Exhibit 10.1

SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”), dated as of
May 30, 2001, among P&F INDUSTRIES, INC., a Delaware corporation (the
“Company”), having its principal place of business at 300 Smith Street,
Farmingdale, New York 11735, and RICHARD A. HOROWITZ, residing at 5 Fir Drive,
Kings Point, New York 11024 (the “Executive”).

W I T N E S S E T H:

WHEREAS, the Company and the Executive wish to amend and restate the Employment
Agreement between the parties, dated as of May 28, 1997 (the “Prior Agreement”),
as set forth in this Agreement;

NOW, THEREFORE, it is hereby agreed by and between the parties as follows:

1.             EMPLOYMENT, DUTIES AND ACCEPTANCE

Subject to the provisions of Article 4, the Executive hereby agrees to continue
his employment with the Company, and the Company hereby agrees to continue its
employment of the Executive, for the term of this Agreement, as defined in
Article 2 hereof. The Executive shall render services as Chairman, President and
Chief Executive Officer of the Company and shall perform such executive duties
which are consistent with his position as he may be reasonably directed to
perform by the Board of Directors of the Company.

2.             TERM OF EMPLOYMENT

The term of the Executive’s employment pursuant to this Agreement (the “Term”)
will commence on the date hereof (the “Effective Date”) and will continue until
the seventh anniversary of the Effective Date, unless sooner terminated pursuant
to the provisions of Article 4. Such employment will, unless sooner terminated
pursuant to the provisions of Article 4, continue from year to year thereafter
(each such year, an “Additional Term”) until one party gives the other notice of
its intention to terminate the Executive’s employment at the end of the Term or
an Additional Term, as the case may be, which notice may not be given more than
ninety or less than thirty days prior to the last day of such Additional Term.

3.             COMPENSATION

                3.1. The minimum base compensation of the Executive will be
$675,000 per annum. All compensation will be paid in installments as determined
by the Company, but not less frequently than monthly.

                3.2. The Company will pay or reimburse the Executive for all 
reasonable expenses actually incurred or paid by him during the Term and each
Additional Term in connection with the performance of his services under this
Agreement, upon presentation of expense statements or vouchers or such other
supporting information as it may reasonably require, it being understood that
the character of and amount available for such expenses will be in accordance
with applicable policies of the Company and may be fixed in advance by the Board
of Directors of the Company. In addition, the Company shall provide the
Executive, at the Company’s expense, with a current model automobile similar to
the automobile

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furnished to the Executive at the date hereof.

                3.3. The Executive will also be eligible to receive such 
increases in base compensation as the Board of Directors of the Company may from
time to time grant to him (which shall not thereafter be reduced) and to receive
such bonuses as the Board of Directors of the Company, in its discretion, may
allocate to him. In addition, so long as the Company continues to provide
pension, group insurance, medical insurance and vacation benefits for its senior
management generally, the Executive will be entitled to participate therein as
well as in any other employee benefit plan hereafter established for senior
management.

                3.4. Throughout the Term, the Company shall maintain in effect
at current levels the split-dollar life insurance policy currently maintained
for the Executive, and shall continue to pay premiums on the supplemental
disability insurance policies currently maintained by the Executive (or
reimburse the Executive for premiums paid by him).

4.             EVENTS OF TERMINATION

                4.1. In the event of the Executive’s death, this Agreement will
terminate. In that event, the Executive’s estate will be entitled to his (i)
full salary through the date of death together with any bonus under the then
current executive bonus plan accrued through the date of death; and (ii) an
additional payment equal to his then current salary for an additional twelve
months.

                4.2. If during the Term or an Additional Term, the Executive
becomes physically or mentally disabled, whether totally or partially, so that
he is prevented from performing his usual duties for a period of 270 consecutive
business days or for 360 business days during any period of 450 business days,
the Company may terminate his employment under this Agreement by 60 days’
advance written notice to the Executive. In that event, the Executive will be
entitled to (i) his full salary through the date of termination, less any amount
received by the Executive under any group policy of disability insurance carried
by the Company in which Executive participates; (ii) an additional payment equal
to his then current salary for an additional twelve months, without regard to
any amount received by the Executive under any policy of disability insurance;
and (iii) during such additional twelve month period, continued use of his
Company car and other perquisites being provided to the Executive prior to such
termination, including continuation of the split-dollar life insurance policy
referenced in Section 3.4 hereof. In addition, during the period of disability
and until (x) the death of the Executive or (y) the re-employment of the
Executive, the Company shall provide the Executive with medical benefits similar
to those provided for other executive officers of the Company, taking into
account medical benefits provided to the Executive by other sources.

