EXECUTION
      VERSION
 

                


        

      

    

      

      
        

      

    

     

    
      P&F
INDUSTRIES, INC.,

    

    
      FLORIDA
PNEUMATIC MANAFUACTURING CORPORATION,

    

    
      HY-TECH
MACHINE, INC.,

    

    
      and

    

    
      NATIONWIDE
INDUSTRIES, INC.,

    

    
      as
Borrowers,

    

    


    CONTINENTAL
TOOL GROUP, INC.,

    COUNTRYWIDE
HARDWARE, INC.,

    EMBASSY
INDUSTRIES, INC.,

    GREEN
MANUFACTURING, INC.,

    PACIFIC
STAIR PRODUCTS, INC.,

    WILP
HOLDINGS, INC.

    and

    WOODMARK
INTERNATIONAL, L.P.,

    as
Guarantors,

     

    
      
        

      

    

    
 

    
      LOAN
AND SECURITY AGREEMENT

    

    


    
      Dated
as of October 25, 2010

    

    


    
      $22,000,000

       

    

    
      
        

      

    

     

    
      CERTAIN
FINANCIAL INSTITUTIONS,

    

    
      as
Lenders

    

    


    
      and

    

    


    
      CAPITAL
ONE LEVERAGE FINANCE CORPORATION,

    

    
      as
Agent

       

    

    
      
        

      

    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    TABLE OF
CONTENTS

     

    
      
        	 
      	 
      	
                Page

              
	 
      	 
      	 
      
	
                SECTION
      1.

              	
                DEFINITIONS;
      RULES OF CONSTRUCTION

              	
                1

              
	 
      	 
      	 
      
	
                1.1.

              	
                Definitions

              	
                1

              
	
                1.2.

              	
                Accounting
      Terms

              	
                26

              
	
                1.3.

              	
                Uniform
      Commercial Code

              	
                27

              
	
                1.4.

              	
                Certain
      Matters of Construction

              	
                27

              
	 
      	 
      	 
      
	
                SECTION
      2.

              	
                CREDIT
      FACILITIES

              	
                27

              
	 
      	 
      	 
      
	
                2.1.

              	
                Revolver
      Commitment

              	
                27

              
	
                2.2.

              	
                Term
      Loan Commitment

              	
                29

              
	
                2.3.

              	
                Letter
      of Credit Facility

              	
                29

              
	 
      	 
      	 
      
	
                SECTION
      3.

              	
                INTEREST,
      FEES AND CHARGES

              	
                31

              
	 
      	 
      	 
      
	
                3.1.

              	
                Interest

              	
                31

              
	
                3.2.

              	
                Fees

              	
                32

              
	
                3.3.

              	
                Computation
      of Interest, Fees, Yield Protection

              	
                33

              
	
                3.4.

              	
                Reimbursement
      Obligations

              	
                33

              
	
                3.5.

              	
                Illegality

              	
                34

              
	
                3.6.

              	
                Inability
      to Determine Rates

              	
                34

              
	
                3.7.

              	
                Increased
      Costs; Capital Adequacy

              	
                34

              
	
                3.8.

              	
                Mitigation

              	
                35

              
	
                3.9.

              	
                Funding
      Losses

              	
                35

              
	
                3.10.

              	
                Maximum
      Interest

              	
                36

              
	 
      	 
      	 
      
	
                SECTION
      4.

              	
                LOAN
      ADMINISTRATION

              	
                36

              
	 
      	 
      	 
      
	
                4.1.

              	
                Manner
      of Borrowing and Funding Revolver Loans

              	
                36

              
	
                4.2.

              	
                Defaulting
      Lender

              	
                37

              
	
                4.3.

              	
                Number
      and Amount of LIBOR Loans; Determination of Rate

              	
                38

              
	
                4.4.

              	
                Borrower
      Agent

              	
                38

              
	
                4.5.

              	
                One
      Obligation

              	
                38

              
	
                4.6.

              	
                Effect
      of Termination

              	
                38

              
	 
      	 
      	 
      
	
                SECTION
      5.

              	
                PAYMENTS

              	
                39

              
	 
      	 
      	 
      
	
                5.1.

              	
                General
      Payment Provisions

              	
                39

              
	
                5.2.

              	
                Repayment
      of Revolver Loans

              	
                39

              
	
                5.3.

              	
                Repayment
      of Term Loans

              	
                39

              
	
                5.4.

              	
                Payment
      of Other Obligations

              	
                40

              
	
                5.5.

              	
                Marshaling;
      Payments Set Aside

              	
                40

              
	
                5.6.

              	
                Post-Default
      Allocation of Payments

              	
                40

              
	
                5.7.

              	
                Application
      of Payments

              	
                41

              
	
                5.8.

              	
                Loan
      Account; Account Stated

              	
                41

              
	
                5.9.

              	
                Taxes

              	
                42

              
	
                5.10.

              	
                Lender
      Tax Information

              	
                42

              
	
                5.11.

              	
                Nature
      and Extent of Each Borrower’s Liability

              	
                43

              
	 
      	 
      	 
      
	
                SECTION
      6.

              	
                CONDITIONS
      PRECEDENT

              	
                45

              
	 
      	 
      	 
      
	
                6.1.

              	
                Conditions
      Precedent to Initial Loans

              	
                45

              
	
                6.2.

              	
                Conditions
      Precedent to All Credit Extensions

              	
                47

              


      

    


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    
      
        	
                SECTION
      7.

              	
                COLLATERAL

              	
                47

              
	 
      	 
      	 
      
	
                7.1.

              	
                Grant
      of Security Interest

              	
                47

              
	
                7.2.

              	
                Lien
      on Deposit Accounts; Cash Collateral

              	
                48

              
	
                7.3.

              	
                Real
      Estate Collateral

              	
                48

              
	
                7.4.

              	
                Investment
      Property and other Equity Interests

              	
                49

              
	
                7.5.

              	
                Other
      Collateral; New Subsidiaries

              	
                50

              
	
                7.6.

              	
                No
      Assumption of Liability

              	
                50

              
	
                7.7.

              	
                Further
      Assurances

              	
                51

              
	
                7.8.

              	
                Foreign
      Subsidiary Stock

              	
                51

              
	 
      	 
      	 
      
	
                SECTION
      8.

              	
                COLLATERAL
      ADMINISTRATION

              	
                51

              
	 
      	 
      	 
      
	
                8.1.

              	
                Borrowing
      Base Certificates

              	
                51

              
	
                8.2.

              	
                Administration
      of Accounts

              	
                51

              
	
                8.3.

              	
                Administration
      of Inventory

              	
                52

              
	
                8.4.

              	
                Administration
      of Equipment

              	
                53

              
	
                8.5.

              	
                Administration
      of Deposit Accounts

              	
                53

              
	
                8.6.

              	
                General
      Provisions

              	
                53

              
	
                8.7.

              	
                Power
      of Attorney

              	
                54

              
	 
      	 
      	 
      
	
                SECTION
      9.

              	
                REPRESENTATIONS
      AND WARRANTIES

              	
                55

              
	 
      	 
      	 
      
	
                9.1.

              	
                General
      Representations and Warranties

              	
                55

              
	
                9.2.

              	
                Complete
      Disclosure

              	
                60

              
	 
      	 
      	 
      
	
                SECTION
      10.

              	
                COVENANTS
      AND CONTINUING AGREEMENTS

              	
                60

              
	 
      	 
      	 
      
	
                10.1.

              	
                Affirmative
      Covenants

              	
                60

              
	
                10.2.

              	
                Negative
      Covenants

              	
                63

              
	
                10.3.

              	
                Financial
      Covenants

              	
                66

              
	 
      	 
      	 
      
	
                SECTION
      11.

              	
                EVENTS
      OF DEFAULT; REMEDIES ON DEFAULT

              	
                67

              
	 
      	 
      	 
      
	
                11.1.

              	
                Events
      of Default

              	
                67

              
	
                11.2.

              	
                Remedies
      upon Default

              	
                69

              
	
                11.3.

              	
                License

              	
                69

              
	
                11.4.

              	
                Setoff

              	
                69

              
	
                11.5.

              	
                Remedies
      Cumulative; No Waiver

              	
                70

              
	 
      	 
      	 
      
	
                SECTION
      12.

              	
                AGENT

              	
                70

              
	 
      	 
      	 
      
	
                12.1.

              	
                Appointment,
      Authority and Duties of Agent

              	
                70

              
	
                12.2.

              	
                Agreements
      Regarding Collateral and Field Examination Reports

              	
                71

              
	
                12.3.

              	
                Reliance
      By Agent

              	
                72

              
	
                12.4.

              	
                Action
      Upon Default

              	
                72

              
	
                12.5.

              	
                Ratable
      Sharing

              	
                72

              
	
                12.6.

              	
                Indemnification
      of Agent Indemnitees

              	
                72

              
	
                12.7.

              	
                Limitation
      on Responsibilities of Agent

              	
                73

              
	
                12.8.

              	
                Successor
      Agent and Co-Agents

              	
                73

              
	
                12.9.

              	
                Due
      Diligence and Non-Reliance

              	
                74

              
	
                12.10.

              	
                Replacement
      of Certain Lenders

              	
                74

              
	
                12.11.

              	
                Remittance
      of Payments and Collections

              	
                74

              
	
                12.12.

              	
                Agent
      in its Individual Capacity

              	
                75

              
	
                12.13.

              	
                Agent
      Titles

              	
                75

              
	
                12.14.

              	
                Bank
      Product Providers

              	
                75

              
	
                12.15.

              	
                No
      Third Party Beneficiaries

              	
                75

              


      

    


    
      
         


      

      
        (ii)

        
          

        

      

      
         


      

    

     

    
      
        	
                SECTION
      13.

              	
                BENEFIT
      OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS

              	
                75

              
	 
      	 
      	 
      
	
                13.1.

              	
                Successors
      and Assigns

              	
                75

              
	
                13.2.

              	
                Participations

              	
                76

              
	
                13.3.

              	
                Assignments

              	
                76

              
	 
      	 
      	 
      
	
                SECTION
      14.

              	
                MISCELLANEOUS

              	
                77

              
	 
      	 
      	 
      
	
                14.1.

              	
                Consents,
      Amendments and Waivers

              	
                77

              
	
                14.2.

              	
                Indemnity

              	
                78

              
	
                14.3.

              	
                Notices
      and Communications

              	
                78

              
	
                14.4.

              	
                Performance
      of Borrowers’ Obligations

              	
                78

              
	
                14.5.

              	
                Credit
      Inquiries

              	
                79

              
	
                14.6.

              	
                Severability

              	
                79

              
	
                14.7.

              	
                Cumulative
      Effect; Conflict of Terms

              	
                79

              
	
                14.8.

              	
                Counterparts

              	
                79

              
	
                14.9.

              	
                Entire
      Agreement

              	
                79

              
	
                14.10.

              	
                Relationship
      with Lenders

              	
                79

              
	
                14.11.

              	
                No
      Control; No Advisory or Fiduciary Responsibility

              	
                79

              
	
                14.12.

              	
                Confidentiality

              	
                80

              
	
                14.13.

              	
                GOVERNING
      LAW

              	
                80

              
	
                14.14.

              	
                Consent
      to Forum

              	
                80

              
	
                14.15.

              	
                Waivers
      by Obligors

              	
                81

              
	
                14.16.

              	
                Patriot
      Act Notice

              	
                81

              
	 
      	 
      	 
      
	
                SECTION
      15.

              	
                GUARANTY
      OF OBLIGATIONS

              	
                81

              
	 
      	 
      	 
      
	
                15.1.

              	
                Guaranty;
      Limitation of Liability

              	
                81

              
	
                15.2.

              	
                Guaranty
      Absolute

              	
                82

              
	
                15.3.

              	
                Waivers
      and Acknowledgments

              	
                83

              
	
                15.4.

              	
                Subrogation

              	
                84

              


      

    


    
      
         


      

      
        (iii)

        
          

        

      

      
         


      

    


    LIST OF EXHIBITS AND
SCHEDULES

     

    Exhibits:

    Exhibit
A        Revolver Note

    Exhibit
B        Term Loan Note

    Exhibit
C        Assignment and
Acceptance

    Exhibit
D        Assignment Notice

    Exhibit
E         Non-recurring Legal,
Accounting and Consulting Expenses

    Exhibit
F         Form of
Opinion

    


    Schedules:

    Schedule
1.1              Commitments
of Lenders

    Schedule
1.2              Immaterial
Subsidiaries

    Schedule
7.3.1           Owned
Real Estate

    Schedule
7.4.1           Pledged
Interests

    Schedule
8.3.3           Sale on
Consignment or Approval

    Schedule
8.5              Deposit
Accounts

    Schedule
8.6.1           Business
Locations

    Schedule
9.1.4           Names and
Capital Structure

    Schedule
9.1.11         Patents, Trademarks,
Copyrights and Licenses

    Schedule
9.1.14         Environmental
Matters

    Schedule
9.1.15         Restrictive
Agreements

    Schedule
9.1.16         Litigation

    Schedule
9.1.18         Pension
Plans

    Schedule
9.1.20         Labor
Contracts

    Schedule
10.2.2         Existing
Liens

    Schedule
10.2.4         Approved Incentive
Compensation Plan

    Schedule
10.2.17       Existing Affiliate
Transactions

    Schedule
10.2.21       Post-Closing
Deliveries


    
      
         


      

      
        -2-

        
          

        

      

      
         


      

    


    LOAN AND SECURITY
AGREEMENT

     

    This LOAN AND SECURITY AGREEMENT
is dated as of October 25, 2010 (this “Agreement”), among
P&F
INDUSTRIES, INC., a
Delaware corporation (“P&F”), FLORIDA PNEUMATIC
MANAFUACTURING 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”) the
financial institutions party to this Agreement from time to time as lenders
(collectively, “Lenders”), and CAPITAL ONE LEVERAGE FINANCE CORPORATION, a
Delaware corporation, as agent for the Lenders (“Agent”).

    


    RECITALS:

    


    Borrowers
have requested that Lenders provide a credit facility to Borrowers to finance
their mutual and collective business enterprise.  Lenders are willing
to provide the credit facility on the terms and conditions set forth in this
Agreement.

     

    NOW, THEREFORE, for valuable
consideration hereby acknowledged, the parties agree as follows:

     

    SECTION
1.       DEFINITIONS; RULES OF
CONSTRUCTION

     

    1.1.       
Definitions.  As
used herein, the following terms have the meanings set forth
below:

     

    Account: as defined
in the UCC, including all rights to payment for goods sold or leased, or for
services rendered.

     

    Account Debtor: a
Person who is obligated under an Account, Chattel Paper or General
Intangible.

     

    Accounts Formula
Amount: 85% of the Value of Eligible Accounts.

     

    Adjusted EBITDA: for
any period, with respect to the Obligors on a consolidated basis, net income (as
that term is determined in accordance with GAAP) for such period, plus:

     

    
      	
               
      

            	
              (a)

            	
              without
      duplication and to the extent already deducted (and not added back) in
      arriving at such consolidated net income, the sum of the following amounts
      for such period:

            


    

     

    
      	
               
      

            	
              (i)

            	
              the
      amount of depreciation and amortization of fixed and intangible assets
      deducted in determining such net income for such
  period;

            


    

     

    
      	
               
      

            	
              (ii)

            	
              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
      indebtedness (including Debt to Agent and Lenders) paid or payable during
      such period;

            


    

     

    
      	
               
      

            	
              (iii)

            	
              all
      tax liabilities paid or accrued during such
  period;

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    
      	
               
      

            	
              (iv)

            	
              non-cash
      compensation charges and expenses including, but limited to, charges and
      expenses related to the management incentive plans and employee bonus
      plans (to the extent deducted in determining net income for such
      period);

            


    

     

    
      	
               
      

            	
              (v)

            	
              any
      non-cash charges related to impairment of intangible
    assets;

            


    

     

    
      	
               
      

            	
              (vi)

            	
              other
      non-cash charges;

            


    

     

    
      	
               
      

            	
              (vii)

            	
              non-recurring
      legal, accounting and consulting expenses as outlined in Exhibit
    E;

            


    

     

    minus    (b)           without
duplication and to the extent included in arriving at such consolidated net
income, the following amounts for such period:

    


    
      	
               
      

            	
              (i)

            	
              the
      amount of all gains realized during such period upon the sale or other
      disposition of property or assets that are sold or otherwise disposed of
      outside the Ordinary Course of Business and any income for such period
      attributable to the early extinguishment of
  Debt;

            


    

    


    
      	
               
      

            	
              (ii)

            	
              all
      other non-cash gains or extraordinary non-recurring income added in
      determining consolidated net
income.

