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
Date of
Report (Date of earliest event reported): October 25,
2010
P
& F INDUSTRIES, INC.
(Exact
Name of Registrant as Specified in Charter)
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Delaware
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1-5332
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22-1657413
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(State
or Other Jurisdiction
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(Commission
File No.)
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(IRS
Employer
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of
Incorporation)
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Identification
Number)
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445 Broadhollow Road, Suite
100, Melville, New York 11747
(Address
of Principal Executive Offices) (Zip Code)
Registrant's
telephone number, including area code: (631)
694-9800
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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o
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17CFR
240.14d-2(b))
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o
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
1.01. Entry Into a Material Definitive
Agreement.
On
October 25, 2010, P & F Industries, Inc. (the “Company”), its subsidiaries
Florida Pneumatic Manufacturing Corporation (“Florida Pneumatic”), Hy-Tech
Machine, Inc. (“Hy-Tech”) and Nationwide Industries, Inc. (“Nationwide”, and
together with the Company, Florida Pneumatic and Hy-Tech, collectively,
“Borrowers”) and its subsidiaries Continental Tool Group, Inc. (“Continental
Tool”), Countrywide Hardware, Inc. (“Countrywide”), Embassy Industries, Inc.
(“Embassy”), Green Manufacturing, Inc. (“Green”), Pacific Stair Products, Inc.
(“Pacific Stair”), WILP Holdings, Inc. (“WILP”) and Woodmark International, L.P.
(“Woodmark”, and together with Continental Tool, Countrywide, Embassy, Green,
Pacific Stair and WILP, collectively, “Guarantors”) entered into a Loan and
Security Agreement (the “Loan Agreement”) with Capital One Leverage Finance
Corporation (“Agent”), as agent for Lenders (“Lenders”) from time to time party
to the Loan Agreement.
The Loan
Agreement provides for (1) a senior secured revolving credit facility and a term
loan facility (collectively, the “Facility”), in an aggregate principal amount
of up to $22,000,000, consisting of a $15,910,000 revolving credit facility
(“Revolving Credit Facility”) and a $6,090,000 term loan (“Term Loan”), which
Facility matures on October 25, 2013, unless sooner terminated in accordance
with the Loan Agreement and (2) Lenders’ extension of credit to Borrowers in the
form of Letters of Credit (as such term is defined in the Loan Agreement), in
the aggregate stated amount of up to $5,000,000. Pursuant to the
terms and conditions of the Loan Agreement, Borrowers may borrow, prepay and
reborrow amounts under the Revolving Credit Facility, provided that the amount
outstanding at any one time shall not exceed the lesser of $15,910,000 in the
aggregate or the Borrowing Base (as such term is defined in the Loan Agreement),
and the Borrowers may, at their option, terminate the Revolving Credit Facility
or permanently reduce the Revolving Credit Facility in increments of
$1,000,000. Also pursuant to the terms and conditions of the Loan
Agreement, the principal amount of the Term Loan shall be repaid in consecutive
monthly installments of $33,833.33, commencing on December 1, 2010 and
continuing until October 25, 2013, on which date all principal, interest and
other amounts owing with respect to the Term Loan shall be due and payable in
full; once repaid, the Term Loan may not be reborrowed.
The Loan
Agreement also provides that the Borrowers are required to use the proceeds from
the Revolving Credit Facility solely (1) for the repayment of the Specified
Pay-Off Debt on the Closing Date (as such terms are defined in the Loan
Agreement), the details of which are more fully described in Item 1.02 herein;
(2) to satisfy the Hy-Tech Closing Date Payment Conditions (as such term is
defined in the Loan Agreement); (3) to satisfy the Hy-Tech Closing Date Payment,
the RAH Closing Date Payment and the Schorr Closing Date Payment (as such terms
are defined in the Loan Agreement), and, to the extent permitted under the Loan
Agreement, the applicable subordination agreement (collectively, the
“Subordination Agreements”) and the applicable secured subordinated promissory
note (collectively, the “Subordinated Promissory Notes”), post-closing payments
of (a) interest and principal in the cases of Hy-Tech Holdings, Inc. and Mr.
Schorr and (b) interest in the case of Mr. Horowitz; (4) to pay fees and
transaction expenses associated with the closing of the Revolving Credit
Facility; (5) to pay Obligations (as such term is defined in the Loan Agreement)
in accordance with the Loan Agreement; and (6) for working capital and other
lawful corporate purposes of the Borrowers.
