EXECUTION VERSION

SECOND AMENDMENT
TO LOAN AND SECURITY AGREEMENT

SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT dated as of November 21, 2011
(this “Amendment”), is among P&F INDUSTRIES, INC., a Delaware corporation
(“P&F”), FLORIDA PNEUMATIC MANUFACTURING CORPORATION, a Florida corporation
(“Florida Pneumatic”), HY-TECH MACHINE, INC., a Delaware corporation
(“Hy-Tech”), and NATIONWIDE INDUSTRIES, INC., a Florida corporation
(“Nationwide”, and together with P&F, Florida Pneumatic and Hy-Tech,
collectively, “Borrowers” and each, a “Borrower”), CONTINENTAL TOOL GROUP, INC.,
a Delaware corporation (“Continental”), COUNTRYWIDE HARDWARE, INC., a Delaware
corporation (“Countrywide”), EMBASSY INDUSTRIES, INC., a New York corporation
(“Embassy”), GREEN MANUFACTURING, INC., a Delaware corporation (“Green”),
PACIFIC STAIR PRODUCTS, INC., a Delaware corporation (“Pacific”), WILP HOLDINGS,
INC., a Delaware corporation (“WILP”), and WOODMARK INTERNATIONAL, L.P., a
Delaware limited partnership (“Woodmark”, and together with Continental,
Countrywide, Embassy, Green, Pacific and WILP, collectively, “Guarantors” and
each, a “Guarantor”), CAPITAL ONE LEVERAGE FINANCE CORPORATION, a Delaware
corporation, as agent for the Lenders (“Agent”), and each of the Lenders party
hereto.

RECITALS:

A.           Borrowers, Guarantors, the lenders from time to time party thereto
(collectively, the “Lenders”) and Agent have entered into a Loan and Security
Agreement dated as of October 25, 2010 (as amended by the First Amendment to
Loan and Security Agreement dated as of September 21, 2011, the “Loan
Agreement”).  Capitalized terms used and not otherwise defined herein shall have
the meanings ascribed to them in the Loan Agreement.
 
B.           Borrowers have requested that Agent and the Lenders amend certain
provisions of the Loan Agreement.
 
C.           Subject to the terms and conditions set forth below, Agent and the
Lenders party hereto are willing to so amend the Loan Agreement.
 
In furtherance of the foregoing, the parties agree as follows:

Section 1.            AMENDMENTS.  Subject to the covenants, terms and
conditions set forth herein and in reliance upon the representations and
warranties set forth herein, the Loan Agreement is amended as follows:

(a)          The following new definitions are inserted in Section 1.1 in the
appropriate alphabetical positions therein:

Base Rate Capex Loan: a Capex Loan that bears interest based on the Base Rate.

Capex Loan: a term loan made pursuant to Section 2.2B.

 
 

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Capex Loan Commitment: for any Lender, its obligation to make Capex Loans up to
the maximum principal amount shown on Schedule 1.1, or as hereafter determined
pursuant to each Assignment and Acceptance to which it is a party.  “Capex Loan
Commitments” means the aggregate amount of such commitments of all Lenders in an
aggregate amount up to $2,500,000.

Capex Loan Note: a promissory note to be executed by Borrowers in favor of a
Lender in form and substance reasonably satisfactory to such Lender, which shall
be in the amount of such Lender’s Capex Loan Commitment and shall evidence the
Capex Loans made by such Lender.

Capex Loan Termination Date:  the earliest to occur of (a) October 25, 2013; (b)
the date on which Borrowers terminate the Revolver Commitments pursuant to
Section 2.1.4; and (c) the date on which the Capex Loan Commitments are
terminated pursuant to Section 11.2.

LIBOR Capex Loan:  a Capex Loan that bears interest based on LIBOR.

Second Amendment Effective Date:  November 21, 2011.