            


    

    


    Affiliate: with
respect to any Person, another Person that directly, or indirectly through one
or more intermediaries, Controls or is Controlled by or is under common Control
with the Person specified.  “Control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the ability
to exercise voting power, by contract or otherwise.  “Controlling” and
“Controlled”
have correlative meanings.

     

    Agent Indemnitees:
Agent and its officers, directors, employees, Affiliates, agents and
attorneys.

     

    Agent Professionals:
attorneys, accountants, appraisers, auditors, business valuation experts,
environmental engineers or consultants, turnaround consultants, and other
professionals and experts retained by Agent.

     

    Allocable Amount: as
defined in Section
5.11.3.

     

    Anti-Terrorism Laws:
any laws relating to terrorism or money laundering, including OFAC requirements
and the Patriot Act.

     

    Applicable Law: all
laws, rules, regulations and governmental guidelines applicable to the Person,
conduct, transaction, agreement or matter in question, including all applicable
statutory law, common law and equitable principles, and all provisions of
constitutions, treaties, statutes, rules, regulations, orders and decrees of
Governmental Authorities.

     

    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; and (b) 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:


    
      
         


      

      
        -2-

        
          

        

      

      
         


      

    

     

    
      
        
          
            
              
                
                  
                    
                      
                        	
                                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 II 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.  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.

     

    Approved Fund: any
Person (other than a natural person) that is engaged in making, purchasing,
holding or otherwise investing in commercial loans and similar extensions of
credit in its ordinary course of activities, and is administered or managed by a
Lender, an entity that administers or manages a Lender, or an Affiliate of
either.

     

    Asset Disposition: a
sale, lease, license, consignment, transfer or other disposition of Property of
an Obligor, including a disposition of Property in connection with a
sale-leaseback transaction or synthetic lease.

     

    Assignment and
Acceptance: an assignment agreement between a Lender and Eligible
Assignee, in the form of Exhibit C.

     

    Availability: the
Borrowing Base minus the principal balance of all Revolver Loans.

     

    Availability Block:
$300,000 until (i) April 30, 2011, if the audited financial statements and Form
10-K required by Section 10.1.2(a) for
the Fiscal Year ended December 31, 2010 reflect a net loss of not more than
$700,000 from continuing operations (to the extent such net loss is greater than
$700,000, the amount by which such net loss exceeds $700,000 is hereafter
referred to as the “Shortfall Amount”) or
(ii) August 31, 2011, if the unaudited financial statements and Form 10-Q
required by Section
10.1.2(b) for the period ending June 30, 2011 reflect a net profit
(determined on a cumulative basis from January 1, 2011) at least equal to the
Shortfall Amount, excluding at all times in the calculation of net profit or
loss, the profit or loss from the discontinued operations of WMC, or (iii) 60
days after any Fiscal Quarter end (120 days in the case of the Fiscal Year end)
thereafter for which the unaudited (or audited, as the case may be) financial
statements and Form 10-Q (or 10K, as the case may be) required by Section 10.1.2 for
such Fiscal Quarter (or Fiscal Year, if applicable) reflect a net profit
(determined on a cumulative basis from January 1, 2011) at least equal to the
Shortfall Amount, excluding at all times in the calculation of net profit or
loss, the profit or loss from the discontinued operations of WMC.

     

    Availability Reserve:
the sum (without duplication of any other Reserve or items that are otherwise
addressed or excluded through eligibility criteria) of (a) the Rent and Charges
Reserve; (b) the LC Reserve; (c) the Bank Product Reserve; and (d) the aggregate
amount of liabilities at any time (i) secured by Liens upon Collateral that are
senior to Agent’s Liens or (ii) for which Agent and Lenders may be obligated to
third parties in connection with this Agreement for which claims may be
reasonably expected to be asserted against the Collateral, Agent or Lenders (but
imposition of any such reserve shall not waive an Event of Default arising
therefrom).


    
      
         


      

      
        -3-

        
          

        

      

      
         


      

    

     

    Bank Product: any of
the following products, services or facilities extended to any Obligor or
Subsidiary by a Lender or any of its Affiliates: (a) Cash Management Services;
(b) products under Hedging Agreements; (c) commercial credit card and merchant
card services; and (d) other banking products or services as may be requested by
any Borrower or other Obligor, other than Letters of Credit.

     

    Bank Product Debt:
Debt and other obligations of an Obligor relating to Bank Products.

     

    Bank Product Reserve:
the aggregate amount of reserves established by Agent from time to time in its
reasonable discretion in respect of Secured Bank Product
Obligations.

     

    Bankruptcy Code:
Title 11 of the United States Code.

     

    Base Rate: for any
day, a per annum rate equal to the greatest of (a) the Prime Rate for such
day; (b) the annualized rate for 90-day dealer commercial paper which
normally appears in the “Money Rates” section of The Wall Street Journal; and
(c) LIBOR for a 30 day interest period as determined on such day, plus 1.00
%.

     

    Base Rate Loan: any
Loan that bears interest based on the Base Rate.

     

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

     

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

     

    Beneficial
Owner:  without duplication, any Person who, directly or
indirectly, through any contract, arrangement, understanding relationship or
otherwise has or shares (a) voting power, which includes the power to vote, or
to direct the voting of, such security; and/or (b) investment power, which
includes the power to dispose, or to direct the disposition, of such
security.

     

    Board of Governors:
the Board of Governors of the Federal Reserve System.

     

    Borrowed Money: with
respect to any Obligor, without duplication, its (a) Debt that (i) arises from
the lending of money by any Person to such Obligor, (ii) is evidenced by notes,
drafts, bonds, debentures, credit documents or similar instruments, (iii)
accrues interest or is a type upon which interest charges are customarily paid
(excluding trade payables owing in the Ordinary Course of Business), or (iv) was
issued or assumed as full or partial payment for Property; (b) Capital Leases;
(c) reimbursement obligations with respect to letters of credit; and (d)
guaranties of any Debt of the foregoing types owing by another
Person.

     

    Borrower Agent: as
defined in Section
4.4.

     

    Borrowing: a group of
Loans of one Type that are made on the same day or are converted into Loans of
one Type on the same day.

     

    Borrowing Base: on
any date of determination, an amount equal to the lesser of (a) the aggregate
amount of Revolver Commitments, minus the
Availability Reserve, minus the
Availability Block and (b) the sum of the Accounts Formula Amount, plus the Inventory
Formula Amount, plus the Equipment
Formula Amount, minus the Borrowing
Base Reserve, minus the
Availability Block.

     

    Borrowing Base
Certificate: a certificate, in form and substance satisfactory to Agent,
by which Borrowers certify calculation of the Borrowing Base.


    
      
         


      

      
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    Borrowing Base
Reserve:  the sum (without duplication of any other Reserve or
items that are otherwise addressed or excluded through eligibility criteria) of
(a) the Inventory Reserve; (b) the Rent and Charges Reserve; (c) the LC Reserve;
(d) the Bank Product Reserve; (e) the Dilution Reserve; (f) the
aggregate amount of liabilities secured by Liens upon Revolving Credit
Collateral that are senior in priority to Agent’s Liens (but imposition of any
such reserve shall not waive an Event of Default arising therefrom); and
(g) such additional reserves, in such amounts and with respect to such
matters, as Agent in its reasonable credit judgment exercised in good faith may
elect to impose from time to time.

     

    Business Day: any day
other than a Saturday, Sunday or other day on which commercial banks are
authorized to close under the laws of, or are in fact closed in, New York, and
if such day relates to a LIBOR Loan, any such day on which dealings in Dollar
deposits are conducted between banks in the London interbank Eurodollar
market.

     

    Capital Expenditures:
without duplication, all liabilities incurred, expenditures made or payments due
(whether or not made) by a Borrower or Subsidiary for the acquisition of any
fixed assets, or any improvements, replacements, substitutions or additions
thereto with a useful life of more than one year, including the principal
portion of Capital Leases.

     

    Capital Lease: any
lease that is required to be capitalized for financial reporting purposes in
accordance with GAAP.

     

    Capital One: Capital
One, N.A., a national banking association, and its successors and
assigns.

     

    Capital One
Indemnitees: Capital One and its officers, directors, employees,
Affiliates, agents and attorneys.

     

    Cash Collateral: cash
and Cash Equivalents, and any interest or other income earned thereon, that is
delivered to Agent to Cash Collateralize any Obligations.

     

    Cash Collateral
Account: a demand deposit, money market or other account with Agent or an
Affiliate of Agent, which account shall be subject to Agent’s Liens for the
benefit of Secured Parties.

     

    Cash Collateralize:
the delivery of cash to Agent, as security for the payment of Obligations, in an
amount equal to (a) with respect to LC Obligations, 105% of the aggregate LC
Obligations, and (b) with respect to any inchoate, contingent or other
Obligations (including Secured Bank Product Obligations), Agent’s good faith
estimate of the amount due or to become due, including all fees contracted for
and other amounts relating to such Obligations.  “Cash
Collateralization” has a correlative meaning.

     

    Cash Equivalents: (a)
marketable obligations issued or unconditionally guaranteed by, and backed by
the full faith and credit of, the United States government, maturing within 12
months of the date of acquisition; (b) certificates of deposit, time deposits
and bankers’ acceptances maturing within 12 months of the date of acquisition,
and overnight bank deposits, in each case which are issued by Capital One or a
commercial bank organized under the laws of the United States or any state or
district thereof, rated A-1 (or better) by S&P or P-1 (or better) by Moody’s
at the time of acquisition, and (unless issued by a Lender) not subject to
offset rights; (c) repurchase obligations with a term of not more than 30 days
for underlying investments of the types described in clauses (a) and (b) entered
into with any bank meeting the qualifications specified in clause (b); (d)
commercial paper issued by Capital One or rated A-1 (or better) by S&P or
P-1 (or better) by Moody’s, and maturing within nine months of the date of
acquisition; and (e) shares of any money market fund that has substantially all
of its assets invested continuously in the types of investments referred to
above, has net assets of at least $500,000,000 and has the highest rating
obtainable from either Moody’s or S&P.

     

    Cash Management
Services: any services provided from time to time by Capital One,
N.A. or
any of its Affiliates to any Obligor or Subsidiary in connection with operating,
collections, payroll, trust, or other depository or disbursement accounts,
including automated clearinghouse, e-payable, electronic funds transfer, wire
transfer, controlled disbursement, overdraft, depository, information reporting,
lockbox and stop payment services.


    
      
         


      

      
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    CERCLA: the
Comprehensive Environmental Response Compensation and Liability Act (42 U.S.C. §
9601 et seq.).

     

    Change in Law: the
occurrence, after the date hereof, of (a) the adoption or taking effect of any
law, rule, regulation or treaty; (b) any change in any law, rule, regulation or
treaty or in the administration, interpretation or application thereof by any
Governmental Authority; or (c) the making or issuance of any request, guideline
or directive (whether or not having the force of law) by any Governmental
Authority.

     

    Change of Control:
(a) P&F ceases to own and control, beneficially and of record, directly or
indirectly, all Equity Interests in all other Obligors (other than Immaterial
Subsidiaries); (b) the Horowitz Percentage is less than twenty-five percent
(25%); (c) the current Board of Directors of P&F, or any of them, together
with any director approved or nominated by the then majority of the Board of
Directors of P&F, or any of them, does not constitute a majority of the
Board of Directors of P&F; (d) all or substantially all of any Borrower’s
assets are sold or transferred, other than sale or transfer to another Borrower;
or (e) Richard A. Horowitz at any time ceases to be the chief executive officer
of P&F, whether because of death, disability or otherwise, unless the
replacement chief executive officer of P&F appointed by the Board of
Directors of P&F within 120 days is reasonably acceptable to Agent and
Required Lenders.

     

    Claims: all
liabilities, obligations, losses, damages, penalties, judgments, proceedings,
interest, costs and expenses of any kind (including remedial response costs,
reasonable attorneys’ fees and Extraordinary Expenses) at any time (including
after Full Payment of the Obligations, resignation or replacement of Agent, or
replacement of any Lender) incurred by or asserted against any Indemnitee in any
way relating to (a) any Loans, Letters of Credit, Loan Documents, or the use
thereof or transactions relating thereto, (b) any action taken or omitted to be
taken by any Indemnitee in connection with any Loan Documents, (c) the existence
or perfection of any Liens, or realization upon any Collateral, (d) exercise of
any rights or remedies under any Loan Documents or Applicable Law, or (e)
failure by any Obligor to perform or observe any terms of any Loan Document, in
each case including all costs and expenses relating to any investigation,
litigation, arbitration or other proceeding (including an Insolvency Proceeding
or appellate proceedings), whether or not the applicable Indemnitee is a party
thereto.

     

    Closing Date: as
defined in Section
6.1.

     

    Code: the Internal
Revenue Code of 1986.

     

    Collateral: all
Property described in Section
7.1, all Property described in any Security Documents as security for any
Obligations, and all other Property that now or hereafter secures (or is
intended to secure) any Obligations.

     

    Commitment: for any
Lender, the aggregate amount of such Lender’s Revolver Commitment and Term Loan
Commitment.  “Commitments” means
the aggregate amount of all Revolver Commitments and Term Loan
Commitments.

     

    Commitment Letter:
the commitment letter agreement dated as of September 10, 2010, between Agent
and Borrowers.

     

    Commitment Termination
Date: the earliest to occur of (a) the Revolver Termination Date; (b) the
date on which Borrowers terminate the Revolver Commitments pursuant to Section 2.1.4; or (c) the date
on which the Revolver Commitments are terminated pursuant to Section 11.2.


    
      
         


      

      
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    Compliance
Certificate: a certificate, in form and substance satisfactory to Agent,
by which Borrowers (i) certify compliance with Sections 10.2.3 and 10.3, (ii) calculate the
applicable Level for the Applicable Margin and (iii) with the financial
statements required under Section 10.1.2(a) and (b) with respect to a Fiscal
Quarter or Fiscal Year end, calculate Excess Cash Flow for purposes of Section
5.3.2(a) and Section 10.2.8(a) and (b) and with respect to any payment of
Subordinated Debt to be made therewith, certify compliance with the applicable
payment conditions in the applicable Subordination Agreement.

     

    Contingent
Obligation: any obligation of a Person arising from a guaranty, indemnity
or other assurance of payment or performance of any Debt, lease, dividend or
other obligation (“primary obligations”)
of another obligor (“primary obligor”) in
any manner, whether directly or indirectly, including any obligation of such
Person under any (a) guaranty, endorsement, co-making or sale with recourse of
an obligation of a primary obligor; (b) obligation to make take-or-pay or
similar payments regardless of nonperformance by any other party to an
agreement; and (c) arrangement (i) to purchase any primary obligation or
security therefor, (ii) to supply funds for the purchase or payment of any
primary obligation, (iii) to maintain or assure working capital, equity capital,
net worth or solvency of the primary obligor, (iv) to purchase Property or
services for the purpose of assuring the ability of the primary obligor to
perform a primary obligation, or (v) otherwise to assure or hold harmless the
holder of any primary obligation against loss in respect thereof.  The
amount of any Contingent Obligation shall be deemed to be the stated or
determinable amount of the primary obligation (or, if less, the maximum amount
for which such Person may be liable under the instrument evidencing the
Contingent Obligation) or, if not stated or determinable, the maximum reasonably
anticipated liability with respect thereto.

