commission, except as expressly stated herein. 	Information relating to the executive officers of the Company is set forth in Item 1, section 10, of this Form 10-K under the caption "Executive Officers".
ITEM 11.
ITEM 11.	DIRECTORS' AND EXECUTIVE OFFICERS' COMPENSATION 	The information regarding directors' compensation set forth on pages 3 through 4 of the 1995 Proxy Statement under the caption "Committees, Meetings and Compensation of the Board of Directors," and the information regarding executive officers' compensation set forth on pages 5 through 10 of the 1995 Proxy Statement under the caption "Executive Compensation" other than the information set forth on pages 5 through 7 and pages 10 and 11 under the captions "Report of the Compensation Committee on Executive Compensation" and "Five-Year Stock Performance Graph," respectively, are incorporated herein by reference. ITEM 12.
ITEM 12.	
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (a)	Set forth below is certain information relating to each person known to the Company to be the beneficial holder of more than five percent of the Company's Common Stock as of March 13, 1995.
		Percentage of Name and Address of	Amount and Nature of	Outstanding Common Stock Beneficial Owner	Beneficial Ownership	Owned as of March 13, 1995
Albert L. Ueltschi	9,617,040 (1)	30.7% Marine Air Terminal La Guardia Airport Flushing, NY 11371
Putnam Investment, Inc.	 4,129,572 (2)	13.2% One Post Office Square Boston, MA 02109
FMR Corp.	3,093,300 (3)	9.9% 82 Devonshire Street Boston, MA 02109
(1)	Includes 9,616,540 shares held pursuant to a revocable trust for which Mr. Ueltschi is the sole beneficiary during his lifetime and 500 shares held pursuant to a partnership. Does not include approximately 1,513,000 shares beneficially owned by various members of Mr. Ueltschi's family, in respect of which Mr. Ueltschi disclaims beneficial ownership.
(2)	Putnam Investment, Inc., is a wholly-owned subsidiary of Marsh and McLennan. Putnam Investment Inc.'s subsidiaries, Putnam Investment Management, Inc., and the Putnam Advisory Company, Inc., are investment advisors to investment companies. This represents the number of shares owned as of December 31, 1994 as indicated in a Schedule 13G filed by Putnam Investment, Inc., with the Securities and Exchange Commission (SEC) on January 23, 1995. Putnam has shared power to vote or to direct the vote for 375,560 shares and has shared power to dispose or to direct the disposition of all the shares.							
(3)	FMR Corp. is a holding company and its subsidiary, Fidelity Management & Research Company, is an investment advisor to investment companies. This represents the number of shares owned as of December 31, 1994, as indicated in a Schedule 13(G) filed by FMR with the SEC on February 13, 1995. FMR has neither sole nor shared voting power with respect to such shares and has sole power to dispose of such shares. 	____________________
(b)	The information regarding beneficial ownership of shares of the Company's Common Stock as of March 13, 1995 by the directors and named executive officers of the Company (those named in the Summary Compensation Table on page 8 of the 1995 Proxy Statement), and by all directors and executive officers of the Company as a group, set forth under the caption "Security Ownership of Certain Beneficial Owners and Management" on page 4 of the 1995 Proxy Statement, is incorporated herein by reference.
ITEM 13.
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
	None.
	PART IV
ITEM 14.
ITEM 14.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
a.	List of documents filed as part of this Form 10-K: 			Page In 1994 			Annual 			Report to 			Shareholders 	1.	Financial Statements
		Report of Independent Accountants		25
		Consolidated Statements of Income 		for each of the three years in the period ending December 31, 1994	15
		Consolidated Balance Sheets at December 31, 1994 and 1993 		Consolidated Statements of Cash Flows for each of the 		three years in the period ending December 31, 1994		17
		Notes to Consolidated Financial Statements 		18-25
	2.	Financial Statement Schedules - 1994, 1993 and 1992		Page In 				This 				Form 10-K
		Report of Independent Accountants on Financial Statement Schedules	27
		I.	 Marketable Securities	30-35
		V.	 Property, Plant and Equipment	36
		VI.	Accumulated Depreciation, Depletion 			and Amortization of Property, Plant and Equipment	 37
		VIII.	Valuation and Qualifying Accounts	38
		X.	Supplementary Income Statement Information	39
	Financial statement schedules not included in this Form 10-K have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
ITEM 14(a)	3.	EXHIBITS 	3)	(a)	Certificate of Incorporation of the Company, as amended, filed as Exhibit 3(a) to theCompany's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (the "1993 Form 10-K"), is incorporated herein by reference. 	 	(b)	The By-Laws of the Company, as amended, filed as Exhibit 3(b) to the 1993 Form 10-K, is herein incorporated by reference. 10) (a)	Company's 1979 Stock Option Plan, with first and second amendments thereto, filed as Exhibit 10(i) to the Company's Annual Report on Form 10-K for the year ended December 31, 1991 (the "1991 Form 10-K"), is incorporated herein by reference. 		(b)	Company's Employee Stock Purchase Plan, as amended April 27, 1994. 		(c)	Company's 1982 Incentive Stock Option Plan with first and second amendments thereto, filed as Exhibit 10(k) to the 1991 Form 10-K, is incorporated herein by reference. 		(d)	Company's 1984 Restricted Stock Compensation Plan, and first amendment thereto, filed as Exhibit 10(l) to the 1991 Form 10-K, is incorporated herein by reference. 		(e)	Company's Retirement Plan for Non-Employee Directors, and first amendment thereto. 		(f)	Company's 1992 Stock Option Plan, filed as Exhibit 10(n) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, (the "1992 Form 10-K") is incorporated herein by reference. 		(g)	Change of Control severance agreement for Executive Officers. 	13)	Company's Annual Report to Shareholders for the Fiscal Year Ended December 31, 1994. 	21)	Subsidiaries of the Company. 	23)	Consent of Independent Accountants.
ITEM 14 (b).	No reports on Form 8-K were filed with the Commission by the Company during the fiscal year ended December 31, 1994. ITEM 14 (c).	See Item 14 (a)(3) above.
ITEM 14 (d).	See Item 14 (a)(2) above.
	Report of Independent Accountants on Financial Statement Schedules
To the Board of Directors of FlightSafety International, Inc.
	Our audits of the consolidated financial statements referred to in our report dated January 31, 1995 appearing on page 25 of the 1994 Annual Report to Shareholders of FlightSafety International, Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedules listed in Item 14(a) (2) of this Form 10-K. In our opinion, such Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
PRICE WATERHOUSE LLP
New York, New York January 31, 1995
	SIGNATURES
	Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized. 	FLIGHTSAFETY INTERNATIONAL, INC. 	(Company)
Date: March 27, 1995	By:	 /s/ Albert L. Ueltschi 		Albert L. Ueltschi 		President
	Pursuant to the requirements of the Securities Exchange Act of 1934, this Form 10-K has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
Date: March 27, 1995	By:	 /s/ Albert L. Ueltschi 		Albert L. Ueltschi 		Chairman of the Board, 		Director and President 		(Principal Executive Officer)
Date: March 27, 1995		 /s/ George B. Beitzel 		George B. Beitzel 		Director
Date: March 27, 1995		 /s/ Charles R. Longsworth 		 Charles R. Longsworth 		Director
Date: March 27, 1995		 /s/ Edward E. Hood, Jr. 		 Edward E. Hood, Jr. 		Director
Date: March 27, 1995		 /s/ John A. Morgan 		 John A. Morgan 		Director
Date: March 27, 1995		 /s/ Bruce N. Whitman 		Bruce N. Whitman 		Director and Executive Vice President
Date: March 27, 1995		 /s/ Kenneth W. Motschwiller 		 Kenneth W. Motschwiller 		Vice President - Treasurer 		(Principal Financial Officer)
Date: March 27, 1995		 /s/ Mario D'Angelo 		Mario D'Angelo 		Controller 		(Principal Accounting Officer) 	Exhibit (21)
	 Subsidiaries of FlightSafety International, Inc.
			Percentage owned 		Jurisdiction of	by Company 	Name of Subsidiary	Incorporation	(Directly or Indirectly)
FlightSafety Capital Corporation	Delaware	100%
MarineSafety International, Inc.	New York	100%
MarineSafety International Rotterdam B.V. 	Netherlands	 51%
FlightSafety Canada, Ltd/Ltee	Canada 	100%
FlightSafety International, S.A.R.L.	France	100%
FlightSafety New York, Inc.	New York	100%
FlightSafety Properties, Inc.	Delaware	100%
FlightSafety Services Corporation	Delaware	100%
FlightSafety Texas, Inc.	Delaware	100%
FlightSafety China, Inc.	Delaware	100%
Kunming FlightSafety Aviation Training Company, Limited	China	85%
								
EXHIBIT 10(b)
	FLIGHTSAFETY INTERNATIONAL, INC. 	EMPLOYEE STOCK PURCHASE PLAN, 	AS AMENDED APRIL 27, 1994
	Section 1. Purpose. The purpose of this Plan (the "Plan") is to provide an opportunity for employees of FlightSafety International, Inc. (the "Company") and any subsidiary (a "Subsidiary") that is (i) designated by the Board of Directors of the Company (the "Board") and (ii) meets the requirements of Section 424(f) of the Internal Revenue Code of 1986, as amended (the "Code"), to purchase Common Stock (the "Stock") of the Company and thereby have an additional incentive to contribute to the prosperity of the Company. It is the intention of the Company to have the Plan qualify as an "Employee Stock Purchase Plan" under Section 423 of the Code, and the Plan shall be construed in accordance with such purpose.
	Section 2. Eligibility. Any person regularly employed by the Company or its Subsidiaries shall be eligible to participate in the Plan on an Offering Date (as hereinafter defined), provided that as of such Offering Date he shall have completed at least seventeen consecutive months of full- time employment with the Company or a Subsidiary. For purposes of the Employee Stock Purchase Plan, the term "full-time" when used in connection with an employee's eligibility to participate, means employment which customarily involves more than 20 hours per week and more than five months in a calendar year. No employee may participate in an offering under the Plan if after giving effect to an option granted in such offering such employee would own (within the meaning of the Code) shares of Stock, including Stock which he may purchase under outstanding options, possessing 5 percent or more of the total combined voting power or value of all classes of stock of the Company or any Subsidiary. All employees who participate in the Plan shall have the same rights and privileges thereunder.
	Section 3. Offering. The maximum number of shares of Stock which may be issued pursuant to the Plan shall be 1,112,500 shares. The shares of stock sold by the Company pursuant to the Plan shall be either authorized but unissued shares or shares acquired by the Company and held in its treasury. The Stock Purchase Plan Committee (the "Committee"), established pursuant to Section 11 hereof, may designate any amount of such shares for offering at any of the Offering Dates, as hereinafter defined. In the event of a stock split, stock dividend, combination or recapitalization of shares of Stock subsequent to the effective date of the Plan, the maximum number of shares of Stock for which rights to purchase may therefore be granted under the Plan will be, pursuant to action taken by the Board, proportionately increased or decreased, and such other action will be taken as in the opinion of the Board of the Company will be appropriate under the circumstances.
	Offerings of Stock under the Plan shall commence July 1, 1977 and terminate June 30, 1997 (the "Offering Period"). During such period options will be granted each July 1 in 1977 through 1996 (the "Offerings Dates") to eligible employees who elect to participate in the Plan under Section 4. Each option shall expire on the June 30 following the year in which the option was granted. The number of shares of Stock to be subject to each option shall be fixed in full shares as of each Offering Date and shall be that number of shares of Stock resulting from the division of the option price hereinafter specified in the next paragraph into the percentage (up to a maximum of 10%) of each Participant's annual gross basic compensation rate on such Offering Dates which the Participant commits through payroll deductions as provided in Section 4 hereof.
	The option price under each option shall be the lower of: (1) 85% of the closing price of the Stock on the New York Stock Exchange (or the principal exchange on which such shares are traded at that time) on the date such option is granted, or (ii) 85% of such closing price on the date of exercise, and may be adjusted pursuant to Section 7 hereof.
	No option shall be granted which would permit a Participant's right to purchase stock of any class of the Company under all employee Stock Purchase Plans of the Company and any Subsidiary to accrue (as specified in Section 423 of the Code) at a rate which exceeds $25,000 of fair market value of such stock (determined at the time such option is granted) during each calendar year in which such option will be outstanding at any time.
	If options granted on any Offering Date would be exercisable for an aggregate number of shares of Stock that exceeds the maximum number of shares offered on any Offering Date, the options so granted and the number of shares which may be purchased under such options shall be reduced on a pro rata basis in as nearly a uniform manner as shall be practicable and equitable. In such event, payroll deductions shall also be reduced or refunded accordingly and the Company shall give written notice of such reduction or refund to each Participant affected thereby.
	Section 4. Participation. An eligible employee may become a participant in the Plan ("Participant") by filing on or before an applicable Offering Date of grant a completed payroll deduction authorization form provided by the Company. Employees may authorize payroll deductions at the rate of any whole percentage up through 10% of their gross basic compensation (excluding any overtime, bonuses, or other extra compensation). Payroll deductions in accordance with such authorization shall commence on the applicable Offering Date and shall end one year thereafter. All payroll deductions may be held by the Company and commingled with its other corporate funds. A separate account for each Participant shall be maintained by the Company under the Plan and the amount of each Participant's payroll deductions shall be credited to such account.
	Participants may discontinue participation in the Plan, in which event the amount credited to their accounts shall thereupon be paid to them with 6% per annum simple interest. In the event Participants terminate their employment with the Company or a Subsidiary for any reason (including death) prior to the expiration of the one-year option period, their participation in the Plan shall terminate and all amounts credited to their accounts with interest shall thereupon be paid to them or their estates, except that if Participants' employment is terminated not more than three months immediately preceding the date upon which their stock would be purchased pursuant to Section 5, the Participants or their estates may elect to leave amounts then credited to their accounts in the Plan until such stock purchase.
