UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 2002
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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 of (I.R.S. Employer Identification Number)
incorporation or organization)
300 SMITH STREET, FARMINGDALE, NEW YORK 11735
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (631) 694-1800
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, and (2) has been subject to such filing
requirements for the past 90 days.
YES (X) NO ( )
As of May 13, 2002, there were 3,504,148 shares of the registrant's Class A Common Stock outstanding.
P & F INDUSTRIES, INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2002
TABLE OF CONTENTS
PAGE
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PART I
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 2002 and December 31, 2001 1 - 2
Consolidated Statements of Income
for the three months ended March 31, 2002 3
Consolidated Statement of Shareholders' Equity
for the three months ended March 31, 2002 4
Consolidated Statements of Cash Flows for the
three months ended March 31, 2002 and 2001 5 - 6
Notes to Consolidated Financial Statements 7 - 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11 - 14
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 15
PART II
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Use of proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
EXHIBIT INDEX 18 - 20
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
P & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
MARCH 31, DECEMBER 31,
2002 2001
------------ ------------
ASSETS
------
CURRENT:
Cash $ 43,762 $ 507,833
Accounts receivable, less allowance
for possible losses of $410,808
in 2002 and $404,557 in 2001 11,655,838 9,729,605
Inventories 16,298,266 17,223,225
Deferred income taxes 580,000 580,000
Prepaid expenses and other 761,741 723,538
------------ ------------
TOTAL CURRENT ASSETS 29,339,607 28,764,201
------------ ------------
PROPERTY AND EQUIPMENT:
Land 1,182,938 1,182,938
Buildings and improvements 6,301,849 6,291,225
Machinery and equipment 13,011,090 12,728,582
------------ ------------
20,495,877 20,202,745
Less accumulated depreciation
and amortization 10,270,594 9,901,650
------------ ------------
NET PROPERTY AND EQUIPMENT 10,225,283 10,301,095
------------ ------------
GOODWILL, net of accumulated
amortization of $2,163,347 7,699,551 7,301,611
OTHER ASSETS 99,165 102,615
------------ ------------
TOTAL ASSETS $ 47,363,606 $ 46,469,522
============ ============
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P & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(CONTINUED)
MARCH 31, DECEMBER 31,
2002 2001
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Short-term borrowings $ 1,800,000 $ 2,000,000
Accounts payable 3,131,608 1,981,368
Accruals:
Compensation 750,684 1,512,141
Other 2,237,391 1,947,143
Current maturities of long-term debt 306,395 313,075
------------ ------------
TOTAL CURRENT LIABILITIES 8,226,078 7,753,727
LONG-TERM DEBT, less current maturities 3,517,816 3,548,945
DEFERRED INCOME TAXES 939,000 939,000
------------ ------------
12,682,894 12,241,672
------------ ------------
SHAREHOLDERS' EQUITY:
Preferred stock - $10 par;
authorized - 2,000,000 shares;
no shares outstanding - -
Common stock:
Class A - $1 par;
authorized - 7,000,000 shares;
issued - 3,677,593 shares 3,677,593 3,677,593
Class B - $1 par;
authorized - 2,000,000 shares;
no shares issued or outstanding - -
Additional paid-in capital 8,464,139 8,464,139
Retained earnings 23,926,945 23,373,283
Treasury stock, at cost
(173,445 shares and 157,445 shares) (1,387,965) (1,287,165)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 34,680,712 34,227,850
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 47,363,606 $ 46,469,522
============ ============
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P & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
---------------------------
2002 2001
------------ ------------
REVENUES:
Net sales 17,037,755 17,298,505
Other 58,964 145,259
------------ ------------
17,096,719 17,443,764
------------ ------------
COSTS AND EXPENSES:
Cost of sales 12,004,222 12,254,793
Selling, general and administrative 4,089,063 4,214,920
Interest - net 101,772 270,072
------------ ------------
16,195,057 16,739,785
------------ ------------
INCOME BEFORE TAXES ON INCOME 901,662 703,979
TAXES ON INCOME 348,000 273,000
------------ ------------
NET INCOME $ 553,662 $ 430,979
============ ============
Weighted average common shares outstanding:
Basic 3,510,605 3,575,599
Diluted 3,587,437 3,649,245
Earnings per share of common stock:
Basic $ .16 $ .12
Diluted $ .15 $ .12
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P & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
ADDITIONAL
COMMON PAID-IN RETAINED TREASURY
STOCK CAPITAL EARNINGS STOCK
----------- ----------- ------------ ----------
Balance, January 1, 2002 $ 3,677,593 $ 8,464,139 $ 23,373,283 $(1,287,165)
Net income for the
three months ended
March 31, 2002 - - 553,662 -
Purchase of Class A
Common Stock - - - (100,800)
----------- ----------- ------------ ----------
Balance, March 31, 2002 $ 3,677,593 $ 8,464,139 $ 23,926,945 $(1,387,965)
=========== =========== ============ ==========
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P & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
---------------------------
2002 2001
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 553,662 430,979
------------ ------------
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation 368,944 363,876
Amortization 4,295 85,403
Provision for losses on
accounts receivable - net 6,251 2,143
Decrease (increase):
Accounts receivable (1,932,484) 91,921
Inventories 924,959 (628,453)
Prepaid expenses and other (39,048) (33,139)
Other assets - (16,296)
Increase (decrease):
Accounts payable 1,150,240 471,393
Accruals and other (471,209) (1,463,370)
------------ ------------
Total adjustments 11,948 (1,126,522)
------------ ------------
Net cash provided by (used in)
operating activities 565,610 (695,543)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (293,132) (297,275)
Payments for acquisition-related expenses (397,940) -
------------ ------------
Net cash used in
investing activities (691,072) (297,275)
------------ ------------
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P & F INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(CONTINUED)
THREE MONTHS ENDED
MARCH 31,
---------------------------
2002 2001
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings 800,000 2,000,000
Repayments of short-term borrowings (1,000,000) (1,000,000)
Principal payments on long-term debt (37,809) (34,806)
Purchase of Class A Common Stock (100,800) (357,045)
------------ ------------
Net cash provided by (used in)
financing activities (338,609) 608,149
------------ ------------
NET INCREASE (DECREASE) IN CASH (464,071) (384,669)
CASH AT BEGINNING OF PERIOD 507,833 388,422
------------ ------------
CASH AT END OF PERIOD $ 43,762 $ 3,753
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Income taxes $ 2,500 $ 23,000
============ ============
Interest $ 107,635 $ 271,873
============ ============
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P & F INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated unaudited financial statements contained herein include
the accounts of P & F Industries, Inc. and its subsidiaries. All significant
intercompany balances and transactions have been eliminated.
P & F Industries, Inc. ("P & F") conducts business operations through its three wholly-owned subsidiaries; Florida Pneumatic Manufacturing Corporation ("Florida Pneumatic"), Green Manufacturing, Inc. ("Green") and Embassy Industries, Inc. ("Embassy"). P & F and its subsidiaries are herein referred to collectively as the "Company".
Florida Pneumatic is engaged in the importation, manufacture and sale of pneumatic hand tools, primarily for the industrial and retail markets, and the importation and sale of compressor air filters. Florida Pneumatic also markets, through its Berkley Tool division ("Berkley"), a line of pipe cutting and threading tools, wrenches and replacement electrical components for a widely-used brand of pipe cutting and threading machines. Green is engaged primarily in the manufacture, development and sale of heavy-duty welded custom designed hydraulic cylinders. Green also manufactures a line of access equipment for the petro-chemical industry and a line of post hole digging equipment for the agricultural industry. Embassy is engaged in the manufacture and sale of baseboard heating products and the importation and sale of radiant heating systems. Embassy also imports a line of door and window hardware items through its Franklin hardware division ("Franklin"). Note 4 of the Notes to Consolidated Financial Statements presents financial information for the segments of the Company's business.
BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, and with the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Accordingly, these interim financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of the Company, these unaudited consolidated financial statements include all adjustments necessary to present fairly the information set forth therein. All such adjustments are of a normal recurring nature. Results for interim periods are not necessarily indicative of results to be expected for a full year.
P & F INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF FINANCIAL STATEMENT PRESENTATION (CONTINUED)
The consolidated balance sheet information for December 31, 2001 was derived from the audited financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2001. The interim financial statements contained herein should be read in conjunction with that Report.
In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
NOTE 2 - INVENTORIES
Major classes of inventory were as follows:
MARCH 31, DECEMBER 31,
2002 2001
------------ ------------
Raw materials and supplies $ 2,903,609 $ 3,122,061
Work in process 735,430 740,036
Finished goods 12,659,227 13,361,128
------------ ------------
$ 16,298,266 $ 17,223,225
============ ============
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NOTE 3 - CAPITAL STOCK TRANSACTIONS
During the three months ended March 31, 2002, the Company purchased 16,000 shares of its Class A Common Stock, at a cost of $100,800.
P & F INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - SEGMENTS OF BUSINESS
The following tables present financial information by segment for the three-month periods ended March 31, 2002 and 2001. Segment profit (loss) excludes general corporate expenses, interest expense and income taxes. There were no intersegment revenues.
PNEUMATIC
TOOLS AND
THREE MONTHS ENDED RELATED HYDRAULIC HEATING
MARCH 31, 2002 CONSOLIDATED EQUIPMENT CYLINDERS PRODUCTS HARDWARE
---------------------- ------------ --------- --------- --------- --------
(IN THOUSANDS)
Revenues from
external customers $ 17,097 $ 10,009 $ 3,343 $ 2,281 $ 1,464
============ ========= ========= ========= ========
Segment profit (loss) $ 1,770 $ 1,737 $ (94) $ 102 $ 25
============ ========= ========= ========= ========
PNEUMATIC
TOOLS AND
THREE MONTHS ENDED RELATED HYDRAULIC HEATING
MARCH 31, 2001 CONSOLIDATED EQUIPMENT CYLINDERS PRODUCTS HARDWARE
---------------------- ------------ --------- --------- --------- --------
(IN THOUSANDS)
Revenues from
external customers $ 17,444 $ 10,171 $ 4,161 $ 1,971 $ 1,141
============ ========= ========= ========= ========
Segment profit $ 1,696 $ 1,553 $ 47 $ 67 $ 29
============ ========= ========= ========= ========
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The reconciliation of combined operating profits for reportable segments to consolidated income before income taxes is as follows:
THREE MONTHS ENDED
MARCH 31,
---------------------------
2002 2001
------------ ------------
Total profit for reportable segments $ 1,770,133 $ 1,695,556
General corporate expenses (766,699) (721,505)
Interest expense (101,772) (270,072)
------------ ------------
Income before income taxes $ 901,662 $ 703,979
============ ============
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P & F INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per common share:
THREE MONTHS ENDED
MARCH 31,
---------------------------
2002 2001
------------ ------------
Numerator:
Numerator for basic and diluted
earnings per common share -
income available to common
shareholders $ 553,662 $ 430,979
============ ============
Denominator:
Denominator for basic earnings
per common share - weighted
average common shares outstanding 3,510,605 3,575,599
Effect of dilutive securities:
Common stock options 76,742 73,646
------------ ------------
Denominator for diluted earnings
per common share - adjusted
weighted average common shares
and assumed conversions 3,587,347 3,649,245
============ ============
Earnings per common share:
Basic $ .16 $ .12
============ ============
Diluted $ .15 $ .12
============ ============
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NOTE 6 - SUBSEQUENT EVENT
On May 3, 2002, a newly formed wholly-owned subsidiary of the Company acquired the stock of Nationwide Industries, Inc. ("Nationwide") for $11,500,000, subject to adjustment. Nationwide is engaged in the business of importing and manufacturing door, window and fencing hardware. This acquisition was financed primarily through the term loan facility available under the Company's credit agreement. In connection with this acquisition, the same subsidiary entered into a contract to purchase, for $2,500,000, the real property and the improvements thereon in which Nationwide conducts its business. As of the date of this Quarterly Report on Form 10-Q, the purchase of the real property and improvements thereon had not yet been consummated.
P & F INDUSTRIES, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 2002 COMPARED WITH QUARTER ENDED MARCH 31, 2001
Consolidated revenues decreased 2.0%, from $17,443,764 to $17,096,719. Revenues from pneumatic tools and related equipment decreased 1.6%, from $10,170,433 to $10,008,910, due primarily to the continued weakness in the industrial and catalog segments, which was partially offset by increased sales to the retail market. Selling prices of pneumatic tools and related equipment were unchanged from the prior year, with the exception of prices to one significant customer, which were reduced by an average of 16%. Revenues from hydraulic cylinders and other equipment decreased 19.7%, from $4,160,842 to $3,343,175, due primarily to the loss of a significant customer in the wrecker market and a decrease in orders from a customer with significant sales to the airline industry. Selling prices of hydraulic cylinders and other equipment were unchanged from the prior year. Revenues from heating equipment increased 15.7%, from $1,971,073 to $2,280,355, due to increased sales in all of its product lines. Selling prices of heating equipment were unchanged from the prior year. Revenues from hardware increased 28.3%, from $1,141,416 to $1,464,279, due primarily to the addition of two significant customers in late 2001. Selling prices of hardware products were unchanged from the prior year.
Consolidated gross profit, as a percentage of revenues, increased from 29.7% to 29.8%. Gross profit from pneumatic tools and related equipment increased from 36.1% to 36.9%, due primarily to increases in the value of the U.S. dollar as compared to both the Japanese yen and the New Taiwan dollar, which decreased the cost of imported product, continuing productivity improvements and expense reductions. Gross profit from hydraulic cylinders and other equipment decreased from 12.7% to 9.1%, due primarily to the lower absorption of fixed expenses resulting from the decreased manufacturing activity. In addition, significant production labor resources were expended to produce prototypes and initial short-run orders for new customers. These new account activities generate little to no gross profit. Labor productivity increases partially offset these negatives. Gross profit from heating equipment decreased from 34.7% to 32.0%, due primarily to a change in product mix. Gross profit from hardware decreased from 26.6% to 25.2%, due primarily to a less favorable product mix.
Consolidated selling, general and administrative expenses decreased 3.0%, from $4,214,920 to $4,089,063, due primarily to an overall decrease in revenues for the period. Interest expense decreased 62.3%, from $270,072 to $101,772, due primarily to decreases in both the average outstanding balance of the Company's borrowings and the average interest rate on these borrowings.
The effective tax rates for the quarters ended March 31, 2002 and 2001 were 38.6% and 38.8%, respectively.
P & F INDUSTRIES, INC. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
The Company gauges its liquidity and financial stability by the measurements shown in the following table (dollar amounts in thousands):
MARCH 31, DECEMBER 31, MARCH 31,
2002 2001 2001
----------- ------------ -----------
Working Capital $ 21,114 $ 21,010 $ 19,321
Current Ratio 3.57 to 1 3.71 to 1 2.18 to 1
Shareholders' Equity $ 34,681 $ 34,228 $ 33,066
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During the quarter ended March 31, 2002, gross accounts receivable increased by approximately $1,932,000, with increases of approximately $1,668,000 at Florida Pneumatic, approximately $85,000 at Green and approximately $179,000 at Embassy. The increase at Florida Pneumatic was the result of granting longer payment terms to one significant customer and increased sales to another significant customer that also has extended payment terms. The increases at Green and Embassy were the result of increased sales.
During the quarter ended March 31, 2002, inventories decreased by approximately $925,000, with decreases of approximately $685,000 at Florida Pneumatic, approximately $114,000 at Green and approximately $126,000 at Embassy. At Florida Pneumatic, inventory decreased due to the reduction in sales and decreased purchasing activity. The decreases in inventory at Green and Embassy were made to improve inventory turns.