     

    Countrywide
Lease:  that certain lease agreement dated as of April 29, 2010
by and between Countrywide, as landlord, and Purification Technologies, Inc., as
tenant, as heretofore modified, supplemented or amended.

     

    CWA: the Clean Water
Act (33 U.S.C. §§ 1251 et seq.).

     

    Debt: as applied to
any Person, without duplication, (a) all items that would be included as
liabilities on a balance sheet in accordance with GAAP, including Capital
Leases, but excluding accrued expenses and trade payables incurred and being
paid in the Ordinary Course of Business; (b) all Contingent Obligations; (c) all
reimbursement obligations in connection with letters of credit issued for the
account of such Person; and (d) in the case of an Obligor, the
Obligations.  The Debt of a Person shall include any recourse Debt of
any partnership in which such Person is a general partner or joint venturer
(other than the discontinued operations of WMC).

     

    Default: an event or
condition that, with the lapse of time or giving of notice, would constitute an
Event of Default.

     

    Default Rate: for any
Obligation (including, to the extent permitted by law, interest not paid when
due), 2% plus the interest rate otherwise applicable thereto.

     

    Defaulting Lender:
any Lender that (a) fails to make any payment or provide funds to Agent or any
Borrower as required hereunder or fails otherwise to perform its obligations
under any Loan Document, and such failure is not cured within one Business Day,
(b) has notified a Borrower, Agent or any Lender that it does not intend to
comply with its funding obligations or has made a public statement to that
effect with respect to its funding obligations hereunder or under other
agreements in which it commits to extend credit, (c) has failed, within three
Business Days after request by Agent, to confirm in a manner satisfactory to
Agent that it will comply with its funding obligations, or (d) has, or has a
direct or indirect parent company that has, (i) become the subject of an
Insolvency Proceeding, (ii) had a receiver, conservator, trustee, administrator,
assignee for the benefit of creditors or similar Person charged with
reorganization or liquidation of its business or a custodian appointed for it,
or (iii) taken any action in furtherance of, or indicated its consent to,
approval of or acquiescence in any such proceeding or appointment; provided that
a Lender shall not be a Defaulting Lender solely by virtue of the ownership or
acquisition of any equity interest in that Lender or any direct or indirect
parent company thereof by a Governmental Authority.


    
      
         


      

      
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    Deposit Account Control
Agreements: the Deposit Account control agreements to be executed by each
institution maintaining a Deposit Account (including the Dominion Account) for
an Obligor, in favor of Agent, for the benefit of Secured Parties, as security
for the Obligations.

     

    Derivative Security:
the right to become the Beneficial Owner of any Equity Interest, including any
right to acquire such Equity Interest (a) through the exercise of any option,
warrant or right or similar arrangement; (b) through the conversion of a
security or similar arrangement; (c) pursuant to the power to revoke a trust,
discretionary account or similar arrangement; or (d) pursuant to the automatic
termination of a trust, discretionary account or similar
arrangement.

     

    Dilution Percent: the
percent, determined for Borrowers’ most recent Fiscal Quarter, equal to (a) bad
debt write-downs or write-offs, discounts, returns, promotions, credits, credit
memos and other dilutive items with respect to Accounts, divided by (b) gross
sales.

     

    Dilution Reserve: at
any date of determination, the percentage amount by which the Dilution Percent
exceeds 5% (rounded up to the nearest whole number) times the amount of Eligible
Accounts of the Borrowers.

     

    Distribution: any
declaration or payment of a distribution, interest or dividend on any Equity
Interest of an Obligor (other than payment-in-kind); any distribution, loan,
management fee, advance or repayment of Debt to a holder of Equity Interests of
an Obligor or of an Affiliate of an Obligor; or any purchase, redemption, or
other acquisition or retirement for value of any Equity Interest of an Obligor
or an Affiliate of an Obligor.

     

    Dividend:  as
defined in Section
7.4.3.

     

    Dollars: lawful money
of the United States.

     

    Dominion Account: a
special account established by Borrowers at Capital One, over which Agent has
exclusive control for withdrawal purposes.


    
      
         


      

      
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    Eligible Account: an
Account owing to a Borrower that arises in the Ordinary Course of Business from
the sale of goods, is
payable in Dollars and is deemed by Agent, in its reasonable discretion, to be
an Eligible Account.  Without limiting the foregoing, no Account shall
be an Eligible Account if (a)(i) with respect to Accounts from Sears Holdings
Corp., it is unpaid for more than 30 days
after the original due date, or more than 120 days
after the original invoice date, and (ii) with respect to all other Accounts, it
is unpaid for more than 60 days
after the original due date, or more than 90 days
after the original invoice date; (b) 50% or more of the Accounts owing by the
Account Debtor are not Eligible Accounts under the foregoing clause; (c) when
aggregated with other Accounts owing by the Account Debtor, (i) with respect to
Accounts from Sears Holdings Corp., it exceeds (A) so long as Sears Holdings
Corp. is rated BB- (or better) by Fitch (secured bank facility rating category),
50% of the aggregate Eligible Accounts during the period of September 1 through
November 30 of each year or (B) 40% of the aggregate Eligible Accounts
during all other times and (ii) with respect to all other Accounts,
20% of
the aggregate Eligible Accounts (or such higher percentage as Agent may
establish for the Account Debtor from time to time); (d) it does not conform
with a covenant or representation herein; (e) it is owing by a creditor or
supplier, or is otherwise subject to an offset, counterclaim, dispute,
deduction, discount, recoupment, reserve, defense, chargeback, credit or
allowance (but ineligibility shall be limited to the amount thereof); (f) an
Insolvency Proceeding has been commenced by or against the Account Debtor; or
the Account Debtor has failed, has suspended or ceased doing business, is
liquidating, dissolving or winding up its affairs, or is not Solvent; or the
Borrower is not able to bring suit or enforce remedies against the Account
Debtor through judicial process; (g) the Account Debtor is organized or has its
principal offices or assets outside the United States or Canada; (h) it is owing
by a Government Authority, unless the Account Debtor is the United States or any
department, agency or instrumentality thereof and the Account has been assigned
to Agent in compliance with the Assignment of Claims Act; (i) it is not subject
to a duly perfected, first priority Lien in favor of Agent, or is subject to any
other Lien except Permitted Liens permitted by Section 10.2.2(c); (j) the
goods giving rise to it have not been delivered to and accepted by the Account
Debtor, the services giving rise to it have not been accepted by the Account
Debtor, or it otherwise does not represent a final sale; (k) it is evidenced by
Chattel Paper or an Instrument of any kind, or has been reduced to judgment; (l)
its payment has been extended, the Account Debtor has made a partial payment, or
it arises from a sale on a cash-on-delivery basis; (m) it arises from a sale to
an Affiliate, from a sale on a bill-and-hold, guaranteed sale, sale-or-return,
sale-on-approval, consignment, or other repurchase or return basis, or from a
(direct) sale to a Person for personal, family or household purposes; (n) it
represents a progress billing or retainage, or relates to services for which a
performance, surety or completion bond or similar assurance has been issued; or
(o) it includes a billing for interest, fees or late charges, but ineligibility
shall be limited to the extent thereof.  In calculating delinquent
portions of Accounts under clauses (a) and (b), credit balances more than 90
days old will be excluded.

     

    Eligible Assignee: a
Person that is (a) a Lender, U.S.-based Affiliate of a Lender or Approved Fund;
(b) any other financial institution approved by Agent and Borrower Agent (which
approval by Borrower Agent shall not be unreasonably withheld or delayed, and
shall be deemed given if no objection is made within five Business Days after
notice of the proposed assignment), that is organized under the laws of the
United States or any state or district thereof, has total assets in excess of $5
billion, extends asset-based lending facilities in its ordinary course of
business and whose becoming an assignee would not constitute a prohibited
transaction under Section 4975 of the Code or any other Applicable Law; and (c)
during any Event of Default, any Person acceptable to Agent in its discretion.
None of  the Obligors or any Affiliates of any Obligor shall
be Eligible Assignees.

     

    Eligible
Equipment:  Equipment that is owned by a Borrower and that
Agent, in its reasonable discretion, deems to be Eligible
Equipment.  Without limiting the foregoing, no Equipment shall be
Eligible Equipment unless it (a) is in good condition and is not damaged,
defective, shopworn or otherwise unfit for use and has not been subject to loss
or condemnation; (b) is not obsolete or unmerchantable; (c) meets all standards
imposed by any Governmental Authority, and does not constitute hazardous
materials under any Environmental Law; (d) conforms with the covenants and
representations herein; (e) is subject to Agent’s duly perfected, first priority
Lien, and no other Lien; (f) is within the continental United States, is not in
transit except between locations of Borrowers, and is not consigned to any
Person; (g) is not subject to any warehouse receipt or negotiable Document; (h)
is not subject to any License or other arrangement that restricts such
Borrower’s or Agent’s right to dispose of such Equipment, unless Agent has
received an appropriate Lien Waiver; and (i) is not located on leased premises
or in the possession of a warehouseman, processor, repairman, mechanic, shipper,
freight forwarder or other Person, unless the lessor or such Person has
delivered a Lien Waiver or an appropriate Rent and Charges Reserve has been
established.

     

    If at any
time any Equipment included in the Borrowing Base ceases to be owned by a
Borrower by reason of a sale or disposition thereof or otherwise or is affected
by a material casualty, such Equipment shall be excluded from the Borrowing Base
and the Equipment Formula Amount shall be reduced by the NOLV of such
Equipment.  Such reduction shall be permanent unless such Equipment is
replaced by new Eligible Equipment, or any such Equipment affected by a casualty
is fully restored to the condition it was in prior to such casualty, within
twelve months after such removal from the Borrowing Base.  If
Equipment removed from the Borrowing Base by the operation of this paragraph is
replaced by new Eligible Equipment, the Equipment Formula Amount (after giving
effect to the reduction thereof by the NOLV of the replaced Equipment) shall be
increased by the lesser of (i) the NOLV of the Equipment replaced by such new
Eligible Equipment and (ii) the NOLV of such new Eligible
Equipment.


    
      
         


      

      
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    Eligible In-Transit
Inventory: Inventory owned by a Borrower that would be Eligible Inventory
if it were not subject to a Document and in transit from a foreign location to a
location of the Borrower within the United States, with respect to which the
Borrower maintains accurate and complete accounting and other records in form
satisfactory to Agent and that Agent, in its reasonable discretion, deems to be
Eligible In-Transit Inventory.  Without limiting the foregoing, no
Inventory shall be Eligible In-Transit Inventory unless it (a) is subject to a
Document showing Agent (or, with the consent of Agent, another Person acceptable
to Agent) as consignee, which Document is in the possession of Agent or such
other Person as Agent shall approve; (b) is fully insured in a manner
satisfactory to Agent; (c) has been identified to the applicable sales contract
and title has passed to the Borrower; (d) is not sold by a vendor that has a
right to reclaim, divert shipment of, repossess, stop delivery, claim any
reservation of title or otherwise assert Lien rights against the Inventory, or
with respect to whom any Borrower is in default of any obligations; (e) is
subject to purchase orders and other sale documentation satisfactory to Agent;
(f) is shipped by a common carrier that is not affiliated with the vendor; and
(g) is being handled by a customs broker, freight-forwarder or other handler
that has delivered a Lien Waiver.

     

    Eligible Inventory:
Inventory that is owned by a Borrower and that Agent, in its reasonable
discretion, deems to be Eligible Inventory.  Without limiting the
foregoing, no Inventory shall be Eligible Inventory unless it (a) is finished
goods or raw materials, and not work-in-process, packaging or shipping
materials, labels, samples, display items, bags, replacement parts or
manufacturing supplies; (b) is not held on consignment, nor subject to any
deposit or downpayment; (c) is in new and saleable condition and is not damaged,
defective, shopworn or otherwise unfit for sale; (d) is not slow-moving,
obsolete or unmerchantable, and does not constitute returned or repossessed
goods; (e) meets all standards imposed by any Governmental Authority, and does
not constitute hazardous materials under any Environmental Law; (f) conforms
with the covenants and representations herein; (g) is subject to Agent’s duly
perfected, first priority Lien, and no other Lien; (h) is within the continental
United States, is not in transit except between locations of Borrowers, and is
not consigned to any Person; (i) is not subject to any warehouse receipt or
negotiable Document; (j) is not subject to any License or other arrangement that
restricts such Borrower’s or Agent’s right to dispose of such Inventory, unless
Agent has received an appropriate Lien Waiver; (k) is not located on leased
premises or in the possession of a warehouseman, processor, repairman, mechanic,
shipper, freight forwarder or other Person, unless the lessor or such Person has
delivered a Lien Waiver or an appropriate Rent and Charges Reserve has been
established; and (l) is reflected in the details of a current perpetual
inventory report.

     

    Enforcement Action:
any action to enforce any Obligations or Loan Documents or to exercise any
rights or remedies relating to any Collateral (whether by judicial action,
self-help, notification of Account Debtors, exercise of setoff or recoupment,
exercise of any right to vote or act in an Obligor’s Insolvency Proceeding, or
otherwise).

     

    Environmental
Agreement: each agreement of Obligors with respect to any Real Estate
subject to a Mortgage, pursuant to which Obligors agree to indemnify and hold
harmless Agent and Lenders from liability under any Environmental
Laws.

     

    Environmental Laws:
all Applicable Laws (including all programs, permits and guidance promulgated by
regulatory agencies), relating to public health (but excluding occupational
safety and health, to the extent regulated by OSHA) or the protection or
pollution of the environment, including CERCLA, RCRA and CWA.


    
      
         


      

      
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    Environmental Notice:
a notice (whether written or oral) from any Governmental Authority or other
Person of any possible noncompliance with, investigation of a possible violation
of, litigation relating to, or potential fine or liability under any
Environmental Law, or with respect to any Environmental Release, environmental
pollution or hazardous materials, including any complaint, summons, citation,
order, claim, demand or request for correction, remediation or
otherwise.

     

    Environmental
Release: a release as defined in CERCLA or under any other Environmental
Law.

     

    Equipment Formula
Amount:  the lesser of (a) $1,339,000 and (b) 85% of the NOLV
of Eligible Equipment, which amount shall be reduced in each case on December 1,
2010 and on the first day of each month thereafter by $22,316.67, such
reductions to be permanent and cumulative.

     

    Equity Interest: the
interest of any (a) shareholder in a corporation; (b) partner in a partnership
(whether general, limited, limited liability or joint venture); (c) member in a
limited liability company; or (d) other Person having any other form of equity
security or ownership interest, including any Derivative
Securities.

     

    ERISA: the Employee
Retirement Income Security Act of 1974.

     

    ERISA Affiliate: any
trade or business (whether or not incorporated) under common control with an
Obligor within the meaning of Section 414(b) or (c) of the Code (and
Sections 414(m) and (o) of the Code for purposes of provisions relating to
Section 412 of the Code).

     

    ERISA Event: (a) a
Reportable Event with respect to a Pension Plan; (b) the withdrawal of any
Obligor or ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA
during a plan year in which such entity was a “substantial employer” (as defined
in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as
such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial
withdrawal by any Obligor or ERISA Affiliate from a Multiemployer Plan or
notification that a Multiemployer Plan is in reorganization; (d) the filing of a
notice of intent to terminate, the treatment of a Pension Plan amendment as a
termination under Section 4041 or 4041A of ERISA, or the commencement of
proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e)
the institution by the PBGC of proceedings to terminate a Pension Plan; (f) any
Obligor or ERISA Affiliate fails to meet any funding obligations with respect to
any Pension Plan or Multiemployer Plan, or requests a minimum funding waiver;
(g) any event or condition which constitutes grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
Pension Plan; (h) the determination that any Pension Plan is considered an
at-risk plan or a plan in endangered or critical status within the meaning of
Sections 430, 431 and 432 of the Code or Sections 303, 304 and 305 of ERISA; or
(i) the imposition of any liability under Title IV of ERISA, other than for PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon any Obligor or
ERISA Affiliate.

