SEVERANCE AGREEMENT (this “Agreement”), dated as of June 22, 2012 (the
“Effective Date”), between P&F INDUSTRIES, INC., a Delaware corporation (the
“Company”), and JOSEPH A. MOLINO, JR. (the “Executive”).

 

W I T N E S S E T H

 

WHEREAS, the Company believes that the establishment and maintenance of a sound
and vital management of the Company is essential to the protection and
enhancement of the interests of the Company and its stockholders; and

 

WHEREAS, the Company has determined that the Executive is a key employee of the
Company and that it is appropriate to take steps to induce the Executive to
remain with the Company by offering the Executive protection for a possible loss
of income upon a loss of employment under the terms and conditions set forth in
this Agreement, including enhanced protection if the Executive suffers a loss of
employment under the terms and conditions set forth in this Agreement within two
years following a Change in Control (as defined below).

 

NOW THEREFORE, in consideration of the foregoing, the mutual promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1.             TERM. The term of this Agreement (the “Term”) shall commence on
the Effective Date and, unless terminated earlier as provided in Section 2,
shall expire on December 31, 2014 (the “Expiration Date”); provided that, if a
Change in Control takes place prior to the Expiration Date, the Term shall be a
period of two years after the date of the consummation of the Change in Control.
Notwithstanding anything in this Agreement to the contrary, if the Company
becomes obligated to make any payment to the Executive pursuant to the terms
hereof at or prior to the expiration of this Agreement, then this Agreement
shall remain in effect for such and related purposes (including but not limited
to under Section 4(c)) until all of the Company’s obligations hereunder are
fulfilled.

 

2.             TERMINATION. The Executive’s employment with the Company and the
Term shall terminate prior to the Expiration Date on the first of the following
to occur prior to the Expiration Date:

 

(a)        Disability. Upon 30 days’ prior written notice by the Company to the
Executive of termination due to Disability if the Executive does not return to
full-time continuous employment with the Company within such 30 days. For
purposes of this Agreement, “Disability” shall be defined as the Executive’s
becoming physically or mentally disabled, whether totally or partially, so that
he has been unable to perform his material duties hereunder for a period of 180
days (including weekends and holidays) during any 365-day period.

 

(b)        Death. Automatically on the date of death of the Executive.

 

 

 

 

(c)        Cause. Upon the Company’s termination of the Executive’s employment
hereunder for Cause which shall be effective immediately upon written notice by
the Company to the Executive of a termination for Cause. “Cause” shall mean the
Executive’s:

 

(i) refusal or willful failure to attempt in good faith to perform his duties
for the Company (other than as a result of physical of mental incapacity);

 

(ii) gross negligence or willful misconduct with regard to the Company, its
assets or employees of a material nature or any fraud, theft or material
dishonesty with regard to the Company or in the performance of his duties for
the Company;

 

(iii) willful misconduct which in the good faith judgment of the Chief Executive
Officer of the Company (the “CEO”) or the Board of Directors of the Company (the
“Board”) has or may materially damage the Company economically or reputation
wise;

 

(iv) commission of any felony or any other crime involving fraud, dishonesty,
securities law violations or moral turpitude, provided that any conviction for,
or pleading guilty or nolo contendere to, any such felony or other crime shall
conclusively be deemed acknowledgement by the Executive of commission thereof;

 

(v) failure to attempt in good faith to follow the written direction of the CEO
or the Board; or

 

(vi) material breach of a material term of this Agreement or any other material
agreement with the Company that is not cured within 15 days of the giving of
written notice thereof.

 

(d)         Without Cause. Upon written notice by the Company to the Executive
of an involuntary termination without Cause, other than for death or Disability.

 

(e)         Good Reason. Upon written notice by the Executive to the Company of
a termination for Good Reason upon or within two years following a Change in
Control, provided that such notice is given within 60 days of the Good Reason
event. “Good Reason” shall mean the occurrence of any of the following events,
without the express written consent of the Executive, unless such events are
cured by the Company within 30 days following written notification by the
Executive to the Company that he intends to terminate his employment hereunder
for one of the reasons set forth below:

 

(i) any reduction or diminution in the Executive’s title immediately prior to
the Change in Control;

 

(ii) any material reduction or diminution in the Executive’s then authorities,
duties, or responsibilities with the Company;

 

(iii) a material reduction in the Executive’s base salary or benefits, in either
case as in effect immediately prior to the Change in Control (but not including
any reduction related to a broader compensation reduction by the Company that is
not limited to any particular employee or executive);

 

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(iv) a relocation of the Executive’s principal business location to an area
outside of a 35 mile radius of both the Executive’s principal business location
and the Executive’s principal residence at the time of such relocation; or

 

(v) a material breach of this Agreement by the Company.

 

Notwithstanding the foregoing, the Executive agrees that, during any period of
incapacity, the Company may appoint or temporarily assign his duties to another
or others without such action resulting in Good Reason.

 

(f)          Without Good Reason. Upon 60 days’ prior written notice by the
Executive to the Company of the Executive’s voluntary termination of employment
without Good Reason (which the Company may, in its sole discretion, make
effective earlier than any notice date).

