UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
July 12, 2002
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DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
COMMISSION FILE NUMBER 1-11775
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TIMCO Aviation Services, Inc.
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(Exact Name Of Registrant As Specified In Its Charter)
Delaware 65-0665658
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(State Or Other Jurisdiction Of (IRS Employer
Incorporation Or Organization) Identification No.)
623 Radar Road
Greensboro, N.C. 27410
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(Address Of Principal Executive Offices)
(336) 668-4410 x 3004
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(Registrant's Telephone Number,
Including Area Code)
Aviation Sales Company
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(Former Name Or Former Address,
If Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
Amendment to the Company's Senior Credit Facilities
On July 12, 2002, the Company entered into an agreement amending and
restating its senior credit facilities with a syndicate of four lenders led by
Citicorp USA Inc. and UPS Capital Corporation pursuant to the terms of a Fifth
Amended and Restated Credit Agreement dated as of July 12, 2002 (the "Amended
Credit Agreement"). Under the Amended Credit Agreement, the Company has obtained
a $30.0 million senior secured revolving line of credit (the "Amended Revolving
Credit Facility") and a $7.0 million senior secured term loan (the "Amended Term
Loan" and collectively with the Amended Revolving Credit Facility, the "Amended
Credit Facility").
The Company utilized the proceeds from the Amended Credit Facility to
repay outstanding borrowings under its previously outstanding revolving credit
facility and its previously outstanding $12.0 million senior secured term loan.
As of July 19, 2002, the outstanding principal balance of the revolving loans
under the Amended Revolving Credit Facility was $2.5 million, the aggregate
amount of letters of credit outstanding under the Amended Revolving Credit
Facility was $11.6 million and availability under the Amended Revolving Credit
Facility was $4.6 million.
The interest rate on the Amended Revolving Credit Facility is, at the
Company's option, (a) prime plus 3% per annum, or (b) LIBOR plus 4.5% per annum.
The interest rate on the Amended Term Loan is 12% per annum. The Amended
Revolving Credit Facility is due on January 31, 2004. The Amended Term Loan is
due in quarterly installments of $500,000, commencing September 30, 2002, with
the remaining principal balance due in full on January 31, 2004.
The Amended Credit Agreement contains certain financial covenants
regarding the Company's financial performance and certain other covenants,
including limitations on the amount of annual capital expenditures and the
incurrence of additional debt, and provides for the suspension of the Amended
Credit Facility and repayment of all debt in the event of a material adverse
change in the business or a change in control. Generally, the Amended Credit
Agreement requires mandatory repayments and reduction of the commitments
thereunder from proceeds of a sale of assets or an issuance of equity or debt
securities. Mandatory repayments are also required as a result of insufficient
collateral to meet the borrowing base requirements thereunder or in the event
the outstanding obligations under the Amended Credit Facility exceed the
commitments thereunder. Substantially all of the Company's assets are pledged as
collateral for amounts borrowed.
The foregoing is a summary of certain information contained in the
above-referenced Amended Credit Agreement. Reference is made to the more
detailed information contained in such document, which is attached to this Form
8-K as Exhibit 10.1.
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Amendment to the Company's TROL Financing Agreements
On July 12, 2002, the Company entered into an agreement amending its
existing tax retention operating lease ("TROL") financing pursuant to the terms
of an Amendment and Consent Agreement No. 14 for Lease Agreement and Other
Operative Agreements between the Company as Construction Agent and Lessee, Wells
Fargo Bank Northwest, National Association, as Owner Trustee ("Trustee"), and
Bank of America, N.A., as Administrative Agent and Lender (the "Amended TROL
Financing Agreement"). Under the terms of the Amended TROL Financing Agreement,
the maturity date of the TROL financing has been extended until June 30, 2005
and the base rent under the TROL has been increased to the greater of: (i) the
amount being paid by Kellstrom Industries, Inc. ("Kellstrom") under its sublease
for the Miramar facility, plus, commencing July 1, 2003, an additional monthly
payment by the Company, or (ii) $210,000. The TROL financing continues to be
secured by the Miramar facility. See below for a discussion of the terms of a
recent amendment to the Kellstrom sublease for the Miramar facility.
The foregoing is a summary of certain information contained in the
above-referenced document. Reference is made to the more detailed information
contained in such document, which is attached to this Form 8-K as Exhibit 10.2.
Restructuring of the Company's Term Loan from Bank of America
On July 12, 2002, the Company restructured its outstanding $10.0
million senior secured term loan with Bank of America, N.A. ("BofA"). This term
loan had originally been obtained in February 2001 and had been guaranteed on a
limited basis by four individuals, Lacy J. Harber, the Company's principal
stockholder, Ben Quevedo, a director of the Company, Robert Alpert, a former
principal stockholder and a former director of the Company, and Don A. Sanders.
