Item 2.01. Completion of Acquisition or Disposition of Assets.
On July 1, 2014, Florida Pneumatic Manufacturing Corporation, a Florida
corporation ("Purchaser"), an indirect wholly owned subsidiary of P&F
Industries, Inc. (the "Company"), Flying Tiger Acquisition Corp, a Washington
corporation, a direct wholly-owned subsidiary of Purchaser ("Merger Sub"),
Exhaust Technologies, Inc., a Washington corporation (the "Exhaust"), and Robert
E. Sterling and Mary Louise Sterling, being all of the Shareholders of Exhaust
(collectively, the "Shareholders"), and Robert E. Sterling in his capacity as
representative of the Shareholders (the "Shareholders' Representative"), entered
into an Agreement and Plan of Merger (the "Merger Agreement"), pursuant to
which, among other things, Purchaser acquired all of the outstanding equity
interests of Exhaust, more particularly described below and in the Merger
Agreement. A copy of the Merger Agreement is filed as Exhibit 2.1 hereto and
incorporated herein by reference. Contemporaneously, the parties both executed
the Merger Agreement and consummated the transactions contemplated by the Merger
Agreement, including, but not limited to, the closing of the Merger (defined
The Merger.The Merger Agreement provides for the merger of Merger Sub with, and
into Exhaust, on the terms and subject to the conditions set forth in the Merger
Agreement (the "Merger"), with Exhaust continuing as the surviving corporation
in the Merger. As a result of the Merger, Exhaust became a wholly owned
subsidiary of Purchaser (the "Surviving Corporation"). Contemporaneously with
the closing, the Surviving Corporation re-domiciled as a Delaware corporation.
The Merger Consideration.The Merger became effective upon the filing of the
Articles of Merger with the State of Washington on July 1, 2014 (the "Effective
Time"). Pursuant to the Merger Agreement, at the Effective Time, each share of
Company Common Stock (as defined in the Merger Agreement) issued and outstanding
immediately prior to the Effective Time, was converted into and became a right
to receive cash, without interest, in an amount equal to a pro rata share of the
Merger Consideration (defined below). The base purchase price for the Shares
acquired in the Merger equaled $9,850,000 (the "Merger Consideration"). At the
closing of the Merger, and pursuant to the Merger Agreement, the Merger
Consideration was increased by $527,215.16, adjusted for increases in Working
Capital (the "Total Merger Consideration"), and the Total Merger Consideration
was paid by Purchaser, from availability under revolver loans pursuant to the
Loan Agreement (defined below), to the Shareholders, less certain amounts
escrowed pursuant to, among others, the terms of the Merger Agreement. All
outstanding indebtedness of Exhaust was extinguished at the closing of the
Merger utilizing a portion of the Merger Consideration.
The Representations, Warranties and Covenants. The Merger Agreement contains
customary representations, warranties and covenants made by the Shareholders to
Purchaser, on the one hand, and by Purchaser and Merger Sub to the Shareholders
and Exhaust, on the other hand.
The foregoing descriptions of the Merger and the Merger Agreement do not purport
to be complete, and are qualified in their entirety by reference to the full
text of the Merger Agreement attached as an Exhibit hereto.
The Merger Agreement and the above description of such agreement, have been
included to provide investors and security holders with information regarding
the terms of the Merger Agreement, and are not intended to provide any other
factual information about Exhaust, the Company, their respective subsidiaries or
affiliates, the Shareholders or their respective affiliates, or the
Shareholders' Representative or any of his affiliates. The representations and
warranties contained in the Merger Agreement, were made only for purposes of
those agreements, and as of specific dates, were solely for the benefit of the
parties to those agreements, may be subject to a contractual standard of
materiality different from what might be viewed as material to shareholders, and
may be subject to limitations agreed upon by the parties, including being
qualified by confidential disclosures made by the parties to each other.
Investors should not rely on the representations and warranties contained in the
Merger Agreement as characterizations of the actual state of facts or condition
of Exhaust, the Company or any of their respective subsidiaries, affiliates or
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant
Contemporaneously with the Merger referred to and described in Item 2.01, above,
the Company, its subsidiaries Florida Pneumatic Manufacturing Corporation
(defined above as "Purchaser"), Hy-Tech Machine, Inc. ("Hy-Tech") and Nationwide
Industries, Inc. ("Nationwide", and together with the Company, Purchaser and
Hy-Tech, collectively, "Borrowers") and the Company's subsidiaries Continental
Tool Group, Inc. ("Continental Tool"), Countrywide Hardware, Inc.
("Countrywide"), Embassy Industries, Inc. ("Embassy"), Green Manufacturing, Inc.
("Green"), Pacific Stair Products, Inc. ("Pacific Stair"), WILP Holdings, Inc.
("WILP") and Woodmark International, L.P. ("Woodmark", and together with
Continental Tool, Countrywide, Embassy, Green, Pacific Stair and WILP,
collectively, "Guarantors") entered into the Fifth Amendment to Loan and
Security Agreement, effective as of July 1, 2014 (the "Amendment"), with Capital
One Business Credit Corp. (f/k/a Capital One Leverage Finance Corporation) (the
"Agent"), as agent for Lenders (the "Lenders") from time to time party to the
Loan Agreement (as defined below). The Amendment amended the Loan and Security
Agreement, dated as of October 25, 2010, as previously amended (the "Loan
Agreement"), among the Borrowers, the Guarantors, the Agent and the Lenders. A
copy of the Amendment is attached as Exhibit 10.1 hereto and incorporated herein
The Amendment, among other things, amended the Loan Agreement by providing the
Lender's consent to, among other things, the Merger, and adding and modifying
certain definitions in connection with the Merger and the transactions
The foregoing description of the Amendment is qualified its entirety by
reference to the full text of the Amendment attached as an Exhibit 10.1 hereto.
Item 8.01. Other Items
On July 2, 2014
, the Company issued a press release (the "Press Release")
announcing the entering into of the Merger Agreement described herein. A copy of
the Press Release is furnished as Exhibit 99.1 hereto.
Item 9.01. Financial Statements and Exhibits.
2.1 Agreement and Plan of Merger, dated as of July 1, 2014, by and among
Purchaser, Merger Sub, Exhaust, the Shareholders, and the
10.1 Fifth Amendment to the Loan Agreement, dated as of July 1, 2014, by
and among the Borrowers, Guarantors, and Lenders.
99.1 Press Release, dated July 2, 2014, issued by the Company.