 

3.            CONSEQUENCES OF TERMINATION.

 

(a)         Disability. In the event the Executive’s employment is terminated
due to Disability upon or prior to the Expiration Date, the Company shall pay or
provide the Executive (i) any unpaid base salary through the date of termination
paid in accordance with the Company’s normal payroll policies as if the
Executive were an employee, (ii) any annual bonus earned but unpaid with respect
to the fiscal year ending on or preceding the date of termination, paid when
such annual bonus would have ordinarily been paid in accordance with its terms,
(iii) reimbursement for any unreimbursed expenses through the date of
termination incurred and paid in accordance with the Company’s normal
reimbursement procedures, (iv) any other amounts and benefits the Executive is
entitled to receive under any employee benefit plan in accordance with the terms
of the applicable plan (collectively items (i) through (iv) shall be hereafter
referred to as the “Accrued Amounts”), (v) a pro-rata portion of the Executive’s
annual bonus for the fiscal year in which the Executive’s termination occurs
based on actual results for the fiscal year (determined by multiplying the
amount of such bonus which would be due for the full fiscal year by a fraction,
the numerator of which is the number of days during the fiscal year of
termination that the Executive is employed by the Company and the denominator of
which is 365), paid when such annual bonus would have ordinarily been paid in
accordance with its terms (the “Pro Rata Bonus”), and (vi) subject to Section
18(b) hereof and solely to the extent the Executive does not otherwise receive
such coverage under any other medical benefits available to the Executive as a
result of his Disability, if the Executive timely elects continuation coverage
(“COBRA Coverage”) under the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended (“COBRA”) for continuation of coverage under the Company’s
group health insurance plans in which the Executive participated immediately
prior to the date of termination (the “Health Plans”), the Company shall pay to
the Executive monthly an amount equal to the difference of the Executive’s
premium costs for such COBRA Coverage for the Executive and the Executive’s
dependents minus the active employee rate under the Health Plans (excluding, for
purposes of calculating cost, an employee’s ability to pay premiums with pre-tax
dollars) until the earliest of (x) one (1) year after the date of termination,
(y) the Executive’s ceasing to have a physical or mental disability that would
have prevented him from performing his material duties hereunder and (z) the
Executive and the Executive’s dependents otherwise ceasing to be eligible for
COBRA Coverage (the “Disability COBRA Payments”); provided, that unless subject
to further delay as set forth in Section 18(b), the first payment of the
Disability COBRA Payments will made on the sixtieth (60th) day after the date of
termination and will include payment of any amounts that would otherwise be due
prior thereto. Following a termination due to Disability all equity awards
granted to the Executive shall be governed in accordance with the terms of the
applicable grant agreements.

 

3

 

 

(b)         Death. In the event the Executive’s employment is terminated due to
the Executive’s death upon or prior to the Expiration Date, the Company shall
pay or provide to the Executive’s estate (i) the Accrued Amounts, (ii) the Pro
Rata Bonus and (iii) subject to the Executive’s dependents timely election of
COBRA Coverage under the Health Plans, the Company shall pay to the Executive’s
dependents monthly an amount equal to the difference of the premium costs for
such COBRA Coverage for the Executive’s dependents minus the active employee
rate under the Health Plans (excluding, for purposes of calculating cost, an
employee’s ability to pay premiums with pre-tax dollars) until the earlier of
(i) one (1) year after the date of the Executive’s death and (ii) the
Executive’s dependents ceasing to be eligible for COBRA Coverage. Following a
termination due to the Executive’s death all equity awards granted to the
Executive shall be governed in accordance with the terms of the applicable grant
agreements.

 

(c)         Termination For Cause Or Voluntary Termination. In the event the
Executive’s employment is terminated upon or prior to the Expiration Date (i) by
the Company for Cause, or (ii) subject to Section 4(a), by the Executive for any
reason, the Company shall pay or provide to the Executive the Accrued Amounts.
Following any such termination all equity awards granted to the Executive shall
be governed in accordance with the terms of the applicable grant agreements.

 

(d)         Termination Without Cause. In the event the Executive’s employment
is terminated by the Company other than for Cause upon or prior to the
Expiration Date, and Section 4(a) does not apply, the Company shall pay or
provide to the Executive (i) the Accrued Amounts; and (ii) subject to Sections 5
and 18(b), continued payments of base salary for 12 months following the date of
termination (the “Severance Payment”) paid in accordance with the Company’s
normal payroll policies as if the Executive were an employee (but off employee
payroll); provided, that unless subject to further delay as set forth in Section
18(b), the first payment of the Severance Payment will made on the sixtieth
(60th) day after the date of termination and will include payment of any amounts
that would otherwise be due prior thereto. Following any such termination all
equity awards granted to the Executive shall be governed in accordance with the
terms of the applicable grant agreements. Payments and benefits provided in this
Section 3(d) shall be in lieu of any termination or severance payments or
benefits for which the Executive may be eligible under any of the plans,
policies or programs of the Company.

 

4.             CHANGE IN CONTROL.

 

(a)           Notwithstanding anything herein to the contrary, subject to
Section 4(c), in the event a Change in Control occurs prior to the Expiration
Date and the Executive’s employment is terminated by the Company without Cause
or the Executive resigns for Good Reason within two years following such Change
in Control, and in lieu of the amounts and benefits under Section 3(d) in the
event of a termination by the Company without Cause, the Company shall pay or
provide to the Executive (i) the Accrued Amounts; and (ii) subject to Sections 5
and 18(b):

 

4

 

 

(A) payment in an amount equal to 12 months Base Salary, such payment to be made
as follows: (x) if the Change in Control is not as a result of an event that
constitutes a “change in control event” (a “409A Change in Control”) within the
meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the
“Code”), and the regulations and guidance promulgated thereunder (collectively
“Code Section 409A”), then such payment shall be paid to the Executive in equal
installments for 12 months following the date of termination in accordance with
the Company’s normal payroll policies as if the Executive were an employee (but
off employee payroll); provided, that unless subject to further delay as set
forth in Section 18(b), the first payment of such payment will made on the
sixtieth (60th) day after the date of termination and will include payment of
any amounts that would otherwise be due prior thereto, and (y) if the Change in
Control does result from an event that constitutes a 409A Change in Control,
then the full amount of such payment shall be paid to the Executive in a lump
sum on the 60th day after the date of termination;

 

(B) a lump sum amount equal to the Executive’s target annual bonus for the
fiscal year in which the Executive’s termination occurs, such payment to be made
as follows: (x) if the Change in Control is not a 409A Change in Control, then
such payment shall be paid to the Executive on the later of the date such annual
bonus would have ordinarily been paid in accordance with its terms and the
sixtieth (60th) day after the date of termination, and (y) if the Change in
Control does result from an event that constitutes a 409A Change in Control,
then on the 60th day after the date of termination;