     

    Event of Default: as
defined in Section
11.

     

    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 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) paid or payable during such period.


    
      
         


      

      
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    Excluded Tax: with
respect to Agent, any Lender, Issuing Bank or any other recipient of a payment
to be made by or on account of any Obligation, (a) taxes imposed on or measured
by its overall net income (however denominated), and franchise taxes imposed on
it (in lieu of net income taxes), by the jurisdiction (or any political
subdivision thereof) under the laws of which such recipient is organized or in
which its principal office is located or, in the case of any Lender, in which
its applicable Lending Office is located; (b) any branch profits taxes imposed
by the United States or any similar tax imposed by any other jurisdiction in
which Borrower Agent is located; (c) any backup withholding tax required by the
Code to be withheld from amounts payable to a Lender that has failed to comply
with Section 5.10; (d)
in the case of a Foreign Lender, any United States withholding tax that is (i)
required pursuant to laws in force at the time such Lender becomes a Lender (or
designates a new Lending Office) hereunder, or (ii) attributable to such
Lender’s failure or inability (other than as a result of a Change in Law) to
comply with Section
5.10, except to the extent that such Foreign Lender (or its assignor, if
any) was entitled, at the time of designation of a new Lending Office (or
assignment), to receive additional amounts from Obligors with respect to such
withholding tax; and (e) taxes imposed on it by reason of Section 1471 or 1472
of the Code.

     

    Existing Subordinated
Debt: the Hy-Tech Seller Debt, the RAH Debt and the Schorr
Debt.

     

    Extraordinary
Expenses: all costs, expenses or advances that Agent may incur during a
Default or Event of Default, or during the pendency of an Insolvency Proceeding
of an Obligor, including those relating to (a) any audit, inspection,
repossession, storage, repair, appraisal, insurance, manufacture, preparation or
advertising for sale, sale, collection, or other preservation of or realization
upon any Collateral; (b) any action, arbitration or other proceeding (whether
instituted by or against Agent, any Lender, any Obligor, any representative of
creditors of an Obligor or any other Person) in any way relating to any
Collateral (including the validity, perfection, priority or avoidability of
Agent’s Liens with respect to any Collateral), Loan Documents, Letters of Credit
or Obligations, including any lender liability or other Claims; (c) the
exercise, protection or enforcement of any rights or remedies of Agent in, or
the monitoring of, any Insolvency Proceeding; (d) settlement or satisfaction of
any taxes, charges or Liens with respect to any Collateral; (e) any Enforcement
Action; (f) negotiation and documentation of any modification, waiver, workout,
restructuring or forbearance with respect to any Loan Documents or Obligations;
and (g) Protective Advances.  Such costs, expenses and advances
include transfer fees, Other Taxes, storage fees, insurance costs, permit fees,
utility reservation and standby fees, legal fees, appraisal fees, brokers’ fees
and commissions, auctioneers’ fees and commissions, accountants’ fees,
environmental study fees, wages and salaries paid to employees of any Obligor or
independent contractors in liquidating any Collateral, and travel
expenses.

     

    Facility
Guaranty:  as defined in Section 15.1.

     

    Family
Trust:  in respect of any individual, any trust for the
exclusive benefit of such individual, his/her spouse and lineal descendents, so
long as such individual has the exclusive right to control such
trust.

     

    FASB ASC: the
Accounting Standards Codification of the Financial Accounting Standards
Board.

     

    Federal Funds Rate:
(a) the weighted average of interest rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers on the applicable Business Day (or on the preceding Business Day,
if the applicable day is not a Business Day), as published by the Federal
Reserve Bank of New York on the next Business Day; or (b) if no such rate is
published on the next Business Day, the average rate (rounded up, if necessary,
to the nearest 1/8 of 1%) charged to Capital One on the applicable day on such
transactions, as determined by Agent.


    
      
         


      

      
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    Fiscal Quarter: each
period of three months, commencing on the first day of a Fiscal
Year.

     

    Fiscal Year: the
fiscal year of P&F and its Subsidiaries for accounting and tax purposes,
ending on December 31 of each year.

     

    Fitch: Fitch Ratings
Ltd., a division of Fitch, Inc., and its successors.

     

    Fixed Charge Coverage
Ratio: the ratio, determined on a consolidated basis for P&F and its
Subsidiaries for the most recent Measurement Period, of (a) Adjusted EBITDA
minus Capital
Expenditures (except those financed with Borrowed Money other than Revolver
Loans) and cash taxes paid, to (b) Fixed Charges (other than the Hy-Tech Closing
Date Payment, the RAH Closing Date Payment and the Schorr Closing Date Payment);
provided that
for any Measurement Period that includes any month ended prior to the Closing
Date, Fixed Charges shall be calculated on a pro forma basis as if this
Agreement were in effect as of the first day of such Measurement Period
(including principal payments that would have been required under this Agreement
if it were in effect as of the first day of such Measurement Period and
excluding principal payments made in connection with the Specified Pay-Off Debt
during such Measurement Period).

     

    Fixed Charges: the
sum of interest expense (other than payment-in-kind), principal payments made on
Borrowed Money (other than 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 Distributions made.

     

    FLSA: the Fair Labor
Standards Act of 1938.

     

    Foreign Lender: any
Lender that is organized under the laws of a jurisdiction other than the laws of
the United States, or any state or district thereof.

     

    Foreign Plan: any
employee benefit plan or arrangement (a) maintained or contributed to by any
Obligor or Subsidiary that is not subject to the laws of the United States; or
(b) mandated by a government other than the United States for employees of any
Obligor or Subsidiary.

     

    Foreign Subsidiary: a
Subsidiary that is a “controlled foreign corporation” under Section 957 of the
Code, such that a guaranty by such Subsidiary of the Obligations or a Lien on
the assets of such Subsidiary to secure the Obligations would result in material
tax liability to Borrowers.

     

    Full Payment: with
respect to any Obligations or Guaranteed Obligations, (a) the full and
indefeasible cash payment thereof, including any interest, fees and other
charges accruing during an Insolvency Proceeding (whether or not allowed in the
proceeding); (b) if such Obligations or Guaranteed Obligations are LC
Obligations or inchoate or contingent in nature, Cash Collateralization thereof
(or delivery of a standby letter of credit acceptable to Agent in its
discretion, in the amount of required Cash Collateral); and (c) a release of any
Claims of Obligors against Agent, Lenders and Issuing Bank arising on or before
the payment date.  No Loans shall be deemed to have been paid in full
until all Commitments related to such Loans have expired or been
terminated.

     

    GAAP: generally
accepted accounting principles in effect in the United States from time to
time.

     

    Governmental
Approvals: all authorizations, consents, approvals, licenses and
exemptions of, registrations and filings with, and required reports to, all
Governmental Authorities.

     

    Governmental
Authority: any federal, state, municipal, foreign or other governmental
department, agency, commission, board, bureau, court, tribunal, instrumentality,
political subdivision, or other entity or officer exercising executive,
legislative, judicial, regulatory or administrative functions for or pertaining
to any government or court, in each case whether associated with the United
States, a state, district or territory thereof, or a foreign entity or
government.


    
      
         


      

      
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    Guaranteed
Obligations: as defined in Section 15.1.

     

    Guarantor Payment: as
defined in Section
5.11.3.

     

    Guarantors: as
defined in the first paragraph of this Agreement together with each other Person
who guarantees payment or performance of any Obligations.

     

    Guaranty: each
guaranty agreement, including the guaranties set forth in Section 15, now or hereafter
executed by a Guarantor in favor of Agent.

     

    Hedging Agreement: an
agreement relating to any swap, cap, floor, collar, option, forward, cross right
or obligation, or combination thereof or similar transaction, with respect to
interest rate, foreign exchange, currency, commodity, credit or equity
risk.

     

    Horowitz Family: any
child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law,
sister-in-law, cousin, niece or nephew, including adoptive
relationships.

     

    Horowitz Group:
Richard A. Horowitz, the Horowitz Family and any Family Trust, and all
Affiliates Controlled by any of the foregoing (the terms “Affiliate” and
“Control” for purposes of this definition only having the meaning ascribed to
such terms in Rule 405 promulgated by the U.S. Securities and Exchange
Commission).

     

    Horowitz Percentage:
(a) the sum of all Equity Interests of P&F (including all Derivative
Securities) Beneficially Owned by one or more members of the Horowitz Group
divided by (b) the sum of all issued and outstanding Equity Interests of P&F
(including all Derivative Securities).

     

    Hy-Tech Closing Date
Payment: the payment of up to $573,235 plus accrued interest in the
amount of $111,757.31 on the Closing Date to Hy-Tech Holdings, Inc. in partial repayment of
the Hy-Tech Seller Debt.

     

    Hy-Tech Closing Date Payment
Conditions: (a) the Agent shall establish the Availability Block and (b)
no Default or Event of Default shall have occurred and be continuing immediately
before and after giving effect to payment of the  Hy-Tech Closing Date
Payment.

     

    Hy-Tech Seller Debt:
all outstanding Debt of Hy-Tech to Hy-Tech Holdings, Inc., including all Debt
under that certain Amended and Restated Subordinated Promissory Note dated as of
the date hereof from Hy-Tech in favor of Hy-Tech Holdings, Inc. in an original
principal amount of $573,235.

     

    
      
         


      

      
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    Immaterial
Subsidiary: each Subsidiary of P&F that has been designated by the
Borrower Agent in writing to Agent as a “Designated Immaterial Subsidiary” for
purposes of this Agreement and the other Loan Documents; provided that at no
time shall (a) the total assets of all Immaterial Subsidiaries as of the end of
the most recent Fiscal Quarter for which financial statements have been
delivered pursuant to Section
10.1.2 equal or exceed $250,000; (b) any Immaterial Subsidiary own assets
included in the Borrowing Base; or (c) the gross revenues of all Immaterial
Subsidiaries (including any Immaterial Subsidiaries dissolved, liquidated or
otherwise disposed of during any Measurement Period) for any Measurement Period
equal or exceed $250,000, in each case, as determined in accordance with GAAP;
provided further, however, that (i) an
intercompany receivable owing to Embassy from P&F of approximately
$5,000,000 shall not be considered an “asset” for purposes hereof so long as
such intercompany receivable is not transferred or encumbered (except among
Obligors)  and if so requested by Agent, such intercompany payable
shall be represented by a note and  pledged to Agent pursuant to
documentation reasonably satisfactory to Agent; (ii) notes payable to Woodmark
and Pacific from WMC  in the approximate amount of $7,339,648.78 shall
not be considered “assets” for purposes hereof so long as the realizable value
thereof as reasonably determined by Borrower Agent is less than $250,000 (and if
at any time greater, notice thereof will be given promptly to Agent) and if so
requested by Agent, such notes shall be pledged to Agent pursuant to
documentation reasonably satisfactory to Agent; and (iii) the Equity Interest of
WMC held by Woodmark and Pacific shall not be considered “assets” for purposes
hereof so long as the value reasonably attributed thereto by Borrower Agent is
less than $250,000 (and if at any time greater, notice thereof will be given
promptly to Agent) and if so requested by Agent, such Equity Interests shall be
pledged to Agent pursuant to documentation reasonably satisfactory to
Agent.   As of the Closing Date, the Subsidiaries specified on
Schedule 1.2 are the only Subsidiaries designated by the Borrower Agent as
Immaterial Subsidiaries for purposes of this Agreement and the other Loan
Documents.

     

    Indemnified Taxes:
Taxes other than Excluded Taxes.

     

    Indemnitees: Agent
Indemnitees, Lender Indemnitees, Issuing Bank Indemnitees and Capital One
Indemnitees.

     

    Insolvency
Proceeding: any case or proceeding commenced by or against a Person under
any state, federal or foreign law for, or any agreement of such Person to, (a)
the entry of an order for relief under the Bankruptcy Code, or any other
insolvency, debtor relief or debt adjustment law; (b) the appointment of a
receiver, trustee, liquidator, administrator, conservator or other custodian for
such Person or any part of its Property; or (c) an assignment or trust mortgage
for the benefit of creditors.

     

    Intellectual
Property: all intellectual and similar Property of a Person, including
inventions, designs, patents, copyrights, trademarks, service marks, trade
names, trade secrets, confidential or proprietary information, customer lists,
know-how, software and databases; all embodiments or fixations thereof and all
related documentation, applications, registrations and franchises; all licenses
or other rights to use any of the foregoing; and all books and records relating
to the foregoing.

     

    Intellectual Property
Claim: any claim or assertion (whether in writing, by suit or otherwise)
that an Obligor’s or Subsidiary’s ownership, use, marketing, sale or
distribution of any Inventory, Equipment, Intellectual Property or other
Property violates another Person’s Intellectual Property.

     

    Interest Period: as
defined in Section
3.1.3.

     

    Inventory: as defined
in the UCC, including all goods intended for sale, lease, display or
demonstration; all work in process; and all raw materials, and other materials
and supplies of any kind that are or could be used in connection with the
manufacture, printing, packing, shipping, advertising, sale, lease or furnishing
of such goods, or otherwise used or consumed in a Borrower’s business (but
excluding Equipment).

     

    Inventory Formula
Amount:  the least of (i) $8,000,000; (ii) 60% of the Value of
Eligible Inventory (including Eligible In-Transit Inventory); and (iii) 85% of
the NOLV Percentage of the Value of Eligible Inventory; 
provided, however, that the
Inventory Formula Amount attributable to Eligible Inventory that is Sears
Branded Inventory or to Eligible In-Transit Inventory shall not, in each
case,  exceed $1,000,000.  On the Closing Date, the
Inventory advance rates established pursuant to the Accuval appraisal dated as
of June 30, 2010 are as follows:  Florida Pneumatic, 42.5%;
Nationwide, 41.7% and Hy-Tech, 16.2%.


    
      
         


      

      
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    Inventory Reserve:
reserves established by Agent to reflect factors that may negatively impact the
Value of Inventory, including change in salability, obsolescence, seasonality,
theft, shrinkage, imbalance, change in composition or mix, markdowns and vendor
chargebacks.  On the Closing Date, the Inventory Reserve was
$102,335.

     

    Investment: any
acquisition of all or substantially all assets of a Person; any acquisition of
record or beneficial ownership of any Equity Interests of a Person; or any
advance or capital contribution to or other investment in a Person.

     

    IRS: the United
States Internal Revenue Service.

     

    Issuing Bank: Capital
One or any Affiliate of Capital One, or any replacement appointed pursuant to
Section
2.3.4.

     

    Issuing Bank
Indemnitees: Issuing Bank and its officers, directors, employees,
Affiliates, agents and attorneys.

     

    LC Application: an
application by Borrower Agent to Issuing Bank for issuance of a Letter of
Credit, in form and substance satisfactory to Issuing Bank.

     

    LC Conditions: : the
following conditions necessary for issuance of a Letter of Credit: (a) each
of the conditions set forth in Section 6; (b) after
giving effect to such issuance, total LC Obligations do not exceed the Letter of
Credit Subline, no Overadvance exists and, if no Revolver Loans are outstanding,
the LC Obligations do not exceed the Borrowing Base (without giving effect to
the LC Reserve for purposes of this calculation); (c) the expiration date
of such Letter of Credit is (i) no more than 365 days from issuance
(subject to any automatic renewal provisions in the case of “evergreen” letters
of credit), in the case of standby Letters of Credit, (ii) no more than 120
days from issuance, in the case of documentary Letters of Credit, and
(iii) at least 20 Business Days prior to the Revolver Termination Date;
(d) the Letter of Credit and payments thereunder are denominated in
Dollars; and (e) the purpose and form of the proposed Letter of Credit is
satisfactory to Lender in its reasonable discretion.

     

    LC Documents: all
documents, instruments and agreements (including LC Requests and LC
Applications) delivered by Borrowers or any other Person to Issuing Bank or
Agent in connection with issuance, amendment or renewal of, or payment under,
any Letter of Credit.