During the quarter ended March 31, 2002, accounts payable increased by approximately $1,150,000, with increases of approximately $990,000 at Florida Pneumatic and approximately $196,000 at Green being partially offset by a decrease of approximately $36,000 at Embassy. All of the changes in accounts payable were the result of the timing of payments. Short-term borrowings decreased by $200,000, as a result of the decrease in working capital requirements consistent with changes in accounts receivable, accounts payable and inventory.
The Company has a credit agreement, as amended, with Citibank, N.A. (successor-in-interest to European American Bank), which expires on July 26, 2002. This agreement provides the Company with various credit facilities, including revolving credit loans, term loans for acquisitions and a foreign exchange line. On May 3, 2002, the credit agreement was amended in connection with the Company's acquisition of Nationwide.
The revolving credit loan facility provides a total of $12,000,000, with various sublimits, for direct borrowings, letters of credit, bankers' acceptances and equipment loans. At March 31, 2002, there was $1,800,000 outstanding against the revolving credit loan facility. There was a commitment of approximately $830,000 for open letters of credit at March 31, 2002.
P & F INDUSTRIES, INC. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The term loan facility provides a commitment of $15,000,000 to finance acquisitions subject to the lending bank's approval. There was no loan balance outstanding against this facility at March 31, 2001. There was, however, a standby letter of credit totaling approximately $510,000 outstanding against this facility at March 31, 2001. This standby letter of credit was used to secure the Economic Development Revenue Bond assumed as part of the acquisition of Green.
On May 3, 2002, the Company borrowed $11,500,000 against the term loan facility in connection with the acquisition of Nationwide.
The foreign exchange line provides for the availability of up to $10,000,000 in foreign currency forward contracts. These contracts fix the exchange rate on future purchases of Japanese yen needed for payments to foreign suppliers. The total amount of foreign currency forward contracts outstanding at March 31, 2002 was approximately $2,530,000.
The Company's credit agreement is subject to annual review by the lending bank. Under this agreement, the Company is required to adhere to certain financial covenants. At March 31, 2002, and for the three months then ended, the Company satisfied all of these covenants.
Capital spending for the quarter ended March 31, 2002 was approximately $295,000. The total amount was provided from working capital. Capital expenditures for the remainder of 2002 are expected to total approximately $1,000,000, some of which may be financed through the Company's credit facilities. Included in the expected total for the remainder of 2002 are capital expenditures relating to new products, expansion of existing product lines and replacement of old equipment.
The Company, through Florida Pneumatic, imports a significant amount of its purchases from Japan, with payment due in Japanese yen. As a result, the Company is subject to the effects of foreign currency exchange fluctuations. The Company uses a variety of techniques to mitigate the effects of these fluctuations, including increasing its selling prices, obtaining price reductions from its overseas suppliers, using alternative supplier sources and entering into foreign currency forward contracts. The strengthening of the U.S. dollar versus the Japanese yen over the last 12 months has had a positive effect on the Company's results of operations and its financial position. There can be no assurance however, that this situation will continue. See "Item 3 - Quantitative and Qualitative Disclosures About Market Risk."
P & F INDUSTRIES, INC. AND SUBSIDIARIES
NEW ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141"), and No. 142, "Goodwill and Other Intangible Assets" ("SFAS" 142). SFAS 141 requires the use of the purchase method of accounting for business combinations initiated after June 30, 2001. SFAS 141 also requires that the Company recognize acquired intangible assets apart from goodwill if the acquired intangible assets meet certain criteria. SFAS 141 applies to all business combinations initiated after June 30, 2001, and to all business combinations accounted for by the purchase method for which the date of acquisition is July 1, 2001 or later. It also requires, upon adoption of SFAS 142, that the Company reclassify, if necessary, the carrying amounts of intangible assets and goodwill, based on the criteria in SFAS 141.
SFAS 142 requires, among other things, that companies no longer amortize goodwill, but instead test goodwill for impairment at least annually. In addition, SFAS 142 requires that the Company identify reporting units for the purposes of assessing potential future impairments of goodwill, reassess the useful lives of other existing recognized intangible assets, and cease amortizing intangible assets with an indefinite useful life. An intangible asset with an indefinite useful life should be tested for impairment in accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in fiscal years beginning after December 15, 2001 to all goodwill and other intangible assets recognized. SFAS 142 requires the Company to complete a transitional goodwill impairment test six months from the date of adoption. The Company is also required to reassess the useful lives of other intangible assets within the first interim quarter after adoption of SFAS 142.
With respect to the Company's business combinations that were effected prior to June 30, 2001 using the purchase method of accounting, the net carrying amount of the resulting goodwill as of March 31, 2002 was $7,301,611. The Company is currently assessing the effect that the adoption of SFAS 141 and SFAS 142 will have on its consolidated financial statements.
In October 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144 ("SFAS 144"), "Accounting for the Impairment or Disposal of Long-Lived Assets", which supersedes Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", and addresses financial accounting and reporting for the impairment of long-lived assets to be disposed of. SFAS 144 is required to be adopted for fiscal years beginning after December 15, 2001. The Company is currently assessing the effect that the adoption of SFAS 144 will have on its consolidated financial statements.
P & F INDUSTRIES, INC. AND SUBSIDIARIES
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risks, which include changes in U.S. and international exchange rates, the prices of certain commodities and currency rates as measured against the U.S. dollar and each other. The Company attempts to reduce the risks related to foreign currency fluctuation by utilizing financial instruments, pursuant to Company policy.
The value of the U.S. dollar affects the Company's financial results. Changes in exchange rates may positively or negatively affect the Company's gross margins and operating expenses. The Company engages in hedging programs aimed at limiting, in part, the impact of currency fluctuations. Using primarily forward exchange contracts, the Company hedges some of those transactions that, when remeasured according to accounting principles generally accepted in the United States of America, impact the income statement. Factors that could impact the effectiveness of the Company's programs include volatility of the currency markets and availability of hedging instruments. All currency contracts that are entered into by the Company are components of hedging programs and are entered into for the sole purpose of hedging an existing or anticipated currency exposure and not for speculation. The Company does not buy or sell financial instruments for trading purposes. Although the Company maintains these programs to mitigate the effects of changes in currency exchange rates, when the U.S. dollar sustains a weakening exchange rate against currencies in which the Company incurs costs, the Company's costs are adversely affected.
The Company accounts for changes in the fair value of its foreign currency contracts by marking them to market and recognizing any resulting gains or losses through its statement of income. The Company also marks its yen-denominated payables to market, recognizing any resulting gains or losses in its statement of income. At March 31, 2002, the Company had foreign currency forward contracts, maturing in 2002, to purchase approximately $2,530,000 in Japanese yen at contracted forward rates. This amount was not in excess of the Company's yen-denominated payables.
The potential loss in value of the Company's net investment in foreign currency forward contracts resulting from a hypothetical 10 percent adverse change in foreign currency exchange rates at March 31, 2002 was approximately $280,000.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a defendant or co-defendant in various actions brought
about in the course of conducting its business. The Company has
accrued approximately $400,000 for possible liability relating to
these actions.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See "Exhibit Index" immediately following the signature page.
(b) Reports on Form 8-K No reports on Form 8-K were filed by the registrant during the quarter ended March 31, 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
P & F INDUSTRIES, INC.
(Registrant)
By /s/ Joseph A. Molino, Jr.
-------------------------------
Joseph A. Molino, Jr.
Vice President
Dated: May 13, 2002 (Principal Financial Officer)
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EXHIBIT INDEX
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 Securities and Exchange Commission upon request.
3.1 Restated Certificate of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1999).
3.2 Amended By-laws of the Registrant (Incorporated by reference to Exhibit 3.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999).
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 to 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 to 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 (Incorporated by reference to Exhibit 4.3 to the Registrant's Annual Report on Form 10-K/A for the fiscal year ended December 31, 1998).
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 (Incorporated by reference to Exhibit 4.4 to the Registrant's Annual Report on Form 10-K/A for the fiscal year ended December 31, 1998).
EXHIBIT INDEX
(CONTINUED)
4.5 Amendment No. 2 to Credit Agreement, dated as of July 28, 1999, 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 (Incorporated by reference to
Exhibit 4.5 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999).
4.6 Amendment No. 3 to Credit Agreement, dated as of July 26, 2000, 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 (Incorporated by reference to
Exhibit 4.5 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2000).
4.7 Amendment No. 4 to Credit Agreement, dated as of June 25, 2001, 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 (Incorporated by reference to
Exhibit 4.7 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000).
4.8 Amendment No. 5 to Credit Agreement, dated as of May 3, 2002, 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 Citibank, N.A.
(successor-in-interest to European American Bank), a New York banking
corporation.
4.9 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 Second Amended and Restated Employment Agreement, dated as of May 30,
2001, between the Registrant and Richard A. Horowitz (Incorporated by
reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 2000).
|
EXHIBIT INDEX
(CONTINUED)
10.2 Consulting Agreement, effective as of November 1, 2000, between the
Registrant and Sidney Horowitz (Incorporated by reference to Exhibit 10.3
to the Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 2000).
10.3 1992 Incentive Stock Option Plan of the Registrant, as amended and
restated as of March 13, 1997 (Incorporated by reference to Exhibit 10.3
to the Registrant's Annual Report on Form 10-K/A for the fiscal year
ended December 31, 1998).
10.4 Executive Incentive Bonus Plan of the Registrant (Incorporated by
reference to Exhibit 10.4 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 2001).
10.5 2002 Stock Incentive Plan of the Registrant.
|
EXHIBIT 4.8
P & F INDUSTRIES, INC.
EXHIBIT 4.8
AMENDMENT NO. 5 AND WAIVERTO
CREDIT AGREEMENT
THIS AMENDMENT NO. 5 AND WAIVER TO CREDIT AGREEMENT, is entered into as of May 3, 2002 (the "Amendment and Waiver"), 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 CITIBANK, N.A. (successor-in-interest to European American Bank), a New York banking corporation (the "Bank").
BACKGROUND
The Co-Borrowers and the Bank are parties to a Credit Agreement, dated as of
July 23, 1998 (as same has been amended by Amendments Nos. 1, 2, 3 and 4
thereto, the "Credit Agreement"), pursuant to which the Bank provides the
Co-Borrowers with certain financial accommodations.
P&F has informed the Bank that it has entered into a Stock Purchase Agreement,
dated as of the date hereof, with Mark C. Weldon and Nationwide Industries, Inc.
(the "Stock Purchase Agreement") pursuant to which P&F will acquire the shares
of stock of Nationwide Industries, Inc., a Florida corporation. The Co-Borrowers
have requested that the Bank amend and waive 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:
AMENDMENTS TO CREDIT AGREEMENT
SECTION 1.1 OF THE CREDIT AGREEMENT IS HEREBY AMENDED TO ADD THE FOLLOWING
DEFINITIONS IN THEIR APPROPRIATE ALPHABETICAL ORDER:
"Amendment No. 5 Effective Date" shall mean May 3, 2002.
"Countrywide" shall mean Countrywide Hardware, Inc., a Delaware corporation.
"Nationwide" shall mean Nationwide Industries, Inc., a Florida corporation.
"Term Loan Commitment Maturity Date" shall mean July 26, 2002. Such term shall
be deemed to extend the Maturity Date from the original expiration of July 26,
2000, through July 26, 2002.
SECTION 7.12(b) OF THE CREDIT AGREEMENT IS HEREBY AMENDED IN ITS ENTIRETY TO
PROVIDE AS FOLLOWS:
"(b) MINIMUM CAPITAL BASE. Maintain a Consolidated Capital Base at all
times, of at least $17,000,000."
SECTION 7.12(d) OF THE CREDIT AGREEMENT IS HEREBY AMENDED IN ITS ENTIRETY TO
PROVIDE AS FOLLOWS:
"(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.
Notwithstanding anything to the contrary, for the purpose of
determining compliance with this financial covenant only, the purchase
of the premises located at 10333 Windhorst Road, Tampa, Florida 33619
(the "Florida Premises") shall not be deemed a Capital Expenditure."
SCHEDULE II TO THE CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED IN ITS ENTIRETY TO PROVIDE AS SET FORTH ON SCHEDULE II ATTACHED HERETO.
WAIVERS
THE BANK WAIVES COMPLIANCE WITH THE PROVISIONS OF SECTION 5.3(b) OF THE CREDIT AGREEMENT TO THE EXTENT NECESSARY TO PERMIT P&F TO ENTER INTO THE STOCK PURCHASE AGREEMENT, THE EMPLOYMENT AGREEMENT, AND THE OTHER DOCUMENTS AND AGREEMENTS EXECUTED IN CONNECTION THEREWITH.
THE BANK WAIVES COMPLIANCE WITH THE PROVISIONS OF SECTION 7.01 AND SECTION 7.02 OF THE CREDIT AGREEMENT SOLELY TO THE EXTENT NECESSARY TO PERMIT COUNTRYWIDE TO ENTER INTO A MORTGAGE LOAN, IN AN AMOUNT UP TO $2,200,000, WITH FIRST UNION NATIONAL BANK PURSUANT TO THE TERMS OF A MORTGAGE ON TERMS AND CONDITIONS SATISFACTORY TO THE BANK AND TO GRANT A MORTGAGE AND LIEN ON THE FLORIDA PREMISES, ALONG WITH THE FIXTURES THEREON AND PROCEEDS THEREOF (THE "ASSETS"), IN FAVOR OF FIRST UNION NATIONAL BANK TO SECURE THE PAYMENT OF AMOUNTS BORROWED FROM FIRST UNION; PROVIDED, HOWEVER, THAT SUCH LIEN EXTENDS ONLY TO THE ASSETS AND PROVIDED, FURTHER THAT, FIRST UNION NATIONAL BANK SHALL HAVE EXECUTED A MORTGAGEE WAIVER, SUBSTANTIALLY IN THE FORM
OF EXHIBIT 2 ATTACHED HERETO.
CONDITIONS OF EFFECTIVENESS
THIS AMENDMENT AND WAIVER SHALL BECOME EFFECTIVE AS OF THE AMENDMENT NO. 5
EFFECTIVE DATE, UPON SATISFACTION OF THE FOLLOWING CONDITIONS PRECEDENT:
The Bank shall have received each of the following, in form and substance
satisfactory to the Bank and its counsel: this Amendment and Waiver, duly
executed by each Co-Borrower; the Term Loan Note, substantially in the form
attached hereto as EXHIBIT 1, duly executed by each Co-Borrower in favor of the
Bank;
the Reaffirmation Agreement, substantially in the form attached hereto as
EXHIBIT 3, duly executed by each Co-Borrower; a certificate of the Secretary of
each of Countrywide and Nationwide, dated as of the Amendment No. 5 Effective
Date, and certifying: (A) that neither its Certificate of Incorporation nor
By-laws 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 such Guarantor authorizing the execution, delivery and
performance of this Amendment and Waiver and each other Loan Document to which
such Guarantor is a party; and (C) the incumbency and specimen signature of each
officer of such Guarantor executing each Loan Document to which it is a party
and any certificates or instruments furnished pursuant hereto, and a
certification by another officer of such Guarantor as to the incumbency and
signature of the Secretary, and together with certified copies of the
Certificate of Incorporation and By-laws of such Guarantor; a certificate of
good standing for each of Countrywide and Nationwide from the Secretary of the
States of Delaware and Florida, respectively, dated as of a recent date; a
certificate of the Secretary of each of the Co-Borrowers, dated as of the
Amendment No. 5 Effective Date, certifying (A) the names and true signatures of
the officers of such Co-Borrower authorized to sign this Amendment and Waiver,
the other Loan Documents and any other documents to be delivered by such entity
under this Amendment and Waiver, (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 Waiver 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, with respect to P&F, Florida
Pneumatic and Embassy, the Closing Date and, with respect to Green, the
Amendment No. 2 Effective Date; Intentionally Deleted.
a Guaranty, substantially in the form of EXHIBIT 4 attached hereto, and a
Security Agreement, substantially in the form of EXHIBIT 5 attached hereto, duly
executed by each of Countrywide and Nationwide, 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;
an amendment to the Pledge Agreement, substantially in the form of EXHIBIT 6
attached hereto, duly executed by P&F, with respect to the pledge of the shares
of Countrywide held by P&F, along with share certificates evidencing such shares
and stock powers executed in blank;
a Pledge Agreement, substantially in the form of EXHIBIT 7 attached hereto, duly
executed by Countrywide, with respect to the shares of Nationwide held by
Countrywide, along with share certificates evidencing such shares and stock
powers executed in blank;
receipt of a copy of the duly executed Stock Purchase Agreement and all
documents and instruments executed in connection therewith, including but not
limited to the Escrow Agreement, and the Employment Agreement;
a favorable opinion of counsel for Countrywide and Nationwide dated as of the
Amendment No. 5 Effective Date, as required pursuant to Section 6.10 of the
Credit Agreement;
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, with respect to Countrywide and Nationwide to be delivered ten (10)
days from the date hereof;
such other documents, instruments, agreements, approvals, opinions and evidence
as the Bank may reasonably require. All conditions precedent set forth in the
Stock Purchase Agreement shall have been satisfied and the transactions
thereunder shall occur simultaneously with the consummation of the transactions
contemplated by this Amendment and Waiver. The indebtedness of Nationwide to
First Union National Bank shall have been paid in full simultaneously with the
consummation of the transactions contemplated by this Amendment and Waiver and
all existing documentation with respect to said indebtedness shall have been
terminated.