 

(C) if the Executive timely elects COBRA Coverage for continuation of coverage
under the Health Plans, the Company shall pay to the Executive monthly an amount
equal to the difference of the Executive’s premium costs for such COBRA Coverage
for the Executive and the Executive’s dependents minus the active employee rate
under the Health Plans (excluding, for purposes of calculating cost, an
employee’s ability to pay premiums with pre-tax dollars) until the earliest of
(I) 12 months from the date of termination, (II) the Executive becoming eligible
for medical benefits from a subsequent employer, or (III) the Executive and the
Executive’s dependents otherwise ceasing to be eligible for COBRA Coverage (the
“COBRA Payments”); provided, that unless subject to further delay as set forth
in Section 18(b), the first payment of the COBRA Payments will made on the
sixtieth (60th) day after the date of termination and will include payment of
any amounts that would otherwise be due prior thereto.

 

Following any such termination all equity awards granted to the Executive shall
be governed in accordance with the terms of the applicable grant agreements.

 

(b)           For purposes of this Agreement, “Change in Control” will mean the
occurrence of one of the following events:

 

5

 

 

(i) any “person” (as such term is defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) and as used in Sections
13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes, after the Effective
Date, a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 50% or more of
the combined voting power of the Company’s then outstanding securities eligible
to vote for the election of the Board (the “Company Voting Securities”);
provided, however, that an event described in this subsection (i) shall not be
deemed to be a Change in Control if any of following becomes such a beneficial
owner:

 

(A) the Company or any majority-owned subsidiary (provided, that this exclusion
applies solely to the ownership levels of the Company or the majority-owned
subsidiary),

 

(B) any tax-qualified, broad-based employee benefit plan sponsored or maintained
by the Company or any majority-owned subsidiary,

 

(C) any underwriter temporarily holding securities pursuant to an offering of
such securities, or

 

(D) any person pursuant to a Non-Qualifying Transaction (as defined below);

 

(ii) individuals who, on the Effective Date, constitute the Board (the
“Incumbent Directors”) cease for any reason to constitute at least a majority of
the Board, provided that any person becoming a director subsequent to the
Effective Date whose election or nomination for election was approved by a vote
of at least two-thirds of the Incumbent Directors then on the Board (either by a
specific vote or by approval of the proxy statement of the Company in which such
person is named as a nominee for director, without objection to such nomination)
shall be an Incumbent Director.

 

(iii) the consummation of a merger, consolidation, statutory share exchange or
similar form of corporate transaction involving the Company or any of its
Subsidiaries that requires the approval of the Company’s stockholders, whether
for such transaction or the issuance of securities in the transaction (a
“Business Combination”), unless immediately following such Business Combination:

 

(A) 50% or more of the total voting power of:

 

(x) the corporation resulting from such Business Combination (the “Surviving
Corporation”), or

 

(y) if applicable, the ultimate parent corporation that directly or indirectly
has beneficial ownership of 100% of the voting securities eligible to elect
directors of the Surviving Corporation (the “Parent Corporation”),

 

is represented by Company Voting Securities that were outstanding immediately
prior to such Business Combination (or, if applicable, is represented by shares
into which such Company Voting Securities were converted pursuant to such
Business Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of such Company Voting
Securities among the holders thereof immediately prior to the Business
Combination;

 

6

 

 

(B) no person (other than any employee benefit plan (or related trust) sponsored
or maintained by the Surviving Corporation or the Parent Corporation), is or
becomes the beneficial owner, directly or indirectly, of 50% or more of the
total voting power of the outstanding voting securities eligible to elect
directors of the Parent Corporation (or, if there is no Parent Corporation, the
Surviving Corporation); and

 

(C) at least a majority of the members of the board of directors of the Parent
Corporation (or if there is no Parent Corporation, the Surviving Corporation)
following the consummation of the Business Combination were Incumbent Directors
at the time of the Board’s approval of the execution of the initial agreement
providing for such Business Combination

 

(any Business Combination which satisfies all of the criteria specified in (A),
(B) and (C) above shall be deemed to be a “Non-Qualifying Transaction”); or

 

(iv) consummation of the sale of all or substantially all of the Company’s
assets or stockholder approval of a liquidation or dissolution of the Company,
unless the voting common equity interests of the acquirer of such assets or an
ongoing entity (other than a liquidating trust), as the case may be, based on
total voting power, are at least more than 50% beneficially owned, directly or
indirectly, by the Company’s shareholders in substantially the same proportions
as such shareholders owned the Company’s outstanding voting common equity
interests immediately prior to such sale or liquidation and, if a plan of
liquidation or dissolution, such ongoing entity assumes all existing obligations
of the Company under this Plan.

 

Notwithstanding the foregoing, a Change in Control of the Company shall not be
deemed to occur solely because any person acquires beneficial ownership of more
than 50% of the Company Voting Securities, based on total voting power, as a
result of the acquisition of Company Voting Securities by the Company which
reduces the number of Company Voting Securities outstanding; provided, that, if
after such acquisition by the Company such person becomes the beneficial owner
of Company Voting Securities that increases the percentage of outstanding
Company Voting Securities beneficially owned by such person, a Change in Control
of the Company shall then occur.