     

    LC Obligations: the
sum (without duplication) of (a) all amounts owing by Borrowers for any drawings
under Letters of Credit; (b) the undrawn amount of all outstanding Letters of
Credit; and (c) all fees and other amounts owing with respect to Letters of
Credit.

     

    LC Request: a request
for issuance of a Letter of Credit, to be provided by Borrower Agent to Issuing
Bank, in form satisfactory to Agent and Issuing Bank.

     

    LC Reserve: the
aggregate of all LC Obligations, other than (a) those that have been Cash
Collateralized; and (b) if no Default or Event of Default exists, those
constituting charges owing to the Issuing Bank.

     

    Lender Indemnitees:
Lenders and their officers, directors, employees, Affiliates, agents and
attorneys.

     

    Lenders: as defined
in the preamble to this Agreement, including Agent in its capacity as a provider
of Swingline Loans and any other Person who hereafter becomes a “Lender”
pursuant to an Assignment and Acceptance.

     

    Lending Office: the
office designated as such by the applicable Lender at the time it becomes party
to this Agreement or thereafter by notice to Agent and Borrower
Agent.


    
      
         


      

      
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    Letter of Credit: any
standby or documentary letter of credit issued by Issuing Bank for the account
of a Borrower, or any indemnity, guarantee, exposure transmittal memorandum or
similar form of credit support issued by Agent or Issuing Bank for the benefit
of an Obligor.

     

    Letter of Credit
Subline: $5,000,000.

     

    Leverage Ratio: the
ratio, determined as of the end of any month, of (a) Borrowed Money (other than
Contingent Obligations) of P&F and its Subsidiaries as of the last day of
such month, to (b) Adjusted EBITDA for the Measurement Period then
ending.

     

    LIBOR: for any
Interest Period with respect to a LIBOR Loan, the per annum rate of interest
(rounded up, if necessary, to the nearest 1/8th of 1%), determined by Agent at
approximately 11:00 a.m. (London time) two Business Days prior to commencement
of such Interest Period, for a term comparable to such Interest Period, equal to
(a) the British Bankers Association LIBOR Rate (“BBA LIBOR”), as
published by Reuters (or other commercially available source designated by
Agent); or (b) if BBA LIBOR is not available for any reason, the interest
rate determined by the Agent to be the rate at which Eurodollar deposits in the
approximate amount of the LIBOR Loan would be offered by Agent’s London branch
to major banks in the London interbank Eurodollar market.  If the
Board of Governors imposes a Reserve Percentage with respect to LIBOR deposits,
then LIBOR shall be the foregoing rate, divided by 1 minus the Reserve
Percentage.

     

    LIBOR Loan: each set
of LIBOR Revolver Loans or LIBOR Term Loans having a common length and
commencement of Interest Period.

     

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

     

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

     

    License: any license
or agreement under which an Obligor is authorized to use Intellectual Property
in connection with any manufacture, marketing, distribution or disposition of
Collateral, any use of Property or any other conduct of its
business.

     

    Licensor: any Person
from whom an Obligor obtains the right to use any Intellectual
Property.

     

    Lien: any Person’s
interest in Property securing an obligation owed to, or a claim by, such Person,
whether such interest is based on common law, statute or contract, including
liens, security interests, pledges, hypothecations, statutory trusts,
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases, and other title exceptions and encumbrances
affecting Property.

     

    Lien Waiver: an
agreement, in form and substance satisfactory to Agent, by which (a) for any
material Collateral located on leased premises, the lessor waives or
subordinates any Lien it may have on the Collateral, and agrees to permit Agent
to enter upon the premises and remove the Collateral or to use the premises to
store or dispose of the Collateral; (b) for any Collateral held by a
warehouseman, processor, shipper, customs broker or freight forwarder, such
Person waives or subordinates any Lien it may have on the Collateral, agrees to
hold any Documents in its possession relating to the Collateral as agent for
Agent, and agrees to deliver the Collateral to Agent upon request; (c) for any
Collateral held by a repairman, mechanic or bailee, such Person acknowledges
Agent’s Lien, waives or subordinates any Lien it may have on the Collateral, and
agrees to deliver the Collateral to Agent upon request; and (d) for any
Collateral subject to a Licensor’s Intellectual Property rights, the Licensor
grants to Agent the right, vis-à-vis such Licensor, to enforce Agent’s Liens
with respect to the Collateral, including the right to dispose of it with the
benefit of the Intellectual Property, whether or not a default exists under any
applicable License.


    
      
         


      

      
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    Loan: a Revolver Loan
or Term Loan.

     

    Loan Account: the
loan account established by each Lender on its books pursuant to Section 5.8.

     

    Loan Documents: this
Agreement, Other Agreements and Security Documents.

     

    Loan Year: each 12
month period commencing on the Closing Date and on each anniversary of the
Closing Date.

     

    Margin Stock: as
defined in Regulation U of the Board of Governors.

     

    Material Adverse
Effect: the effect of any event or circumstance that, taken alone or in
conjunction with other events or circumstances, (a) has or could be reasonably
expected to have a material adverse effect on the business, operations,
Properties, prospects or condition (financial or otherwise) of any Borrower or
of the Obligors, taken as a whole, on the value of any material Collateral, on
the enforceability of any Loan Documents, or on the validity or priority of
Agent’s Liens on any Collateral; (b) impairs the ability of any Borrower or of
the Obligors, taken as a whole, to perform any obligations under the Loan
Documents, including repayment of any Obligations; or (c) otherwise impairs the
ability of Agent or any Lender to enforce or collect any Obligations or to
realize upon any Collateral in any material respect.

     

    Material Contract:
any agreement or arrangement to which a Borrower or Subsidiary is party (other
than the Loan Documents) (a) that is deemed to be a material contract under any
securities law applicable to such Obligor, including the Securities Act of 1933;
(b) for which breach, termination, nonperformance or failure to renew could
reasonably be expected to have a Material Adverse Effect; or (c) that relates to
Subordinated Debt, or Debt in an aggregate amount of $100,000 or
more.

     

    Measurement Period:
at any date of determination, the most recently completed twelve consecutive
months of P&F and its Subsidiaries.

     

    Moody’s: Moody’s
Investors Service, Inc., and its successors.

     

    Mortgage: each
mortgage, deed of trust or deed to secure debt 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.

     

    Multiemployer Plan:
any employee benefit plan of the type described in Section 4001(a)(3) of
ERISA, to which any Obligor or ERISA Affiliate makes or is obligated to make
contributions, or during the preceding five plan years, has made or been
obligated to make contributions.

     

    Multiple Employer
Plan:  a Plan which has two or more contributing sponsors
(including an Obligor or any ERISA Affiliate) at least two of whom are not under
common control, as such a plan is described in Section 4064 of
ERISA.

     

    Net Proceeds: with
respect to an Asset Disposition, proceeds (including, when received, any
deferred or escrowed payments) received by a Borrower or Subsidiary in cash from
such disposition, net of (a) reasonable and customary costs and expenses
actually incurred in connection therewith, including legal fees and sales
commissions; (b) amounts applied to repayment of Debt secured by a Permitted
Lien senior to Agent’s Liens on Collateral sold; (c) transfer or similar taxes;
and (d) reserves for indemnities, until such reserves are no longer
needed.


    
      
         


      

      
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    NOLV: the net orderly
liquidation value expected to be realized at an orderly, negotiated sale held
within a reasonable period of time, net of all liquidation expenses, as
determined from the most recent appraisal performed by an appraiser and on terms
satisfactory to Agent

     

    NOLV Percentage: the
net orderly liquidation value of Inventory, expressed as a percentage, expected
to be realized at an orderly, negotiated sale held within a reasonable period of
time, net of all liquidation expenses, as determined from the most recent
appraisal of Borrowers’ Inventory performed by an appraiser and on terms
satisfactory to Agent.

     

    Notes: each Revolver
Note, Term Note or other promissory note executed by an Obligor to evidence any
Obligations.

     

    Notice of Borrowing:
a Notice of Borrowing to be provided by Borrower Agent to request a Borrowing of
Revolver Loans, in form satisfactory to Agent.

     

    Notice of
Conversion/Continuation: a Notice of Conversion/Continuation to be
provided by Borrower Agent to request a conversion or continuation of any Loans
as LIBOR Loans, in form satisfactory to Agent.

     

    Noticed Hedge:
Secured Bank Product Obligations arising under a Hedging Agreement.

     

    Obligations: all (a)
principal of and premium, if any, on the Loans, (b) LC Obligations and other
obligations of Obligors with respect to Letters of Credit, (c) interest,
expenses, fees and other sums payable by Obligors under Loan Documents, (d)
obligations of Obligors under any indemnity for Claims, (e) Extraordinary
Expenses, (f) Secured Bank Product Obligations, and (g) other Debts, obligations
and liabilities of any kind owing by Obligors pursuant to the Loan Documents,
whether now existing or hereafter arising, whether evidenced by a note or other
writing, including interest, fees and expenses accruing or incurred after the
commencement of an Insolvency Proceeding whether allowed or allowable in any
Insolvency Proceeding, whether arising from an extension of credit, issuance of
a letter of credit, acceptance, loan, guaranty, indemnification or otherwise,
and whether direct or indirect, absolute or contingent, due or to become due,
primary or secondary, or joint or several.

     

    Obligor: each
Borrower, Guarantor, or other Person that is liable for payment of any
Obligations or that has granted a Lien in favor of Agent on its assets to secure
any Obligations.

     

    Operating
Account:  the operating/disbursement account established by
Obligors at Capital One, N.A.

     

    Ordinary Course of
Business: the ordinary course of business of any Borrower or Subsidiary,
consistent with past practices and undertaken in good faith and with respect to
compensation, which will include, without limitation, actions contemplated by
any existing plan or agreement or any plan or agreement approved by the Borrower
Agent’s Board of Directors (or committee thereof) and such Board’s independent
compensation consultant reasonably satisfactory to Agent.

     

    Organic Documents:
with respect to any Person, its charter, certificate or articles of
incorporation, bylaws, articles of organization, limited liability agreement,
operating agreement, members agreement, shareholders agreement, partnership
agreement, certificate of partnership, certificate of formation, voting trust
agreement, or similar agreement or instrument governing the formation or
operation of such Person.

     

    OSHA: the
Occupational Safety and Hazard Act of 1970.


    
      
         


      

      
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    Other Agreement: each
Note; Guaranty; LC Document; Commitment Letter; Lien Waiver; Subordination
Agreement; Real Estate Related Document; Borrowing Base Certificate, Compliance
Certificate, financial statement or report delivered hereunder; or other
document, instrument or agreement (other than this Agreement or a Security
Document) now or hereafter delivered by an Obligor or other Person to Agent or a
Lender in connection with any transactions relating hereto.

     

    Other Taxes: all
present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies arising from any payment made under any Loan
Document or from the execution, delivery or enforcement of, or otherwise with
respect to, any Loan Document.

     

    Overadvance: as
defined in Section
2.1.5.

     

    Overadvance Loan: a
Base Rate Revolver Loan made when an Overadvance exists or is caused by the
funding thereof.

     

    Participant: as
defined in Section
13.2.

     

    Patriot Act: the
Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56, 115 Stat. 272
(2001).

     

    Payment Account: the
Agent’s account at Capital One to which all payments on account of the
Obligations are to made or transferred from the Dominion Account, as designated
by the Agent

     

    Payment Item: each
check, draft or other item of payment payable to a Obligor, including those
constituting proceeds of any Collateral.

     

    PBGC: the Pension
Benefit Guaranty Corporation.

     

    Pension
Act:  the Pension Protection Act of 2006.

     

    Pension Funding
Rules:  the rules of the Code and ERISA regarding minimum
required contributions (including any installment payment thereof) to Pension
Plans and set forth in, with respect to plan years ending prior to the effective
date of the Pension Act, Section 412 of the Code and Section 302 of ERISA, each
as in effect prior to the Pension Act and, thereafter, Section 412, 430, 431,
432 and 436 of the Code and Sections 302, 303, 304 and 305 of
ERISA.

     

    Pension Plan: any
employee pension benefit plan (including a Multiple Employer Plan or a
Multiemployer Plan) that is maintained or is contributed to by any Obligor and
any ERISA Affiliate and is either covered by Title IV of ERISA or is subject to
the minimum funding standards under Section 412 of the Code.

     

    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; (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.


    
      
         


      

      
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    Permitted Contingent
Obligations: Contingent Obligations (a) arising from endorsements of
Payment Items for collection or deposit in the Ordinary Course of Business; (b)
arising from Hedging Agreements permitted hereunder; (c) existing on the Closing
Date, and any extension or renewal thereof that does not increase the amount of
such Contingent Obligation when extended or renewed; (d) incurred in the
Ordinary Course of Business with respect to surety, appeal or performance bonds,
or other similar obligations; (e) arising from customary indemnification
obligations in favor of purchasers in connection with dispositions of Equipment
permitted hereunder; (f) arising under the Loan Documents; (g) guaranties of
Permitted Debt; or (h) in an aggregate amount of $50,000 or less at any
time.

     

    Permitted Lien: as
defined in Section
10.2.2.

     

    Permitted Purchase Money
Debt: Purchase Money Debt of Borrowers and Subsidiaries that is unsecured
or secured only by a Purchase Money Lien, as long as the aggregate amount does
not exceed $250,000 at any time and its incurrence does not violate Section 10.2.3.

     

    Person: any
individual, corporation, limited liability company, partnership, joint venture,
joint stock company, land trust, business trust, unincorporated organization,
Governmental Authority or other entity.

     

    Plan: any employee
benefit plan within the meaning of Section 3(3) of ERISA (including a Pension
Plan) maintained for employees of an Obligor or any ERISA Affiliate or any such
Plan to which an Obligor or any ERISA Affiliate is required to contribute on
behalf of any of its employees.

     

    Pledged
Interests:  as defined in Section 7.4.1.

     

    Post Petition
Interest: as defined in Section 15.4.3.

     

    Prime
Rate:  the highest of the rate of interest announced by Capital
One, N.A., Citicorp, N. A. or Bank of America, N.A. from time to time as its
prime rate, which rate may be set by such banks on the basis of various factors,
including its costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans, which may be
priced at, above or below such rate.  Any change in such rate shall
take effect at the opening of business on the day specified in the public
announcement or publication, as applicable, of such change.

     

    Pro Rata: with
respect to any Lender, a percentage (carried out to the ninth decimal place)
determined (a) while Revolver Commitments are outstanding, by dividing the
amount of such Lender’s Revolver Commitment and Term Loan by the aggregate
amount of all Revolver 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.

     

    Properly Contested:
with respect to any obligation of an Obligor, (a) the obligation is subject to a
bona fide dispute regarding amount or the Obligor’s liability to pay; (b) the
obligation is being properly contested in good faith by appropriate proceedings
promptly instituted and diligently pursued; (c) appropriate reserves have been
established in accordance with GAAP; (d) non-payment could not have a Material
Adverse Effect, nor result in forfeiture or sale of any assets of the Obligor;
(e) no Lien is imposed on assets of the Obligor, unless bonded and stayed to the
satisfaction of Agent; and (f) if the obligation results from entry of a
judgment or other order, such judgment or order is stayed pending appeal or
other judicial review.

     

    Property: any
interest in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible.

     

    Protective Advances:
as defined in Section
2.1.6.


    
      
         


      

      
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    Purchase Money Debt:
(a) Debt (other than the Obligations) for payment of any of the purchase price
of fixed assets; (b) Debt (other than the Obligations) incurred within 10 days
before or after acquisition of any fixed assets, for the purpose of financing
any of the purchase price thereof; and (c) any renewals, extensions or
refinancings (but not increases) thereof.

     

    Purchase Money Lien:
a Lien that secures Purchase Money Debt, encumbering only the fixed assets
acquired with such Debt and constituting a Capital Lease or a purchase money
security interest under the UCC.

     

    RAH Closing Date
Payment: the payment of accrued interest, in the aggregate amount of
$10,136.99,  on the Closing
Date to Richard A. Horowitz with respect to the RAH
Debt.