(b)          The existing definitions of “Applicable Margin,” “Commitment,”
“Excess Cash Flow”, “Fixed Charges”, “ “LIBOR Loan,” “Loan,” “Mortgage,”
“Notes,” “Permitted Asset Disposition”, “Pro Rata” and “Required Lenders,” in
Section 1.1 are deleted in their entirety and the following definitions are
inserted in lieu thereof:

Applicable Margin: (a) with respect to Term Loans, (i) 4.75% with respect to
Base Rate Term Loans and (ii) 5.75% with respect to LIBOR Term Loans; (b) with
respect to Capex Loans, (i) 2.50% with respect to Base Rate Capex Loans and (ii)
3.50% with respect to LIBOR Capex Loans; and (c) with respect to Revolver Loans,
the margin set forth below, as determined by the Leverage Ratio for the
Measurement Period ending as of the most recently ended month:
 
Level
 
Leverage Ratio
 
Base Rate
Revolver
Loans
   
LIBOR
Revolver
Loans
 
I
 
> 6.00 to 1.00
    3.00 %     4.00 %
II
 
> 5.00 to 1.00 and < 6.00 to 1.00
    2.75 %     3.75 %
III
 
> 4.00 to 1.00 and < 5.00 to 1.00
    2.50 %     3.50 %
IV
 
< 4.00 to 1.00
    2.25 %     3.25 %

Until Agent receives a Compliance Certificate for the month ended March 31, 2011
margins shall be determined as if Level IV were applicable. Thereafter, the
margins shall be subject to increase or decrease upon receipt by Agent pursuant
to Section 10.1.2 of the financial statements and corresponding Compliance
Certificate for the last month, which change shall be effective on the first day
of the calendar month following receipt; provided that commencing with the
Second Amendment Effective Date, the margins shall be determined as set forth
below and be subject to increase or decrease upon receipt by Agent pursuant to
Section 10.1.2 of the financial statements and corresponding Compliance
Certificate for the last month, which change shall be effective on the first day
of the calendar month following receipt; provided, however, that Level V shall
not apply at any time prior to Agent’s receipt pursuant to Section 10.1.2 of the
financial statements and corresponding Compliance Certificate for the Fiscal
Year ending December 31, 2011:

 
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Level
 
Leverage Ratio
 
Base Rate
Revolver
Loans
   
LIBOR
Revolver
Loans
 
I
 
> 5.00 to 1.00
    2.50 %     3.50 %
II
 
> 4.00 to 1.00 and < 5.00 to 1.00
    2.25 %     3.25 %
III
 
> 3.00 to 1.00 and< 4.00 to 1.00
    2.00 %     3.00 %
IV
 
> 2.15 to 1.00 and < 3.00 to 1.00
    1.75 %     2.75 %
V
 
< 2.15 to 1.00
    1.50 %     2.50 %

 
  If, by the first day of a month, any financial statements and Compliance
Certificate due in the preceding month have not been received, then, at the
option of Agent or Required Lenders, the margins shall be determined as if Level
I were applicable, from such day until the first day of the calendar month
following actual receipt.
 
Commitment: for any Lender, the aggregate amount of such Lender’s Revolver
Commitment, Term Loan Commitment and Capex Loan Commitment.  “Commitments” means
the aggregate amount of all Revolver Commitments, Term Loan Commitments and
Capex Loan Commitments.
 
Excess Cash Flow: (without duplication), with respect to P&F and its
Subsidiaries on a consolidated basis for any Fiscal Year ending after the
Closing Date, Adjusted EBITDA for such period, minus (a) all payments with
respect to Capital Expenditures (except those financed with Borrowed Money other
than Revolver Loans)  made during such period, minus (b) all Interest Expense
and all fees for the use of money or the availability of money, including
commitment, facility and like fees and charges upon Debt paid or payable on a
non-duplicative basis during such period, minus (c) all tax liabilities paid or
accrued during such period on a non-duplicative basis, minus (d) all principal
amounts of Debt (other than (i) prepayments of Revolver Loans pursuant to
Section 5.2 to the extent the Revolver Commitments are not permanently reduced
by a corresponding amount pursuant to Section 2.1.4 and (ii) the prepayment in
full of the principal amount of the Hy-Tech Seller Debt) paid or payable during
such period.
 