5.             PROTECTION OF INFORMATION: NONCOMPETITION

                5.1. In view of the fact that the Executive’s work with the
Company will bring him into close contact with many confidential affairs of the
Company, including matters of a business nature such as information about costs,
profits, markets, sales, plans for future development and other information not
readily available to the public, the Executive will:

                                5.1.1. keep secret all confidential information
relating to the Company and not disclose the same to anyone outside of the
Company either during or after his employment with the Company, except with the
Company’s written consent;

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                                5.1.2. deliver promptly to the Company on 
termination of his services hereunder, or at any time the Company may so
request, all memoranda, notes, records, lists, reports and other documents (and
all copies thereof) relating to the business of the Company which he may then
possess or have under his control; and

                                5.1.3. during his employment and, provided that
a “change in control” (as hereinafter defined) has not occurred, for a period of
three years following the termination of his employment, not, directly or
indirectly, (i) enter the employ of, or render any services to, any person, firm
or corporation engaged in any business competitive with the business of the
Company, (ii) engage in such a business for his own account, or (iii) become
interested in such a business as an individual, partner, shareholder, director,
officer, principal, agent, employee, trustee, consultant or in any other
relationship or capacity. The provisions of this Section 5.1.3 shall not apply
to the Executive following any termination of employment which occurs in
connection with or following a “change in control” (as hereinafter defined).

                5.2. “Business competitive with the business of the Company”
means, as of any date, any business then being conducted by the Company in which
Executive has been actively engaged.

6.             CHANGE IN CONTROL

                6.1.     The term “change in control” of the Company shall mean:

                                6.1.1. an occurrence of a nature that would be
required to be reported in response to (i) Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934 (the
“Exchange Act”) as in effect on the date of this Agreement, or (ii) Item I(a) of
Form 8-K under the Exchange Act, or (iii) if Item 6(e) of Schedule 14A or Item
I(a) of form 8-K is not longer in effect, any regulations issued by the
Securities and Exchange Commission pursuant to the Exchange Act which serve
similar purposes; or

                                6.1.2. an event in which (i) any “person,” as
such  term is used in Sections 13(d) and 14(d)(2) of the Exchange Act (a
“Person”), other than the Executive, is or becomes a beneficial owner, directly
or indirectly, of securities of the Company representing 20% or more of the
combined voting power of the Company’s then outstanding securities then entitled
to vote for the election of directors or (ii) individuals who, as of the date
hereof, constitute the Board of Directors of the Company (the “Incumbent Board”)
cease for any reason to constitute at least a majority of the Board of
Directors; provided, however, that any individual becoming a director subsequent
to the date hereof whose election, or nomination for election by the Company’s
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board of Directors; or

                                6.1.3. an event in which there shall be
consummated (i) any consolidation, merger or recapitalization of the Company or
any similar transaction involving the Company, whether or not the Company is the
continuing or surviving corporation, pursuant to which shares of the Company’s
common stock, par value $1.00 per share (“Common Stock”), would be converted
into cash, securities or other property, other than a merger of the Company in
which the holders of Common Stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation immediately
after the merger, (ii) any sale, lease, exchange or other transfer (in one
transaction or a

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series of related transactions) of all, or substantially all, of the assets of
the Company or (iii) the adoption of a plan of complete liquidation of the
Company (whether or not in connection with the sale of all or substantially all
of the Company’s assets) or a series of partial liquidations of the Company that
is dejure or defacto part of a plan of complete liquidation of the Company;
provided, that the divestiture of less than substantially all of the assets of
the Company in one transaction or a series of related transactions, whether
effected by sale, lease, exchange, spin-off, sale of the stock or merger of a
subsidiary or otherwise, or a transaction solely for the purpose of
reincorporating the Company in another jurisdiction, shall not constitute a
change in control.

                6.2. The “change date” shall be the date on which a change in
control of the Company (as described in paragraph 6.1) occurs.

                6.3. The term “discharge” shall mean (i) any termination by the
Company of the employment of the Executive which occurs in connection with or
following a change in control of the Company, or (ii) resignation by the
Executive which occurs in connection with or following a change in control,
which is based on a determination by the Executive that, (A) as a result of a
change in circumstances affecting his position, he is unable to exercise the
authorities, powers, functions or duties attached to his position as
contemplated by Article 1 of this Agreement, (B) the compensation, benefits or
perquisites being provided to the Executive have been reduced or adversely
affected, or (C) the Company (or its successor) has breached this Agreement in
any material respect.

                6.4. In the event of a discharge, the Company shall pay to the
Executive and provide him with the following:

                                6.4.1. during the remainder of the Term, the
Company shall continue to pay the Executive his salary as frequently as the
Company then pays other executives and at the same rate as payable immediately
prior to the date of discharge plus the estimated amount of any bonuses to which
he would have been entitled had he remained in the employ of the Company;

                                6.4.2. during the remainder of the Term, the 
Executive shall continue to be entitled to all benefits and service credit for
benefits under medical, insurance, life insurance and other employee benefit
plans, programs and arrangements of the Company as if he were still employed
during such period under this Agreement;

                                6.4.3. if, despite the provisions of paragraph
6.4.2 above, benefits or service credits under any employee benefit plan shall
not be payable or provided under any such plan to the Executive, or his
dependents, beneficiaries or the Company, the Company itself shall, to the
extent necessary, pay or provide for payment of such benefits and service credit
so as to place the Executive, his dependents, beneficiaries and estate in such
financial position as if the Executive were employed by the Company during the
Term; and

                                6.4.4. any outstanding Incentive Stock Options
held by the Executive shall be converted to nonqualified stock options on the
day after the last day of the three month period following the date of
discharge.