	Section 5. Purchase of Stock. Upon the expiration of each one-year option period, Participants' options shall be exercised automati cally for the purchase of that number of full shares of Stock which the accumulated payroll deductions credited to their accounts at that time will purchase at the applicable price specified in Section 3. Notwith standing the foregoing, Participants may by written notice to the Company prior to the expiration of the one-year option period elect to terminate such options and withdraw all accumulated payroll deductions credited to their accounts with interest, or to exercise their options for a specified number of full shares less than the number which may be purchased pursuant to Section 3.
	Section 6. Payment and Delivery. Upon the exercise of an option, the Company will deliver to the Participants the Stock purchased upon such exercise and the balance of any amount of payroll deductions credited to their accounts not used for such purchase with interest. The Participants may elect to have such unused cash balance credited to their accounts for the next option period, if they are Participants therein. The Company shall retain the amount of payroll deductions used to purchase the Stock in full payment therefore and such Stock shall thereupon be fully paid and non-assessable. Except as otherwise provided herein, no Participant shall have any voting, dividend or other stockholder rights with respect to shares subject to any option granted under the Plan until such option is exercised and such shares are issued to them.
	Section 7. Recapitalization. If after the grant of an option but prior to the purchase of the Stock thereunder, there shall be any increase or decrease in the amount of outstanding shares of Stock by reason of a stock split, stock dividend, combination or recapitalization of such shares, the number of shares to be purchased pursuant to such option and the option price per share will be proportionately increased or decreased, and such other action will be taken as in the opinion of the Board will be appropriate under the circumstances.
	Section 8. Merger or Liquidation. In the event of a dissolution or liquidation of the Company or a merger or consolidation in which the Company is not the surviving corporation, the Plan shall terminate upon the date of approval of such dissolution, liquidation, merger or consolidation by the Company's shareholders. The exercise date of all options outstanding under the Plan shall be exercised in the manner provided in Section 5 as though such approval date constituted the expiration of the normal one-year option period.
	Section 9. Transferability. Options granted to Participants may not be assigned, transferred, pledged or otherwise disposed of in any way, and any such attempted assignment, transfer, pledge or other disposition shall be null and void and without effect.
	Section 10. Amendment or Termination of the Plan. The Board may at any time and from time to time amend or terminate the Plan, provided that no such amendment or termination may adversely affect the rights of any Participant under outstanding options under this Plan, and provided further that no amendment shall be effective unless shareholder approval has been obtained if such approval is required (i) in order for the Plan to meet the conditions specified in Rule 16b-3(a) under the Securities and Exchange Act of 1934, as amended, or (ii) by any other provision of applicable law.
	Section 11. Administration. The Plan shall be administered by a Committee of at least three members who shall be appointed by the Board. The Committee shall have full power and authority to promulgate such rules and regulations as it deems necessary for the proper administration of the Plan, to interpret the provisions and supervise the administration of the Plan, and to take all action in connection therewith or in relation thereto as it deems necessary or advisable. Decisions of the Committee shall be made by a majority of its members and shall be final and binding upon all Participants. Any decision reduced to writing and signed by a majority of the members of the Committee shall be fully effective as if it had been made at a meeting of the Committee duly held. The Company will pay all expenses incurred in the administration of the Plan.
EXHIBIT 10(e)
	RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS 	OF FLIGHTSAFETY INTERNATIONAL, INC.
	ARTICLE I.
	Section 1.1 - Purpose: The purpose of the Retirement Plan for Non-Employee Directors of FlightSafety International, Inc. is to provide non-employee directors with pension benefits at retirement.
	ARTICLE II.
	DEFINITIONS AND CONSTRUCTION
	Section 2.1 Definitions: The following definitions shall apply for purposes of the Plan, unless a different meaning is plainly indicated by the context:
		(a)	"Accrued Benefit": The amount determined in accordance with Article IV, Section 4.1 for Retirement at the Normal Retirement Date and Article IV, Section 4.2 for Retirement for Disability.
		(b)	"Annual Retainer": the annual amount payable to a Director for serving on the Board, excluding (i) any annual amount payable to a Director for serving on a committee of the Board and (ii) any per meeting fee paid for attending meetings of the Board or a committee thereof.
		(c)	"Board": The Board of Directors of the Company, as constituted from time to time.
		(d)	"Code": The Internal Revenue Code of 1986, as amended from time to time, and the applicable rulings and regulations thereunder (including the corresponding revisions of any succeeding law).
		(e)	"Company": FlightSafety International, Inc. a New York Corporation, its successors and assigns.
		(f)	"Director": Any non-employee director of the Company. A director of the Company who is also an employee of the Company or any of its subsidiaries shall not be considered a Director under this Plan.
		(g)	"Disability": A condition of incapacity due to physical or mental illness as a result of which a Participant is unable to perform his duties and responsibilities as a Director for a period of six consecutive months.
		(h)	"Disability Retirement Pension": The Pension that Participants are entitled to receive upon fulfilling all of the requirements under Section 4.2.
		(i)	"Effective Date": December 8, 1988.
		(j)	"Eligible Spouse": The husband or wife to whom the Participant had been legally married throughout the six-month period ending on the earlier of 1) the Participant's Normal Retirement Date or 2) the date of the Participant's death.
		(k)	"ERISA": Public Law No. 93-406, the Employee Retirement Income Security Act of 1974, as amended from time to time.
		(l)	"Normal Retirement Date": The date upon which the Participant attains age 70.
		(m)	"Normal Retirement Pension": The Pension that Participants are entitled to receive upon fulfilling all of the requirements under Section 4.1.
		(n)	"Participant": A Director participating in the Plan in accordance with the provisions of Article III or a former Director entitled to receive a Pension under the Plan.
		(o)	"Pension": A series of semi-annual amounts, as described in Article IV hereof, which are payable to a person who is entitled to receive benefits under the Plan.
		(p)	"Plan": The Retirement Plan for Non-Employee Directors of FlightSafety International, Inc. as amended from time to time.
		(q)	"Plan Year": The twelve-month period commencing on December 8, and ending on December 7.
		(r)	"Retirement": Termination of service as a Director for any reason other than death after a Participant has fulfilled all requirements for a Normal Retirement Pension pursuant to Section 4.1 or a Disability Retirement Pension pursuant to Section 4.2. Retirement shall be considered as commencing on the day immediately following a Participant's last day of service as a Director.
		(s)	"Service": The period of a Participant's service as a Director of the Company considered in the determination of his eligibility for benefits under the Plan in accordance with Section 3.1.
		(t)	"Year of Service": A twelve-month period commencing on the anniversary date of a Director's election to the Board.
	Section 2.2 - Construction of Language: Whenever appropriate in the Plan, words used in the singular may be read in the plural, words used in the plural may be read in the singular, and words importing the masculine gender may read as referring equally to the feminine or the neuter. Any reference to an Article or Section number shall refer to an Article or Section of the Plan unless otherwise indicated.
	ARTICLE III.
	PARTICIPATION AND SERVICE
	Section 3.1 - Participation: All Directors on the Effective Date of the Plan shall be eligible to participate in the Plan as of the Effective Date. All other Directors shall become Participants in this Plan on the date they are elected Directors of the Company. Any Director who was previously an employee of the Company shall be eligible to participate in the Plan upon his retirement as an employee of the Company, provided that he remains a Director following such retirement.
	ARTICLE IV.
	PENSION
	Section 4.1 - Normal Retirement Pension: Upon a Participant's Normal Retirement Date, regardless of whether such Participant is still then serving as a Director, such Participant shall become entitled to receive an annual Normal Retirement Pension, equal to one hundred percent (100%) of the Annual Retainer payable to him as a Director immediately prior to the date of his Retirement.
	Section 4.2 - Disability Retirement Pension: In the event that a Participant shall retire as a Director of the Company prior to his Normal Retirement Date by reason of his Disability, such Participant shall be granted a Disability Retirement Pension. The annual amount of such Participant's Disability Retirement Pension shall be equal to one hundred (100%) of the Annual Retainer payable to him as a Director on the date of his Retirement by reason of Disability, without reduction for Retirement prior to his Normal Retirement Date.
	Section 4.3 - Payment of Pension: A Participant's Normal Retirement Pension or Disability Retirement Pension shall be paid in semi-annual installments, each installment equalling 1/2 of his annual Pension. The first installment of such Pension shall be paid to a Participant on the first day of the semi-annual period commencing January 1 or July 1, as the case may be, next following the month in which he actually terminates his Service with the Company as a Director.
	Section 4.4 - Termination of Service: In no event shall any Pension be paid to a Participant prior to actual termination of Service. In the event a Participant does not retire at his Normal Retirement Date, but continues to serve as a Director of the Company beyond such date, his Pension shall be determined based upon his Annual Retainer on the date of his Retirement; it being understood, however, that his Pension shall not be otherwise increased by reason of the fact that he continued to serve as a Director after the date he was entitled to receive a Normal Retirement Pension hereunder.
	Section 4.5 - Duration of Payments: Payment of a Normal Retirement Pension or a Disability Retirement Pension shall be made to a Participant (or to his Eligible Spouse, if any, in accordance with Article V hereof) for a number of years equal to the shorter of the Participant's Years of Service or Ten Years, or, in the event such Participant dies prior to receiving all of such payments, as provided in Section 5.1.
	Section 4.6 - Death of Participant: Upon the death of a Participant all of his interest in or right to Pension benefits shall cease except as set forth under the provisions of Article V.
	ARTICLE V.
	JOINT AND SURVIVOR PENSION
	Section 5.1 - 100% Joint and Survivor Pension: If a Participant has an Eligible Spouse on the date his Pension payments commence, his Pension shall be paid in the form of a 100% Joint and Survivor Pension.
	Under such Pension, if a Participant dies prior to receiving all of the payments to which he would otherwise have been entitled under Section 4.5, said payments shall be made to his Eligible Spouse, if any, until all of such payments have been made or such Eligible Spouse shall die, whichever shall first occur. If at the time of the Participant's death there is no Eligible Spouse surviving such Participant, the Company's obligations under the Plan to such Participant shall cease.
	Section 5.2 - Death Prior to Retirement:
		(a)	(1)	If a Participant dies prior to Retirement (regardless of whether he has attained his Normal Retirement Date) and leaves surviving an Eligible Spouse, he shall automatically be deemed, as of the date of his death, to have:
			(i)	been entitled to receive a Normal Retirement Pension, and
			(ii)	retired.
	The Pension shall be paid in the form of a 100% Joint and Survivor Pension, as described in Section 5.1, and the deceased Participant's surviving Eligible Spouse shall thereupon become entitled to receive a Pension thereunder.
	ARTICLE VI.
	ADMINISTRATION
	Section 6.1 - Administration: The Plan shall be administered by the Board.
	Section 6.2 - Duties: The Board shall perform the required duties and it shall have the necessary powers of administering the Plan and carrying out the provisions thereof.
	Section 6.3 - Powers: The powers of the Board shall be as follows:
		(a)	To determine any question arising in connection with the Plan, and its decision or action in respect thereof shall be final, conclusive, and binding upon the Company, and the Participant.
		(b)	To engage the services of counsel or attorney (who may be counsel or attorney for the Company), if it deems necessary, and such other agents or assistants as it deems advisable for the proper administration of the Plan.
		(c)	To receive from the Company and from Participants such information as shall be necessary for the proper administration of the Plan.
	Section 6.4 - Claims Procedure: The Board shall make all determinations as to the right of any person to a Pension. Any denial by the Board of the claim for benefits under the Plan by a Participant or his Eligible Spouse shall be stated in writing by the Board and delivered or mailed to the Participant or his Eligible spouse, as the case may be. Such notice shall set forth the specific reasons for the denial, written to the best of the Board's ability in a manner that may be understood without legal or actuarial counsel. In addition, the Board shall afford a reasonable opportunity to any Participant or his Eligible Spouse whose claim for benefits has been denied for a review of the decision denying the claim.
	Section 6.5 - Records and Reports: The Board shall exercise such authority and responsibility as it deems appropriate in order to comply with ERISA and governmental regulations issued thereunder relating to the following: records of Participants' Service, Accrued Benefits and the percentage of such benefits which are nonforfeitable under the Plan; notifications to Participants; and any applicable reports to the Department of Labor or other government agencies.
	Section 6.6 - Expenses: All expenses of the Plan shall be borne by the Company.
	ARTICLE VII.
	AMENDMENT OR TERMINATION OF PLAN
	Section 7.1 - Amendment or Termination of the Plan: The Board reserves the right to (i) amend the Plan at any time and from time to time by any such amendment or amendments to this Plan as it deems appropriate or (ii) terminate the Plan at any time; provided, however, that any amendment or termination of the Plan shall not adversely affect the Pension accrued by a Participant as of the date of such amendment or termination without the prior written consent of the Participant (or, if such Participant is not then living, his Eligible Spouse, if any).
	ARTICLE VIII
	SUCCESSOR EMPLOYER AND MERGER AND 	CONSOLIDATION OF PLANS 	 	Section 8.1 - Successor Company: Subject to Section 7.1 hereof, in the event of a dissolution, merger, consolidation, or reorganization of the Company, provision may be made by which the Plan will be continued by the successor; and, in that event, such successor shall be substituted for the Company under the Plan. The substitution of the successor shall constitute an assumption of Plan liabilities by the successor, and the successor shall have all of the powers, duties and responsibilities of the Company under the Plan.
	ARTICLE IX.
	MISCELLANEOUS
	Section 9.1 - Status: This Plan is not intended to satisfy the requirements for qualification under Section 401(a) of the Code. It is intended to be an unfunded, non-qualified defined benefit plan which is exempt from the regulatory requirements of ERISA. The Plan shall be construed and administered so as to effectuate this intent.
