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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 1)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
Commission file number 1-5332
P&F INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-1657413
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
300 Smith Street
Farmingdale, New York 11735
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 694-1800
Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange
Title of each class on which registered
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NONE NONE
Securities registered pursuant to Section 12 (g) of the Act:
CLASS A COMMON STOCK, $1.00 PAR VALUE
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES |X| NO |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. |_|
The aggregate market value of voting stock held by non-affiliates of the
Registrant, based on the last sale price on March 25, 1999, was approximately
$20,413,283.
Documents Incorporated By Reference
Part III incorporates by reference information from the Registrant's
definitive Proxy Statement for the 1998 Annual Meeting of Stockholders.
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P&F Industries, Inc. (the "Registrant") hereby amends, in accordance with Rule
12b-15 of the Securities Exchange Act of 1934, its Annual Report on Form 10-K
for the year ended December 31, 1998, in order to revise Item 14, add an
exhibit list and file certain exhibits pursuant to Item 14.
Part IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
PAGE
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(a) Financial statements and financial statement schedules
(1) The consolidated financial statements of the Registrant
as set forth under Item 8 are filed as part of this report.
(2) The following consolidated financial statement schedule
for the three years ended December 31, 1998, 1997 and 1996
is filed as part of this report:
Schedule II - Valuation and Qualifying Accounts 44
All other schedules are omitted because they are not required,
are not applicable, or the required information is otherwise shown in
the financial statements or notes thereto.
(3) Exhibits: See index immediately following the signature
page.
(b) Reports on Form 8-K
A report on Form 8-K/A was filed by the Registrant on December 18,
1998 regarding the acquisition of Green Manufacturing, Inc. The date of the
related Form 8-K was September 16, 1998.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
P & F INDUSTRIES, INC.
(Registrant)
By: /s/ RICHARD A. HOROWITZ
-----------------------
Richard A. Horowitz
Chairman of the Board
President
Principal Executive Officer
Principal Operating Officer
2
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EXHIBIT INDEX
Exhibit
No.
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2.1 Asset Purchase Agreement, dated as of September 16, 1998, by and
between Green Manufacturing, Inc., an Ohio corporation, and the
Registrant (Incorporated by reference to Exhibit 2.1 of the
Registrant's Current Report on Form 8-K dated September 16, 1998).
Pursuant to Item 601(b)(2) of Regulation S-K, the Registrant agrees
to furnish supplementally a copy of any exhibit or schedule omitted
from the Asset Purchase Agreement to the Commission upon request.
3.1 Restated Certificate of Incorporation of the Registrant (Incorporated
by reference to Exhibit 3A to the Registrant's Registration Statement
on Form S-8 (File No. 33-31186) filed on September 20, 1989).
3.2 By-laws of the Registrant.
4.1 Rights Agreement, dated as of August 23, 1994, between the Registrant
and American Stock Transfer & Trust Company, as Rights Agent
(Incorporated by reference to Exhibit 1 of the Registrant's
Registration Statement on Form 8-A dated August 24, 1994).
4.2 Amendment to Rights Agreement, dated as of April 11, 1997, between
the Registrant and American Stock Transfer & Trust Company, as Rights
Agent (Incorporated by reference to Exhibit 4.1 of the Registrant's
Current Report on Form 8-K dated April 11, 1997).
4.3 Credit Agreement, dated as of July 23, 1998, by and among the
Registrant, Florida Pneumatic Manufacturing Corporation, a Florida
corporation, Embassy Industries, Inc., a New York corporation, and
European American Bank, a New York banking corporation.
4.4 Amendment No. 1 to Credit Agreement, dated as of September 16, 1998,
by and among the Registrant, Florida Pneumatic Manufacturing
Corporation, a Florida corporation, Embassy Industries, Inc., a New
York corporation, Green Manufacturing, Inc., a Delaware corporation,
and European American Bank, a New York banking corporation.
4.5 Certain instruments defining the rights of holders of the long-term
debt securities of the Registrant are omitted pursuant to Section
(b)(4)(iii)(A) of Item 601 of Regulation S-K. The Registrant agrees
to furnish supplementally copies of these instruments to the
Commission upon request.
10.1 Amended and Restated Employment Agreement, dated as of May 28, 1997,
between the Registrant and Richard A. Horowitz.
10.2 Consulting Agreement, effective as of November 1, 1998, between the
Registrant and Sidney Horowitz.
10.3 1992 Incentive Stock Option Plan of the Registrant, as amended and
restated as of March 13, 1997.
21 Subsidiaries of the Registrant.
23 Consent of BDO Seidman, LLP.
27 Financial Data Schedules.
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BY-LAWS
OF
P&F INDUSTRIES, INC.
ARTICLE I.
OFFICES
SECTION 1. Principal Office. The registered office of P&F
Industries, Inc. (the "corporation") shall be located in such place as may be
provided from time to time in the Certificate of Incorporation.
SECTION 2. Other Offices. The corporation may also have
offices at such other places both within and without the State of Delaware as
the board of directors may from time to time determine or as the business of
the corporation may require.
ARTICLE II.
STOCKHOLDERS
SECTION 1. Annual Meetings. The annual meeting of the
stockholders of the corporation shall be held at such place, within or without
the State of Delaware, on such date and at such time as may be determined by
the board of directors and as shall be designated in the notice of said
meeting.
SECTION 2. Special Meetings. Special meetings of the
stockholders for any purpose or purposes, unless otherwise prescribed by
statute or by the Certificate of Incorporation, may be held at any place,
within or without the State of Delaware, and may be called by resolution of
the board of directors, or by the Chairman or the President.
SECTION 3. Notice and Purpose of Meetings. Written or
printed notice of the meeting stating the place, day and hour of the meeting
and, in case of a special meeting, stating the purpose or purposes for which
the meeting is called, shall be delivered not less than ten nor more than
sixty days before the date of the meeting, either personally or by mail, by or
at the direction of the Chairman or the President to each stockholder of
record entitled to vote at such meeting.
SECTION 4. Quorum. The holders of a majority of the shares
of capital stock issued and outstanding and entitled to vote, represented in
person or by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business, except as otherwise provided by
statute or by the Certificate of Incorporation. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders present in person or represented by proxy shall have power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be
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present or represented. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might have been
transacted at the meeting as originally notified.
SECTION 5. Order of Business. At each meeting of the
stockholders, the Chairman of the Board, or, in the absence of the Chairman of
the Board, the President, shall act as chairman. The order of business at each
meeting shall be as determined by the chairman of the meeting. The chairman of
the meeting shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts and things as are necessary
or desirable for the proper conduct of the meeting, including, without
limitation, the establishment of procedures for the maintenance of order and
safety, limitations on the time allotted to questions or comments on the
affairs of the corporation, restrictions on entry to such meeting after the
time prescribed for the commencement thereof, and the opening and closing of
the voting polls.
At any annual meeting of stockholders, only such business
shall be conducted as shall have been brought before the annual meeting (i) by
or at the direction of the chairman of the meeting or (ii) by any stockholder
who complies with the procedures set forth in this Section 5.
For business properly to be brought before an annual meeting
by a stockholder, the stockholder must have given timely notice thereof in
proper written form to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not more than 180 days nor less
than 120 days in advance of the date of the corporation's proxy statement
released to stockholders in connection with the previous year's annual
meeting. To be in proper form, a stockholder's notice to the Secretary shall
set forth in writing as to each matter the stockholder proposes to bring the
annual meeting the following information: (i) a description of the business
desired to be brought before the annual meeting, consisting of 500 or fewer
words conforming to the requirements of Schedule 14A of the Regulations of the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended (the "Regulations"); (ii) the reasons for conducting such
business at the annual meeting; (iii) the name and address, as they appear on
the corporations books, of the stockholder proposing such business; (iv) the
class and number of shares of the corporation's capital stock which are
beneficially owned by the stockholder and the length of the time during which
the stockholder beneficially owned such shares; and (v) any material interest
of the stockholder in such business. Notwithstanding anything in these by-laws
to the contrary, no business shall be conducted at an annual meeting except in
accordance with the procedures set forth in this Section 5. The chairman of an
annual meeting shall, if the facts warrant, determine and declare
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to the annual meeting that business was not properly brought before the annual
meeting in accordance with the provisions of this Section 5 and, if he should
so determine, he shall so declare to the annual meeting and any such business
not properly brought before the annual meeting shall not be transacted.
SECTION 6. Voting Process. If a quorum is present or
represented the affirmative vote of a majority of the shares of stock present
or represented at the meeting shall be the act of the stockholders unless the
vote of a greater number of shares of stock is required by law, by the
Certificate of Incorporation or by these by-laws. Each outstanding share of
stock having voting power, shall be entitled to one vote on each matter
submitted to a vote at a meeting of stockholders. A shareholder may vote
either in person or by proxy executed in writing by the stockholder or by his
duly authorized attorney-in-fact. The term, validity and enforceability of any
proxy shall be determined in accordance with the General Corporation Law of
the State of Delaware.
ARTICLE III.
DIRECTORS
SECTION 1. Powers, Number, Qualification and Term. The
property, affairs and business of the corporation shall be managed by its
board of directors, consisting of five persons. At the annual meeting held in
1976, directors shall be elected in three classes as nearly equal in number as
may be. The terms of office of the first class shall expire at the annual
meeting in 1977, and of the second and third classes at the annual meetings in
1978 and 1979 respectively. At each annual election held after 1976, directors
shall be elected for three year terms to succeed those whose terms then
expire. If a vacancy shall occur in any class the director elected to fill
that vacancy shall be elected for the remaining term of that class. The
directors shall have power at any time when a stockholders' meeting is not in
session to increase or decrease their own number by an amendment to these
By-Laws. If the number of directors be increased, the additional directors
shall be elected for such terms as shall maintain equality in the annual
classes, as nearly as may be. Vacancies created by an amendment increasing the
number of directors may be filled like other vacancies by a majority of the
directors in office at the time. If the number of directors be reduced, the
terms of the directors remaining in office need not be changed, but the terms
of the directors elected to succeed them shall be changed to the extent
necessary to maintain equality in the annual classes as nearly as may be. The
number of directors shall never be less than three. Directors need not be
stockholders.
SECTION 2. Quorum. A majority of the members of the board of
directors then acting, but in no event less than one-third of the number of
directors authorized nor less than two, acting at a meeting duly assembled,
shall constitute a
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quorum for the transaction of business, but if at any meeting of the board of
directors then shall be less than a quorum present, a majority of those
present may adjourn the meeting, without further notice, from time to time
until a quorum shall have been obtained.
SECTION 3. Vacancies. In case one or more vacancies shall
occur in the board of directors by reason of death, resignation or otherwise,
except insofar as otherwise provided in the case of a vacancy or vacancies
occurring by reason of removal by the stockholders, the remaining directors,
although less than a quorum, may, by a majority vote, elect a successor or
successors for the unexpired term or terms.
SECTION 4. Place of Meetings. Meetings of the board of
directors, regular or special, may be held either within or without the State
of Delaware.
SECTION 5. First Meeting. The first meeting of each newly
elected board of directors shall be held immediately following and at the
place of the annual meeting of stockholders and no other notice of such
meeting shall be necessary to the newly elected directors in order legally to
constitute the meeting, provided a quorum shall be present, or it may convene
at such place and time as shall be fixed by the consent in writing or the
attendance of all the directors.
SECTION 6. Regular Meetings. Regular meetings of the board
of directors may be held upon such notice, or without notice, and at such time
and at such place as shall from time to time be determined by the board.
SECTION 7. Special Meetings. Special meetings of the board
of directors may be called by the Chairman or the President or by the number
of directors who then legally constitute a quorum. Notice of each special
meeting shall, if mailed, be addressed to each director at his last known
address at least four (4) days prior to the date on which the meeting is to be
held; or such notice shall be sent to each director at such address by
telegram, telex, or facsimile, or be delivered to him personally, not later
than one full day before the date on which such meeting is to be held.
SECTION 8. Notice; Waiver. Attendance of a director at any
meeting shall constitute a waiver of notice of such meeting, except where a
director attends for the express purpose of objecting to the transaction of
any business because the meeting is not lawfully called or convened. Neither
the business to be transacted at, nor the purpose of, any regular or special
meeting of the board of directors need be specified in the notice or waiver of
notice of such meeting.
SECTION 9. Quorum. One-third of the directors then in office
shall constitute a quorum for the transaction of
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business unless a greater number is required by law, by the Certificate of
incorporation or by these by-laws. If a quorum shall not be present at any
meeting of directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting,
until a quorum shall be present.
SECTION 10. Action Without a Meeting. Any action required or
permitted to be taken at a meeting of the directors may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the directors entitled to vote with respect to the subject
matter thereof. In addition, meetings of the board may be held by means of
conference telephone as permitted by the General Corporation Law of the State
of Delaware.
SECTION 11. Action. Except as otherwise provided by law or
in the Certificate of Incorporation or these by-laws, if a quorum is present
the affirmative vote of a majority of the members of the board of directors
present will be required for any action.
SECTION 12. Removal of Directors. Subject to any contrary
provisions of law, a director may be removed only for cause, either by
affirmative vote of the holders of a majority of the outstanding shares of
stock entitled to vote for the election of directors or by affirmative vote of
at least two thirds of the remaining members of the board. A finding of cause
shall be made only upon notice to the director to be removed and opportunity
to respond to evidence that the director is unfit to serve.
SECTION 13. Nominations. Subject to the rights of the
holders of any class or series of stock having a preference over the Class A
common stock as to dividends or upon liquidation, nominations for the election
of directors may be made by the board of directors or by any stockholder
entitled to vote for the election of directors. Any stockholder entitled to
vote for the election of directors at a meeting may nominate persons for
election as directors only if written notice of such stockholder's intent to
make such nomination is given, either by personal delivery or by United States
mail, postage prepaid, to the Secretary of the corporation not later than (i)
with respect to an election to be held at an annual meeting of stockholders,
not more than 180 nor less than 120 days in advance of the date of the
corporation's proxy statement released to stockholders in connection with the
previous year's annual meeting; and (ii) with respect to an election to be
held at a special meeting of stockholders for the election of directors, the
close of business on the seventh day following the date on which notice of
such meeting is first given to stockholders. Each such notice shall set forth:
(a) the name and address as they appear in the corporation's books of the
stockholder who intends to make the nomination; (b) the name and address of
the person or persons to be nominated; (c) a representation of the stockholder
listing the
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class and number of shares of stock of the corporation beneficially held by
him or her and that he or she intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the notice; (d) a
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder; (e) such other information regarding each nominee proposed by
such stockholder as would have been required to be included in a proxy
statement filed pursuant to Schedule 14A of the Regulations had each nominee
been nominated, or intended to be nominated, by the board of directors; and
(f) the consent of each nominee to serve as a director of the corporation if
so elected. The chairman of the meeting may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing procedure.
ARTICLE IV.
COMMITTEES
SECTION 1. Executive Committee. The board may, by resolution
adopted by a majority of the whole board, designate one or more of its members
to constitute members or alternate members of an Executive Committee.
SECTION 2. Powers and Authority of Executive Committee. The
Executive Committee shall have and may exercise, between meetings of the
Board, all the powers and authority of the Board in the management of the
business and affairs of the Company, including the right to authorize the
purchase of stock, except that the Executive Committee shall not have such
power or authority in reference to amending the Certificate of Incorporation;
adopting an agreement of merger or consolidation; recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets; recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, amending the
By-laws of the corporation authorizing the declaration of a dividend or
electing or removing officers provided for in these By-laws.
SECTION 3. Other Committees. The Board may, by resolution
adopted by a majority of the whole Board, designate one or more other
committees, each of which shall, except as otherwise prescribed by law, have
such authority of the Board as shall be specified in the resolution of the
Board designating such committee. A majority of all the members of such
committee may determine its action and fix the time and place of its meeting,
unless the Board shall otherwise provide. The Board shall have the power at
any time to change the membership of, to fill all vacancies in and to
discharge any such committee, either with or without cause.
SECTION 4. Procedure; Meetings; Quorum. Regular meetings of
the Executive Committee or any other committee of the
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Board, of which no notice shall be necessary, may be held at such times and
places as shall be fixed by resolution adopted by a majority of the members
thereof. Special meetings of the Executive Committee or any other committee of
the Board shall be called at the request of the Chairman or a majority of
members thereof. So far as applicable, the provisions of Article III of these
By-laws relating to notice, quorum and voting requirements applicable to
meetings of the Board shall govern meetings of the Executive Committee or any
other committee of the Board. The Executive Committee and each other committee
of the Board shall keep written minutes of its proceedings and circulate
summaries of such written minutes to the Board before or at the next meeting
of the Board.
ARTICLE V.
OFFICERS
SECTION 1. Number. The board of directors at its first
meeting after each annual meeting of stockholders shall choose a Chairman, a
President, a Secretary and a Treasurer, none of whom need be a member of the
board. The board of directors way also choose one or more Executive Vice
Presidents, one or more vice presidents, assistant secretaries and assistant
treasurers. The board of directors may appoint such other officers and agents
as it shall deem necessary, who shall hold their offices for such terms and
shall exercise such powers and perform such duties as shall be determined from
time to time by the board of directors Two or more offices may be held by the
same person.
SECTION 2. Compensation. The salaries or other compensation
of all officers of the corporation shall be fixed by the board of directors.
No officer shall be prevented from receiving a salary or other compensation by
reason of the fact that he is also a director.
SECTION 3. Term; Removal; Vacancy. The officers of the
corporation shall hold office until their successors are chosen and qualify.
Any officer may be removed at any time, with or without cause, by the
Affirmative vote of a majority of the whole board of directors. Any vacancy
occurring in any office of the corporation shall be filled by the board of
directors.
SECTION 4. Chairman. The Chairman shall, if one be elected,
preside at all meetings of the board of directors and shall be the chief
executive officer of the corporation.
SECTION 5. President. The President shall be the chief
operating officer of the corporation, shall preside at all meetings of the
stockholders and the board of directors in the absence of the Chairman, shall
have general supervision over the business of the corporation and shall see
that all directions and resolutions of the board of directors are carried into
affect.
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SECTION 6. Executive Vice President. The Executive Vice
President shall, in the absence or disability of the President, perform the
duties and exercise the powers of the President and shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe. If there shall be more than one Executive Vice President, the
Executive Vice Presidents shall perform such duties and exercise such powers
in the absence or disability of the President, in the order determined by the
board of directors. The vice presidents shall in the absence or disability of
the President and of the Executive Vice Presidents, perform the duties and
exercise the powers of the President and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe. If there shall be more than one vice president, the vice presidents
shall perform such duties and exercise such powers in the absence or
disability of the President and of the Executive Vice President, in the order
determined by the board of directors.
SECTION 7. Secretary. The Secretary shall attend all
meetings of the board of directors and all meetings of the stockholders and
record all the proceedings of the meetings of the corporation and of the board
of directors in a book to be kept for that purpose. He shall give, or cause to
be given, notice of all meetings of the stockholders and special meetings of
the board of directors, and shall perform such other duties as may be
prescribed by the board of directors or President, under whose supervision he
shall be. He shall have custody of the corporate seal of the corporation and
he, or an assistant secretary, shall have the authority to affix the same to
an instrument requiring it and when so affixed, it may be attested by his
signature or by the signature of such assistant secretary. The board of
directors may give general authority to any other officer to affix the seal of
the corporation and to attest the affixing by his signature.
SECTION 8. Assistant Secretary. The assistant secretary, if
there shall be one, or if there shall be more than one, the assistant
secretaries in the order determined by the board of directors, shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties and have such
powers as the board of directors may from time to time prescribe.
SECTION 9. Treasurer. The Treasurer shall have the custody
of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the corporation
and shall deposit all moneys and other valuable effects in the name and to the
credit of the corporation in such depositories as may be designated by the
board of directors. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the Chairman, the President and the board
of directors, at its
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regular meetings, or when the board of directors so requires, an account of
all of his transactions as Treasurer and of the financial condition of the
corporation.
SECTION 10. Assistant Treasurer. The assistant treasurer, if
there shall be one, or, if there shall be more than one, the assistant
treasurers in the order determined by the board of directors, shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
ARTICLE VI.
CAPITAL STOCK
SECTION 1. Form. The shares of the capital stock of the
corporation shall be represented by certificates in such form as shall be
approved by the board of directors and shall be signed by the Chairman, the
President, an Executive Vice President or a vice president, and by the
Treasurer or an assistant treasurer or the Secretary or an assistant secretary
of the corporation manually or by facsimile, and may be sealed with the seal
of the corporation or a facsimile thereof.
SECTION 2. Lost and Destroyed Certificates. The board of
directors may direct a new certificate to be issued in place of any
certificate theretofore issued by the corporation alleged to have been lost or
destroyed. When authorizing such issue of a new certificate, the board of
directors, in its discretion and as a condition precedent to the issuance
thereof, may prescribe such terms and conditions as it deems expedient, and
may require such indemnities as it deems adequate, to protect the corporation
from any claim that may be made against it with respect to any such
certificate alleged to have been lost or destroyed.
SECTION 3. Transfer of Shares. Upon surrender to the
corporation or the transfer agent of the corporation of a certificate
representing shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, a new certificate shall be
issued to the person entitled thereto, and the old certificate cancelled and
the transaction recorded upon the books of the corporation.
ARTICLE VII.
INDEMNIFICATION
SECTION 1. (a) The corporation shall indemnify, subject to
the requirements of subsection (d) of this Section, any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation),
by reason of the fact that he is or was a director,
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officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests, of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(b) The corporation shall indemnify, subject to the
requirements of subsection (d) of this Section, any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) actually and reasonably incurred
by him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery of the
State of Delaware or such other court shall deem proper.
(c) To the extent that a director, officer, employee or
agent of the corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in subsections (a) and
(b) of this Section, or in defense of any claim, issue or matter therein, the
corporation shall indemnify him against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of
this Section (unless ordered by a court) shall be made by the
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<PAGE>
corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth
in subsections (a) and (b) of this Section. Such determination shall be made
(1) by the board of directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (2) if
such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders.
(e) Expenses incurred by a director, officer, employee or
agent in defending a civil or criminal action, suit or proceeding may be paid
by the corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by the corporation as authorized in this
Section. Such expenses incurred by other employees and agents may be so paid
upon such terms and conditions, if any, as the board of directors deems
appropriate.
(f) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other subsections of this Section shall not
limit the corporation from providing any other indemnification or advancement
of expenses permitted by law nor shall they be deemed exclusive of any other
rights to which a person seeking indemnification or advancement of expenses
may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office.
(g) The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liability under the provisions of this Section.
(h) For the purposes of this Section, references to "the
corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed
in a consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
employees or agents, so that any person who in or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as
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<PAGE>
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position
under the provisions of this Section with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
(i) For purposes of this Section, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to any employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to
in this Section.
(j) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Section shall, unless otherwise provided when
authorized or ratified by the board of directors, continue as to a person who
has ceased to be a director, officer, employee or agent of the corporation and
shall inure to the benefit of the heirs executors and administrators of such a
person.
(k) For purposes of this Article the term "corporation"
shall include wholly-owned subsidiaries of the corporation.
ARTICLE VIII.
GENERAL PROVISIONS
SECTION 1. Checks. All checks or demands for money and notes
of the corporation shall be signed by such officer or officers or such other
person or persons as the board of directors may from time to time designate.
SECTION 2. Fiscal Year. The fiscal year of the corporation
shall be determined, and may be changed, by resolution of the board of
directors.
SECTION 3. Seal. The corporate seal shall have inscribed
thereon the name of the corporation, the year of its organization and the
words "Corporate Seal, Delaware." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any manner reproduced.
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<PAGE>
ARTICLE IX.
AMENDMENTS
SECTION 1. These by-laws may be altered, amended,
supplemented or repealed or new by-laws may be adopted by a resolution adopted
by a majority of the whole board of directors at any regular or special
meeting of the board.
