THIS INSTRUMENT IS SUBJECT TO THAT CERTAIN SUBORDINATION AND INTERCREDITOR
AGREEMENT DATED AS OF OCTOBER 25, 2010, BETWEEN HY-TECH HOLDINGS, INC., A
DELAWARE CORPORATION, AS THE SUBORDINATED CREDITOR, AND CAPITAL ONE LEVERAGE
FINANCE CORPORATION, AS SENIOR AGENT FOR ALL SENIOR LENDERS.
 
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.

AMENDED AND RESTATED
SUBORDINATED PROMISSORY NOTE
 
$573,235.00
As of October 25, 2010

 
FOR VALUE RECEIVED, the undersigned, Hy-Tech Machine, Inc., a Delaware
corporation (including its successors, the “Borrower”), hereby promises to pay
to the order of Hy-Tech Holdings, Inc., a Delaware corporation (successor in
interest by merger to Hy-Tech Machine, Inc., a Pennsylvania corporation) (the
“Holder”), in lawful money of the United States of America and in immediately
available funds the principal sum of Five Hundred Seventy-Three Thousand Two
Hundred Thirty-Five and 00/100 ($573,235.00) Dollars, together with interest on
the unpaid principal balance at the rate and on the terms and conditions
provided in this amended and restated subordinated promissory note (the “Note”).
 
This Note is being executed and delivered as a restatement of the outstanding
indebtedness evidenced by that certain $1,719,706.50 note dated May 16, 2009
(hereinafter referred as the “Original Note”) in the current outstanding
aggregate principal amount due thereunder of $573,235.00. This Note shall not
constitute a cancellation or novation with respect to the indebtedness evidenced
by the Original Note.  Such indebtedness (as heretofore evidenced by the
Original Note and as hereafter evidenced by this Note) shall continue to be
secured by, inter alia, the personal property security for the Original Note
without interruption in the lien or priority thereof.  Subject to the foregoing
provisions this Note amends, restates and supersedes the Original Note in its
entirety and specifically extends the Maturity Date, as hereinafter defined, and
modifies the payments of principal and interest heretofore provided to conform
same to the Subordination Agreement as hereinafter defined.  By its execution
hereof, Borrower agrees that interest has been paid to date and Holder waives
and discharges the Borrower and P&F Industries, Inc. from any claims it may have
against such persons or their affiliates in connection with the superseded note
and the loan documents executed and delivered in connection therewith.
 
1.           Acquisition Agreement. This Note evidences payment of a portion of
the purchase price payable under that certain Asset Purchase Agreement, dated as
of February 12, 2007 (the “Original  Purchase Agreement”), by and among Holder,
Quality Gear Holdings, Inc., a Delaware corporation (successor in interest by
merger to Quality Gear & Machine, Inc., a Pennsylvania corporation (together
with Holder, “Sellers”), HTM Associates, a Pennsylvania general partnership
(“HTM”), Robert H. Ober, Elizabeth Small, James J. Browne, Daniel Berg and James
Hohman (collectively, the “Shareholders”) and Hy-Tech Machine, Inc., a Delaware
corporation (“Borrower”), as amended by that certain Amendment No. 1 to the
Original Purchase Agreement, dated as of June 26, 2009, by and between the
Sellers, HTM, the Shareholders and Borrower (the “Amended Purchase Agreement”).
This Note is an amendment and restatement of the Promissory Note referred to in
the Amended Purchase Agreement. Unless otherwise defined herein, capitalized
terms used in this Note have the same meanings set forth in the Amended Purchase
Agreement.

 
 

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2.           Interest; Principal. Interest on the unpaid principal balance of
this Note shall accrue (a) from the date hereof at the rate of eight (8.0%)
percent per annum, (b) from and after any Payment Date, as defined herein, by
which the applicable Installment Payment, as defined herein, has not been made
and continuing until such Installment Payment is made, or during the continuance
of an Event of Default pursuant to Section 6(b), (c), (d) or (e), at the rate
set forth in (i) plus eight (8.0%) percent, or (iii) if less than the rates
applicable under (i) and (ii), the maximum rate permitted by law. Interest shall
be calculated on the basis of a 365 day year for the actual days
elapsed.  Subject to the terms and conditions of the Subordination Agreement and
the Loan Agreement, each as hereinafter defined, the Borrower shall (i) pay to
the Holder all accrued interest on each Payment Date (as defined below) and (ii)
shall prepay to the Holder the outstanding Principal Sum hereunder in
installments equal to the amount of Excess Cash Flow permitted to be received by
the Holder under the Subordination Agreement and Loan Agreement each as
hereinafter defined, as and when permitted thereunder (such date(s) on which
payments under clauses (a) and (b) are made, each a “Payment Date”, until
October 25, 2013 (the “Maturity Date”) at which time any remaining Principal
Sum, together with accrued interest shall be repaid.
 