	Section 9.2 - Governing Law: The Plan shall be construed and enforced in accordance with the laws of the State of New York, except to the extent that such laws are preempted by the federal laws of the United States of America.
	Section 9.3 - Headings: The headings of Articles and sections are included solely for convenience of reference. If there is any conflict between such headings and the text of the Plan, the text shall control.
	Section 9.4 - Nonalienation of Benefits: the right to receive a benefit under the Plan shall not be subject in any manner to anticipation, alienation or assignment, nor shall such right be liable for or subject to debts, contracts, liabilities, engagements or torts.
	Section 9.5 - No Right of Service: Nothing contained in this Plan shall give any Director the right to remain as Director.
FIRST AMENDMENT TO THE RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS OF FLIGHTSAFETY INTERNATIONAL, INC.
		WHEREAS, FlightSafety International, Inc., a New York corporation (the "Company"), has heretofore maintained the Retirement Plan for Non-Employee Directors of FlightSafety International, Inc. (the "Plan") for the benefit of its non-employee directors; and 		WHEREAS, the Company considers it advisable to amend the Plan in the following respect; and 		WHEREAS, the Board of Directors, pursuant to Article VII of the Plan, has the authority to amend the Plan; 		NOW THEREFORE, effective as of June 14, 1994 (the "Effective Date"), the Company hereby amends the Plan to provide as follows: 		1. Section 4.5 of the Plan is hereby amended by deleting the word "Payment" the first place it appears therein and substituting therefor, "Subject to the provisions of Section 4.7 hereof, payment." 		2. A new Section 4.7 is added to the Plan, reading in its entirety as follows: 			"Section 4.7 Change in Control: Upon the occurrence of a "Change in Control" (as defined below), payment of a Normal Retirement Pension or a Disability Retirement Pension shall be made to a Participant (or to his Eligible Spouse, if any, in accordance with Article V hereof) for ten years, or in the event such Participant dies prior to receiving all of such payments, as provided in Section 5.1.
			For purposes of this Section 4.7, a "Change in Control" shall be deemed to have occurred if the conditions set forth in any one of the following subsections shall have occurred:
				(a) any "Person" (as defined below) is or be comes the "Beneficial Owner" (as defined below), directly or indirectly, of securities of the Company (not including in the securities benefi cially owned by such Person any securities acquired directly from the Company or its affiliates) representing 30% or more of the combined voting power of the Company's then outstanding securities (other than any Beneficial Owner with such voting power as of June 14, 1994); or
				(b) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a Person who has entered into an agreement with the Company to effect a transaction described in clause (a), (c) or (d) of this subsection) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or
				(c) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company, at least 75% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person acquires more than 50% of the combined voting power of the Company's then outstanding securities; or
				(d) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets.
		"Person" shall have the meaning given in Section 3(a)(9) of the Securities Exchange Act of 1934,as amended from time to time (the "Exchange Act"), as modified and used in Sections 13(d) and 14(d) thereof; however, a Person shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries, (iii) an underwriter temporarily holdings securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.
		"Beneficial Owner" shall have the meaning defined in Rule 13d-3 under the Exchange Act."
		3. Section 5.1 of the Plan is hereby amended by adding the words "or Section 4.7, as the case may be," following the words "Section 4.5" where they appear in the second paragraph thereof.
		Thus done and signed as of the Effective Date in the presence of the undersigned and competent witness, who hereunto sign their name.
WITNESSES:			FLIGHTSAFETY INTERNATIONAL, INC. _____________________ By:____________________________ _____________________									
EXHIBIT 10(g)
	FLIGHTSAFETY INTERNATIONAL, INC. 	 SEVERANCE AGREEMENT
		THIS SEVERANCE AGREEMENT, dated December 2, 1994, is made by and between FLIGHTSAFETY INTERNATIONAL, INC., a New York corporation (the "Company"), and (the "Executive").
		The Executive is presently employed by the Company as Vice President-Treasurer.
		The Board recognizes that the Executive's contribution to the growth and success of the Company has been substantial. The Board desires to reinforce and encourage the continued attention and dedication to the Company of the Executive as a member of the Company's management, in the best interest of the Company and its stockholders.
		In order to effect the foregoing, the Company and the Executive wish to enter into this severance agreement ("Agreement") on the terms and conditions set forth below. Accordingly, in consideration of the premises and the respective covenants and agreements of the parties herein contained, and intending to be legally bound hereby, the parties hereto agree as follows:
		1. Defined Terms. The definition of capitalized terms used in this Agreement is provided in the last Section hereof.
		2. Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect through December 31, 1995; provided that, commencing on January 1, 1996 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Company or the Executive shall have given notice not to extend this Agreement or a Change in Control shall have occurred prior to such January 1; provided, however, that if a Potential Change in Control or a Change in Control shall have occurred during the term of this Agreement (even if subsequent to a notice not to extend), this Agreement shall continue in effect for a period of not less than twelve (12) months beyond the month in which the later of such Potential Change in Control or Change in Control occurred.
		3. Company's Covenants. In order to induce the Executive to remain in the employ of the Company and in consideration of the Executive's covenants set forth in Section 4 hereof, the Company agrees, under the condi tions described herein, to pay the Executive the "Severance Payments" described in Section 6.1 hereof and the other payments and benefits described herein in the event the Executive's employment with the Company is terminated within one (1) year following a Change in Control and during the term of this Agreement. No amount or benefit shall be payable under this Agreement unless there shall have been (or, under the terms hereof, there shall be deemed to have been) such a termination of the Executive's employment with the Company following a Change in Control. This Agreement shall not be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between the Executive and the Company, the Executive shall not have any right to be retained in the employ of the Company.
		4. The Executive's Covenants. The Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a Potential Change in Control during the term of this Agreement, the Executive will remain in the employ of the Company until the earliest of (i) a date which is six (6) months from the date of such Potential Change of Control, (ii) the date of a Change in Control, (iii) the date of termination by the Executive of
the Executive's employment for Good Reason (determined by treating the Potential Change in Control as a Change in Control in applying the definition of Good Reason), by reason of death, Disability or Retirement, or (iv) the termination by the Company of the Executive's employment for any reason.
		5. Compensation Other Than Severance Payments.
		5.1 During the term of this Agreement and following a Change in Control, during any period that the Executive fails to perform the Executive's full-time duties with the Company as a result of incapacity due to physical or mental illness, the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of any such period, together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period, until the Executive's employment is terminated by the Company for Disability.
		5.2 If the Executive's employment shall be terminated for any reason following a Change in Control and during the term of this Agreement, the Company shall pay the Executive's full salary to the Executive through the Date of Termination at the rate in effect at the time the Notice of Termination is given, together with all compensation and benefits payable to the Executive through the Date of Termination under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period. The Company shall pay the Executive's normal post-termination compensation and benefits to the Executive as such payments become due. Such post-termination compensation and benefits shall be determined under, and paid in accordance with, the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements.
		6. Severance Payments.
		6.1 The Company shall pay the Executive the payments described in this Section 6.1 (the "Severance Payments") upon the termination of the Executive's employment within one (1) year following a Change in Control and during the term of this Agreement, in addition to the payments and benefits described in Section 5 hereof, unless such termination is (i) by the Company for Cause, (ii) by reason of death, Disability or Retirement, or (iii) by the Executive without Good Reason. The Executive's employment shall be deemed to have been terminated following a Change in Control by the Company without Cause or by the Executive with Good Reason if the Executive's employment is termi nated prior to a Change in Control without Cause at the direction or request of a Person who has entered into an agreement with the Company the consummation of which will constitute a Change in Control or if the Executive terminates his employment with Good Reason prior to a Change in Control (determined by treat ing a Potential Change in Control as a Change in Control in applying the definition of Good Reason) if the circumstance or event which constitutes Good Reason occurs at the direction or request of such Person.
			(A) In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination, the Company shall pay, within five (5) days after the Date of Termination, to the Executive a lump sum severance payment, in cash, equal to the sum of three times (i) the Executive's annual base salary in effect immediately prior to the occurrence of the event or circumstance upon which the Notice of Termination is based and (ii) the greater of the amount paid to the Executive as bonus compensation for the year preceding the year in which the Date of Termination occurs and the amount of bonus compensation that would have been paid to the Executive for such year if 100% of the Performance Percentage applicable to the bonus award had been realized.
			(B) In lieu of Company Shares issuable upon exercise of outstanding Options (which Options shall be cancelled upon the making of the payment referred to below), the Company shall pay the Executive a lump sum amount, in cash, equal to the product of (i) the excess of (x) in the case of ISOs granted after the date hereof, the closing price of Company Shares as reported on the New York Stock Exchange Composite Tape on or nearest the Date of Termination (or, if not listed on such exchange, on the nationally recognized exchange or quotation system on which trading volume in Company Shares is highest), or (y) in the case of all other Options, the higher of such closing price or the highest per share price for Company Shares actually paid in connection with any Change in Control, over the per share exercise price of each such Option held by the Executive (whether or not then fully exercisable), times (ii) the number of Company Shares covered by each such Option.
		(C) For a thirty-six (36) month period after the Date of Termination, the Company shall arrange to provide the Executive with life, disability, accident and health insurance benefits substantially similar to those which the Executive is receiving immediately prior to the Notice of Termination (without giving effect to any reduction in such benefits subsequent to a Potential Change in Control or a Change in Control which reduction constitutes Good Reason). Benefits otherwise receivable by the Executive pursuant to this Section 6.1(C) shall be reduced to the extent comparable benefits are actually received by or made available to the Executive without cost during the twelve (12) month period following the Executive's termination of employment (and any such benefits actually received by the Executive shall be reported to the Company by the Executive).
		(D) The restrictions on all Restricted Shares shall lapse upon the occurrence of a Change in Control.
		6.2 Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit received or to be received by the Executive in connection with a Change in Control or the termination of the Executive's employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control or any Person affiliated with the Company or such Person) (all such payments and benefits, including the Severance Payments, being hereinafter called "Total Payments") would be subject (in whole or part), to the Excise Tax, then the Severance Payments shall be reduced to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax (after taking into account any reduction in the Total Payments provided by reason of section 280G of the Code in such other plan, arrangement or agree ment) if (A) the net amount of such Total Payments, as so reduced, (and after deduction of the net amount of federal, state and local income tax on such reduced Total Payments) is greater than (B) the excess of (i) the net amount of such Total Payments, without reduction (but after deduction of the net amount of federal, state and local income tax on such Total Payments), over (ii) the amount of Excise Tax to which the Executive would be subject in respect of such Total Payments. For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments the receipt or enjoyment of which the Executive shall have effectively waived in writing prior to the Date of Termination shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which in the opinion of tax counsel selected by the Company does not constitute a "parachute payment" within the meaning of section 280G(b)(2) of the Code (including by reason of section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which constitutes reasonable compensation for services actually rendered, within the meaning of section 280G(b)(4)(B) of the Code, in excess of the Base Amount allocable to such reasonable compensation, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Pay ments shall be determined by the Company in accordance with the principles of sections 280G(d)(3) and (4) of the Code. Prior to the payment date set forth in Section 6.3 hereof, the Company shall provide the Executive with its calculation of the amounts referred to in this Section and such supporting materials as are reasonably necessary for the Executive to evaluate the Company's calculations. If the Executive objects to the Company's calcula tions, the Company shall pay to the Executive such portion of the Severance Payments (up to 100% thereof) as the Executive determines is necessary to result in the Executive receiving the greater of clauses (A) and (B) of this Section.
		6.3 The payments provided for in Section 6.1 (other than Section 6.1(C)) and 6.2 hereof shall be made not later than the fifth (5th) day following the Date of Termination; provided that, if the amounts of such pay ments cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate, as determined in good faith by the Company, of the minimum amount of such payments to which the Executive is clearly entitled and shall pay the remainder of such payments as soon as the amount thereof can be determined but in no event later than the thirtieth (30th) day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth (5th) business day after demand by the Company (together with interest at the rate provided in section 1274(b)(2)(B) of the Code). At the time that payments are made under this Section, the Company shall provide the Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations including, without limitation, any opinions or other advice the Company has received from outside counsel, auditors or consultants (and any such opinions or advice which are in writing shall be attached to the statement).
		6.4 The Company also shall pay to the Executive all legal fees and expenses incurred by the Executive as a result of a termination which entitles the Executive to the Severance Payments (including all such fees and expenses, if any, incurred in disputing any such termination or in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder). Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require.
		7. Termination Procedures and Compensation During Dispute.
		7.1 Notice of Termination. After a Change in Control and during the term of this Agreement, any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive's counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail.
		7.2 Date of Termination. "Date of Termination", with respect to any purported termination of the Executive's employment after a Change in Control and during the term of this Agreement, shall mean (i) if the Execu tive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty (30) day period), and (ii) if the Executive's employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given).
		7.3 Dispute Concerning Termination. If within fifteen (15) days after any Notice of Termination is given, or, if later, prior to the Date of Termination (as determined without regard to this Section 7.3), the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally resolved, either by mutual written agreement of the parties or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); provided that, the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence.
		7.4 Compensation During Dispute. If a purported termination occurs following a Change in Control and during the term of this Agreement, and such termination is disputed in accordance with Section 7.3 hereof, the Company shall continue to pay the Executive the full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, any bonus payments) and continue the Executive as a participant in all compensa tion, benefit and insurance plans in which the Executive was participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in addition to all other amounts due under this Agreement (other than those due under Section 5.2 hereof) and shall not be offset against or reduce any other amounts due under this Agreement.
		8. No Mitigation. The Company agrees that, if the Execu tive's employment by the Company is terminated during the term of this Agreement, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 or Section 7.4. Further, the amount of any payment or benefit provided for in Section 6 (other than Section 6.1(C)) or Section 7.4 shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise.