     

    RAH Debt: all
outstanding Debt of Obligors to Richard A. Horowitz, including all Debt under
that certain Amended and Restated Secured Subordinated Promissory Note dated as
of the date hereof, by the Obligors in favor of Richard A. Horowitz in an
original principal amount of $250,000, but excluding all accruals for
compensation and deferred compensation in the Ordinary Course of
Business.

     

    RCRA: the Resource
Conservation and Recovery Act (42 U.S.C. §§ 6991-6991i).

     

    Real Estate: all
right, title and interest (whether as owner, lessor or lessee) in any real
Property or any buildings, structures, parking areas or other improvements
thereon.

     

    Refinancing
Conditions: the following conditions for Refinancing Debt:  (a)
it is in an aggregate principal amount that does not exceed the principal amount
of the Debt being extended, renewed or refinanced; (b) it has a final maturity
no sooner than, a weighted average life no less than, and an interest rate no
greater than, the Debt being extended, renewed or refinanced; (c) it is
subordinated to the Obligations at least to the same extent as the Debt being
extended, renewed or refinanced; (d) the representations, covenants and defaults
applicable to it are no less favorable to Borrowers than those applicable to the
Debt being extended, renewed or refinanced; (e) no additional Lien is granted to
secure it; (f) no additional Person is obligated on such Debt; and (g) upon
giving effect to it, no Default or Event of Default exists.

     

    Refinancing Debt:
Borrowed Money that is the result of an extension, renewal or refinancing of
Debt permitted under Section
10.2.1(b), (d) or
(f).

     

    Reimbursement Date:
as defined in Section
2.3.2.

     

    Related Real Estate
Documents: with respect to any Real Estate subject to a Mortgage, the
following, in form and substance satisfactory to Agent and received by Agent for
review at least 10 days prior to the effective date of the
Mortgage:  (a) a mortgagee title policy (or binder therefor) covering
Agent’s interest under the Mortgage, in a form and amount and by an insurer
acceptable to Agent, which must be fully paid on such effective date; (b) such
assignments of leases, estoppel letters, attornment agreements, consents,
waivers and releases as Agent may require with respect to other Persons having
an interest in the Real Estate; (c) a current, as-built survey of the Real
Estate, containing a metes-and-bounds property description and flood plain
certification, and certified by a licensed surveyor acceptable to Agent; (d)
flood insurance in an amount, with endorsements and by an insurer acceptable to
Agent, if the Real Estate is within a flood plain; (e) a current appraisal of
the Real Estate, prepared by an appraiser acceptable to Agent, and in form and
substance satisfactory to Required Lenders; (f) an environmental assessment,
prepared by environmental engineers acceptable to Agent, and accompanied by such
reports, certificates, studies or data as Agent may reasonably require, which
shall all be in form and substance satisfactory to Required Lenders; and (g) an
Environmental Agreement and such other documents, instruments or agreements as
Agent may reasonably require with respect to any environmental risks regarding
the Real Estate.


    
      
         


      

      
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    Rent and Charges
Reserve: the aggregate of (a) all past due rent and other amounts owing
by an Obligor to any landlord, warehouseman, processor, repairman, mechanic,
shipper, freight forwarder, broker or other Person who possesses any Collateral
or could assert a Lien on any Collateral; and (b) a reserve equal to not more
than three months rent and other charges that could be payable to any such
Person, unless it has executed a Lien Waiver.

     

    Report: as defined in
Section
12.2.3.

     

    Reportable Event: any
of the events set forth in Section 4043(c) of ERISA, other than events for which
the 30 day notice period has been waived.

     

    Representation
Letter:  that certain letter dated as of the date hereof from
Borrowers to Agent relating to the relationship between the Obligors and WMC and
the obligations of WMC.

     

    Required Lenders:
Lenders (subject to Section
4.2) having (a) Revolver Commitments and Term Loans in excess of 50% of
the aggregate Revolver Commitments and Term Loans; and (b) if the Revolver
Commitments have terminated, Loans in excess of 50% of all outstanding
Loans.

     

    Reserve Percentage:
the reserve percentage (expressed as a decimal, rounded up to the nearest 1/8th
of 1%) applicable to member banks under regulations issued from time to time by
the Board of Governors for determining the maximum reserve requirement
(including any emergency, supplemental or other marginal reserve requirement)
with respect to Eurocurrency funding (currently referred to as “Eurocurrency
liabilities”).

     

    Restricted
Investment: any Investment by an Obligor or Subsidiary, other than (a)
Investments in Subsidiaries to the extent existing on the Closing Date; (b) Cash
Equivalents that are subject to Agent’s Lien and control, pursuant to
documentation in form and substance satisfactory to Agent; (c) loans and
advances permitted under Section 10.2.7 and (d) to the
extent constituting Distributions, Distributions permitted under Section 10.2.4.

     

    Restrictive
Agreement: an agreement (other than a Loan Document) that conditions or
restricts the right of any Borrower, Subsidiary or other Obligor to incur or
repay Borrowed Money, to grant Liens on any assets, to declare or make
Distributions, to modify, extend or renew any agreement evidencing Borrowed
Money, or to repay any intercompany Debt or to perform any of its obligations
hereunder.

     

    Revolver Commitment:
for any Lender, its obligation to make Revolver Loans and to participate in LC
Obligations 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.  “Revolver Commitments”
means the aggregate amount of such commitments of all Lenders in an aggregate
amount up to $15,910,000.

     

    Revolver Loan: a loan
made pursuant to Section
2.1, and any Swingline Loan, Overadvance Loan or Protective
Advance.

     

    Revolver Note: a
promissory note to be executed by Borrowers in favor of a Lender in the form of
Exhibit A, which shall
be in the amount of such Lender’s Revolver Commitment and shall evidence the
Revolver Loans made by such Lender.

     

    Revolver Termination
Date: October 25, 2013.

     

    Royalties: all
royalties, fees, expense reimbursement and other amounts payable by a Borrower
under a License.


    
      
         


      

      
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    S&P: Standard
& Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc.,
and its successors.

     

    Schorr Closing Date
Payment: the payment of accrued interest, in the aggregate amount of
$20,273.97,  on the Closing
Date to Marc Schorr with respect to the
Schorr Debt.

     

    Schorr Debt: all
outstanding Debt of Obligors to Marc Schorr, including all Debt under that
certain Amended and Restated Secured Subordinated Promissory Note dated as of
the date hereof, by the Obligors in favor of Marc Schorr in an original
principal amount of $500,000.

     

    Sears Branded
Inventory: all Inventory of the Obligors that is marked or labeled with a
trade name, trademark, logo, service mark or other mark or name owned or
licensed by Sears Roebuck and Co. or its Affiliates.

     

    Sears Supply
Agreement:  that certain Supply Agreement For Compressors and
Pneumatic Tools dated as of January 1, 2006, between Sears Roebuck and Co. and
Florida Pneumatic, as amended and in effect on the date hereof.

     

    Secured Bank Product
Obligations: Bank Product Debt owing to a Secured Bank Product Provider,
provided that ,
in the case of any Secured Bank Product Provider other than Capital One and its
Affiliates, the maximum amount of such Secured Bank Product Obligations shall
not exceed the amount specified by such provider in writing to Agent, which
amount may be established or increased (by further written notice to Agent from
time to time) as long as no Default or Event of Default exists and establishment
of a Bank Product Reserve for such amount and all other Secured Bank Product
Obligations would not result in an Overadvance.

     

    Secured Bank Product
Provider: (a) Agent, Capital One or any of their respective Affiliates;
and (b) any Lender or Affiliate of a Lender that is provides a Bank Product,
provided, however, in the case
of this clause (b), such Lender delivers written notice to Agent, in form and
substance satisfactory to Agent, by the later of the Closing Date or 10 days
following the entering into or creation of a Bank Product, (i) describing the
Bank Product and setting forth the maximum amount of the related Secured Bank
Product Obligations (subject to subsequent increase or decrease as set forth in
the definition thereof) which is to be secured by the Collateral and the
methodology to be used in calculating such amount, and (ii) agreeing to be bound
by Section
12.14.

     

    Secured Parties:
Agent, Issuing Bank, Lenders and Secured Bank Product Providers.

     

    Security Documents:
the Mortgages, the Environmental Agreement, Trademark
Security Agreements, Deposit Account Control Agreements, any agreement creating
or perfecting rights in Cash Collateral pursuant to the provisions of this
Agreement and
all other documents, instruments and agreements now or hereafter securing (or
given with the intent to secure) any Obligations.

     

    Senior Officer: the
chairman of the board, president, chief executive officer or chief financial
officer of a Borrower or, if the context requires, an Obligor.

     

    Settlement Report: a
report delivered by Agent to Lenders summarizing the Revolver Loans and
participations in LC Obligations outstanding as of a given settlement date,
allocated to Lenders on a Pro Rata basis in accordance with their Revolver
Commitments.


    
      
         


      

      
        -24-

        
          

        

      

      
         


      

    


    Solvent: as to any
Person, such Person (a) owns Property whose fair salable value is greater than
the amount required to pay all of its debts (including contingent, subordinated,
unmatured and unliquidated liabilities); (b) owns Property whose present fair
salable value (as defined below) is greater than the probable total liabilities
(including contingent, subordinated, unmatured and unliquidated liabilities) of
such Person as they become absolute and matured; (c) is able to pay all of its
debts as they mature; (d) has capital that is not unreasonably small for its
business and is sufficient to carry on its business and transactions and all
business and transactions in which it is about to engage; (e) is not “insolvent”
within the meaning of Section 101(32) of the Bankruptcy Code; and (f) has not
incurred (by way of assumption or otherwise) any obligations or liabilities
(contingent or otherwise) under any Loan Documents, or made any conveyance in
connection therewith, with actual intent to hinder, delay or defraud either
present or future creditors of such Person or any of its
Affiliates.  “Fair salable value”
means the amount that could be obtained for assets within a reasonable time,
either through collection or through sale under ordinary selling conditions by a
capable and diligent seller to an interested buyer who is willing (but under no
compulsion) to purchase.

     

    Specified Pay-Off
Debt: all outstanding Debt of any Obligor to (a) Citibank, N.A. and HSBC
Bank USA, National Association, including all Debt under that certain Credit
Agreement dated as of June 30, 2004 among Obligors, Citibank, N.A. and HSBC Bank
USA, National Association, as amended, and (b) Wells Fargo
Bank, National Association, including all Debt under that certain Promissory
Note in the original principal amount of $2,024,000 dated as of May 24, 2002, as
amended, and under that certain Promissory Note in the original principal amount
of $1,800,000 dated as of February 26, 1999, as amended.

     

    Subordinated Debt:
(i) the Existing Subordinated Debt and (ii) unsecured Debt incurred by an
Obligor that is expressly subordinate and junior in right of payment to Full
Payment of all Obligations, and is on terms (including maturity, interest, fees,
repayment, covenants and subordination) satisfactory to Agent.

     

    Subordination
Agreements: (a) the Subordination Agreement of even date herewith,
between Richard A. Horowitz and Agent, relating to the RAH Debt, (b) the
Subordination Agreement of even date herewith, between Marc Schorr and Agent,
relating to the Schorr Debt, and (c) the Subordination Agreement of even date
herewith, between Hy-Tech Holdings, Inc. and Agent, relating to
the Hy-Tech Seller Debt.

     

    Subsidiary: any
entity (other than WMC) at least 50% of whose voting securities or Equity
Interests is owned by a Borrower or any combination of Borrowers (including
indirect ownership by a Borrower through other entities in which the Borrower
directly or indirectly owns 50% of the voting securities or Equity
Interests).

     

    Swingline Loan: any
Borrowing of Base Rate Revolver Loans funded with Agent’s funds, until such
Borrowing is settled among Lenders or repaid by Borrowers.

     

    Tangible Net Worth:
as of any date of determination, for P&F and its Subsidiaries on a
consolidated basis, consolidated shareholders’ equity of P&F and its
Subsidiaries on that date as determined in accordance with GAAP minus intangible
assets of P&F and its Subsidiaries on that date minus deferred tax
assets of P&F and its Subsidiaries on that date plus, to the extent
not otherwise included, $12,838,159 representing the accrual related to the WMC
discontinued operations minus, to the extent
otherwise included, assets of WMC or relating to the discontinued operations of
WMC plus
Subordinated Debt on that date.

     

    Taxes: all present or
future taxes, levies, imposts, duties, deductions, withholdings (including
backup withholding), assessments, fees or other charges imposed by any
Governmental Authority, including any interest, additions to tax or penalties
applicable thereto.

     

    Term Loan: a loan
made pursuant to Section
2.2.


    
      
         


      

      
        -25-

        
          

        

      

      
         


      

    

     

    Term Loan Commitment:
for any Lender, the obligation of such Lender to make a Term Loan hereunder, up
to the principal amount shown on Schedule
1.1.  “Term Loan
Commitments” means the aggregate amount of such commitments of all
Lenders in an aggregate amount up to $6,090,000.

     

    Term Loan Maturity
Date: October 25, 2013.

     

    Term Note: a
promissory note to be executed by Borrowers in favor of a Lender in the form of
Exhibit B, which shall
be in the amount of such Lender’s Term Loan Commitment and shall evidence the
Term Loan made by such Lender.

     

    Trademark Security
Agreement: each trademark security agreement pursuant to which an Obligor
grants to Agent, for the benefit of Secured Parties, a Lien on such Obligor’s
interests in trademarks, as security for the Obligations.

     

    Transferee: any
actual or potential Eligible Assignee, Participant or other Person acquiring an
interest in any Obligations.

     

    Trigger Period: the
period (a) commencing on the day that a Default or Event of Default occurs, or
Availability is less than $1,500,000 at any time; and (b) continuing until,
during the preceding 30 consecutive days, no Event of Default has existed and
Availability has been greater than $1,500,000 at all times.

     

    Type: any type of a
Loan (i.e., Base Rate Loan or LIBOR Loan) that has the same interest option and,
in the case of LIBOR Loans, the same Interest Period.

     

    UCC: the Uniform
Commercial Code as in effect in the State of New York or, when the laws of any
other jurisdiction govern the perfection or enforcement of any Lien, the Uniform
Commercial Code of such jurisdiction.

     

    Unused Line Fee
Percentage: a per annum rate equal to (a) 0.75%, if the average daily
balance of Revolver Loans and stated amount of Letters of Credit was 50% or less
of the Revolver Commitments during the preceding calendar month, or (b) 0.50%,
if such average daily balance was more than 50% of the Revolver Commitments
during the preceding calendar month.

     

    Upstream Payment: a
Distribution by a Subsidiary of a Borrower to such Borrower.

     

    Value: (a) for
Inventory (other than Eligible In-Transit Inventory), its value determined on
the basis of the lower of cost or market, calculated on a first-in, first-out
basis, and excluding any portion of cost attributable to intercompany profit
among Borrowers and their Affiliates; (b) for Eligible In-Transit Inventory, its
value determined on the basis of FOB (as defined in Incoterms 2000 by the
International Chamber of Commerce) at the point of shipment; and (c) for an
Account, its face amount, net of any returns, rebates, discounts (calculated on
the shortest terms), credits, allowances or Taxes (including sales, excise or
other taxes) that have been or could be claimed by the Account Debtor or any
other Person.

     

    WMC:  WM
Coffman LLC, a Delaware limited liability company, now known as Old Stairs Co
LLC.

     

    1.2.      Accounting
Terms.  Under
the Loan Documents (except as otherwise specified herein), all accounting terms
shall be interpreted, all accounting determinations shall be made, and all
financial statements shall be prepared, in accordance with GAAP applied on a
basis consistent with the most recent audited financial statements of Borrowers
delivered to Agent before the Closing Date and using the same inventory
valuation method as used in such financial statements, except for any change
required or permitted by GAAP if Borrowers’ certified public accountants concur
in such change, the change is disclosed to Agent, and Section 10.3 is amended in a
manner satisfactory to Required Lenders to take into account the effects of the
change.