The term loan was restructured as follows:
. $5.0 million of this loan (the "$5.0 million BofA Loan") is now
due on January 31, 2004. The $5.0 million BofA Loan continues
to bear interest at the rate of LIBOR plus 2% and continues to
be guaranteed on a limited basis by Messrs. Harber and Sanders;
. $2.5 million of this loan (the $2.5 million BofA Loan")
continues to be due on August 14, 2002. The $2.5 million BofA
Loan continues to bear interest at the rate of LIBOR plus 2%
and continues to be guaranteed on a limited basis by Mr. Alpert;
. $2.5 million of this loan (the "Quevedo Loan") was restructured
as follows: (i) at the closing of the refinancing, Mr. Quevedo
paid BofA $2.5 million, reducing the Company's obligation under
this term loan from $10.0 million to $7.5 million (which amount
was then restructured as set forth above); (ii) the Company
sold Mr. Quevedo a 100,000 square foot warehouse facility in
Pearland, Texas which had been previously been utilized by the
Company's redistribution operation for a gross purchase price
of $1.5 million (which is at least as favorable a price for this
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property as could have been obtained from an unaffiliated
third party); and (iii) the Company agreed to pay Mr. Quevedo
the remaining $1.0 million balance of this loan, with interest
at the rate of 12% per annum, on the earlier of certain
Company sales of assets or January 31, 2004.
The $8.5 million in restructured senior term loan indebtedness
continues to be secured by a lien on substantially all of the assets of the
Company.
The foregoing is a summary of certain information contained in the
above-referenced documents. Reference is made to the more detailed information
contained in such documents, which are attached to this Form 8-K as Exhibits
10.3 to 10.17.
Closing of Post-Closing Resolution Agreement with Kellstrom Industries, Inc.
On July 18, 2002, the Company closed on the transactions contemplated
by the Post-Closing Resolution Agreement, dated as of June 10, 2002 (the "PCRA")
between the Company, its subsidiary, Aviation Sales Distribution Services
Company ("ASDC"), and Kellstrom. The settlement resolves and settles globally
outstanding disputes between the Company and Kellstrom (the "Settlement")
relating to matters arising out of the Company's and ASDC's December 2000 sale
of substantially all of the assets of its redistribution operation to Kellstrom.
As part of the Settlement:
a. Kellstrom purchased certain furniture, fixtures and equipment
("FF&E") from ASDC, which equipment is being used by Kellstrom
in the operation of its business;
b. Kellstrom "put" to the Company certain uncollected accounts
receivable which were sold by ASDC to Kellstrom as part of the
sale of the assets of the redistribution operation in
accordance with the terms of the Asset Purchase Agreement,
dated December 1, 2000, among Kellstrom, the Company and ASDC
(the "APA");
c. Kellstrom and the Company resolved outstanding purchase price
adjustment disputes under the APA;
d. The Company and Kellstrom settled and setoff amounts due and
owing in the ordinary course between Kellstrom and AVS,
including certain rental amounts owed by Kellstrom under the
Miramar Lease (defined below);
e. Kellstrom's sub-lease (the "Miramar Lease") of the Company's
525,000 square foot Miramar, Florida warehouse and office
facility (the "Miramar Facility") was amended (the "Amended
Kellstrom Lease") to provide for a term of twenty (20) years
with an annual minimum rental of $2,750,000 for the first five
years, $3,000,000 for years six through ten and at fair market
value thereafter (all subject to CPI increases). Further, the
Amended Kellstrom Lease provides
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Kellstrom with a one-time right to terminate the Amended
Kellstrom Lease upon the completion of the 7/th/ lease year
after the closing of the Settlement;
f. The Non-Competition Agreement between the Company and
Kellstrom was amended to, among other things, allow the
Company's Aerocell Structures flight surfaces MR&O operation
to exchange flight surfaces with its customers and to allow
the Company, during the six months following the completion of
the settlement to sell in the open market up to $4.0 million
of aircraft parts acquired by the Company in connection with
its MR&O activities; and
g. The Cooperation Agreement between Kellstrom and the Company,
which obligates the Company to purchase aircraft parts from
Kellstrom, was terminated.
The Settlement resulted in a net cash payment to the Company of
approximately $426,000. The closing of the Settlement occurred in connection
with the sale of Kellstrom's business to an entity, Kellstrom Aerospace, LLC,
organized by Inverness Management LLC. As part of that sale, the Amended
Kellstrom Lease was assigned to Kellstrom Aerospace LLC. Such sale and the terms
of the Settlement were approved by the Bankruptcy Court in Kellstrom's Chapter
11 bankruptcy proceeding.