 

7

 

 

 

(c)      Notwithstanding anything else herein, if any payment or benefit, within
the meaning of Section 280G(b)(2) of the Code, to the Executive or for
Executive’s benefit paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise in connection with, or arising out of,
Executive’s employment with the Company or a change in ownership or effective
control of the Company or of a substantial portion of its assets, would be
subject to the excise tax imposed by Section 4999 of the Code or any interest or
penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the “Excise Tax”), the amounts and benefits provided
under this Agreement or otherwise that are subject to Section 280G of the Code
as a result of the transaction will be automatically reduced to an amount that
equals the product of 2.99 multiplied by the Executive’s “base amount” (as
determined in accordance with Sections 280G and 4999 of the Code by the
Company’s certified public accountants unless the Company and the Executive
mutually agree to the appointment of an independent certified public accounting
firm), such that the Executive will not be subject to the Excise Tax. Unless
otherwise elected by the Executive, to the extent permitted under Code Section
409A, such reduction shall first be applied to any severance payments payable to
the Executive under this Agreement in reverse order of receipt, then to the
vesting on any equity, with underwater stock options first net withholding, and
thereafter any in-the-money stock options starting from the stock options with
smallest spread between fair market value and exercise price, and thereafter any
restricted stock or restricted stock units.

 

5.            RELEASE. Any and all amounts payable and benefits or additional
rights provided pursuant to Sections 3(d)(ii) or 4(a)(ii) shall only be payable
or provided if the Executive executes and delivers to the Company a general
release of all claims against the Company in the form attached to the Agreement
as Appendix A (the “Release”) (with such changes as the Company may request to
support the legality and effectiveness of the Release). The Company shall
provide the Executive with a copy of the Release within seven (7) days following
the Executive’s date of termination and the Executive will be required to
provide the Company with an executed copy of the Release that has become
effective within sixty (60) days following the Executive’s date of termination.

 

6.            RESTRICTIVE COVENANTS.

 

(a)          Confidentiality. The Executive agrees that he shall not, directly
or indirectly, use, make available, sell, disclose or otherwise communicate to
any person, other than in the reasonable good faith performance of his duties
and for the benefit of the Company, either during the period of the Executive’s
employment or at any time thereafter, any nonpublic, proprietary or confidential
information, knowledge or data relating to the Company, any of its subsidiaries,
affiliated companies or businesses, which shall have been obtained by the
Executive during the Executive’s employment by the Company. The foregoing shall
not apply to information that (i) was known to the public prior to its
disclosure to the Executive; (ii) becomes generally known to the public
subsequent to disclosure to the Executive through no wrongful act of the
Executive or any representative of the Executive; or (iii) the Executive is
required to disclose by applicable law, regulation or legal process (provided
that the Executive provides the Company with prior notice of the contemplated
disclosure and reasonably cooperates with the Company at its expense in seeking
a protective order or other appropriate protection of such information).

 

(b)          Nonsolicitation. During the Executive’s employment with the Company
and for the 12 month period thereafter, the Executive agrees that he will not,
except in the furtherance of his duties hereunder, directly or indirectly,
individually or on behalf of any other person, firm, corporation or other
entity, (i) solicit or hire any employees, representatives or agents of the
Company (or any of its affiliates) or (ii) solicit any of the Company’s
customers.

 

8

 

 

(c)          Noncompetition. The Executive acknowledges that he performs
services of a unique nature for the Company that are irreplaceable, and that his
performance of such services to a competing business will result in irreparable
harm to the Company. Accordingly, during the Executive’s employment hereunder
and for the 12 month period thereafter, the Executive agrees that the Executive
will not, (i) enter the employ of (whether as an employee, consultant,
independent contractor or otherwise, and whether or not for compensation), or
render any services to, any person, firm, corporation or other entity, in
whatever form, engaged or actively planning to be engaged in any Competitive
Business, (ii) directly or indirectly, own, manage, operate, control or
otherwise engage in such a Competitive Business for his own account, or (iii)
directly or indirectly, become interested in a Competitive Business as an
individual, partner, shareholder, director, officer, principal, agent, trustee
or in any other relationship or capacity. “Competitive Business” will mean, as
of any date, any business competitive with any business then being conducted by
the Company and operating in some or all of the same geographic areas; provided
that, upon the termination of the Executive’s employment such determinations
shall thereafter be determined as of the date of the termination. The foregoing
shall not be violated by the Executive’s providing services to a noncompetitive
portion of a group of related businesses which noncompetitive portion consists
of less than 20% of the overall revenues of such group of related businesses
measured based on the fiscal year prior to the fiscal year in which the
Executive had his initial relationship with such noncompetitive portion, nor by
ownership of less than 2% of public company stock or debt or a passive interest
of less than 2% in a pooled account, such as a hedge fund, private equity fund
or mutual fund.

 

(d)          Nondisparagment. During the Employment Term and thereafter, the
Executive agrees not to disparage or encourage or induce others to disparage the
Company or any of its affiliates or any of its and their past and present
officers, directors, employees, products or services. For purposes of this
Agreement, the term “disparage” includes, without limitation, comments or
statements to the press, to the Company or any of its affiliates or any of its
or their officers, directors, or employees or to any individual or entity with
whom the Company or any of its affiliates has a business relationship
(including, without limitation, any vendor, supplier, customer or distributor of
the Company or any of its affiliates) that would adversely affect in any manner:
(i) the conduct of any business of the Company or any of its affiliates
(including, without limitation, any business plans or prospects) or (ii) the
business reputation of the Company or any of its affiliates or any of its and
their officers, directors, employees, products or services. Notwithstanding the
foregoing, this Section 6(d) shall not apply to truthful statements made in the
course of sworn testimony in administrative, judicial or arbitral proceedings or
normal competitive statements.

 

(e)          Reformation. If it is determined by a court of competent
jurisdiction in any state that any restriction in this Section 6 is excessive in
duration or scope or is unreasonable or unenforceable under the laws of that
state, it is the intention of the parties that such restriction may be modified
or amended by the court to render it enforceable to the maximum extent permitted
by the law of that state.

 

(f)           Survival of Provisions. The obligations contained in this Section
6 shall survive the termination or expiration of the Executive’s employment with
the Company and shall be fully enforceable thereafter.