    
      
         


      

      
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    1.3.     
 Uniform
Commercial Code.  As
used herein, the following terms are defined in accordance with the UCC in
effect in the State of New York from time to time:  “Chattel Paper,”
“Commercial Tort Claim,” “Deposit Account,” “Document,” “Equipment,” “General
Intangibles,” “Goods,” “Instrument,” “Investment Property,” “Letter-of-Credit
Right” and “Supporting Obligation.”

     

    1.4.      
Certain Matters of
Construction.  The
terms “herein,” “hereof,” “hereunder” and other words of similar import refer to
this Agreement as a whole and not to any particular section, paragraph or
subdivision.  Any pronoun used shall be deemed to cover all
genders.  In the computation of periods of time from a specified date
to a later specified date, “from” means “from and including,” and “to” and
“until” each mean “to but excluding.”  The terms “including” and
“include” shall mean “including, without limitation” and, for purposes of each
Loan Document, the parties agree that the rule of ejusdem generis shall not be
applicable to limit any provision.  Section titles appear as a matter
of convenience only and shall not affect the interpretation of any Loan
Document.  All references to (a) laws or statutes include all related
rules, regulations, interpretations, amendments and successor provisions; (b)
any document, instrument or agreement include any amendments, waivers and other
modifications, extensions or renewals (to the extent permitted by the Loan
Documents); (c) any section mean, unless the context otherwise requires, a
section of this Agreement; (d) any exhibits or schedules mean, unless the
context otherwise requires, exhibits and schedules attached hereto, which are
hereby incorporated by reference; (e) any Person include successors and assigns;
(f) time of day mean time of day at Agent’s notice address under Section 14.3.1; or (g)
discretion of Agent, Issuing Bank or any Lender mean the sole and absolute
discretion of such Person.  All calculations of Value, fundings of
Loans, issuances of Letters of Credit and payments of Obligations shall be in
Dollars and, unless the context otherwise requires, all determinations
(including calculations of Borrowing Base and financial covenants) made from
time to time under the Loan Documents shall be made in light of the
circumstances existing at such time.  Borrowing Base calculations
shall be consistent with historical methods of valuation and calculation, and
otherwise satisfactory to Agent (and not necessarily calculated in accordance
with GAAP).  Obligors shall have the burden of establishing any
alleged negligence, misconduct or lack of good faith by Agent, Issuing Bank or
any Lender under any Loan Documents.  No provision of any Loan
Documents shall be construed against any party by reason of such party having,
or being deemed to have, drafted the provision.  Whenever the phrase
“to the best of Borrowers’ knowledge” or words of similar import are used in any
Loan Documents, it means actual knowledge of a Senior Officer, or knowledge that
a Senior Officer would have obtained if he or she had engaged in good faith and
diligent performance of his or her duties, including reasonably specific
inquiries of employees or agents and a good faith attempt to ascertain the
matter to which such phrase relates.

     

    SECTION
2.      CREDIT FACILITIES

     

    2.1.     
 Revolver
Commitment.

     

    2.1.1.        Revolver
Loans.  Each
Lender agrees, severally on a Pro Rata basis up to its Revolver Commitment, on
the terms set forth herein, to make Revolver Loans to Borrowers from time to
time through the Commitment Termination Date.  The Revolver Loans may
be repaid and reborrowed as provided herein.  In no event shall
Lenders have any obligation to honor a request for a Revolver Loan if the unpaid
balance of Revolver Loans outstanding at such time (including the requested
Loan) would exceed the Borrowing Base.

     

    2.1.2.        Revolver
Notes.  The
Revolver Loans made by each Lender and interest accruing thereon shall be
evidenced by the records of Agent and such Lender.  At the request of
any Lender, Borrowers shall deliver a Revolver Note to such Lender.

     

    
      
        
        

      

      
        -27-

        
          

        

      

      
        
        

      

    

     

    2.1.3.        Use of
Proceeds.  The
proceeds of Revolver Loans shall be used by Borrowers solely (a) for the
repayment of the Specified Pay-Off Debt on the Closing Date; (b) at the
Borrowers’ option, so long as the Hy-Tech Closing Date Payment Conditions are
satisfied, the Hy-Tech Closing Date Payment, the RAH Closing Date Payment and
the Schorr Closing Date Payment (in each case, to the extent permitted hereunder
and under the applicable Subordination Agreement) (c) to pay fees and
transaction expenses associated with the closing of this credit facility; (d) to
pay Obligations in accordance with this Agreement; and (e) for working capital
and other lawful corporate purposes of Borrowers.

     

    2.1.4.        Voluntary Reduction or
Termination of Revolver Commitments.

     

    (a)      
   The Revolver Commitments shall terminate on the Revolver
Termination Date, unless sooner terminated in accordance with this
Agreement.  Upon at least 20 Business Days prior written notice to
Agent at any time after the first Loan Year, Borrowers may, at their option,
terminate the Revolver Commitments and this credit facility.  Any
notice of termination given by Borrowers shall be irrevocable.  On the
termination date, Borrowers shall make Full Payment of all
Obligations.

     

    (b)     
    Borrowers may permanently reduce the Revolver
Commitments, on a Pro Rata basis for each Lender, upon at least 20 Business Days
prior written notice to Agent, which notice shall specify the amount of the
reduction and shall be irrevocable once given.  Each reduction shall
be in a minimum amount of $1,000,000, or an increment of $1,000,000 in excess
thereof.

     

    (c)     
    Concurrently with any reduction in or termination of the
Revolver Commitments, for whatever reason (including an Event of Default),
Borrowers shall pay to Agent, for the Pro Rata benefit of Lenders and as
liquidated damages for loss of bargain (and not as a penalty), an amount equal
to (i) if the reduction or termination occurs during the first Loan Year, 1.00%
of the Revolver Commitments being reduced or terminated; and (ii) if it occurs
during the second Loan Year, 0.50% of the Revolver Commitments being reduced or
terminated.  No termination charge shall be payable if termination
occurs on the Revolver Termination Date.

     

    2.1.5.        Overadvances.  If
the aggregate Revolver Loans exceed the Borrowing Base (“Overadvance”) at any
time, the excess amount shall be payable by Borrowers on demand by Agent, but all
such Revolver Loans shall nevertheless constitute Obligations secured by the
Collateral and entitled to all benefits of the Loan Documents.  Unless
its authority has been revoked in writing by Required Lenders, Agent may require
Lenders to honor requests for Overadvance Loans and to forbear from requiring
Borrowers to cure an Overadvance, (a) when no other Event of Default is known to
Agent, as long as (i) the Overadvance does not continue for more than 30
consecutive days (and no Overadvance may exist for at least five consecutive
days thereafter before further Overadvance Loans are required), and (ii) the
Overadvance is not known by Agent to exceed 10% of the Borrowing Base; and (b)
regardless of whether an Event of Default exists, if Agent discovers an
Overadvance not previously known by it to exist, as long as from the date of
such discovery the Overadvance (i) is not increased by more than $1,000,000, and
(ii) does not continue for more than 30 consecutive days.  In no event
shall Overadvance Loans be required that would cause the outstanding Revolver
Loans and LC Obligations to exceed the aggregate Revolver
Commitments.  Any funding of an Overadvance Loan or sufferance of an
Overadvance shall not constitute a waiver by Agent or Lenders of the Event of
Default caused thereby.  In no event shall any Borrower or other
Obligor be deemed a beneficiary of this Section nor authorized to enforce any of
its terms.


    
      
         


      

      
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    2.1.6.        Protective
Advances.  Agent
shall be authorized, in its discretion, at any time that any conditions in Section 6 are not satisfied to
make Base Rate Revolver Loans (“Protective Advances”) (a) up to an aggregate
amount (when combined with any outstanding Overadvance) of $1,000,000
outstanding at any time, if Agent deems such Loans necessary or desirable to
preserve or protect Collateral, or to enhance the collectability or repayment of
Obligations; or (b) to pay any other amounts chargeable to Obligors under any
Loan Documents, including costs, fees and expenses.  Each Lender shall
participate in each Protective Advance on a Pro Rata basis.  Required
Lenders may at any time revoke Agent’s authority to make further Protective
Advances by written notice to Agent.  Absent such revocation, Agent’s
determination that funding of a Protective Advance is appropriate shall be
conclusive.

     

    2.2.       Term Loan
Commitment.

     

    2.2.1.        Term
Loans.  Each
Lender agrees, severally on a Pro Rata basis up to its Term Loan Commitment, on
the terms set forth herein, to make a Term Loan to Borrowers.  The
Term Loans shall be funded by Lenders on the Closing Date.  The Term
Loan Commitment of each Lender shall expire upon the funding by Lenders of the
Term Loans.  Once repaid, whether such repayment is voluntary or
required, Term Loans may not be reborrowed.

     

    2.2.2.        Term
Notes.  The
Term Loan made by each Lender and interest accruing thereon shall be evidenced
by the records of Agent and such Lender.  At the request of any
Lender, Borrowers shall deliver a Term Note to such Lender.

     

    2.3.       Letter of Credit
Facility.

     

    2.3.1.        Issuance of Letters of
Credit.  Issuing
Bank shall issue Letters of Credit from time to time until 30 days prior to the
Revolver Termination Date (or until the Commitment Termination Date, if
earlier), on the terms set forth herein, including the following:

     

    (a)         Each
Borrower acknowledges that Issuing Bank’s issuance of any Letter of Credit is
conditioned upon Issuing Bank’s receipt of a LC Application with respect to the
requested Letter of Credit, as well as such other instruments and agreements as
Issuing Bank may customarily require for issuance of a letter of credit of
similar type and amount.  Issuing Bank shall have no obligation to
issue any Letter of Credit unless (i) Issuing Bank receives a LC Request and LC
Application at least three Business Days prior to the requested date of
issuance; (ii) each LC Condition is satisfied; and (iii) if a Defaulting Lender
exists, such Lender or Borrowers have entered into arrangements satisfactory to
Agent and Issuing Bank to eliminate any funding risk associated with the
Defaulting Lender.  If, in sufficient time to act, Issuing Bank
receives written notice from Required Lenders that any LC Condition has not been
satisfied, Issuing Bank shall not issue the requested Letter of
Credit.  Prior to receipt of any such notice, Issuing Bank shall not
be deemed to have knowledge of any failure of LC Conditions.

     

    (b)           Letters
of Credit may be requested by a Borrower only (i) to support obligations of
such Borrower incurred in the Ordinary Course of Business; or (ii) for
other purposes as Agent may approve from time to time in writing.

     

    (c)           Obligors
assume all risks of the acts, omissions or misuses of any Letter of Credit by
the beneficiary.  In connection with issuance of any Letter of Credit,
none of Agent, Issuing Bank or any Lender shall be responsible for the
existence, character, quality, quantity, condition, packing, value or delivery
of any goods purported to be represented by any Documents; any differences or
variation in the character, quality, quantity, condition, packing, value or
delivery of any goods from that expressed in any Documents; the form, validity,
sufficiency, accuracy, genuineness or legal effect of any Documents or of any
endorsements thereon; the time, place, manner or order in which shipment of
goods is made; partial or incomplete shipment of, or failure to ship, any goods
referred to in a Letter of Credit or Documents; any deviation from instructions,
delay, default or fraud by any shipper or other Person in connection with any
goods, shipment or delivery; any breach of contract between a shipper or vendor
and a Borrower; errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex, telecopy, e-mail,
telephone or otherwise; errors in interpretation of technical terms; the
misapplication by a beneficiary of any Letter of Credit or the proceeds thereof;
or any consequences arising from causes beyond the control of Issuing Bank,
Agent or any Lender, including any act or omission of a Governmental
Authority.  The rights and remedies of Issuing Bank under the Loan
Documents shall be cumulative.  Issuing Bank shall be fully subrogated
to the rights and remedies of each beneficiary whose claims against Borrowers
are discharged with proceeds of any Letter of Credit.

     

    
      
        
        

      

      
        -29-

        
          

        

      

      
        
        

      

    

     

    (d)         In
connection with its administration of and enforcement of rights or remedies
under any Letters of Credit or LC Documents, Issuing Bank shall be entitled to
act, and shall be fully protected in acting, upon any certification,
documentation or communication in whatever form believed by Issuing Bank, in
good faith, to be genuine and correct and to have been signed, sent or made by a
proper Person.  Issuing Bank may consult with and employ legal
counsel, accountants and other experts to advise it concerning its obligations,
rights and remedies, and shall be entitled to act upon, and shall be fully
protected in any action taken in good faith reliance upon, any advice given by
such experts.  Issuing Bank may employ agents and attorneys-in-fact in
connection with any matter relating to Letters of Credit or LC Documents, and
shall not be liable for the negligence or misconduct of agents and
attorneys-in-fact selected with reasonable care.

     

    2.3.2.        Reimbursement;
Participations.

     

    (a)         If
Issuing Bank honors any request for payment under a Letter of Credit, Borrowers
shall pay to Issuing Bank, on the same day (“Reimbursement Date”),
the amount paid by Issuing Bank under such Letter of Credit, together with
interest at the interest rate for Base Rate Revolver Loans from the
Reimbursement Date until payment by Borrowers.  The obligation of
Borrowers to reimburse Issuing Bank for any payment made under a Letter of
Credit shall be absolute, unconditional, irrevocable, and joint and several, and
shall be paid without regard to any lack of validity or enforceability of any
Letter of Credit or the existence of any claim, setoff, defense or other right
that Borrowers may have at any time against the beneficiary.  Whether
or not Borrower Agent submits a Notice of Borrowing, Borrowers shall be deemed
to have requested a Borrowing of Base Rate Revolver Loans in an amount necessary
to pay all amounts due Issuing Bank on any Reimbursement Date and each Lender
agrees to fund its Pro Rata share of such Borrowing whether or not the
Commitments have terminated, an Overadvance exists or is created thereby, or the
conditions in Section 6
are satisfied.

     

    (b)         Upon
issuance of a Letter of Credit, each Lender shall be deemed to have irrevocably
and unconditionally purchased from Issuing Bank, without recourse or warranty,
an undivided Pro Rata interest and participation in all LC Obligations relating
to the Letter of Credit.  If Issuing Bank makes any payment under a
Letter of Credit and Borrowers do not reimburse such payment on the
Reimbursement Date, Agent shall promptly notify Lenders and each Lender shall
promptly (within one Business Day) and unconditionally pay to Agent, for the
benefit of Issuing Bank, the Lender’s Pro Rata share of such
payment.  Upon request by a Lender, Issuing Bank shall furnish copies
of any Letters of Credit and LC Documents in its possession at such
time.

     

    (c)         The
obligation of each Lender to make payments to Agent for the account of Issuing
Bank in connection with Issuing Bank’s payment under a Letter of Credit shall be
absolute, unconditional and irrevocable, not subject to any counterclaim,
setoff, qualification or exception whatsoever, and shall be made in accordance
with this Agreement under all circumstances, irrespective of any lack of
validity or unenforceability of any Loan Documents; any draft, certificate or
other document presented under a Letter of Credit having been determined to be
forged, fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect; or the existence of any
setoff or defense that any Obligor may have with respect to any
Obligations.  Issuing Bank does not assume any responsibility for any
failure or delay in performance or any breach by any Borrower or other Person of
any obligations under any LC Documents.  Issuing Bank does not make to
Lenders any express or implied warranty, representation or guaranty with respect
to the Collateral, LC Documents or any Obligor.  Issuing Bank shall
not be responsible to any Lender for any recitals, statements, information,
representations or warranties contained in, or for the execution, validity,
genuineness, effectiveness or enforceability of any LC Documents; the validity,
genuineness, enforceability, collectability, value or sufficiency of any
Collateral or the perfection of any Lien therein; or the assets, liabilities,
financial condition, results of operations, business, creditworthiness or legal
status of any Obligor.

     

    
      
        
        

      

      
        -30-

        
          

        

      

      
        
        

      

    

     

    (d)         No
Issuing Bank Indemnitee shall be liable to any Lender or other Person for any
action taken or omitted to be taken in connection with any LC Documents except
as a result of its actual gross negligence or willful
misconduct.  Issuing Bank shall not have any liability to any Lender
if Issuing Bank refrains from any action under any Letter of Credit or LC
Documents until it receives written instructions from Required
Lenders.

