Exhibit 10.2

 

CONSENT AND AMENDMENT NO. 7

TO SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

This CONSENT AND AMENDMENT NO. 7 TO SECOND AMENDED AND RESTATED LOAN AND
SECURITY AGREEMENT is dated as of April 19, 2019 (this “Consent and Amendment”),
among P&F INDUSTRIES, INC., a Delaware corporation (“P&F”), FLORIDA PNEUMATIC
MANUFACTURING CORPORATION, a Florida corporation (“Florida Pneumatic”), HY-TECH
MACHINE, INC., a Delaware corporation (“Hy-Tech” and together with P&F and
Florida Pneumatic, collectively, the “Borrowers” and each, a “Borrower”), JIFFY
AIR TOOL, INC., a Delaware corporation (“Jiffy”), ATSCO HOLDINGS CORP., a
Delaware corporation (“ATSCO”), BONANZA PROPERTIES CORP, a Delaware corporation
(“Properties”), CONTINENTAL TOOL GROUP, INC., a Delaware corporation
(“Continental”), COUNTRYWIDE HARDWARE, INC., a Delaware corporation
(“Countrywide”), EMBASSY INDUSTRIES, INC., a New York corporation (“Embassy”)
and EXHAUST TECHNOLOGIES, INC., a Delaware corporation, (“Exhaust”, and together
with Jiffy, ATSCO, Properties, Continental, Countrywide, Embassy, collectively,
“Guarantors” and each, a “Guarantor”) the financial institutions party to this
Consent and Amendment as lenders (collectively, “Lenders”), and CAPITAL ONE,
NATIONAL ASSOCIATION, a national banking association, as agent for the Lenders
(“Agent”)

 

RECITALS:

 

A.           Borrowers, Guarantors, the lenders from time to time party thereto
(collectively, the “Lenders”) and Agent have entered into the Second Amended and
Restated Loan and Security Agreement dated as of April 5, 2017 (as amended,
restated, supplemented, or otherwise modified from time to time immediately
prior to the effectiveness of this Consent and Amendment, the “Loan Agreement”).
Capitalized terms used and not otherwise defined herein shall have the meanings
ascribed to them in the Loan Agreement.

 

B.            Borrowers have requested that Agent and the Lenders consent to the
sale of Real Estate owned by Florida Pneumatic and located in Jupiter, Palm
Beach County, Florida (the “Subject Property”) and to amend certain provisions
of the Loan Agreement.

 

C.            Subject to the terms and conditions set forth below, Agent and the
Lenders party hereto are willing to consent to the sale of the Subject Property
(and in connection therewith, release their Liens on the Subject Property) and
amend the Loan Agreement as set forth herein.

 

In furtherance of the foregoing, the parties agree as follows:

 

Section 1. CONSENTS. Subject to the covenants, terms and conditions set forth
herein and in reliance upon the representations and warranties set forth herein,
each of the undersigned Lenders hereby consents to (a) to the entry by Florida
Pneumatic into a Purchase and Sale Agreement (the “Purchase Agreement”) for the
sale of the Subject Property; and (b) the consummation of the sale of the
Subject Property free and clear of the Liens of the Agent and Lenders on terms
reasonably satisfactory to Agent, provided that upon the closing of such sale
the proceeds thereof are remitted directly to the Dominion Account by wire
transfer of immediately available funds, net of taxes, fees, commissions and
usual and customary selling expenses and adjustments and such sale is
consummated pursuant to the Purchase Agreement and any amendment thereto
reasonably approved by the Agent. Such proceeds shall be applied to the
outstanding Capex Loans until paid in full, then to the Tranche A Term Loan
until paid in full and any remaining balance applied to the Revolving Loans.

 

 

 

 

 

Section 2. AMENDMENTS. Subject to the covenants, terms and conditions set forth
herein and in reliance upon the representations and warranties set forth herein,
the Loan Agreement is amended as follows:

 

(a)                  Section 1.1 of the Loan Agreement is hereby amended by
inserting the following new definition in appropriate alphanumeric order:

 

“Additional Availability Reserve: the sum of $5,000,000 from the date of
consummation of the sale of Real Estate in Jupiter, Florida owned by Florida
Pneumatic through the later of (i) the end of the Fixed Charge Coverage Ratio
Suspension Period or (ii) the date of delivery of the requisite Compliance
Certificate demonstrating compliance with Section 10.3.2, and thereafter, $0.00
(zero).”

 

“Fixed Charge Coverage Ratio Suspension Period”: each Measurement Period
commencing with the Measurement Period ending April 30, 2019 through and
including the Measurement Period ending March 31, 2020.”