 

9

 

 

7.            COOPERATION. Upon the receipt of reasonable notice from the
Company (including outside counsel), the Executive agrees that while employed by
the Company and thereafter, the Executive will respond and provide information
with regard to matters in which he has knowledge as a result of his employment
with the Company, and will provide reasonable assistance to the Company, its
affiliates and their respective representatives in defense of any claims that
may be made against the Company or its affiliates, and will assist the Company
and its affiliates in the prosecution of any claims that may be made by the
Company or its affiliates, to the extent that such claims may relate to the
period of the Executive’s employment with the Company. The Executive agrees to
promptly inform the Company if he becomes aware of any lawsuits involving such
claims that may be filed or threatened against the Company or its affiliates.
The Executive also agrees to promptly inform the Company (to the extent he is
legally permitted to do so) if he is asked to assist in any investigation of the
Company or its affiliates (or their actions), regardless of whether a lawsuit or
other proceeding has then been filed against the Company or its affiliates with
respect to such investigation, and shall not do so unless legally required. Upon
presentation of appropriate documentation, the Company shall pay or reimburse
the Executive for all reasonable out-of-pocket travel, duplicating or telephonic
expenses incurred by the Executive in complying with this Section 7.

 

8.           EQUITABLE RELIEF AND OTHER REMEDIES.

 

(a)                The Executive acknowledges and agrees that the Company’s
remedies at law for a breach or threatened breach of any of the provisions of
Section 6 or Section 7 would be inadequate and, in recognition of this fact, the
Executive agrees that, in the event of such a breach or threatened breach, in
addition to any remedies at law, the Company, without posting any bond, shall be
entitled to obtain equitable relief in the form of specific performance,
temporary restraining order, a temporary or permanent injunction or any other
equitable remedy which may then be available.

 

(b)               In the event of a violation of Section 6 or Section 7 of this
Agreement, any severance being paid to the Executive by the Company pursuant to
this Agreement (or any successor agreement) or otherwise shall immediately
cease.

 

9.           NO ASSIGNMENTS.

 

(a)                This Agreement is personal to each of the parties hereto.
Except as provided in Section 9(b) below, no party may assign or delegate any
rights or obligations hereunder without first obtaining the written consent of
the other party hereto.

 

(b)               The Company may assign this Agreement to any successor to all
or substantially all of the business and/or assets of the Company provided the
Company shall require such successor to expressly assume and agree to perform
this Agreement and, if applicable, any Change in Control Agreement (but without
creating any rights on a second change in control), in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place.

 

10

 

 

10.         NOTICE. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given (i) on the date of delivery if delivered by hand,
(ii) on the first business day following the date of deposit with the overnight
delivery service if delivered by guaranteed overnight delivery service, or (iii)
on the fourth business day following the date mailed by United States registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:

 

If to the Executive:

 

At the last address shown on the records of the Company;

 

If to the Company:

 

P&F Industries, Inc.

445 Broadhollow Road

Suite 100

Melville, New York 11747

Facsimile: (631) 773-4230

Attn: General Counsel

 

With a copy to:

 

Certilman Balin Adler & Hyman, LLP

90 Merrick Avenue

East Meadow, New York 11554

Facsimile: (516) 296-7111

Attn: Steven J. Kuperschmid, Esq.

 

and

 

Proskauer Rose LLP

Eleven Times Square

New York, New York 10036-8299

Facsimile: (212) 969-2900

Attn: Michael S. Sirkin, Esq.

 

or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.

 

11.         SECTION HEADINGS; INCONSISTENCY. The section headings used in this
Agreement are included solely for convenience and shall not affect, or be used
in connection with, the interpretation of this Agreement. In the event of any
inconsistency between the terms of this Agreement and any form, award, plan or
policy of the Company, the terms of this Agreement shall control.

 

12.         SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity of unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.

 

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13.         COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instruments.

 

14.         ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement or the Executive’s employment with the Company,
other than injunctive relief under Section 8 hereof, shall be settled
exclusively by arbitration, conducted before a single arbitrator in New York,
New York (applying New York law) in accordance with the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association then
in effect. The decision of the arbitrator will be final and binding upon the
parties hereto. Judgment may be entered on the arbitrator’s award in any court
having jurisdiction. The parties acknowledge and agree that in connection with
any such arbitration and regardless of outcome (a) each party shall pay all its
own costs and expenses, including without limitation its own legal fees and
expenses, and (b) joint expenses shall be borne equally among the parties;
provided, however, in the event that the arbitrator determines that the
Executive is the prevailing party, then the Company shall pay or reimburse all
reasonable legal fees and expenses incurred by the Executive.

 

15.         MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer or director as may be
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with respect
to the employment of the Executive by the Company and, together with all
exhibits hereto sets forth the entire agreement of the parties hereto in respect
of the subject matter contained herein. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of New York without regard to its
conflicts of law principles.

 

16.         NO MITIGATION; TERMINATION CLAIM LIMIT. In no event shall the
Executive be obliged to seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any of the provisions
of this Agreement, nor shall the amount of any payment hereunder be reduced by
any compensation earned by the Executive as a result of employment by another
employer, except as provided in Section 8(b) hereof. Any claim by the Executive
for damages as a result of a termination based on Section 2(c)(iv) shall not be
brought prior to resolution of the criminal case and the Executives damages
shall be limited to (a) the monetary amounts the Executive would have received
in the event of a termination without Cause and (b) the intrinsic value on the
termination date of any equity vested at, or upon, such termination that the
Executive forfeited or did not receive because of the classification of the
termination for Cause (and the Executive shall have no right to the equity,
which shall be cancelled upon the termination for Cause).

 

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17.         WITHHOLDING. The Company may withhold from any and all amounts
payable under this Agreement such federal, state and local taxes as may be
required to be withheld pursuant to any applicable law or regulation.