                6.5. Severance Allowance. In the event of discharge of the
Executive during the Term, the Executive may elect, within 60 days after such
discharge, to be paid a lump sum severance allowance, in lieu of payments to be
made pursuant to 6.4.1 hereof, in an amount equal to 2.99 times the Executive’s
“annualized includable compensation for the base period,” as those terms are
defined in section 280G of

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the Internal Revenue Code of 1986, as amended (the “Code”). Any payment due
hereunder will be made within five days after the election by the Executive to
receive the lump sum payment.

                In the event of discharge by reason of an event described in
paragraph 6.3, if the Executive makes an election pursuant to the first sentence
of this paragraph 6.5 to receive a lump sum severance allowance, then, in
addition to such amount, he shall receive (i) in addition to the benefits
provided under any pension plan maintained by the Company, the pension benefits
he would have accrued under such pension plan if he had remained in the employ
of the Company for 36 calendar months after his discharge, which benefits will
be paid concurrently with, and in addition to, the benefits provided under such
pension plan, (ii) incentive compensation (including, but not limited to, the
right to receive and exercise stock options and stock appreciation rights and to
receive restricted stock and grants thereof and similar incentive compensation
benefits) to which he would have been entitled under all incentive compensation
plans maintained by the Company if he had remained in the employ of the Company
for 36 calendar months after his discharge, and (iii) the employee benefits
(including, but not limited to, coverage under any medical, disability and life
insurance arrangements or programs) to which he would have been entitled under
all employee benefit plans, programs or arrangements maintained by the Company
if he had remained in the employ of the Company for 36 calendar months after his
discharge, or the value of the amounts described in clauses (i), (ii) and (iii)
of this sentence. The amount of payments described in the preceding sentence
shall be determined and such payments shall be distributed as soon as it is
reasonably possible.

                6.6. Parachute Payment. If any payment to be made by the Company
to the Executive pursuant to Article 6 of this Agreement, after taking into
account any other payments to be made by the Company to the Executive, is not
deductible by the Company pursuant to section 280G(a) of the Code, then any
payment to be made pursuant to Article 6 of this agreement shall be reduced by
the smallest amount necessary so that no such payment shall fail to be
deductible pursuant to section 280G(a) of the Code. If the Company determines
that any payment to the Executive is subject to limitation pursuant to this
paragraph 6.6, it shall provide the Executive with a written determination
within 30 days of the Executive’s discharge during the terms of this Agreement.
If the Executive disagrees with the Company’s determination, he shall provide
the Company with written notice of his objection within 15 days of receipt of
the Company’s determination. The matter shall then be promptly submitted by
either the Executive or the Company to a “Big 6” accounting firm, not otherwise
associated with the Company or the Executive, for a determination within 30 days
after the date of such submission. The determination of such accounting firm
shall be binding on both the Executive and the Company. The expenses incurred in
connection with any determination will be shared equally by the parties. Any
payment due hereunder shall be paid within five days of the determination by the
Company or the “Big 6” accounting firm, as the case may be.

7.             MISCELLANEOUS.

                7.1. If any of the provisions contained in this Agreement is
hereafter construed to be invalid or unenforceable, such event will not affect
the remainder of this Agreement, which will be given full effect, without regard
to the invalid portions.

                7.2. If any of the covenants contained in Article 5, or any part
thereof, is held to be unenforceable because of the duration or scope of such
provision or the area covered thereby, the parties agree that the court making
such determination will have the power to reduce the duration, scope and/or area
of such provision and in its reduced form, such provision will then be
enforceable.

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                7.3. This Agreement has been negotiated and executed in the
State of New York, and will be construed and enforced in accordance with the
laws of the State of New York applicable to agreements made and to be performed
entirely in New York.

                7.4. All notices, requests, consents and other communications,
required or permitted to be given hereunder, shall be in writing and shall be
deemed to have been duly given if delivered personally or sent by prepaid
telegram, or mailed first class, postage prepaid, by registered or certified
mail (if possible), addressed to either party at the address set forth in the
preamble to this Agreement (or to such other address as either party shall
designate by notice in writing to the other in accordance herewith).

                7.5. The article headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.

                7.6. This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter hereof, and
supersedes and will supersede all prior agreements, arrangements and
understandings, written or oral, relating to the subject matter including,
without limitation, the Prior Agreement.

                7.7. This Agreement may be amended, modified, superseded,
canceled, renewed or extended and the terms or covenants hereof may be waived,
only by a written instrument executed by each of the parties hereto, or in the
case of a waiver, by the party waiving compliance. The failure of either party
at any time or times to require performance of any provision hereof will in no
manner affect the right at a later time to enforce the same. No waiver by either
party of the breach of any term or covenant contained in this Agreement, whether
by conduct or otherwise, in any one or more instances, will be deemed to be, or
construed as a further or continuing waiver of, any such breach, or a waiver of
the breach of any other term or covenant contained in this Agreement.

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
first above written.

 

P & F INDUSTRIES, INC.

 

 

 

 

 

 

 

By:

/s/ Richard Horowitz

 

 

Richard Horowitz

 

 

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