Fixed Charges: the sum of interest expense (other than payment-in-kind),
principal payments made on Borrowed Money (other than (i) prepayments of
Revolver Loans pursuant to Section 5.2 to the extent the Revolver Commitments
are not permanently reduced by a corresponding amount pursuant to Section 2.1.4
and (ii) the prepayment in full of the principal amount of the Hy-Tech Seller
Debt), and Distributions made
 
LIBOR Loan: each set of LIBOR Revolver Loans, LIBOR Term Loans or LIBOR Capex
Loans having a common length and commencement of Interest Period.
 
Loan: a Revolver Loan, Term Loan or Capex Loan.
 
Mortgage: each mortgage, deed of trust or deed to secure debt (in each case, as
amended, modified, supplemented or restated) pursuant to which an Obligor grants
to Agent, for the benefit of Secured Parties, Liens upon the Real Estate owned
by such Obligor, as security for the Obligations
 
Notes: each Revolver Note, Term Note, Capex Loan Note or other promissory note
executed by an Obligor to evidence any Obligations.

 
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Permitted Asset Disposition: an Asset Disposition that is (a) a sale of
Inventory in the Ordinary Course of Business; (b) as long as no Default or Event
of Default exists and all Net Proceeds are remitted to Agent, a disposition of
Equipment that, in the aggregate during any 12 month period, has a fair market
or book value (whichever is more) of $100,000 or less, provided that any
disposition of Equipment related to a Capex Loan shall be in the form of an
arms-length sale of such Equipment for cash; (c) as long as no Default or Event
of Default exists and all Net Proceeds are remitted to Agent, a disposition of
Inventory that is obsolete, unmerchantable or otherwise unsalable in the
Ordinary Course of Business; (d) termination of a lease of real or personal
Property that is not necessary for the Ordinary Course of Business, could not
reasonably be expected to have a Material Adverse Effect and does not result
from an Obligor’s default; (e) a disposition, liquidation or dissolution of any
Immaterial Subsidiary; (f) approved in writing by Agent and Required Lenders or
(g) the sale and/or issuance of Equity Interests to the extent not constituting
a Change of Control.
 
Pro Rata: with respect to any Lender, a percentage (carried out to the ninth
decimal place) determined (a) while Revolver Commitments and Capex Loan
Commitments are outstanding, by dividing the amount of such Lender’s Revolver
Commitment, Capex Loan Commitment and Term Loan by the aggregate amount of all
Revolver Commitments, Capex Loan Commitments and Term Loans; and (b) at any
other time, by dividing the amount of such Lender’s Loans and LC Obligations by
the aggregate amount of all outstanding Loans and LC Obligations.
 
Required Lenders: Lenders (subject to Section 4.2) having (a) Revolver
Commitments, Capex Loan Commitments and Term Loans in excess of 50% of the
aggregate Revolver Commitments, Capex Loan Commitments and Term Loans; and (b)
if the Revolver Commitments and Capex Loan Commitments have terminated, Loans in
excess of 50% of all outstanding Loans.
 
(c)           The following Section 2.2B is inserted in the appropriate
numerical position therein:

2.2B.    Capex Loan Commitment.
 
2.2B.1    Capex Loans.  Each Lender agrees, severally on a Pro Rata basis up to
its Capex Loan Commitment, on the terms set forth herein, to make one or more
Capex Loans to Borrowers from time to time through the earlier of April 25, 2013
or the Capex Loan Termination Date as requested by Borrowers in the manner set
forth in Section 2.2B.2.  No repayment in respect of any Capex Loan may be
reborrowed.  Each Lender will make Capex Loans only if each of the following
conditions is satisfied:
 
(a)           Borrowers shall have provided evidence to Agent, in form and
substance reasonably satisfactory to Agent, that Borrowers will use the proceeds
of each requested Capex Loan to purchase, or reimburse Borrowers in connection
with the purchase of, new production, used or refurbished Equipment (i) used in
such Borrowers’ business operations, (ii) to be located at locations in
compliance with this Agreement, and (iii) subject to no Liens other than those
in favor of Agent and, when such Capex Loan is made, other Permitted Liens
permitted hereunder pursuant to Section 10.2.2(c), (d), (f), and (i); provided
that (A) any used or refurbished Equipment is subject to an appraisal in form
and substance (and by an appraiser) reasonably satisfactory to Agent; and (B)
any Capex Loans made to reimburse Borrowers shall be made within 30 days of
Borrowers’ purchase.