 

18.         SECTION 409A COMPLIANCE.

 

(a)                The intent of the parties is that payments and benefits under
this Agreement comply with, or be exempt from, Code Section 409A and,
accordingly, to the maximum extent permitted, this Agreement shall be limited,
construed and interpreted in accordance with such intent. If the Executive
notifies the Company (with specificity as to the reason therefore) that the
Executive believes that any provision of this Agreement (or of any award of
compensation, including equity compensation or benefits) would cause the
Executive to incur any additional tax or interest under Code Section 409A and
the Company concurs with such belief or the Company (without any obligation
whatsoever to do so) independently makes such determination, and modifying such
provision would avoid such additional tax or interest, the Company shall, after
consulting with the Executive, reform such provision to try to comply with Code
Section 409A through good faith modifications to the minimum extent reasonably
appropriate to conform with Code Section 409A. To the extent that any provision
hereof is modified in order to comply with Code Section 409A, such modification
shall be made in good faith and shall, to the maximum extent reasonably
possible, maintain the original intent and economic benefit to the Executive and
the Company of the applicable provision without violating the provisions of Code
Section 409A.

 

(b)               A termination of employment shall not be deemed to have
occurred for purposes of any provision of this Agreement providing for the
payment of any amounts or benefits upon or following a termination of employment
unless such termination is also a “Separation from Service” within the meaning
of Code Section 409A and, for purposes of any such provision of this Plan,
references to a “termination,” “termination of employment” or like terms shall
mean Separation from Service. Notwithstanding any provision to the contrary in
this Agreement, if the Executive is deemed on the date of his termination to be
a “specified employee” within the meaning of that term under Code Section
409A(a)(2)(B) and using the identification methodology selected by the Company
from time to time, or if none, the default methodology set forth in Code Section
409A, then with regard to any payment or the providing of any benefit that
constitutes “non-qualified deferred compensation” pursuant to Code Section 409A
that is payable due to the Executive’s Separation from Service, to the extent
required to be delayed in compliance with Code Section 409A(a)(2)(B), such
payment or benefit shall not be made or provided to the Executive (subject to
the last sentence of this Section 18(b)) prior to the earlier of (i) the
expiration of the six (6)-month period measured from the date of the Executive’s
Separation from Service, and (ii) the date of the Executive’s death (the “Delay
Period”). For avoidance of doubt, the Severance Payment shall not be treated as
non-qualified deferred compensation that is required to be delayed in compliance
with Code Section 409A(a)(2)(B) to the extent that it meets the exemption set
forth in Department of Treasury Regulation Section 1.409A-1(b)(9)(iii) (for
separation pay due to involuntary separation from service) and only that
portion, if any, of the Severance Payment that exceeds the exempt amount shall
be subject the delay, if any, required pursuant to the preceding sentence. On
the first day of the seventh month following the date of the Executive’s
Separation from Service or, if earlier, on the date of the Executive’s death,
all payments delayed pursuant to this Section 18(b) (whether they would have
otherwise been payable in a single sum or in installments in the absence of such
delay) shall be paid or reimbursed to the Executive in a lump sum, and any
remaining payments and benefits due to the Executive under this Agreement shall
be paid or provided in accordance with the normal payment dates specified for
them herein. Notwithstanding the foregoing, to the extent that the provision of
any welfare benefits provided to the Executive following his Separation from
Service will be treated as non-qualified deferred compensation that is required
to be delayed (after taking into account the exemption in Department of Treasury
Regulation Section 1.409A-1(b)(9)(v)) but would not be required to be delayed if
the premiums therefor were paid by the Executive, the Executive shall pay the
full cost of the premiums for such welfare benefits during the Delay Period and
the Company shall pay the Executive an amount equal to the amount of such
premiums paid by the Executive during the Delay Period promptly after its
conclusion.

 

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(c)                In no event whatsoever shall the Company be liable for any
additional tax, interest or penalties that may be imposed on the Executive by
Code Section 409A or any damages for failing to comply with Code Section 409A.

 

(d)               To the extent any reimbursement of costs and expenses provided
for under this Agreement constitutes taxable income to the Executive for Federal
income tax purposes, such reimbursements shall be made no later than December 31
of the calendar year next following the calendar year in which the expenses to
be reimbursed are incurred.

 

(e)                If under this Agreement, an amount is to be paid in two or
more installments, for purposes of Code Section 409A, each installment shall be
treated as a separate payment.

 

(f)                Whenever a payment under the Agreement specifies a payment
period with reference to a number of days, the actual date of payment within the
specified period shall be within the sole discretion of the Company.

 

19.           CLAWBACKS. The Executive hereby acknowledges and agrees that he is
subject to Section 304 of the Sarbanes-Oxley Act of 2002, and that pursuant
thereto he may under certain circumstances be obligated to pay back to the
Company certain amounts previously received by him. In addition, the Executive
hereby acknowledges and agrees that he shall be subject to any clawback policy
adopted or implemented by the Company in respect of the Dodd-Frank Wall Street
Reform and Consumer Protection Act of 2010 and such regulations as are
promulgated thereunder from time to time to the extent required by the Act and
the implementing regulations.

 

 

 

[End of text - Signature page follows]

 

14

 

 

 

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

 

 

P&F INDUSTRIES, INC.

 

By:/s/ Richard A. Horowitz
Name: Richard A. Horowitz

Its: President

 

 

/s/ Joseph A. Molino, Jr.

JOSEPH A. MOLINO, JR.

 

 

 

15

 

 

APPENDIX A

 

FORM OF RELEASE

 

AGREEMENT AND GENERAL RELEASE AND WAIVER, dated as of ______________ (the
“Agreement”), by and between JOSEPH A. MOLINO, JR. (the “Employee”) and P&F
INDUSTRIES, INC., a Delaware corporation (the “Company”).