Additionally, simultaneous with the Settlement: (i) the Company
resolved certain purchase price adjustment issues with KAV Inventory, LLC, an
entity owned 50% by the Company and 50% by Kellstrom, under that certain
Inventory Purchase Agreement, dated December 1, 2000, among the Company, ASDC
and KAV; (ii) KAV entered into a new consignment agreement with Kellstrom
Commercial Aerospace, Inc., a subsidiary of Kellstrom Aerospace, LLC, with
respect to the aircraft parts inventory owned by KAV; and (iii) the senior
secured loan arrangement between KAV and BofA was amended and restated.
The foregoing is a summary of certain information contained in the
above-referenced documents. Reference is made to the more detailed information
contained in such documents, which are attached to this Form 8-K as Exhibits
10.18 to 10.24.
Agreement between Kellstrom's senior lenders and certain investors affiliated
with the Company who previously provided credit support to Kellstrom
In December 2000, at the time of the Company's sale of its
redistribution operation to Kellstrom, four investors posted $8.0 million in
letters of credit with Kellstrom's lenders to support Kellstrom's senior
revolving credit facility. The four investors are Lacy Harber, the Company's
principal stockholder, Robert Alpert, a former director and a former principal
stockholder of the Company, Don A. Sanders and Robert Belfer. The letters of
credit were drawn by Kellstrom's lenders in October 2001 and the four investors
are creditors in Kellstrom's bankruptcy proceeding. In Kellstrom's bankruptcy
proceeding, the four investors have asserted claims against a warehouse and
office facility owned by Kellstrom which is located in Sunrise, Florida (the
"Sunrise Facility").
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Simultaneous with the Settlement, the four investors entered into an
agreement with Kellstrom's senior lenders with respect to a sharing of proceeds
from any sale of the Sunrise Facility and regarding certain other matters.
Additionally, as part of the same agreement, the Company entered into a release
agreement with BofA with respect to certain matters.
The foregoing is a summary of certain information contained in the
above-referenced documents. Reference is made to the more detailed information
contained in such documents, which are attached to this Form 8-K as Exhibits
10.25 to 10.28.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(c) Exhibits.
Exhibit No. Description
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4.1 Amendment No. 2 to Common Stock Warrant Certificate between
the Company and Citicorp USA, Inc.
10.1 Fifth Amended and Restated Credit Agreement dated as of July
12, 2002;
10.2 Amendment and Consent Agreement No. 14 for Lease Agreement and
Certain Other Operative Agreements;
10.3 Replacement Term Loan Note in the principal amount of $5.0
million in favor of Bank or America, N.A.
10.4 Second Amendment to Limited Guaranty of LJH Ltd.;
10.5 Second Amendment to Limited Guaranty of Don A. Sanders;
10.6 Replacement Term Loan Note in the principal amount of $2.5
million in favor of Bank or America, N.A.
10.7 Second Amendment to Limited Guaranty of James Investments,
Inc.;
10.8 Loan Parties Agreement, dated as of July 12, 2002, relating
to the $5.0 million and the $2.5 million term loans due to
Bank of America, N.A.;
10.9 Guaranty by the Company and subsidiaries of the $5.0 million
and the $2.5 million term loans due to Bank of America, N.A.;
10.10 Term Loan Note in the principal amount of $1.0 million in
favor of Benito and Martha Quevedo;
10.11 Loan Parties Agreement, dated as of July 12, 2002, relating to
the $1.0 million in favor of Benito and Martha Quevedo;
10.12 Guaranty by the Company and subsidiaries of the $1.0 million
in favor of Benito and Martha Quevedo;
10.13 Memorandum of Purchase and Sale between ASDC, the Company and
Quevedo Family Limited Partnership, dated as of July 12, 2002;
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10.14 Security Agreement, dated as of July 12, 2002, among the
Company, its subsidiaries, Benito and Martha Quevedo, James
Investments, Inc., LJH Ltd. and Don A. Sanders;
10.15 Agreement, dated as of July 12, 2002, among Benito and Martha
Quevedo, James Investments, Inc., LJH Ltd. and Don A. Sanders;
10.16 Amended and Restated Intercreditor Agreement between Citicorp
USA, Inc., as Agent, and Bank of America, N.A.