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<PAGE>
================================================================================
CREDIT AGREEMENT
Dated as of July 23, 1998
by and between
P&F INDUSTRIES, INC.,
FLORIDA PNEUMATIC MANUFACTURING CORPORATION,
EMBASSY INDUSTRIES, INC., as "Co-Borrowers"
and
EUROPEAN AMERICAN BANK, as "Bank"
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS ............................................ 1
SECTION 1.01. Definitions ............................................... 1
SECTION 1.02. Accounting Terms .......................................... 13
ARTICLE II
LOANS ....................................................................... 13
SECTION 2.01. Revolving Credit Loans .................................... 13
SECTION 2.02. Revolving Credit Note ..................................... 14
SECTION 2.03. Equipment Loans ........................................... 14
SECTION 2.04. Term Loans ................................................ 15
SECTION 2.05. Term Notes ................................................ 16
SECTION 2.06 Letters of Credit and Documentary
Banker's Acceptances ...................................... 16
ARTICLE III
INTEREST RATE; FEES AND PAYMENTS; USE OF PROCEEDS ........................... 19
SECTION 3.01. Interest Rate ............................................. 19
SECTION 3.02. Use of Proceeds ........................................... 22
SECTION 3.03. Prepayments ............................................... 22
SECTION 3.04. Fees and Discounting of Acceptances ....................... 22
SECTION 3.05. Inability to Determine Interest Rate ...................... 23
SECTION 3.06. Illegality ................................................ 23
SECTION 3.07. Other Events .............................................. 24
SECTION 3.08. Indemnity ................................................. 25
SECTION 3.09. Funds; Manner of Payment .................................. 25
ARTICLE IV
REPRESENTATIONS AND WARRANTIES .............................................. 27
SECTION 4.01. Organization, Corporate Powers, etc. ...................... 27
SECTION 4.02. Authorization of Borrowing, Enforceable
Obligations ............................................... 27
SECTION 4.03. Financial Condition ....................................... 28
SECTION 4.04. Taxes ..................................................... 29
SECTION 4.05. Title to Properties ....................................... 29
SECTION 4.06. Litigation ................................................ 29
SECTION 4.07. Agreements ................................................ 29
SECTION 4.08. Compliance with ERISA ..................................... 30
SECTION 4.09. Federal Reserve Regulations; Use of
Proceeds .................................................. 30
SECTION 4.10. Approval .................................................. 30
SECTION 4.11. Subsidiaries .............................................. 31
SECTION 4.12. Hazardous Materials ....................................... 31
SECTION 4.13. Investment Company Act .................................... 31
SECTION 4.14. Security Agreement ........................................ 31
SECTION 4.15. No Default ................................................ 31
SECTION 4.16. Permits and Licenses ...................................... 31
SECTION 4.17. Compliance with Law ....................................... 32
SECTION 4.18. Disclosure ................................................ 32
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SECTION 4.19. Year 2000 Compliance ...................................... 32
SECTION 4.20. Pledge Agreement .......................................... 32
SECTION 4.21. Inventory at Outside Locations ............................ 33
ARTICLE V
CONDITIONS OF LENDING ....................................................... 33
SECTION 5.01. Conditions to the Initial Loan ............................ 33
SECTION 5.02. Conditions to all Loans ................................... 36
SECTION 5.03. Conditions to Each Term Loan .............................. 36
SECTION 5.04. Additional Condition with respect to each
Equipment Loan ............................................ 38
ARTICLE VI
AFFIRMATIVE COVENANTS ....................................................... 38
SECTION 6.01. Corporate Existence, Properties, etc. ..................... 38
SECTION 6.02. Payment of Indebtedness, Taxes, etc. ...................... 39
SECTION 6.03. Financial Statements, Reports, etc. ....................... 39
SECTION 6.04. Access to Premises and Records ............................ 41
SECTION 6.05. Notice of Adverse Change .................................. 41
SECTION 6.06. Notice of Default ......................................... 41
SECTION 6.07. Notice of Litigation ...................................... 41
SECTION 6.08. ERISA ..................................................... 42
SECTION 6.09. Compliance with Applicable Laws ........................... 43
SECTION 6.10. Subsidiaries .............................................. 43
SECTION 6.11. Default in Other Agreements ............................... 43
SECTION 6.12. Environmental Laws ........................................ 43
SECTION 6.13. Outside Inventory Locations ............................... 44
ARTICLE VII
NEGATIVE COVENANTS .......................................................... 44
SECTION 7.01. Liens ..................................................... 44
SECTION 7.02. Indebtedness .............................................. 45
SECTION 7.03. Guaranties ................................................ 46
SECTION 7.04. Sale of Assets ............................................ 47
SECTION 7.05. Sales of Notes ............................................ 47
SECTION 7.06. Loans and Investments ..................................... 47
SECTION 7.07. Nature of Business ........................................ 47
SECTION 7.08. Sale and Leaseback ........................................ 47
SECTION 7.09. Federal Reserve Regulations ............................... 47
SECTION 7.10. Change in Fiscal Year ..................................... 48
SECTION 7.11. Limitations on Fundamental Changes ........................ 48
SECTION 7.12. Financial Condition Covenants ............................. 48
SECTION 7.13. Subordinated Debt ......................................... 49
SECTION 7.14. Transactions with Affiliates .............................. 49
SECTION 7.15. Impairment of Security Interest ........................... 49
ARTICLE VIII
EVENTS OF DEFAULT ........................................................... 49
SECTION 8.01. Events of Default ......................................... 49
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ARTICLE IX
MISCELLANEOUS ............................................................... 52
SECTION 9.01. Notices ................................................... 52
SECTION 9.02. Survival of Agreement ..................................... 53
SECTION 9.03. Expenses of the Bank ...................................... 53
SECTION 9.04. No Waiver of Rights by the Bank ........................... 54
SECTION 9.05. APPLICABLE LAW ............................................ 54
SECTION 9.06. SUBMISSION TO JURISDICTION ................................ 54
SECTION 9.07. Extension of Maturity ..................................... 55
SECTION 9.08. Modification of Agreement ................................. 55
SECTION 9.09. Severability .............................................. 55
SECTION 9.10. Sale of Participations .................................... 55
SECTION 9.11. Reinstatement; Certain Payments ........................... 55
SECTION 9.12. Right of Setoff ........................................... 56
SECTION 9.13. Joint and Several Obligations of the Co-
Borrowers ..................................................56
SECTION 9.14. Counterparts .............................................. 56
SECTION 9.15. Headings .................................................. 56
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS ............................................ 1
SECTION 1.01. Definitions ............................................... 1
SECTION 1.02. Accounting Terms .......................................... 13
ARTICLE II
LOANS ....................................................................... 13
SECTION 2.01. Revolving Credit Loans .................................... 13
SECTION 2.02. Revolving Credit Note ..................................... 14
SECTION 2.03. Equipment Loans ........................................... 14
SECTION 2.04. Term Loans ................................................ 15
SECTION 2.05. Term Notes ................................................ 16
SECTION 2.06 Letters of Credit and Documentary
Banker's Acceptances ...................................... 16
ARTICLE III
INTEREST RATE; FEES AND PAYMENTS; USE OF PROCEEDS ........................... 19
SECTION 3.01. Interest Rate ............................................. 19
SECTION 3.02. Use of Proceeds ........................................... 22
SECTION 3.03. Prepayments ............................................... 22
SECTION 3.04. Fees and Discounting of Acceptances ....................... 22
SECTION 3.05. Inability to Determine Interest Rate ...................... 23
SECTION 3.06. Illegality ............................................... 23
SECTION 3.07. Other Events .............................................. 24
SECTION 3.08. Indemnity ................................................. 25
SECTION 3.09. Funds; Manner of Payment .................................. 25
ARTICLE IV
REPRESENTATIONS AND WARRANTIES .............................................. 27
SECTION 4.01. Organization, Corporate Powers, etc. ...................... 27
SECTION 4.02. Authorization of Borrowing, Enforceable
Obligations ............................................... 27
SECTION 4.03. Financial Condition ....................................... 28
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SECTION 4.04. Taxes ..................................................... 29
SECTION 4.05. Title to Properties ....................................... 29
SECTION 4.06. Litigation ................................................ 29
SECTION 4.07. Agreements ................................................ 29
SECTION 4.08. Compliance with ERISA ..................................... 30
SECTION 4.09. Federal Reserve Regulations; Use of
Proceeds .................................................. 30
SECTION 4.10. Approval .................................................. 30
SECTION 4.11. Subsidiaries .............................................. 31
SECTION 4.12. Hazardous Materials ....................................... 31
SECTION 4.13. Investment Company Act .................................... 31
SECTION 4.14. Security Agreement ........................................ 31
SECTION 4.15. No Default ................................................ 31
SECTION 4.16. Permits and Licenses ...................................... 31
SECTION 4.17. Compliance with Law ....................................... 32
SECTION 4.18. Disclosure ................................................ 32
SECTION 4.19. Year 2000 Compliance ...................................... 32
SECTION 4.20. Pledge Agreement .......................................... 32
SECTION 4.21. Inventory at Outside Locations ............................ 33
ARTICLE V
CONDITIONS OF LENDING ....................................................... 33
SECTION 5.01. Conditions to the Initial Loan ............................ 33
SECTION 5.02. Conditions to all Loans ................................... 36
SECTION 5.03. Conditions to Each Term Loan .............................. 36
SECTION 5.04. Additional Condition with respect to each
Equipment Loan ............................................ 38
ARTICLE VI
AFFIRMATIVE COVENANTS ....................................................... 38
SECTION 6.01. Corporate Existence, Properties, etc. ..................... 38
SECTION 6.02. Payment of Indebtedness, Taxes, etc. ...................... 39
SECTION 6.03. Financial Statements, Reports, etc. ....................... 39
SECTION 6.04. Access to Premises and Records ............................ 41
SECTION 6.05. Notice of Adverse Change .................................. 41
SECTION 6.06. Notice of Default ......................................... 41
SECTION 6.07. Notice of Litigation ...................................... 41
SECTION 6.08. ERISA ..................................................... 42
SECTION 6.09. Compliance with Applicable Laws ........................... 43
SECTION 6.10. Subsidiaries .............................................. 43
SECTION 6.11. Default in Other Agreements ............................... 43
SECTION 6.12. Environmental Laws ........................................ 43
SECTION 6.13. Outside Inventory Locations ............................... 44
ARTICLE VII
NEGATIVE COVENANTS .......................................................... 44
SECTION 7.01. Liens ..................................................... 44
SECTION 7.02. Indebtedness .............................................. 45
SECTION 7.03. Guaranties ................................................ 46
SECTION 7.04. Sale of Assets ............................................ 47
SECTION 7.05. Sales of Notes ............................................ 47
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SECTION 7.06. Loans and Investments ..................................... 47
SECTION 7.07. Nature of Business ........................................ 47
SECTION 7.08. Sale and Leaseback ........................................ 47
SECTION 7.09. Federal Reserve Regulations ............................... 47
SECTION 7.10. Change in Fiscal Year ..................................... 48
SECTION 7.11. Limitations on Fundamental Changes ........................ 48
SECTION 7.12. Financial Condition Covenants ............................. 48
SECTION 7.13. Subordinated Debt ......................................... 49
SECTION 7.14. Transactions with Affiliates .............................. 49
SECTION 7.15. Impairment of Security Interest ........................... 49
ARTICLE VIII
EVENTS OF DEFAULT ........................................................... 49
SECTION 8.01. Events of Default ......................................... 49
ARTICLE IX
MISCELLANEOUS ............................................................... 52
SECTION 9.01. Notices ................................................... 52
SECTION 9.02. Survival of Agreement ..................................... 53
SECTION 9.03. Expenses of the Bank ...................................... 53
SECTION 9.04. No Waiver of Rights by the Bank ........................... 54
SECTION 9.05. APPLICABLE LAW ............................................ 54
SECTION 9.06. SUBMISSION TO JURISDICTION ................................ 54
SECTION 9.07. Extension of Maturity ..................................... 55
SECTION 9.08. Modification of Agreement ................................. 55
SECTION 9.09. Severability .............................................. 55
SECTION 9.10. Sale of Participations .................................... 55
SECTION 9.11. Reinstatement; Certain Payments ........................... 55
SECTION 9.12. Right of Setoff ........................................... 56
SECTION 9.13. Joint and Several Obligations of the Co-
Borrowers ................................................. 56
SECTION 9.14. Counterparts .............................................. 56
SECTION 9.15. Headings .................................................. 56
v
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SCHEDULES
Schedule I - Subsidiaries and Affiliates
Schedule II - Liens
Schedule III - Existing Indebtedness
Schedule IV - Existing Guarantees
Schedule V - Outside Inventory Locations
Schedule VI - Permitted Investments
Schedule VII - Litigation
Schedule VIII - Environmental Matters
EXHIBITS
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Equipment Loan Note
Exhibit C - Form of Term Note
Exhibit D - Form of Corporate Guaranty
Exhibit E-1 - Form of Co-Borrower Security Agreement
Exhibit E-2 - Form of Corporate Guarantor Security Agreement
Exhibit F - Form of Notice of Borrowing
Exhibit G - Form of Opinion of Counsel
Exhibit H - Form of Pledge Agreement
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CREDIT AGREEMENT dated as of July 23, 1998, by and among P&F
INDUSTRIES, INC., a Delaware corporation ("P&F"), FLORIDA PNEUMATIC
MANUFACTURING CORPORATION, a Florida corporation ("Florida Pneumatic") and
EMBASSY INDUSTRIES, INC., a New York corporation ("Embassy", collectively with
P&F and Florida Pneumatic, the "Co-Borrowers") and EUROPEAN AMERICAN BANK, a
New York banking corporation (the "Bank").
RECITALS
The Co-Borrowers have requested the Bank to extend credit from time to
time and the Bank is willing to extend credit to the Co-Borrowers, subject to
the terms and conditions hereinafter set forth.
Accordingly, the Co-Borrowers and the Bank agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Definitions. As used herein, the following words and
terms shall have the following meanings:
"Affiliate" shall mean with respect to any Person, any corporation,
partnership, limited liability company, limited liability partnership, joint
venture, trust or unincorporated organization which, directly or indirectly,
controls or is controlled by or is under common control with such Person. For
the purpose of this definition, "control" of a Person shall mean the power,
direct or indirect, to direct or cause the direction of the management or
policies of such Person whether through the ownership of voting securities, by
contract or otherwise; provided that, in any event, any Person who owns directly
or indirectly 10% or more of the securities having ordinary voting power for the
election of directors or other governing body of a corporation or 10% or more of
the partnership or other ownership interest of any Person (other than as a
limited partner of such other Person) will be deemed to control such corporation
or other Person.
"Aggregate Banker's Acceptances Outstanding" shall mean on the date of
determination thereof, the aggregate principal balance of outstanding
Documentary Banker's Acceptances created on behalf of or for the benefit of the
Co-Borrowers, or any of them, hereunder.
"Aggregate Letters of Credit Outstanding" shall mean on the date of
determination thereof, the sum of (a) the aggregate maximum amount which is
available or available in the future to be drawn under all outstanding Letters
of Credit under this Agreement plus (b) the aggregate amount of any payments
made by the Bank under any Letter of Credit issued pursuant to this Agreement
that has not been reimbursed by the Co-Borrowers.
<PAGE>
"Aggregate Outstandings" shall mean on the date of determination
thereof, the sum of (i) the Aggregate Letters of Credit Outstanding, plus (ii)
the Aggregate Banker's Acceptances Outstanding, plus (iii) the aggregate
outstanding principal amount of the Revolving Credit Loans plus (iv) the
aggregate outstanding principal amount of the Equipment Loans at such time.
"Aggregate Term Loan Outstandings" shall mean, on the date of
determination thereof, the aggregate outstanding principal amount of the Term
Loans at such time.
"Agreement" shall mean this Credit Agreement dated as of July 23, 1998,
as it may hereafter be amended, restated, supplemented or otherwise modified
from time to time.
"Applicable Term Loan Margin" shall mean with respect to Term Loans
that are Prime Rate Loans or LIBOR Loans hereunder, the percentage set forth
below under the headings "Prime Rate Margin" and "LIBOR Margin", respectively,
opposite the applicable ratio:
Consolidated
Senior Debt to Prime Rate
Consolidated EBITDA Margin LIBOR Margin
------------------- ---------- ------------
Greater than 3.25:1.00 0.25% 2.00%
Less than or equal to
3.25:1.00 0% 1.75%
The Applicable Term Loan Margins will be initially set with respect to each Term
Loan on the date which is five (5) Business Days following the date of receipt
by the Bank of the pro forma financial statements referred to in Section 5.03(f)
on the basis of such financial statements and thereafter shall be reset on the
date which is five (5) Business Days following the date of receipt by the Bank
of the financial statements referred to in 6.03(a) and Section 6.03(b), together
with a certificate of the Chief Financial Officer of the Co-Borrowers certifying
the ratio of Consolidated Senior Debt to Consolidated EBITDA and setting forth
the calculation thereof in detail; provided, however, that if any such financial
statement and certificate are not received by the Bank within the time period
required pursuant to Section 6.03(a) or Section 6.03(b), as the case may be, the
Applicable Term Loan Margin will be established at the highest rates provided
above from the date such financial statement and certificate were due until the
date which is five (5) Business Days following the receipt by the Bank of such
financial statements and certificate; and provided, further, that the Bank shall
not in any way be deemed to have waived any Event of Default, or any rights or
remedies hereunder or under any other Loan Document in connection with the
foregoing proviso. During the occurrence and continuance of a Default or an
Event of Default, no downward adjustment, and only
2
<PAGE>
upward adjustments, shall be made to the Applicable Term Loan Margin.
"Available Revolving Credit Commitment" shall mean at any time the
Revolving Credit Commitment reduced by the aggregate principal amount of the
Revolving Credit Loans and of the Equipment Loans then outstanding and by
Aggregate Banker's Acceptances Outstanding and Aggregate Letters of Credit
Outstanding.
"Available Term Loan Commitment" shall mean at any time the Term Loan
Commitment reduced by the aggregate outstanding principal amount of the Term
Loans.
"Availability Period" shall have the meaning specified in Section 2.04
hereof.
"Borrowing Date" shall mean, with respect to any Loan, the date on
which such Loan is disbursed to a Co-Borrower.
"Business Day" shall mean any day not a Saturday, Sunday or legal
holiday, on which banks in New York City are open for business; provided,
however, that when used in connection with an LIBOR Loan the term "Business Day"
shall exclude any day on which the Bank is not open for dealings in dollar
deposits in the London interbank eurodollar market.
"Capital Expenditures" shall mean additions to property and equipment
of P&F and its Subsidiaries, which, in conformity with GAAP, are included as
"additions to property, plant or equipment" or similar items which would be
reflected in the consolidated statement of cash flow of P&F and its
Subsidiaries, including without limitation, property and equipment which are the
subject of Capital Leases.
"Capital Lease" shall mean (a) any lease of property, real or personal,
if the then present value of the minimum rental commitment thereunder should, in
accordance with GAAP, be capitalized on the balance sheet of the lessee, and (b)
any other such lease the obligations with respect to which are required to be
capitalized on the balance sheet of the lessee.
"Chief Financial Officer" shall mean, with respect to any entity, the
Chief Financial Officer of such entity or in the event no such officership
exists, the Corporate Controller/Treasurer of such entity or the person
performing comparable duties.
"Closing Date" shall mean July 23, 1998.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
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<PAGE>
"Commitments" shall mean, collectively, the Revolving Credit Commitment
and the Term Loan Commitment.
"Consolidated" shall mean, as applied to any financial or accounting
term, such term determined on a consolidated basis in accordance with GAAP for
P&F and its Subsidiaries.
"Consolidated Capital Base" shall mean on a Consolidated basis, the
shareholders' equity of P&F and its Subsidiaries plus, Subordinated Debt, less
all intangible assets, including without limitation, organization expenses,
intellectual property, goodwill, loans or mortgages due from shareholders and/or
employees and/or Affiliates, treasury stock or deferred charges.
"Consolidated Current Maturities on Long Term Debt" shall mean the
portion of any Indebtedness which is classified as the current portion of long
term debt on the Consolidated financial statements of P&F and its Subsidiaries,
in accordance with GAAP.
"Consolidated EBITDA" shall mean for P&F and its Subsidiaries for any
period, the Consolidated Net Income (or Consolidated net loss) of P&F and its
Subsidiaries for such period, plus the sum, without duplication, of (a) gross
interest expense, (b) depreciation and amortization expenses or charges, (c) all
income taxes to any government or governmental instrumentality, expenses on
P&F's or its Subsidiaries' books (whether paid or accrued) minus the sum of (a)
all extraordinary gains, (b) all interest income and (c) all non-cash income or
gain, in each case determined on a Consolidated basis for P&F and its
Subsidiaries in accordance with GAAP.
"Consolidated Interest Expense" shall mean the Consolidated interest
expense of P&F and its Subsidiaries, determined in accordance with GAAP.
"Consolidated Net Income" shall mean, for any period, the net income
(or net loss) of P&F and its Subsidiaries on a Consolidated basis for such
period determined in accordance with GAAP.
"Consolidated Net Worth" shall mean (a) total Consolidated assets of
P&F and its Subsidiaries less (b) the total Consolidated liabilities of P&F and
its Subsidiaries, in each case determined in accordance with GAAP.
"Consolidated Senior Debt" shall mean all Indebtedness of P&F and its
Subsidiaries for borrowed money other than (i) Indebtedness described in clause
"(i)", but only to the extent such Banker's acceptance do not constitute
Documentary Banker's Acceptances, and clause "(j)" of the definition of the term
"Indebtedness" and (ii) Subordinated Debt.
4
<PAGE>
"Corporate Guarantors" shall mean, collectively, each Person listed on
Schedule IV hereto and each Person who, from time to time, is required to
execute a Corporate Guaranty in accordance with Section 5.01(b) or Section 6.10;
provided such Person's status as a Corporate Guarantor shall be effective as of
the date of such execution.
"Corporate Guaranty" means the Corporate Guaranty in the form attached
hereto as Exhibit D to be executed and delivered by the Corporate Guarantors, as
the same may hereafter be amended, restated, supplemented or otherwise modified
from time to time.
"Default" shall mean any event or condition which upon notice, lapse of
time or both, would constitute an Event of Default.
"Documentary Banker's Acceptances" shall mean banker's acceptances
created by the Bank accepting a draft drawn on the Bank and which satisfy
eligibility requirements established by the Board of Governors of the Federal
Reserve System and the Bank's internal requirements as in effect from
time-to-time.
"Environmental Law" shall mean any federal, state, local or foreign
environmental law, ordinance, rule, regulation or policy relating to the
pollution or the protection of the environment or to the use, handling,
transportation, treatment, storage, disposal, release or discharge of Hazardous
Materials, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (42 U.S.C.
ss.ss.9601, et. seq.), the Hazardous Materials Transportation Act, as amended
(49 U.S.C. ss.ss.1801, et. seq.), the Resource Conservation and Recovery Act, as
amended (42 U.S.C. ss.ss.6901, et. seq.) and the rules and regulations
promulgated pursuant thereto.
"Equipment Loan" shall have the meaning given to such term in Section
2.03 hereof.
"Equipment Loan Maturity Date" means, with respect to each Equipment
Loan, the date on which such Equipment Loan becomes due and payable in
accordance with its terms, which date shall be the date determined as set forth
in Section 2.03 but which shall not be more than five (5) years from the date
such Equipment Loan is made.
"Equipment Loan Note" shall mean a promissory note of the Co-Borrower
in the form attached as Exhibit B hereto as the same may be amended,
supplemented or otherwise modified from time to time.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9) of
ERISA) which together with the Co-Borrowers or any of them would be deemed to be
a member of the same "controlled
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group" within the meaning of Section 414(b), (c), (m) and (o) of the Code.
"Eurocurrency Reserve Requirement" shall mean a fraction (expressed as
a decimal), the numerator of which is the number one and the denominator of
which is the number one minus the applicable statutory reserve requirements
(expressed as a decimal) for the Bank (without duplication, but including,
without limitation, basic, supplemental, marginal and emergency reserves), from
time to time in effect under Regulation D with respect to eurocurrency funding
currently referred to as "Eurocurrency liabilities" in Regulation D. It is
agreed that for purposes hereof each LIBOR Loan shall be deemed to constitute a
"Eurocurrency liability" as defined in Regulation D, and to be subject to the
reserve requirements of Regulation D without benefit of credit or proration,
exemptions or offsets which might otherwise be available to the Bank from time
to time under Regulation D.
"Event of Default" shall have the meaning set forth in Article VIII.
"Executive Officer" shall mean with respect to any entity, the
Chairman, the President, the Chief Financial Officer or the Secretary of such
entity, as applicable, and their respective successors, if any, designated by
the board of directors.
"Existing Indebtedness" shall mean the aggregate Indebtedness of the
Co-Borrowers to Hong Kong Shanghai Bank and to all other persons in respect of
Loans made by such Persons, other than Indebtedness permitted pursuant to
Section 7.02 and contingent obligations permitted pursuant to Section 7.03.
"Fixed Rate" shall mean a rate of interest per annum quoted to the
Co-Borrowers by the Bank, from time to time at the request of the Co-Borrowers,
as the "Fixed Rate". Such quoted rate shall be the fixed rate which would be
applicable to a Fixed Rate Loan made by the Bank on the requested date for a
proposed Fixed Rate Loan, in the specified amount and for the specified term
thereof. Notwithstanding any other provision of this Agreement, the rate so
quoted by the Bank shall be the rate, at the time of election, on United States
Treasury Notes (as determined by the Bank) having maturities approximately equal
to the maturity of such Fixed Rate Loan plus 175 basis points.
"Fixed Rate Loan" shall mean a Loan at such time as it is made or being
maintained at the rate of interest based upon the Fixed Rate.
"Foreign Exchange Line" shall mean that credit line more particularly
described in that certain Line Letter dated June 30, 1998 from Bank to
Co-Borrowers.
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"GAAP" shall mean generally accepted accounting principles and
practices which are recognized as such by the American Institute of Certified
Public Accountants acting through the financial Accounting Standards Board and
which are consistently applied for all periods so as to properly reflect the
consolidated financial condition and the consolidated results of operations and
cash flows of P&F and its Subsidiaries.
"Green Acquisition" shall mean the acquisition by P&F of all of the
issued and outstanding stock or substantially all of the assets of Green
Manufacturing, Inc.
"Green Debt" shall mean the indebtedness assumed by a Co-Borrower in
connection with the Green Acquisition, which indebtedness shall not exceed
$1,095,000.
"Hazardous Materials" shall mean any explosives, radioactive materials,
or other materials, wastes, chemicals or substances regulated as toxic,
hazardous, or as a pollutant, contaminant, or waste under any Environmental Law.
"Indebtedness" shall mean, without duplication, as to any Person or
Persons (a) indebtedness for borrowed money; (b) indebtedness for the deferred
purchase price of property or services; (c) indebtedness evidenced by bonds,
debentures, term notes or other similar instruments; (d) obligations and
liabilities secured by a Lien upon property owned by such Person, whether or not
owing by such Person and even though such Person has not assumed or become
liable for the payment thereof; (e) Indebtedness of others directly or
indirectly guaranteed by such Person; (f) obligations or liabilities created or
arising under any conditional sales contract or other title retention agreement
with respect to property used and/or acquired by such Person; (g) obligations of
such Person as lessee under Capital Leases; (h) all obligations of such Person
under hedging agreements and foreign currency exchange agreements, as calculated
on a basis satisfactory to the Bank and in accordance with accepted practice;
(i) all obligations of such Person in respect of bankers acceptances; and (j)
all obligations, contingent or otherwise of such Person as an account party in
respect of letters of credit.
"Interest Payment Date" means, (i) with respect to Prime Rate Loans or
LIBOR Loans, the first business day of each calendar month during the term of
such Loan commencing with the month following the month in which such Loan is
made and the date such Loan is required to be repaid in full; and (ii) with
respect to Fixed Rate Loans the monthly or quarterly interest payment dates
established by the Bank at the time such Fixed Rate Loan is made.