The stock to be acquired pursuant to the Stock Purchase Agreement shall be free
and clear of all Liens, except those Liens permitted pursuant to Section 7.01 of
the Credit Agreement.
REPRESENTATIONS AND WARRANTIES; EFFECT ON CREDIT AGREEMENT
EACH CO-BORROWER HEREBY REPRESENTS AND WARRANTS AS FOLLOWS:
This Amendment and Waiver 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. Upon the effectiveness of this Amendment and Waiver, the 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. 5 Effective Date. No Default or Event of Default has occurred and is continuing or would exist after giving effect to this Amendment and Waiver. No Co-Borrower has any defense, counterclaim or offset with respect to the Credit Agreement.
EFFECT ON CREDIT AGREEMENT.
Upon the effectiveness of this Amendment and Waiver, 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.
Except as specifically amended herein, the Credit Agreement, and all other
documents, instruments and agreements executed and/or delivered in connection
therewith, shall remain in full force and effect, and are hereby ratified and
confirmed.
Except as expressly provided herein, the execution, delivery and effectiveness
of this Amendment and Waiver 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.
Upon consummation of the transactions contemplated hereby and by the Stock
Purchase Agreement, the acquisition of Nationwide shall be deemed a "Permitted
Acquisition" for purposes of the Agreement.
MISCELLANEOUS
THIS AMENDMENT AND WAIVER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION HEADINGS IN THIS AMENDMENT AND WAIVER ARE INCLUDED HEREIN FOR CONVENIENCE OF REFERENCE ONLY AND SHALL NOT CONSTITUTE A PART OF THIS AMENDMENT AND WAIVER FOR ANY OTHER PURPOSE.
THIS AMENDMENT AND WAIVER 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.
[NEXT PAGE IS SIGNATURE PAGE]
IN WITNESS WHEREOF, the Co-Borrowers and the Bank have caused this Amendment and Waiver to be duly executed by their duly authorized officers as of the day and year first above written. P&F INDUSTRIES, INC.
By:
Name: Joseph A. Molino. Jr.
Title: Vice President
FLORIDA PNEUMATIC MANUFACTURING
CORPORATION
By:
Name: Joseph A. Molino. Jr.
Title: Vice President
EMBASSY INDUSTRIES, INC.
By:
Name: Joseph A. Molino. Jr.
Title: Vice President
GREEN MANUFACTURING, INC.
By:
Name: Joseph A. Molino. Jr.
Title: Vice President
CITIBANK, N.A.
By:
Name: Richard Romano
Title: Group Vice President
SCHEDULE II
P&F INDUSTRIES
Amada America, Inc. Equipment - #98074253
Equipment - #98074252
FLORIDA PNEUMATIC MANUFACTURING CORPORATION
Liens under the Mortgage and Security Agreement by and between Barnett Bank of
Palm Beach County and Florida Pneumatic Manufacturing Corporation, dated
February 25, 1998, as amended and supplemented.
EMBASSY INDUSTRIES, INC.
Liens under the Security Agreement by and between Embassy Industries, Inc. and Met Life Capital Financial Corporation, dated as of April 11, 1996, in connection with the Mortgage by and between Embassy Industries, Inc. and Met Life Capital Financial Corporation, dated April 11, 1996, as amended and supplemented.
NATIONWIDE INDUSTRIES, INC.
AT&T Capital Leasing Services, Inc. Equipment - #
980000283614 Norwest Financial Leasing Equipment --# 99000033403 Dell Financial Services Equipment - # 200000220124 Schlegel Systems, Inc. Equipment --# 200200251781 |
EXHIBIT 1
TERM NOTE
$11,500,000 May 3, 2002
FOR VALUE RECEIVED, 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", and collectively
with P&F, Florida Pneumatic and Embassy, the "Co-Borrowers"), promise to pay to
the order of CITIBANK, N.A. (successor-in-interest to European American Bank)
(the "Bank") on or before May 3, 2009, (the "Maturity Date"), the principal
amount of ELEVEN MILLION FIVE HUNDRED THOUSAND AND 00/100 ($11,500,000) DOLLARS
in twenty four (24) consecutive quarterly installments of $479,166.67 each,
commencing June 1, 2003 and continuing on the first day of each June, September,
December, and March thereafter of each year, with a final installment, on the
Maturity Date, in an amount equal to the remaining principal amount outstanding
on the Maturity Date.
The Co-Borrowers also promise to pay interest on the unpaid principal amount
hereof from the date hereof until paid in full at the rates and at the times
which shall be determined in accordance with the provisions of the Credit
Agreement referred to below.
This Note is a "Term Note" issued pursuant to and entitled to the benefits of
the Credit Agreement dated as of July 23, 1998, among the Bank and the
Co-Borrowers (as the same has been and may be further amended, modified or
supplemented from time to time, the "Credit Agreement"), to which reference is
hereby made for a more complete statement of the terms and conditions under
which the Loans evidenced hereby was made and is to be repaid. Capitalized terms
used herein without definition shall have the meanings set forth in the Credit
Agreement.
The Bank shall record the date, Type and amount of each payment or prepayment of
principal of the Loans on the grid schedule annexed to this Note; PROVIDED,
HOWEVER, that the failure of the Bank to set forth the Loans, payments and other
information on the attached grid schedule shall not in any manner affect the
obligation of the Co-Borrowers to repay the Loans made by the Bank in accordance
with the terms of this Note.
This Note is subject to prepayment as provided in Section 3.03 of the Agreement.
Upon the occurrence of an Event of Default the unpaid balance of the principal
amount of this Note, together with all accrued but unpaid interest thereon, may
become, or may be declared to be, due and payable in the manner, upon the
conditions and with the effect provided in the Credit Agreement.
All payments of principal and interest in respect of this Note shall be made in
lawful money of the United States of America in same day funds at the office of
the Bank located at the Bank's Payment Office or at such other place as shall be
designated in writing for such purpose in accordance with the terms of the
Credit Agreement.
No reference herein to the Credit Agreement and no provision of this Note or the
Credit Agreement shall alter or impair the obligation of the Co-Borrowers, which
is absolute and unconditional, to pay the principal of and interest on this Note
at the place, at the respective times, and in the currency herein prescribed.
Each Co-Borrower and each endorser of this Note waive diligence, presentment,
demand, protest and notice of any kind in connection with this Note.
THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW.
IN WITNESS WHEREOF, each Co-Borrower has caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year and at the
place first above written.
P&F INDUSTRIES, INC. FLORIDA PNEUMATIC MANUFACTURING
CORPORATION
By: By:
------------------------------- -------------------------------
Name: Joseph A. Molino, Jr. Name: Joseph A. MOLINO, Jr.
Title: Vice President Title: Vice President
EMBASSY INDUSTRIES, INC. GREEN MANUFACTURING, INC.
By: By:
------------------------------- -------------------------------
Name: Joseph A. Molino, Jr. Name: Joseph A. Molino, Jr.
Title: Vice President Title: Vice President
|
SCHEDULE OF LOANS
Amount of
Principal Principal
Date of Type of Interest Amount of Maturity Paid or
Loan Loan Rate Loan of Loan Unpaid
-------- -------- -------- --------- --------- ---------
|
EXHIBIT 2
FIRST UNION NATIONAL BANK
("Mortgagee")
May __, 2002
CITIBANK, N.A.
730 Veterans Memorial Highway
Hauppauge, New York 11788
Gentlemen:
We, First Union National Bank (the "Mortgagee"), have been granted a security
interest in certain items of personal property of Countrywide Hardware, Inc.
(the "Mortgagor") pursuant to a Mortgage, dated May __, 2002, between the
Mortgagee and the Mortgagor, together with the notes secured thereby and all
other ancillary documents delivered in connection therewith (collectively, the
"Mortgage Documents"). We have been advised that Citibank, N.A. (the "Bank") has
a security interest in all personal property of the Mortgagor described on
EXHIBIT A attached hereto (the "Collateral") and requires the Collateral as
collateral security for all obligations of the Mortgagor to the Bank, now owing
or hereafter incurred, in the above described capacities (the "Indebtedness").
We hereby agree that the Collateral may be stored, utilized and/or installed at
the Mortgagor's premises located at 10333 Windhorst Road, Tampa, Florida (the
"Premises") and shall not be deemed a fixture or part of the real estate but
shall at all times be considered personal property. If the Mortgagee has
obtained possession of the Premises as the result of the Mortgagor's default,
the Mortgagee shall give prompt written notice to the Bank, following which the
Bank shall have up to 45 days (the "Period") during which it shall have
reasonable access to the Premises for purposes of inventorying, maintaining,
selling and/or removing the Collateral in accordance with and to the extent
permitted by law. The Bank shall be liable for the reasonable costs of repairing
any damage caused to the Premises in the exercise of its rights under this
paragraph, but the Bank shall not be responsible for any pre-existing damage to
the Premises or any diminution in value of the Premises caused by the absence of
the Collateral actually removed. During the Period, the Mortgagor will not
interfere with any sale of the Collateral, by public auction or otherwise,
conducted by or on behalf of the Bank on the Premises, and the Mortgagee shall
cooperate in any such sale.
This agreement shall inure to the benefit of the Bank and its successors and
assigns and shall be binding on the undersigned and its successors and assigns.
The Agreement will be effective only if accepted by you as herein below provided
and returned to us.
Very truly yours,
COUNTRYWIDE HARDWARE, INC.
EXHIBIT A
ALL ASSETS
All personal property of the Mortgagor, now owned and hereafter acquired, of
every kind and description wherever located, including, without limitation, all
(i) Accounts; (ii) Chattel paper, including Electronic Chattel Paper; (iii)
Goods, including all Inventory and Equipment and any accessions thereto; (iv)
Instruments, including Promissory Note; (v) Documents; (vi) General Intangibles,
including Payment Intangibles and Software; and (vii) to the extent not listed
above as original collateral, proceeds and products of the foregoing (as such
capitalized terms are defined in the Uniform Commercial Code as in effect in the
State of New York).
EXHIBIT 3
REAFFIRMATION AGREEMENT
May 3, 2002
CITIBANK, N.A.
730 Veterans Memorial Highway
Hauppauge, New York 11788
Gentlemen:
Reference is hereby made to (a) those certain Security Agreements, dated as of
July 23, 1998 and September 16, 1998, by and between Citibank, N.A.
(successor-in-interest to European American Bank) (the "Bank") and each of P&F
Industries, Inc. ("P&F"), Florida Pneumatic Manufacturing Corporation ("Florida
Pneumatic"), Embassy Industries, Inc. ("Embassy") and Green Manufacturing, Inc.
("Green", with P&F, Florida Pneumatic and Embassy, collectively, the
"Co-Borrowers"), and (b) the Credit Agreement, dated as of July 23, 1998 (as the
same has been amended by Amendments Nos. 1, 2,3 and 4 thereto, the "Credit
Agreement"), by and the Bank and the Co-Borrowers. Capitalized terms not
otherwise defined herein shall have the meanings given to them in the Security
Agreements.
In connection with the foregoing and as a condition precedent to the
effectiveness of the Amendment No. 5 and Waiver to Credit Agreement, dated as of
the date hereof (the "Amendment and Waiver") by and among the Bank and the
Co-Borrowers, each Co-Borrower hereby acknowledges and confirms that (a) all
terms and provisions contained in their respective Security Agreement are and
shall remain, in full force and effect in accordance with their respective
terms, and are hereby ratified and confirmed and (b) the liens heretofore
granted, pledged and/or assigned to the Bank as security for the Co-Borrowers'
obligations under their respective Security Agreements and the Credit Agreement
shall not be impaired, limited or affected in any manner whatsoever by reason of
the Amendment and Waiver.
Except as expressly provided herein, the execution, delivery and effectiveness
of this letter 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, any
Security Agreement or any Loan Documents.
If you are in agreement with the foregoing, kindly execute this agreement in the
space provided for below.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered as of the date first above written.
P&F INDUSTRIES, INC.
FLORIDA PNEUMATIC MANUFACTURING
CORPORATION
EMBASSY INDUSTRIES, INC.
GREEN MANUFACTURING, INC.
Title: The Vice President of
each of the foregoing
corporations
ACKNOWLEDGED AND AGREED
CITIBANK, N.A.
EXHIBIT 4
FORM OF GUARANTY
[see attached]
EXHIBIT 5
FORM OF SECURITY AGREEMENT
[see attached]
EXHIBIT 6
REAFFIRMATION AND AMENDMENT NO. 2 TO
COMPANY PLEDGE AGREEMENT
May 3, 2002
CITIBANK, N.A., as Administrative Agent
730 Veterans Memorial Highway
Hauppauge, New York 11788
Gentlemen:
Reference is hereby made to that certain (a) Pledge Agreement, dated as of July
23, 1998, by and between P&F Industries, Inc. (the "Pledgor") and Citibank, N.A.
(successor-in-interest to European American Bank) (the "Pledgee") (as same has
been and may be further amended, restated, supplemented, or modified, from time
to time, the "Pledge Agreement") and (b) the Credit Agreement, dated as of July
23, 1998 (as the same has been amended by Amendments Nos. 1, 2, 3 and 4 thereto,
the "Credit Agreement"), by and among the Bank and the Co-Borrowers. Capitalized
terms not otherwise defined herein shall have the meanings given to them in the
Credit Agreement.
In connection with the foregoing and as a condition precedent to the
effectiveness of the Amendment No. 5 and Waiver to Credit Agreement, dated as of
the date hereof (the "Amendment and Waiver") by and among the Bank and the
Co-Borrowers, the Pledgor hereby:
1. acknowledges and confirms that (a) as security for the Obligations, the
Pledgor hereby delivers, pledges and assigns to the Pledgee and creates in the
Pledgee a first security interest in the shares of stock of Countrywide
Hardware, Inc., a Delaware corporation ("Countrywide"), which it owns, as same
is represented by the stock certificate listed on Schedule A hereto (the
"Countrywide Stock"), (b) the term "Pledged Shares" shall be deemed to include
the Countrywide Stock and (c) except as specifically amended herein, all terms
and provisions contained in the Pledge Agreement are, and shall remain, in full
force and effect in accordance with their respective terms and shall be deemed
to apply to the Countrywide Stock, as same may apply to the other Pledged
Shares, and are hereby ratified and confirmed;
2. acknowledges and agrees that the Pledgor is the beneficial owner of that
percentage of the issued and outstanding capital stock of Countrywide, as listed
on Schedule A annexed hereto;
3. acknowledges and agrees that Schedule A to the Pledge Agreement is hereby
amended in its entirety and replaced with Schedule A attached hereto.