 

 

(b)                   Section 1.1 of the Loan Agreement is hereby amended by
deleting the definitions of “Availability” and “ Reporting Trigger Event” set
forth therein and inserting the following definitions, respectively, in lieu
thereof:

 

“Availability: the Borrowing Base minus the principal balance of all Revolver
Loans minus the Additional Availability Reserve.”

 

“Reporting Trigger Period: the period (a) commencing on the day that a Default
or Event of Default occurs, or Availability (without giving effect to the
Additional Availability Reserve) is less than $2,500,000 at any time; and (b)
continuing until, during the preceding 30 consecutive days, no Event of Default
has existed and Availability has been greater than $2,500,000 at all times.”

 

 

 

 

(c)                  The existing Section 10.2.4 of the Loan Agreement is hereby
amended by deleting Section 10.2.4 in its entirety and replacing it with the
following:

 

“10.2.4 Distributions; Upstream Payments; Executive Compensation. Declare or
make any Distributions or pay executive compensation, except (a) Upstream
Payments, (b) Distributions of Equity Interests that do not result in a Change
of Control, (c) executive compensation, including incentive compensation, and
management and directors’ fees and expenses consistent with past practice and,
in the case of incentive compensation, with any incentive plans approved by the
Board of Directors of P&F as set forth on Schedule 10.2.4 or as subsequently
approved by such Board (or a committee thereof) and such Board’s independent
compensation consultant reasonably satisfactory to Agent, (d) commencing January
1, 2017, Distributions in the form of the redemption or repurchase of the Equity
Interests of P&F when no Default or Event of Default exists in an amount not to
exceed (1) $1,700,000 in the Fiscal Year ending December 31, 2018 or (2)
$1,000,000 in any other Fiscal Year, provided that, in each case (x)
Availability (without giving effect to the Additional Availability Reserve) is
not less than $2,500,000 after giving effect to any such Distribution and (y)
for any month in which any such Distribution is made, the Fixed Charge Coverage
Ratio shall be determined as if a Reporting Trigger Period were in effect (i) as
of such month end (i.e. determined for the then ending twelve month period) and
(ii) for each of the eleven (11) month ends thereafter, and Borrower Agent shall
deliver to Agent within 30 days (or such longer period as Agent may allow) of
each such month end, a certificate of a Senior Officer of the Borrower Agent, in
form and substance reasonably satisfactory to the Agent, certifying that all of
the requirements set forth above were satisfied with respect to the
Distribution(s) made (if any) during such month, together with a reasonably
detailed calculation of the Fixed Charge Coverage Ratio as of such month end;
provided further, however, that no more than 33,465 shares of Equity Interests
of P&F shall be repurchased or redeemed between April 16, 2019 and September 17,
2019 and no such Distributions shall be made thereafter (pursuant to this
Section 10.2.4 or any other provision of this Agreement) until after the Fixed
Charge Coverage Ratio Suspension Period expires and the Borrowers demonstrate
compliance with the Fixed Charge Coverage Ratio, (e) commencing with the Fiscal
Quarter ending March 31, 2016, quarterly Distributions to the holders of the
Equity Interests of P&F when no Default or Event of Default exists in an amount
not to exceed the lesser of $0.05 per share or $200,000 ($175,000 commencing
April 1, 2019) and (f) the Fidelity Transaction, provided that ((x) no Default
or Event of Default exists before or after giving effect to the Fidelity
Transaction, (y) Availability is not less than $2,500,000 after giving effect to
the Fidelity Transaction and (z) the Fixed Charge Coverage Ratio as of the month
end immediately preceding the consummation of the Fidelity Transaction
(determined for the then ending twelve month period) is not less than 1.00 to
1.00; or create or suffer to exist any encumbrance or restriction on the ability
of a Subsidiary to make any Upstream Payment, except for restrictions under the
Loan Documents, under Applicable Law or in effect on the Closing Date as shown
on Schedule 9.1.15.”

 

(d)                  The existing Section 10.3.2 of the Loan Agreement is hereby
amended by deleting Section 10.3.2 in its entirety and replacing it with the
following:

 

“Fixed Charge Coverage Ratio. Maintain a Fixed Charge Coverage Ratio of not less
than 1.00 to 1.00 as of the end of each Measurement Period other than any
Measurement Period ending during the Fixed Charge Coverage Ratio Suspension
Period.”

 

 

 

 

The amendments to the Loan Agreement are limited to the extent specifically set
forth above and no other terms, covenants or provisions of the Loan Agreement
are intended to be affected hereby.