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"Interest Period" shall mean with respect to any LIBOR Loan:
(a) initially, the period commencing on the date such LIBOR Loan is
made and ending one, three or six months thereafter, as selected by the
Co-Borrowers in their Notice of Borrowing, or in their notice of conversion from
a Prime Rate Loan as provided in Section 3.01(e); and
(b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such LIBOR Loan and ending one, three or
six months thereafter, as selected by the Co-Borrowers by irrevocable written
notice to the Bank not later than 11:00 a.m. three Business Days prior to the
last day of the then current Interest Period with respect to such LIBOR Loan;
provided, however, that all of the foregoing provisions relating to Interest
Periods are subject to the following:
(i) if any Interest Period pertaining to a LIBOR Loan would
otherwise end on a day which is not a Business Day, the Interest
Period shall be extended to the next succeeding Business Day unless
the result of such extension would be to carry such Interest Period
into another calendar month in which event such Interest Period shall
end on the immediately preceding Business Day;
(ii) if the Co-Borrowers shall fail to give notice as provided in
clause (b) above, the Co-Borrowers shall be deemed to have requested
conversion of the affected LIBOR Loan to a Prime Rate Loan on the last
day of the then current Interest Period with respect thereto;
(iii) any Interest Period that begins on the last Business Day of
a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month;
(iv) no Interest Period may be selected with respect to (a) a
Revolving Credit Loan which ends later than the Revolving Credit
Termination Date, and (b) the Term Loan which ends later than the Term
Loan Maturity Date; and
(v) no more than twelve (12) Interest Periods may exist at any
one time.
"Letter of Credit" shall mean any Sight Letter of Credit or Standby
Letter of Credit issued by the Bank for the account of the Co-Borrowers, or any
of them, pursuant to the terms of this Agreement. Letters of Credit issued by
the Bank hereunder shall be for the account of the Co-Borrowers for the purpose
of providing the primary payment mechanism in connection with the purchase of
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any materials, goods or service by the Co-Borrowers in the ordinary course of
their business and to support repayment of the Green Debt.
"LIBOR Loan" shall mean any Loan at such time as it is made and/or
being maintained at a rate of interest based upon Reserve Adjusted Libor.
"Liens" shall mean any lien (statutory or otherwise) security interest,
mortgage, deed of trust, pledge, charge, conditional sale, title retention
agreement, Capital Lease or other encumbrance or similar right of others, or any
agreement to give any of the foregoing.
"Loans" shall mean, collectively, the Revolving Credit Loans, the Term
Loans and the Equipment Loans and shall refer to a Prime Rate Loan, a LIBOR Loan
or a Fixed Rate Loan, each of which shall be a "Type" of Loan.
"Loan Documents" shall mean, collectively, this Agreement, the Notes,
the Security Agreements, the Corporate Guaranties, the Pledge Agreement and each
other agreement executed in connection with the transactions contemplated hereby
or thereby, as each of the same may hereafter or thereafter be amended,
supplemented or otherwise modified from time to time.
"Material Adverse Effect" shall mean a material adverse effect on (i)
the business, operations, properties or condition, financial or otherwise, of
the Co-Borrowers taken as a whole or of the Co-Borrowers and their Subsidiaries,
taken as a whole, or (ii) the ability of the Co-Borrowers, their Subsidiaries or
any of them to perform their obligations hereunder or under the Loan Documents.
"Notice of Borrowing" shall mean the Notice of Borrowing substantially
in the form attached hereto as Exhibit F.
"Obligations" shall mean all obligations, liabilities and indebtedness
of the Co-Borrowers to the Bank, whether now existing or hereafter created,
absolute or contingent, direct or indirect, due or not, whether created directly
or acquired by assignment or otherwise, including, without limitation, all
obligations, liabilities and indebtedness of the Co-Borrowers with respect to
the principal of and interest on the Loans and the payment and performance of
all other obligations, liabilities, and indebtedness of the Co-Borrowers to the
Bank hereunder, under the Notes or any other Loan Document or with respect to
the Loans, including without limitation all fees, costs, expenses and indemnity
obligations hereunder.
"Payment Office" shall mean the Bank's office located at 730 Veterans
Memorial Highway, Hauppauge, New York 11788.
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"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"Permitted Acquisition" shall mean any acquisition by a Co-Borrower of
more than 50% of the outstanding capital stock, membership interest, partnership
interest or other similar ownership interest of a Person organized under the
laws of the United States or any state thereof which is engaged in a line of
business similar to the business of P&F or any of its Subsidiaries or the
purchase of all or substantially all of the assets used by such Person or a
division of such Person; provided (a) the acquisition complies with the terms
and conditions of Section 5.03 (regardless of whether the Co-Borrowers have
requested the Bank to finance the acquisition with the proceeds of a Term Loan);
(b) no Default or Event of Default shall have occurred and be continuing
immediately prior to or would occur after giving effect to the acquisition, and
(c) the acquisition has either (i) been approved by the Board of Directors or
other governing body of the Person which is the subject of the acquisition or
(ii) been recommended for approval by the Board of Directors or other governing
body of such Person to the shareholders or other members of such Person and
subsequently approved by all of the shareholders or all of such members if
shareholder or such member approval is required under applicable law or by the
by-laws, certificate of incorporation or other governing instruments of such
Person.
"Permitted Investments" shall mean (a) direct obligations of the United
States of America or any governmental agency thereof, provided that such
obligations mature within one year from the date of acquisition thereof; (b)
dollar denominated certificates of time deposit maturing within eighteen months
issued by the Bank or any commercial bank organized and existing under the laws
of the United States or any state thereof and having aggregate capital and
surplus in excess of $1,000,000,000; (c) money market mutual funds having assets
in excess of $2,500,000,000; (d) commercial paper rated not less than P-1 or A-1
or their equivalent by Moody's Investor Services, Inc. or Standard & Poor's
Corporation, respectively; or (e) tax exempt securities of a U.S. issuer rated A
or better by Standard and Poor's Corporation or Moody's Investors Service, Inc.
"Person" shall mean any natural person, corporation, limited liability
company, limited liability partnership, business trust, joint venture,
association, company, partnership or government, or any agency or political
subdivision thereof.
"Plan" shall mean any multi-employer or single-employer plan defined in
Section 4001 of ERISA, which is maintained, or at any time during the five
calendar years preceding the date of this Agreement was maintained, by any
Co-Borrower or an ERISA Affiliate for employees of any Co-Borrower or an ERISA
Affiliate.
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"Pledge Agreement" shall mean the Pledge Agreement in the form annexed
hereto as Exhibit I.
"Prime Rate" shall mean the rate per annum publicly announced by the
Bank from time to time as its prime rate in effect at its principal office, each
change in the Prime Rate to be effective on the date such change is announced to
become effective.
"Prime Rate Loan" shall mean the portion of a Loan at such time as it
is bearing interest at the Prime Rate.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time to
time.
"Reportable Event" shall mean an event described in Section 4043(c) of
ERISA as to which the 30 day notice requirement has not been waived by the PBGC
and which event occurs with respect to a Plan.
"Reserve Adjusted Libor" shall mean with respect to the Interest Period
pertaining to a LIBOR Loan, the rate per annum equal to the product (rounded
upwards to the next higher 1/100 of one percent) of (a) the annual rate of the
interest determined by the Bank at which dollar deposits of an amount comparable
to the amount of such Loan and for a period equal to the Interest Period
applicable thereto are offered to leading banks in immediately available funds
in the London interbank market for eurodollars at approximately 11:00 A.M.
(London time) on the second Business Day prior to the commencement of such
Interest Period, multiplied by (b) the Eurocurrency Reserve Requirement.
"Revolving Credit Commitment" shall mean the Bank's obligation to make
Revolving Credit Loans to the Co-Borrowers pursuant to Section 2.01 hereof in an
aggregate principal amount not to exceed $12,000,000.
"Revolving Credit Loan" shall have the meaning specified in Section
2.01.
"Revolving Credit Note" shall mean the promissory note of the
Co-Borrowers in the form attached as Exhibit A hereto evidencing the Revolving
Credit Loans, as the same may be amended, supplemented or otherwise modified
from time to time.
"Revolving Credit Termination Date" shall mean the earlier of (i) July
22, 1999 or (ii) the date on which the Revolving Credit Commitment shall have
been terminated hereunder.
"Security Agreements" shall mean the Security Agreements in the form
annexed hereto as Exhibit E-1 in the case of those Security Agreements to be
executed and delivered by each Co-
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Borrower and as Exhibit E-2 in the case of those Security Agreements to be
executed by each Corporate Guarantor.
"Sight Letter of Credit" shall mean a Letter of Credit wherein the
draft is drawn at sight (i.e., drawn payable upon presentment).
"Solvent" shall mean with respect to any Person as of the date of
determination thereof that (a) the amount of the "present fair saleable value"
of the assets of such Person will, as of such date, exceed the amount of all
"liabilities of such Person, contingent or otherwise," as of such date, as such
quoted terms are determined in accordance with applicable federal and state laws
governing determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such Person will, as of such date, be greater
than the amount that will be required on its debts as such debts become absolute
and matured, (c) such Person will not have as of such date, an unreasonably
small amount of capital with which to conduct its business, and (d) such Person
will be able to pay its debts as they mature.
"Standby Letter of Credit" shall mean any letter of credit issued to
support an obligation of a Person and which may only be drawn upon the failure
of such Person to perform such obligation or another contingency.
"Subordinated Debt or Subordinated Indebtedness" shall mean all debt
which is subordinated in right of payment to the prior indefeasible payment in
full of the obligations of any Co-Borrower and/or any of their Subsidiaries to
the Bank on terms satisfactory to and approved in writing by the Bank.
"Subsidiaries" shall mean with respect to any Person any corporation,
association or other business entity more than 50% of the voting stock or other
ownership interest of which is at the time owned or controlled, directly or
indirectly, by such Person or one or more of its Subsidiaries or a combination
thereof.
"Term Loan Commitment" shall mean the Bank's obligation to make Term
Loans to the Co-Borrowers pursuant to Section 2.04 hereof in an aggregate
principal amount of $15,000,000.
"Term Loan Commitment Termination Date" shall mean July 22, 1999.
"Term Loan" shall have the meaning specified in Section 2.04.
"Term Loan Maturity Date" shall mean, with respect to any Term Loan,
the date on which such Term Loan becomes due and payable in accordance with its
terms, which date shall be the date determined as set forth in Section 2.04 but
which shall not be more than seven (7) years from the date such Term Loan was
made.
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"Term Loan Note" shall mean the promissory note of the Co-Borrowers in
the form attached as Exhibit C hereto evidencing the Term Loans, as the same may
be amended, supplemented or otherwise modified from time to time.
"Type" shall have the meaning set forth in the definition of "Loans".
"Unfunded Current Liability" of any Plan shall mean the amount, if any,
by which the present value of the accrued benefits under the Plan as of the
close of its most recent plan year exceeds the fair market value of the assets
allocable thereto, determined in accordance with Section 412 of the Code.
SECTION 1.02. Accounting Terms. Except as otherwise herein specifically
provided, each accounting term used herein shall have the meaning given to it
under GAAP.
ARTICLE II
LOANS
SECTION 2.01. Revolving Credit Loans. (a) Subject to the terms and
conditions, and relying upon the representations and warranties, set forth
herein, the Bank agrees to make loans (individually, a "Revolving Credit Loan"
and, collectively, the "Revolving Credit Loans") to the Co-Borrowers at any time
or from time to time on or after the Closing Date and until the Revolving Credit
Termination Date. Within the foregoing limits, the Co-Borrowers may borrow,
repay and reborrow hereunder on or after the Closing Date and prior to the
Revolving Credit Termination Date, subject to the terms, provisions and
limitations set forth herein. The Revolving Credit Loans may be LIBOR Loans or
Prime Rate Loans or a combination thereof.
(b) The initial Revolving Credit Loan made by the Bank shall be made
against delivery to the Bank of the Revolving Credit Note, payable to the order
of the Bank, as referred to in Section 2.02 hereof. The Bank will make available
each requested Revolving Credit Loan to the Co-Borrowers by crediting the
proceeds thereof into an account of the Co-Borrowers at the Payment Office on
the date and in the amount set forth in the applicable Notice of Borrowing.
(c) The Co-Borrowers shall give the Bank a completed irrevocable Notice
of Borrowing, no later than 11:00 a.m., New York City time, three Business Days
prior to the date of each proposed LIBOR Loan under this Section 2.01 or no
later than 11:00 a.m. on the date of each proposed Prime Rate Loan under this
Section 2.01. Each borrowing pursuant to the Revolving Credit Commitment shall
be in an aggregate principal amount of (A) the lesser of (x) $50,000 or whole
multiples of $25,000 in excess thereof and (y) the Available Revolving Credit
Commitment, with respect to Prime Rate
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Loans, and (B) $250,000 or whole multiples of $50,000 in excess thereof, with
respect to LIBOR Loans.
(d) The Co-Borrowers shall have the right, upon not less than three
Business Days' prior written notice to the Bank, to terminate the Revolving
Credit Commitment or, from time to time, to permanently reduce the amount of the
Revolving Credit Commitment; provided, however, that no such termination or
reduction shall be permitted if, after giving effect thereto and to any
prepayments of the Revolving Credit Loans made on the effective date thereof,
Aggregate Outstandings would exceed the Revolving Credit Commitment, as then
reduced; and provided, further, that any such terminations or reduction of LIBOR
Loans shall be made only on the last day of the Interest Period with respect
thereto or on the date of payment in full of all amounts owing to the Bank
pursuant to Section 3.08 as a result of such termination or reduction. Any such
reduction shall be in the amount of $1,000,000 or an amount in excess thereof,
and shall reduce permanently the amount of the Revolving Credit Commitment then
in effect.
(e) The Revolving Credit Commitment shall automatically terminate on
the Revolving Credit Termination Date. Upon such termination, the Co-Borrowers
shall immediately repay in full the principal amount of the Revolving Credit
Loans then outstanding, together with all accrued interest thereon and all other
amounts due and payable hereunder with respect to the Revolving Credit Loans.
SECTION 2.02. Revolving Credit Note. The Revolving Credit Loans made by
the Bank shall be evidenced by the Revolving Credit Note, appropriately
completed, duly executed and delivered on behalf of the Co-Borrowers and payable
to the order of the Bank in a principal amount equal to the Revolving Credit
Commitment. The date, Type and amount of each Revolving Credit Loan and the date
and amount of each payment or prepayment of principal of each Revolving Credit
Loan shall be recorded on the grid schedule annexed to the Revolving Credit
Note, and the Co-Borrowers authorize the Bank to make such recordation;
provided, however, that the failure of the Bank to set forth each such Revolving
Credit Loan, payment and other information on such grid shall not in any manner
affect the obligation of the Co-Borrowers to repay each Revolving Credit Loan
made by the Bank in accordance with the terms of the Revolving Credit Note and
this Agreement. The Revolving Credit Note, the grid schedule and the books and
records of the Bank shall be prima facie evidence of the Revolving Credit Loans
absent manifest error. The aggregate unpaid amount of the Revolving Credit Loans
of the Bank at any time shall be the principal amount owing on the Revolving
Credit Note of the Co-Borrowers at such time.
SECTION 2.03. Equipment Loans. (a) Subject to the terms and conditions
set forth in this Agreement, the Co-Borrowers may
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utilize up to $3,000,000 of the Revolving Credit Commitment to borrow equipment
term loans from the Bank and the Bank agrees to make loans (individually, an
"Equipment Loan" and, collectively, the "Equipment Loans") to the Co-Borrowers
at any time and from time to time on and after the Closing Date until the
Revolving Credit Termination Date, in an aggregate principal amount not in
excess of $3,000,000 at any one time outstanding, provided that the Aggregate
Outstandings shall not at any time exceed the Revolving Credit Commitment (it
being understood that this provision does not affect the maturity of any
Equipment Loan).
(b) Each Equipment Loan made by the Bank to the Co-Borrowers
shall be made against delivery to the Bank of an Equipment Loan Note,
appropriately completed, duly executed on behalf of the Co-Borrowers and payable
to the order of the Bank. Each Equipment Loan shall be a Prime Rate Loan or a
Fixed Rate Loan and shall have a term designated by the Co-Borrower in the
Notice of Borrowing but which shall not exceed five (5) years from the date of
the borrowing and, in the absence of any such designation shall be five (5)
years. Each Equipment Loan shall be payable in monthly or quarterly (as
determined by the Bank) installments of interest and principal. The date and
amount of each Equipment Loan and the date and amount of each payment or
prepayment of principal of such Equipment Loan shall be recorded on a schedule
annexed to such Equipment Loan Note, and the Co-Borrowers authorize the Bank to
make such recordation; provided, however, that the failure of the Bank to set
forth payments and other information in such grid shall not in any manner affect
the obligation of the Co-Borrowers to repay any Equipment Loan made by the Bank
in accordance with the terms of this Agreement. Each Equipment Loan Note, the
grid schedule and the books and records of the Bank shall be prima facie
evidence of the information so recorded absent manifest error.
(c) The Co-Borrowers shall deliver to the Bank a completed
Notice of Borrowing for each Prime Rate Loan no later than 11:00 a.m., New York
City time, on the date of each proposed borrowing of a Prime Rate Loan pursuant
to this Section 2.03, and for each Fixed Rate Loan, no later than 11:00 a.m.,
New York City time, two days prior to the date of each proposed borrowing of a
Fixed Rate Loan pursuant to this Section 2.03. The Bank will make available each
requested Equipment Loan to the Co-Borrowers by crediting the proceeds thereof
into an account of the Co-Borrower specified in the Notice of Borrowing at the
Payment Office.
SECTION 2.04. Term Loans. (a) Subject to the terms and conditions, and
relying upon the representations and warranties, set forth herein, the Bank
agrees to make loans (individually, a "Term Loan" and, collectively, the "Term
Loans") to the Co-Borrowers at any time and from time to time on and after the
Closing Date and until the Term Loan Commitment Termination Date or until the
Term Loan Commitment shall have been terminated in accordance with the terms
hereof (the "Availability Period"), in an
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aggregate principal amount at any one time outstanding not in excess of the Term
Loan Commitment. Within the foregoing limits, the Co-Borrowers may borrow during
the Availability Period subject to the terms, provisions and limitations set
forth herein. The Term Loan Commitment shall automatically terminate on the Term
Loan Commitment Termination Date.
(b) The initial Term Loan by the Bank shall be made against
delivery to the Bank of a Term Note, payable to the order of the Bank, as
referred to in Section 2.05. Each Term Loan shall be a Prime Rate Loan or a
LIBOR Loan. The Co-Borrowers shall deliver to the Bank a completed Notice of
Borrowing for each Prime Rate Loan no later than 11:00 a.m., New York City time,
on the date of each proposed borrowing of a Prime Rate Loan under this Section
2.04, and for each LIBOR Loan, no later than 11:00 a.m. three (3) Business Day
prior to the date of each proposed borrowing of a LIBOR Loan under this Section
2.04. The Bank will make available each requested Term Loan to the Co-Borrowers
by crediting the proceeds thereof into an account of the Co-Borrowers specified
in the Notice of Borrowing at the Payment Office. Each borrowing pursuant to the
Term Loan Commitment shall be in an aggregate principal amount of (A) the lesser
of (x) $50,000 or whole multiples thereof, and (y) the Available Term Loan
Commitment, with respect to Prime Rate Loans, and (B) at least $250,000 with
respect to LIBOR Loans. Such notice shall be irrevocable and shall specify the
amount and Type of Term Loan, and if applicable, the requested Interest Period
with respect thereto.
SECTION 2.05. Term Notes. Each Term Loan by the Bank shall be evidenced
by a Term Loan Note, appropriately completed, duly executed and delivered on
behalf of the Co-Borrowers and payable to the order of the Bank in a principal
amount equal to the amount of such Term Loan. Each Term Loan shall have a term
designated by the Co-Borrower in the Notice of Borrowing but which term shall
not exceed seven (7) years from the date of the borrowing and, in the absence of
any such designation, shall not exceed seven (7) years and, at the option of the
Co-Borrowers, may allow for interest only to be paid during the first year of
the term thereof. The date and amount of each Term Loan and the date and amount
of each payment or prepayment of principal of such Term Loan shall be recorded
on the grid schedule annexed to such Term Loan Note, and the Co-Borrowers
authorize the Bank to make such recordation; provided, however, that the failure
of the Bank to set forth payments and other information on such grid shall not
in any manner affect the obligation of the Co-Borrowers to repay any Term Loan
made by the Bank in accordance with the terms of this Agreement. Each Term Loan
Note, the grid schedule and the books and records of the Bank shall be prima
facie evidence of the information so recorded absent manifest error.
SECTION 2.06 Letters of Credit and Documentary Banker's Acceptances.
(a) Subject to the terms and conditions set forth in
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this Agreement, upon the written request of the Co-Borrowers in accordance
herewith, the Bank shall issue Letters of Credit and create Documentary Banker's
Acceptances, at any time from the date hereof through the Revolving Credit
Termination Date. Notwithstanding the foregoing, no Letter of Credit or
Documentary Banker's Acceptance shall be issued or created if, after giving
effect to the same, the Aggregate Outstandings would exceed the Revolving Credit
Commitment. Furthermore, in no event shall the Aggregate Bankers Acceptances
Outstanding exceed $8,000,000 at any time and in no event shall the Aggregate
Letters of Credit Outstanding exceed $8,000,000 at any time. Notwithstanding
anything contained herein to the contrary, the Bank shall be under no obligation
to issue a Letter of Credit or create a Documentary Banker's Acceptance, if any
order, judgment or decree of any court, arbitrator or governmental authority
shall purport by its terms to enjoin, restrict or restrain the Bank in any
respect relating to the issuance of such Letter of Credit or creation of such
Documentary Banker's Acceptance or a similar letter of credit or documentary
banker's acceptance, or any law, rule, regulation, policy, guideline or
directive (whether or not having the force of law) from any governmental
authority with jurisdiction over the Bank shall prohibit or direct the Bank in
any respect relating to the issuance of such Letter of Credit or the creation of
such Documentary Banker's Acceptance or similar letter of credit or documentary
banker's acceptance, or shall impose upon the Bank with respect to any Letter of
Credit or Documentary Banker's Acceptance any restrictions, any reserve or
capital requirement or any loss, cost or expense not reimbursed by the
Co-Borrowers to the Bank. Each request for issuance of a Letter of Credit shall
be in writing and shall be received by the Bank by no later than 12:00 p.m. on
the day which is at least one Business Day prior to the proposed date of
issuance. Such issuance shall occur by no later than 5:00 p.m. on the proposed
date of issuance (assuming proper prior notice as aforesaid). Subject to the
terms and conditions contained herein, the expiry dates, the type of Letter of
Credit, the purpose, the amounts and the beneficiaries of the Letters of Credit
will be as designated by the Co-Borrowers. Each Letter of Credit issued by the
Bank hereunder shall identify: (i) the dates of issuance and expiry of such
Letter of Credit, (ii) the amount of such Letter of Credit (which shall be a sum
certain, although partial drawings shall be permitted), (iii) the beneficiary
and account party of such Letter of Credit, and (iv) the drafts and other
documents necessary to be presented to the Bank upon drawing thereunder. No
Sight Letter of Credit issued hereunder shall expire more than 180 days from the
date of issuance, no Standby Letter of Credit issued hereunder shall expire more
than one year from the date of issuance and no Documentary Banker's Acceptance
shall mature more than 180 days from the date of creation thereof, and in no
event shall any Letter of Credit expire or any Documentary Banker's Acceptance
mature, after the Business Day which is immediately prior to the Revolving
Credit Termination Date. The Co-Borrowers agree to execute and deliver to the
Bank
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such further documents and instruments in connection with any Letter of Credit
issued or Documentary Banker's Acceptance created hereunder (including, without
limitation, applications therefor and the Bank's Master Letter of Credit
Agreement and Standard Acceptance Credit Agreement) as the Bank in accordance
with its customary practices may request. To the extent of any inconsistency
between those documents and this Agreement, the provisions of this Agreement
shall control and such other documents shall not impose any operating
restrictions, financial covenants, or payment obligations or require
Co-Borrowers to provide any collateral in addition to or different from those
imposed under this Agreement.
(b) Drawings Under Letters of Credit and Payments of
Documentary Banker's Acceptances. The Co-Borrowers hereby absolutely and
unconditionally promise to pay to the Bank on the date of any drawing under a
Letter of Credit or the maturity of a Documentary Banker's Acceptance, in
immediately available funds from its accounts, the amount of such drawing under
such Letter of Credit or Documentary Banker's Acceptance. If the Co-Borrowers so
request by a Notice of Borrowing delivered to the Bank not later than 12:30 p.m.
(New York City time) on the date of the drawing under a Letter of Credit or the
maturity of a Documentary Banker's Acceptance in accordance with the terms
hereof and if each of the conditions precedent to the making of a Loan set forth
in Article V of this Agreement has been satisfied, on the Business Day on which
a drawing under a Letter of Credit or the maturity of a Documentary Banker's
Acceptance occurs, the amount of such drawing, plus interest thereon, or the
amount of such Documentary Banker's Acceptance, for which the Bank has not been
reimbursed by the Co-Borrowers, shall become a Prime Rate Loan made by the Bank
to the Co-Borrowers on such day.
(c) Letter of Credit and Documentary Banker's Acceptance
Obligations Absolute. (i) The obligations of the Co-Borrowers to reimburse the
Bank as provided hereunder in respect of drawings or payments under Letters of
Credit and Documentary Banker's Acceptances shall rank pari passu with the
obligations of the Co-Borrowers to repay the Loans hereunder, shall be absolute
and unconditional under any and all circumstances and shall be secured pro rata
with the other Obligations (if any) pursuant to the Security Agreements in
accordance with the provisions of the Security Agreements. Without limiting the
generality of the foregoing, the obligation of the Co-Borrowers to reimburse the
Bank in respect of drawings under Letters of Credit and upon the maturity of
Documentary Banker's Acceptances shall not be subject to any defense based on
the non-application or misapplication by the beneficiary of the proceeds of any
such payment or the legality, validity, regularity or enforceability of the
Letters of Credit or Documentary Banker's Acceptances or any related document or
any dispute between or among the Co-Borrowers, or any of them, the beneficiary
of any Letter of Credit or any financing
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institution or other party to which any Letter of Credit or Documentary Banker's
Acceptances may be transferred. The Bank may accept or pay any draft presented
to it under any Letter of Credit regardless of when drawn or made and whether or
not negotiated, if such draft, accompanying certificate or documents and any
transmittal advice are presented or negotiated on or before the expiry date of
the Letter of Credit or any renewal or extension thereof then in effect, and
conforms to the terms and conditions of such Letter of Credit. Furthermore,
neither the Bank nor any of its correspondents shall be responsible, as to any
document presented under a Letter of Credit which appears to be regular on its
face, and appears on its face to conform to the terms of the Letter of Credit,
for the validity or sufficiency of any signature or endorsement, for delay in
giving any notice or failure of any instrument to bear adequate reference to the
Letter of Credit, or for failure of any Person to note the amount of any draft
on the reverse of the Letter of Credit.