		9. Successors; Binding Agreement.
		9.1 In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination.
		9.2 This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate.
		10. Notices. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt:
			To the Company:
			FlightSafety International, Inc. 			Marine Air Terminal 			LaGuardia Airport 			Flushing, New York 11371 			Attention: President
			To the Executive:
			 			 			
		11. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of New York. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under Sections 6 and 7 shall survive the expiration of the term of this Agreement.
		12. Validity. The invalidity or unenforce-ability or any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
		13. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.
		14. Settlement of Disputes; Arbitration. All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive's claim has been denied. Any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in New York, New York in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that the Executive shall be entitled to seek specific performance of the Executive's right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement.
		15. Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below:
		(A) "Base Amount" shall have the meaning defined in section 280G(b)(3) of the Code.
		(B) "Beneficial Owner" shall have the meaning defined in Rule 13d-3 under the Exchange Act.
		(C) "Board" shall mean the Board of Directors of the Company.
		(D) "Cause" for termination by the Company of the Executive's employment, after any Change in Control, shall mean (i) the willful and continued failure by the Executive to substantially perform the Executive's duties with the Company (other than any such failure resulting from the Executive's incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination for Good Reason by the Executive pursuant to Section 7.1) after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materi ally injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company.
		(E) A "Change in Control" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied:
				(i) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates) representing 30% or more of the combined voting power of the Company's then outstanding securities (other than any Beneficial Owner with such voting power as of the date of this Agreement); or
				(ii) during any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a Person who has entered into an agreement with the Company to effect a transaction described in clause (i), (iii) or (iv) of this paragraph) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previ ously so approved, cease for any reason to constitute a majority thereof; or
				(iii) the shareholders of the Company ap prove a merger or consolidation of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company, at least 75% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person acquires more than 50% of the combined voting power of the Company's then outstanding securities; or
				(iv) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets.
Notwithstanding the foregoing, a Change in Control shall not include any event, circumstance or transaction occurring during the six-month period following a Potential Change in Control which results from the action of any entity or group which includes, is affiliated with or is wholly or partly controlled by one or more executive officers of the Company, including the Executive (a "Man agement Group"); provided that, such action shall not be taken into account for this purpose if it occurs within a six-month period following a Potential Change in Control resulting from the action of any Person which is not a Management Group.
		(F) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.
		(G) "Company" shall mean FlightSafety International, Inc., a New York corporation, and any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise (except in determining, under Section 15(E) hereof, whether or not any Change in Control of the Company has occurred in connection with such succession).
		(H) "Company Shares" shall mean shares of common stock of the Company or any equity securities into which such shares have been converted.
		(I) "Date of Termination" shall have the meaning stated in Section 7.2 hereof.
		(J) "Disability" shall be deemed the reason for the termina tion by the Company of the Executive's employment, if, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties.
		(K) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time.
		(L) "Excise Tax" shall mean any excise tax imposed under section 4999 of the Code.
		(M) "Executive" shall mean the individual named in the first paragraph of this Agreement.
		(N) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent) of any one of the following acts by the Company, or failures by the Company to act, unless, in the case of any act or failure to act described in paragraph (i), (v), (vi), (vii), or (viii) below, such act or failure to act is corrected prior to the Date of Termination specified in the Notice of Termination given in respect thereof:
				(i) the assignment to the Executive of any duties inconsistent with the Executive's status as a senior executive officer of the Company or a substantial adverse alteration in the nature or status of the Executive's responsibilities from those in effect immediately prior to the Change in Control;
				(ii) a reduction by the Company in the Executive's annual base salary as in effect on the date hereof or as the same may be increased from time to time;
				(iii) the relocation of the Company's princi pal executive offices to a location outside the New York City Metropolitan Area (or, if different, the metropolitan area in which such offices are located immediately prior to the Change in Control) or the Company's requiring the Executive to be based anywhere other than the Company's principal executive offices except for required travel on the Company's business to an extent substantially consistent with the Executive's present business travel obligations;
				(iv) the failure by the Company, without the Executive's consent, to pay to the Executive any portion of the Executive's current compensation, or to pay to the Executive any portion of an installment of deferred compensation under any deferred compensation program of the Company, within seven (7) days of the date such compensation is due;
				(v) the failure by the Company to continue in effect any compensation plan in which the Executive participates immediately prior to the Change in Control which is material to the Executive's total compensation, including but not limited to any stock option, restricted stock, stock appreciation right, incentive compensation, bonus and other plans or any substitute plan(s) adopted prior to the Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of the Executive's participation relative to other participants, as existed at the time of the Change in Control;
				(vi) the failure by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company's pension, life insurance, medical, health and accident, or disability plans in which the Executive was participating at the time of the Change in Control, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the Change in Control, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect at the time of the Change in Control; or
				(vii) any purported termination of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 9.1; for purposes of this Agreement, no such purported termination shall be effective.
		The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to physical or mental illness. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder.
		(O) "ISOs" shall mean options qualifying as incentive stock options under section 422 of the Code.
		(P) "Notice of Termination" shall have the meaning stated in Section 7.1 hereof.
		(Q) "Options" shall mean options for Company Shares granted to the Executive under the Company's 1979 Stock Option Plan, 1982 Stock Option Plan and 1992 Stock Option Plan, other than ISOs granted on or before the date of this Agreement and ISOs which have not become exercisable on the Date of Termination.
		(R) "Performance Percentage" shall mean the percentage of the bonus base of the Executive's annual salary determined by the Compensation Committee of the Board of Directors to have been achieved by the Executives.
		(S) "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof; however, a Person shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries, (iii) an underwriter temporari ly holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.
		(T) "Potential Change in Control" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied:
				(i) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control;
				(ii) the Company or any Person publicly an nounces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control;
				(iii) any Person after the date of this Agreement becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 15% or more of the combined voting power of the Company's then outstanding securities (other than (i) a person who acquires voting securities of the Company by devise or by operation of the laws of descent and distribution or interstate succession from any Person who is a Beneficial Owner with such voting power as of the date of this Agreement or (ii) any Person who acquires securities with such voting power directly from the Company or its affiliates); or
				(iv) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred.	
		(U) "Restricted Shares" shall mean Company Shares awarded pursuant to the 1984 Restricted Stock Compensation Plan of the Company.
		(V) "Retirement" shall be deemed the reason for the termina tion by the Company or the Executive of the Executive's employment if such employment is terminated in accordance with the Company's retirement policy, not including early retirement, generally applicable to its salaried employees, as in effect immediately prior to the Change in Control, or in accordance with any retirement arrangement established with the Executive's consent with respect to the Executive.
		(W) "Severance Payments" shall mean those payments described in Section 6.1 hereof.
		(X) "Shares" shall mean shares of the common stock, $.10 par value, of the Company.
		(Y) "Total Payments" shall mean those payments described in Section 6.2 hereof.
					FLIGHTSAFETY INTERNATIONAL, INC.
					By	 					 Name: 					 Title:
						 ANNUAL REPORT				 Selected pages from the Annual Report of FlightSafety International for 1994
Management's Discussion and Analysis of Results of Operations and Financial Condition
Results of Operations 1994 Compared with 1993
Training revenues increased by $27.0 million, or 11 percent, in 1994 as compared to 1993. Business aviation training revenues increased by $10.6 million primarily because of increased demand for the Company s training services. Commercial airline training revenues increased by $4.5 million as demand from South American customers increased and from the continued expansion of the Company s Airline New Hire Program. Primary flight training revenues increased by $2.0 million, primarily from more individual pilots seeking careers as professional pilots. There was also an increase in training revenues of $7.8 million from two aircrew training systems contracts with the U.S. Air Force. The most significant of which was for training of KC-135 tanker aircraft crews, and included contract revenues of $1.9 million related to an equivalent amount of retroactive salary and benefit expenses from October 1, 1992 paid to employees in accordance with the United States Government Services Contract Act.
Product sales in 1994 decreased $22.8 million, or 44 percent, from 1993. The decrease in product sales was primarily attributable to a decrease in market demand and customer orders for equipment being produced by the Company s Simulation Systems Division.
Total expenses decreased $1.6 million, or one percent, in 1994 as compared to 1993. Salary expense increased $6.6 million principally due to additional personnel hired for the U.S. Air Force KC-135 contract and the retroactive salary paid as indicated above. Depreciation and amortization increased by $2.4 million due to a full year of depreciation on simulators added in 1993 and a partial year of depreciation for simulators added in 1994. General and administrative expenses increased by $3.3 million primarily because of costs associated with the KC-135 contract with the U.S. Air Force and increases in employee benefit costs. Operating expenses increased by $1.9 million primarily from increases in costs of training supplies and simulator maintenance. Cost of product sales decreased by $15.7 primarily from the related decrease in product sales. Research and development expenditures incurred by the Visual Simulation Systems Division amounted to $1.2 million in 1994 ($3.2 million in 1993) and are included in cost of product sales. The decrease in gross profit margin of product sales to 19.5% in 1994 from 24.6% in 1993 was principally due to an increased percentage of sales to the U.S. Government which have lower profit margins.
Interest and other income increased by $0.8 million in 1994 as compared to 1993 principally due to proceeds from the corporate owned life insurance policies. Interest expense increased primarily from higher interest rates in 1994 on the Company s borrowings and increases in borrowings against the cash surrender value of corporate owned life insurance policies.
Income taxes decreased by $1.6 million, or four percent, in 1994 as compared to 1993 due primarily to the additional deferred income tax liability recorded in 1993 offset by increased taxable income in 1994 as compared to 1993. The effective income tax rate decreased to 35.8% in 1994 from 39.4% in 1993 primarily due to the previously mentioned deferred income taxes recorded in 1993.
Earnings per share and net income increased by 17 percent and 12 percent to $2.35 per share from $2.01 per share and $74,475,000 from $66,414,000 in 1994 as compared to 1993, respectively. The higher percentage increase of earnings per share than net income is a result of the Company s stock repurchase program and its corresponding effect on the weighted average shares outstanding.
In December 1994, the Company divested itself of PowerSafety International, Inc. to focus on its core business. The divestiture had no significant effect on the Company s financial statements.
Inflation continued to increase operating costs and costs of equipment and facilities during 1994. The Company expects to recover its additional costs due to inflation with increases in volume and prices.
Financial Condition
In 1994, $118.4 million of cash was provided by operations and $10.3 million was provided by additional borrowings against the cash surrender value of corporate owned life insurance. Cash was principally used to purchase equipment and facilities ($64.4 million), repurchase common stock ($29.2 million), purchase short-term investments ($16.0 million), pay dividends ($13.9 million) and pay corporate owned life insurance premiums ($7.5 million).
Accounts receivable at December 31, 1994 increased by $10.8 million, or 22 percent, from December 31, 1993 due primarily to an increase in amounts billed in the 1994 fourth quarter as compared to the 1993 fourth quarter.
In 1995, the Company expects to spend in excess of $55 million for additional equipment and facilities. If appropriate market conditions exist, the Company will continue to repurchase shares of its common stock. The Board of Directors increased the shares authorized for the stock repurchase program from 3,000,000 shares to 4,000,000 shares on December 3, 1993. The Company expects to fund these items with cash provided by operations and short-term investments. As of December 31, 1994, the Company had repurchased 3,291,700 shares of its common stock.
Results of Operations 1993 Compared with 1992
Training revenues increased by $5.4 million, or two percent, in 1993 as compared to 1992. Business aviation training revenues increased by $6.3 million primarily because of new business aircraft simulators that were added and increases in initial training related to new aircraft deliveries in the fourth quarter of 1993. Commercial airline training revenues increased by $3.9 million as demand from South American and Asian customers increased and as a result of the continued success of the Company s New Hire Program. There was also an increase in training revenues of $10.2 million from a contract with the U.S. Air Force to train KC-135 tanker aircraft crews. These increases were offset by lower revenues of $8.9 million from the U.S. Air Force C-5 contract and $2.9 million in primary flight training.
Product sales in 1993 increased $13.3 million, or 34 percent, from 1992. The increase in product sales was primarily attributable to sales of visual systems by the Visual Simulation Systems Division which was acquired in January 1993. Total expenses increased $23.6 million, or 14 percent, in 1993 as compared to 1992. Salary expense increased $6.7 million principally due to additional personnel hired for the U.S. Air Force KC-135 contract. Depreciation and amortization increased by $4.4 million due to a full year of depreciation on simulators added in 1992 and a partial year of depreciation for simulators added in 1993. General and administrative expenses increased primarily because of costs associated with the KC-135 contract with the U.S. Air Force. These increases were offset by a net decrease in operating expenses of $0.5 million primarily due to a $3.6 million reduction of effort for the U.S. Air Force C-5 contract offset by increases in operating expenses from the KC-135 contract. Cost of product sales increased by $11.8 million principally due to sales of visual systems. Research and development expenditures incurred by the Visual Simulation Systems Division amounted to $3.2 million and are included in cost of product sales. The decrease in gross profit margin to 24.6% in 1993 from 29.1% in 1992 was principally due to the research and development expenditures in cost of product sales.
Interest and other income decreased by $1.7 million in 1993 as compared to 1992 principally due to lower investment balances in 1993 resulting from funds used for the Company s stock repurchase program. Interest expense decreased primarily from lower interest rates in 1993 on the Company s borrowings against the cash surrender value of corporate-owned life insurance policies.
Note Notes to Consolidated Financial Statements
Note 1- Summary of Significant Accounting and Reporting Policies
Consolidation and Reporting The accompanying financial statements include the accounts of the Company and its majority-owned subsidiaries.
