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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
December 1, 2000
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
COMMISSION FILE NUMBER 1-11775
AVIATION SALES COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 65-0665658
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3601 FLAMINGO ROAD
MIRAMAR, FLORIDA 33027
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(954) 538-8900
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
3701 Flamingo Road
Miramar, Florida 33027
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 1, 2000 ("Closing Date"), Aviation Sales Company
("Company") completed the sale of substantially all of the assets and business
of its redistribution operation in a series of transactions intended to
constitute a single transaction (the "Transaction"). The Transaction was entered
into with Kellstrom Industries, Inc. ("Kellstrom") and KAV Inventory, LLC
("KAV"). KAV is a 50/50 limited liability company organized by the Company and
Kellstrom. The aggregate purchase price received by the Company in the
Transaction was $156.4 million, approximately $127.0 million of which was paid
in cash ($122.0 million after payment of transaction expenses). The net proceeds
of the Transaction were used by the Company to repay senior debt.
The first component of the Transaction consisted of KAV's acquisition
of substantially all of the aircraft and engine spare parts inventory and the
engine inventory of the Company's redistribution operation, as well as certain
rotable parts inventories from two of the Company's MR&O operations. The
purchase price paid for this inventory was 89% of the closing date adjusted book
value of such inventory ($148.6 million), subject to post-closing adjustment as
set forth in the agreement relating to the inventory sale. As part of the
transaction, KAV consigned the inventory to Kellstrom.
The cash portion of the purchase price paid for the inventory ($105.5
million) was obtained by KAV from a syndicate of financial institutions led by
Bank of America, N.A., with the balance paid in the form of three subordinated
promissory notes. The KAV institutional financing is secured by a lien on all of
the assets of KAV. The first two subordinated notes, each in the principal
amount of $13.7 million, are five-year senior subordinated notes bearing
interest at the rate of 14% per annum (see below for a description of
Kellstrom's purchase of one of these notes). The first two notes are
subordinated in all respects to the KAV institutional financing. The third
subordinated note is a five-year junior subordinated note in the principal
amount of $15.7 million bearing interest at the rate of 14% per annum. The
junior subordinated note is subordinated in all respects to both the KAV
institutional financing and to repayment of the two senior subordinated notes.
The Company and Kellstrom have agreed to share equally the operational
expenses of KAV beyond amounts permitted under the loan agreement relating to
KAV's institutional financing. Additionally, the Company posted an $8.5 million
letter of credit and Kellstrom posted a $6.5 million letter of credit with Bank
of America to secure (in part) KAV's institutional financing. The letters of
credit will only be drawn upon a default by KAV of its loan obligations and if
drawn, such amounts will be treated as loans to KAV and will be repaid prior to
repayment of the senior subordinated notes.
The second component of the Transaction consisted of a sale to
Kellstrom of certain non-inventory assets of the Company's redistribution
operation and the assumption by Kellstrom of a portion of the redistribution
operation's accounts payable. Kellstrom also acquired one of the $13.7
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million senior subordinated notes described above. The net purchase price for
these assets (including the $13.7 million senior subordinated note), after
adjustment for assumed debt, was $21.5 million, all of which was paid in cash.
The purchase price of the non-inventory assets purchased by Kellstrom is subject
to post-closing adjustment as set forth in the agreement relating to the asset
sale.
Additionally, as part of the Transaction:
(i) Kellstrom leased certain furniture, fixtures and equipment
(the "FF&E") used in the redistribution operation and the
redistribution operation's warehouse facility in Pearland,
Texas for a one-year term;
(ii) Kellstrom leased the redistribution operation's 545,000 square
foot warehouse facility located in Miramar, Florida. Pursuant
to a sublease agreement, Kellstrom will pay the Company the
lesser of $384,000 or the actual lease payment due under the
Company's lease for this facility. The Company also granted
Kellstrom the right to renew the sublease for five consecutive
five year periods, at a fair market rental rate;
(iii) Kellstrom has an option to acquire the FF&E and/or the
Pearland, Texas property during the term of the
above-described leases, and for a period of 60 days
thereafter, for a purchase price equal to the net book value
of such assets (approximately $10.0 million in the aggregate).