Except as expressly provided herein, the execution, delivery and effectiveness
of this agreement shall not operate as a waiver of any right, power or remedy of
the Pledgee, nor constitute a waiver of any provision of the Pledge Agreement,
the Credit Agreement, or any other Loan Document.
If you are in agreement with the foregoing, kindly executed this agreement in
the space provided for below.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered as of the date first above written.
CITIBANK, N.A.
SCHEDULE A
Number of Percentage Par
Issuer Shares Class Ownership Value
-------------------------- --------- -------- --------- -------
Florida Pneumatic 1,000 Common 100% $ 1.00
Manufacturing Corporation
Embassy Industries, Inc. 1,000 Common 100% $ 1.00
Green Manufacturing, Inc. 1,000 Common 100% $ .01
Countrywide Hardware, Inc. 100 Common 100% $ .01
|
EXHIBIT 7
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of May 3, 2002, by and between COUNTRYWIDE HARDWARE, INC., a Delaware corporation having an office at 10333 Windhorst Road, Tampa, Florida 33619 "Pledgor") and CITIBANK, N.A. (successor-in-interest to European American Bank), a New York banking corporation having an office at 730 Veterans Memorial Highway, Hauppauge, New York 11788 (the "Pledgee").
RECITALS
P&F Industries, Inc., Florida Pneumatic Manufacturing Corporation,
Embassy Industries, Inc. and Green Manufacturing, Inc. (each, a "Co-Borrower"
and collectively, the "Co-Borrowers") and the Pledgee are parties to a Credit
Agreement, dated as of July 23, 1998, (as same has been and may be further
amended, modified or supplemented from time to time, the "Credit Agreement")
pursuant to which, the Co-Borrowers have and will continue to receive loans and
other financial accommodations from the Pledgee and will incur Obligations (as
defined in the Credit Agreement).
Pursuant to a Guaranty dated the date hereof, the Pledgor has
guaranteed the payment by the Company of all its Obligations (the obligations of
the Pledgor under such Guaranty are hereinafter referred to as the "Guaranty
Obligations").
The Pledgor is the beneficial owner of that percentage of the issued
and outstanding capital stock of each respective corporation listed on Schedule
A annexed hereto (collectively, the "Pledged Companies") as indicated on such
Schedule A.
In order to induce the Pledgee to continue to extend credit to the
Co-Borrowers on and after the date hereof as provided in the Credit Agreement,
the Pledgor wishes to grant to the Pledgee security and assurance in order to
secure the payment and performance of all its Guaranty Obligations, and to that
effect to pledge to the Pledgee all of the issued and outstanding capital stock
of the Pledged Companies that is owned by the Pledgor, represented by the stock
certificates listed opposite the name of such Pledgor on such Schedule A
(collectively, the "Pledged Shares").
Accordingly, the parties hereto agree as follows:
SECURITY INTEREST. As security for the Guaranty Obligations, including any and
all renewals or extensions thereof, the Pledgor hereby delivers, pledges and
assigns to the Pledgee and creates in the Pledgee a first security interest in
all of the Pledgor's right, title and interest in and to all of the Pledged
Shares, together with all rights and privileges of Pledgor with respect thereto,
all proceeds, income and profits thereof and all property received with respect
to the Pledged Shares in addition thereto, in exchange thereof or in
substitution therefor (collectively, the "Collateral").
STOCK DIVIDENDS, OPTIONS, OR OTHER ADJUSTMENTS. The Pledgee shall receive, as
Collateral, any and all additional shares of stock or any other property of any
kind distributable on or by reason of the Collateral pledged hereunder, whether
in the form
of or by way of stock dividends, warrants, partial liquidation, conversion,
prepayments or redemptions (in whole or in part), liquidation, or otherwise with
the exceptions of cash dividends or other cash distributions to the extent
permitted under Section 7(a). If any additional shares of capital stock,
instruments, or other property against which a security interest can only be
perfected by possession by the Pledgee, which are distributable on or by reason
of the Collateral pledged hereunder, shall come into the possession or control
of the Pledgor, the Pledgor shall hold or control in trust and forthwith
transfer and deliver the same to the Pledgee subject to the provisions hereof.
DELIVERY OF SHARE CERTIFICATES; STOCK POWERS. All instruments and stock
certificates representing the Collateral are being delivered to the Pledgee, for
the benefit of the Pledgee, simultaneously herewith, together with stock powers
duly executed in blank by Pledgor. Pledgor shall promptly deliver to Pledgee, or
cause the corporation or other entity issuing the Collateral to deliver directly
to Pledgee, share certificates or other documents representing Collateral
acquired or received after the date of this Agreement with a stock power duly
executed by such Pledgor. If at any time the Pledgee notifies Pledgor that
additional stock powers endorsed in blank with respect to the Collateral are
required, Pledgor shall promptly execute in blank and deliver such stock powers
as the Pledgee may request.
POWER OF ATTORNEY. Pledgor hereby constitutes and irrevocably appoints the
Pledgee, with full power of substitution and revocation by the Pledgee, as
Pledgor's true and lawful attorney-in-fact, to the full extent permitted by law,
at any time or times when an Event of Default has occurred and is continuing to
affix to certificates and documents representing the Collateral the stock power
delivered with respect thereto, to transfer or cause the transfer of the
Collateral, or any part thereof on the books of the corporation or other entity
issuing the same, to the name of the Pledgee or the Pledgee's nominee and
thereafter exercise as to such Collateral all the rights, power and remedies of
an owner. The power of attorney granted pursuant to this Agreement and all
authority hereby conferred are granted and conferred solely to protect the
Pledgee's interest in the Collateral and shall not impose any duty upon the
Pledgee to exercise any power. This power of attorney shall be irrevocable as
one coupled with an interest.
INDUCING REPRESENTATIONS OF THE PLEDGOR. Pledgor makes the following
representations and warranties to the Pledgee, each and all of which shall
survive the execution and delivery of this Agreement:
The information concerning the Pledged Companies and Pledgor's beneficial
ownership of capital stock thereof that is contained in Schedule A is correct in
all respects;
Pledgor is the sole legal and beneficial owner of, and has good and indefeasible
title to, the Pledged Shares pledged by Pledgor, free and clear of all pledges,
liens, security interests and other encumbrances and restrictions on the
transfer and assignment thereof, other than the security interest created by
this Agreement and has the unqualified right and authority to
execute this Agreement and to pledge the Collateral to the Pledgee as provided
for herein;
There are no outstanding options, warrants or other agreements to which the
Pledged Companies or the Pledgor is a party with respect to the Pledged Shares
pledged by Pledgor;
The Pledged Shares pledged by the Pledgor have been validly issued and are fully
paid and non-assessable; the holder or holders thereof are not and will not be
subject to any personal liability as such holder under any applicable law; and
are not subject to any charter, by-law, statutory, contractual or other
restrictions governing their issuance, transfer, ownership or control except
transfer of the Pledged Shares may be restricted by applicable securities laws;
Any consent, approval or authorization of or designation or filing with any
authority on the part of Pledgor which is required in connection with the pledge
and security interest granted under this Agreement has been obtained or
effected; The execution and delivery of this Agreement by Pledgor, and the
performance by Pledgor of its obligations hereunder, will not result in a
violation of any mortgage, indenture, contract, instrument, judgment, decree,
order, statute, rule or regulation to which Pledgor is subject; and
Pledgor has delivered to the Pledgee all instruments and stock certificates, if
any, representing the Pledged Shares, duly endorsed in blank or accompanied by
an assignment or assignments sufficient to transfer title thereto.
OBLIGATIONS OF PLEDGOR. Pledgor makes the following representations, warranties
and covenants to the Pledgee, each and all of which shall survive the execution
and delivery of this Agreement:
Pledgor will not, without the prior written consent of the Pledgee (which
consent shall be in the Pledgee's sole discretion), sell, transfer or convey any
interest in, or suffer or permit any lien or encumbrance to be created upon or
with respect to, any of the Collateral (other than as created under this
Agreement) during the term of the pledge established hereby. Pledgor will, at
its own expense, at any time and from time to time at the Pledgee's request, do,
make, procure, execute and deliver all acts, things, writings, assurances and
other documents as may be required by the Pledgee to further enhance, preserve,
establish, demonstrate or enforce the Pledgee's rights, interests and remedies
created by, provided in or emanating from this Agreement.
RIGHTS OF PLEDGOR. So long as no Event of Default has occurred and is
continuing, and so long as the Pledgee has not transferred the Collateral to its
own name under Section 8 hereof: Pledgor shall be entitled to receive any cash
dividends and other cash distributions paid on the Collateral, in each case, to
the extent permitted pursuant to the Credit Agreement; and Pledgor shall be
entitled to vote or consent or grant waivers or ratifications with respect to
the Collateral in any manner not inconsistent with this Agreement, the Credit
Agreement or any other Loan Document. Pledgor hereby grants to the Pledgee an
irrevocable proxy to vote the Collateral, which proxy shall be
effective immediately upon the occurrence of an Event of Default or registration
of the Collateral in the name of the Pledgee pursuant to Section 8 hereof. Upon
request of the Pledgee, Pledgor agrees to deliver to the Pledgee such further
evidence of such irrevocable proxy or such further irrevocable proxy to vote the
Collateral during the continuance of an Event of Default as the Pledgee may
reasonably request.
RIGHTS OF THE PLEDGEE. At any time when an Event of Default has occurred and is
continuing, the Pledgee may in its sole discretion:
Cause the Collateral to be transferred to its name or to the name of its nominee
or nominees and thereafter exercise as to such Collateral all of the rights,
powers and remedies of an owner; Collect by legal proceedings or otherwise all
dividends, interest, principal payments, capital distributions and other sums
now or hereafter payable on account of said Collateral, and hold the same as
part of the Collateral, or apply the same to any of the Guaranty Obligations in
such manner and order as the Pledgee may decide in its sole discretion;
Enter into any extension, subordination, reorganization, deposit, merger, or
consolidation agreement, or any other agreement relating to or affecting the
Collateral, and in connection therewith deposit or surrender control of such
collateral thereunder, and accept other property in exchange therefor and hold
and apply such property or money so received in accordance with the provisions
hereof; and
Discharge any taxes, liens, security interests or other encumbrances levied or
placed on the Collateral or pay for the maintenance and preservation of the
Collateral; the amount of such payments, plus any and all reasonable fees, costs
and expenses of the Pledgee (including attorneys' fees and disbursements), in
connection therewith, shall be added to the Guaranty Obligations of the Pledgor
secured hereby.
EVENT OF DEFAULT; REMEDIES. Upon the occurrence and continuance of an Event of
Default:
In addition to all the rights and remedies of a secured party under applicable
law, the Pledgee shall have the right, and without demand of performance or
other demand, advertisement or notice of any kind, except as specified below, to
or upon Pledgor or any other person (all and each of which demands,
advertisements and/or notices are hereby expressly waived to the extent
permitted by law), to proceed forthwith to collect, receive, appropriate and
realize upon the Collateral, or any part thereof and to proceed forthwith to
sell, assign, give an option or options to purchase, contract to sell, or
otherwise dispose of and deliver the Collateral or any part thereof in one or
more parcels at public or private sale or sales at any stock exchange, broker's
board or at any of the Pledgee's offices or elsewhere at such prices and on such
terms (including, without limitation, a requirement that any purchaser of all or
any part of the Collateral shall be required to purchase any securities
constituting the Collateral solely for investment and without any intention to
make a distribution thereof) as the Pledgee in its sole and absolute discretion
deems appropriate without any
liability for any loss due to decrease in the market value of the Collateral
during the period held. Such notification to the Pledgor shall be deemed
reasonable and properly given if mailed, postage prepaid, at least five (5) days
before any such disposition, to the address indicated in Section 13(d) below.
Any disposition of the Collateral or any part thereof may be for cash or on
credit or for future delivery without assumption of any credit risk, with the
right to the Pledgee to purchase all or any part of the Collateral so sold at
any such sale or sales, public or private, free of any equity or right of
redemption in Pledgor, which right or equity is, to the extent permitted by
applicable law, hereby expressly waived or released by Pledgor. All of the
Pledgee's rights and remedies, including but not limited to the foregoing, shall
be cumulative and not exclusive and shall be enforceable alternatively,
successively or concurrently as the Pledgee may deem expedient.
The Pledgee may elect to obtain, at the Pledgor's expense the advice of any
independent investment banking firm with respect to the method and manner of
sale or other disposition of any of the Collateral, the price reasonably
obtainable therefor, the consideration of cash and/or credit terms, or any other
details concerning such sale or disposition. The Pledgee, in its sole
discretion, may elect to sell on such credit terms which it deems reasonable.
The sale of any of the Collateral on credit terms shall not relieve the Pledgor
of its liability under any Loan Document until its Guaranty Obligations have
been paid in full. All payments received by the Pledgee in respect of a sale of
Collateral shall be applied to the Guaranty Obligations in the manner provided
in Section 10 of this Agreement, as and when such payments are received.
Pledgor recognizes that the Pledgee may be unable to effect a public sale of all
or a part of the Collateral by reason of certain prohibitions contained in any
applicable securities law, but may be compelled to resort to one or more private
sales to a restricted group of purchasers who will be obliged to agree, among
other things, to acquire the Collateral for their own account, for investment
and not with a view for the distribution or resale thereof. Pledgor agrees that
private sales so made may be at prices and on other terms less favorable to the
seller than if the Collateral were sold at public sale, and that the Pledgee has
no obligation to delay the sale of any Collateral for the period of time
necessary to permit the registration of the Collateral for public sale under the
Securities Act of 1933, as amended. Pledgor agrees that a private sale or sales
made under the foregoing circumstances shall be deemed to have been made in a
commercially reasonable manner.
If any consent, approval or authorization of any state, municipal or other
governmental department, agency or authority should be necessary to effectuate
any sale or other disposition of the Collateral, or any partial disposition of
the Collateral, the Pledgor will execute all such applications and other
instruments as may be required in connection with securing any such consent,
approval or authorization, and will otherwise use its best efforts to secure
such sale or other disposition of the
Collateral as the Pledgee may reasonably deem necessary pursuant to the terms of
this Agreement, provided, that nothing herein shall require the Pledgor to
effect a registration under the Securities Act of 1933, as amended, except as
may be provided to the contrary in Paragraph 6(b) or 8 hereof.
Upon any sale or other disposition, the Pledgee shall have the right to deliver,
assign and transfer to the purchaser thereof the Collateral so sold or disposed
of. Each purchaser at any such sale or other disposition (including the Pledgee)
shall hold the Collateral free from any claim or right of the Pledgor of
whatever kind, including any equity or right of redemption of Pledgor. Pledgor
specifically waives, to the extent permitted by applicable laws, all rights of
redemption, stay or appraisal which it had or may have under any rule of law or
statute now existing or hereafter adopted.
The Pledgee shall not be obligated to make any sale or other disposition, unless
the terms thereof shall be satisfactory to it. The Pledgee may, subject to
applicable laws, without notice or publication, adjourn any private or public
sale, and hold such sale at any time or place to which the same may be so
adjourned.
In case of any sale of all or any part of the Collateral, on credit or future
delivery, the Collateral so sold may be retained by the Pledgee until the
selling price is paid by the purchaser thereof, but the Pledgee shall incur no
liability in the case of the failure of such purchaser to take up and pay for
the property so sold and, in case of any such failure, such property may again
be sold as herein provided.
DISPOSITION OF PROCEEDS.