The Company operates primarily in one industry segment: training. Training activities include advanced training of professional pilots and crews, primary training for individuals to obtain private or commercial pilot licenses, training in the maintenance of aircraft, design and implementation of integrated training systems and training crews of large ocean-going vessels in ship and cargo handling. The Company is also engaged in the manufacture and sale of products including simulators and visual systems. The Company s clients include corporations, commercial airlines, ship operators, the military and other government agencies.
Revenues Revenue from training is recognized when the training is provided except for revenue from training provided pursuant to annual contracts which is recognized on the straight-line method over the life of the contract. Revenues and costs arising from product sales are accounted for principally under the percentage of completion method.
Depreciation and Amortization Depreciation is provided on the straight-line method over estimated useful lives as follows: simulators, training equipment and spare parts, 4 to 20 years; buildings, 25 to 40 years; and furniture, fixtures and equipment, 4 to 10 years. Leasehold improvements, including buildings on leased property, are amortized over the life of the lease or the life of the improvement, whichever is shorter.
Interest is capitalized as an integral component of cost during the construction period of simulators and facilities and is amortized over the life of the related assets.
Short-term Investments Short-term investments consist primarily of state and municipal obligations and are stated at amortized cost, which approximates market value.
Common Stock Repurchase The Company records the repurchase of its common stock by reducing the common stock account by the par value of the common stock purchased and reducing retained earnings by the amounts in excess of par value. Repurchased common stock is cancelled and returned to the Company s authorized and unissued common shares.
Amortization of Intangible Assets Intangible assets arose principally from the acquisitions of a subsidiary in 1988 and a division in 1993 and are amortized over periods from 3 to 20 years.
Income Taxes The Company records income taxes in accordance with Statement of Financial Accounting Standards No.109- Accounting for Income Taxes, which was adopted in 1993 and had no effect on the Company s financial statements since the Company had previously recorded income taxes in accordance with Statement of Financial Accounting Standards No. 96.
Net Income Per Share Net income per share is based upon the weighted average number of shares outstanding during each year. Stock options have not been included in the calculation of net income per share because their inclusion would not have a significant dilutive effect.
Note 2- Acquisition
On January 29, 1993, the Company purchased the assets of the Visual Simulation Systems business unit of McDonnell Douglas Corporation. The assets purchased included accounts receivable, inventory, contracts in process, furniture, fixtures and various intangible assets arising from the acquisition. The new Division manufactures computer generated image display systems for aircraft simulators, under the trade name VITAL, at its St. Louis, Missouri facility.
Notes to Consolidated Financial Statements
State and local income taxes amounted to $5,591,000 in 1994 ($5,645,000 in 1993 and $6,760,000 in 1992). Foreign income before taxes and foreign income taxes were not material. The principal temporary difference generating deferred income taxes in the current year and past years is depreciation of equipment and facilities which is recognized in different years for financial reporting than for tax reporting. Due to an increase in the federal income tax rate in 1993, additional deferred income tax liabilities of $3.4 million were recorded in 1993 related to temporary differences that arose in prior years.
The Company does not provide taxes on undistributed earnings of foreign subsidiaries since the Company anticipates no significant incremental U.S. income taxes on the repatriation of these earnings due to tax rates in foreign jurisdictions in which the Company has operations approximating or exceeding the U.S. statutory income tax rates.
The Company made tax payments of $33.9 million in 1994 ($33.5 million in 1993 and $40.9 million in 1992).
Notes to Consolidated Financial Statements
The Company s industrial development obligations had variable rates between 2.1 and 5.8 percent during 1994. The weighted average interest rate for the above borrowings was 3.6 percent in 1994 (3.3 percent in 1993). At December 31, 1994, approximately $15 million of the Company s assets were pledged as security for the industrial development obligations. Under the most restrictive covenants, the Company must maintain positive working capital, a long-term debt to net worth ratio of less than 0.75 to 1.0 and a minimum net worth of $100 million.
Intangible and other assets include investments in corporate-owned life insurance which have a cash surrender value of $52.7 million offset by borrowings against cash surrender values of $30.6 million at December 31, 1994 ($43.6 million and $20.3 million, respectively, at December 31, 1993). In 1994, the interest rate on borrowings against cash surrender value of corporate owned life insurance was 8.9 percent (9.3 percent in 1993).
The amounts of debt payable in the five years subsequent to 1994 are: $1,759,000 in 1995 and 1996, $1,259,000 in 1997, $1,224,000 in 1998 and no debt payable in 1999.
The Company paid interest of $1,506,000 in 1994, $2,402,000 in 1993 and $2,605,000 in 1992, net of amounts capitalized. The amount of interest capitalized was $1,484,000 in 1994 ($1,543,000 in 1993 and $2,262,000 in 1992).
Note 6- Retirement Plans
Substantially all employees of the Company and all but one of its domestic subsidiaries are eligible to participate in the Company s noncontributory defined benefit retirement plan. Benefits are based principally on years of service and compensation during an employee s career. An employee becomes vested upon completion of five years of service or the attainment of age 55 and is entitled to receive a minimum monthly benefit at normal retirement age. The Company also has a defined Contribution Plan for certain employees. Pension cost amounted to $1,821,000 in 1994 ($1,799,000 in 1993 and $1,225,000 in 1992).
The Company s funding policy is to contribute amounts sufficient to meet the requirements of the Employee Retirement Income Security Act of 1974, plus any additional amounts which the Company may determine to be appropriate. The assets of the Plan include insurance contracts, marketable equity securities and mutual funds.
Notes to Consolidated Financial Statements
Note 8- Employee Stock Plans
Stock Option Plans The Company has three active stock option plans for its key employees, the "1979 Plan", the "1982 Plan" and the "1992 Plan".
The 1979 Plan provided for awards consisting of non-qualified options for the purchase of shares of common stock at the market price at date of grant. Options granted under the 1979 Plan expire ten years from date of grant. As of December 1989, pursuant to its terms, no further grants of options were available under the 1979 plan.
The 1982 Plan permitted awards consisting of non-qualified and incentive stock options at the market price at date of grant. As of August 1992, pursuant to its terms, no further grants of options were available under the 1982 Plan. The 1992 Plan permits awards consisting of non-qualified and incentive stock options for the purchase of up to 600,000 shares of common stock at the market price at date of grant. Options for 110,340 shares were granted in 1994 (102,410 in 1993 and 67,275 in 1992). At December 31, 1994, shares available for future options under the 1992 Plan were 324,975.
Proceeds received from the exercise of options under the plans are credited to the capital accounts in the year the options are exercised. The plans permit employeesto tender shares to the Company in lieu of cash for the exercise of stock options. No amounts are charged or credited to income as a result of these plans.
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
Note 9- Sale of Minority Interest in European Venture
In July 1992, the Company sold its minority financial interest in a European venture to the majority shareholder for a pre-tax gain of $12.6 million which increased net income per share by $7.7 million, or 22 cents per share.
Notes to Consolidated Financial Statements Note 10- Commitments and Contingencies
The Company is obligated under long-term operating leases for offices, facilities and real property. The future minimum rental payments under these leases are as follows: $1,619,000 in 1995, $1,387,000 in 1996, $1,155,000 in 1997, $648,000 in 1998, $641,000 in 1999 and $4,589,000 thereafter. These leases are generally subject to renewal. Rent for 1994 was $1,811,000 ($1,790,000 in 1993 and $1,407,000 in 1992).
Report of Independent Accountants
To the Board of Directors and Shareholders of FlightSafety International, Inc.
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income and of cash flows present fairly, in all material respects, the financial position of FlightSafety International, Inc. and its subsidiaries at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP New York, New York January 31, 1995
Board of Directors and Officers
Directors
Albert L. Ueltschi Chairman President, FlightSafety International, Inc.
George B. Beitzel* Senior Vice President and Director, Retired International Business Machines Corporation Information Handling Systems, Equipment and Services
Edward E. Hood, Jr.* Vice Chairman and Executive Officer, Retired General Electric Company Diversified technology, manufacturing and services
Charles R. Longsworth* Chairman, Emeritus Colonial Williamsburg Foundation Museum, education, hotel and restaurant services
John A. Morgan* Partner Morgan Lewis Githens & Ahn Investment Bankers
Bruce N. Whitman Executive Vice President FlightSafety International, Inc.
* Member of the Audit Committee
Officers
Albert L. Ueltschi President
Bruce N. Whitman Executive Vice President
Elmer G. Gleske Vice President-Government Affairs
Dennis Gulasy Vice President-Simulation Systems
Kenneth W. Motschwiller Vice President-Treasurer
James S. Waugh Vice President-Marketing
Mario D'Angelo Controller
Peter P. Mullen Secretary Partner, Skadden, Arps, Slate, Meagher & Flom
Registrar and Transfer Agent American Stock Transfer and Trust Co., 40 Wall Street, New York, New York 10005
Annual Meeting The Annual Meeting of Shareholders is scheduled for 4 p.m., Wednesday, April 26, 1995 at the corporate headquarters, Marine Air Terminal, LaGuardia Airport, Flushing, New York 11371
Form 10-K The Form 10-K report to the Securities and Exchange Commission will be made available to interested persons upon written request to the Treasurer of the Corporation.
Corporate Brochure A brochure on the Company and its services will be gladly provided upon request. Please contact the office of the Treasurer.
FlightSafety Learning Centers and Other Locations
Alliance Flight Training Academy 2250 Alliance Blvd. Fort Worth, Texas 76177 toll free (800) 791-1414 tel (817) 491-9699 fax (817) 491-4002 Helicopter Primary Flight Training plus Add On Ratings Private through ATP Bell JetRanger 206B III Schweizer/Hughes H300C
Atlanta Learning Center 1804 Hyannis Court College Park, Georgia 30337 toll free (800) 889-7916 tel (404) 991-6064 fax (404) 991-5959 Embraer 120 DC-9 JetStar -6, -8, 731 JetStar II King Air 90, 100, 200 Series
Bethany Learning Center Wiley Post Airport 7310 N.W. 50th Street P.O. Box 1640 Bethany, Oklahoma 73008 tel (405) 495-6400 fax (405) 495-6404 Cmdr. Jetprop 840, 900, 980, 1000 Cmdr: Turbo 690, 690A, 690B
Cincinnati Airline Learning Center 1600 Dolwick Drive Erlanger, Kentucky 41018 tel (606) 283-2345 fax (606) 283-2362 Boeing 727 Embraer 120
Daleville Learning Center 600 Industrial Blvd. Daleville, Alabama 36322 tel (334) 598-4485 fax (334) 598-4488 C-12, C, D, F U-21, RC-12
Dothan Learning Center 600 FlightSafety Drive Dothan, Alabama 36303 tel (334) 983-5652 fax (334) 983-1393 A-90/U-21 C-182
FlightSafety Academy Vero Beach Municipal Airport 2805 Airport Drive Vero Beach, Florida 32961 toll free (800) 800-1411 tel (407) 567-5178 fax (407) 567-5228 Airline Ab Initio & Transition tel (407) 778-4992 fax (407) 778-6496 Ab Initio Airline Training Career-Oriented Primary Flight Training, Private through Instructor
Fort Worth Learning Center 9601 Trinity Blvd. Fort Worth, Texas 76053 toll free (800) 379-7413 tel (817) 282-2557 fax (817) 282-8543 Bell 212, 214ST, 222, 222B, 222U, 230, 412
Greater Philadelphia/Wilmington Learning Center New Castle County Airport 155 N. Dupont Hwy. New Castle, Delaware 19720 toll free (800) 733-7548 tel (302) 328-7548 fax (302) 322-6664 HS-125/1A-400, /600, /700 Hawker 800/1000 Jet Commander 1121 Westwind 1123,1124 Westwind 2 Astra ATR 42/72 Fokker 100
Houston Learning Center William P. Hobby Airport 7525 Fauna Street Houston, Texas 77061 toll free (800) 927-1521 tel (713) 644-1521 fax (713) 644-2118 MU-2 Embraer 120 King Air 90, 100, 200 Series Hawker 800 HS-125/700 Falcon 20 Boeing 737 ATR 42/72 Challenger 601-3A Gulfstream I
LaGuardia Airline Learning Center Marine Air Terminal LaGuardia Airport Flushing, New York 11371 toll free (800) 877-5343 tel (718) 565-4100 fax (718) 565-4174 Beech 1900 Series Shorts 360 Saab 340
Lakeland Flight Academy Lakeland Airport 2949 Medulla Road Lakeland, Florida 33811 toll free (800) 726-5037 tel (813) 646-5037 fax (813) 644-6211 Primary Flight Training plus Add On Ratings, Private through ATP Cheyenne I, IA, II, IIXL, III, IIIA, 400 Chieftain Mojave Aerostar Navajo 310, 325, 350 T1020, T1040 King Air
Long Beach Learning Center Long Beach Municipal Airport 4330 Donald Douglas Drive Long Beach, California 90808 toll free (800) 487-7670 Corporate Scheduling tel (310) 420-7670 Airline Scheduling tel (310) 420-7733 fax (310) 429-1226 Boeing 737 Citation I, II Cessna 300/400 Series King Air 90, 100, 200 Series MD-80 MD-88/87 Gulfstream II
Miami Airline Learning Center 4800 N.W. 36th Street Miami, Florida 33122 P.O. Box 661198 Miami, Florida 33266-1198 tel (305) 871-8625 fax (305) 871-8659 A310-300/A300-600 MD-88/87 Boeing 727, B757 DC-9
Montreal Learning Center 9555 Ryan Avenue Dorval, Quebec Canada H9P 1A2 tel (514) 631-2084 fax (514) 631-2263 Challenger 600, 601, 601-3A
Paris Learning Center BP 25, Zone d Aviation d Affaires, Bldg. 404 Aeroport du Bourget 93352 Le Bourget CEDEX France tel +33 (1) 49-92-19-19 fax +33 (1) 49-92-18-92 Falcon 10/100, 20, 50, 200, 900 King Air 200 Citation I, II, V Embraer 120 Dash 8 Mooney