10.17 Intercreditor Agreement among Citicorp USA, Inc., as Agent,
Benito and Martha Quevedo, James Investments, Inc., LJH Ltd.
and Don A. Sanders;
10.18 Post-Closing Resolution Agreement among the Company, ASDC and
Kellstrom, dated as of June 10, 2002;
10.19 First Amendment to Non-Competition Agreement;
10.20 First Amendment to Miramar Lease between the Company and
Kellstrom;
10.21 Assignment of Amended Miramar Lease from Kellstrom to KIAC,
Inc.;
10.22 Assignment of Amended Miramar Lease from KIAC, Inc. to
Kellstrom Aerospace, LLC;
10.23 Consignment Agreement between KAV, Kellstrom Commercial
Aerospace, Inc. and Bank of America, N.A.;
10.24 Amended and Restated Loan and Security Agreement between Bank
of America, N.A. and KAV;
10.25 Proceeds Sharing Agreement;
10.26 AVS Investor Mutual Release
10.27 KAV Mutual Release
10.28 AVS/ASDC Mutual Release
99.1 Press Release issued July 16, 2002 announcing the completion
of the senior debt refinancing;
99.2 Press Release issued July announcing the closing of the
Kellstrom Settlement.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, this 31/st/ day of July, 2002.
TIMCO AVIATION SERVICES, INC.
/s/ C. Robert Campbell
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C. Robert Campbell
Executive Vice President and CFO
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EXHIBIT INDEX
Exhibit No. Description
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4.1 Amendment No. 2 to Common Stock Warrant Certificate between
the Company and Citicorp USA, Inc.
10.1 Fifth Amended and Restated Credit Agreement dated as of July
12, 2002;
10.2 Amendment and Consent Agreement No. 14 for Lease Agreement and
Certain Other Operative Agreements;
10.3 Replacement Term Loan Note in the principal amount of $5.0
million in favor of Bank or America, N.A.
10.4 Second Amendment to Limited Guaranty of LJH Ltd.;
10.5 Second Amendment to Limited Guaranty of Don A. Sanders;
10.6 Replacement Term Loan Note in the principal amount of $2.5
million in favor of Bank or America, N.A.
10.7 Second Amendment to Limited Guaranty of James Investments,
Inc.;
10.8 Loan Parties Agreement, dated as of July 12, 2002, relating
to the $5.0 million and the $2.5 million term loans due to
Bank of America, N.A.;
10.9 Guaranty by the Company and subsidiaries of the $5.0 million
and the $2.5 million term loans due to Bank of America, N.A.;
10.10 Term Loan Note in the principal amount of $1.0 million in
favor of Benito and Martha Quevedo;
10.11 Loan Parties Agreement, dated as of July 12, 2002, relating
to the $1.0 million in favor of Benito and Martha Quevedo
10.12 Guaranty by the Company and subsidiaries of the $1.0 million
in favor of Benito and Martha Quevedo;
10.13 Memorandum of Purchase and Sale between ASDC, the Company and
Quevedo Family Limited Partnership, dated as of July 12, 2002;
10.14 Security Agreement, dated as of July 12, 2002, among the
Company, its subsidiaries, Benito and Martha Quevedo, James
Investments, Inc., LJH Ltd. and Don A. Sanders;
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10.15 Agreement, dated as of July 12, 2002, among Benito and Martha
Quevedo, James Investments, Inc., LJH Ltd. and Don A.
Sanders;
10.16 Amended and Restated Intercreditor Agreement between Citicorp
USA, Inc., as Agent, and Bank of America, N.A.
10.17 Intercreditor Agreement among Citicorp USA, Inc., as Agent,
Benito and Martha Quevedo, James Investments, Inc., LJH Ltd.
and Don A. Sanders;
10.18 Post-Closing Resolution Agreement among the Company, ASDC and
Kellstrom, dated as of June 10, 2002;
10.19 First Amendment to Non-Competition Agreement;
10.20 First Amendment to Miramar Lease between the Company and
Kellstrom;
10.21 Assignment of Amended Miramar Lease from Kellstrom to KIAC,
Inc.;
10.22 Assignment of Amended Miramar Lease from KIAC, Inc. to
Kellstrom Aerospace, LLC;
10.23 Consignment Agreement between KAV, Kellstrom Commercial
Aerospace, Inc. and Bank of America, N.A.;
10.24 Amended and Restated Loan and Security Agreement between Bank
of America, N.A. and KAV;
10.25 Proceeds Sharing Agreement;
10.26 AVS Investor Mutual Release
10.27 KAV Mutual Release
10.28 AVS/ASDC Mutual Release
99.1 Press Release issued July 16, 2002 announcing the completion
of the senior debt refinancing;
99.2 Press Release issued July announcing the closing of the
Kellstrom Settlement.
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