The proceeds of any sale or disposition of all or any part of the Collateral
shall be applied by the Pledgee in the following order:
to the payment in full of the costs and expenses of such sale or sales,
collections, and the protection, declaration and enforcement of any security
interest granted hereunder including the reasonable compensation of the
Pledgee's agents and attorneys';
to the payment of the Guaranty Obligations; and
to the payment to Pledgor of any surplus then remaining from such proceeds,
subject to the rights of any holder of a lien on the Collateral of which the
Pledgee has actual notice.
In the event that the proceeds of any sale or other disposition of Collateral
are insufficient to cover the principal of, and premium, if any, and interest
on, the Guaranty Obligations secured thereby plus costs and expenses of the sale
or other disposition, the Pledgor shall remain liable for any deficiency.
TERMINATION. This Agreement shall continue in full force and effect until all of
the Guaranty Obligations shall have been indefeasibly paid in full and
satisfied, and the Credit Agreement shall have been terminated. Subject to any
sale or other disposition by the Pledgee of the Collateral or any part thereof
pursuant to this Agreement, the Collateral shall be returned to Pledgor upon
full payment, satisfaction and termination of all of the Guaranty Obligations.
EXPENSES OF THE PLEDGEE. All expenses (including reasonable fees
and disbursements of counsel) incurred by the Pledgee in connection with the
perfection and continuation of the security interest granted hereunder and any
actual or attempted sale, exchange of, or any enforcement, collection,
compromise or settlement respecting the Collateral, or any other action taken by
the Pledgee hereunder whether directly or as attorney-in-fact pursuant to a
power of attorney or other authorization herein conferred, for the purpose of
satisfaction of the liability of the Pledgor for failure to pay the Guaranty
Obligations or as additional amounts owing by Pledgor to cover the Pledgee's
costs of acting against the Collateral, shall be deemed a Guaranty Obligation of
the Pledgor for all purposes of this Agreement and the Pledgee may apply the
Collateral to payment of or reimbursement of itself for such liability.
GENERAL PROVISIONS.
All capitalized terms used in this Pledge Agreement and not defined herein shall
have the respective meanings assigned to them in the Credit Agreement.
The Pledgee or its designee is hereby appointed the attorney-in-fact of Pledgor
for the purpose of carrying out the provisions of this Agreement and taking any
action and executing any instrument which the Pledgee reasonably may deem
necessary and advisable to accomplish the purposes hereof, which appointment as
attorney-in-fact is irrevocable as one coupled with an interest.
The Pledgee and its assigns shall have no obligation in respect of the
Collateral, except to use reasonable care in holding the Collateral and to hold
and dispose of the same in accordance with the terms of this Agreement.
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:
if to the Pledgor, at
Countrywide Hardware, Inc.
300 Smith Street
Farmingdale, New York 11735
Attention: Mr. Joseph A. Molino, Jr.
Telecopy: (516) 694-1836
if to the Pledgee, at
Citibank, N.A.
730 Veterans Memorial Highway
Hauppauge, New York 11788
Attention: Relationship Manager, P&F
Industries, Inc.
Telecopy: (631) 360-7112
- and -
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 13.
No failure on the part of the Pledgee to exercise, and no delay in exercising,
any right, power or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise by the Pledgee of any right, power or
remedy hereunder preclude any other or future exercise thereof, or the exercise
of any other right, power or remedy. The remedies herein provided are cumulative
and are not exclusive of any remedies provided by law or any other agreement.
The representations, covenants and agreements of the Pledgor herein contained
shall survive the date hereof. Neither this Agreement nor the provisions hereof
can be changed, waived or terminated orally. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors, heirs, legal representatives and assigns.
APPLICABLE LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. THIS AGREEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICT OR CHOICE OF LAWS. THE
PLEDGOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK AND ANY COURT IN THE STATE
OF NEW YORK IN ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND RELATED TO
OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY,
AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PLEDGOR 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 DOCUMENT OR ANY INSTRUMENT REFERRED TO
HEREIN OR THE SUBJECT MATTER HEREOF OR THEREOF MAY NOT BE LITIGATED IN OR BY
SUCH COURTS. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PLEDGOR AGREES NOT
TO (I) 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 (II) ASSERT ANY COUNTERCLAIM
IN ANY SUCH SUIT, ACTION OR PROCEEDING. THE PLEDGOR 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. THE PLEDGOR IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered as of the date first above written. COUNTRYWIDE HARDWARE, INC.
CITIBANK, N.A.
SCHEDULE A
Number Percenage Par
Issuer of Shares Class Ownership Value
--------------------------- --------- ------ --------- ------
Nationwide Industries, Inc. 100 Common 100% $ 1.00
|
EXHIBIT 10.5
P&F INDUSTRIES, INC.
EXHIBIT 10.5
P&F INDUSTRIES, INC.
2002 STOCK INCENTIVE PLAN
PURPOSE
The purpose of the Plan is to provide a means through which the Company and its Subsidiaries may attract able persons to become and remain directors of the Company and enter and remain in the employ of the Company and its Subsidiaries and to provide a means whereby employees, directors and consultants of the Company and its Subsidiaries can acquire and maintain Common Stock ownership, or be paid incentive compensation measured by reference to the value of Common Stock, thereby strengthening their commitment to the welfare of the Company and its Subsidiaries and promoting an identity of interest between stockholders and these employees, directors and consultants.
So that the appropriate incentive can be provided, the Plan allows for the grant of Incentive Stock Options, Nonqualified Stock Options, Restricted Stock Awards, and other Stock-based Awards, or any combination of the foregoing.
DEFINITIONS
The following definitions shall be applicable throughout the Plan.
"AFFILIATE" OF ANY INDIVIDUAL OR ENTITY MEANS AN INDIVIDUAL OR ENTITY THAT IS DIRECTLY OR INDIRECTLY THROUGH ONE OR MORE INTERMEDIARIES CONTROLLED BY OR UNDER COMMON CONTROL WITH THE INDIVIDUAL OR ENTITY SPECIFIED.
"AWARD" MEANS, INDIVIDUALLY OR COLLECTIVELY, ANY INCENTIVE STOCK OPTION, NONQUALIFIED STOCK OPTION, RESTRICTED STOCK AWARD, OR OTHER STOCK-BASED AWARD.
"BOARD" MEANS THE BOARD OF DIRECTORS OF THE COMPANY.
"CAUSE" MEANS THE COMPANY OR A SUBSIDIARY HAVING CAUSE TO TERMINATE A
PARTICIPANT'S EMPLOYMENT OR SERVICE UNDER ANY EXISTING EMPLOYMENT, CONSULTING OR
ANY OTHER AGREEMENT BETWEEN THE PARTICIPANT AND THE COMPANY OR A SUBSIDIARY. IN
THE ABSENCE OF ANY SUCH EMPLOYMENT, CONSULTING OR OTHER AGREEMENT, A PARTICIPANT
SHALL BE DEEMED TO HAVE BEEN TERMINATED FOR CAUSE IF THE COMMITTEE DETERMINES
THAT HIS TERMINATION OF EMPLOYMENT WITH THE COMPANY OR A SUBSIDIARY IS ON
ACCOUNT OF (A) INCOMPETENCE, FRAUD, PERSONAL DISHONESTY, EMBEZZLEMENT,
DEFALCATION OR ACTS OF GROSS NEGLIGENCE OR GROSS MISCONDUCT ON THE PART OF THE
PARTICIPANT IN THE COURSE OF HIS EMPLOYMENT OR SERVICES, (B) A MATERIAL BREACH
OF THE PARTICIPANT'S FIDUCIARY DUTY OF LOYALTY TO THE COMPANY OR A SUBSIDIARY,
(C) THE PARTICIPANT'S ENGAGEMENT IN CONDUCT THAT IS MATERIALLY INJURIOUS TO
THE COMPANY OR A SUBSIDIARY, (D) THE PARTICIPANT'S CONVICTION BY A COURT OF COMPETENT JURISDICTION OF, OR PLEADING "GUILTY" OR "NO CONTEST" TO, (X) A FELONY, OR (Y) ANY OTHER CRIMINAL CHARGE (OTHER THAN MINOR TRAFFIC VIOLATIONS) WHICH COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE IMPACT ON COMPANY'S OR A SUBSIDIARY'S REPUTATION AND STANDING IN THE COMMUNITY; (E) PUBLIC OR CONSISTENT DRUNKENNESS BY THE PARTICIPANT OR HIS ILLEGAL USE OF DRUGS WHICH IS, OR COULD REASONABLY BE EXPECTED TO BECOME, MATERIALLY INJURIOUS TO THE REPUTATION OR BUSINESS OF THE COMPANY OR A SUBSIDIARY OR WHICH IMPAIRS, OR COULD REASONABLY BE EXPECTED TO IMPAIR, THE PERFORMANCE OF THE PARTICIPANT'S DUTIES TO THE COMPANY OR A SUBSIDIARY; OR (F) WILLFUL FAILURE BY THE PARTICIPANT TO FOLLOW THE LAWFUL DIRECTIONS OF A SUPERIOR OFFICER OR THE BOARD, REPRESENTING DISLOYALTY TO THE GOALS OF THE COMPANY OR A SUBSIDIARY.
"CHANGE IN CONTROL" SHALL, UNLESS THE BOARD OTHERWISE DIRECTS BY RESOLUTION ADOPTED PRIOR THERETO OR, IN THE CASE OF A PARTICULAR AWARD, THE APPLICABLE AWARD AGREEMENT STATES OTHERWISE, BE DEEMED TO OCCUR IF (i) ANY "PERSON" (AS THAT TERM IS USED IN SECTIONS 13 AND 14(d)(2) OF THE EXCHANGE ACT) OTHER THAN A FOUNDER (AS DEFINED BELOW) IS OR BECOMES THE BENEFICIAL OWNER (AS THAT TERM IS USED IN SECTION 13(d) OF THE EXCHANGE ACT), DIRECTLY OR INDIRECTLY, OF 50% OR MORE OF EITHER THE OUTSTANDING SHARES OF COMMON STOCK OR THE COMBINED VOTING POWER OF THE COMPANY'S THEN OUTSTANDING VOTING SECURITIES ENTITLED TO VOTE GENERALLY, (ii) DURING ANY PERIOD OF TWO CONSECUTIVE YEARS, INDIVIDUALS WHO CONSTITUTE THE BOARD AT THE BEGINNING OF SUCH PERIOD CEASE FOR ANY REASON TO CONSTITUTE AT LEAST A MAJORITY THEREOF, UNLESS THE ELECTION OR THE NOMINATION FOR ELECTION BY THE COMPANY'S STOCKHOLDERS OF EACH NEW DIRECTOR WAS APPROVED BY A VOTE OF AT LEAST THREE-QUARTERS OF THE DIRECTORS THEN STILL IN OFFICE WHO WERE DIRECTORS AT THE BEGINNING OF THE PERIOD OR (iii) THE COMPANY UNDERGOES A LIQUIDATION OR DISSOLUTION OR A SALE OF ALL OR SUBSTANTIALLY ALL OF ITS ASSETS. NO MERGER, CONSOLIDATION OR CORPORATE REORGANIZATION IN WHICH THE OWNERS OF THE COMBINED VOTING POWER OF THE COMPANY'S THEN OUTSTANDING VOTING SECURITIES ENTITLED TO VOTE GENERALLY PRIOR TO SAID COMBINATION, OWN 50% OR MORE OF THE RESULTING ENTITY'S OUTSTANDING VOTING SECURITIES SHALL, BY ITSELF, BE CONSIDERED A CHANGE IN CONTROL. AS USED HEREIN, "FOUNDER" MEANS RICHARD A. HOROWITZ AND ANY OF HIS AFFILIATES.
"CODE" MEANS THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. REFERENCE IN THE PLAN TO ANY SECTION OF THE CODE SHALL BE DEEMED TO INCLUDE ANY AMENDMENTS OR SUCCESSOR PROVISIONS TO SUCH SECTION AND ANY REGULATIONS UNDER SUCH SECTION.
"COMMITTEE" MEANS THE BOARD, THE COMPENSATION COMMITTEE OF THE BOARD OR SUCH OTHER COMMITTEE OF AT LEAST TWO PEOPLE AS THE BOARD MAY APPOINT TO ADMINISTER THE PLAN.
"COMMON STOCK" MEANS THE CLASS A COMMON STOCK, PAR VALUE $1.00 PER
SHARE, OF THE COMPANY.
"COMPANY" MEANS P&F INDUSTRIES, INC.
"DATE OF GRANT" MEANS THE DATE ON WHICH THE GRANTING OF AN AWARD IS
AUTHORIZED OR SUCH OTHER DATE AS MAY BE SPECIFIED IN SUCH AUTHORIZATION.
"DISABILITY", WITH RESPECT TO ANY PARTICULAR PARTICIPANT, MEANS DISABILITY AS DEFINED IN SUCH PARTICIPANT'S EMPLOYMENT, CONSULTING OR OTHER RELEVANT AGREEMENT WITH THE COMPANY OR A SUBSIDIARY OR, IN THE ABSENCE OF ANY SUCH AGREEMENT, DISABILITY AS DEFINED IN THE LONG-TERM DISABILITY PLAN OF THE COMPANY OR A SUBSIDIARY, AS MAY BE APPLICABLE TO THE PARTICIPANT IN QUESTION, OR, IN THE ABSENCE OF SUCH A PLAN, THE COMPLETE AND PERMANENT INABILITY BY REASON OF ILLNESS OR ACCIDENT TO PERFORM THE DUTIES OF THE OCCUPATION AT WHICH THE PARTICIPANT WAS EMPLOYED OR SERVED WHEN SUCH DISABILITY COMMENCED OR, IF THE PARTICIPANT WAS RETIRED WHEN SUCH DISABILITY COMMENCED, THE INABILITY TO ENGAGE IN ANY SUBSTANTIAL GAINFUL ACTIVITY, IN EITHER CASE AS DETERMINED BY THE COMMITTEE BASED UPON MEDICAL EVIDENCE ACCEPTABLE TO IT.
"DISINTERESTED PERSON" MEANS A PERSON WHO IS (i) A "NON-EMPLOYEE DIRECTOR" WITHIN THE MEANING OF RULE 16b-3 UNDER THE EXCHANGE ACT, OR ANY SUCCESSOR RULE OR REGULATION, AND (ii) AN "OUTSIDE DIRECTOR" WITHIN THE MEANING OF SECTION 162(m) OF THE CODE; PROVIDED, HOWEVER, THAT CLAUSE (ii) SHALL APPLY ONLY WITH RESPECT TO GRANTS OF AWARDS WITH RESPECT TO WHICH THE COMPANY'S TAX DEDUCTION COULD BE LIMITED BY SECTION 162(m) OF THE CODE IF SUCH CLAUSE DID NOT APPLY.
"ELIGIBLE PERSON" MEANS ANY (i) PERSON REGULARLY EMPLOYED BY THE COMPANY OR A SUBSIDIARY; PROVIDED, HOWEVER, THAT NO SUCH EMPLOYEE COVERED BY A COLLECTIVE BARGAINING AGREEMENT SHALL BE AN ELIGIBLE PERSON UNLESS AND TO THE EXTENT THAT SUCH ELIGIBILITY IS SET FORTH IN SUCH COLLECTIVE BARGAINING AGREEMENT OR IN AN AGREEMENT OR INSTRUMENT RELATING THERETO; (ii) DIRECTOR OF THE COMPANY OR A SUBSIDIARY; OR (iii) CONSULTANT TO THE COMPANY OR A SUBSIDIARY.
"EXCHANGE ACT" MEANS THE SECURITIES EXCHANGE ACT OF 1934.