St. Louis (Sabreliner) Learning Center Lambert-St. Louis International Airport 6185 Aviation Drive St. Louis, Missouri 63134-0888 toll free (800) 349-5447 tel (314) 731-2040 fax (314) 731-3077 Sabreliner 40/60, 65, 75A/80
St. Louis Airline Learning Center 4619 Le Bourget Drive St. Louis, Missouri 63134-0888 toll free (800) 258-4351 tel (314) 426-6160 fax (314) 426-2834 Jetstream 31/32 Metro II, III Series MD-80 DC-9 Saab 340 Boeing 727
Salt Lake City Airline Learning Center 201 North 2200 West Salt Lake City, Utah 84116 tel (801) 355-3901 fax (801) 355-3801 Boeing 737
San Antonio Airline Learning Center San Antonio International Airport 9027 Airport Blvd. San Antonio, Texas 78216 toll free (800) 889-7917 tel (210) 826-6358 fax (210) 826-4008 Metro II, III Series, Metro 23 Saab 340 Mooney TBM 700
Savannah Learning Center Savannah Maintenance Learning Center Travis Field P.O. Box 2307 Savannah, Georgia 31402 toll free (800) 625-9369 tel (912) 964-6421 fax (912) 964-6430 Gulfstream I, II, III, IV
Seattle Airline Learning Center 1505 South 192nd Street Seattle, Washington 98148 tel (206) 243-9081 fax (206) 243-0357 Boeing 737, B757, B767 Jetstream 31/32 Embraer 120 Metro III Series Dash 8
Teterboro Learning Center Teterboro Airport 100 Moonachie Avenue Moonachie, New Jersey 07074 toll free (800) 827-8058 tel (201) 939-1810 fax (201) 939-7341 Falcon 10/100, 20/20-731, 50, 200, 900, 2000
Toledo Learning Center Toledo Express Airport 11600 West Airport Service Road Swanton, Ohio 43558 toll free(800) 497-4023 tel (419) 865-0551 fax (419) 865-0754 Citation I, II, S/II, III, V, VI, VII King Air 90, 100, 200 Series
Toronto Airline Learning Center 95 Garratt Blvd. Downsview, Ontario Canada M3K 2A5 tel (416) 638-9313 fax (416) 638-3348 de Havilland Twin Otter Dash 7, Dash 8
Tucson Learning Center Tucson International Airport 1071 E. Aero Park Blvd. Tucson, Arizona 85706 toll free (800) 203-5627 tel (602) 889-9538 fax (602) 889-9619 Learjet 20, 30, 50, 60 Series
West Palm Beach Learning Center Palm Beach International Airport 3887 Southern Blvd. West Palm Beach, Florida 33406 toll free (800) 769-6763 tel (407) 686-7677 fax (407) 689-7719 Sikorsky S-76 Series Learjet 30 Series Composite Structures
Wichita (Beech) Learning Center 9720 E. Central Avenue Wichita, Kansas 67206 toll free (800) 488-3747 tel (316) 685-4949 fax (316) 685-2476 Beech 1900, C99 Baron 55, 58, 58P/58TC King Air 90, 100, 200, 300 Series Bonanza Duke Starship Diamond MU-300 Beechjet 400
Wichita (Beech) Maintenance Learning Center 9525 East Central Avenue Wichita, Kansas 67206 toll free (800) 808-0976 tel (316) 685-5510 fax (316) 685-2448 Beech 1900, C99 King Air 90, 100, 200, 300 Series Bonanza Baron 58 Starship Diamond MU-300 Beechjet 400 King Air 200 Series Troubleshooting Starship Composite Repair
Wichita (Cessna) Learning Center 1951 Airport Road Wichita, Kansas 67209 P.O. Box 12304 Wichita, Kansas 67277 toll free (800) 227-5656 tel (316) 943-2140 fax (316) 943-1017 Cessna 210, 300/400 Series Conquest I, II Caravan I, II
Wichita (Cessna) Maintenance Learning Center 1962 Midfield Road Wichita, Kansas 67209 P.O. Box 12263 Wichita, Kansas 67277 toll free (800) 491-9796 tel (316) 945-0123 fax (316) 945-0161 Cessna 182, R182, 206, 208, 210, T210, P210, 303, 340A, 402C, 406, 414, 421, 425, 441 Citation I, II, S/II, III, V, VI, VII Composite Repair Citation 500 Series CitationJet Troubleshooting
Wichita (Citation) Learning Center 1851 Airport Road Wichita, Kansas 67209 P.O. Box 12323 Wichita, Kansas 67277 toll free (800) 488-3214 tel (316) 943-3214 fax (316) 943-7651 Citation I, II, S/II, III, V, V Ultra, VI, VII CitationJet
Wichita (Learjet) Learning Center 2 Learjet Way Wichita, Kansas 67209 toll free (800) 491-9807 tel (316) 943-3394 fax (316) 943-0314 Learjet 20, 30, 50, 60 Series
FLIGHTSAFTEY INTERNATIONAL PROXY STATEMENT
[Logo]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of FlightSafety International, Inc., a New York corporation (the 'Company'), will be held at the offices of the Company, Marine Air Terminal, La Guardia Airport, Flushing, New York 11371, on Wednesday, April 26, 1995, at 4:00 P.M., New York City time (with any adjournment or postponement thereof, the 'Meeting'), for the following purposes:
1. To elect a Board of six Directors, each to serve until the next Annual Meeting and until his successor shall have been duly elected and qualified;
2. To ratify and approve the appointment by the Board of Directors of Price Waterhouse LLP as independent accountants for the Company for the year ending December 31, 1995; and
3. To transact such other business as may properly come before the Meeting.
The Board of Directors has fixed the close of business on March 13, 1995 as the record date for the determination of shareholders entitled to notice of and to vote at the Meeting.
You are cordially invited to attend the Meeting in person and vote. Even if you plan to attend the Meeting in person, you are urged to complete, sign and date the enclosed proxy card and to return it promptly in the prepaid return envelope provided. If you attend the Meeting in person, you may then withdraw your proxy and vote in person if you so desire.
By Order of the Board of Directors,
PETER P. MULLEN Secretary
Flushing, New York March 24, 1995
FLIGHTSAFETY INTERNATIONAL, INC. PROXY STATEMENT ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of FlightSafety International, Inc., a New York corporation (the 'Company'), to be used at the Annual Meeting of Shareholders of the Company which is scheduled to be held at the offices of the Company, Marine Air Terminal, La Guardia Airport, Flushing, New York 11371, on Wednesday, April 26, 1995, at 4:00 P.M., New York City time, and any adjournment or postponement thereof (the 'Meeting'). This proxy statement, the accompanying notice and the enclosed proxy card are first being mailed to shareholders on or about March 24, 1995.
The Board of Directors does not intend to bring any matter before the Meeting except as specifically indicated in the notice, nor does the Board of Directors know of any matters which anyone else proposes to present for action at the Meeting. If any other matters properly come before the Meeting, however, the persons named in the enclosed proxy, or their duly constituted substitutes acting at the Meeting, will be authorized to vote or otherwise act thereon in accordance with their judgment on such matters.
Shares represented by properly executed proxies received by the Company in time for the Meeting will be voted in accordance with the instructions given therein. If no instructions are specified in a proxy, the shares represented by that proxy will be voted 'For' the election of all six nominees for the Board of Directors and 'For' the ratification and approval of Price Waterhouse LLP as independent accountants for the Company for the year ending December 31, 1995.
A shareholder giving a proxy may revoke such proxy at any time before it is exercised by giving written notice to the Company (bearing a date later than the proxy) or by executing a subsequent proxy relating to the same shares, and by filing with or hand delivering to the Secretary, at the offices of the Company, such written notice or subsequent proxy at or before the taking of the vote at the Meeting. In addition, any shareholder attending the Meeting may vote in person whether or not such shareholder has previously filed a proxy, although attendance at the Meeting will not in and of itself constitute a revocation of a proxy.
The accompanying form of proxy is being solicited on behalf of the Board of Directors of the Company. The expenses of solicitation of proxies for the Meeting will be paid by the Company. In addition to the mailing of the proxy materials, such solicitation may be made in person or by telephone by directors, officers and employees of the Company, who will receive no additional compensation therefor. Upon request, the Company will reimburse brokers, dealers, banks and trustees, or their nominees, for reasonable expenses incurred by them in forwarding solicitation materials to beneficial owners of shares of the Company's Common Stock.
The Board of Directors has fixed the close of business on March 13, 1995 as the record date for the Meeting. Accordingly, only shareholders of record of the Company's Common Stock at the close of business on such date will be entitled to notice of and to vote at the Meeting. On that date, there were issued and outstanding 31,325,878 shares of the Company's Common Stock.
The presence, in person or by proxy, of the holders of one-third of the total number of issued and outstanding shares of the Company's Common Stock entitled to vote at the Meeting will constitute a quorum. Shareholders granting a proxy to vote on one issue but abstaining as to the other issue will be counted for the purpose of determining a quorum. On all matters voted upon at the Meeting, the holders of shares of the Company's Common Stock vote together as a single class, with each record holder entitled to one vote per share.
ELECTION OF DIRECTORS
The Board of Directors of the Company has nominated six candidates to be elected at the Meeting. Each nominee is currently serving as a director of the Company. The directors elected at the Meeting will hold office until the next annual meeting of shareholders and until their successors have been duly elected and qualified.
Directors shall be elected by a plurality of votes cast in the election of directors. Under applicable New York law, in tabulating the vote, broker non-votes will be disregarded and will have no effect on the outcome of the vote. Unless a contrary instruction is indicated, a properly executed and returned proxy will be voted 'For' the election of Messrs. George B. Beitzel, Edward E. Hood, Jr., Charles R. Longsworth, John A. Morgan, Albert L. Ueltschi and Bruce N. Whitman.
Each nominee has consented to being named in the proxy statement and to serve if elected. If, prior to the Meeting, any nominee should become unavailable to serve, the shares of the Company's Common Stock represented by a properly executed and returned proxy will be voted for a substitute nominee designated by the Board of Directors, unless the Board should determine to reduce the number of directors pursuant to the Company's By-laws.
The table below sets forth certain information concerning the nominees for election as directors at the Meeting, including such nominee's positions with the Company and principal occupation, a brief account of such nominee's business experience during the last five years, certain other directorships currently held by such nominee, such nominee's age and the year such nominee was first elected a director of the Company.
Year First Positions with the Company, Principal Elected Occupation and Other Directorships Age Director
George B. Beitzel......... Retired (March 1987); prior thereto, Senior 66 1974 Vice President and Director, International Business Machines Corporation, an information handling systems, equipment and services company. Mr. Beitzel is Chairman of the Colonial Williamsburg Foundation and a director of Bankers Trust Company, Bankers Trust New York Corporation, Computer Task Group, Inc., Phillips Petroleum Company, Phillips Gas Company, Rohm and Haas Company, Roadway Services, Inc. and Xillix Technologies Corp. Mr. Beitzel is also Trustee Emeritus of Amherst College.
Edward E. Hood, Jr........ Retired (February 1993); prior thereto, Vice 64 1991 Chairman, Executive Officer and Director, General Electric Company, a diversified technology, manufacturing and services company. Mr. Hood is a director of Lockheed Martin Corp., Gerber Scientific,Inc. and Lincoln Electric Company and is also Chairman of the Board of Trustees of Rensselaer Polytechnic Institute.
Charles R. Longsworth..... Chairman Emeritus, Colonial Williamsburg 65 1985 Foundation, museum, education, hotel and restaurant services. Mr. Longsworth is a director of Public Radio International, Crestar Financial Corporation, Houghton Mifflin Company, Roadway Services, Inc., Saul Centers, Inc. and Virginia Eastern Shore Corporation and is also Chairman of the Board of Trustees of Amherst College.
John A. Morgan............ Partner, Morgan Lewis Githens & Ahn, 64 1961 investment bankers. Mr. Morgan is a director of Masco Corporation, Masco Industries, Inc., McDermott International,Inc. and Tri Mas Corporation.
Albert L. Ueltschi........ Chairman of the Board of Directors and 77 1951 President of the Company. Bruce N. Whitman.......... Executive Vice President of the Company. 61 1962
Committees, Meetings and Compensation of the Board of Directors
The Board of Directors held one special and four regular meetings during 1994. Each director attended at least 75 percent of the aggregate number of meetings of the Board and Committees of the Board of which he was a member, except Mr. Morgan.
The Company's Board of Directors has a standing Audit Committee, Executive Committee, Nominating Committee, Compensation Committee and Employee Stock Purchase Plan Committee. The Audit Committee is composed of Messrs. Morgan (Chairman), Beitzel, Hood and Longsworth and recommends to the Board of Directors the accounting firm to be appointed as independent accountants for the Company; reviews with the Company's management and independent accountants the Company's annual operating results; and reviews with the Company's independent accountants the scope and results of the audit and the adequacy of the Company's internal accounting procedures and systems. The Audit Committee met twice during 1994.
The Executive Committee is composed of Messrs. Ueltschi (Chairman), Beitzel, Morgan and Whitman, and is authorized to exercise all of the powers and authority of the Board except those powers reserved to the Board of Directors by law, the Company's Certificate of Incorporation or By-laws, or by resolution of the Board of Directors. The Executive Committee did not meet during 1994.
The Nominating Committee consists of Messrs. Ueltschi (Chairman), Beitzel, Morgan and Whitman, and considers and makes recommendations to the Board of Directors of the names of persons to be nominated for election as directors by the shareholders of the Company, and also those to be elected by the Board to fill vacancies that may arise between annual meetings of the shareholders of the Company. The Nominating Committee will consider nominees recommended by the Company's shareholders. Any such recommendations should be mailed to the Nominating Committee, at the Company's address, and should include the name, address and a statement of qualifications of each nominee as well as the signed consent of such person to serve if nominated and elected. The Nominating Committee did not meet during 1994.