At the
election of the Borrowers, the annual interest rate contemplated to be payable
with respect to the Facility shall be equal to (1) (a) the Base Rate (as such
term is defined in the Loan Agreement) plus a base margin of 2.75% or (b) the
Libor Rate (as such term is defined in the Loan Agreement) plus a libor margin
of 3.75% for the Revolving Credit Facility and (2) (a) the Base Rate plus a base
margin of 4.75% or (b) the Libor Rate plus a libor margin of 5.75% for the Term
Loan. As of April 1, 2011, the applicable margin for Revolving Credit
Facility loans shall be subject to adjustment in accordance with the Borrowers’
ratio of Total Funded Debt to EBITDA.
The terms
and conditions of the Loan Agreement contain, among other things, covenants of
Borrowers and Guarantors (collectively, the “Obligors”), including the Borrowers
maintaining, on a consolidated basis, a Maximum Leverage Ratio, a Minimum Fixed
Charge Coverage Ratio and a Minimum Tangible Net Worth (as such terms are
defined in the Loan Agreement). The terms and conditions of the Loan
Agreement also include representations, warranties and events of default by the
Obligors upon the occurrence of which the outstanding Obligations under the Loan
Agreement may be accelerated and become immediately due and payable and the
Commitment (as such term is defined in the Loan Agreement) of the Lenders to
make loans under the Loan Agreement may be terminated.
In
connection with the Loan Agreement, Borrowers executed and delivered to Agent,
for the benefit of the Lenders, a Revolver Note, dated October 25, 2010, in the
original principal amount of $15,910,000 (of which $11,258,000 was borrowed at
the closing), and a Term Loan Note, dated October 25, 2010, in the original
principal amount of $6,090,000, evidencing Borrowers’ obligation to repay the
loans. All Obligations under the Loan Agreement have been guaranteed,
jointly and severally, by the Guarantors, and, to secure the performance of such
Obligations, the Obligors have granted to Agent, for the benefit of the Lenders,
a security interest in all Property (as such term is defined in the Loan
Agreement) of such Obligors, including, without limitation, any Deposit Account
(as such term is defined in the Loan Agreement) and cash collateral of such
Obligors and in all real estate owned by the Obligors.
In
particular, contemporaneously with the execution of the Loan Agreement, each of
Hy-Tech, Florida Pneumatic and Countrywide entered into (1) a Mortgage,
Assignment of Leases and Rents Security Agreement and Financing Statement, dated
as of October 25, 2010, wherein it mortgaged to Agent, for the benefit of the
Lenders, a lien and security interest in all of its right, title and interest in
and to the real property located in Cranberry, Pennsylvania, Tampa, Florida and
Jupiter, Florida, respectively (collectively, the “Mortgages”), and (2) an
Environmental Indemnification and Release Agreement, pursuant to which, as
further security for the performance of the Obligations, it has agreed to
indemnify and hold harmless Agent and Lenders from liability under any
environmental laws.
Further,
contemporaneously with the execution of the Loan Agreement, (1) the Obligors
entered into a Trademark Security Agreement in favor of Agent, dated October 25,
2010, wherein each Obligor owning trademarks conveyed to Agent, for the benefit
of the Lenders, a security interest in all of its right, title and interest in
and to its United States trademarks and (2) each of Nationwide and Florida
Pneumatic entered into an Imported Inventory Security Agreement with Agent,
pursuant to which it has granted to Agent, for the benefit of the Lenders, a
security interest in certain collateral, including merchandise purchased by it
from vendors located outside of the United States.
The
foregoing descriptions of the Loan Agreement, the Subordination Agreements, the
Subordinated Promissory Notes, the Revolver Note, the Term Loan Note and the
Mortgages do not purport to be complete and are qualified in their entirety by
reference to the full text of the Loan Agreement, the Subordination Agreements,
the Subordinated Promissory Notes, the Revolver Note, the Term Loan Note and the
Mortgages, filed as Exhibits 10.1, 10.2-10.4, 10.5-10.7, 10.8, 10.9 and
10.10-10.12, respectively, to this Current Report on Form 8-K and incorporated
by reference herein.
Item
1.02. Termination of a Material Definitive
Agreement.
The Loan Agreement
replaces that certain Credit Agreement, dated as of June 30, 2004, as amended,
by and between the Company, Florida Pneumatic, Embassy, Green, Countrywide,
Nationwide and Woodmark, as Co-Borrowers, HSBC Bank USA, National Association,
as Lender, and Citibank, N.A., as Administrative Agent for the Lender (the
“Former Credit Agreement”). The Credit Agreement, dated June 30,
2004, was filed as Exhibit 10.1 to a Current Report on Form 8-K filed
with the Securities and Exchange Commission on July 14, 2004, incorporated by
reference into this Item 1.01, and was more fully described in the Company’s
quarterly report on Form 10-Q for the period ended June 30, 2004, which
description (as it has since been amended and supplemented, as filed with the
Securities and Exchange Commission) is incorporated by reference into this Item
1.01. As a result of such replacement, all outstanding amounts under
the revolving credit and term loan facilities, pursuant to the Former Credit
Agreement, were paid in full on October 25, 2010, and the Former Credit
Agreement, and all security-related agreements thereunder, were thereby
terminated.