"FAIR MARKET VALUE" ON A GIVEN DATE MEANS (i) IF THE STOCK IS LISTED ON A NATIONAL SECURITIES EXCHANGE, THE CLOSING PRICE ON THE PRIMARY EXCHANGE WITH WHICH THE STOCK IS LISTED AND TRADED ON THE DATE PRIOR TO SUCH DATE, OR, IF THERE IS NO SUCH SALE ON THAT DATE, THEN ON THE LAST PRECEDING DATE ON WHICH SUCH A SALE WAS REPORTED; (ii) IF THE STOCK IS NOT LISTED ON ANY NATIONAL SECURITIES EXCHANGE BUT IS QUOTED IN THE NASDAQ NATIONAL MARKET SYSTEM ON A LAST SALE BASIS, THE CLOSING PRICE REPORTED ON THE DATE PRIOR TO SUCH DATE, OR, IF THERE IS NO SUCH SALE ON THAT DATE, THEN ON THE LAST PRECEDING DATE ON WHICH A SALE WAS REPORTED; OR (iii) IF THE STOCK IS NOT LISTED ON A NATIONAL SECURITIES EXCHANGE NOR QUOTED IN THE NASDAQ NATIONAL MARKET SYSTEM ON A LAST SALE BASIS, THE AMOUNT DETERMINED BY THE COMMITTEE TO BE THE FAIR MARKET VALUE BASED UPON A GOOD FAITH ATTEMPT TO VALUE THE STOCK ACCURATELY AND COMPUTED IN ACCORDANCE WITH APPLICABLE REGULATIONS OF THE INTERNAL REVENUE SERVICE.
"HOLDER" MEANS A PARTICIPANT WHO HAS BEEN GRANTED AN AWARD.
"INCENTIVE STOCK OPTION" MEANS AN OPTION GRANTED BY THE COMMITTEE TO A PARTICIPANT UNDER THE PLAN WHICH IS DESIGNATED BY THE COMMITTEE AS AN INCENTIVE STOCK OPTION PURSUANT TO SECTION 422 OF THE CODE.
"NONQUALIFIED STOCK OPTION" MEANS AN OPTION GRANTED UNDER THE PLAN
WHICH IS NOT DESIGNATED AS AN INCENTIVE STOCK OPTION.
"NORMAL TERMINATION" MEANS TERMINATION OF EMPLOYMENT OR SERVICE WITH
THE COMPANY AND ALL SUBSIDIARIES:
Upon retirement pursuant to the retirement plan of the Company or a Subsidiary, as the same may be applicable at the time to the Participant in question;
On account of Disability;
With the written approval of the Committee; or
By the Company or a Subsidiary without Cause.
"OPTION" MEANS A STOCK OPTION TO PURCHASE SHARES OF STOCK GRANTED UNDER
SECTION 7 OF THE PLAN.
"OPTION PERIOD" MEANS THE PERIOD DESCRIBED IN SECTION 7(c).
"OPTION PRICE" MEANS THE EXERCISE PRICE SET FOR AN OPTION DESCRIBED IN
SECTION 7(a).
"PARTICIPANT" MEANS AN ELIGIBLE PERSON WHO HAS BEEN SELECTED BY THE
COMMITTEE TO PARTICIPATE IN THE PLAN AND TO RECEIVE AN AWARD.
"PLAN" MEANS THE COMPANY'S 2002 STOCK INCENTIVE PLAN.
"RESTRICTED PERIOD" MEANS, WITH RESPECT TO ANY SHARE OF RESTRICTED STOCK, THE PERIOD OF TIME DETERMINED BY THE COMMITTEE DURING WHICH SUCH AWARD IS SUBJECT TO THE RESTRICTIONS SET FORTH IN SECTION 8.
"RESTRICTED STOCK" MEANS SHARES OF STOCK ISSUED OR TRANSFERRED TO A
PARTICIPANT SUBJECT TO FORFEITURE AND THE OTHER RESTRICTIONS SET FORTH IN
SECTION 8.
"RESTRICTED STOCK AWARD" MEANS AN AWARD OF RESTRICTED STOCK GRANTED
UNDER SECTION 8 OF THE PLAN.
"SECURITIES ACT" MEANS THE SECURITIES ACT OF 1933, AS AMENDED.
"STOCK" MEANS THE COMMON STOCK OR SUCH OTHER AUTHORIZED SHARES OF STOCK
OF THE COMPANY AS FROM TIME TO TIME MAY BE AUTHORIZED FOR USE UNDER THE PLAN.
"STOCK OPTION AGREEMENT" MEANS THE AGREEMENT BETWEEN THE COMPANY AND A PARTICIPANT WHO HAS BEEN GRANTED AN OPTION PURSUANT TO SECTION 7 WHICH DEFINES THE RIGHTS AND OBLIGATIONS OF THE PARTIES AS REQUIRED IN SECTION 7(d).
"SUBSIDIARY" MEANS ANY SUBSIDIARY OF THE COMPANY AS DEFINED IN SECTION
424(f) OF THE CODE.
EFFECTIVE DATE, DURATION AND SHAREHOLDER APPROVAL
The Plan is effective as of April __, 2002, the date on which the Plan was adopted by the Board.
The expiration date of the Plan, after which no Awards may be granted hereunder, shall be April __, 2012; PROVIDED, HOWEVER, that the administration of the Plan shall continue in effect until all matters relating to the payment of Awards previously granted have been settled.
ADMINISTRATION
The Committee shall administer the Plan. Unless otherwise determined by the Board, each member of the Committee shall, at the time he takes any action with respect to an Award under the Plan, be a Disinterested Person. The majority of the members of the Committee shall constitute a quorum. The acts of a majority of the members present at any meeting at which a quorum is present or acts approved in writing by a majority of the Committee shall be deemed the acts of the Committee.
Subject to the provisions of the Plan, the Committee shall have exclusive power to:
SELECT THE ELIGIBLE PERSONS TO PARTICIPATE IN THE PLAN;
DETERMINE THE NATURE AND EXTENT OF THE AWARDS TO BE MADE TO EACH
ELIGIBLE PERSON;
DETERMINE THE TIME OR TIMES WHEN AWARDS WILL BE MADE TO ELIGIBLE
PERSONS;
DETERMINE THE DURATION OF EACH OPTION PERIOD AND RESTRICTED PERIOD;
DETERMINE THE TERMS AND CONDITIONS TO WHICH AWARDS MAY BE SUBJECT;
PRESCRIBE THE FORM OF STOCK OPTION AGREEMENT OR OTHER FORM OR FORMS
EVIDENCING AWARDS; AND
CAUSE RECORDS TO BE ESTABLISHED IN WHICH THERE SHALL BE ENTERED, FROM TIME TO TIME AS AWARDS ARE MADE TO PARTICIPANTS, THE DATE OF EACH AWARD, THE NUMBER OF INCENTIVE STOCK OPTIONS, NONQUALIFIED STOCK OPTIONS, SHARES OF RESTRICTED STOCK AND OTHER STOCK-BASED AWARDS GRANTED BY THE COMMITTEE TO EACH PARTICIPANT, THE EXPIRATION DATE, THE OPTION PERIOD AND THE DURATION OF ANY APPLICABLE RESTRICTED PERIOD.
The Committee shall have the authority to interpret the Plan and, subject to the provisions of the Plan, to establish, adopt or revise such rules and regulations and to make all such determinations relating to the Plan as it may deem necessary or advisable for the administration of the Plan. The Committee's interpretation of the Plan or any documents evidencing Awards granted pursuant thereto and
all decisions and determinations by the Committee with respect to the Plan shall be final, binding and conclusive on all parties unless otherwise determined by the Board.
GRANT OF AWARDS; SHARES SUBJECT TO THE PLAN
The Committee may, from time to time, grant Awards of Options, Restricted Stock and other Stock-based Awards to one or more Eligible Persons; PROVIDED, HOWEVER, that:
1. Subject to Section 11, the aggregate number of shares of Stock reserved and available for issuance pursuant to Awards under the Plan is 1,100,000;
2. Except as set forth in Section 5(d), such shares shall be deemed to have been used in payment of Awards only to the extent they are actually delivered and not where the Fair Market Value equivalent of such shares for a Stock-based Award is paid in cash. In the event any Award shall be surrendered, terminate, expire or be forfeited, the number of shares of Stock no longer subject thereto shall thereupon be released and shall thereafter be available for new Awards under the Plan;
3. Stock delivered by the Company in settlement of Awards under the Plan may be authorized and unissued Stock or Stock held in the treasury of the Company or may be purchased on the open market or by private purchase; and
4. No Participant may receive Options or stock appreciation rights under the Plan with respect to more than 1,100,000 shares of Stock in any one year. For this purpose, such shares shall be deemed to have been used in payment of Awards whether they are actually delivered or where the Fair Market Value equivalent of such shares for a stock appreciation right is paid in cash.
ELIGIBILITY
Participation shall be limited to Eligible Persons who have received written notification from the Committee, or from a person designated by the Committee, that they have been selected to participate in the Plan.
STOCK OPTION AWARDS
The Committee is authorized to grant one or more Incentive Stock Options or Nonqualified Stock Options to any Eligible Person; PROVIDED, HOWEVER, that no Incentive Stock Options shall be granted to any Eligible Person who is not an employee of the Company or a Subsidiary. Each Option so granted shall be subject to the following conditions, or to such other conditions as may be reflected in the applicable Stock Option Agreement.
OPTION PRICE. THE EXERCISE PRICE ("OPTION PRICE") PER SHARE OF STOCK
FOR EACH OPTION SHALL BE SET BY THE COMMITTEE AT THE TIME OF GRANT BUT SHALL NOT
BE LESS THAN (i) IN THE CASE OF AN INCENTIVE STOCK OPTION, AND SUBJECT TO
SECTION 7(e), THE FAIR MARKET VALUE OF A SHARE
OF STOCK AT THE DATE OF GRANT, AND (ii) IN THE CASE OF A NON-QUALIFIED STOCK OPTION, THE PAR VALUE PER SHARE OF STOCK; PROVIDED, HOWEVER, THAT ALL OPTIONS INTENDED TO QUALIFY AS "PERFORMANCE-BASED COMPENSATION" UNDER SECTION 162(m) OF THE CODE SHALL HAVE AN OPTION PRICE PER SHARE OF STOCK NOT LESS THAN THE FAIR MARKET VALUE OF A SHARE OF STOCK ON THE DATE OF GRANT.
MANNER OF EXERCISE AND FORM OF PAYMENT. OPTIONS WHICH HAVE BECOME EXERCISABLE MAY BE EXERCISED BY DELIVERY OF WRITTEN NOTICE OF EXERCISE TO THE COMMITTEE ACCOMPANIED BY PAYMENT OF THE OPTION PRICE. THE OPTION PRICE MAY BE PAYABLE IN CASH, BY BANK CHECK (ACCEPTABLE TO THE COMMITTEE) AND/OR SHARES OF STOCK (VALUED AT THE FAIR MARKET VALUE AT THE TIME THE OPTION IS EXERCISED), HAVING IN THE AGGREGATE A VALUE EQUAL TO THE AGGREGATE OPTION PRICE OR, IN THE DISCRETION OF THE COMMITTEE, EITHER (i) IN OTHER PROPERTY HAVING A FAIR MARKET VALUE ON THE DATE OF EXERCISE EQUAL TO THE AGGREGATE OPTION PRICE, OR (ii) BY DELIVERING TO THE COMMITTEE A COPY OF IRREVOCABLE INSTRUCTIONS TO A STOCKBROKER TO DELIVER PROMPTLY TO THE COMPANY AN AMOUNT OF SALE OR LOAN PROCEEDS SUFFICIENT TO PAY THE AGGREGATE OPTION PRICE.
OPTION PERIOD AND EXPIRATION. OPTIONS SHALL VEST AND BECOME EXERCISABLE IN SUCH MANNER AND ON SUCH DATE OR DATES DETERMINED BY THE COMMITTEE AND SHALL EXPIRE AFTER SUCH PERIOD, NOT TO EXCEED TEN YEARS, AS MAY BE DETERMINED BY THE COMMITTEE (THE "OPTION PERIOD"); PROVIDED, HOWEVER, THAT NOTWITHSTANDING ANY VESTING DATES SET BY THE COMMITTEE, THE COMMITTEE MAY IN ITS SOLE DISCRETION ACCELERATE THE EXERCISABILITY OF ANY OPTION, WHICH ACCELERATION SHALL NOT AFFECT THE TERMS AND CONDITIONS OF ANY SUCH OPTION OTHER THAN WITH RESPECT TO EXERCISABILITY. UNLESS OTHERWISE SPECIFICALLY DETERMINED BY THE COMMITTEE, THE VESTING OF AN OPTION SHALL OCCUR ONLY WHILE THE PARTICIPANT IS EMPLOYED OR RENDERING SERVICES TO THE COMPANY OR ITS SUBSIDIARIES AND ALL VESTING SHALL CEASE UPON A HOLDER'S TERMINATION OF EMPLOYMENT OR SERVICES FOR ANY REASON. IF AN OPTION IS EXERCISABLE IN INSTALLMENTS, SUCH INSTALLMENTS OR PORTIONS THEREOF WHICH BECOME EXERCISABLE SHALL REMAIN EXERCISABLE UNTIL THE OPTION EXPIRES. UNLESS OTHERWISE STATED IN THE APPLICABLE OPTION AGREEMENT, THE OPTION SHALL EXPIRE EARLIER THAN THE END OF THE OPTION PERIOD IN THE FOLLOWING CIRCUMSTANCES:
If prior to the end of the Option Period, the Holder shall undergo a Normal Termination, the Option shall expire on the earlier of the last day of the Option Period or the date that is three months after the date of such Normal Termination. In such event, the Option shall remain exercisable by the Holder until its expiration, but only to the extent the Option was vested and exercisable at the time of such Normal Termination.
If the Holder dies prior to the end of the Option Period and while still in the employ or service of the Company or a Subsidiary, or within three months of Normal Termination, the Option shall expire on the earlier of the last day of the Option Period or the date that is twelve months after the date of death of the Holder. In such event, the Option shall remain exercisable by
the person or persons to whom the Holder's rights under the Option pass by will or the applicable laws of descent and distribution until its expiration, but only to the extent the Option was vested and exercisable by the Holder at the time of death.
If the Holder ceases employment or service with the Company and all Subsidiaries for reasons other than Normal Termination or death, the Option shall expire immediately upon such cessation of employment or service.
STOCK OPTION AGREEMENT - OTHER TERMS AND CONDITIONS. EACH OPTION GRANTED UNDER THE PLAN SHALL BE EVIDENCED BY A STOCK OPTION AGREEMENT, WHICH SHALL CONTAIN SUCH PROVISIONS AS MAY BE DETERMINED BY THE COMMITTEE AND, EXCEPT AS MAY BE SPECIFICALLY STATED OTHERWISE IN SUCH STOCK OPTION AGREEMENT, WHICH SHALL BE SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS:
Each Option issued pursuant to this Section 7 or portion thereof that is exercisable shall be exercisable for the full amount or for any part thereof.
Each share of Stock purchased through the exercise of an Option issued pursuant to this Section 7 shall be paid for in full at the time of the exercise. Each Option shall cease to be exercisable, as to any share of Stock, when the Holder purchases the share or when the Option expires.
Options issued pursuant to this Section 7 shall not be transferable by the Holder except by will or the laws of descent and distribution and shall be exercisable during the Holder's lifetime only by him; PROVIDED, HOWEVER, that the Committee may at any time upon the request of a Holder allow for the transfer of any Option, subject to such conditions or limitations as it may establish.
Each Option issued pursuant to this Section 7 shall vest and become exercisable by the Holder in accordance with the vesting schedule established by the Committee and set forth in the Stock Option Agreement.