The Compensation Committee consists of Messrs. Beitzel (Chairman), Hood and Morgan and considers and makes recommendations to the Board of Directors on matters relating to the cash compensation of employees of the Company, including, with respect to executive officers, salaries and bonuses. The Compensation Committee also administers the Company's 1979 Stock Option Plan, 1982 Incentive Stock Option Plan, 1984 Restricted Stock Compensation Plan and 1992 Stock Option Plan. The Compensation Committee met three times during 1994.
The Employee Stock Purchase Plan Committee consists of Messrs. Ueltschi (Chairman), Morgan and Whitman, and administers the Company's Employee Stock Purchase Plan. The Employee Stock Purchase Plan Committee did not meet during 1994.
Members of the Board of Directors, who are not employees of the Company, currently receive an annual retainer of $22,000 and are paid $500 per Board or Committee meeting attended (other than Committee meetings held on the same day as a Board meeting). Such directors are reimbursed for expenses they incur in attending such meetings. Members of the Board of Directors who are employees of the Company do not receive additional compensation for serving in such capacity.
The Company maintains a retirement plan for its non-employee directors pursuant to which directors of the Company who are not employees of the Company and who retire as a director of the Company are entitled to receive the semi-annual payments described below after reaching age 70 (or earlier if their retirement as a director of the Company is due to disability). Any director of the Company who serves as an employee of the Company is eligible to participate in the plan upon such director's retirement as an employee of the Company, provided that such director remains a director of the Company following such retirement. Directors are paid semi-annual amounts under the plan equal to one-half of the last annual retainer fee paid to such director for such director's last active year as a director of the Company and receive such payments for the same number of years that such director served as a director of the Company or ten years, whichever is shorter. If a director dies before retiring or before receiving all scheduled retirement payments, such payments are paid to such director's spouse, but only if such spouse survives such director and, commencing upon the death of such director, continue until all retirement payments which would otherwise have been paid to such director have been paid or until such spouse's death, whichever occurs first.
The Company maintains directors and officers liability insurance which insures directors and officers of the Company and its subsidiaries against certain liabilities incurred by them while serving in such capacities, and reimburses the Company for certain indemnification payments made by the Company to directors and officers of the Company and its subsidiaries. This policy extends through August 15, 1995 at a premium of $106,800 per year. No claims have been made under this policy.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth on the following table is furnished as of March 13, 1995 with respect to any person (including any 'group' as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the 'Exchange Act')), who is known to the Company to be the beneficial owner of more than 5% of the Company's Common Stock, as to those shares beneficially owned by each of the Company's directors, each of the Company's executive officers named in the Summary Compensation Table (see page 9) and all directors and executive officers of the Company as a group.
Number of Shares Beneficially Percent of Owned Outstanding as of March 13, Common Stock Name of Beneficial Owner 1995 as of March 13, 1995
Directors Albert L. Ueltschi(1).......... 9,617,040(2) 30.7% George B. Beitzel.............. 3,860(3) * Edward E. Hood, Jr.............. 1,000 * Charles R. Longsworth........... 725 * John A. Morgan.................. 118,885 * Bruce N. Whitman(4)............. 263,184(5) * Executive Officers Kenneth W. Motschwiller......... 22,598(5)(6) * James S. Waugh.................. 27,615(5) * Dennis Gulasy................... 31,537(5)(7) Directors and Executive Officers as a group (11 persons)....................... 10,121,497(5) 32.3% Putnam Investments, Inc.(8)..... 4,129,572(8) 13.2% FMR Corp.(9).......................3,093,300(9) 9.9%
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* Indicates beneficial ownership of less than 1% of the shares of Common Stock outstanding on such date.
(1) The address for Mr. Ueltschi is Marine Air Terminal, La Guardia Airport, Flushing, NY 11371. Mr. Ueltschi is also the President of the Company.
(2) Includes 9,616,540 shares held pursuant to a revocable trust for which Mr. Ueltschi is the sole beneficiary during his lifetime and 500 shares held pursuant to a partnership. Does not include approximately 1,513,000 shares beneficially owned by various members of Mr. Ueltschi's family, in respect of which Mr. Ueltschi disclaims beneficial ownership.
(3) Does not include 275 shares beneficially owned by Mr. Beitzel's spouse, in respect of which Mr. Beitzel disclaims beneficial ownership.
(4) Mr. Whitman is also Executive Vice President of the Company.
(5) Includes shares which the executive officer has the right to acquire within 60 days through the exercise of stock options granted under the Company's stock option plans. These amounts are as follows: Mr. Whitman, 14,805 shares; Mr. Motschwiller, 16,516 shares; Mr. Waugh, 17,050 shares; Mr. Gulasy, 20,478 shares; and all directors and executive officers as a group, 77,512 shares.
(6) Includes 1,234 shares held by Mr. Motschwiller as custodian for his minor children.
(7) Does not include 1,022 shares beneficially owned by Mr. Gulasy's spouse, in respect of which Mr. Gulasy disclaims beneficial ownership.
(8) Putnam Investment, Inc.'s address is: One Post Office Square, Boston, MA 02109. Putnam Investment, Inc. is a wholly-owned subsidiary of Marsh and McLennan. Putnam Investment, Inc's subsidiaries, Putnam Investment Management, Inc. and The Putnam Advisory Company, Inc., are investment advisors to investment companies. This represents the number of shares owned as of December 31, 1994 as indicated in a Schedule 13G filed by Putnam Investment, Inc. with the Securities and Exchange Commission (SEC) on January 23, 1995. Putnam has shared power to vote
or to direct the vote for 375,560 shares and has shared power to dispose or to direct the disposition of all the shares.
(9) FMR Corp.'s address is: 82 Devonshire Street, Boston, MA 02109. FMR Corp. is a holding company and its subsidiary, Fidelity Management & Research Company, is an investment advisor to investment companies. This represents the number of shares owned as of December 31, 1994 as indicated in a Schedule 13G filed by FMR with the SEC on February 13, 1995. FMR has neither sole nor shared voting power with respect to such shares and has sole power to dispose of such shares.
EXECUTIVE OFFICERS
Each executive officer of the Company serves at the pleasure of the Company's Board of Directors, and, subject to removal, holds office until the regular meeting of the Board of Directors which follows the annual meeting of shareholders and until his successor has been appointed and qualified.
The following table sets forth certain information with respect to the executive officers of the Company.
Years Position Name Age Position with Company Held --------------------------------------------------------------------------- ----
Albert L. Ueltschi................. 77 President and Chairman of the Board 44 years Bruce N. Whitman................... 61 Executive Vice President 33 years Elmer G. Gleske.................... 64 Vice President -- Government Affairs 18 years Dennis Gulasy(1)................... 52 Vice President -- Simulation Systems 3 years Kenneth W. Motschwiller(2)......... 38 Vice President -- Treasurer 4 years James S. Waugh..................... 47 Vice President -- Marketing 15 years Mario D'Angelo(3).................. 42 Controller 4 years
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(1) Mr. Gulasy was elected Vice President -- Simulation Systems of the Company on September 17, 1992. Mr. Gulasy has also been General Manager of the Company's Simulation Systems Division since 1985. Prior thereto, Mr. Gulasy held various positions with the Company.
(2) Prior to becoming Vice President -- Treasurer, Mr. Motschwiller was Controller of the Company from December 1983 until July 1991.
(3) Prior to becoming Controller, Mr. D'Angelo was Assistant Controller of the Company from September 1988 until July 1991. Prior thereto, Mr. D'Angelo held various positions with the Company.
EXECUTIVE COMPENSATION
Report of the Compensation Committee on Executive Compensation
Overall Compensation Policy. The Compensation Committee of the Board of Directors has three members, all of whom are non-employee directors. Each member of the Committee is a 'disinterested director' within the meaning of Rule 16b-3 under the Exchange Act. As noted earlier in this proxy statement, the Committee is responsible for considering matters relating to the annual cash compensation for the Company's executive officers (including the named executive officers) and administering the Company's stock-based employee benefit plans (other than the Company's Employee Stock Purchase Plan).
The Company's executive compensation program has been designed to (i) provide compensation comparable to that offered by other companies of similar size (which are in the geographic area of the Company's headquarters and the Standard and Poor's Specialized Services Index which is used in the stock performance graph presented below), thereby allowing the Company to attract and retain highly qualified executives, (ii) motivate these executives to achieve the goals inherent in the Company's business strategy, (iii) align the interests of these executives with the long-term interests of the Company's shareholders through stock-based employee benefit plans, (iv) provide a compensation package that recognizes individual contributions as well as overall Company performance and (v) be cost effective. A basic tenet of the compensation philosophy of the program is that a substantial portion of each executive officer's annual compensation relates to and must be contingent upon the
performance of the Company, as well as the individual contributions of such executive. The Committee believes that the cash compensation of the executive officers, consisting of their annual base salary and annual bonus, are slightly below the median ranges of such items paid by companies of a comparable size in the Company's geographic area and with other companies in the Standard and Poor's Specialized Services Index.
The key elements of the Company's executive compensation program are base salary, annual bonus, stock option grants and restricted stock awards. Mr. Ueltschi, the President of the Company, does not participate in the Company's stock option and restricted stock programs. The Committee's policies with respect to each of these elements, including the bases for the compensation awarded to Mr. Ueltschi, are discussed below. While the elements of compensation described below are considered separately, the Committee takes into account the full compensation package provided by the Company to the individual executive.
Base Salaries. Executive officer base salaries are reviewed annually by the Compensation Committee in order to consider any adjustments for the upcoming year. Annual salary adjustments are determined by evaluating the competitive marketplace, changes in the cost of living, the Company's current and historical performance (taking into account changes in the Company's business and economic conditions affecting the Company), the executive's contributions and any change in the executive's responsibilities. Mr. Ueltschi evaluates the performance of the other executive officers of the Company and recommends appropriate adjustments for the Compensation Committee's consideration.
Within this framework, in making its recommendations to the Board for 1994 annual salary adjustments, the Compensation Committee focused on, among other things, that the base salaries of the Company's executive officers were less than 70 percent of the average base salaries of executive officers of comparable companies in the Company's geographic area. After the 1994 base salary increases, the executive officers' base salaries were less than 80 percent of the average salaries of executive officers at such companies. The base salaries were also increased to allow the Company to increase the salary of other personnel to a competitive level since the salaries being paid to executive officers of the Company were compressing the level of salaries which could be paid to such personnel. The Compensation Committee independently, and the Board after receiving the recommendation of the Compensation Committee (and without the involvement of any employee director), evaluates the performance of Mr. Ueltschi and reaches a determination regarding his salary. Similar to the other executive officers, Mr. Ueltschi's 1994 base salary was also increased but after such increase, was no more than approximately 70 percent of the average salary of other chief executive officers of companies in the Company's geographic area.
Annual Bonus. Annual bonus awards in respect of any year are considered by the Compensation Committee in the following March in conjunction with their review of the Company's audited financial statements for the prior year. Bonus awards are normally paid in two increments; two-thirds payable upon award and one-third payable on the first business day of the year following the award, subject to the condition that the executive officer be employed by the Company at the time of payment unless such employment is terminated as a result of the death of such officer.
Annual bonus awards are determined as a percentage (the 'Performance Percentage') of the applicable bonus base of the executive officer's annual salary (the 'Bonus Base'). Bonus Bases have historically ranged between 25 percent to 60 percent. In determining the Bonus Base for a particular executive officer, the Compensation Committee considers, among other things, the length of employment, current responsibilities, individual contributions and past bonus history for such executive. In determining the applicable Performance Percentage, the Compensation Committee considers the Company's overall performance for the preceding year, including the earnings for that year and for prior years (taking into account general economic conditions and the performance of relevant sectors of the economy). In order to foster a team approach among senior management, the Performance Percentage normally does not vary greatly as between individual executive officers. Performance Percentages usually range from 75 percent to 150 percent.
In making its determinations of annual bonus awards in respect of 1994, the Compensation Committee focused on, among other things, the Company's 11 percent increase in training revenues, a 17 percent increase in net income per share in 1994 as compared to 1993 and the Company's executive officers' total cash compensation being below that of comparable-sized companies' cash compensation.
The Bonus Bases were all increased due to the 1994 base salary increases previously mentioned and the Performance Percentages were also increased in 1994 for the same reasons for all named executive officers, except for Mr. Gulasy. Mr. Ueltschi's annual bonus increased due to both his Bonus Base and Performance Percentage increasing due primarily for the items indicated earlier.
Stock Option Grants and Restricted Stock Awards. The objective in granting stock options and restricted stock is to create an incentive for grantees with respect to future performance of the Company, rather than to reward them for past contributions. The stock awards are designed to align the long-term interests of the Company's executive officers with those of its shareholders by creating a direct link between executive compensation and shareholder return and by enabling such executives to develop and maintain a significant, long-term stock ownership position in the Company's Common Stock.
Under the Company's 1992 Stock Option Plan, stock options to purchase 110,340 shares were granted in December 1994 to key employees of the Company (including certain named executive officers). Such options were granted with an exercise price equal to the closing market price of the Company's Common Stock on the date of grant, become exercisable in 20 percent increments on the first five anniversaries of the date of grant and expire 10 years after the date of grant.
The Compensation Committee, in considering award levels, granted to certain named executive officers, options to purchase a number of shares of the Company's Common Stock, based on the closing market price of the Company's Common Stock on the date of grant, equal to twice such executive officer's 1994 base salary. This formula was utilized to increasingly link executive officers' total compensation to a greater extent to shareholder return. The number of options previously awarded to the executive officers also was considered.