If any such interest or principal payment is not permitted to be made under the
Subordination Agreement or Loan Agreement (as defined below), such amounts shall
be paid on the first Business Day that such payment is permitted to be made
under the Subordination Agreement or Loan Agreement.
 
3.          Manner and Application of Payment. If a payment to be made by the
Borrower hereunder shall become due on a Saturday, Sunday or bank holiday in
either New York City, New York, or Pittsburgh, Pennsylvania, such payment shall
be made on the next succeeding day that is a business day in both of the
above-referenced cities. All payments of principal and interest shall be made to
the Holder in immediately available funds to an account designated by the Holder
in writing. Any payment made hereunder shall be applied first to costs and
expenses due hereunder, then to accrued interest and thereafter to principal.
 
4.          Prepayment. Subject to the Subordination Agreement, Borrower may at
its option, prepay the outstanding principal balance of this Note, in whole or
in part, at any time or, from time to time, without premium or penalty;
provided, that any such prepayment shall also include all accrued but unpaid
interest on the Note through the repayment date.
 
5.          Subordination. ALL OBLIGATIONS UNDER THIS NOTE ARE SUBJECT TO THE
TERMS OF A SUBORDINATION AND INTERCREDITOR AGREEMENT, DATED AS OF OCTOBER  25,
2010, AMONG THE BORROWER, THE HOLDER AND CAPITAL ONE LEVERAGE FINANCE
CORPORATION AS AGENT AND THE LENDERS PARTY TO THE LOAN AGREEMENT FROM TIME TO
TIME (AS AMENDED, RESTATED, SUPPLEMENTED OR MODIFIED, FROM TIME TO TIME (THE
“SUBORDINATION AGREEMENT”).  NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS
NOTE, THE PAYMENT AND PRIORITY OF ALL CLAIMS OF PAYEE UNDER THIS NOTE ARE
SUBORDINATE IN RIGHT, TIME, AND PRIORITY TO THE CLAIMS OF CAPITAL ONE LEVERAGE
FINANCE CORPORATION AS AGENT AND THE LENDERS PARTY TO THE LOAN AGREEMENT DATED
AS OF OCTOBER 25, 2010 AS AMENDED, RESTATED, SUPPLEMENTED OF MODIFIED FROM TIME
TO TIME (THE “LOAN AGREEMENT”).

 
 

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6.           Default. Each of the following events shall be an “Event of
Default” hereunder:
 
(a)          the Borrower fails to pay any of the principal, interest or any
other amounts payable under this Note when and as the same becomes due and
payable, which is not cured within fifteen (15) days of such nonpayment, except
to the extent such payment is not permitted under the Subordination Agreement;
 
(b)          the Borrower files any petition or action for relief under any
bankruptcy, reorganization, insolvency or moratorium law or any other law for
the relief of, or relating to, debtors, now or hereafter in effect, or seeks the
appointment of a custodian, receiver, trustee (or other similar official) of the
Borrower or all or any substantial portion of the Borrower's assets, or makes
any assignment for the benefit of creditors or takes any action in furtherance
of any of the foregoing, or fails to generally pay its debts as they become due;
 
(c)          an involuntary petition is filed, or any proceeding or case is
commenced, against the Borrower (unless such proceeding or case is dismissed or
discharged within sixty (60) days of the filing or commencement thereof) under
any bankruptcy, reorganization. arrangement, insolvency, adjustment of debt,
liquidation or moratorium statute now or hereafter in effect, or a custodian,
receiver, trustee, assignee for the benefit of creditors (or other similar
official) is applied for, appointed for the Borrower or to take possession,
custody or control of any property of the Borrower, or an order for relief is
entered against the Borrower in any of the foregoing:
 
(d)           the Borrower shall fail to perform any material covenant,
condition or agreement under this Note: or

(e)           any representation or warranty made or deemed made by the Borrower
under this Note shall have been false or misleading, in any material respect
when made or deemed made:
 
7.           Remedies. Upon the occurrence and during the continuance of an
Event of Default hereunder:
 
(a)          all unpaid principal, accrued interest and other amounts owing
hereunder shall, at the option of the Holder, be immediately due, payable and
collectible by the Holder pursuant to applicable law;
 
(b)          any and all unpaid principal, interest or other amounts due under
this Note shall thereafter bear interest at the maximum rate set forth in
Section 2 hereof; and
 
(c)          the Holder may exercise any and all rights and remedies it may have
under this Note or under applicable law.