 

The Employee and the Company mutually want to enter into this Agreement
concerning the Employee’s separation from the Company. Where appropriate in the
context of this Agreement, the term “Company” includes, the Company’s past,
present and future subsidiaries, affiliates, divisions, parents, and any of its
or their respective predecessors, successors, assigns, assets, employee benefit
plans or funds and its or their past, present and future directors, officers,
fiduciaries, trustees, administrators, representatives, shareholders, agents,
employees, and independent contractors, whether acting on behalf of the Company
or in their individual capacities.

 

1.                  The Employee acknowledges and agrees that (a) his last date
of employment with the Company was __________ (the “Termination Date”), (b) the
Termination Date was the termination date of his employment with the Company for
purposes of participation in and coverage under all benefit plans and programs
sponsored by or through the Company, (c) the Company shall have no obligation to
rehire the Employee, or to consider him for employment, after the Termination
Date, and (d) he will not seek employment with the Company at any time in the
future.

 

2.                  The Employee acknowledges that he has carefully read this
Agreement in its entirety, the terms and implications of this Agreement have
been fully explained to the Employee, the Employee has had answered to his
satisfaction any questions he has asked with regard to the meaning and
significance of any provision of this Agreement, and that he fully understands
the significance of all of the terms and conditions of this Agreement.

 

3.                  The Employee acknowledges that he has been given the
opportunity to consider this Agreement for twenty-one (21) days and decide for
himself whether or not he wants to sign it.

 

4.                  The Employee acknowledges that he has been advised to
consult with an attorney of his choice concerning this Agreement and the
implications to the Employee of signing or not signing it.

 

5.                  The Employee acknowledges that he has carefully considered
other alternatives to executing this Agreement, and has decided that he wants to
sign it.

 

6.                  The Employee may accept this Agreement by signing it and
returning it to _____________, P&F Industries, Inc., 445 Broadhollow Road, Suite
100, Melville, New York, 11747, within twenty-one (21) days of his receipt of
this Agreement. The Employee is entitled to change his mind and revoke this
Agreement by indicating his desire to do so in writing delivered to __________
at the address above (or by fax at (     )    -     ) by no later than 5:00 p.m.
EST on the seventh (7th) day after the date he signs this Agreement (the
“Revocation Period”). This Agreement will not become effective and the Employee
will not receive any of the benefits set out below until the eighth (8th) day
after the Employee signs it (the “Effective Date”). If the last day of the
Revocation Period falls on a Saturday, Sunday or holiday, the last day of the
Revocation Period will be deemed to be the next business day.

 

 

 

 

7.                  In consideration for the Employee’s signing and not revoking
this Agreement, the Company has agreed to pay the Employee the consideration set
forth in Section [IF TERMINATION IS NOT IN CONNECTION WITH A CHANGE IN CONTROL -
3(d)(ii)] [IF TERMINATION IS IN CONNECTION WITH A CHANGE IN CONTROL – 4(a)(ii)]
of that certain Severance Agreement, dated as of _________, 2012, by and between
the Company and the Employee (the “Severance Agreement”). The Company and the
Employee expressly agree that the Company is not otherwise obligated to pay such
consideration; that the Employee is not otherwise entitled to receive any of
such consideration; and that, if the Employee does not sign this Agreement or
revokes this Agreement during the Revocation Period, the Company will have no
further obligations to the Employee under this Agreement, including, without
limitation, the obligation to make the payments set forth in Section 7 of this
Agreement.

 

8.                  By entering into this Agreement, the parties do not admit,
and specifically deny, any liability or wrongdoing, or violation of any law,
statute, order, regulation or policy. It is expressly understood and agreed that
this Agreement is being entered into solely for the purpose of avoiding the
costs of litigation and amicably resolving all matters in controversy, disputes,
causes of action, claims, contentions and differences of any kind whatsoever
which have been or could have been alleged by the respective parties against
each other.

 

9.                  The Employee acknowledges that he knows that there are
various state and federal laws which prohibit employment discrimination on the
basis of age, sex, race, color, creed, national origin, marital status,
religion, disability or veteran status and that these laws are enforced through
the Federal Equal Employment Opportunity Commission, the New York State Division
of Human Rights and various city, county and local human rights agencies.  In
addition, the Employee acknowledges that he knows that there are other federal,
state, and local laws of other types or description regarding employment,
including, but not limited to, claims arising from or derivative of the
Employee’s employment with the Company.

 

10.              The consideration set forth in Section 7 of this Agreement is
in full and complete satisfaction of all claims whatsoever the Employee may have
against the Company arising from the Employee’s employment and/or separation
from employment with the Company, or from any other matter whatsoever up to and
including the date of this Agreement, whether known or unknown. Without limiting
the generality of the foregoing, the Employee hereby releases, waives, and
forever discharges any and all claims of any kind against the Company arising
from the Employee’s employment and/or separation from employment with the
Company, or from any other matter whatsoever up to and including the date of
this Agreement, whether known or unknown, that he may have or had, including,
but not limited to, fraud, claims arising under Age Discrimination in Employment
Act of 1967, as amended, 29 U.S.C. §621 et. seq., Title VII of the Civil Rights
Act of 1964, as amended, 42 U.S.C. §2000 et. seq., the Civil Rights Act of 1866,
42 U.S.C. §1981, 42 U.S.C. §1983, The Equal Pay Act, as amended, 29 U.S.C.
§206(d)(1), the Fair Labor Standards Act of 1938, as amended, 29 U.S.C. §201 et.
seq., the Family and Medical Leave Act of 1993, 29 U.S.C. §2601 et. seq., the
Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. §1001 et.
seq., the Americans with Disabilities Act, 42 U.S.C. §12101 et. seq., the Civil
Rights Act of 1991, 105 Stat. 1071, Executive Order 11246, the Sarbanes-Oxley
Act of 2002 (a federal whistleblower law), the New York State Human Rights Law,
New York City Human Rights Law, New York Equal Pay Law and N.Y. Lab. Law,
Section’s 201-c (adoptive parent leave) and 740 (whistle blower statute (private
employees)), all as amended, and any other federal, state and local fair
employment practice law, workers’ compensation law, unemployment insurance law,
and any other employee relations duties and obligations, whether imposed by
express or implied contract, tort (including, but not limited to, all
intentional torts, negligence, negligent hiring, training, supervision or
retention), common law, equity, public policy statute, executive order or law,
any claims for physical or emotional distress or injuries, or any other duty
obligation of any kind or description, as well as any rights or claims the
Employee or his attorney or other representative have or may have for costs,
expenses, attorneys’ fees or otherwise. The foregoing shall not apply to the
Employee’s right to receive the payments and benefits provided under Sections
[IF TERMINATION IS NOT IN CONNECTION WITH A CHANGE IN CONTROL - 3(d)(i) and
(ii)] [IF TERMINATION IS IN CONNECTION WITH A CHANGE IN CONTROL – 4(a)(i) and
(ii)] of the Severance Agreement, nor to the Employee’s rights, if any, to
indemnification as an officer of the Company or a fiduciary of any Company
benefit plan. In addition, nothing in this Agreement shall be construed to
prevent the Employee from filing a charge with, or participating in an
investigation conducted by, any governmental agency, including, without
limitation, the Equal Employment Opportunity Commission or applicable state/city
fair employment practices agency, to the extent required or permitted by law, or
to prevent any challenge by the Employee to the waiver and release of any claims
as set forth herein; provided, that the Employee hereby agrees not to accept any
award or settlement from any source or proceeding (including, but not limited
to, any proceeding brought by any other person or by any government agency) with
respect to any claim or right waived in this Agreement.