(ii) Any action, inaction or omission on the part of the Bank
or any of its correspondents under or in connection with any Letter of Credit or
the related instruments, documents or property, if in good faith and in
conformity with such laws, regulations or customs as are applicable, shall be
binding upon the Co-Borrowers and shall not place the Bank or any of its
correspondents under any liability to the Co-Borrowers, or any of them, in the
absence of (i) gross negligence or willful misconduct by the Bank or its
correspondents or (ii) the failure by the Bank to pay under a Letter of Credit
after presentation of a draft and documents strictly complying with such Letter
of Credit. The Bank's rights, powers, privileges and immunities specified in or
arising under this Agreement are in addition to any heretofore or at any time
hereafter otherwise created or arising, whether by statute or rule of law or
contract. All Letters of Credit issued hereunder will, except to the extent
otherwise expressly provided hereunder, be governed by the Uniform Customs and
Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce, Publication No. 500, and any subsequent revisions thereof.
ARTICLE III
INTEREST RATE; FEES AND PAYMENTS; USE OF PROCEEDS
SECTION 3.01. Interest Rate. (a) Each Prime Rate Loan shall bear
interest for the period from the date thereof on the unpaid principal amount
thereof at a fluctuating rate per annum equal to the Prime Rate, plus, in the
case of Equipment Loans only, a margin equal to 0.25% per annum and in the case
of Term Loans, the applicable Prime Rate Margin as provided in the definition of
the term "Applicable Term Loan Margin".
(b) Each LIBOR Loan shall bear interest for the Interest
Period applicable thereto on the unpaid principal amount thereof at
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a rate per annum equal to the Reserve Adjusted Libor determined for each
Interest Period thereof in accordance with the terms hereof plus, in the case of
Revolving Credit Loans, a margin of 1.60% per annum and, in the case of Term
Loans, the applicable LIBOR Margin as provided in the definition of the term
"Applicable Term Loan Margin".
(c) Each Fixed Rate Loan shall bear interest on the unpaid
principal amount thereof at a rate per annum equal to the Fixed Rate established
by the Bank for such Loan in accordance with the terms hereof.
(d) If the Co-Borrowers shall default in the payment of the
principal of or interest on any portion of any Loan or any other amount becoming
due hereunder, including, without limitation, fees, the Co-Borrowers shall on
demand from time to time pay interest on such defaulted amount accruing from the
date of such default (without reference to any period of grace) up to and
including the date of actual payment (after as well as before judgment) at a
rate per annum equal to the Prime Rate plus a margin of 2% per annum.
(e) Upon the occurrence and during the continuance of an Event
of Default, the outstanding principal amount of the Loans (excluding any
defaulted payment accruing interest in accordance with clause (c) above), shall,
in the Bank's sole and absolute discretion, bear interest payable on demand at a
rate of interest equal to 2% above the rate otherwise in effect with respect to
such Loans.
(f) The Co-Borrowers may elect from time to time to convert
outstanding Revolving Credit Loans and Term Loans from LIBOR Loans to Prime Rate
Loans by giving the Bank at least three Business Days' prior irrevocable notice
of such election, provided that any such conversion of LIBOR Loans shall only be
made on the last day of an Interest Period with respect thereto or upon the date
of payment in full of any amounts owing pursuant to Section 3.08 as a result of
such conversion. The Co-Borrowers may elect from time to time to convert
outstanding Revolving Credit Loans and Term Loans from Prime Rate Loans to LIBOR
Loans by giving the Bank irrevocable written notice of such election not later
than 11:00 a.m. three Business Days prior to the date of the proposed
conversion. All or any part of outstanding Prime Rate Loans may be converted as
provided herein, provided that each conversion shall be in the principal amount
of $50,000 or whole multiples of $25,000 in excess thereof. Any conversion to or
from LIBOR Loans hereunder shall be in such amounts and be made pursuant to such
elections so that, after giving effect thereto, the aggregate principal amount
of all LIBOR Loans having the same Interest Period shall not be less than
$250,000.
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(g) Any LIBOR Loans may be continued as such upon the
expiration of an Interest Period with respect thereto by compliance by the
Co-Borrowers with the notice provisions contained in the definition of Interest
Period.
(h) No Revolving Credit Loan may be funded, converted to or
continued as a LIBOR Loan if the Interest Period would extend beyond the
Revolving Credit Termination Date. No Term Loan may be funded, converted to, or
continued as a LIBOR Loan if the Interest Period would extend beyond the Term
Loan Maturity Date.
(i) Notwithstanding any other provision of this Agreement,
during the occurrence and continuance of a Default hereunder, the Co-Borrowers
may not select Interest Periods longer than one month.
(j) Anything in this Agreement or in any Note to the contrary
notwithstanding, the obligation of the Co-Borrowers to make payments of interest
shall be subject to the limitation that payments of interest shall not be
required to be paid to the Bank to the extent that the charging or receipt
thereof would not be permissible under the law or laws applicable to the Bank
limiting the rates of interest that may be charged or collected by the Bank. If
the provisions of this Agreement or any Note would at any time otherwise require
payment by the Co-Borrowers to the Bank of any amount of interest in excess of
the maximum amount permitted by applicable law the interest payments shall be
reduced to the extent necessary so that the Bank shall not receive interest in
excess of such maximum amount. To the extent that, pursuant to the foregoing
sentence, the Bank shall receive interest payments hereunder or under any Note
in an amount less than the amount otherwise provided herein or in any Note, such
deficit (hereinafter called the "Interest Deficit") will accumulate and will be
carried forward (without interest) until the termination of this Agreement.
Interest otherwise payable to the Bank hereunder and under such Note for any
subsequent period shall be increased by such maximum amount of the Interest
Deficit that may be so added without causing the Bank to receive interest in
excess of the maximum amount then permitted by applicable law. The amount of the
Interest Deficit relating to any Note at the time of complete payment of such
Note and termination of the Commitment shall be cancelled and not paid.
(k) Interest on each Loan shall be payable to the Bank in
arrears on each Interest Payment Date for such Loan and shall be calculated on a
year of 360 days for the actual days elapsed.
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SECTION 3.02. Use of Proceeds. The proceeds of the Revolving Credit
Loans shall be used by the Co-Borrowers for general corporate purposes and to
finance ongoing working capital requirements. The proceeds of the Term Loans
shall be used by the Co-Borrowers to finance all or a portion of the cash
portion of the purchase price of Permitted Acquisitions and of the Green
Acquisition. The proceeds of the Equipment Loans shall be used by the
Co-Borrowers to finance the acquisition of equipment.
SECTION 3.03. Prepayments. The Co-Borrowers may repay the then
outstanding Loans, in whole or in part, without premium or penalty except as
provided in Section 3.08, upon not less than three Business Days' irrevocable
written notice to the Bank with respect to prepayments of LIBOR Loans or Fixed
Rate Loans and on the same Business Day irrevocable written notice with respect
to Prime Rate Loans, specifying the date and amount of repayment and whether
such repayment is of LIBOR Loans, Fixed Rate Loans or Prime Rate Loans or a
combination thereof, and if a combination thereof, the amount of repayment
allocable to each. If such notice is given, the Co-Borrowers shall make such
repayment and the payment amount specified in such notice shall be due and
payable, on the date specified therein, together with accrued interest to such
date on the amount repaid to the Bank. Partial prepayments of any Term Loan or
Equipment Loan pursuant to this Section 3.03 shall be (a) in an aggregate
principal amount of (i) $50,000 or whole multiples of $25,000 in excess thereof
with respect to Prime Rate Loans or Fixed Rate Loans and (ii) $250,000 or whole
multiples of $50,000 in excess thereof with respect to LIBOR Loans and (b)
applied to the remaining installments of principal of the Term Loan or Equipment
Loan, as the case may be, in inverse order of maturity.
SECTION 3.04. Fees and Discounting of Acceptances. (a) Term Loans. The
Co-Borrowers agree to pay to the Bank a non-refundable utilization fee of 1/2 of
1% of each Term Loan, which fee shall be payable on the date such Term Loan is
made.
(b) Letters of Credit. The Co-Borrowers agree to pay to the
Bank, with respect to each Sight Letter of Credit, upon the issuance of such
Letter of Credit an amount equal to 1/8 of 1% of the face amount of such Letter
of Credit (subject to a maximum of $2,000) and upon presentation of such Letter
of Credit for payment to the Bank, a payment commission equal to 1/8 of 1% on
the face amount of such Letter of Credit (subject to a maximum of $2,000). The
Co-Borrowers agree to pay to the Bank, with respect to each Standby Letter of
Credit a fee equal to 1% of the face amount of such Letter of Credit upon the
issuance of such Letter of Credit.
(c) Discount of Acceptances. The Bank agrees, subject to the
terms and conditions of this Agreement, that any date on which it creates a
Documentary Banker's Acceptance hereunder, it will discount such Documentary
Banker's Acceptance at the acceptance rate, as determined by the Bank, plus 1
1/2% per annum,
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by making available to the Co-Borrowers an amount in immediately available funds
equal to the face amount of such Documentary Acceptance less such discount.
(d) Additional Letter of Credit and Bankers Acceptance Fees.
The Co-Borrowers agree to pay the Bank, on demand, in addition to the amounts
set forth in clauses (b) and (c) alone, all standard fees and commissions
charged by the Bank with respect to the issuance and maintenance of Letters of
Credit (including, without limitation, amendments to letters of credit) and the
creation of bankers acceptances which fees and commissions may change from time
to time without notice to the Co-Borrowers.
SECTION 3.05. Inability to Determine Interest Rate. In the event that
the Bank shall have determined (which determination shall be conclusive and
binding upon the Co-Borrowers) that, by reason of circumstances affecting the
London interbank market, adequate and reasonable means do not exist for
ascertaining the Reserve Adjusted Libor applicable pursuant to Section 3.01(b)
for any requested Interest Period with respect to (a) the making of an LIBOR
Loan, (b) a LIBOR Loan that will result from the requested conversion of a Prime
Rate Loan into a LIBOR Loan, or (c) the continuation of a LIBOR Loan beyond the
expiration of the then current Interest Period with respect thereto, the Bank
shall forthwith give notice of such determination, confirmed in writing, to the
Co-Borrowers at least one Business Day prior to, as the case may be, the
requested Borrowing Date for such LIBOR Loan, the conversion date of such Prime
Rate Loan or the last day of such Interest Period. If such notice is given (a)
any LIBOR Loan that was to have been made shall be made as a Prime Rate Loan,
(b) any Prime Rate Loan that was to have been converted to a LIBOR Loan shall be
continued as a Prime Rate Loan and (c) any outstanding LIBOR Loan shall be
converted, on the last day of the then current Interest Period with respect
thereto, to a Prime Rate Loan. Until such notice has been withdrawn by the Bank,
which notice of withdrawal shall be given promptly after the Bank determines
that such conditions no longer exist, the Co-Borrowers shall not have the right
to request a LIBOR Loan or to convert a Prime Rate Loan to a LIBOR Loan.
SECTION 3.06. Illegality. Notwithstanding any other provisions herein,
if any introduction of or change in any law, regulation, treaty or directive or
in the interpretation or application thereof shall make it unlawful for the Bank
to make or maintain LIBOR Loans as contemplated by this Agreement, the Bank
shall forthwith give notice of such circumstances, confirmed in writing, to the
Co-Borrowers and (a) the commitment of the Bank to make and to allow conversion
to or continuations of LIBOR Loans shall forthwith be cancelled for the duration
of such illegality and (b) the Loans then outstanding as LIBOR Loans, if any,
shall be converted automatically to Prime Rate Loans on the next succeeding last
day of each Interest Period applicable to such LIBOR Loans or
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within such earlier period as may be required by law. The Co-Borrowers shall pay
to the Bank, upon demand, any additional amounts required to be paid pursuant to
Section 3.08 hereof.
SECTION 3.07. Other Events. (a) In the event that any introduction of
or change in any applicable law, regulation, treaty, order, directive or in the
interpretation or application thereof (including, without limitation, any
request, guideline or policy, whether or not having the force of law of, or from
any central bank or other governmental authority, agency or instrumentality and
including, without limitation, Regulation D), by any authority charged with the
administration or interpretation thereof shall occur, which:
(i) shall subject the Bank to any tax of any kind whatsoever
with respect to this Agreement, any Note, the Loans, or change the basis of
taxation of payments to the Bank of principal, interest, fees or any other
amount payable hereunder (other than any tax that is measured with respect to
the overall net income of the Bank or of a lending office of the Bank and that
is imposed by the United States of America, or any political subdivision or
taxing authority thereof or therein, or by the jurisdiction in which the Bank is
making or maintaining any Loan hereunder, or by any jurisdiction in which the
Bank is organized, has its principal office or is managed and controlled); or
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement (whether or not having
the force of law but excluding any of the foregoing including in the computation
of Reserve Adjusted LIBOR) against assets held by, or deposits or other
liabilities in or for the account of, advances or loans by, or other credit
extended by, or any other acquisition of funds by, any office of the Bank; or
(iii) shall impose on the Bank any other condition, or change
therein;
and the result of any of the foregoing is to increase the cost to the Bank of
making, renewing or maintaining advances or extensions of credit or to reduce
any amount receivable hereunder, in each case by an amount which the Bank deems
material, then, in any such case, the Co-Borrowers, shall pay the Bank, upon
demand, such additional amount or amounts as the Bank shall have determined will
compensate the Bank for such increased costs or reduction. The Bank's
determination of such additional amounts shall be conclusive absent manifest
error. This Section 3.07 shall survive the termination of this Agreement and
payment of the Notes.
(b) No failure on the part of the Bank to demand compensation
under clause (a) above on one occasion shall constitute a waiver of its right to
demand compensation on any other occasion and no failure on the part of the Bank
to promptly
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notify the Co-Borrowers shall in any way reduce any obligations of the
Co-Borrowers to the Bank under this Section 3.07, except that no compensation
shall be payable with respect to any event giving rise to a request for
compensation unless such request is made within 180 days after the Bank has
actual knowledge of such event.
SECTION 3.08. Indemnity. (a) The Co-Borrowers agree to indemnify the
Bank and to hold the Bank harmless from any loss, cost or expense which the Bank
sustains or incurs, including, without limitation, interest or fees payable by
the Bank to lenders of funds obtained by it in order to maintain LIBOR Loans
hereunder (but such loss shall not include any loss of profit), as a consequence
of (i) default by the Co-Borrowers in payment of the principal amount of or
interest on any LIBOR Loan, (ii) default by the Co-Borrowers to accept or make a
borrowing of a LIBOR Loan or a conversion or continuation of a LIBOR Loan after
the Co-Borrowers have requested such borrowing, conversion or continuation,
(iii) default by the Co-Borrowers in making any prepayment of any LIBOR Loan
after the Co-Borrowers give a notice in accordance with Section 3.03 of this
Agreement and/or (iv) the making of any payment or prepayment (whether mandatory
or optional) of a LIBOR Loan or the making of any conversion of a LIBOR Loan to
a Prime Rate Loan on a day which is not the last day of the applicable Interest
Period with respect thereto. The Bank's determination of such amounts shall be
conclusive absent manifest error.
(b) The Co-Borrowers agree that all prepayments of Fixed Rate
Loans hereunder shall be accompanied by interest accrued on the amount prepaid
through the date of prepayment together with a prepayment charge as liquidated
damages and not as a penalty equal to the net present value (as determined by
the Bank) of (a)(i) the difference (if positive) between the relevant Fixed Rate
(less 175 basis points) and the then current yield on U.S. Treasury Securities
with maturities approximately equal to the remaining time between the date of
prepayment and the maturity date of such Fixed Rate Loan (expressed as a
percentage), multiplied by (ii) the total amount of principal prepaid, divided
by (iii) 360 multiplied by (b) the actual number of days remaining until the
maturity date of such Fixed Rate Loan.
(c) This Section 3.08 shall survive termination of this
Agreement and payment of the Notes.
SECTION 3.09. Funds; Manner of Payment. (a) Unless otherwise specified
herein each payment and prepayment of principal of and interest on each Loan
shall be made by the Co-Borrowers not later than 12:00 noon, New York City time,
on the date on which it is payable.
(b) All payments made by the Co-Borrowers hereunder or under
any Note will be made without setoff, counterclaim, deductions or other defense.
All such payments will be made free and clear of,
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and without deduction or withholding for, any present or future taxes, levies,
imposts, duties, fees, assessments or other charges of whatever nature now or
hereafter imposed by any jurisdiction or by any political subdivision or taxing
authority thereof or therein (but excluding any tax imposed on or measured by
the net income of the Bank) and all interest, penalties or similar liabilities
with respect thereto (such non-excluded items being hereinafter collectively
referred to as "Taxes"). If any Taxes are so levied or imposed, the Co-Borrowers
will pay the full amount of such Taxes and such additional amounts as may be
necessary so that every payment of all amounts due hereunder or under any Note,
after withholding or deduction for or on account of any Taxes, will not be less
than the amount provided for herein or in such Note. The Co-Borrowers will
furnish to the Bank within 30 days after the date the payment of any Taxes is
due pursuant to applicable law certified copies of tax receipts evidencing such
payment by the Co-Borrowers. The Co-Borrowers will indemnify and hold harmless
the Bank, and reimburse the Bank upon its written request, for the amount of any
Taxes so levied or imposed and paid by the Bank, which indemnity shall survive
termination of this Agreement and payment of the Notes. All payments under this
Agreement shall be made in lawful money of the United States of America in
immediately available funds at the Payment Office of the Bank.
(c) In the event that the Bank assigns all or a portion of its
obligations hereunder to a bank that is organized outside of the United States,
such bank shall deliver to the Co-Borrowers on the date of the assignment and
from time to time as required for renewal under applicable law duly completed
copies of United States Internal Revenue Service Form 1001 or 4224 (or any
successor or additional forms), as appropriate, indicating in each case that
such bank is entitled to receive payments under this Agreement without any
deduction or withholding of any United States federal income taxes. Any bank
that is organized outside the United States that becomes a party to this
Agreement shall promptly notify the Co-Borrowers and each other bank of any
change in its Lending Office and upon written request of the Co-Borrowers such
bank shall, prior to the immediately following due date of any payment by the
Co-Borrowers or any Guarantor hereunder or under any other Loan Document,
deliver to the Co-Borrowers or such Guarantor, as the case may be, such
certificates, documents or other evidence, as required by the Code or Treasury
Regulations issued pursuant thereto, including without limitation Internal
Revenue Service Form 4224, Form 1001 and any other certificate or statement of
exemption required by Treasury Regulation Section 1.1441-4(a) or Section
1.1441-6(c) or any subsequent version thereof, properly completed and duly
executed by such bank establishing that such payment is (i) not subject to
withholding under the Code because such payment is effectively connected with
the conduct by such bank of a trade or business in the United States or (ii)
totally exempt from United States tax under a provision of an applicable tax
treaty. The Co-Borrowers shall be entitled to rely on such forms in their
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possession until receipt of any revised or successor form pursuant to this
Section 3.09(c). If a bank fails to provide a certificate, document or other
evidence required pursuant to this Section 3.09(c), then, unless it is no longer
entitled to such exemption due to a change in law, upon notice by the
Co-Borrowers to such bank (i) the Co-Borrowers shall be entitled to deduct or
withhold on payments to such bank as a result of such failure, as required by
law, and (ii) the Co-Borrowers shall not be required to make payments of
additional amounts with respect to such withheld Taxes pursuant to this Section
3.09(c) to the extent such withholding is required solely by reason of the
failure of such bank to provide the necessary certificate, document or other
evidence.
(d) The Bank shall directly charge all interest and principal
payments due in respect of the Loans and all fees payable hereunder to one or
more of the accounts of the Co-Borrowers at the Payment Office or other office
of the Bank.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
In order to induce the Bank to enter into this Agreement and to make
the Loans the Co-Borrowers represent and warrant to the Bank that:
SECTION 4.01. Organization, Corporate Powers, etc. Each of the
Co-Borrowers and their respective Subsidiaries (a) is a corporation duly
incorporated, validly existing and in good standing under the laws of the state
of its incorporation, (b) has the power and authority to own its properties and
to carry on its business as now being conducted, (c) is duly qualified to do
business in every jurisdiction wherein the failure to be so qualified could
reasonably be expected to, individually or in the aggregate, have a Material
Adverse Effect, (d) has the corporate power to execute and perform each of the
Loan Documents to which it is a party, (e) with respect to each Co-Borrower, has
the corporate power to borrow hereunder and to execute and deliver the Notes,
and (f) is in compliance in all material respects with all applicable federal,
state and local laws, rules and regulations the violation of which could
reasonably be expected to, individually or the aggregate, have a Material
Adverse Effect.
SECTION 4.02. Authorization of Borrowing, Enforceable Obligations. The
execution, delivery and performance by each Co-Borrower of this Agreement, and
the other Loan Documents to which it is a party, the borrowings by the
Co-Borrowers hereunder, and the execution, delivery and performance of each
Subsidiary of the Loan Documents to which such Subsidiary is a party, (a) have
been duly authorized by all requisite corporate action, (b) will not violate or
require any consent (other than consents as have been made or obtained and which
are in full force and effect) under (i) any provision of law applicable to any
Co-Borrower or any
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Subsidiary, any governmental rule or regulation, or the Certificate of
Incorporation, By-laws or other organizational documents, as applicable, of any
Co-Borrower or any Subsidiary or (ii) any order of any court or other agency of
government binding on any Co-Borrower or any Subsidiary or any indenture,
agreement or other instrument to which any Co-Borrower or any Subsidiary is a
party, or by which any Co-Borrower or any Subsidiary or any of its property is
bound, and (c) will not be in conflict with, result in a breach of or constitute
(with due notice and/or lapse of time) a default under, any such indenture,
agreement or other instrument, or result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any of the property or
assets of any Co-Borrower or any Subsidiary other than as contemplated by this
Agreement or the other Loan Documents. This Agreement and each other Loan
Document to which the Co-Borrowers and each Subsidiary is a party constitutes a
legal, valid and binding obligation of each Co-Borrower and each Subsidiary, as
the case may be, enforceable against each Co-Borrower and each Subsidiary, as
the case may be, in accordance with its terms except to the extent
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally or by general principles of equity, regardless of whether considered
in a proceeding in equity or at law.
SECTION 4.03. Financial Condition. (a) The Co-Borrowers have heretofore
furnished to the Bank (i) the audited Consolidated balance sheet of P&F and its
Subsidiaries and the related Consolidated statement of income, shareholders
equity and cash flow of P&F and its Subsidiaries, dated December 31, 1997,
audited by independent certified accountants for the fiscal year ended December
31, 1997, and (ii) the unaudited Consolidated balance sheet of P&F and its
Subsidiaries and the related Consolidated statements of income, shareholders
equity and cash flow of P&F and its Subsidiaries for the three month period
ended March 31, 1998. Such financial statements were prepared in conformity with
GAAP and fairly present the financial position and results of operations of P&F
and its Subsidiaries as of the date of such financial statements and for the
periods to which they relate and, since December 31, 1997, no event which has
had a Material Adverse Effect has occurred. The Co-Borrowers shall deliver to
the Bank a certificate by the Chief Financial Officer of the Co-Borrowers to
that effect on the Closing Date. As of the Closing Date, there are no material
obligations or liabilities contingent or otherwise of P&F or any of its
Subsidiaries which are not reflected or disclosed on such audited statements
other than obligations arising in the ordinary course of business since March
31, 1998.
(b) Each of the Co-Borrowers and the Corporate Guarantors is
Solvent (taking into account contribution rights).
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SECTION 4.04. Taxes. To the best knowledge of the Co-Borrowers, all
assessed deficiencies resulting from Internal Revenue Service examinations of
the federal income tax returns of the Co-Borrowers, or any of them, or any of
their Subsidiaries have been discharged or reserved against in accordance with
GAAP. To the best knowledge of the Co-Borrowers, each Co-Borrower and each of
their Subsidiaries has filed or caused to be filed all federal, state and local
tax returns which are required to be filed, and has paid or has caused to be
paid all taxes as shown on said returns or on any assessment received by them,
to the extent that such taxes have become due, except taxes which are being
contested in good faith and which are reserved against in accordance with GAAP.
SECTION 4.05. Title to Properties. Each Co-Borrower and each of their
Subsidiaries has good title to their respective properties and assets except for
such properties and assets as have been disposed of as no longer used or useful
in the conduct of their respective business or as have been disposed of in the
ordinary course of business.
SECTION 4.06. Litigation. (a) Except as set forth in Schedule VII,
there are no actions, suits or proceedings (whether or not purportedly on behalf
of the Co-Borrowers, or any of them, or any of their Subsidiaries) pending or,
to the knowledge of the Co-Borrowers, threatened against or affecting the
Co-Borrowers, or any of them, or any of their Subsidiaries at law or in equity
or before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, which
involve any of the transactions contemplated herein or which could reasonably be
expected to result in a Material Adverse Effect; and (b) none of the
Co-Borrowers nor any of their Subsidiaries is in default with respect to any
judgment, writ, injunction, decree, rule or regulation of any court or federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, which could reasonably be
expected to have a Material Adverse Effect.
SECTION 4.07. Agreements. None of the Co-Borrowers nor any of their
Subsidiaries is a party to any agreement or instrument or subject to any charter
or other corporate restriction or any judgment, order, writ, injunction, decree
or regulation which could reasonably be expected to have a Material Adverse
Effect. None of the Co-Borrowers nor any of their Subsidiaries is in default in
any manner which could reasonably be expected to have a Material Adverse Effect
in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any agreement or instrument to which it is
a party.