 
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(b)           Agent shall have received true copies of the invoice(s) from the
seller of the Equipment evidencing the cost of the Equipment Borrowers propose
to purchase or for which Borrowers are requesting reimbursement with the
proceeds of each Capex Loan, and such invoice(s) disclose(s) that the original
principal amount of such requested Capex Loan does not exceed  (i) in the case
of new Equipment, 75% of the cost of such Equipment, or (ii) in the case of used
or refurbished Equipment, 75% of the NOLV of the appraised value of such
Equipment, in each case, exclusive of transportation, installation, taxes,
software, perishable tooling and other “soft” costs (as determined by Agent in
its reasonable discretion) pertaining thereto;
 
(c)           Agent shall have received, in form and substance reasonably
satisfactory to Agent, evidence of insurance covering such Equipment as to which
Agent is loss payee pursuant to a Lenders Loss Payable Endorsement acceptable to
Agent;
 
(d)           the requested Capex Loan is in a minimum original principal amount
of $250,000;
 
(e)           the principal amount of the requested Capex Loan, together with
the original principal amounts of all other outstanding Capex Loans does not
exceed the Capex Commitments;
 
(f)           unless waived by Lenders, the requested Capex Loan would be the
only Capex Loan funded by Lenders during Borrowers’ then existing fiscal
quarter;
 
(g)           Borrowers shall have delivered or caused to be delivered to Agent
and each Lender any and all documents, agreements and instruments deemed
reasonably necessary by Agent or any Lender in connection with the making of
such Capex Loan.  The proceeds of the Capex Loans shall be used solely for the
purposes specified in this Section 2.2B.
 
2.2B.2    Manner of Borrowing and Funding Capex Loans.  A request for a Capex
Loan shall be made in the following manner:  Borrower Agent shall give Agent
notice (in form reasonably satisfactory to Agent) of its intention to borrow a
Capex Loan, in which Borrower Agent shall specify the amount of the proposed
borrowing (consistent with Section 2.2B.1) and the proposed borrowing date,
which shall be a Business Day, no later than 12:00 p.m. (New York time) on the
date (a) two (2) Business Days prior to the requested funding date, in the case
of Base Rate Loans, and (b) four (4) Business Days prior to the requested
funding date, in the case of LIBOR Loans.  In addition, Borrowers shall also
comply with the requirements of Section 2.2B.1 with respect to such Capex
Loan.  Each Lender shall timely honor its Capex Loan Commitment on the terms set
forth in Section 4.1.2.

 
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2.2B.3    Repayment of Capex Loans.  The principal amount of each Capex Loan
shall be repaid in consecutive equal monthly installments of 1/60th of the
original principal amount thereof, commencing on the first day of the month
following the month in which such Capex Loan is made and the first day of each
month thereafter until the Capex Loan Termination Date.  On the Capex Loan
Termination Date, all principal, interest and other amounts owing with respect
to each Capex Loan shall be due and payable in full.  Each installment shall be
paid to Agent for the Pro Rata benefit of Lenders.  Payments made with respect
to a Capex Loan may not be reborrowed. Borrowers may, at their option from time
to time, prepay any Capex Loan selected by Borrowers, in whole or in part, which
prepayment must be at least $50,000, plus any increment of $50,000 in excess
thereof.  Borrowers shall give written notice to Agent of an intended prepayment
of a Capex Loan, which notice shall specify the amount of the prepayment, shall
be irrevocable once given, shall be given at least 10 Business Days prior to the
end of a month and shall be effective as of the first day of the next
month.  All prepayments shall be applied to such Capex Loan in inverse order of
maturity.
 