Under the Company's 1984 Restricted Stock Plan, restricted shares were awarded in June 1994 to key employees of the Company (including the named executive officers). Shares of restricted stock generally vest upon normal retirement, death or total disability. Recipients of restricted stock awards are entitled to receive dividends on such shares as of the date of the award. The Compensation Committee, in recommending to the Board the 1994 restricted stock awards for executive officers, recommended that each of the executive officers participating in the restricted stock program be awarded a number of shares of restricted stock equal in value, based on the closing market price of the Company's Common Stock on the date of grant, to 10 percent of such executive's 1994 base salary, which is the percentage that has been used for all employees in this program since 1986.
Due to his significant stock ownership in the Company, Mr. Ueltschi does not participate in any of the Company's stock-based employee benefit programs.
Severance Agreements. In 1994, the Company entered into change in control severance agreements with the named executive officers, except Mr. Ueltschi. The Compensation Committee believes that these agreements are in the best interest of the shareholders in order to insure that, in case of a change in control event, the Company will have continuity of management and independent judgement will be exercised by the named executive officers to maximize shareholder value. For additional information on the severance agreements, see the description on page 10 of this proxy statement.
Although new federal income tax laws limit the deductibility of executive officer compensation if the compensation is above certain levels, the Compensation Committee believes that these laws will not impact the Company's tax deduction in 1994.
Compensation Committee George B. Beitzel, Chairman Edward E. Hood, Jr. John A. Morgan
Summary Compensation Table
The following table sets forth the cash and non-cash compensation for each of the last three fiscal years awarded to or earned by the chief executive officer of the Company and the four other most highly compensated executive officers of the Company at the end of 1994.
SUMMARY COMPENSATION TABLE
Long-Term
------------------------ Annual Compensation Compensation Awards
---------------------- ------------------------ All Other Base Restricted Stock Compensation Year Salary(1) Bonus(2) Stock($)(3) Options(#) ($)(4) --------- ----------- --------- ----------- ----------- -----------
Albert L. Ueltschi(5) ........ 1994 $ 250,000 $ 150,000 -- -- $ 1,584 President and Chairman of 1993 $ 220,000 $ 118,800 -- -- $ 2,257 the Board 1992 $ 220,000 $ 118,800 -- -- $ 2,769 Bruce N. Whitman ............. 1994 $ 210,000 $ 126,000 $ 21,000 10,910 $ 9,277 Executive Vice President and 1993 $ 190,000 $ 102,600 $ 19,000 11,240 $ 11,614 Director 1992 $ 190,000 $ 102,600 $ 19,000 4,305 $ 8,960 Kenneth W. Motschwiller ...... 1994 $ 130,000 $ 101,400 $ 13,000 6,750 $ 2,120 Vice President-Treasurer 1993 $ 103,000 $ 68,000 $ 10,300 6,090 $ 2,507 1992 $ 103,000 $ 68,000 $ 10,300 3,000 $ 2,020 James S. Waugh ............... 1994 $ 130,000 $ 78,000 $ 13,000 6,750 $ 3,771 Vice President-Marketing 1993 $ 108,000 $ 58,300 $ 10,800 6,390 $ 4,729 1992 $ 108,000 $ 58,300 $ 10,800 2,447 $ 3,777 Dennis Gulasy ................ 1994 $ 135,000 $ 48,600 $ 13,500 -- $ 2,925 Vice President-Simulation 1993 $ 110,000 $ 72,600 $ 11,000 6,520 $ 3,493 Systems 1992 $ 107,500 $ 72,600 $ 10,500 3,000 $ 2,486
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(1) The amounts shown in this column include amounts deferred pursuant to the Company's 401(k) plan. There are no Company funds contributed to this plan.
(2) Annual bonus includes amounts awarded in March of the following year. Such bonuses are normally paid two-thirds upon award and, subject to certain conditions, one-third on the first business day of the following year.
(3) The amounts shown in this column represent the market value of the restricted stock awarded and were calculated by multiplying the closing market price of the Company's Common Stock on the date of award by the number of shares awarded. Shares of restricted stock generally vest upon normal retirement, death or total disability. Recipients of restricted stock awards are entitled to receive dividends on such shares as of the date of the award. As of December 31, 1994, the number and value of the aggregate restricted stock holdings of each of the named executive officers was as follows: Mr. Ueltschi, 0 shares; Mr. Whitman, 7,992 shares ($324,700); Mr. Motschwiller, 3,644 shares ($148,000); Mr. Waugh, 4,765 shares ($193,600) and Mr. Gulasy, 3,987 shares ($162,000).
(4) The amounts shown in this column represent (i) above-market interest in excess of 120 percent of the applicable federal long-term rate which was credited to the executive officer's 1986 deferred income account and the amounts for 1994 were: Mr. Ueltschi, $1,365; Mr. Whitman, $9,058; Mr. Motschwiller, $1,901; Mr. Waugh, $3,552; and Mr. Gulasy, $2,706; and (ii) the dollar value of group term life insurance premiums of $219 paid by the Company for each of the named executive officers. Subject to certain eligibility requirements, the Company's group term life insurance is available to all employees of the Company.
(5) Mr. Ueltschi does not participate in the Company's restricted stock or stock option programs.
Stock Option Grants Table
The following tables summarize stock options granted during 1994 to the named executive officers of the Company.
STOCK OPTION GRANTS IN 1994
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation for % of Total Options Option Stock Granted to All Exercise Term Compounded Annually Executive Options Employees Price Expiration -------------------------------- Officer(1) Granted(2) in 1994(3) ($ Per Share) Date 5% 10% ------------------ ----------- ------------------- ------------- ----------- --------------- ---------------
Bruce N. Whitman.. 10,910 9.9% $ 38.50 12/02/04 $ 264,200 $ 669,400 Kenneth W. Motschwiller.... 6,750 6.1% $ 38.50 12/02/04 $ 163,400 $ 414,200 James S. Waugh.... 6,750 6.1% $ 38.50 12/02/04 $ 163,400 $ 414,200
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(1) Mr. Ueltschi does not participate in the Company's stock option programs.
(2) The options become exercisable to purchase shares of the Company's Common Stock at the fair market value of such stock on the date of grant in 20 percent increments on the first five anniversaries of the date of the grant and expire ten years from date of grant.
(3) The Company granted stock options for an aggregate of 110,340 shares to its employees in 1994.
Stock Option Exercises and Year-End Value Table
The following table summarizes the exercise of stock options by the named executive officers and the value of stock options held by such executives as of the end of 1994.
AGGREGATED STOCK OPTION EXERCISES IN 1994 AND VALUE OF STOCK OPTIONS AT END OF 1994
Value of Unexercised
Number of Unexercised In-the-Money Options at
Options at End of 1994 End of Fiscal 1994(2) Executive Shares Acquired Value -------------------------- ------------------------ Officer(1) On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable ----------------------- --------------- --------- ----------- ------------- ----------- -----------
Bruce N. Whitman....... 1,786 $ 21,200 14,805 25,044 $ 15,300 $ 84,400 Kenneth W. Motschwiller......... - 0 - $ - 0 - 16,516 14,694 $ 195,000 $ 47,500 James S. Waugh......... - 0 - $ - 0 - 17,050 14,771 $ 253,700 $ 49,200 Dennis Gulasy.......... - 0 - $ - 0 - 20,478 8,471 $ 294,900 $ 35,500
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(1) Mr. Ueltschi does not participate in the Company's stock option programs.
(2) Value based on closing market price of the Company's Common Stock at December 31, 1994, minus the exercise price, multiplied by the applicable number of options.
Pension Plan
The Company maintains a defined benefit pension plan (the 'Pension Plan') which covers substantially all of its employees and those of its North American subsidiaries, excluding employees of the Company's subsidiary, FlightSafety Services Corporation (who participate in such subsidiary's defined contribution plan). Full-time employees are eligible to participate in the Pension Plan on the December 31st or June 30th coincident with or next following such employee's 21st birthday and the completion of one year of service. The normal retirement benefit provided by the Pension Plan is (i) the benefit accrued by the participant to December 30, 1989, plus .75% of average monthly compensation, excluding overtime, multiplied by the participant's total number of credited years of service up to 35 less credited service prior to December 31, 1989, plus (ii) .75% of such average monthly compensation in excess of a specified level of compensation tied to social security benefits multiplied by the participant's total number of years of credited service up to 35 less credited service prior to December 31, 1989. When an employee has completed five years of service with the Company or has attained age 55, the
employee becomes 100% vested under the Pension Plan. Normal retirement age under the Pension Plan is 65 and five years of participation, although early retirement benefits are available. For the named executive officers, the projected annual benefits under the Pension Plan, assuming (i) retirement at normal retirement age or deferred retirement and (ii) current salary levels, are as follows: Mr. Ueltschi, $59,900; Mr. Whitman, $44,000; Mr. Motschwiller, $57,000; Mr. Waugh, $54,500 and Mr. Gulasy, $40,000.
Severance Agreements. On December 2, 1994, the Compensation Committee of the Board of Directors authorized the entering into severance agreements with each individual named in the Summary Compensation Table (each such person being an executive officer) except for Mr. Ueltschi. The Company believes that these severance agreements are in the best interest of the shareholders in order to insure that, in case of a change in control event, the Company will have continuity of management and independent judgement will be exercised by the executives to maximize shareholder value. The severance agreements continue through December 31, 1995 and are automatically extended in one-year increments unless the Company has given prior notice of termination to the executive.
In the event, that following a 'Change in Control', employment is terminated by the executive officer for 'Good Reason' or the employee is involuntarily terminated by the Company other than for 'Cause' (as those terms are defined in the severance agreements), the severance agreements generally provide for: (a) a lump sum cash payment equal to the sum of three times (i) the annual base salary and (ii) the amount of bonus compensation for the year preceding the year in which the date of termination occurs; (b) a cash payment for each outstanding option equal to the amount of the higher of the closing price for shares of the Company's Common Stock or the price actually paid in connection with any Change in Control over the per share exercise price of each such option held by the executive officer (whether or not then fully exercisable) times the number of shares covered by each such option; (c) a lapse of restrictions on all shares of restricted stock; and (d) life, disability, and health insurance benefits for a period of 36 months. Benefits under the severance agreements are limited to the extent they would result in the disallowance of a deduction to the Company under the Parachute payment provisions of Section 280G of the Internal Revenue Code.
Five-Year Stock Performance Graph
The annual changes for the five-year period shown in the following graph are based on the assumption that $100 had been invested in the Company's Common Stock and each index on December 31, 1989, and that all dividends were reinvested. The total cumulative dollar return shown on the graph represents the value (to the nearest dollar) that such investments would have had on December 31, 1994.
The stock performance graph in the proxy statement uses the following indexes, return values and coordinates:
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company, on the recommendation of the Audit Committee, has appointed Price Waterhouse LLP ('Price Waterhouse') as independent accountants for the Company for the year ending December 31, 1995, subject to ratification by the shareholders of the Company. Price Waterhouse has served as independent accountants for the Company since 1955. The Board of Directors believes that the retention of the services of Price Waterhouse is in the best interests of the Company's shareholders and recommends that shareholders approve their appointment. Representatives of Price Waterhouse are expected to attend the Meeting and will have an opportunity to make a statement, if they desire to do so, and to respond to questions from the Company's shareholders.
A majority of the votes cast at the Meeting is required to ratify the appointment of Price Waterhouse as independent accountants for the Company for the year ending December 31, 1995. Under applicable New York law, in determining whether this proposal has received the requisite number of affirmative votes, abstentions and broker non-votes will be disregarded and will have no effect on the outcome of the vote. Unless a contrary instruction is indicated, a properly executed and returned proxy will be voted FOR the ratification and approval of Price Waterhouse as independent accountants for the Company for the year ending December 31, 1995.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires that the Company's officers and directors, and persons who own more than 10 percent of the Company's Common Stock, file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the SEC and The New York Stock Exchange, Inc. Officers, directors and greater than 10 percent shareholders are also required by rules of the SEC to furnish the Company with copies of all Forms 3, 4 and 5 which they file.
Based solely on the Company's review of the copies of such reports it has received, and written representations from certain reporting persons that they were not required to file a Form 5 for 1994, the Company believes that all officers, directors and greater than 10 percent shareholders complied with all filing requirements applicable to them with respect to transactions in the Company's Common Stock during 1994.
SHAREHOLDER PROPOSALS
Under the rules of the SEC, proposals which shareholders of the Company intend to present at next year's annual meeting of shareholders must be received, in order to be considered at such meeting, by the Secretary of the Company, at the Company's executive offices located at Marine Air Terminal, La Guardia Airport, Flushing, New York 11371, no later than the close of business on November 30, 1995. Shareholder proposals received after that date will not be included in the Company's proxy statement or form of proxy prepared in connection with such meeting.
ADDITIONAL INFORMATION
The Company's 1994 Annual Report to Shareholders, which contains financial statements for the year ended December 31, 1994 and other information concerning the operations of the Company, is enclosed with this proxy statement, but is not to be regarded as proxy soliciting materials.
Upon written request, the Company will provide without charge to each shareholder of the Company a copy of the Company's Annual Report on Form 10-K for its prior fiscal year, as filed with the SEC. Address all such requests to: Treasurer, FlightSafety International, Inc., Marine Air Terminal, La Guardia Airport, Flushing, New York 11371.
By Order of the Board of Directors,
PETER P. MULLEN Secretary
Flushing, New York March 24, 1995
	Exhibit (23)
	Consent of Independent Accountants
	We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statements on Form S-8 (Reg. No. 2-67335, Reg. No. 2-79846, Reg. No. 2-92050 and Reg. No. 33-52998) of FlightSafety International, Inc. of our report dated January 31, 1995, appearing on page 25 of the 1994 Annual Report to Shareholders which is incorporated by reference in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedules, which appears on page __27__ of this Form 10-K.
PRICE WATERHOUSE LLP
New York, New York March 27, 1995