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SECTION 4.08. Compliance with ERISA. Each Plan is in compliance in all
material respects with ERISA; to the knowledge of the Co-Borrowers no Plan which
is a "Multi-Employer Plan (as defined in Section 4001(a)(3) of ERISA) is
insolvent (as defined in Section 4245 of ERISA) or in reorganization (as defined
in Section 4241 of ERISA), no Plan or Plans which are single employer Plans
(within the meaning of Section 4001(a)(15) of ERISA) have an Unfunded Current
Liability in excess of $100,000 in the aggregate, and no Plan which is a single
employer Plan (within the meaning of Section 4001(a)(15) of ERISA) has an
accumulated or waived funding deficiency within the meaning of Section 412 of
the Code; none of the Co-Borrowers nor any ERISA Affiliate has incurred any
material liability to or on account of a Plan pursuant to Section 515, 4062,
4063, 4064, 4201 or 4204 of ERISA or reasonably expects to incur any liability
under any of the foregoing sections on account of the prior termination of
participation in or contributions to any such Plan; to the knowledge of the
Co-Borrowers no proceedings have been instituted to terminate any Plan; to the
knowledge of the Co-Borrowers no condition exists which presents a risk to the
Co-Borrowers, or any ERISA Affiliate of incurring a liability to or on account
of a Plan pursuant to the foregoing provisions of ERISA and the Code in excess
of $250,000 in the aggregate; and no lien imposed under the Code or ERISA on the
assets of any Co-Borrower or any of their ERISA Affiliates exists or, to the
knowledge of the Co-Borrowers, is likely to arise on account of any Plan.
SECTION 4.09. Federal Reserve Regulations; Use of Proceeds. (a) None of
the Co-Borrowers nor any of their Subsidiaries is engaged principally in, nor
has as one of its important activities, the business of extending credit for the
purpose of purchasing or carrying any "margin stock" (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System of the
United States, as amended from time to time). If requested by the Bank, the
Co-Borrowers will, and will cause each of their Subsidiaries to, furnish to the
Bank such a statement on Federal Reserve Form U- 1.
(b) No part of the proceeds of any Loan will be used, whether
directly or indirectly, and whether immediately, incidentally or ultimately, (i)
to purchase or to carry margin stock or to extend credit to others for the
purpose of purchasing or carrying margin stock, or to refund indebtedness
originally incurred for such purposes, or (ii) for any purpose which violates or
is inconsistent with the provisions of the Regulations T, U, or X of the Board
of Governors of The Federal Reserve System.
(c) The proceeds of the each Loan shall be used solely for the
purposes permitted under Section 3.02.
SECTION 4.10. Approvals. No registration with or consent or approval
of, or other action by, any federal, state or other governmental authority or
regulatory body or any other Person is
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required in connection with the execution, delivery and performance of this
Agreement by any of the Co-Borrowers or any of their Subsidiaries, or with the
execution and delivery of the other Loan Documents to which it is a party or,
with respect to the Co-Borrowers, the borrowings hereunder other than
registrations, consents and approvals received prior to the date hereof and
disclosed to the Bank and which are in full force and effect or as may be
required in the perfection or continuation of perfection of any security
interest in any collateral for the Loans or in connection with any sale of
collateral for the Loans.
SECTION 4.11. Subsidiaries. Attached hereto as Schedule I is a true,
correct and complete list as of the Closing Date of all of the Co-Borrower's
Subsidiaries and indicating, as to each Subsidiary, its name, the jurisdiction
of its incorporation, its shareholders or other owners of an interest in such
Subsidiary and the number of outstanding shares or other ownership interest
owned by each shareholder or other owner of an interest.
SECTION 4.12. Hazardous Materials. Except as may be relevant with
respect to the matters set forth on Schedule VIII, the Co-Borrowers and each of
their Subsidiaries are in compliance in all material respects with all
applicable Environmental Laws and none of the Co-Borrowers nor any of their
Subsidiaries has used Hazardous Materials on, from, or affecting any property
now owned or occupied or hereafter owned or occupied by any of the Co-Borrowers
or any of their Subsidiaries in any manner which violates any applicable
Environmental Law. To the best knowledge of the Co-Borrowers, no prior owner of
any such property or any tenant, subtenant, prior tenant or prior subtenant have
used Hazardous Materials on, from, or affecting such property in any manner
which violates any applicable Environmental Law in any material respect.
SECTION 4.13. Investment Company Act. None of the Co-Borrowers nor any
of their Subsidiaries is an "investment company", or a company "controlled" by
an "investment company", within the meaning of the Investment Company Act of
1940, as amended.
SECTION 4.14. Security Agreement. Each Security Agreement when executed
by the Co-Borrowers or Corporate Guarantor, as applicable, shall pursuant to its
terms constitute a valid and continuing lien on and security interest in the
collateral referred to in such Security Agreement in favor of the Bank.
SECTION 4.15. No Default. No event has occurred and is continuing and
no condition exists which constitutes a Default or an Event of Default.
SECTION 4.16. Permits and Licenses. The Co-Borrowers and each of their
Subsidiaries has all permits, licenses, certifications, authorizations and
approvals required for it lawfully to own and operate their respective
businesses, except
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where the failure to do so could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
SECTION 4.17. Compliance with Law. The Co-Borrowers and each of their
Subsidiaries are in compliance with all laws, rules, regulations, orders and
decrees which are applicable to them, or to any of their respective properties,
except where the failure to be in compliance could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
SECTION 4.18. Disclosure. None of the reports, financial statements,
certificates or other documents, certificates or other written statements
furnished to the Bank by or on behalf of the Co-Borrowers, or any of them, or
any of their Subsidiaries hereunder or any other Loan Document for use in
connection with the transactions contemplated by this Agreement or any other
Loan Document taken as a whole contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances in
which they were made.
SECTION 4.19. Year 2000 Compliance. Any reprogramming or other
corrective modifications required to permit the proper functioning, in and
following the year 2000, of (i) the computer systems of the Co-Borrowers and
each of their Subsidiaries and (ii) equipment containing embedding microchips
(including systems and equipment supplied by others or with which systems of the
Co-Borrowers and each of their Subsidiaries interface) and the testing of all
such systems and equipment, as so reprogrammed, will be substantially completed
by January 1, 1999 except to the extent that the failure to do so is not
reasonably likely to have a Material Adverse Effect. The cost to the
Co-Borrowers and their Subsidiaries of such reprogramming, modifications and
testing and of the reasonably foreseeable consequences of year 2000 to the
Co-Borrowers and their Subsidiaries (including, without limitation,
reprogramming errors and the failure of others' systems or equipment) will not
result in the occurrence of an Event of Default or have a Material Adverse
Effect. Except for such of the reprogramming and modifications referred to in
the preceding sentence as may be necessary, the computer and management
information systems of the Co-Borrowers are, and with ordinary course upgrading
and maintenance, will continue for the term of the Notes to be, sufficient to
permit the Co-Borrowers and their Subsidiaries to conduct their business without
any Material Adverse Effect.
SECTION 4.20. Pledge Agreement. The Pledge Agreement, when executed by
P&F, shall pursuant to its terms, pledge and grant to the Bank a first security
interest in all of P&F's right, title and interest in and to all of the issued
and outstanding shares of capital stock of each of its Subsidiaries.
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SECTION 4.21. Inventory at Outside Locations. The Co-Borrowers'
inventory is located at the addresses set forth Schedule V hereto or at another
Acceptable Locations. The net present value of the inventory of (i) Florida
Pneumatic held at the locations set forth in Schedule V hereto, will not be
greater than $1,100,000, in the aggregate and (ii) Embassy held at the locations
set forth in Schedule V hereto, will not be greater than $50,000, in the
aggregate. A location is an "Acceptable Location" if (a) the Bank has been given
at least 30 days prior written notice of such location and (b) all action deemed
necessary or desireable by the Bank (including, without limitation, notice to
bailees, landlord waivers, access agreements, and filing of Uniform Commercial
Code financing statements) has been taken to create and maintain a first
priority perfected security interest in favor of the Bank securing the
Obligations in the inventory located at such location.
ARTICLE V
CONDITIONS OF LENDING
SECTION 5.01. Conditions to the Initial Loan. The obligation of the
Bank to make the initial Loan hereunder is subject to the following conditions
precedent:
(a) Revolving Credit Note. On or prior to the Closing Date, the Bank
shall have received the Revolving Credit Note duly executed by the Co-Borrowers.
(b) Corporate Guaranties. On or prior to the Closing Date, the Bank
shall have received a Corporate Guaranty duly executed by each Corporate
Guarantor.
(c) Security Agreements. On or prior to the Closing Date, the Bank
shall have received the Security Agreements, duly executed by each Co-Borrower
and each Corporate Guarantor.
(d) UCC-1 Financing Statements. On or prior to the Closing Date, the
Bank shall have received UCC-1 financing statements in a form acceptable to the
Bank for such jurisdictions at the Bank determines are necessary to perfect the
liens created by the Security Agreements.
(e) Opinion of Counsel. On or prior to the Closing Date, the Bank shall
have received the favorable written opinion of counsel for the Co-Borrowers and
the Corporate Guarantors dated the date thereof, substantially in the form of
Exhibit H attached hereto.
(f) Supporting Documents. The Bank shall have received on or prior to
the Closing Date (i) a certificate of good standing for each Co-Borrower and
each Corporate Guarantor from the secretary of the state of their respective
jurisdiction of incorporation dated as of a recent date; (ii) certified copies
of the Certificate of
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Incorporation and By-laws of each Co-Borrower and each Corporate Guarantor;
(iii) a certificate of the Secretary or an Assistant Secretary of each
Co-Borrower and each Corporate Guarantor dated the Closing Date and certifying
(a) that neither the Certificates of Incorporation nor the By-laws of such
Co-Borrower or such Corporate Guarantor has been amended since the date of their
certification; (b) that attached thereto is a true and complete copy of
resolutions adopted by the Board of Directors of such Co-Borrower and by the
Board of Directors and the shareholders of such Corporate Guarantor authorizing
the execution, delivery and performance of each Loan Document to which it is a
party and, with respect to each Co-Borrower, the borrowings hereunder; and (c)
the incumbency and specimen signature of each officer of such Co-Borrower and
such Corporate Guarantor executing each Loan Document to which such Co-Borrower
or Corporate Guarantor is a party and any certificates or instruments furnished
pursuant hereto or thereto, and a certification by another officer of each
Co-Borrower and each Corporate Guarantor as to the incumbency and signature of
the Secretary or Assistant Secretary of such Co-Borrower and such Corporate
Guarantor; and (iv) such other documents as the Bank may reasonably request.
(g) Insurance. The Bank shall have received on or prior to the Closing
Date a certificate of insurance from an independent insurance broker confirming
the insurance required to be maintained pursuant to Section 6.01 hereof.
(h) Assets Free from Encumbrances. The Bank shall have received on or
prior to the Closing Date evidence satisfactory to the Bank that the accounts
receivable, inventory, equipment and all other assets of each Co-Borrower and
each Corporate Guarantor are free and clear of all Liens, except those Liens
permitted pursuant to Section 7.01.
(i) No Material Adverse Changes. There shall not have occurred any
event which could reasonably be expected to cause a Material Adverse Effect.
(j) Fees. The Co-Borrowers shall have paid the fees payable on the
Closing Date referred to in Section 3.04 and all costs and expenses incurred by
the Bank in connection with the negotiation, preparation and execution of the
Loan Documents and the creation and perfection of the Liens granted pursuant to
the Security Agreements.
(k) Certain Agreements. Receipt and satisfactory review by the Bank of
(i) all shareholder agreements, voting trust agreements, employment agreements,
consulting agreements, management agreements and any agreement between the
Co-Borrowers, or any of them, their Subsidiaries, and any of their respective
shareholders, and (ii) all agreements (excluding leases of real
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property) governing the Existing Indebtedness of any Co-Borrower and each
Corporate Guarantor.
(l) ERISA. Receipt and satisfactory review by the Bank of (i) the most
recent audit, if any, of the pension plans (within the meaning of Section 3(2)
of ERISA) maintained by the Co-Borrowers and their ERISA Affiliates which are
subject to audit requirements under ERISA, filed by independent qualified public
accountants, (ii) the documents comprising all Plans (except Multiemployer Plans
within the meaning of Section 4001(a)(3) of ERISA) and (iii) confirmation
satisfactory to the Bank that (a) such plans are funded in accordance with any
applicable minimum statutory requirements for funding under Section 312 of the
Code, (b) no notice of a Reportable Event has occurred with respect to any Plan
and (c) no termination of, or withdrawal from, any of such Plans has occurred or
is contemplated that could reasonably be expected to result in any liability on
the part of any Co-Borrower or any ERISA Affiliate in excess of $250,000.
(m) Lease Schedule. Prior to the Closing Date the Bank shall have
received a schedule of all the lease agreements to which any Co-Borrower or any
Corporate Guarantor is a party (other than leases of real property, leases of
motor vehicles and leases of equipment which do not require an annual lease
expenditure in excess of $50,000) and the Bank shall have been satisfied with
its review thereof or, in lieu thereof, a copy of each lease agreement shall be
delivered to the Bank prior to the Closing Date.
(n) Financial Statements of the Co-Borrowers and their Subsidiaries.
The Bank shall have received prior to the Closing Date the management prepared
consolidated and consolidating financial statements of the Co-Borrowers and
their Subsidiaries for the three month interim period ended March 31, 1998, all
of the foregoing statements in form, substance and detail satisfactory to the
Bank.
(o) Payment of Indebtedness. On the Closing Date, the Bank shall have
received evidence satisfactory to it that the Existing Indebtedness of the
Co-Borrowers shall be paid in full simultaneously with the consummation of the
transactions contemplated hereby.
(p) Completion of Proceedings. All corporate and other proceedings, and
all documents, instruments and other legal matters in connection with the
transactions contemplated by the Loan Documents shall be reasonably satisfactory
in form and substance to the Bank and its counsel.
(q) Other Information, Documentation. The Bank shall have received such
other and further information and documentation as it may reasonably require,
including, but not limited, to any information or documentation relating to
compliance by the Co-
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Borrower, or any of them, or any of their Subsidiaries with the requirements of
all federal, state and local laws, ordinances, rules, regulations or policies
governing the use, storage, treatment, transportation, refinement, handling,
production or disposal of Hazardous Materials.
(r) Pledge Agreement. On or prior to the Closing Date, the Bank shall
have received the Pledge Agreement, duly executed by P&F along with all share
certificates evidencing the shares pledged thereunder and stock powers executed
in blank.
SECTION 5.02. Conditions to all Loans. The obligation of the Bank to
make each Loan hereunder is subject to the conditions precedent set forth in
Section 5.01, 5.03 and 5.04, to the extent applicable, and the following
conditions precedent:
(a) Representations and Warranties. The representations and warranties
by the Co-Borrowers and each Corporate Guarantor pursuant to this Agreement and
the Loan Documents to which each is a party shall be true and correct on and as
of the Borrowing Date with the same effect as though such representations and
warranties had been made on and as of the Borrowing Date (unless limited to an
earlier date, in which event they will be true as of such earlier date).
(b) No Default. No Default or Event of Default shall have occurred and
be continuing at the time of each borrowing hereunder or will result after
giving effect to the Loan requested.
(c) Notice of Borrowing. The Bank shall have received a Notice of
Borrowing duly executed by an Executive Officer of the Co-Borrowers with respect
to the requested Loan.
Each Notice of Borrowing and the acceptance by the Co-Borrowers of the
proceeds of each Loan shall constitute a representation and warranty that the
statements contained in Sections 5.02(a) and 5.02(b) above are true and correct
as of the date of such Loan.
SECTION 5.03. Conditions to Each Term Loan. The obligation of the Bank
to make each Term Loan is subject to the conditions precedent set forth in
Sections 5.01 and 5.02 and the following conditions precedent:
(a) Term Loan Note. The Co-Borrowers shall have delivered to the Bank a
fully executed Term Loan Note, which shall be dated the date of such Term Loan,
be stated to mature in consecutive quarterly installments of principal, have a
term not to exceed seven (7) years and shall bear interest for a period from the
date such Loan is made on the unpaid principal amount thereof at the applicable
rates per annum specified herein.
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(b) Consideration. The aggregate consideration, including, without
limitation, cash, notes, stock, transaction costs, guarantees and other
contingent obligations, liabilities and Indebtedness, in the event of an
acquisition of assets, liabilities assumed, compensation to be paid to former
shareholders of the seller pursuant to employment agreements, consulting
agreements or non-compete agreements, fees, earn-out provisions, any deferred
portions of the purchase price or any other costs paid in connection with any
and all such acquisitions (other than the Green Acquisition), shall not exceed
$5,000,000.
(c) Security Agreement and Guaranty. The Bank shall have received, to
the extent not previously received, a duly executed Security Agreement executed
by the Person acquired in the Permitted Acquisition, and a Corporate Guaranty
duly executed by such Person.
(d) Receipts of Consents. The Bank shall have been reasonably satisfied
that all material third party and governmental consents and approvals, necessary
in connection with the consummation of the Permitted Acquisition shall have been
obtained.
(e) Assets Free From Encumbrances. The Bank shall have received
evidence satisfactory to it that the shares or other interest in the Person, or
the assets of the Person, which is the subject of the Permitted Acquisition are
free and clear of all Liens, except those Liens permitted pursuant to Section
7.01, including, without limitation, with respect to the acquisition of shares
or other equity interests, free of any restrictions on transfer other than
restrictions applicable to the sale of securities under the federal and state
securities laws and regulations generally.
(f) Pro Forma Financial Statements. The Bank shall have received 5 days
prior to the date of such Loan, pro forma balance sheet and income statements of
P&F and its Subsidiaries (after giving effect to the Permitted Acquisition)
demonstrating that upon consummation of the Permitted Acquisition, the
Co-Borrowers will be in compliance with the financial condition covenants
contained in Section 7.12 hereof.
(g) Projections. The Bank shall have received 5 days prior to the date
of such Loan combined projections for the Co-Borrowers and the Person, or the
assets of the Person, which is the subject of the Permitted Acquisition for a
period of five (5) years, which projections shall be in form reasonably
satisfactory to the Bank.
(i) Acquisition Documents. The Bank shall have been provided 10 days
prior to the date of such Loan with copies of the relevant purchase agreement
and shall be satisfied in all respects with the term of the proposed
acquisition.
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(j) Pledge of Stock. The Bank shall have received to the extent not
previously received, (i) an amended Schedule A to the Pledge Agreement adding a
reference to the stock of the Person acquired in the Permitted Acquisition and
(ii) the applicable share certificate(s) and stock power(s) executed in blank,
with respect to such pledged stock.
SECTION 5.04. Additional Condition with respect to each Equipment Loan.
The obligation of the Bank to make each Equipment Loan hereunder is subject to
the conditions precedent set forth in Section 5.01 and 5.02 and to the following
conditions precedent.
(a) Equipment Loan Note. The Co-Borrowers shall have delivered to the
Bank an Equipment Loan Note which shall be dated the date of such Equipment
Loan, be stated to mature in consecutive monthly or quarterly installments of
principal, have a term not to exceed five (5) years and shall bear interest for
a period from the date such Loan is made on the unpaid principal amount thereof
at the applicable rates per annum specified herein.
(b) Equipment Free from Encumbrances. The Bank shall have been provided
a description of the equipment to be acquired with the proceeds of such
Equipment Loan and shall be satisfied that such equipment is being acquired free
and clear of all Liens, other than Liens permitted pursuant to Section 7.01.
(c) Security Interest of Bank. The Bank shall be satisfied that the
equipment to be acquired with the proceeds of such Equipment Loan shall be
subject to the Lien granted to the Bank pursuant to the Security Agreements and
the Co-Borrowers shall take all steps determined by the Bank to be necessary or
desirable to perfect the Bank's Liens on such equipment.
ARTICLE VI
AFFIRMATIVE COVENANTS
Each Co-Borrower covenants and agrees with the Bank that so long as the
Revolving Credit Commitment or the Term Loan Commitment shall remain in effect
or any of the principal of or interest on any Note or any other Obligations
shall be unpaid it will, and will cause each of its Subsidiaries to:
SECTION 6.01. Corporate Existence, Properties, etc. Do or cause to be
done all things necessary to preserve and keep in full force and effect its
corporate existence; at all times maintain, preserve and protect all franchises
and trade names and preserve all of its property, except to the extent that
failure to do so is not reasonably likely to have a Material Adverse Effect; and
keep the same in good repair, working order and condition, ordinary wear and
tear excepted, and from time to time make, or cause to be made, all needful and
proper repairs, renewals, replacements, betterments
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and improvements thereto so that the business carried on in connection therewith
may be properly and advantageously conducted at all times; at all times keep its
insurable properties adequately insured and maintain (a) insurance to such
extent and against such risks, including fire, as is customary with companies in
the same or similar businesses, (b) workmen's compensation insurance in the
amount required by applicable law, (c) public liability insurance, which shall
include product liability insurance, in the amount customary with companies in
the same or similar business against claims for personal injury or death or
properties owned, occupied or controlled by it, and (d) such other insurance as
may be required by law or as may be reasonably required in writing by the Bank.
Each Co-Borrower shall provide to the Bank promptly upon receipt of written
request therefor, evidence of the annual renewal of each such policy.
SECTION 6.02. Payment of Indebtedness, Taxes, etc. (a) Pay all
indebtedness and obligations, now existing or hereafter arising, as and when due
and payable except where the failure to make such payment pending such contest
could not reasonably be expected to have Material Adverse Effect, and (b) pay
and discharge or cause to be paid and discharged promptly all taxes, assessments
and government charges or levies imposed upon it or upon its income and profits,
or upon any of its property, real, personal or mixed, or upon any part thereof,
before the same shall become in default, as well as all lawful claims for labor,
materials and supplies or otherwise which, if unpaid, might become a Lien or
charge upon such properties or any part thereof; provided, however, that none of
the Co-Borrowers nor any of their Subsidiaries shall be required to pay and
discharge or cause to be paid and discharged any such tax, assessment, charge,
levy or claim so long as the validity thereof shall be contested in good faith
by appropriate proceedings, and the relevant Co-Borrower or Subsidiary, as the
case may be, shall have set aside on its books adequate reserves determined in
accordance with GAAP with respect to any such tax, assessment, charge, levy or
claim so contested and; further, provided that, subject to the foregoing
proviso, each Co-Borrower and each of its Subsidiaries will pay or cause to be
paid all such taxes, assessments, charges, levies or claims upon the
commencement of proceedings to foreclose any lien which has attached as security
therefor.
SECTION 6.03. Financial Statements, Reports, etc. Furnish to the Bank:
(a) (i) as soon as available, but in any event within 90 days
after the end of each fiscal year of the Co-Borrowers, a copy of the
audited consolidated balance sheet of P&F and its Subsidiaries as of
the end of such year and the related audited consolidated statements of
income, shareholders equity and cash flow for such year, setting forth
in each case in comparative form the respective figures for the
previous
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fiscal year end, and accompanied by a report thereon of BDO Siedman,
LLP or other independent certified public accountants of recognized
standing selected by the Co-Borrowers and reasonably satisfactory to
the Bank (the "Auditor"), which report shall be unqualified; and (ii)
as soon as available, but in any event within 90 days after the end of
each fiscal year of P&F and each of its Subsidiaries, a copy of the
management prepared consolidating financial statements of the
Co-Borrowers setting forth in comparative form the respective figures
for the previous fiscal year end and which support the financial
statements delivered pursuant to clause (i), in each case of (i) and
(ii) prepared in accordance with GAAP, applied on a consistent basis
and with respect to the statements referred to in clause (ii)
accompanied by a certificate to that effect executed by the Chief
Financial Officer;
(b) as soon as available, but in any event not later than 60
days after the end of each quarterly period of each fiscal year of the
Co-Borrowers, a copy of the unaudited interim consolidated and
consolidating balance sheet of P&F and its Subsidiaries as of the end
of each such quarter and the related unaudited interim consolidated and
consolidating statements of income, shareholders equity and cash flow
for such quarter and the portion of the fiscal year through such date
and setting forth in each case in comparative form the respective
figures for the corresponding date and period in the previous fiscal
year, in each case prepared by the Chief Financial Officer in
accordance with GAAP, applied on a consistent basis and accompanied by
a certificate to that effect executed by the Chief Financial Officer;
(c) a certificate prepared and signed by the Chief Financial
Officer with each delivery required by (a) and (b), as to whether or
not, as of the close of such preceding period and at all times during
such preceding period, the Co-Borrowers were in compliance with all
the provisions in this Agreement, showing computation of financial
covenants and quantitative negative covenants, and if the Auditor or
Chief Financial Officer, as the case may be, shall have obtained
knowledge of any default in such compliance or notice of such default,
it shall disclose in such certificate such default or defaults or
notice thereof and the nature thereof, whether or not the same shall
constitute an Event of Default hereunder;
(d) at all times indicated in (a) above, a copy of the
management letter, if any, prepared by the Auditor;
(e) promptly after filing thereof, copies of all regular and
periodic financial information, proxy materials and other information
and reports which P&F or any of its Subsidiaries shall file with the
Securities and Exchange Commission;
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(f) simultaneously with the delivery of the financial
statements referred to in clauses (a) and (b) above, quarterly accounts
receivable aging reports for the Co-Borrowers, in form satisfactory to
the Bank;
(g) promptly after submission to any government or regulatory
agency, all documents and information furnished to such government or
regulatory agency other than such documents and information prepared in
the normal course of business and which could not reasonably be
expected to result in any materially adverse action to be taken by such
agency; and
(h) promptly, from time to time, such other information
regarding the operations, business affairs and condition, financial or
otherwise, of the Co-Borrowers, or any of them, or any of their
Subsidiaries as the Bank may reasonably request.
SECTION 6.04. Access to Premises and Records. Maintain financial
records in accordance with GAAP and permit representatives of the Bank upon
reasonable written prior notice to have access during normal business hours to
the premises of each Co-Borrower and each of their Subsidiaries upon request,
and to examine and make excerpts from the minute books, books of accounts,
reports and other records and to discuss the affairs, finances and accounts of
each Co-Borrower and their Subsidiaries with their respective executive officers
or with their respective independent accountants. The Co-Borrowers shall be
entitled to have a representative present at any meetings with such accountants.
SECTION 6.05. Notice of Adverse Change. Promptly notify the Bank in
writing of (a) any change in the business or the operations of the Co-Borrowers,
or any of them, or any of their Subsidiaries which could reasonably be expected
to have a Material Adverse Effect, disclosing the nature thereof, and (b) any
information which indicates that any financial statements which are the subject
of any representation contained in this Agreement, or which are furnished to the
Bank pursuant to this Agreement, fail, in any material respect, to present
fairly, as of the date thereof and for the periods covered thereby, the
financial condition and results of operations purported to be presented therein,
disclosing the nature thereof.