In addition to paying off
in full the debt under the Former Credit Agreement, on October 25, 2010, the
Borrowers and the Guarantors paid off in full all debt under that certain
Promissory Note, dated as of May 24, 2002, as amended, made by Countrywide in favor of Wells Fargo,
National Association, in the original principal amount of $2,024,000, in
connection with that certain Mortgage, Security Agreement and Absolute
Assignment of Leases, dated May 24, 2002, executed by Countrywide Hardware,
Inc., for the benefit of Wachovia Bank, National Association, as more fully
described in the Company’s quarterly reports on Form 10-Q for the periods ended
June 30, 2002 and September 30, 2002, which descriptions are
incorporated by reference into this Item 1.01. As a result of the
payoff, the promissory note, as amended, and the related mortgage were thereby
terminated. Further, the Borrowers and the Guarantors paid off in
full all debt under that certain Promissory Note, dated as of February
26, 1999, as amended, made by Florida Pneumatic in favor of Wells Fargo,
National Association, in the original principal amount of $1,800,000, in
connection with that certain Mortgage and Security Agreement, dated February 26,
1999, executed by Florida Pneumatic Manufacturing Corporation for the benefit of
First Union National Bank. As a result of the payoff,
the promissory note, as amended, and the related mortgage were thereby
terminated.
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Item
2.03.
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Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance
Sheet Arrangement of a Registrant.
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Reference
is made to Item 1.01 hereof, which is hereby incorporated
herein.
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The Company issued a press release,
dated October 27, 2010, announcing that it has entered into a $22,000,000 senior
secured revolving credit and term loan facility with Agent. A copy of
the press release is furnished as Exhibit 99.1 hereto.
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Item
9.01.
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Financial
Statements and Exhibits.
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10.1
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Loan
and Security Agreement, dated as of October 25, 2010, among the Company,
Florida Pneumatic, Hy-Tech, Nationwide, Continental Tool, Countrywide,
Embassy, Green, Pacific Stair, WILP, Woodmark, Lenders and
Agent
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10.2
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Subordination
and Intercreditor Agreement, dated October 25, 2010, by and between
Richard Horowitz and Agent
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10.3
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Subordination
and Intercreditor Agreement, dated October 25, 2010, by and between Marc
Schorr and Agent
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10.4
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Subordination
and Intercreditor Agreement, dated October 25, 2010, by and between
Hy-Tech Holdings, Inc. and Agent
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10.5
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Amended
and Restated Secured Subordinated Promissory Note, dated October 25, 2010,
executed by Obligors in favor of Richard Horowitz, in the original
principal amount of $250,000
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10.6
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Amended
and Restated Secured Subordinated Promissory Note, dated October 25, 2010,
executed by Obligors in favor of Marc Schorr, in the original principal
amount of $500,000
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10.7
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Amended
and Restated Subordinated Promissory Note, dated October 25, 2010,
executed by Hy-Tech in favor of Hy-Tech Holdings, Inc., in the original
principal amount of $573,235
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10.8
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Revolver
Note, dated October 25, 2010, executed by Borrowers in favor of Agent, in
the original principal amount of
$15,910,000
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10.9
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Term
Loan Note, dated October 25, 2010, executed by Borrowers in favor of
Agent, in the original principal amount of
$6,090,000
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10.10
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Mortgage,
Assignment of Leases and Rents, Security Agreement and Financing
Statement, dated as of October 25, 2010, made by Countrywide in favor of
Agent
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10.11
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Mortgage,
Assignment of Leases and Rents, Security Agreement and Financing
Statement, dated as of October 25, 2010, made by Florida Pneumatic in
favor of Agent
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10.12
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Mortgage,
Assignment of Leases and Rents, Security Agreement and Financing
Statement, dated as of October 25, 2010, made by Hy-Tech in favor of
Agent
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99.1
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Press
Release, dated October 27, 2010, issued by P & F Industries,
Inc.
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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P
& F INDUSTRIES, INC.
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Date:
October
29, 2010
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By:
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/s/
Joseph A. Molino, Jr. |
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Joseph
A. Molino, Jr.
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Vice
President,
Chief
Operating Officer and
Chief
Financial Officer
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