Each Stock Option Agreement may contain a provision that, upon demand by the Committee for such a representation, the Holder shall deliver to the Committee at the time of any exercise of an Option issued pursuant to this Section 7 a written representation that the shares to be acquired upon such exercise are to be acquired for investment and not for resale or with a view to the distribution thereof. Upon such demand, delivery of such representation prior to the delivery of any shares issued upon exercise of an Option issued pursuant to this Section 7 shall be a condition precedent to the
right of the Holder or such other person to purchase any shares. In the event certificates for shares of Stock are delivered under the Plan with respect to which such investment representation has been obtained, the Committee may cause a legend or legends to be placed on such certificates to make appropriate reference to such representation and to restrict transfer in the absence of compliance with applicable federal or state securities laws.
Each Incentive Stock Option Agreement shall contain a provision requiring the Holder to notify the Company in writing immediately after the Holder makes a disqualifying disposition of any Stock acquired pursuant to the exercise of such Incentive Stock Option. A disqualifying disposition is any disposition (including any sale) of such Stock before the later of (a) two years after the Date of Grant of the Incentive Stock Option and (b) one year after the date the Holder acquired the Stock by exercising the Incentive Stock Option.
INCENTIVE STOCK OPTION GRANTS TO 10% STOCKHOLDERS. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS SECTION 7, IF AN INCENTIVE STOCK OPTION IS GRANTED TO A HOLDER WHO OWNS STOCK REPRESENTING MORE THAN 10% OF THE VOTING POWER OF ALL CLASSES OF STOCK OF THE COMPANY OR OF A SUBSIDIARY, THE OPTION PERIOD SHALL NOT EXCEED FIVE YEARS FROM THE DATE OF GRANT OF SUCH OPTION AND THE OPTION PRICE SHALL BE AT LEAST 110% OF THE FAIR MARKET VALUE (ON THE DATE OF GRANT) OF THE STOCK SUBJECT TO THE OPTION.
$100,000 PER YEAR LIMITATION FOR INCENTIVE STOCK OPTIONS. TO THE EXTENT THE AGGREGATE FAIR MARKET VALUE (DETERMINED AS OF THE DATE OF GRANT) OF STOCK FOR WHICH INCENTIVE STOCK OPTIONS ARE EXERCISABLE FOR THE FIRST TIME BY ANY PARTICIPANT DURING ANY CALENDAR YEAR (UNDER ALL PLANS OF THE COMPANY AND ITS SUBSIDIARIES) EXCEEDS $100,000, SUCH EXCESS INCENTIVE STOCK OPTIONS SHALL BE TREATED AS NONQUALIFIED STOCK OPTIONS.
VOLUNTARY SURRENDER. THE COMMITTEE MAY PERMIT THE VOLUNTARY SURRENDER
OF ALL OR ANY PORTION OF ANY NONQUALIFIED STOCK OPTION ISSUED PURSUANT TO THIS
SECTION 7 TO BE CONDITIONED UPON THE GRANTING TO THE HOLDER OF A NEW OPTION FOR
THE SAME OR A DIFFERENT NUMBER OF SHARES AS THE OPTION SURRENDERED OR REQUIRE
SUCH VOLUNTARY SURRENDER AS A CONDITION PRECEDENT TO A GRANT OF A NEW OPTION TO
SUCH PARTICIPANT. SUCH NEW OPTION SHALL BE EXERCISABLE AT AN OPTION PRICE,
DURING AN OPTION PERIOD, AND IN ACCORDANCE WITH ANY OTHER TERMS OR CONDITIONS
SPECIFIED BY THE COMMITTEE AT THE TIME THE NEW OPTION IS GRANTED, ALL DETERMINED
IN ACCORDANCE WITH THE PROVISIONS OF THE PLAN WITHOUT REGARD TO THE OPTION
PRICE, OPTION PERIOD, OR ANY OTHER TERMS AND CONDITIONS OF THE NONQUALIFIED
STOCK OPTION SURRENDERED.
RESTRICTED STOCK AWARDS
AWARD OF RESTRICTED STOCK.
The Committee shall have the authority to (1) grant Restricted Stock, (2) issue or transfer Restricted Stock to Eligible Persons, and (3) establish terms, conditions and restrictions applicable to such Restricted Stock, including the Restricted Period, which may differ with respect to each grantee, the time or times at which Restricted Stock shall be granted or become vested and the number of shares to be covered by each grant.
The Holder of a Restricted Stock Award shall execute and deliver to the Company an Award agreement with respect to the Restricted Stock setting forth the restrictions applicable to such Restricted Stock. If the Committee determines that the Restricted Stock shall be held in escrow rather than delivered to the Holder pending the release of the applicable restrictions, the Holder additionally shall execute and deliver to the Company (i) an escrow agreement satisfactory to the Committee and (ii) the appropriate blank stock powers with respect to the Restricted Stock covered by such agreements. If a Holder shall fail to execute a Restricted Stock agreement and, if applicable, an escrow agreement and stock powers, the Award shall be null and void. Subject to the restrictions set forth in Section 8(b), the Holder shall generally have the rights and privileges of a stockholder as to such Restricted Stock, including the right to vote such Restricted Stock. At the discretion of the Committee, cash dividends and stock dividends, if any, with respect to the Restricted Stock may be either currently paid to the Holder or withheld by the Company for the Holder's account. Unless otherwise determined by the Committee, no interest will accrue or be paid on the amount of any cash dividends withheld. Unless otherwise determined by the Committee, cash dividends or stock dividends so withheld by the Committee shall be subject to forfeiture to the same degree as the shares of Restricted Stock to which they relate.
Upon the Award of Restricted Stock, the Committee shall cause a stock certificate registered in the name of the Holder to be issued and, if it so determines, deposited together with the stock powers with an escrow agent designated by the Committee. If an escrow arrangement is used, the Committee shall cause the escrow agent to issue to the Holder a receipt evidencing any stock certificate held by it registered in the name of the Holder.
RESTRICTIONS.
Restricted Stock awarded to a Participant shall be subject to the following restrictions until the expiration of
the Restricted Period, and to such other terms and
conditions as may be set forth in the applicable Award
agreement: (1) if an escrow arrangement is used, the Holder
shall not be entitled to delivery of the stock certificate;
(2) the shares shall be subject to the restrictions on
transferability set forth in the Award agreement; (3) the
shares shall be subject to forfeiture to the extent provided
in Section 8(d) and the Award Agreement and, to the extent
such shares are forfeited, the stock certificates shall be
returned to the Company, and all rights of the Holder to
such shares and as a shareholder shall terminate without
further obligation on the part of the Company.
The Committee shall have the authority to remove any or all of the restrictions on the Restricted Stock whenever it may determine that, by reason of changes in applicable laws or other changes in circumstances arising after the date of the Restricted Stock Award, such action is appropriate.
RESTRICTED PERIOD. THE RESTRICTED PERIOD OF RESTRICTED STOCK SHALL COMMENCE ON THE DATE OF GRANT AND SHALL EXPIRE FROM TIME TO TIME AS TO THAT PART OF THE RESTRICTED STOCK INDICATED IN A SCHEDULE ESTABLISHED BY THE COMMITTEE AND SET FORTH IN A WRITTEN AWARD AGREEMENT.
FORFEITURE PROVISIONS. EXCEPT TO THE EXTENT DETERMINED BY THE COMMITTEE AND REFLECTED IN THE UNDERLYING AWARD AGREEMENT, IN THE EVENT A HOLDER TERMINATES EMPLOYMENT WITH THE COMPANY AND ALL SUBSIDIARIES DURING A RESTRICTED PERIOD, THAT PORTION OF THE AWARD WITH RESPECT TO WHICH RESTRICTIONS HAVE NOT EXPIRED ("NON-VESTED PORTION") SHALL BE TREATED AS FOLLOWS:
Upon the voluntary resignation of a Participant or discharge by the Company or a Subsidiary for Cause, the Non-Vested Portion of the Award shall be completely forfeited.
Upon Normal Termination, the Non-Vested Portion of the Award shall be prorated for service during the Restricted Period and shall be distributed free of all restrictions as soon as practicable following termination.
Upon death, the Non-Vested Portion of the Award shall be prorated for service during the Restricted Period and shall be distributed free of all restrictions to the Participant's beneficiary as soon as practicable following death.
DELIVERY OF RESTRICTED STOCK. UPON THE EXPIRATION OF THE RESTRICTED PERIOD WITH RESPECT TO ANY SHARES OF STOCK COVERED BY A RESTRICTED STOCK AWARD, THE RESTRICTIONS SET FORTH IN SECTION 8(b) AND THE AWARD AGREEMENT SHALL BE OF NO FURTHER FORCE OR EFFECT WITH
RESPECT TO SHARES OF RESTRICTED STOCK WHICH HAVE NOT THEN BEEN FORFEITED. IF AN ESCROW ARRANGEMENT IS USED, UPON SUCH EXPIRATION, THE COMPANY SHALL DELIVER TO THE HOLDER, OR HIS BENEFICIARY, WITHOUT CHARGE, THE STOCK CERTIFICATE EVIDENCING THE SHARES OF RESTRICTED STOCK WHICH HAVE NOT THEN BEEN FORFEITED AND WITH RESPECT TO WHICH THE RESTRICTED PERIOD HAS EXPIRED (TO THE NEAREST FULL SHARE) AND ANY CASH DIVIDENDS OR STOCK DIVIDENDS CREDITED TO THE HOLDER'S ACCOUNT WITH RESPECT TO SUCH RESTRICTED STOCK AND THE INTEREST THEREON, IF ANY.
STOCK RESTRICTIONS. EACH CERTIFICATE REPRESENTING RESTRICTED STOCK AWARDED UNDER THE PLAN SHALL BEAR THE FOLLOWING LEGEND UNTIL THE END OF THE RESTRICTED PERIOD WITH RESPECT TO SUCH STOCK:
"Transfer of this certificate and the shares represented hereby is restricted pursuant to the terms of a Restricted Stock Agreement, dated as of ____________, between P&F Industries, Inc. and ______________________. A copy of such Agreement is on file at the offices of P&F Industries, Inc."
Stop transfer orders shall be entered with the Company's transfer agent and registrar against the transfer of any such legended securities.
OTHER STOCK-BASED AWARDS
The Committee may grant any other cash, stock or stock-related Awards to any eligible individual under this Plan that the Committee deems appropriate, including, but not limited to, stock appreciation rights, limited stock appreciation rights, phantom stock Awards, the bargain purchase of Stock and Stock bonuses. Any such benefits and any related agreements shall contain such terms and conditions as the Committee deems appropriate. Such Awards and agreements need not be identical. With respect to any benefit under which shares of Stock are or may in the future be issued for consideration other than prior services, the amount of such consideration shall not be less than the amount (such as the par value of such shares) required to be received by the Company in order to comply with applicable state law.
GENERAL
ADDITIONAL PROVISIONS OF AN AWARD. AWARDS UNDER THE PLAN ALSO MAY BE SUBJECT TO SUCH OTHER PROVISIONS (WHETHER OR NOT APPLICABLE TO THE BENEFIT AWARDED TO ANY OTHER PARTICIPANT) AS THE COMMITTEE DETERMINES APPROPRIATE INCLUDING, WITHOUT LIMITATION, PROVISIONS TO ASSIST THE PARTICIPANT IN FINANCING THE PURCHASE OF STOCK UPON THE EXERCISE OF OPTIONS, PROVISIONS FOR THE FORFEITURE OF OR RESTRICTIONS ON RESALE OR OTHER DISPOSITION OF SHARES OF STOCK ACQUIRED UNDER ANY AWARD, PROVISIONS GIVING THE COMPANY THE RIGHT TO REPURCHASE SHARES OF STOCK ACQUIRED UNDER ANY AWARD IN THE EVENT THE PARTICIPANT ELECTS TO DISPOSE OF SUCH SHARES, AND PROVISIONS TO COMPLY WITH FEDERAL AND STATE SECURITIES LAWS AND FEDERAL AND STATE TAX WITHHOLDING REQUIREMENTS. ANY SUCH PROVISIONS SHALL BE REFLECTED IN THE APPLICABLE AWARD AGREEMENT.
PRIVILEGES OF STOCK OWNERSHIP. EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN THE PLAN, NO PERSON SHALL BE ENTITLED TO THE PRIVILEGES OF STOCK OWNERSHIP IN RESPECT OF SHARES OF STOCK WHICH ARE SUBJECT TO AWARDS HEREUNDER UNTIL SUCH SHARES HAVE BEEN ISSUED TO THAT PERSON.
GOVERNMENT AND OTHER REGULATIONS. THE OBLIGATION OF THE COMPANY TO MAKE PAYMENT OF AWARDS IN STOCK OR OTHERWISE SHALL BE SUBJECT TO ALL APPLICABLE LAWS, RULES AND REGULATIONS, AND TO SUCH APPROVALS BY GOVERNMENTAL AGENCIES AS MAY BE REQUIRED. NOTWITHSTANDING ANY TERMS OR CONDITIONS OF ANY AWARD TO THE CONTRARY, THE COMPANY SHALL BE UNDER NO OBLIGATION TO OFFER TO SELL OR TO SELL AND SHALL BE PROHIBITED FROM OFFERING TO SELL OR SELLING ANY SHARES OF STOCK PURSUANT TO AN AWARD UNLESS SUCH SHARES HAVE BEEN PROPERLY REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT WITH THE SECURITIES AND EXCHANGE COMMISSION OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH SHARES MAY BE OFFERED OR SOLD WITHOUT SUCH REGISTRATION PURSUANT TO AN AVAILABLE EXEMPTION THEREFROM AND THE TERMS AND CONDITIONS OF SUCH EXEMPTION HAVE BEEN FULLY COMPLIED WITH. THE COMPANY SHALL BE UNDER NO OBLIGATION TO REGISTER FOR SALE UNDER THE SECURITIES ACT ANY OF THE SHARES OF STOCK TO BE OFFERED OR SOLD UNDER THE PLAN. IF THE SHARES OF STOCK OFFERED FOR SALE OR SOLD UNDER THE PLAN ARE OFFERED OR SOLD PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, THE COMPANY MAY RESTRICT THE TRANSFER OF SUCH SHARES AND MAY LEGEND THE STOCK CERTIFICATES REPRESENTING SUCH SHARES IN SUCH MANNER AS IT DEEMS ADVISABLE TO ENSURE THE AVAILABILITY OF ANY SUCH EXEMPTION.
TAX WITHHOLDING. NOTWITHSTANDING ANY OTHER PROVISION OF THE PLAN, THE COMPANY OR A SUBSIDIARY, AS APPROPRIATE, SHALL HAVE THE RIGHT TO DEDUCT FROM ALL AWARDS CASH AND/OR STOCK, VALUED AT FAIR MARKET VALUE ON THE DATE OF PAYMENT, IN AN AMOUNT NECESSARY TO SATISFY ALL FEDERAL, STATE AND LOCAL TAXES AS REQUIRED BY LAW TO BE WITHHELD WITH RESPECT TO SUCH AWARDS AND, IN THE CASE OF AWARDS PAID IN STOCK, THE HOLDER OR OTHER PERSON RECEIVING SUCH STOCK MAY BE REQUIRED TO PAY TO THE COMPANY OR A SUBSIDIARY, AS APPROPRIATE, PRIOR TO DELIVERY OF SUCH STOCK, THE AMOUNT OF ANY SUCH TAXES, IF ANY, WHICH THE COMPANY OR SUBSIDIARY IS REQUIRED TO WITHHOLD WITH RESPECT TO SUCH STOCK. SUBJECT IN PARTICULAR CASES TO THE DISAPPROVAL OF THE COMMITTEE, THE COMPANY MAY ACCEPT SHARES OF STOCK OF EQUIVALENT FAIR MARKET VALUE IN
PAYMENT OF SUCH WITHHOLDING TAX OBLIGATIONS IF THE HOLDER OF THE AWARD ELECTS TO MAKE PAYMENT IN SUCH MANNER.