SECTION 6.06. Notice of Default. Promptly notify the Bank of any
Default or Event of Default which notice shall include a written statement as to
such occurrence, specifying the nature thereof and the action which is proposed
to be taken with respect thereto.
SECTION 6.07. Notice of Litigation. Give the Bank prompt written notice
of any action, suit or proceeding at law or in equity or by or before any
governmental instrumentality or other
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agency which, if adversely determined against the Co-Borrowers, or any of them,
or any of their Subsidiaries on the basis of the allegations and information set
forth in the complaint or other notice of such action, suit or proceeding, or in
the amendments thereof, if any, would (a) materially impair the right of the
Co-Borrowers, or any of them, or any of their Subsidiaries to carry on their
business substantially as now conducted or (b) have a Material Adverse Effect.
SECTION 6.08. ERISA. Promptly deliver to the Bank a certificate of the
Chief Financial Officer of the Co-Borrowers setting forth details as to such
occurrence and such action, if any, which the Co-Borrowers, or any of them, or
any ERISA Affiliate is required or proposes to take, together with any notices
required to be given to or filed with or by (as applicable) the Co-Borrowers, or
any of them, any ERISA Affiliate, the PBGC, a Plan participant or the Plan
Administrator, with respect thereto: that a Reportable Event has occurred with
respect to a Plan, that an accumulated funding deficiency (as defined in Section
412 of the Code) has been incurred or an application has been made to the
Secretary of the Treasury for a waiver or modification of the minimum funding
standard (including of any required installment payments) or for an extension of
any amortization period under Section 412 of the Code with respect to a Plan
that is a single employer plan (within the meaning of Section 4001(a)(15) of
ERISA), that a Plan has been terminated, reorganized, partitioned or declared
insolvent under Title IV of ERISA, that one or more Plans that are Single
Employer Plans within the meaning of Section 4001(a)(15) of ERISA) have an
Unfunded Current Liability in excess of $100,000 in the aggregate, that
proceedings have been instituted to terminate a Plan, that a proceeding has been
instituted pursuant to Section 515 of ERISA to collect a delinquent contribution
to a Plan, or that the Co-Borrowers, or any of them, or any ERISA Affiliate will
incur any liability (including any contingent or secondary liability) to or on
account of the termination of or withdrawal from a Plan under Section 4062,
4063, 4064, 4201 or 4204 of ERISA. Upon request of the Bank, the Co-Borrowers
will deliver to the Bank a complete copy of the annual report (Form 5500) of
each Plan that is a single employer Plan (within the meaning of Section
4001(a)(15) of ERISA), required to be filed with the Internal Revenue Service.
In addition to any certificates or notices delivered to the Bank pursuant to the
first sentence hereof, copies of annual reports and any other notices received
by the Co-Borrowers, or any of them, or any of their Subsidiaries required to be
delivered to the Bank hereunder shall be delivered to the Bank no later than 10
days after the later of the date such report or notice has been filed with the
Internal Revenue Service or the PBGC, given to Plan participants or received by
the Co-Borrowers, or any of them, or any of the Subsidiaries.
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SECTION 6.09. Compliance with Applicable Laws. Comply in all material
respects with the requirements of all applicable laws, rules, regulations and
orders of any governmental authority.
SECTION 6.10. Subsidiaries. Promptly notify the Bank prior to the
occurrence thereof, of the creation, establishment or acquisition, in any
manner, including without limitation, as a result of a Permitted Acquisition, of
any Subsidiary of any Co-Borrower or any Corporate Guarantor not existing on
the date hereof. The Co-Borrowers shall cause each Subsidiary to execute a
Corporate Guaranty and a Security Agreement, in each case, concurrently with the
creation, establishment or acquisition of such Subsidiary and in connection
therewith shall provide to the Bank the supporting documents identified in
Section 5.01(f) in each case with respect to such Subsidiary, together with a
favorable written opinion of counsel to such Subsidiary in form and substance
satisfactory to the Bank and such counsel, as to the due execution, delivery and
enforceability of such documents and such other usual and customary matters
(with usual and customary exceptions) as the Bank may reasonably request. All
costs and expenses incurred by the Bank or its representatives in connection
with the execution of such Corporate Guaranties or Security Agreements shall be
for the account of the Co-Borrowers, including the Bank's reasonable attorneys'
fees.
SECTION 6.11. Default in Other Agreements. Promptly notify the Bank of
any default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or instrument to
which the Co-Borrowers, or any of them, or any of their Subsidiaries is a party,
which default could reasonably be expected to have a Material Adverse Effect.
SECTION 6.12. Environmental Laws. Comply in all material respects with
the requirements of all applicable Environmental Laws, provide to the Bank all
documentation in connection with such compliance that the Bank may reasonably
request, and defend, indemnify, and hold harmless the Bank, its employees,
agents, officers, and directors, from and against any claims, demands,
penalties, fines, liabilities, settlements, damages, costs, or expenses of
whatever kind or nature, known or unknown, contingent or otherwise, arising out
of, or in any way related to, (a) the presence, disposal, release, or threatened
release of any Hazardous Materials on any property at any time owned or occupied
by the Co-Borrowers, or any of them, or any of their Subsidiaries; (b) any
personal injury (including wrongful death) or property damage (real or personal)
arising out of or related to such Hazardous Materials; (c) any lawsuit brought
or threatened, settlement reached, or government order relating to such
Hazardous Materials; and/or (d) any violation of laws, orders, regulations,
requirements, or demands of government authorities, which are based upon or in
any way related to such Hazardous Materials including, without
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limitation, reasonable attorney and consultant fees, investigation and
laboratory fees, court costs, and litigation expenses.
SECTION 6.13. Outside Inventory Locations. The Co-Borrowers shall keep
all inventory at the location(s) set forth on Schedule V hereto and shall not
remove any inventory from such location(s) without the prior written consent of
the Bank, except to an Acceptable Location (as described in Section 4.21 above)
with respect to the sale of inventory in the ordinary course of business. In
addition, at any time after November 1, 1998, Florida Pneumatic shall keep all
of its inventory at its Jupiter, Florida location or at an Acceptable Location.
ARTICLE VII
NEGATIVE COVENANTS
Each Co-Borrower covenants and agrees with the Bank that so long as the
Revolving Credit Commitment or the Term Loan Commitment shall remain in effect
or any of the principal of or interest on any Note or any other Obligations
shall be unpaid, it will not, and will not cause or permit any of its
Subsidiaries, directly or indirectly, to:
SECTION 7.01. Liens. Incur, create, assume or suffer to exist any Lien
on any of their respective assets now or hereafter owned, other than:
(a) Liens existing on the date hereof as set forth on Schedule
II attached hereto including any renewals or extensions thereof, or, with
respect to the liens of Barnett Bank of Palm Beach County or MetLife Capital
Financial Corporation on the real property of Florida Pneumatic and Embassy,
respectively, any refinancings of such debt with the same or new lenders;
provided that no such Lien is extended to cover any additional property and that
the amount of Indebtedness secured thereby is not increased;
(b) Liens for taxes, assessments or other governmental charges
or levies not yet delinquent or which are being contested in good faith by
appropriate proceedings, provided, however, that adequate reserves with respect
thereto are maintained on the books of the relevant Co-Borrower or Subsidiary in
accordance with GAAP;
(c) carriers', warehousemans', mechanics', suppliers, or other
like Liens arising in the ordinary course of business and not overdue for a
period of more than 45 days or which are being contested in good faith by
appropriate proceedings in a manner which will not jeopardize or diminish in any
material respect the interest of the Bank in any of the collateral subject to
the Security Agreements;
(d) Liens incurred or deposits to secure the performance of
tenders, bids, trade contracts, leases, statutory obligations,
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surety, performance and appeal bonds, and other obligations of a similar nature
incurred in the ordinary course of business;
(e) any attachment, judgment or similar Lien arising in
connection with any court or governmental proceeding provided that the execution
or other enforcement of such Lien is effectively stayed;
(f) easements, rights of way, restrictions and other similar
charges or encumbrances which in the aggregate do not materially interfere with
the occupation, use and enjoyment by the Co-Borrowers, or any of them, or any of
their Subsidiaries of the property or assets encumbered thereby in the normal
course of their respective business or materially impair the value of the
property subject thereto;
(g) deposits under workmen's compensation, unemployment
insurance and social security laws;
(h) purchase money Liens for fixed or capital assets,
including obligations under any Capital Lease; provided, in each case, (x) no
Event of Default or event which, upon notice or lapse of time or both, would
constitute an Event of Default shall have occurred and be continuing or shall
occur after the grant of the proposed Lien, and (y) such purchase money Lien
does not exceed 100% of the purchase price and encumbers only the property being
acquired and such other property that may have been previously acquired from
such Person or an affiliate of such Person, so long as such Lien does not, at
any time, extend to any items of collateral not so acquired from such Person;
(i) Liens on assets acquired in a Permitted Acquisition or in
the Green Acquisition;
(j) Liens on assets acquired in the Green Acquisition,
provided, that such Liens only cover assets acquired thereunder;
(k) Liens granted to the Bank.
SECTION 7.02. Indebtedness. Incur, create, assume or suffer to exist or
otherwise become liable in respect of any Indebtedness, other than:
(a) Indebtedness incurred prior to the date hereof as
described in Schedule III attached hereto including any renewals or
extensions thereof; provided such renewal or extension does not result
in an increase in the aggregate principal amount of such Indebtedness;
(b) Indebtedness to the Bank;
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(c) Indebtedness for trade payables incurred in the ordinary
course of business which are not overdue;
(d) Indebtedness consisting of guarantees permitted pursuant
to Section 7.03;
(e) Subordinated Indebtedness approved in writing by the Bank;
(f) Indebtedness secured by purchase money liens as permitted
under Section 7.01(h) for Capital Expenditures permitted hereunder;
provided no Default or Event of Default shall have occurred and be
continuing or would occur after giving effect to the incurrence of such
Indebtedness;
(g) Indebtedness under the Foreign Exchange Line;
(h) the Green Debt; and
(i) Additional Indebtedness not otherwise permitted by this
Section 7.01 in an amount not to exceed $1,000,000, in the aggregate,
at any time.
SECTION 7.03. Guaranties. Guarantee, endorse, become surety for, or
otherwise in any way become or be responsible for the Indebtedness of any
Person, whether by agreement to maintain working capital or equity capital or
otherwise to maintain the net worth or solvency of any Person or by agreement to
purchase the Indebtedness of any other Person, or agreement for the furnishing
of funds, directly or indirectly, through the purchase of goods, supplies or
services for the purpose of discharging the Indebtedness of any other Person or
otherwise, or enter into or be a party to any contract for the purchase of
merchandise, materials, supplies or other property if such contract provides
that payment for such merchandise, materials, supplies or other property shall
be made regardless of whether delivery of such merchandise, supplies or other
property is ever made or tendered except:
(a) guaranties executed prior to the date hereof as described
on Schedule IV attached hereto but not including any renewals or
extension thereof;
(b) endorsements of negotiable instruments for collection or
deposit in the ordinary course of business;
(c) guaranties of any Indebtedness under this Agreement or any
other Indebtedness owing to the Bank; and
(d) guarantees of Indebtedness permitted under Section 7.02,
provided, that, any guarantee of Subordinated Indebtedness shall be
subordinated in the same manner and to the same extent as the
Subordinated Indebtedness.
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SECTION 7.04. Sale of Assets. Sell, lease, transfer or otherwise
dispose of their respective properties and assets, whether or not pursuant to an
order of a federal agency or commission, except for (a) the sale of inventory
disposed of in the ordinary course of business and (b) the sale or other
disposition of properties or assets no longer used or useful in the conduct of
their respective businesses.
SECTION 7.05. Sales of Notes. Sell, transfer, discount or otherwise
dispose of notes, accounts receivable or other obligations owing to the
Co-Borrowers, or any of them, or any of their Subsidiaries, with or without
recourse, except for collection in the ordinary course of business.
SECTION 7.06. Loans and Investments. Make or commit to make any
advance, loan, extension of credit, or capital contributions to or purchase or
hold beneficially any stock or other securities, or evidence of Indebtedness of,
purchase or acquire all or a substantial part of the assets of, make or permit
to exist any interest whatsoever in, any other Person except for (a) the
ownership of stock of any Subsidiaries existing as of the Closing Date or
acquired after the date hereof whether pursuant to a Permitted Acquisition or
otherwise, provided the Co-Borrowers have complied with their obligations under
Section 6.10 with respect to such Subsidiary, (b) investments described on
Schedule VI attached hereto, (c) loans by any Co-Borrower to any other
Co-Borrower or any Corporate Guarantor and loans by any Corporate Guarantor to
any Co-Borrower or any other Corporate Guarantor, (d) Permitted Investments, (e)
Permitted Acquisitions (provided that the conditions specified in Section 5.03
hereof shall have been satisfied) and (f) the Green Acquisition.
SECTION 7.07. Nature of Business. Change or alter, in any material
respect, the primary nature of its business from the nature of the business
engaged in by it on the date hereof but nothing herein shall prevent any
acquisition of a business which is engaged in the same line of business of the
Co-Borrowers or a business incidental thereto.
SECTION 7.08. Sale and Leaseback. Enter into any arrangement, directly
or indirectly, with any Person whereby it shall sell or transfer any property,
whether real or personal, used or useful in its business, whether now owned or
hereafter acquired, if at the time of such sale or disposition it intends to
lease or otherwise acquire the right to use or possess (except by purchase) such
property or like property for a substantially similar purpose.
SECTION 7.09. Federal Reserve Regulations. Permit any Loan or the
proceeds of any Loan to be used for any purpose which violates or is
inconsistent with the provisions of Regulations T, U or X of the Board of
Governors of the Federal Reserve System.
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SECTION 7.10. Change in Fiscal Year. Permit a change in the fiscal year
of the Co-Borrowers, or any of them.
SECTION 7.11. Limitations on Fundamental Changes. Merge or consolidate
with, or sell, assign, lease or otherwise dispose of (whether in one transaction
or in a series of transactions) all or substantially all of its assets (whether
now owned or hereafter acquired) to any Person, or, except with respect to a
Permitted Acquisition, acquire all of the stock or all or substantially all of
the assets or the business of any Person or liquidate, wind up or dissolve or
suffer any liquidation or dissolution; provided, however, any Corporate
Guarantor may merge or consolidate with any other Corporate Guarantor or merge
with and into a Co-Borrower (provided the Co-Borrower is the surviving
corporation).
SECTION 7.12. Financial Condition Covenants.
(a) Fixed Charge Coverage Ratio. Permit at any time the ratio of (i)
Consolidated EBITDA to (ii) Consolidated Interest Expense plus Consolidated
Current Maturities on Long Term Debt to be less than 1.25:1.00 at any time.
(b) Minimum Capital Base. Maintain a Consolidated Capital Base of at
least (i) $16,000,000 at all times prior to the closing of the Green
Acquisition, and (ii) $10,000,000 at all times following the closing of the
Green Acquisition.
(c) Consolidated Senior Debt to Consolidated EBITDA. Permit the ratio
of Consolidated Senior Debt to Consolidated EBITDA to be greater than (i)
4.00:1.00 at any time prior to the closing of the Green Acquisition or (ii)
3.50:1.00 at any time following the closing of the Green Acquisition.
(d) Consolidated Capital Expenditures. Permit Consolidated Capital
Expenditures to exceed $3,000,000 for any fiscal year, provided, that up to
$1,500,000 of an unexpended amount in any fiscal year may be carried forward for
use in the immediately following fiscal year only.
All financial condition covenants included in this Section 7.12 shall
be tested on a "rolling four quarters" basis. If any Permitted Acquisition is
consummated, then for purposes of calculating compliance with this Section 7.12,
for each of the first three quarters following consummation of such Permitted
Acquisition, Consolidated EBITDA shall be determined on the basis of such
quarters and shall be annualized. For purposes of calculating compliance with
the provisions of Section 7.12(a) and (c) above, Consolidated EBITDA at any time
shall mean Consolidated EBITDA as determined on the basis of the financial
statements most recently delivered to the Bank pursuant to Section 6.03.
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SECTION 7.13. Subordinated Debt. Directly or indirectly prepay,
defease, purchase, redeem, or otherwise acquire any Subordinated Debt.
SECTION 7.14. Transactions with Affiliates. Enter into any transaction,
including, without limitation, the purchase, sale, or exchange of property or
the rendering of any service, with any Affiliate, except in the ordinary course
of and pursuant to the reasonable requirements of the business of such
Co-Borrower or of its Subsidiary and upon fair and reasonable terms no less
favorable to the such entity than it would obtain in a comparable arms-length
transaction with a Person not an Affiliate.
SECTION 7.15. Impairment of Security Interest. Neither take or omit to
take any action which could reasonably be expected to adversely effect or impair
the security interest in any property subject to a security interest in favor of
the Bank nor grant to any Person any interest whatsoever in any property subject
to a security interest in favor of the Bank.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01. Events of Default. In the case of the happening of any of
the following events (each an "Event of Default"):
(a) failure by the Co-Borrowers to (i) pay the principal or
interest on any Loan when due and payable, (ii) pay any fees or other
amounts payable under any Loan Document when due or payable and, with
respect to clause (ii), such failure shall continue unremedied for a
period of three (3) Business Days;
(b) default shall be made in (i) the due observance or
performance of any covenant, condition or agreement of the Co-
Borrowers, or any of them, or any of their Subsidiaries to be performed
pursuant to Section 6.03, 6.04, 6.05, 6.06 or 6.07 or Article VII of
this Agreement, or (ii) the due observance or performance of any other
covenant, condition or agreement of the Co-Borrowers, or any of them,
or any of their Subsidiaries to be performed pursuant to this Agreement
or any other Loan Document (other than those specified in clause (a) of
this Section 8.01) and such failure shall continue unremedied for a
period of ten (10) days after written notice thereof from the Bank;
(c) any representation or warranty made in this Agreement or
any other Loan Document or in any report, certificate, financial
statement or other instrument furnished in connection with this
Agreement or any other Loan Document,
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shall prove to be false or misleading in any material respect when made
or given or when deemed made or given;
(d) default in the performance or compliance in respect of any
agreement or condition relating to any Indebtedness (other than any
Note and unsecured trade payables) of the Co-Borrowers or any of their
Subsidiaries in excess of $500,000, individually or in the aggregate,
if the effect of such default is to accelerate the maturity of such
Indebtedness or to permit the holder or obligee thereof (or a trustee
on behalf of such holder or obligee) to cause such Indebtedness to
become due prior to the stated maturity thereof, or any Indebtedness
(other than unsecured trade payables) in excess of $500,000,
individually or in the aggregate, shall not be paid when due;
(e) the Co-Borrowers, or any of them, or any of their
Subsidiaries shall (i) voluntarily commence any proceeding or file any
petition seeking relief under Title 11 of the United States Code or any
other federal or state bankruptcy, insolvency or similar law, (ii)
consent to the institution of, or fail to controvert in a timely and
appropriate manner, any such proceeding or the filing of any such
petition, (iii) apply for or consent to the employment of a receiver,
trustee, custodian, sequestrator or similar official for the Co-
Borrowers, or any of them, or any of their Subsidiaries or for a
substantial part of its property; (iv) file an answer admitting the
material allegations of a petition filed against it in such proceeding,
(v) make a general assignment for the benefit of creditors, (vi) take
corporate action for the purpose of effecting any of the foregoing, or
(vii) the Co-Borrowers, or any of them, or any of their Subsidiaries
shall become unable or admit in writing its inability or fail generally
to pay its debts as they become due;
(f) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (i) relief in respect of the Co-Borrowers, or any
of them, or any of their Subsidiaries or of a substantial part of their
respective property, under Title 11 of the United States Code or any
other federal or state bankruptcy, insolvency or similar law, (ii) the
appointment of a receiver, trustee, custodian, sequestrator or similar
official for the Co-Borrowers, or any of them, or any of their
Subsidiaries or for a substantial part of their property, or (iii) the
winding-up or liquidation of the Co-Borrowers, or any of them, or any
of their Subsidiaries and such proceeding or petition shall continue
undismissed for 30 days or an order or decree approving or ordering any
of the foregoing shall continue unstayed and in effect for 30 days;
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(g) One or more orders, judgments or decrees for the payment
of money in excess of $250,000 in the aggregate shall be rendered
against the Co-Borrowers, or any of them, or any of their Subsidiaries
and the same shall not have been paid in accordance with such judgment,
order or decree and either (i) an enforcement proceeding shall have
been commenced by any creditor upon such judgment, order or decree
which is not stayed, or (ii) there shall have been a period of sixty
(60) days during which a stay of enforcement of such judgment order or
decree, by reason of pending appeal or otherwise, was not in effect;
(h) any Plan which is a single employer Plan shall fail to
comply in any material respect with the minimum funding standard
required under Section 412 of the Code for any Plan year or part
thereof or a waiver of such standard is applied for or granted under
Section 412 of the Code, any Plan is terminated by the Co-Borrowers, or
any of them, or any ERISA Affiliate or the subject of termination
proceedings by the PBGC under ERISA, any Plan shall have an Unfunded
Current Liability, a Reportable Event shall have occurred with respect
to a Plan or the Co-Borrowers, or any of them, or any ERISA Affiliate
shall have incurred a liability to or on account of a Plan under
Section 515, 4062, 4063, 4063, 4201 or 4204 of ERISA, and there shall
result from any such event or events the imposition of a lien upon the
assets of the Co-Borrowers, or any of them, or any ERISA Affiliate, the
granting of a security interest on such assets, or a liability to the
PBGC or a Plan or a trustee appointed under ERISA or a penalty under
Section 4971 of the Code, and in each case, such event or condition,
together with all such events or conditions, if any, could reasonably
be expected to result in liability of the Co-Borrowers, or any of them,
or any of their Subsidiaries in an aggregate amount exceeding $250,000;
(i) any material provision of any Loan Document shall for any
reason cease to be in full force and effect in accordance with its
terms or the Co-Borrowers, or any of them, or any Corporate Guarantor
shall so assert in writing; or
(j) any of the Liens purposed to be granted pursuant to any
Security Agreement shall cease for any reason to be legal, valid and
enforceable Liens on the collateral purported to be covered thereby or
shall cease to have the priority purported to be created thereby,
then, at any time thereafter during the continuance of any such event, the Bank
may, without notice to the Co-Borrowers, or any of them, or any Corporate
Guarantor, (A) terminate the Commitments and declare (i) the Notes, both as to
principal and interest, (ii) an amount equal to the Aggregate Letters of Credit
Outstanding, and (iii) an amount equal to the Aggregate Banker's Acceptances
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Outstanding, to be forthwith due and payable, without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived,
anything contained herein or in the Notes to the contrary notwithstanding;
provided, however, that if an event specified in Section 8.01 (e) and (f) shall
have occurred, the Commitments shall automatically terminate and the Notes and
an amount equal to the Aggregate Letters of Credit Outstanding and to the
Aggregate Banker's Acceptances Outstanding, shall be immediately due and
payable; and (B) exercise any or all of the rights and remedies afforded to the
Bank in the Security Agreements, by the Uniform Commercial Code or otherwise
possessed by the Bank and, realize upon, dispose of, or sell, all or any part of
the collateral given by the Co-Borrowers and the Corporate Guarantors to the
Bank, and the Bank may apply the net proceeds of such realization, disposal or
sale to the payment of any liabilities of the Co-Borrowers under the Notes or
this Agreement as set forth in the Security Agreements. With respect to all
Letters of Credit that shall not have matured or presentment for honor shall not
have occurred, and with respect to Documentary Banker's Acceptances the maturity
date of which has not occurred, the amounts in respect thereof as described in
the preceding sentence shall be deposited in an account under the sole domain
and control of the Bank, as cash collateral for the obligation of the
Co-Borrowers to reimburse the Bank in the event of any drawing or payment in
respect thereof.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing, and unless
otherwise expressly provided herein, shall be conclusively deemed to have been
received by a party hereto and to be effective on the day on which delivered to
such party at the address set forth below, or, in the case of telecopy notice,
when acknowledged as received, or if sent by registered or certified mail, on
the third Business Day after the day on which mailed in the United States,
addressed to such party at said address:
(a) if to the Bank, at
European American Bank
730 Veterans Memorial Highway
Hauppauge, New York 11788
Attention: Mr. Richard Romano
Telecopy: (516) 360-7112
(b) if to the Co-Borrowers at
P & F Industries, Inc.
300 Smith Street
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Farmingdale, New York 11735
Attention: Mr. Joseph A. Molino, Jr.
Telecopy: (516) 694-1836
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6099
Attention: Neil Novikoff, Esq.
Telecopy: (212) 728-8111
- and -
(c) as to each such party at such other address as such
party shall have designated to the other in a written
notice complying as to delivery with the provisions
of this Section 9.01.
SECTION 9.02. Survival of Agreement. All covenants, agreements,
representations and warranties made herein and in the other Loan Documents and
in the certificates delivered pursuant hereto or thereto shall survive the
making by the Bank of the Loans herein contemplated and the execution and
delivery to the Bank of the Notes evidencing the Loans and shall continue in
full force and effect so long as any Note is outstanding and unpaid. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of the Co-Borrowers, or any of them, and
their Subsidiaries which are contained in this Agreement shall bind and inure to
the benefit of the respective successors and assigns of the Bank. The
Co-Borrowers may not assign or transfer any of their interest under this
Agreement, any Note or any other Loan Document without the prior written consent
of the Bank.
SECTION 9.03. Expenses of the Bank. The Co-Borrowers agree (a) to
indemnify, defend and hold harmless the Bank and its officers, directors,
employees and affiliates (each, an "indemnified person") from and against any
and all losses, claims, damages, liabilities or judgments to which any such
indemnified person may be subject and arising out of or in connection with the
Loan Documents, the financings contemplated hereby, the use of any proceeds of
such financings or any related transaction or any claim, litigation,
investigation or proceeding relating to any of the foregoing, whether or not any
of such indemnified person is a party thereto, and to reimburse each of such
indemnified persons upon demand for any reasonable legal or other expenses
incurred in connection with the investigation or defending of any of the
foregoing; provided that the foregoing indemnity will not, as to any indemnified
person, apply to losses, claims, damages, liabilities, judgments or related
expenses to the extent arising from the wilful misconduct or gross negligence of
such indemnified person; and (b) to reimburse the Bank from time to time, upon
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demand, all out-of-pocket expenses (including reasonable expenses of its due
diligence investigation, and fees and disbursements of counsel and the allocated
costs of internal counsel) incurred in connection with the financings
contemplated under this Agreement, the preparation, execution and delivery of
this Agreement and the other Loan Documents, any amendments and waivers hereof
or thereof, the security arrangements contemplated thereby and the enforcement
thereof. The provisions of this Section 9.03 shall survive termination of this
Agreement.