 

Section 3.           FURTHER AGREEMENTS. Notwithstanding anything to the
contrary in the Loan Agreement or in this Amendment, so long as the Additional
Availability Reserve is greater than zero, the Borrowers shall deliver a
Compliance Certificate to Agent as if a Reporting Trigger Period were in effect.

 

Section 4.           CONDITIONS PRECEDENT. The parties hereto agree that the
consent and amendments set forth in Section 1 and Section 2 above shall not be
effective until the satisfaction of each of the following conditions precedent:

 

(a)           Documentation. Agent shall have received (i) a counterpart of this
Consent and Amendment, duly executed and delivered by Borrowers, Guarantors and
all of the Lenders then party to the Loan Agreement, and (ii) such other
documents and certificates as Agent or its counsel may reasonably request
relating to the organization, existence and good standing of Obligors, the
authorization of this Consent and Amendment and any other legal matters relating
to any Obligor or the transactions contemplated hereby.

 

(b)           Sale. The sale of the Subject Property shall have been consummated
on terms reasonably satisfactory to Agent and the net proceeds thereof shall
have been received substantially simultaneously with the closing of such sale.

 

(c)           Fees and Expenses. All fees and expenses of counsel to Agent
estimated to date shall have been paid in full (without prejudice to final
settling of accounts for such fees and expenses).

 

Section 5.           REPRESENTATIONS AND WARRANTIES.

 

(a)         In order to induce Agent and the Lenders to enter into this Consent
and Amendment, each Borrower represents and warrants to Agent and the Lenders as
follows:

 

(i)       The representations and warranties made by such Borrower in Section 9
of the Loan Agreement are true and correct on and as of the date hereof, except
to the extent that such representations and warranties expressly relate to an
earlier date in which case such representations and warranties are true and
correct on and as of such earlier date.

 

(ii)       No Default or Event of Default has occurred and is continuing or will
exist after giving effect to this Consent and Amendment.

 

 

 

 

(b)       In order to induce Agent and the Lenders to enter into this Consent
and Amendment, each Borrower and each Guarantor represents and warrants to Agent
and the Lenders that (i) this Consent and Amendment has been duly authorized,
executed and delivered by it and constitutes its legal, valid and binding
obligation and (ii) the execution, delivery and performance by each Borrower and
each Guarantor of this Consent and Amendment (w) do not require any consent or
approval of, registration or filing with, or any other action by, any
Governmental Authority or third party, except for (A) such as have been obtained
or made and are in full force and effect or (B) the failure of which to obtain
would not reasonably be expected to result in a Material Adverse Effect, (x) do
not and will not violate any Applicable Law or the Organic Documents of such
Borrower or such Guarantor, except to the extent that such violation would not
reasonably be expected to result in a Material Adverse Effect, (y) do not and
will not violate or result in a default under any indenture or any other
agreement, instrument or other evidence of Material Indebtedness, except to the
extent that such default would not reasonably be expected to result in a
Material Adverse Effect, and (z) do not and will not result in the creation or
imposition of any Lien on any asset of any Obligor, except Liens created under
the Loan Documents.

 

Section 6.           MISCELLANEOUS.

 

(a)       Ratification and Confirmation of Loan Documents. Each Borrower and
each Guarantor hereby consents, acknowledges and agrees to the amendment set
forth herein and hereby confirms and ratifies in all respects the Loan Documents
to which such Person is a party (including without limitation, with respect to
each Guarantor, the continuation of its payment and performance obligations
under the guaranties set forth in Section 15 of the Loan Agreement upon and
after the effectiveness of the amendment contemplated hereby and, with respect
to each Borrower and each Guarantor, the continuation and extension of the liens
granted under the Loan Agreement and Security Documents to secure the
Obligations). Except as expressly set forth herein, this Consent and Amendment
(i) shall not by implication or otherwise limit, impair, constitute a waiver of,
or otherwise affect the rights and remedies of the Lenders, or Agent under the
Loan Agreement or any other Loan Document, and (ii) shall not alter, modify,
amend or in any way affect any of the terms, conditions, obligations, covenants
or agreements contained in the Loan Agreement or any other Loan Document, all of
which are ratified and affirmed in all respects and shall continue in full force
and effect. Without limiting the generality of the foregoing, the Security
Documents and all of the Collateral described therein do and shall continue to
secure the payment of all Obligations of the Obligors under the Loan Documents,
in each case, as amended by this Consent and Amendment. This Consent and
Amendment shall for all purposes constitute a Loan Document.

 

(b)       Fees and Expenses. Borrowers shall pay on demand all reasonable costs
and expenses of Agent in connection with the preparation, reproduction,
execution, and delivery of this Consent and Amendment and any other documents
prepared in connection herewith, including, without limitation, the reasonable
fees and out-of-pocket expenses of counsel for Agent.