The Company has an option after one year to require Kellstrom
to purchase the FF&E and/or the Pearland, Texas property for
the same purchase prices; provided, however, that if the
Company exercises either or both of its options, Kellstrom may
defer its purchases of and continue to lease the FF&E and/or
the Pearland, Texas property for up to an additional six
months under certain circumstances;
(iv) The Company and Kellstrom entered into a cooperation agreement
under which the Company agreed to provide repair services for
the KAV parts inventory as well as repair services to
Kellstrom with respect to Kellstrom's parts inventory, and
Kellstrom agreed to supply parts to the Company's MR&O
operations, on an ongoing basis;
(v) The Company and Kellstrom entered into a non-competition
agreement whereby the Company is restricted for a period of up
to five years from engaging in the redistribution business;
and
(vi) The Company granted Kellstrom a limited license to use the
name "Aviation Sales" (if combined with the Kellstrom name) in
connection with Kellstrom's redistribution business.
In connection with the Transaction, the Company entered into amendments
to the agreements relating to its senior credit facility and the lease financing
for its Miramar, Florida facilities.
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The foregoing is a summary of the information contained in the
agreements relating to the Transaction. Reference is made to the more detailed
information contained therein and attached hereto as Exhibits 10.1 through
10.19.
On the Closing Date, the Company issued a press release announcing the
completion of the sale of the assets of its redistribution operation. A copy of
the Company's press release is attached to this Form 8-K as Exhibit 99.1.
ITEM 5. OTHER EVENTS
On December 4, 2000, the Company entered into an amendment to its
standstill agreement with LJH Corporation ("LJH"), which is wholly-owned by Mr.
Lacy J. Harber of Dennison, Texas, and Mr. Harber. The amendment permits LJH and
Mr. Harber to increase their stake in the Company to up to 30% of the Company's
outstanding common stock. The standstill agreement, which was originally entered
into in March 2000 and remains in full force and effect, prohibits LJH and Mr.
Harber from engaging in certain activities without approval of a majority of the
Company's disinterested board members.
The Company also simultaneously entered into an amendment to the rights
agreement relating to its Stockholders' Rights Plan to allow LJH and Mr. Harber
to increase their stake in the Company as described above. This amendment will
not trigger the exercise of rights under the rights agreement and no rights will
be distributed in connection therewith.
The foregoing is a summary of the information contained in the
amendments to the standstill agreement and rights agreement. Reference is made
to the more detailed information contained therein and attached hereto as
Exhibits 10.20 and 10.21.
On December 5, 2000, the Company issued a press release announcing the
amendments to the standstill agreement and rights agreement. A copy of the
Company's press release is attached to this Form 8-K as Exhibit 99.2.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
(a,b) Financial Statements and Pro Forma Financial Information
No historic financial statements of the Company are required
to be filed with this Form 8-K. The pro forma financial
information required to be filed by the Company under
Regulation S-X has previously been filed by the Company
through inclusion of the required information in the Company's
Quarterly Report on Form 10-Q for the quarter ended September
30, 2000.
(c) Exhibits.