SECTION 9.04. No Waiver of Rights by the Bank. Neither any failure nor
any delay on the part of the Bank in exercising any right, power or privilege
hereunder or under any Note or any other Loan Document shall operate as a waiver
thereof, nor shall a single or partial exercise thereof preclude any other or
further exercise of any other right, power or privilege.
SECTION 9.05. APPLICABLE LAW. THIS AGREEMENT AND EACH NOTE SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
SECTION 9.06. SUBMISSION TO JURISDICTION; JURY WAIVER. EACH CO-BORROWER
HEREBY IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK AND EACH SUPREME COURT OF
THE STATE OF NEW YORK SITTING IN NEW YORK, NASSAU OR SUFFOLK COUNTY AND ANY
APPELLATE COURT FROM ANY THEREOF IN ANY ACTION, SUIT OR PROCEEDING BROUGHT
AGAINST IT AND RELATED TO OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, AND TO THE
EXTENT PERMITTED BY APPLICABLE LAW, EACH CO-BORROWER HEREBY WAIVES AND AGREES
NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, IN ANY SUCH SUIT,
ACTION OR PROCEEDING ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN
AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS
IMPROPER, OR THAT THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OTHER
DOCUMENT OR INSTRUMENT REFERRED TO HEREIN OR THEREIN OR THE SUBJECT MATTER
THEREOF MAY NOT BE LITIGATED IN OR BY SUCH COURTS. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EACH CO-BORROWER AGREES NOT TO (a) SEEK AND HEREBY WAIVES THE
RIGHT TO ANY REVIEW OF THE JUDGMENT OF ANY SUCH COURT BY ANY COURT OF ANY OTHER
NATION OR JURISDICTION WHICH MAY BE CALLED UPON TO GRANT AN ENFORCEMENT OF SUCH
JUDGMENT AND (b) ASSERT ANY COUNTERCLAIM IN ANY SUCH SUIT, ACTION OR PROCEEDING
UNLESS SUCH COUNTERCLAIM IS A COMPULSORY COUNTERCLAIM UNDER FEDERAL LAW OR NEW
YORK LAW, AS APPLICABLE. EACH CO-BORROWER AGREES THAT SERVICE OF PROCESS MAY BE
MADE UPON IT BY CERTIFIED OR REGISTERED MAIL TO THE ADDRESS FOR NOTICES SET
FORTH IN THIS AGREEMENT OR ANY METHOD AUTHORIZED BY THE LAWS OF NEW YORK. EACH
CO-BORROWER AND THE BANK HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT, ANY NOTE OR ANY OTHER LOAN DOCUMENT.
54
<PAGE>
SECTION 9.07. Extension of Maturity. Except as otherwise expressly
provided herein, whenever a payment to be made hereunder shall fall due and
payable on any day other than a Business Day, such payment may be made on the
next succeeding Business Day, and such extension of time shall be included in
computing interest.
SECTION 9.08. Modification of Agreement. No modification, amendment or
waiver of any provision of this Agreement, any Note or any other Loan Document,
nor consent to any departure by the Co-Borrowers therefrom shall in any event
be effective unless the same shall be in writing and signed by the Bank and the
Co-Borrowers and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No notice to or demand on
the Co-Borrowers in any case shall entitle the Co-Borrowers to any other or
further notice or demand in the same, similar or other circumstance.
SECTION 9.09. Severability. In case any one or more of the provisions
contained in this Agreement, any Note or in any other Loan Document should be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby.
SECTION 9.10. Sale of Participations. The Bank reserves the right to
sell participations in or to sell and assign its rights, duties or obligations
with respect to the Loans or the Commitment to such banks, lending institutions
or other parties as it may choose and without the consent of the Co-Borrowers
except (a) the Bank shall not assign its rights or obligations under the Loan
Documents without the prior written consent of the Co-Borrowers (which consent
shall not be unreasonably withheld) and (b) the Bank shall not sell
participations to any competitor of the Co-Borrowers. In the event that the Bank
shall sell a participation interest in the Loans, the Bank shall, nevertheless,
remain liable to perform all obligations of the Bank hereunder as if such
participation had not been sold and shall not restrict its right to grant
waivers, amendments and consents to the Loan Documents except with respect to
the default in any payment of principal or interest on the Loans beyond any
applicable grace period, any acceleration of the maturity of the Loan, any
material amendment of the Credit Agreement or any change in the accrual status
of the Loans. The Bank may furnish any information concerning the Co-Borrowers
or any of their Subsidiaries in its possession from time to time to any assignee
or participant (or proposed assignee or participant).
SECTION 9.11. Reinstatement; Certain Payments. If claim is ever made
upon the Bank for repayment or recovery of any amount or amounts received by the
Bank in payment or on account of any of the Obligations under this Agreement,
the Bank shall give prompt notice of such claim to the Co-Borrowers, and if the
Bank repays all or part of said amount by reason of (i) any judgment, decree or
order of any court or administrative body having jurisdiction over the Bank or
any of its property, or (ii) any settlement or compromise of any such claim
effected by the Bank with any such claimant, then
55
<PAGE>
and in such event each Co-Borrower agrees that any such judgment, decree, order,
settlement or compromise shall be binding upon such Co-Borrower notwithstanding
the cancellation of any Note or other instrument evidencing the Obligations
under this Agreement or the termination of this Agreement, and the Co-Borrower
shall be and remain liable to the Bank hereunder for the amount so repaid or
recovered to the same extent as if such amount had never originally been
received by the Bank.
SECTION 9.12. Right of Setoff. If an Event of Default shall have
occurred and be continuing, the Bank and each Affiliate of the Bank are each
hereby authorized at any time and from time to time after acceleration of the
Loan, to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by the Bank to or for the credit
or the account of the Co-Borrowers or any of them, against any and all the
Obligations. The rights of the Bank under this Section 9.12 are in addition to
the other rights and remedies (including, without limitation, other rights of
setoff) which the Bank may have.
SECTION 9.13. Joint and Several Obligations of the Co-Borrowers. The
obligations of the Co-Borrowers hereunder constitute joint and several
obligations of the Co-Borrowers and may be enforced against any of the
Co-Borrowers to the full extent thereof without proceeding against the others.
SECTION 9.14. Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original, but all of which,
taken together, shall constitute one and the same instrument.
SECTION 9.15. Headings. Section headings used herein are for
convenience of reference only and are not to affect the construction of or be
taken into consideration in interpreting this Agreement.
56
<PAGE>
IN WITNESS WHEREOF, the Co-Borrowers and the Bank have caused this
Agreement to be duly executed by their duly authorized officers, as of the day
and year first above written.
THE CO-BORROWERS:
P&F INDUSTRIES, INC.
By: /s/ Joseph A. Molino
---------------------------------
Name: Joseph A. Molino
Title: Vice President
FLORIDA PNEUMATIC MANUFACTURING
CORPORATION
By: /s/ Joseph A. Molino
---------------------------------
Name: Joseph A. Molino
Title: Vice President
EMBASSY INDUSTRIES, INC.
By: /s/ Joseph A. Molino
---------------------------------
Name: Joseph A. Molino
Title: Vice President
THE BANK:
EUROPEAN AMERICAN BANK
By: /s/ Richard Romano
---------------------------------
Name: Richard Romano
Title: Vice President
57
<PAGE>
AMENDMENT NO. 1
TO
CREDIT AGREEMENT
THIS AMENDMENT NO. 1 is entered into as of September 16, 1998 (the
"Amendment"), by and among P&F INDUSTRIES, INC., a Delaware corporation ("P&F),
FLORIDA PNEUMATIC MANUFACTURING CORPORATION, a Florida corporation ("Florida
Pneumatic"), EMBASSY INDUSTRIES, INC., a New York corporation ("Embassy") and
GREEN MANUFACTURING, INC., a Delaware corporation ("Green") (P&F, Florida
Pneumatic, Embassy and Green, the "Co-Borrowers"), and EUROPEAN AMERICAN BANK, a
New York banking corporation (the "Bank").
BACKGROUND
P&F, Florida Pneumatic and Embassy (the "Original Co-Borrowers") and
the Bank are parties to a Credit Agreement, dated as of July 23, 1998 (as
amended, restated, supplemented or modified, from time to time, the "Credit
Agreement"), pursuant to which the Bank provides the Original Co-Borrowers with
certain financial accommodations.
The Original Co-Borrowers have informed the Bank that (i) Green has
entered into an Asset Purchase Agreement, dated as of the date hereof, pursuant
to which Green will acquire certain assets of Green Manufacturing, Inc., an Ohio
corporation ("Old Green").
The Co-Borrowers have requested that the Bank (i) include Green as a
Co-Borrower under the existing credit facility and (ii) amend certain provisions
of the Credit Agreement and the Bank is willing to do so on the terms and
conditions hereinafter set forth. Capitalized terms used herein and not defined
herein shall have the meanings given to them in the Credit Agreement.
Accordingly, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I.
Amendments to Credit Agreement.
Section 1.1. The first paragraph of the Credit Agreement is hereby
amended in its entirety to provide as follows:
"CREDIT AGREEMENT dated as of July 23, 1998, by and among P&F
INDUSTRIES, INC., a Delaware corporation ("P&F"), FLORIDA PNEUMATIC
MANUFACTURING CORPORATION, a Florida corporation ("Florida Pneumatic"),
EMBASSY INDUSTRIES, INC., a New York corporation ("Embassy") and GREEN
MANUFACTURING, INC., a Delaware
1
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corporation ("Green", and, collectively, with P&F, Florida Pneumatic
and Embassy, the "Co-Borrowers") and EUROPEAN AMERICAN BANK, a New York
banking corporation (the "Bank").
Section 1.2. Section 1.1 of the Credit Agreement is hereby amended as
follows:
a. the following defined terms are hereby added in their
appropriate alphabetical order:
"Amendment No. 1" shall mean Amendment No. 1 to Credit
Agreement among the Co-Borrowers and the Bank dated as of the Amendment
No. 1 Effective Date.
"Amendment No. 1 Effective Date" shall mean September 16,
1998.
"Asset Purchase Agreement" shall mean the Asset Purchase
Agreement between Old Green and Green, dated as of the Amendment No. 1
Effective Date, and all exhibits and schedules thereto.
"Green" shall mean Green Manufacturing, Inc., a Delaware
corporation.
"Green Letter of Credit" shall mean that certain Letter of
Credit issued by the Bank for the benefit of Green pursuant to and in
accordance with the terms and conditions of the Reimbursement
Agreement.
"Green Letter of Credit Outstanding" shall mean, at any time,
the face amount of the Green Letter of Credit.
"Indenture" shall mean the Trust Indenture dated as of
November 1, 1994, between the Issuer and the Trustee, as the same may
hereafter be amended, restated, supplemented or otherwise modified from
time to time.
"Issuer" shall mean the County of Wood, Ohio, and its
successors.
"Old Green" shall mean Green Manufacturing, Inc., an Ohio
corporation.
"Reimbursement Agreement" shall mean the Reimbursement
Agreement, dated as of the Amendment No. 1 Effective Date, between the
Bank and Green,
"Trustee" shall mean PNC Bank, Ohio, National Association.
b. the following defined terms are amended in their entirety
to provide as follows:
"Loan Documents" shall mean, collectively, this Agreement, the
Notes, the Security Agreements, the Corporate Guaranties, the Pledge
Agreement, the Reimbursement Agreement, and each other agreement
executed in connection with the transactions contemplated hereby or
thereby, as each of the same may hereafter or thereafter be amended,
supplemented or otherwise modified from time to time.
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<PAGE>
"Revolving Credit Note" shall mean the amended and restated
promissory note of the Co-Borrowers in the form attached as Exhibit A
to Amendment No. 1 evidencing the Revolving Credit Loans, as the same
may be amended, supplemented, restated or otherwise modified, from time
to time.
"Term Loan Commitment" shall mean the Bank's obligation to
make Term Loans to the Co-Borrowers pursuant to Section 2.04 hereof in
an aggregate principal amount equal to the difference between (a)
$15,000,000 and (b) the Green Letter of Credit Outstanding.
c. The definition of "Letter of Credit" is hereby amended by
(i) adding a period after the word "business" on the eighth line thereof and
(ii) by deleting the remainder of said definition.
Section 1.3. Section 2.06(a) of the Credit Agreement is hereby amended
by deleting the third sentence thereof in its entirety and replacing it with the
following sentence in its place and stead:
"Furthermore, in no event shall (i) the Aggregate Bankers Acceptances
Outstanding, exceed an amount in excess of $8,000,000, at any time and
(ii) (A) the Aggregate Letters of Credit Outstanding plus (B) the Green
Letter of Credit Outstanding, exceed $8,000,000, at any time.
Section 1.4. Subsections (i) and (j) of Section 7.01 of the Credit
Agreement are hereby amended in their entirety to read as follows:
"(i) Liens on assets acquired in a Permitted Acqusition,
provided, that such Liens (i) only cover assets acquired thereunder and
(ii) are the result of the continuation of Liens on such assets in
existence of the date of closing of such Permitted Acquisition;
(j) Liens on assets acquired in the Green Acquisition,
provided, that such Liens (i) only cover assets acquired thereunder and
(ii) are the result of the continuation of Liens on such assets in
existence of the date of closing of the
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<PAGE>
Green Acquisition;"
Section 1.5. Section 8.01 of the Credit Agreement is hereby amended by
(a) deleting the "or" at the end of subsection "(i)" thereof, (b) by deleting
the comma at the end of subsection "(j)" thereof and replacing it with "; or" in
its place and stead and (c) adding the following new subsection "(k)"
immediately thereafter:
"(k) an "Event of Default" as defined in the Reimbursement
Agreement shall have occurred,"
Section 1.6. Schedules I, III, IV and VIII to the Credit Agreement are
hereby amended in their entirety and are replaced with Schedules I, III, IV and
VIII, respectively, attached to Amendment No. 1.
Section 1.7. Exhibits A, B, C, D, E-1 and E-2 to the Credit Agreement
are hereby amended in their entirety and are replaced with Exhibits A, B, C, D,
E-1 and E-2, respectively, attached to Amendment No. 1.
ARTICLE II.
Conditions of Effectiveness
Section 2.1. This Amendment shall become effective as of the Amendment
No. 1 Effective Date, upon satisfaction of the following conditions precedent:
a. The Bank shall have received each of the following, in form and
substance satisfactory to the Bank and its counsel:
(1) this Amendment and the amended and restated Revolving Credit
Note executed by each Co-Borrower in favor of the Bank;
(2) a certificate of the Secretary of Green, dated as of the
Amendment No. 1 Effective Date and certifying (A) that
neither the Certificates of Incorporation nor the By-laws of
Green has been amended since the date of their
certification; (B) that attached thereto is a true and a
complete copy of resolutions adopted by the Board of
Directors of Green authorizing the execution, delivery and
performance of this Amendment and each other Loan Document
to which it is a party and the borrowings thereunder; and
(C) the incumbency and specimen signature of each officer of
Green executing each Loan Document to which Green is a party
and any certificates or instruments furnished pursuant
hereto, and a certification by another officer of Green as
to the incumbency and signature of the Secretary, and
together with certified copies of the Certificate of
Incorporation and By-laws of Green;
(3) a certificate of good standing for Green from the Secretary
of the State of Delaware dated as of a recent date and a
certificate of authorization to do business for Green from
the Secretary of the State of Ohio;
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(4) a certificate of the Secretary of each of the Original
Borrowers, dated as of the Amendment No. 1 Effective Date,
certifying (A) the names and true signatures of the officers
of such entity authorized to sign this Amendment, the other
Loan Documents and any other documents to be delivered by
such entity under this Amendment, (B) that attached thereto
is a true and a complete copy of resolutions adopted by the
Board of Directors authorizing the execution, delivery and
performance of this Amendment and each other Loan Document
to which it is a party and (C) that neither its Certificate
of Incorporation nor By-laws have been amended since the
Closing Date;
(5) a certificate of a duly authorized officer of each of the
Co-Borrowers, dated as of the Amendment No. 1 Effective
Date, stating that the representations and warranties in
Article 4 are true and correct on such date as though made
on and as of such date and that no event has occurred and is
continuing which constitutes a Default or Event of Default;
(6) (A) a Security Agreement duly executed by Green together
with UCC-1 financing statements in a form acceptable to the
Bank for such jurisdictions as the Bank determines are
necessary to perfect the liens created by the Security
Agreement and (B) an amendment to Security Agreement duly
executed by each Original Borrower;
(7) an amendment to the Pledge Agreement, duly executed by P&F,
with respect the pledge of the shares of Green held by P&F,
along with share certificates evidencing such shares and
stock powers executed in blank;
(8) receipt of a copy of duly executed Asset Purchase Agreement
and all documents and instruments executed in connection
therewith, including but not limited to the Consulting
Agreement, Escrow Agreement, Automobile Storage Lease and
Bill of Sale;
(9) combined projections for the Co-Borrowers and Green, for a
period of five (5) years;
(10) a pro forma balance sheet and income statements of P&F and
its Subsidiaries (after giving effect to the Asset Purchase
Agreement) demonstrating that the Co-Borrowers will be in
compliance with the financial condition covenants contained
in Section 7.12 of the Credit Agreement;
(11) a favorable opinion of counsel for Green dated as of the
Amendment No. 1 Effective Date with respect to the
transactions contemplated hereby and pursuant to the
Reimbursement Agreement;
(12) a certificates of insurance from an independent insurance
broker confirming the insurance required to be maintained
pursuant to Section 6.01 of the Credit Agreement;
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<PAGE>
(13) a schedule of all the lease agreements to which Green is a
party (other than leases of real property, leases of motor
vehicles and leases of equipment which do not require an
annual lease expenditure in excess of $50,000) and the Bank
shall have been satisfied with its review thereof or, in
lieu thereof, a copy of each lease agreement shall be
delivered to the Bank prior to the Amendment No. 1 Effective
Date;
(14) Receipt and satisfactory review by the Bank of all (A)
documents with respect to any Plans of Green or Old Green
(which are to be assumed by Green) and (B) material
agreements of Green or Old Green (which are to be assumed by
Green);
(15) the Reimbursement Agreement duly executed by Green, and any
other documents executed in connection with the foregoing;
and
(16) such other documents, instruments, agreements, approvals,
opinions and evidence as the Bank may reasonably require.
b. All conditions precedent set forth in the Reimbursement
Agreement shall have been satisfied and the transactions thereunder, including,
but not limited to the issuance of the Green Letter of Credit, shall occur
simultaneously with the consummation of the transactions contemplated by this
Amendment.
c. The indebtedness of Green to MidAmerican National Bank &
Trust Co. shall have been paid in full simultaneously with the consummation of
the transactions contemplated by this Amendment and all existing documentation
with respect to said indebtedness shall have been terminated.
d. The assets to be acquired pursuant to the Asset Purchase
Agreement shall be free and clear of all Liens, except those Liens permitted
pursuant to Section 7.01 of the Credit Agreement.
ARTICLE III.
Representations and Warranties; Effect on Credit Agreement.
Section 3.1. Each Co-Borrower hereby represents and warrants as
follows:
a. This Amendment and the Credit Agreement, as amended hereby,
constitute legal, valid and binding obligations of the Co-Borrowers and are
enforceable against the Co-Borrowers in accordance with their respective terms.
b. Upon the effectiveness of this Amendment, the Original
Co-Borrowers hereby reaffirm all covenants, representations and warranties made
in the Credit Agreement to the extent that the same are not amended hereby and
each Co-Borrower agrees that all such covenants, representations and warranties
shall be deemed to have been remade as of the Amendment No. 1 Effective Date.
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<PAGE>
c. No Default or Event of Default has occurred and is
continuing or would exist after giving effect to this Amendment.
d. No Co-Borrower has any defense, counterclaim or offset with
respect to the Credit Agreement.
Section 3.2. Effect on Credit Agreement.
a. Upon the effectiveness of this Amendment, each reference in
the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or
words of like import shall mean and be a reference to the Credit Agreement as
amended hereby.
b. Except as specifically amended herein, the Credit
Agreement, and all other documents, instruments and agreement executed and/or
delivered in connection therewith, shall remain in full force and effect, and
are hereby ratified and confirmed.
c. The execution, delivery and effectiveness of this Amendment
shall not operate as a waiver of any right, power or remedy of the Bank, nor
constitute a waiver of any provision of the Credit Agreement, or any other
documents, instruments or agreements executed and/or delivered under or in
connection therewith.
ARTICLE IV.
Miscellaneous.
Section 4.1. This Amendment shall be governed by and construed in
accordance with the laws of the State of New York.
Section 4.2. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
Section 4.3. This Amendment may be executed in one or more
counterparts, each of which shall constitute an original, and all of which,
taken together, shall be deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the Co-Borrowers and the Bank have caused this
Amendment to be duly executed by their duly authorized officers as of the day
and year first above written.
P&F INDUSTRIES, INC.
By: /s/ Joseph A. Molino
-----------------------------
Title: Vice President
FLORIDA PNEUMATIC MANUFACTURING
CORPORATION
7
<PAGE>
By: /s/ Joseph A. Molino
-----------------------------
Title: Vice President
EMBASSY INDUSTRIES, INC.
By: /s/ Joseph A. Molino
-----------------------------
Title: Vice President
GREEN MANUFACTURING, INC.
By: /s/ Joseph A. Molino
-----------------------------
Title: Vice President
EUROPEAN AMERICAN BANK
By: /s/ Richard Romano
-----------------------------
Title: Vice President
8
<PAGE>
AMENDED AND RESTATED EMPLOYMENT AGREEMENT, dated as of May 28, 1997,
among P&F INDUSTRIES, INC., a Delaware corporation (the "Company") having its
principal place of business at 300 Smith Street, Farmingdale, New York 11735,
and RICHARD A. HOROWITZ, residing at 5 Fir Drive, Kings Point, New York 11024
(the "Executive").
W I T N E S S E T H:
WHEREAS, the Company and the Executive wish to amend and restate the
Employment Agreement among the parties hereto, dated as of February 28, 1997
(the "Prior Agreement"), with this Agreement;
NOW, THEREFORE, it is hereby agreed by and between the parties as
follows:
1. Employment, Duties and Acceptance
1.1. Subject to the provisions of Article 4, the Executive hereby
agrees to continue his employment with the Company, and the Company hereby
agrees to continue its employment of the Executive, for the term of this
Agreement, as defined in Article 2 hereof. The Executive shall render services
as Chairman, President and Chief Executive Officer of the Company and shall
perform such executive duties which are consistent with his position as he may
be reasonably directed to perform by the Board of Directors of the Company.
2. Term of Employment
The term of the Executive's employment pursuant to this Agreement (the
"Term") will commence on the date hereof (the "Effective Date") and will
continue until the seventh anniversary of the Effective Date, unless sooner
terminated pursuant to the provisions of Article 4. Such employment will, unless
sooner terminated pursuant to the provisions of Article 4, continue from year to
year thereafter (each such year, an "Additional Term") until one party gives the
other notice of its intention to terminate the Executive's employment at the end
of the Term or an Additional Term, as the case may be, which notice may not be
given more than ninety or less than thirty days prior to the last day of such
Additional Term.
3. Compensation
3.1. The base compensation of the Executive will be $458,000 per annum.
All compensation will be paid in installments as determined by the Company, but
not less frequently than monthly.
3.2. The Company will pay or reimburse the Executive for all reasonable
expenses actually incurred or paid by him during the Term
<PAGE>
and each Additional Term in connection with the performance of his services
under this Agreement, upon presentation of expense statements or vouchers or
such other supporting information as it may reasonably require, it being
understood that the character of and amount available for such expenses will be
in accordance with applicable policies of the Company and may be fixed in
advance by the Board of Directors of the Company. In addition, the Company shall
provide the Executive, at the Company's expense, with a current model automobile
similar to the automobile furnished to the Executive at the date hereof.
3.3. The Executive will also be eligible to receive such increases in
base compensation as the Board of Directors of the Company may from time to time
grant to him (which shall not thereafter be reduced) and to receive such bonuses
as the Board of Directors of the Company, in its discretion, may allocate to
him. In addition, so long as the Company continues to provide money purchase
pension, group insurance, medical insurance and vacation benefits, for its
senior management generally, the Executive will be entitled to participate
therein as well as in any other employee benefit plan hereafter established for
senior management.
3.4. Throughout the Term, the Company shall maintain in effect at
current levels the split-dollar life insurance policy currently maintained for
the Executive, and shall continue to pay premiums on the supplemental disability
insurance policies currently maintained by the Executive (or reimburse the
Executive for premiums paid by him).
3.5. In the event of the Executive's death, this Agreement will
terminate. In that event, the Executive's estate will be entitled to his (i)
full salary through the date of death together with any bonus under the then
current executive bonus plan accrued through the date of death; and (ii) an
additional payment equal to his then current salary for an additional twelve
months.
3.6. If during the Term or an Additional Term, the Executive becomes
physically or mentally disabled, whether totally or partially, so that he is
prevented from performing his usual duties for a period of 270 consecutive
business days or for 360 business days during any period of 450 business days,
the Company may terminate his employment under this Agreement by 60 days'
advance written notice to the Executive. In that event, the Executive will be
entitled to his (i) full salary through the date of termination, less any amount
received by the Executive under any policy of disability insurance carried by
the Company in which Executive participates; (ii) an additional payment equal to
his then current salary for an additional twelve months, without regard to any
amount received by the Executive under any policy of disability insurance; and
(iii) during such additional twelve month period, continued use of his Company
car and other perquisites being
<PAGE>
provided to the Executive prior to such termination, including continuation of
the split-dollar life insurance policy referenced in Section 3.4 hereof. In
addition, during the period of disability and until (x) the death of the
Executive or (y) the re-employment of the Executive, the Company shall provide
the Executive with medical benefits similar to those provided for other
executive officers of the Company, taking into account medical benefits provided
to the Executive by other sources.