(d)           The existing Section 4.3 of the Loan Agreement is deleted in its
entirety and the following is inserted in lieu thereof:
 
4.3           Number and Amount of LIBOR Loans; Determination of Rate.  Each
Borrowing of LIBOR Loans when made shall be in a minimum amount of $250,000,
plus any increment of $100,000 in excess thereof.  No more than 7 Borrowings of
LIBOR Loans may be outstanding at any time, and all LIBOR Loans having the same
length and beginning date of their Interest Periods shall be aggregated together
and considered one Borrowing for this purpose.  The aggregate dollar amount of
LIBOR Loans may not comprise more than 80% of the outstanding dollar amount of
all Revolver Loans plus 100% of the outstanding dollar amount of all Term Loans
plus 100% of the outstanding dollar amount of all Capex Loans minus any
scheduled principal payments of the Term Loans to be made pursuant to Section
5.3.1 minus any scheduled principal payments of the Capex Loans to be made
pursuant to Section 2.2B.3 during Interest Periods for all LIBOR Loans.  Upon
determining LIBOR for any Interest Period requested by Borrowers, Agent shall
promptly notify Borrowers thereof by telephone or electronically and, if
requested by Borrowers, shall confirm any telephonic notice in writing.
 
(e)           The existing Section 5.3.2 of the Loan Agreement is deleted in its
entirety and the following is inserted in lieu thereof:
 
5.3.2           Mandatory Prepayments.
 
(a)           Within ten days after delivery to Agent of Borrowers’ audited
annual financial statements for a Fiscal Year ending on or after December 31,
2011, Borrowers shall (i) deliver to Agent a written calculation of Excess Cash
Flow for such Fiscal Year, certified by a Senior Officer of Borrower Agent, and
(ii) prepay, in an amount equal to 25% of such Excess Cash Flow, and apply same
to the Term Loans until paid in full and then Capex Loans ;
 
(b)           Concurrently with any Asset Disposition of Real Estate, Borrowers
shall prepay, in an amount equal to the Net Proceeds of such disposition, the
Term Loans until paid in full and then Capex Loans;
 
(c)           Concurrently with the receipt of any proceeds of insurance or
condemnation awards paid in respect of any Real Estate, Borrowers shall prepay,
in an amount equal to such proceeds, the Term Loans until paid in full and then
Capex Loans, subject in each case to Section 8.6.2;
 
(d)           Concurrently with any issuance of Equity Interests by a Borrower
(other than in connection with compensation or benefits  paid or provided to
employees, officers or directors), Borrowers shall prepay, in an amount equal to
the net proceeds of such issuance, the Term Loans until paid in full and then
Capex Loans; and

 
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(e)           On the Commitment Termination Date, Borrowers shall prepay all
Term Loans and Capex Loans (unless sooner repaid hereunder).
 
(f)           The existing Section 8.4.2 is deleted in its entirety and the
following is inserted in lieu thereof:
 
8.4.2       Dispositions of Equipment.  No Borrower shall sell, lease or
otherwise dispose of any Equipment, without the prior written consent of Agent,
other than (a) a Permitted Asset Disposition; or (b) replacement of Equipment
that is worn, damaged or obsolete with Equipment of like function and value, if
the replacement Equipment is acquired substantially contemporaneously with such
disposition and is free of Liens other than Permitted Liens (other than a
Purchase Money Lien with respect to Equipment related to a Capex Loan).
 
(g)           The existing Section 8.6.2 is deleted in its entirety and the
following is inserted in lieu thereof:
 
8.6.2           Insurance of Collateral; Condemnation Proceeds.  (a)     Each
Borrower shall maintain insurance with respect to the Collateral, covering
casualty, hazard, theft, malicious mischief, flood and other risks, in amounts,
with endorsements and with insurers (with a Best’s Financial Strength Rating of
at least A_ VII, unless otherwise approved by Agent) reasonably satisfactory to
Agent.  All proceeds under each policy shall be payable to Agent.  From time to
time upon request, Borrowers shall deliver to Agent the originals or certified
copies of its insurance policies and updated flood plain searches.  Unless Agent
shall agree otherwise, each policy shall include reasonably satisfactory
endorsements (i) showing Agent as loss payee; (ii) requiring 30 days prior
written notice to Agent in the event of cancellation of the policy for any
reason whatsoever; and (iii) specifying that the interest of Agent shall not be
impaired or invalidated by any act or neglect of any Borrower or the owner of
the Property, nor by the occupation of the premises for purposes more hazardous
than are permitted by the policy.  If any Borrower fails to provide and pay for
any insurance, Agent may, at its option, but shall not be required to, procure
the insurance and charge Borrowers therefor.  Each Borrower agrees to deliver to
Agent, promptly as rendered, copies of all reports made to insurance
companies.  While no Event of Default exists, Borrowers may settle, adjust or
compromise any insurance claim, as long as the proceeds are delivered to Agent
(and with respect to Real Estate and Equipment related to a Capex Loan, the
terms and amount are reasonably satisfactory to Agent).  If an Event of Default
exists, only Agent shall be authorized to settle, adjust and compromise such
claims.
 