Exhibit No. Description
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10.1 Asset Purchase Agreement among the Company, Aviation
Sales Distribution Services Company ("ASDC") and
Kellstrom, dated September 20, 2000
10.2 Letter Amendment to Asset Purchase Agreement, dated
November 28, 2000
10.3 Inventory Purchase Agreement among KAV, the Company
and ASDC, dated September 20, 2000
10.4 Letter Amendment to Inventory Purchase Agreement, dated
November 28, 2000
10.5 KAV Senior Subordinated Note, dated December 1, 2000
10.6 KAV Junior Subordinated Note, dated December 1, 2000
10.7 Operating Agreement of KAV, dated September 20, 2000,
between the Company and Kellstrom
10.8 Letter Agreement between Kellstrom, KAV and the
Company, dated December 1, 2000, with respect to the
payment of KAV operating expenses
10.9 Consignment Agreement between KAV and Kellstrom,
dated December 1, 2000
10.10 Equipment Lease Agreement, dated December 1, 2000,
among the Company, ASDC and Kellstrom
10.11 Lease Agreement, dated December 1, 2000, among ASDC
and Kellstrom (Pearland)
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Exhibit No. Description
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10.12 Lease Agreement, dated December 1, 2000, between
Kellstrom and the Company (Miramar)
10.13 Non-Competition Agreement, dated December 1, 2000,
among ASDC, KAV, the Company and Kellstrom
10.14 License Agreement, dated December 1, 2000, among the
Company, KAV and Kellstrom
10.15 Cooperation Agreement, dated December 1, 2000, between
Kellstrom, ASDC and the Company
10.16 Letter Agreement, dated December 1, 2000, between
Kellstrom, ASDC and the Company (Equipment)
10.17 Letter Agreement, dated December 1, 2000, between
Kellstrom and ASDC (Pearland)
10.18 Consent and Amendment No. 3, dated November 28, 2000,
to the Fourth Amended and Restated Credit Agreement
dated as of May 31, 2000, as amended
10.19 Amendment and Consent Agreement No. 5 for
Participation Agreement and Certain Other Operative
Agreements, dated as of December 1, 2000
10.20 Amendment No. 2 to Rights Agreement, dated December
4, 2000
10.21 Amendment No. 1 to Agreement, dated December 4, 2000
99.1 Press Release of Aviation Sales Company dated December
4, 2000
99.2 Press Release of Aviation Sales Company dated December
5, 2000
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SIGNATURES
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 18th day of December, 2000.
AVIATION SALES COMPANY
/s/ Michael C. Brant
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Michael C. Brant
Vice President and Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Description
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10.1 Asset Purchase Agreement among the Company, Aviation
Sales Distribution Services Company ("ASDC") and
Kellstrom, dated September 20, 2000
10.2 Letter Amendment to Asset Purchase Agreement, dated
November 28, 2000
10.3 Inventory Purchase Agreement among KAV, the Company
and ASDC, dated September 20, 2000
10.4 Letter Amendment to Inventory Purchase Agreement, dated
November 28, 2000
10.5 KAV Senior Subordinated Note, dated December 1, 2000
10.6 KAV Junior Subordinated Note, dated December 1, 2000
10.7 Operating Agreement of KAV, dated September 20, 2000,
between the Company and Kellstrom
10.8 Letter Agreement between Kellstrom, KAV and the
Company, dated December 1, 2000, with respect to the
payment of KAV operating expenses
10.9 Consignment Agreement between KAV and Kellstrom,
dated December 1, 2000
10.10 Equipment Lease Agreement, dated December 1, 2000,
among the Company, ASDC and Kellstrom
10.11 Lease Agreement, dated December 1, 2000, among ASDC
and Kellstrom (Pearland)
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Exhibit No. Description
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10.12 Lease Agreement, dated December 1, 2000, between
Kellstrom and the Company (Miramar)
10.13 Non-Competition Agreement, dated December 1, 2000,
among ASDC, KAV, the Company and Kellstrom
10.14 License Agreement, dated December 1, 2000, among the
Company, KAV and Kellstrom
10.15 Cooperation Agreement, dated December 1, 2000, between
Kellstrom, ASDC and the Company
10.16 Letter Agreement, dated December 1, 2000, between
Kellstrom, ASDC and the Company (Equipment)
10.17 Letter Agreement, dated December 1, 2000, between
Kellstrom and ASDC (Pearland)
10.18 Consent and Amendment No. 3, dated November 28, 2000,
to the Fourth Amended and Restated Credit Agreement
dated as of May 31, 2000, as amended
10.19 Amendment and Consent Agreement No. 5 for
Participation Agreement and Certain Other Operative
Agreements, dated as of December 1, 2000
10.20 Amendment No. 2 to Rights Agreement, dated December
4, 2000
10.21 Amendment No. 1 to Agreement, dated December 4, 2000
99.1 Press Release of Aviation Sales Company dated December
4, 2000
99.2 Press Release of Aviation Sales Company dated December
5, 2000