4. Protection of Information: Noncompetition
4.1. In view of the fact that the Executive's work with the Company
will bring him into close contact with many confidential affairs of the Company
including matters of a business nature such as information about costs, profits,
markets, sales, plans for future development and other information not readily
available to the public, the Executive will:
4.1.1. Keep secret all confidential information relating to the Company
and not disclose the same to anyone outside of the Company either during or
after his employment with the Company, except with the Company's written
consent;
4.1.2. Deliver promptly to the Company on termination of his services
hereunder, or at any time the Company may so request, all memoranda, notes,
records, lists, reports and other documents (and all copies thereof) relating to
the business of the Company which he may then possess or have under his control;
and
4.1.3. During his employment and, provided that a "change in control"
(as hereinafter defined) has not occurred, for a period of three years following
the termination of his employment, not, directly or indirectly, (i) enter the
employ of, or render any services to, any person, firm or corporation engaged in
any business competitive with the business of the Company, (ii) engage in such a
business for his own account, or (iii) become interested in such a business as
an individual, partner, shareholder, director, officer, principal, agent,
employee, trustee, consultant or in any other relationship or capacity. The
provisions of this Section 4.1.3 shall not apply to the Executive following any
termination of employment which occurs in connection with or following a "change
in control" (as hereinafter defined).
4.2. "Business competitive with the business of the Company" means, as
of any date, any business then being conducted by the Company in which Executive
has been actively engaged.
5. Change in Control
<PAGE>
5.1. The term "change in control" of the Company shall mean:
5.1.1. An occurrence of a nature that would be required to be reported
in response to (i) Item 6(e) of Schedule 14A of Regulation 14A promulgated under
the Securities Exchange Act of 1934 (the "Exchange Act") as in effect on the
date of this Agreement, or (H) Item I(a) of Form 8-K under the Exchange Act, or
(iii) if Item 6(e) of Schedule 14A or Item I(a) of Form 8-K is no longer in
effect, any regulations issued by the Securities and Exchange Commission
pursuant to the Exchange Act which serve similar purposes; or
5.1.2. An event in which (i) any "person," as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act (a "Person"), other
than the Executive is or becomes a beneficial owner, directly or indirectly, of
securities of the Company representing 20% or more of the combined voting power
of the Company's then outstanding securities then entitled to vote for the
election of directors or (ii) individuals who, as of the date hereof, constitute
the Board of Directors of the Company (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of Directors; provided,
however, that any individual becoming a director subsequent to the date hereof
whose election, or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board of Directors; or
5.1.3. An event in which there shall be consummated (i) any
consolidation, merger or recapitalization of the Company or any similar
transaction involving the Company, whether or not the Company is the continuing
or surviving corporation, pursuant to which shares of the Company's common
stock, par value $1.00 per share ("Common Stock"), would be converted into cash,
securities or other property, other than a merger of the Company in which the
holders of Common Stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation immediately
after the merger, (ii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company or (iii) the adoption of a plan of complete
liquidation of the Company (whether or not in connection with the sale of all or
substantially all of the Company's assets) or a series of partial liquidations
of the Company that is dejure or defacto part of a plan of complete liquidation
of the Company; provided, that the divestiture of less than substantially all
<PAGE>
of the assets of the Company in one transaction or a series of related
transactions, whether effected by sale, lease, exchange, spin-off, sale of the
stock or merger of a subsidiary or otherwise, or a transaction solely for the
purpose of reincorporating the Company in another jurisdiction, shall not
constitute a change in control.
5.2. The "change date" shall be the date on which a change in control
of the Company (as described in paragraph 5.1) occurs.
5.3. The term "discharge" shall mean (i) any termination by the Company
of the employment of the Executive which occurs in connection with or following
a change in control of the Company, or (ii) resignation by the Executive which
occurs in connection with or following a change in control, which is based on a
determination by the Executive that, (A), as a result of a change in
circumstances affecting his position, he is unable to exercise the authorities,
powers, functions or duties attached to his position as contemplated by Article
1 of the Agreement, (B) the compensation, benefits or perquisites being provided
to the Executive have been reduced or adversely affected, or (C) the Company (or
its successor) has breached this Agreement in any material respect.
5.4. In the event of a discharge, the Company shall pay to the
Executive and provide him with the following:
5.4.1. During the remainder of the Term, the Company shall continue to
pay the Executive his salary as frequently as the Company then pays other
executives and at the same rate as payable immediately prior to the date of
discharge plus the estimated amount of any bonuses to which he would have been
entitled had he remained in the employ of the Company;
5.4.2. During the remainder of the Term, the Executive shall continue
to be entitled to all benefits and service credit for benefits under medical,
insurance, life insurance and other employee benefit plans, programs and
arrangements of the Company as if he were still employed during such period
under this Agreement;
5.4.3. If, despite the provisions of paragraph 5.4.2 above, benefits or
service credits under any employee benefit plan shall not be payable or provided
under any such plan to the Executive, or his dependents, beneficiaries or the
Company, the Company itself shall, to the extent necessary, pay or provide for
payment of such benefits and service credit so as to place the Executive, his
dependents, beneficiaries and estate in such financial position as if the
Executive were employed by the Company during the Term; and
5.4.4. Any outstanding Incentive Stock Options held by the
<PAGE>
Executive shall be converted to nonqualified stock options on the day after the
last day of the three month period following the date of discharge.
5.5. Severance Allowance. In the event of discharge of the Executive
during the Term, the Executive may elect, within 60 days after such discharge,
to be paid a lump sum severance allowance, in lieu of payments to be made
pursuant to 5.4.1 hereof, in an amount equal to 2.99 times the Executive's
"annualized includible compensation for the base period," as those terms are
defined in section 280G of the Internal Revenue Code of 1986, as amended (the
"Code"). Any payment due hereunder will be made within five days after the
election by the Executive to receive the lump sum payment.
In the event of discharge by reason of an event described in paragraph
5.3, if the Executive makes an election pursuant to the first sentence of this
paragraph 5.6 to receive a lump sum severance allowance, then, in addition to
such amount, he shall receive (i) in addition to the benefits provided under any
pension plan maintained by the Company, the pension benefits he would have
accrued under such pension plan if he had remained in the employ of the Company
for 36 calendar months after his discharge, which benefits will be paid
concurrently with, and in addition to, the benefits provided under such pension
plan, (ii) incentive compensation (including, but not limited to, the right to
receive and exercise stock options and stock appreciation rights and to receive
restricted stock and grants thereof and similar incentive compensation benefits)
to which he would have been entitled under all incentive compensation plans
maintained by the Company if he had remained in the employ of the Company for 36
calendar months after his discharge, and (iii) the employee benefits (including,
but not limited to, coverage under any medical, disability and life insurance
arrangements or programs) to which he would have been entitled under all
employee benefit plans, programs or arrangements maintained by the Company if he
had remained in the employ of the Company for 36 calendar months after his
discharge, or the value of the amounts described in clauses (i), (ii) and (iii)
of this sentence. The amount of the payments described in the preceding sentence
shall be determined and such payments shall be distributed as soon as it is
reasonably possible.
5.6. Parachute Payment. If any payment to be made by the Company to the
Executive pursuant to Article 6 of this Agreement, after taking into account any
other payments to be made by the Company to the Executive, is not deductible by
the Company pursuant to section 280G(a) of the Code, then any payment to be made
pursuant to Article 6 of this Agreement shall be reduced by the smallest amount
necessary so that no such payment shall fail to be deductible pursuant to
section 280G(a) of the Code. If the Company determines that any payment to the
Executive is subject to limitation pursuant to this paragraph 6.7, it shall
<PAGE>
provide the Executive with a written determination within 30 days of the
Executive's discharge during the terms of this Agreement. If the Executive
disagrees with the Company's determination, he shall provide the Company with
written-notice of his objection within 15 days of receipt of the Company's
determination. The matter shall then be promptly submitted by either the
Executive or the Company to a "Big 6" accounting firm, not otherwise associated
with the Company or the Executive, for a determination within 30 days on both
the Executive and the Company. The expenses incurred in connection with any
determination will be shared equally by the parties. Any payment due hereunder
shall be paid within five days of the determination by the Company or the "Big
6" accounting firm.
6. Miscellaneous.
6.1. If any of the provisions contained in this Agreement is hereafter
construed to be invalid or unenforceable, such event will not affect the
remainder of this Agreement, which will be given full effect, without regard to
the invalid portions.
6.2. If any of the covenants contained in Article 5, or any part
thereof, is held to be unenforceable because of the duration or scope of such
provision or the area covered thereby, the parties agree that the court making
such determination will have the power to reduce the duration, scope and/or area
of such provision and in its reduced form, such provision will then be
enforceable.
6.3. This Agreement has been negotiated and executed in the State of
New York, and will be construed and enforced in accordance with the laws of the
State of New York applicable to agreements made and to be performed entirely in
New York.
6.4. All notices, requests, consents and other communications, required
or permitted to be given hereunder, will be in writing and shall be deemed to
have been duly given if delivered personally or sent by prepaid telegram, or
mailed first class, postage prepaid, by registered or certified mail (if
possible), addressed to either party at the address set forth in the preamble to
this Agreement (or to such other address as either party shall designate by
notice in writing to the other in accordance herewith).
6.5. The article headings contained herein are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Agreement.
6.6. This Agreement sets forth the entire agreement and understanding
of the parties relating to the subject matter hereof, and supersedes and will
supersede all prior agreements, arrangements and
<PAGE>
understandings, written or oral, relating to the subject matter including,
without limitation, the Prior Agreement.
6.7. This Agreement may be amended, modified, superseded, canceled,
renewed or extended and the terms or covenants hereof may be waived, only by a
written instrument executed by all of the parties hereto, or in the case of a
waiver, by the party waiving compliance. The failure of any party at any time or
times to require performance o f any provision hereof will in no manner affect
the right at a later time to enforce the same. No waiver by either party of the
breach of any term or covenant contained in this Agreement, whether by conduct
or otherwise, in any one or more instances, will be deemed to be, or construed
as, a further or continuing waiver of any such breach, or a waiver of the breach
of any other term or covenant contained in this Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
P & F INDUSTRIES, INC.
By /s/ Leon D. Feldman
------------------------------
Leon D. Feldman
Executive Vice President
/s/ Richard A. Horowitz
------------------------------
Richard A. Horowitz
<PAGE>
CONSULTING AGREEMENT
AGREEMENT, effective as of November 1, 1998, between P & F INDUSTRIES,
INC., a Delaware corporation (the "Company") having its principal place of
business at 300 Smith Street, Farmingdale, New York 11735, and SIDNEY HOROWITZ,
residing at 20597 Links Circle, Boca Raton, Florida 33434 (the "Consultant").
WITNESSETH
WHEREAS, the Company recognizes the value of the experience, training
and background of the Consultant;
WHEREAS, the Company wishes to utilize the Consultant's expertise and
background regarding the Company; and
WHEREAS, the Company and the Consultant wish to replace the Consulting
Agreement, dated as of November 1, 1995, between the parties hereto, with this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, it is agreed by and between the parties hereto
as follows:
1. Term of Service
The term of the Consultant's service pursuant to this Agreement will
commence on the effective date hereof and will terminate on October 31, 2000
(the "Consulting Term").
2. Consulting Arrangements
2.1. The Consultant's services hereunder shall be rendered at such
place or places and times, on such subjects and in such manner as shall be
satisfactory to him. The Company shall pay the Consultant during the Consulting
Term a consulting fee, on a monthly basis in advance, at the rate of $100,000
per annum.
2.2. During the Consulting Term, the Consultant shall be entitled to
all benefits and service credit for benefits under medical insurance, life
insurance and other employee benefit plans, programs and arrangements of the
Company as if he were still employed during such period under this Agreement, to
the extent that such benefits and service credit are available to consultants to
the Company generally under the terms thereof. In addition, the Company shall
provide the Consultant, at the Company's expense, with the Consultant's current
automobile until May 31, 2000 and with a current-model automobile from June 1,
2000 to and including October 31, 2000, provided that the Consultant shall pay
all costs associated therewith, including without limitation insurance and
gasoline.
3. Events of Termination
<PAGE>
In the event of the Consultant's death, this Agreement will terminate
and the Consultant shall receive (i) his full consulting fee through the date of
death and (ii) an additional payment equal to one year's consulting fee, but no
payment shall be made pursuant to this Article 3 which would result in the
Consultant receiving aggregate compensation pursuant to this Agreement of more
than $200,000.
4. Protection of Information
4.1. In view of the fact that the Consultant's work with the Company
will bring him into close contact with many confidential affairs of the Company,
including matters of a business nature such as information about costs, profits,
markets, sales, plans for future development and other information not readily
available to the public, the Consultant will:
4.1.1. keep secret all confidential information relating to the Company
and not disclose such information to anyone outside of the Company either during
or after his service with the Company, except with the Company's prior written
consent; and
4.1.2. deliver promptly to the Company on termination of his services
hereunder, or at any time the Company may so request, all memoranda, notes,
records, lists, reports and other documents (and all copies thereof) relating to
the business of the Company, which he may then possess or have under his
control.
5. Miscellaneous
5.1. If any provision contained in this Agreement is hereafter
construed to be invalid or unenforceable, such event will not affect the
remainder of this Agreement, which will be given full effect, without regard to
the invalid portions.
5.2 If any covenant contained in Article 4, or any part thereof, is
held to be unenforceable because of the duration or scope of such provision or
the area covered thereby, the parties agree that the court making such
determination will have the power to reduce the duration, scope and/or area of
such provision and, in its reduced form, such provision will then be
enforceable.
5.3. This Agreement has been negotiated and executed in the State of
New York, and will be construed and enforced in accordance with the laws of the
State of New York applicable to agreements made and to be performed entirely in
New York.
5.4. All notices, requests, consents and other communications required
or permitted to be given hereunder will be in writing and shall be deemed to
have been duly given if delivered personally or sent by prepaid telegram, or
mailed first class, postage prepaid, by registered or certified mail (if
possible), addressed to either party at the address set forth in the preamble to
this Agreement (or to such other address as either party shall designate by
notice in writing to the other in accordance herewith).
5.5 The article headings contained herein are for reference purposes
only and
<PAGE>
shall not in any way affect the meaning or interpretation of this Agreement.
5.6. This Agreement sets forth the entire agreement and understanding
of the parties relating to the subject matter hereof, and supersedes and will
supersede all prior agreements, arrangements and understandings, written or
oral, relating to the subject matter hereof between the Consultant and the
Company.
5.6.1. This Agreement may be amended, modified, superseded, cancelled,
renewed or extended and the terms or covenants hereof may be waived only by a
written instrument executed by each of the parties hereto, or in the case of a
waiver, by the party waiving compliance. The failure of either party at any time
or times to require performance of any provision hereof will in no manner affect
the right at a later time to enforce the same. No waiver by either party of the
breach of any term or covenant contained in this Agreement, whether by conduct
or otherwise, in any one or more instances, will be deemed to be, or construed
as, a further or continuing waiver of any such breach, or a waiver of the breach
of any other term or covenant contained in this Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement this
3rd day of December effective as of the date first above written.
P & F INDUSTRIES, INC.
By: Richard Horowitz
Name: Richard Horowitz
Title: President
By: Sidney Horowitz
Name: Sidney Horowitz
<PAGE>
P&F INDUSTRIES, INC.
1992 INCENTIVE STOCK OPTION PLAN
--------------------------------
(Amended and Restated as of March 13, 1997)
1. Purpose.
The purpose of the P&F Industries, Inc. 1992 Incentive Stock Option Plan
(the "Plan) is to induce directors, key executives and other key employees to
remain in the service of P&F Industries, Inc. (the "Company"), to attract new
directors and employees and to encourage such directors and employees to acquire
stock ownership in the Company. The Board of Directors of the Company (the
"Board") believes that the granting of stock options ("Options") under the Plan
will promote continuity of the Board and management and increased incentive and
personal interest in the welfare of the Company by those who are or may become
primarily responsible for shaping and carrying out the long range plans of the
Company and securing its continued growth and financial success. It is intended
that certain Options granted hereunder will qualify as "incentive stock options"
under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")
("Incentive Stock Options") while other Options will not be so qualified
("Nonqualified Stock Options").
<PAGE>
2. Effective Date of the Plan.
The effective date of the Plan, as amended and restated, is March 13, 1997,
the date on which the Plan was amended and restated by the Board, but the Plan
is subject to approval by the holders of a majority of the outstanding shares of
common stock of the Company participating in the vote. If by no later than March
12, 1998 the Plan is not so approved, then the Plan shall continue as it existed
prior to the amendment and restatement and all Options granted hereunder shall
be pursuant to the terms of the Plan as it existed prior to the amendment and
restatement.
3. Stock Subject to Plan.
Subject to adjustment as provided in Section 12 hereof, the number of
shares of the common stock, $1.00 par value, of the Company (the "Common Stock")
available for delivery upon the exercise of Options under the Plan shall not
exceed 1,100,000 shares of Common Stock, which are hereby reserved for issuance
upon exercise of Options. The shares of Common Stock to be delivered upon
exercise of Options may be authorized and unissued shares or treasury shares. If
any Options expire or terminate for any reason without having been exercised in
full, the unissued shares subject thereto shall again become available for the
purposes of the Plan.
4. Administration.
-2-
<PAGE>
(a) The Plan shall be administered by a stock option committee (the
"Committee") consisting of not less than two members of the Board, each of whom,
at the time action is taken with respect to the Plan, shall be a "non-employee
director" within the meaning of Rule 16b-3 of the Securities Exchange Act of
1934, as amended, and an "outside director" within the meaning of Section 162(m)
of the Code. The members of the Committee shall be appointed by the Board and
shall serve at the pleasure of the Board.
(b) The Committee shall have the authority in its discretion (i) to
construe and interpret the Plan and all Options granted thereunder, and to
determine the terms and provisions (and amendments thereof) of the Options
granted under the Plan (which need not be identical), including such terms and
provisions of (and amendments) as shall be required in the judgment of the
Committee to provide that Options intended to be Incentive Stock Options under
the Plan will be so qualified under the Code as it now exists or may from time
to time be amended and/or superseded or to conform to any change in any law or
regulations applicable thereto; (ii) to define the terms used in the Plan and in
the Options granted thereunder; (iii) to prescribe, amend and rescind rules and
regulations relating to the Plan; (iv) to determine the individuals to whom and
the time
-3-
<PAGE>
or times at which Options shall be granted, the number of shares to be subject
to each Option, the vesting schedule, the term of each Option, and the option
price, taking into consideration any requirements of the Code applicable to
Incentive Stock Options; and (v) to make all other determinations necessary or
advisable for the administration of the Plan. All determinations and
interpretations made by the Committee shall be final, binding and conclusive on
all participants in the Plan and on their legal representatives and
beneficiaries.
(c) Any action of the Committee with respect to the Plan shall be taken
by majority vote at a meeting of the Committee or by written consent of a
majority of the members of the Committee without a meeting.
5. Selection of Grantees.
(a) Options may be granted only to employees (which term as used herein
includes officers) who hold positions of responsibility, are able to contribute
significantly to the Company's success and progress and are determined to be key
employees ("Employees"), and to directors of the Company who are not also
Employees ("Eligible Persons"); provided, however, that Incentive Stock Options
may only be granted to Employees. In determining the Eligible Persons to whom
Options shall be granted
-4-
<PAGE>
and the number of shares to be covered by any such Options, the Committee may
take into account the nature of the services rendered by the proposed optionees,
their present and potential contributions to the success of the Company and such
other factors as the Committee in its discretion shall deem relevant; provided,
however, that no Eligible Person may receive Options with respect to more than
250,000 shares of Common Stock in any single calendar year.
(b) Incentive Stock Options may be granted hereunder to an Employee who
owns immediately after such option is granted ten (10%) percent or more of
either the outstanding voting shares of the Company or the value of all classes
of stock of the Company ("10% Shareholder") as defined in Sections 422 and 424
of the Code, only in accordance with the provisions of Sections 6(a) and 7
hereof. For purposes of this Plan, an Employee will be considered as owning the
stock in accordance with Section 424 of the Code.
6. Option Price.
(a) The purchase price of the shares covered by each Option shall be
determined by the Committee, but, with respect to Incentive Stock Options, shall
not be less than 100% of the fair market value of such shares at the time of
granting the Option.
-5-
<PAGE>
The purchase price of the shares under Incentive Stock Options granted pursuant
to the Plan to a 10% Shareholder shall not be less than 110% of the fair market
value of such shares at the time the Option is granted.
(b) The purchase price of the shares as to which an Option shall be
exercised shall be paid in full in cash, or shares of Common Stock held by an
Option holder for at least six months at the time of exercise, or by such other
means as shall be determined by the Committee.
7. Term of Options.
An Option may provide for exercise in full at any time or from time to
time during the term of the Option, or in installments at such times as the
Committee may determine. The term of each Option shall be not more than 10 years
form the date of grant. Notwithstanding the above, any Incentive Stock Option
granted pursuant to the Plan to a 10% Shareholder shall not be exercisable after
the expiration of 5 years from the date the Incentive Stock Option is first
granted.
8. $100,000 Limitation on Exercise of Incentive Stock Options.
To the extent the aggregate fair market value per share (determined as
of the time the Option is granted) with respect to which any Options granted
hereunder which are intended to be
-6-
<PAGE>
Incentive Stock Options may be exercisable for the first time by the Option
holder in any calendar year (under this Plan or any other stock option plan of
the Company or any parent or subsidiary thereof) exceeds $100,000, the excess of
such Options shall not be considered Incentive Stock Options but rather shall be
Nonqualified Stock Options.
9. Non-Transferability of Options.
No Option granted under the Plan shall be transferable or assignable
otherwise than by will or the laws of descent and distribution and an Option may
be exercised, during the lifetime of the holder thereof, only by him.
-7-
<PAGE>
10. Termination of Employment.
Unless otherwise determined by the Committee, if a holder of an Option
ceases to be either an employee or a director of the Company for any reason
other than death or disability, his Option shall terminate three months after
the date he ceases to be an employee or director, unless by its terms it expires
sooner. Unless otherwise determined by the Committee, during the three month
period after an Option holder ceases to be either an employee or a director, all
vesting with respect to his Options shall cease and his Options may be exercised
only as to shares which he could have purchased at the time of such cessation
and no more.
11. Death or Disability of Option Holder.
Unless otherwise determined by the Committee, if a holder of an Option
shall die or become disabled (as acknowledged by the Committee) while he is an
employee or a director of the Company, his Option shall terminate one year from
the date of his death or disability, unless by its terms it expires sooner.
Unless otherwise determined by the Committee, during the period after his death
or disability, all vesting with respect to his Options shall cease and his
Options may be exercised only as to shares which he could have purchased at the
time of his death or disability and no more.
-8-
<PAGE>
12. Adjustments.
In the event of (a) a combination or subdivision of shares purchasable
under any Option, (b) other recapitalization affecting such shares, or (c) an
exchange of such shares for other securities in any plan of disposition,
acquisition or merger, a holder of an Option shall be entitled to purchase the
securities exchangeable for the securities theretofore purchasable under his
Option with the purchase price per share or other unit of securities
proportionately adjusted. In the event of any other material change in the
capital structure of the Company, the Board may make an equitable and
proportionate adjustment of the terms of any Option, and its decision thereon
shall be final, binding and conclusive.
-9-
<PAGE>
13. Amendment of Plan.
The Board may at any time make such amendments to the Plan as it shall
deem advisable; provided, however, that the Board may not without further
approval of the holders of a majority of the shares of the Common Stock present
in person or by proxy at any special or annual meeting of stockholders, increase
the number of shares as to which Options may be granted under the Plan (as
adjusted in accordance with the provisions of Section 12 hereof), increase the
maximum number of shares with respect to which Options may be granted in any
single calendar year to any Eligible Person, or change the class of persons
eligible to receive Incentive Stock Options under the Plan. Except as otherwise
provided in Section 14 hereof, no termination or amendment of the Plan may,
without the consent of the participant to whom any Option shall theretofore have
been granted, adversely affect the rights of such participant under such Option.
14. Expiration and Termination of the Plan.
The Board may at any time terminate the Plan; provided, however, any
Option outstanding under the Plan at the time of termination of the Plan shall
remain in effect until such Option shall have been exercised or shall have
expired in accordance with its terms. Options may be granted under the Plan at
any
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time and from time to time prior to its termination. Unless previously
terminated, the Plan shall terminate on April 8, 2002.
15. Privileges of Stock Ownership.
No person entitled to exercise any Option granted under the Plan shall
have any of the rights or privileges of a stockholder of the Company in respect
of any shares issuable upon exercise of such Option until such Option shall have
been validly exercised.
16. Registration Requirements.
All Options shall include such provisions as are necessary or advisable
in the opinion of counsel for the Company to comply with the requirements of the
Securities Act of 1933, as amended. No shares shall be issued and delivered upon
exercise of any Option unless and until, in the opinion of counsel for the
Company, any applicable requirements of the Securities Act of 1933, any national
securities exchange on which stock of the Company is then listed, or other laws
or rules have been fully complied with.
17. Indemnification of Committee.
In addition to such other rights of indemnification as they may have as
members of the Board or as members of the Committee, the Company shall indemnify
each member of the
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Committee against all costs and expenses reasonably incurred by such member in
connection with any action, suit or proceeding to which such member may be party
by reason of any action taken or failure to act under or in connection with the
Plan or any award made under the Plan, and against all amounts paid by such
member in satisfaction of a judgment in any action, except a judgment based upon
a finding of bad faith.
* * * * * *
As adopted by the Board of Directors
of P&F Industries, Inc. on April 9, 1992
and amended and restated as of March 13, 1997
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Subsidiaries of the Registrant
Embassy Industries, Inc., a New York Corporation
d/b/a Embassy Industries, Inc.
Franklin Manufacturing Corporation
Florida Pneumatic Manufacturing Corporation, a Florida Corporation
d/b/a Florida Pneumatic Manufacturing Corporation
Universal Tool
Fuji Air Tools
Pipemaster
Berkley Tool
Green Manufacturing Corporation, Inc. a Delaware Corporation
d/b/a Green Manufacturing Corporation, Inc.