 

(c)       Headings. Section and subsection headings in this Consent and
Amendment are included herein for convenience of reference only and shall not
constitute a part of this Consent and Amendment for any other purpose or be
given any substantive effect.

 

(d)       Governing Law; Waiver of Jury Trial. This Consent and Amendment shall
be governed by and construed in accordance with the laws of the State of New
York, and shall be further subject to the provisions of Sections 14.13, 14.14
and 14.15 of the Loan Agreement.

 

 

 

 

(e)       Counterparts. This Consent and Amendment may be executed in any number
of counterparts, each of which when executed and delivered shall be deemed to be
an original, and all of which when taken together shall constitute one and the
same agreement. Delivery of an executed counterpart of a signature page of this
Consent and Amendment by facsimile or electronic transmission (including .pdf
file) shall be effective as delivery of a manually executed counterpart hereof.

 

(f)       Notices. All communications and notices hereunder shall be given as
provided in the Loan Agreement as amended hereby.

 

(g)       Entire Agreement. This Consent and Amendment, together with all the
Loan Documents (collectively, the “Relevant Documents”), sets forth the entire
understanding and agreement of the parties hereto in relation to the subject
matter hereof and supersedes any prior negotiations and agreements among the
parties relating to such subject matter. No promise, condition, representation
or warranty, express or implied, not set forth in the Relevant Documents shall
bind any party hereto, and no such party has relied on any such promise,
condition, representation or warranty. Each of the parties hereto acknowledges
that, except as otherwise expressly stated in the Relevant Documents, no
representations, warranties or commitments, express or implied, have been made
by any party to the other. None of the terms or conditions of this Consent and
Amendment may be changed, modified, waived or cancelled orally or otherwise
except in a writing signed by Agent for such purpose.

 

(h)       Enforceability; Severability. Should any one or more of the provisions
of this Consent and Amendment be determined to be illegal or unenforceable as to
one or more of the parties hereto, all other provisions nevertheless shall
remain effective and binding on the parties hereto. Any provision of this
Consent and Amendment held to be invalid, illegal or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity, illegality or unenforceability without affecting the validity,
legality and enforceability of the remaining provisions hereof; and the
invalidity of a particular provision in a particular jurisdiction shall not
invalidate such provision in any other jurisdiction

 

(i)       Successors and Assigns. This Consent and Amendment shall be binding
upon and inure to the benefit of each Borrower, each Guarantor, Agent, each
Lender and their respective successors and assigns (subject to Section 13 of the
Loan Agreement).

 

(j)       Guarantor Acknowledgement. Each Guarantor hereby: (i) consents to this
Consent and Amendment and to the changes to the Loan Agreement to be effected by
this Consent and Amendment; (ii) acknowledges that this Consent and Amendment
does not in any way modify, limit, or release any of its obligations under the
Loan Agreement; and (iii)  acknowledges that its consent to any other
modification to any Loan Document will not be required as a result of the
consent set forth in this Section 6 having been obtained, except to the extent,
if any, required by the specific terms of that Loan Document.

 

 

[Remainder of Page Intentionally Left Blank; Signature Pages Follow]

 

 

 

 

The following parties have caused this Consent and Amendment No. 7 to Second
Amended and Restated Loan and Security Agreement to be executed as of the date
first written above.

 

 

 

BORROWERS:

 

P&F INDUSTRIES, INC.

FLORIDA PNEUMATIC MANUFACTURING

CORPORATION

HY-TECH MACHINE, INC.

 

 

By:      /s/ Joseph A. Molino, Jr.                      

Name: Joseph A. Molino, Jr.

Title: Vice President

 

 

 

GUARANTORS:

 

ATSCO HOLDINGS CORP.

JIFFY AIR TOOL, INC.,

BONANZA PROPERTIES CORP.,

CONTINENTAL TOOL GROUP, INC.

COUNTRYWIDE HARDWARE, INC.

EMBASSY INDUSTRIES, INC.

EXHAUST TECHNOLOGIES, INC.

 

 

By:        /s/ Joseph A. Molino, Jr.                 

Name: Joseph A. Molino, Jr.

Title: Vice President

 

 

 

 

CONSENT AND AMENDMENT NO. 7 TO SECOND AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT

Signature Page

 

 

 

 

AGENT AND LENDERS:

 

CAPITAL ONE, NATIONAL ASSOCIATION, as

Agent and Lender

 

By:     /s/ Juliane Low                              

Name: Julianne Low

Title:   Senior Director

 

 

 

 

 

 

 

 

 

 

 

 

 

CONSENT AND AMENDMENT NO. 7 TO SECOND AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT

Signature Page