CLAIM TO AWARDS AND EMPLOYMENT RIGHTS. NO INDIVIDUAL SHALL HAVE ANY CLAIM OR RIGHT TO BE GRANTED AN AWARD UNDER THE PLAN OR, HAVING BEEN SELECTED FOR THE GRANT OF AN AWARD, TO BE SELECTED FOR A GRANT OF ANY OTHER AWARD. NEITHER THE PLAN NOR ANY ACTION TAKEN HEREUNDER SHALL BE CONSTRUED AS GIVING ANY INDIVIDUAL ANY RIGHT TO BE RETAINED IN THE EMPLOY OR SERVICE OF THE COMPANY OR A SUBSIDIARY.
DESIGNATION AND CHANGE OF BENEFICIARY. EACH PARTICIPANT MAY FILE WITH THE COMMITTEE A WRITTEN DESIGNATION OF ONE OR MORE PERSONS AS THE BENEFICIARY WHO SHALL BE ENTITLED TO RECEIVE THE RIGHTS OR AMOUNTS PAYABLE WITH RESPECT TO AN AWARD DUE UNDER THE PLAN UPON HIS DEATH. A PARTICIPANT MAY, FROM TIME TO TIME, REVOKE OR CHANGE HIS BENEFICIARY DESIGNATION WITHOUT THE CONSENT OF ANY PRIOR BENEFICIARY BY FILING A NEW DESIGNATION WITH THE COMMITTEE. THE LAST SUCH DESIGNATION RECEIVED BY THE COMMITTEE SHALL BE CONTROLLING; PROVIDED, HOWEVER, THAT NO DESIGNATION, OR CHANGE OR REVOCATION THEREOF, SHALL BE EFFECTIVE UNLESS RECEIVED BY THE COMMITTEE PRIOR TO THE PARTICIPANT'S DEATH, AND IN NO EVENT SHALL IT BE EFFECTIVE AS OF A DATE PRIOR TO SUCH RECEIPT. IF NO BENEFICIARY DESIGNATION IS FILED BY THE PARTICIPANT, THE BENEFICIARY SHALL BE DEEMED TO BE HIS OR HER SPOUSE OR, IF THE PARTICIPANT IS UNMARRIED AT THE TIME OF DEATH, HIS OR HER ESTATE.
PAYMENTS TO PERSONS OTHER THAN PARTICIPANTS. IF THE COMMITTEE SHALL FIND THAT ANY PERSON TO WHOM ANY AMOUNT IS PAYABLE UNDER THE PLAN IS UNABLE TO CARE FOR HIS AFFAIRS BECAUSE OF ILLNESS OR ACCIDENT, OR IS A MINOR, OR HAS DIED, THEN ANY PAYMENT DUE TO SUCH PERSON OR HIS ESTATE (UNLESS A PRIOR CLAIM THEREFOR HAS BEEN MADE BY A DULY APPOINTED LEGAL REPRESENTATIVE) MAY, IF THE COMMITTEE SO DIRECTS THE COMPANY, BE PAID TO HIS SPOUSE, CHILD, RELATIVE, AN INSTITUTION MAINTAINING OR HAVING CUSTODY OF SUCH PERSON, OR ANY OTHER PERSON DEEMED BY THE COMMITTEE TO BE A PROPER RECIPIENT ON BEHALF OF SUCH PERSON OTHERWISE ENTITLED TO PAYMENT. ANY SUCH PAYMENT SHALL BE A COMPLETE DISCHARGE OF THE LIABILITY OF THE COMMITTEE AND THE COMPANY THEREFOR.
NO LIABILITY OF COMMITTEE MEMBERS. NO MEMBER OF THE COMMITTEE SHALL BE PERSONALLY LIABLE BY REASON OF ANY CONTRACT OR OTHER INSTRUMENT EXECUTED BY SUCH MEMBER OR ON HIS BEHALF IN HIS CAPACITY AS A MEMBER OF THE COMMITTEE NOR FOR ANY MISTAKE OF JUDGMENT MADE IN GOOD FAITH, AND THE COMPANY SHALL INDEMNIFY AND HOLD HARMLESS EACH MEMBER OF THE COMMITTEE AND EACH OTHER EMPLOYEE, OFFICER OR DIRECTOR OF THE COMPANY TO WHOM ANY DUTY OR POWER RELATING TO THE ADMINISTRATION OR INTERPRETATION OF THE PLAN MAY BE ALLOCATED OR DELEGATED, AGAINST ANY COST OR EXPENSE (INCLUDING COUNSEL FEES) OR LIABILITY (INCLUDING ANY SUM PAID IN SETTLEMENT OF A CLAIM) ARISING OUT OF ANY ACT OR OMISSION TO ACT IN CONNECTION WITH THE PLAN UNLESS ARISING OUT OF SUCH PERSON'S OWN FRAUD OR WILLFUL BAD FAITH; PROVIDED, HOWEVER, THAT APPROVAL OF THE BOARD SHALL BE REQUIRED FOR THE PAYMENT OF ANY AMOUNT IN SETTLEMENT OF A CLAIM AGAINST ANY SUCH PERSON. THE FOREGOING RIGHT OF INDEMNIFICATION SHALL NOT BE EXCLUSIVE OF ANY OTHER RIGHTS OF INDEMNIFICATION TO WHICH SUCH PERSONS MAY BE ENTITLED UNDER THE
COMPANY'S ARTICLES OF INCORPORATION OR BY-LAWS, AS A MATTER OF LAW, OR OTHERWISE, OR ANY POWER THAT THE COMPANY MAY HAVE TO INDEMNIFY THEM OR HOLD THEM HARMLESS.
GOVERNING LAW. THE PLAN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
FUNDING. NO PROVISION OF THE PLAN SHALL REQUIRE THE COMPANY, FOR THE PURPOSE OF SATISFYING ANY OBLIGATIONS UNDER THE PLAN, TO PURCHASE ASSETS OR PLACE ANY ASSETS IN A TRUST OR OTHER ENTITY TO WHICH CONTRIBUTIONS ARE MADE OR OTHERWISE TO SEGREGATE ANY ASSETS, NOR SHALL THE COMPANY MAINTAIN SEPARATE BANK ACCOUNTS, BOOKS, RECORDS OR OTHER EVIDENCE OF THE EXISTENCE OF A SEGREGATED OR SEPARATELY MAINTAINED OR ADMINISTERED FUND FOR SUCH PURPOSES. HOLDERS SHALL HAVE NO RIGHTS UNDER THE PLAN OTHER THAN AS UNSECURED GENERAL CREDITORS OF THE COMPANY, EXCEPT THAT INSOFAR AS THEY MAY HAVE BECOME ENTITLED TO PAYMENT OF ADDITIONAL COMPENSATION BY PERFORMANCE OF SERVICES, THEY SHALL HAVE THE SAME RIGHTS AS OTHER EMPLOYEES UNDER GENERAL LAW.
NONTRANSFERABILITY. A PERSON'S RIGHTS AND INTEREST UNDER THE PLAN, INCLUDING AMOUNTS PAYABLE, MAY NOT BE SOLD, ASSIGNED, DONATED, TRANSFERRED OR OTHERWISE DISPOSED OF, MORTGAGED, PLEDGED OR ENCUMBERED EXCEPT, IN THE EVENT OF A HOLDER'S DEATH, TO A DESIGNATED BENEFICIARY TO THE EXTENT PERMITTED BY THE PLAN, OR IN THE ABSENCE OF SUCH DESIGNATION, BY WILL OR THE LAWS OF DESCENT AND DISTRIBUTION; PROVIDED, HOWEVER, THE COMMITTEE MAY, IN ITS SOLE DISCRETION, ALLOW FOR TRANSFER OF AWARDS OTHER THAN INCENTIVE STOCK OPTIONS TO OTHER PERSONS OR ENTITIES, SUBJECT TO SUCH CONDITIONS OR LIMITATIONS AS IT MAY ESTABLISH.
RELIANCE ON REPORTS. EACH MEMBER OF THE COMMITTEE AND EACH MEMBER OF THE BOARD SHALL BE FULLY JUSTIFIED IN RELYING, ACTING OR FAILING TO ACT, AND SHALL NOT BE LIABLE FOR HAVING SO RELIED, ACTED OR FAILED TO ACT IN GOOD FAITH, UPON ANY REPORT MADE BY THE INDEPENDENT PUBLIC ACCOUNTANT OF THE COMPANY AND ITS SUBSIDIARIES AND UPON ANY OTHER INFORMATION FURNISHED IN CONNECTION WITH THE PLAN BY ANY PERSON OR PERSONS OTHER THAN HIMSELF.
RELATIONSHIP TO OTHER BENEFITS. NO PAYMENT UNDER THE PLAN SHALL BE TAKEN INTO ACCOUNT IN DETERMINING ANY BENEFITS UNDER ANY PENSION, RETIREMENT, PROFIT SHARING, GROUP INSURANCE OR OTHER BENEFIT PLAN OF THE COMPANY OR ANY SUBSIDIARY EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN SUCH OTHER PLAN.
EXPENSES. THE EXPENSES OF ADMINISTERING THE PLAN SHALL BE BORNE BY THE
COMPANY AND ITS SUBSIDIARIES.
PRONOUNS. MASCULINE PRONOUNS AND OTHER WORDS OF MASCULINE GENDER SHALL
REFER TO BOTH MEN AND WOMEN.
TITLES AND HEADINGS. THE TITLES AND HEADINGS OF THE SECTIONS IN THE
PLAN ARE FOR CONVENIENCE OF REFERENCE ONLY, AND IN THE EVENT OF
ANY CONFLICT, THE TEXT OF THE PLAN, RATHER THAN SUCH TITLES OR HEADINGS, SHALL CONTROL.
TERMINATION OF EMPLOYMENT. FOR ALL PURPOSES HEREIN, A PERSON WHO TRANSFERS FROM EMPLOYMENT OR SERVICE WITH THE COMPANY TO EMPLOYMENT OR SERVICE WITH A SUBSIDIARY OR VICE VERSA SHALL NOT BE DEEMED TO HAVE TERMINATED EMPLOYMENT OR SERVICE WITH THE COMPANY OR A SUBSIDIARY.
CHANGES IN CAPITAL STRUCTURE
Awards granted under the Plan and any agreements evidencing such Awards, the maximum number of shares of Stock subject to all Awards under the Plan, the number of shares of Stock subject to outstanding Awards and the maximum number of shares of Stock with respect to which any one person may be granted Options or stock appreciation rights during any year may be subject to adjustment or substitution, as determined by the Committee in its sole discretion, as to the number, price or kind of a share of Stock or other consideration subject to such Awards or as otherwise determined by the Committee to be equitable (i) in the event of changes in the outstanding Stock or in the capital structure of the Company by reason of stock dividends, stock splits, reverse stock splits, recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges, or other relevant changes in capitalization occurring after the Date of Grant of any such Award or (ii) in the event of any change in applicable laws or any change in circumstances which results in or would result in any substantial dilution or enlargement of the rights granted to, or available for, Participants in the Plan, or (iii) for any other reason which the Committee, in its sole discretion, determines otherwise warrants equitable adjustment because it interferes with the intended operation of the Plan. Any adjustment to Incentive Stock Options under this Section 11 shall take into account that adjustments which constitute a "modification" within the meaning of Section 424(h)(3) of the Code may have an adverse tax impact on such Incentive Stock Options and the Committee may, in its sole discretion, provide for a different adjustment or no adjustment in order to preserve the tax effects of Incentive Stock Options. Unless otherwise determined by the Committee, in its sole discretion, any adjustments or substitutions under this Section 11 shall be made in a manner which does not adversely affect the exemption provided pursuant to Rule 16b-3 under the Exchange Act. Further, with respect to Awards intended to qualify as "performance-based compensation" under Section 162(m) of the Code, such adjustments or substitutions shall, unless otherwise determined by the Committee in its sole discretion, be made only to the extent that the Committee determines that such adjustments or substitutions may be made without a loss of deductibility for such Awards under Section 162(m) of the Code. The Company shall give each Participant notice of an adjustment hereunder and, upon notice, such adjustment shall be conclusive and binding for all purposes.
Notwithstanding the above, in the event of any of the following:
A. The Company is merged or consolidated with another corporation or
entity;
B. All or substantially all of the assets of the Company or the
Common Stock are acquired by another person or entity;
C. The reorganization or liquidation of the Company; or
D. The Company shall enter into a written agreement to undergo an
event described in clauses A, B or C above, then the Committee may, in its
discretion and upon at least 10 day's advance notice to the affected persons,
cancel any outstanding Awards and pay to the Holders thereof, in cash or Stock,
the value of such Awards based upon the price per share of Stock received or to
be received by other stockholders of the Company in the event. The terms of this
Section 11 may be varied by the Committee in any particular Award agreement.
EFFECT OF CHANGE IN CONTROL
Except to the extent reflected in a particular Award agreement:
IN THE EVENT OF A CHANGE IN CONTROL, NOTWITHSTANDING ANY VESTING SCHEDULE WITH RESPECT TO AN AWARD OF OPTIONS OR RESTRICTED STOCK, SUCH OPTION SHALL BECOME IMMEDIATELY EXERCISABLE WITH RESPECT TO 100% OF THE SHARES SUBJECT TO SUCH OPTION, AND THE RESTRICTED PERIOD SHALL EXPIRE IMMEDIATELY WITH RESPECT TO 100% OF SUCH SHARES OF RESTRICTED STOCK.
IN THE EVENT OF A CHANGE IN CONTROL, ALL OTHER AWARDS SHALL BECOME FULLY VESTED AND OR PAYABLE TO THE FULLEST EXTENT OF ANY AWARD OR PORTION THEREOF THAT HAS NOT THEN EXPIRED AND ANY RESTRICTIONS WITH RESPECT THERETO SHALL EXPIRE. THE COMMITTEE SHALL HAVE FULL AUTHORITY AND DISCRETION TO INTERPRET THIS SECTION 12 AND TO IMPLEMENT ANY COURSE OF ACTION WITH RESPECT TO ANY AWARD SO AS TO SATISFY THE INTENT OF THIS PROVISION.
THE OBLIGATIONS OF THE COMPANY UNDER THE PLAN SHALL BE BINDING UPON ANY SUCCESSOR CORPORATION OR ORGANIZATION RESULTING FROM THE MERGER, CONSOLIDATION OR OTHER REORGANIZATION OF THE COMPANY, OR UPON ANY SUCCESSOR CORPORATION OR ORGANIZATION SUCCEEDING TO SUBSTANTIALLY ALL OF THE ASSETS AND BUSINESS OF THE COMPANY.
NONEXCLUSIVITY OF THE PLAN
Neither the adoption of this Plan by the Board nor the submission of this Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options otherwise than under this Plan, and such arrangements may be either applicable generally or only in specific cases.
AMENDMENTS AND TERMINATION
The Board may at any time terminate the Plan. Subject to Section 11, with the express written consent of an individual Participant, the
Board or the Committee may cancel or reduce or otherwise alter outstanding Awards if, in its judgment, the tax, accounting, or other effects of the Plan or potential payouts thereunder would not be in the best interest of the Company. The Board or the Committee may, at any time, or from time to time, amend or suspend and, if suspended, reinstate, the Plan in whole or in part; PROVIDED, HOWEVER, that without further stockholder approval neither the Board nor the Committee shall make any amendment to the Plan which would:
MATERIALLY INCREASE THE MAXIMUM NUMBER OF SHARES OF STOCK WHICH MAY BE
ISSUED PURSUANT TO AWARDS, EXCEPT AS PROVIDED IN SECTION 11;
EXTEND THE MAXIMUM OPTION PERIOD;
EXTEND THE TERMINATION DATE OF THE PLAN; OR
CHANGE THE CLASS OF PERSONS ELIGIBLE TO RECEIVE AWARDS UNDER THE PLAN.
* * *
As adopted by the Board of Directors
of P&F Industries, Inc. as of April 18, 2002