(b)         Any proceeds of insurance (other than proceeds from workers’
compensation, D&O, employee practice insurance or life insurance as to which an
Obligor is not the beneficiary) and any awards arising from condemnation of any
Collateral shall be paid to Agent.  Subject to Section 8.6.2(c), any such
proceeds or awards that relate to (i) Inventory or Equipment other than
Equipment related to a Capex Loan  shall be applied to payment of the Revolver
Loans, and then to any other Obligations outstanding, other than Term Loans and
Capex Loans, (ii) Real Estate shall be applied first to Term Loans, then to
Capex Loans or Revolver Loans (in Agent’s reasonable discretion) and then to
other Obligations, (iii) Equipment related to a Capex Loan shall be applied to
payment of such Capex Loan then to other Capex Loans or Revolver Loans (in
Agent’s reasonable discretion) and then to other Obligations, other than Term
Loans and (iv) life insurance shall be applied to payment of the Revolver Loans,
and then to any other Obligations outstanding, other than Term Loans and Capex
Loans.

 
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(c)          Any insurance proceeds or condemnation awards relating to any loss
or destruction of Real Estate or Equipment may be used by the Borrowers (1) with
the consent of the Agent or (2) if requested by Borrowers in writing within 90
days after Agent’s receipt of such proceeds, to repair or replace such Real
Estate or Equipment (and until so used, the proceeds shall be held by Agent as
Cash Collateral); provided that, in the case of this clause (2), as long as (i)
no Default or Event of Default exists; (ii) such repair or replacement is
promptly undertaken and concluded, in accordance with plans or proposed
applications reasonably satisfactory to Agent; (iii) replacement buildings are
constructed on the sites of the original casualties or other locations in
compliance with this Agreement and are of comparable size, quality and utility
to the destroyed buildings or replacement Equipment is of comparable type,
quality and utility to and of equal or greater value than the damaged Equipment;
(iv) the repaired or replaced Property is free of Liens, other than Permitted
Liens that are not Purchase Money Liens; (v) Borrowers comply with disbursement
procedures for such repair or replacement as Agent may reasonably require; and
(vi) the aggregate amount of such proceeds or awards from any single casualty or
condemnation does not exceed $500,000 in the case of Equipment and $2,000,000 in
the case of Real Estate; provided that, any proceeds of Equipment related to a
Capex Loan may not be so used unless at the time of proposed use of such
proceeds, all of the applicable conditions for making a Capex Loan would be met
(other than the limitation set forth in Section 2.2B.1(d), (e) or (f) or
elsewhere in this Agreement, but solely with respect to this clause (c)).
 
(h)           The existing Section 10.2.3 is deleted in its entirety and the
following is inserted in lieu thereof:

10.2.3    Capital Expenditures.  Make Capital Expenditures in excess of, in the
aggregate during any Fiscal Year, the amount set forth below opposite such
Fiscal Year:
 
Fiscal Year
 
Amount
 
2010
  $ 500,000  
2011
  $ 1,400,000  
2012 and thereafter
  $ 2,500,000  

; provided, however, that if the amount of Capital Expenditures permitted to be
made in any Fiscal Year exceeds the amount actually made, up to 100% of such
excess may be carried forward to the next Fiscal Year.

(i)           The existing Section 14.1.1(c)(iii) is deleted in its entirety and
the following is inserted in lieu thereof:

(iii) extend the Revolver Termination Date, Term Loan Maturity Date or Capex
Loan Termination Date.

 
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(j)           The existing Schedule 1.1 is deleted in its entirety and Schedule
1.1 attached hereto is inserted in lieu thereof.