 
 

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All rights and remedies shall be cumulative and not exclusive. The failure of
the holder hereof to exercise all or any of its rights, remedies, powers or
privileges hereunder or applicable law in any instance shall not constitute a
waiver thereof in that or any other instance.
 
8. Governing Law; Consent to Jurisdiction. This Note and any disputes hereunder
shall be governed by and construed in accordance with the internal laws of the
State of New York without giving effect to any choice or conflict of law
provision or rule (whether of the State of New York or any other jurisdiction)
that would cause the application of laws of any jurisdiction other than those of
the State of New York. Each of the Borrower and the Holder (a) submits to the
exclusive jurisdiction of any state or federal court sitting in New York, New
York in any action or proceeding arising out of or relating to this Note, (b)
agrees that all claims in respect of such action or proceeding may be heard and
determined only in any such court, (c) waives any claim of inconvenient forum or
other challenge to venue in such court, and (d) agrees not to bring any action
or proceeding arising out of or relating to this Note in any other court.
 
9. Successors and Assigns. This Note and all obligations of the Borrower
hereunder shall be binding upon the successors and assigns of the Borrower, and
shall, together with the rights and remedies of the Holder hereunder, inure to
the benefit of the Holder, any future holder of this Note and their respective
successors and assigns, provided, however, the Borrower may not transfer or
assign its rights or obligations hereunder without the express written consent
of the Holder, which consent may riot be unreasonably withheld or delayed and
any purported transfer or assignment by the Borrower without the Holder's
written consent shall be null and void. The Holder may assign, transfer,
participate or endorse its rights under this Note. Upon request, the Borrower
shall, at the expense of the Holder, execute and deliver to the assignee of this
Note, a replacement Note of equal and like tenor in an amount assigned to and
assumed by such assignee.
 
10. Waiver of Jury Trial. THE BORROWER AND THE HOLDER EACH WAIVES ITS RIGHT TO A
JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS NOTE. ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE
PERFORMANCE OF ANY SUCH RIGHTS OR OBLIGATIONS. The Borrower ( i) certifies that
neither the Holder nor any representative, agent or attorney of the Holder has
represented. expressly or otherwise, that the Holder would not. in the event of
litigation, seek to enforce the foregoing waivers and acknowledges that, in
entering into this Note, the Holder is relying upon, among other things, the
foregoing waivers and certifications.
 
11. Entire Agreement; Amendments; Invalidity. This Note, the Amended Purchase
Agreement and the Subordination Agreement constitute the entire agreement and
understanding of the parties and supersede and replace in their entirely any
prior discussions, agreements, etc., all of which are merged herein and (herein.
None of the terms of this Note may be amended or otherwise modified except by an
instrument executed by each of the Borrower and the Holder. If any term of this
Note shall be held to be invalid, illegal or unenforceable, the validity of all
other terms hereof shall in no way be affected thereby, and this Note shall be
construed and be enforceable as if such invalid, illegal or unenforceable term
had not been included herein.
 
12.          Notices. All notices, demands and other communications provided for
or permitted hereunder shall be made in writing as set forth in the Amended
Purchase Agreement.

 
 

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13.          Counterparts. This Note may be executed in any number of
counterparts (including by facsimile), all of which taken together shall
constitute one and the same instrument and any of the parties hereto may execute
this Note by signing any such counterpart signature page or counterpart.
 
[Signature page follows on next page.]

 
 

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IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed as of
the date first above written.
 

 
HY-TECH MACHINE, INC.
     
By:
/s/ Joseph A. Molino, Jr.
   
Joseph A. Molino, Jr.
   
Vice President

GUARANTY
 
For good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, and pursuant to that certain Guaranty executed as of
February 12, 2007, P&F Industries, Inc., a Delaware corporation, hereby
guarantees the prompt and faithful performance of all of the Borrower's
obligations under the terms of the foregoing Note. This Guaranty has been
executed as of the date first set forth above.
 
P&F INDUSTRIES, INC.
     
By:
/s/ Joseph A. Molino, Jr.
   
Joseph A. Molino, Jr.
 
Vice President, Chief Operating Officer and Chief Financial Officer

 
 
 

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ACKNOWLEDGMENT
 
The undersigned hereby acknowledges and agrees to the terms of this Amended and
Restated Note, as of the date first set forth above.

 
HY TECH HOLDINGS, INC.
           
BY:
/s/ Joseph A. Molino, Jr.
   
Name:
Joseph A. Molino, Jr.
   
Title:
Vice President
 

 
 
 

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