 

 

 

 

11.              The Employee agrees to keep this Agreement confidential and not
to reveal its contents to anyone except his attorney, his immediate family or
his financial consultant, or as required by law. The Employee will be
responsible for any disclosure by them. The Company agrees to keep this
Agreement confidential and not to reveal the contents to anyone except its
attorneys, accountants, officers, directors and human resources director. The
foregoing will not prohibit disclosure of this Agreement as required by law or
regulation, including, but not limited to, those of the U.S. Securities And
Exchange Commission and the rules of any exchange, quotation system and/or self
regulatory organization on which or with which the Company’s securities are
quoted, listed and/or traded, as the case may be; provided that if the Employee
is required to make a disclosure pursuant to the foregoing he agrees to give the
Company prompt written notice thereof and cooperate with the Company’s efforts
to seek a protective order.

 

12.              The Employee represents and warrants that he has returned all
property belonging to the Company and has deleted from his home or personal
computer, personal e-mail accounts and electronic filings all Company
information.

 

 

 

 

13.              The parties hereto agree and acknowledge that Sections [IF
TERMINATION IS NOT IN CONNECTION WITH A CHANGE IN CONTROL - 3(d)] [IF
TERMINATION IS IN CONNECTION WITH A CHANGE IN CONTROL – 4(a)], 6, 7, 8, 12, 14,
15, 16, 17, 18 and 19 of the Severance Agreement shall remain in full force and
effect and shall remain fully enforceable following the Effective Date.

 

14.              The payments set forth in Section 7 of this Agreement are
subject to taxes and all applicable withholding requirements.

 

15.              Except as specifically set forth in this Agreement, this
Agreement constitute the entire agreement between the Employee and the Company
with respect to the subject matter hereof and may only be modified, altered or
changed in writing, signed by both the Company and the Employee.

 

16.              This Agreement has been executed freely, knowingly and
voluntarily by the Employee without duress, coercion, or undue influence, with a
full understanding of its terms. The Employee acknowledges and agrees that,
prior to executing this Agreement, he has been provided with sufficient time in
which to consider this Agreement and that, in deciding to execute this
Agreement, he has relied on his own judgment and further acknowledges that he is
fully aware of its contents and of its legal effects. The parties to this
Agreement agree that no fact, evidence or transaction currently unknown to them
but which may hereafter become known to them shall affect in any way or manner
the final or unconditional nature of this Agreement.

 

17.              This Agreement shall be interpreted and construed and enforced
in accordance with the laws of the State of New York, excluding choice of law
principles thereof.

 

18.              This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective successors, assigns and
legal representatives.

 

19.              The waiver by either party of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach. If any provision of this Agreement, or part thereof, shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall attach only
to such provision and not in any way affect or render invalid or unenforceable
any other provisions of this Agreement, and this Agreement shall be carried out
as if such invalid or unenforceable provision, or part thereof, had been
reformed, and any court of competent jurisdiction is authorized to so reform
such invalid or unenforceable provision, so that it would be valid, legal and
enforceable to the fullest extent permitted by applicable law.

 

20.              BY SIGNING THIS AGREEMENT, THE EMPLOYEE STATES THAT: HE HAS
READ IT; HE UNDERSTANDS IT AND KNOWS THAT HE IS GIVING UP IMPORTANT RIGHTS; HE
AGREES WITH EVERYTHING IN IT; HE WAS TOLD, IN WRITING, TO CONSULT AN ATTORNEY
BEFORE SIGNING IT; HE HAS HAD [21] [45] DAYS TO REVIEW THE AGREEMENT AND THINK
ABOUT WHETHER OR NOT HE WANTED TO SIGN IT; AND HE HAS SIGNED IT KNOWINGLY AND
VOLUNTARILY.

 

 

 

 

 

[Remainder of page intentionally left blank.]

 

 

 

 

 

 

 

 

 

 

 

 

WHEREFORE, the Employee and the Company now voluntarily and knowingly execute
this Agreement as of the day and year first written above.

 

 

 

P&F INDUSTRIES, INC.

 

By: __________________________________
       Name: _____________________________

                    (Please print) 

       Title:______________________________

 

 

_____________________________________

JOSEPH A. MOLINO, JR.

 

 

Sworn to by JOSEPH A. Molino, Jr. before me this ____ day of ______________,
20___.

 

 

___________________________

Notary Public