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

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

(a)           Documentation.  Agent shall have received (i) a counterpart of
this Amendment, duly executed and delivered by Borrowers, Guarantors and all of
the Lenders then party to the Loan Agreement, (ii) duly executed mortgage
modifications or amendments, title policy updates and title endorsements with
respect to each Mortgage relating to property in Florida and legal opinions with
respect to Obligors organized under the laws of Florida regarding the Mortgages
as supplemented by such mortgage modifications, in each case, as Agent may
reasonably require, (iii) a resolution from the Board of Directors of Borrowers
authorizing this Amendment and the transactions contemplated hereby, (iv) a
legal opinion in form and substance reasonably satisfactory to Agent from
counsel to the Obligors and (v) such other documents and certificates as Agent
or its counsel may reasonably request relating to the organization, existence
and good standing of Obligors, the authorization of this Amendment and any other
legal matters relating to any Obligor or the transactions contemplated hereby.

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

Section 3.            REPRESENTATIONS AND WARRANTIES.

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

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

(ii)          Since December 31, 2010, no act, event, condition or circumstance
has occurred or arisen which, individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect.

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

(b)           In order to induce Agent and the Lenders to enter into this
Amendment, each Borrower and each Guarantor represents and warrants to Agent and
the Lenders that this Amendment has been duly authorized, executed and delivered
by it and constitutes its legal, valid and binding obligation.

 
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Section 4.            MISCELLANEOUS

(a)           Ratification and Confirmation of Loan Documents.  Each Borrower
and each Guarantor hereby consents, acknowledges and agrees to the amendments
set forth herein and hereby confirms and ratifies in all respects the Loan
Documents to which such Person is a party (including without limitation, with
respect to each Guarantor, the continuation of its payment and performance
obligations under the guaranties set forth in Section 15 of the Loan Agreement
upon and after the effectiveness of the amendments contemplated hereby and, with
respect to each Borrower and each Guarantor, the continuation and extension of
the liens granted under the Loan Agreement and Security Documents to secure the
Obligations).

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

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

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

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

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

(g)          Enforceability.  Should any one or more of the provisions of this
Amendment be determined to be illegal or unenforceable as to one or more of the
parties hereto, all other provisions nevertheless shall remain effective and
binding on the parties hereto.

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

 
10

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

 
11

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The following parties have caused this Second Amendment to Loan and Security
Agreement to be executed as of the date first written above.

 
BORROWERS:
     
P&F INDUSTRIES, INC.
 
FLORIDA PNEUMATIC MANUFACTURING
 
CORPORATION
 
HY-TECH MACHINE, INC.
 
NATIONWIDE INDUSTRIES, INC.
     
By:
/s/ Joseph A. Molino, Jr.
   
Name:
Joseph A. Molino, Jr.
   
Title:
Vice President
           
GUARANTORS:
     
CONTINENTAL TOOL GROUP, INC.
 
COUNTRYWIDE HARDWARE, INC.
 
EMBASSY INDUSTRIES, INC.
 
GREEN MANUFACTURING, INC.
 
PACIFIC STAIR PRODUCTS, INC.
 
WILP HOLDINGS, INC.
     
By:
/s/ Joseph A. Molino, Jr.
   
Name:
Joseph A. Molino, Jr.
   
Title:
Vice President
           
WOODMARK INTERNATIONAL, L.P.
     
By:
Countrywide Hardware, Inc.
   
By:
/s/ Joseph A. Molino, Jr.
     
Name:
Joseph A. Molino, Jr.
     
Title:
Vice President
 

SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
Signature Page

 
 

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AGENT AND LENDERS:
     
CAPITAL ONE LEVERAGE FINANCE
CORPORATION, as Agent and Lender
     
By:
/s/ Julianne Low
 
Name:
Julianne Low
 
Title:
Vice President

SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
Signature Page

 
 

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SCHEDULE 1.1
to
Loan and Security Agreement

COMMITMENTS OF LENDERS
 
Lender
 
Revolver 
Commitment
   
Term Loan
Commitment
   
Capex Loan
Commitment
   
Total 
Commitments
                           
Capital One Leverage Finance Corporation
  $ 15,910,000.00     $ 6,090,000.00     $ 2,500,000.00     $ 24,500,000.00    
                               
Total
  $ 15,910,000.00     $ 6,090,000.00     $ 2,500,000.00     $ 24,500,000.00  

 
 

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