     

    2.3.3.        Cash
Collateral.  If
any LC Obligations, whether or not then due or payable, shall for any reason be
outstanding at any time (a) that an Event of Default exists, (b) that
Availability is less than zero, or (c) after the Commitment Termination Date,
then Borrowers shall, at Issuing Bank’s or Agent’s request, Cash Collateralize
the stated amount of all outstanding Letters of Credit and pay to Issuing Bank
the amount of all other LC Obligations.  Borrowers shall, on demand by Issuing Bank or
Agent from time to time, Cash Collateralize the LC Obligations of any Defaulting
Lender.  If Borrowers fail to provide any Cash Collateral as required
hereunder, Lenders may (and shall upon direction of Agent) advance, as Revolver
Loans, the amount of the Cash Collateral required (whether or not the
Commitments have terminated, an Overadvance exists or the conditions in Section 6 are
satisfied).

     

    2.3.4.        Resignation of Issuing
Bank.  Issuing
Bank may resign at any time upon 10 days written notice to Agent and
Borrowers.  On the effective date of such resignation, Issuing Bank
shall have no further obligation to issue, amend, renew, extend or otherwise
modify any Letter of Credit, but shall continue to have the benefits of Sections 2.3, 12.6 and 14.2 with respect to any
Letters of Credit issued or other actions taken while Issuing
Bank.  Agent shall promptly appoint a replacement Issuing Bank and, as
long as no Default or Event of Default exists, such replacement shall be
reasonably acceptable to Borrowers.

     

    2.3.5.        Conflict.  The
provisions of this Section
2.3 control in the event of any conflict between the specific terms
hereof and any LC Application or other LC Document.

     

    SECTION
3.      INTEREST, FEES AND CHARGES

     

    3.1.       Interest.

     

    3.1.1.        Rates and Payment of
Interest.

     

    (a)           The
Obligations shall bear interest (i) if a Base Rate Loan, at the Base Rate in
effect from time to time, plus the Applicable Margin; (ii) if a LIBOR Loan, at
LIBOR for the applicable Interest Period, plus the Applicable Margin; and (iii)
if any other Obligation (including, to the extent permitted by law, interest not
paid when due), at the Base Rate in effect from time to time, plus the
Applicable Margin for Base Rate Revolver Loans.  Interest shall accrue
from the date the Loan is advanced or the Obligation is incurred or payable,
until paid by Borrowers.  If a Loan is repaid on the same day made,
one day’s interest shall accrue.

     

    (b)           During
an Insolvency Proceeding with respect to any Borrower, or during any other Event
of Default if Agent or Required Lenders in their discretion so elect,
Obligations shall bear interest at the Default Rate (whether before or after any
judgment).  Each Borrower acknowledges that the cost and expense to
Agent and Lenders due to an Event of Default are difficult to ascertain and that
the Default Rate is a fair and reasonable estimate to compensate Agent and
Lenders for this.

     

    
      
        
        

      

      
        -31-

        
          

        

      

      
        
        

      

    

     

    (c)           Interest
accrued on the Loans shall be due and payable in arrears, (i) on the first day
of each month; (ii) on any date of prepayment, with respect to the principal
amount of Loans being prepaid; and (iii) on the Commitment Termination
Date.  Interest accrued on any other Obligations shall be due and
payable as provided in the Loan Documents and, if no payment date is specified,
shall be due and payable on
demand.  Notwithstanding the foregoing, interest accrued at the
Default Rate shall be due and payable on demand.

     

    3.1.2.        Application of LIBOR to
Outstanding Loans.

     

    (a)           Borrowers
may on any Business Day, subject to delivery of a Notice of
Conversion/Continuation, elect to convert any portion of the Base Rate Loans to,
or to continue any LIBOR Loan at the end of its Interest Period as, a LIBOR
Loan.  During any Default or Event of Default, Agent may (and shall at
the direction of Required Lenders) declare that no Loan may be made, converted
or continued as a LIBOR Loan.

     

    (b)           Whenever
Borrowers desire to convert or continue Loans as LIBOR Loans, Borrower Agent
shall give Agent a Notice of Conversion/Continuation, no later than 2:00 p.m. at
least three Business Days before the requested conversion or continuation
date.  Promptly after receiving any such notice, Agent shall notify
each Lender thereof.  Each Notice of Conversion/Continuation shall be
irrevocable, and shall specify the amount of Loans to be converted or continued,
the conversion or continuation date (which shall be a Business Day), and the
duration of the Interest Period (which shall be deemed to be 30 days if not
specified).  If, upon the expiration of any Interest Period in respect
of any LIBOR Loans, Borrowers shall have failed to deliver a Notice of
Conversion/Continuation, they shall be deemed to have elected to convert such
Loans into Base Rate Loans.

     

    3.1.3.        Interest
Periods.  In
connection with the making, conversion or continuation of any LIBOR Loans,
Borrowers shall select an interest period (“Interest Period”) to apply, which
interest period shall be 30, 60 or 90 days; provided, however,
that:

     

    (a)           the
Interest Period shall commence on the date the Loan is made or continued as, or
converted into, a LIBOR Loan, and shall expire 30, 60 or 90 days thereafter, as
applicable;

     

    (b)           if
any Interest Period would expire on a day that is not a Business Day, the period
shall expire on the next Business Day; and

     

    (c)           no
Interest Period shall extend beyond the Revolver Termination Date; and no
Interest Period for a LIBOR Term Loan may be established that would require
repayment before the end of an Interest Period in order to make any scheduled
principal payment on Term Loans.

     

    3.2.       Fees.

     

    3.2.1.        Unused Line
Fee.  Borrowers
shall pay to Agent, for the Pro Rata benefit of Lenders, a fee equal to the
Unused Line Fee Percentage times the amount by which the Revolver Commitments
exceed the average daily balance of Revolver Loans and stated amount of Letters
of Credit during any month.  Such fee shall be payable in arrears, on
the first day of each month and on the Commitment Termination Date.

     

    
      
        
        

      

      
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    3.2.2.        LC Facility Fees.  Borrowers
shall pay (a) to Agent, for the Pro Rata benefit of Lenders, a fee equal to the
Applicable Margin in effect for LIBOR Revolver Loans times the average daily
undrawn amount of Letters of Credit, which fee shall be payable monthly in
arrears, on the first day of each month; (b) to Issuing Bank, for its own
account, a fronting fee equal to 0.250% per annum on the undrawn amount of each
Letter of Credit, which fee shall be payable monthly in arrears, on the first
day of each month; and (c) to Issuing Bank, for its own account, all customary
charges associated with the issuance, amending, negotiating, payment,
processing, transfer and administration of Letters of Credit, which may be
charged to the Loan Account upon incurrence or which charges shall be paid upon
5 Business Days notice thereof.  During an Event of Default, the fee
payable under clause (a) shall be increased by 2% per annum.

     

    3.2.3.        Closing
Fee.  On
the Closing Date, Borrowers shall pay to Agent, for the Pro Rata benefit of
Lenders, a closing fee of $125,225, which shall be paid on the Closing
Date.

     

    3.2.4.        Agent
Fees.  In
consideration of Agent’s syndication of the Commitments and service as Agent
hereunder, Borrowers shall pay to Agent, for its own account, the fees described
in the Commitment Letter.

     

    3.3.       Computation of Interest,
Fees, Yield Protection.  All interest, as
well as fees and other charges calculated on a per annum basis, shall be
computed for the actual days elapsed, based on a year of 360
days.  Each determination by Agent of any interest, fees or interest
rate hereunder shall be final, conclusive and binding for all purposes, absent
manifest error.  All fees shall be fully earned when due and shall not
be subject to rebate, refund or proration.  All fees payable under
Section 3.2 are
compensation for services and are not, and shall not be deemed to be, interest
or any other charge for the use, forbearance or detention of money.  A
certificate as to amounts payable by Borrowers under Section 3.4, 3.6, 3.7, 3.9 or 5.9, submitted to Borrower
Agent by Agent or the affected Lender, as applicable, shall be final, conclusive
and binding for all purposes, absent manifest error, and Borrowers shall pay
such amounts to the appropriate party within 10 days following receipt of the
certificate.

     

    3.4.       Reimbursement
Obligations.  Borrowers shall
reimburse Agent for all Extraordinary Expenses.  Borrowers shall also
reimburse Agent for all legal, accounting, appraisal, consulting, and other
fees, costs and expenses incurred by it in connection with (a) negotiation and
preparation of any Loan Documents, including any amendment or other modification
thereof; (b) administration of and actions relating to any Collateral, Loan
Documents and transactions contemplated thereby, including any actions taken to
perfect or maintain priority of Agent’s Liens on any Collateral, to maintain any
insurance required hereunder or to verify Collateral; and (c) subject to the
limits of Section
10.1.1(b), each inspection, audit or appraisal with respect to any
Obligor or Collateral, whether prepared by Agent’s personnel or a third
party.  All legal, accounting and consulting fees shall be charged to
Borrowers by Agent’s professionals at their regular hourly rates, regardless of
any reduced or alternative fee billing arrangements that Agent, any Lender or
any of their Affiliates may have with such professionals with respect to this or
any other transaction.  If, for any reason (including inaccurate
reporting on financial statements or a Compliance Certificate), it is determined
that a higher Applicable Margin should have applied to a period than was
actually applied, then the proper margin shall be applied retroactively and
Borrowers shall immediately pay to Agent, for the Pro Rata benefit of Lenders,
an amount equal to the difference between the amount of interest and fees that
would have accrued using the proper margin and the amount actually
paid.  All amounts payable by Borrowers under this Section may be
charged to the Loan Account upon incurrence during the continuance of Default or
Event of Default or otherwise, upon 3 days notice thereof.

     

    
      
        
        

      

      
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    3.5.       Illegality.  If any Lender
determines that any Applicable Law has made it unlawful, or that any
Governmental Authority has asserted that it is unlawful, for any Lender or its
applicable Lending Office to make, maintain or fund LIBOR Loans, or to determine
or charge interest rates based upon LIBOR, or any Governmental Authority has
imposed material restrictions on the authority of such Lender to purchase or
sell, or to take deposits of, Dollars in the London interbank market, then, on
notice thereof by such Lender to Agent, (a) any obligation of such Lender
to make or continue LIBOR Loans or to convert Base Rate Loans to LIBOR Loans
shall be suspended and (b) if such notice asserts the illegality of such
Lender making or maintaining Base Rate Loans the interest rate on which is
determined by reference to the LIBOR component of the Base Rate, the interest
rate on which Base Rate Loans of such Lender shall, if necessary to avoid such
illegality, be determined by Agent without reference to the LIBOR component of
Base Rate, in each case until such Lender notifies Agent that the circumstances
giving rise to such determination no longer exist.  Upon delivery of
such notice, (x) Borrowers shall prepay or, if applicable, convert all
LIBOR Loans of such Lender to Base Rate Loans (the interest rate on which Base
Rate Loans of such Lender shall, if necessary to avoid such illegality, be
determined by Agent without reference to the LIBOR component of the Base Rate),
either on the last day of the Interest Period therefor, if such Lender may
lawfully continue to maintain such LIBOR Loans to such day, or immediately, if
such Lender may not lawfully continue to maintain such LIBOR Loans and
(y) if such notice asserts the illegality of such Lender determining or
charging interest rates based upon LIBOR, Agent shall, during the period of such
suspension, compute the Base Rate applicable to such Lender without reference to
the LIBOR component thereof until Agent is advised in writing by such Lender
that it is no longer illegal for such Lender to determine or charge interest
rates based upon LIBOR.  Upon any such prepayment or conversion,
Borrowers shall also pay accrued interest on the amount so prepaid or
converted.

     

    3.6.       Inability to Determine
Rates.  If Required
Lenders notify Agent for any reason in connection with a request for a Borrowing
of, or conversion to or continuation of, a LIBOR Loan that (i) Dollar deposits
are not being offered to banks in the London interbank Eurodollar market for the
applicable amount and Interest Period of such Loan, (ii) adequate and reasonable
means do not exist for determining LIBOR for the requested Interest Period, or
(iii) LIBOR for the requested Interest Period does not, in Lender’s good faith
judgment, adequately and fairly reflect the cost to such Lenders of funding such
Loan, then Agent will promptly so notify Borrower Agent and each
Lender.  Thereafter, (x) the obligation of Lenders to make or
maintain LIBOR Loans shall be suspended and (y) in the event of a
determination described in the preceding sentence with respect to the LIBOR
component of the Base Rate, the utilization of the LIBOR component in
determining the Base Rate shall be suspended, in each case until Agent (upon
instruction by Required Lenders) revokes such notice.  Upon receipt of
such notice, Borrower Agent may revoke any pending request for a Borrowing of,
conversion to or continuation of a LIBOR Loan or, failing that, will be deemed
to have submitted a request for a Base Rate Loan.

     

    3.7.       Increased Costs; Capital
Adequacy.

     

    3.7.1.        Change in
Law.  If
any Change in Law shall:

     

    (a)           impose
modify or deem applicable any reserve, special deposit, compulsory loan,
insurance charge or similar requirement against assets of, deposits with or for
the account of, or credit extended or participated in by, any Lender (except any
reserve requirement reflected in LIBOR) or Issuing Bank;

     

    (b)           subject
any Lender or Issuing Bank to any Tax with respect to any Loan, Loan Document,
Letter of Credit or participation in LC Obligations, or change the basis of
taxation of payments to such Lender or Issuing Bank in respect thereof (except
for Indemnified Taxes or Other Taxes covered by Section 5.9 and the imposition
of, or any change in the rate of, any Excluded Tax payable by such Lender or
Issuing Bank); or

     

    (c)           impose
on any Lender or Issuing Bank or the London interbank market any other
condition, cost or expense affecting any Loan, Loan Document, Letter of Credit
or participation in LC Obligations;

     

    
      
        
        

      

      
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    and the
result thereof shall be to increase the cost to such Lender of making or
maintaining any LIBOR Loan (or of maintaining its obligation to make any such
Loan), or to increase the cost to such Lender or Issuing Bank of participating
in, issuing or maintaining any Letter of Credit (or of maintaining its
obligation to participate in or to issue any Letter of Credit), or to reduce the
amount of any sum received or receivable by such Lender or Issuing Bank
hereunder (whether of principal, interest or any other amount) then, upon
request of such Lender or Issuing Bank, Borrowers will pay to such Lender or
Issuing Bank, as applicable, such additional amount or amounts as will
compensate such Lender or Issuing Bank, as applicable, for such additional costs
incurred or reduction suffered.

     

    3.7.2.        Capital
Adequacy.  If
any Lender or Issuing Bank determines that any Change in Law affecting such
Lender or Issuing Bank or any Lending Office of such Lender or such Lender’s or
Issuing Bank’s holding company, if any, regarding capital requirements has or
would have the effect of reducing the rate of return on such Lender’s, Issuing
Bank’s or holding company’s capital as a consequence of this Agreement, or such
Lender’s or Issuing Bank’s Commitments, Loans, Letters of Credit or
participations in LC Obligations, to a level below that which such Lender,
Issuing Bank or holding company could have achieved but for such Change in Law
(taking into consideration such Lender’s, Issuing Bank’s and holding company’s
policies with respect to capital adequacy), then from time to time Borrowers
will pay to such Lender or Issuing Bank, as the case may be, such additional
amount or amounts as will compensate it or its holding company for any such
reduction suffered.

     

    3.7.3.        Compensation.  Failure
or delay on the part of any Lender or Issuing Bank to demand compensation
pursuant to this Section shall not constitute a waiver of its right to demand
such compensation, but Borrowers shall not be required to compensate a Lender or
Issuing Bank for any increased costs incurred or reductions suffered more than
six months prior to the date that the Lender or Issuing Bank notifies Borrower
Agent of the Change in Law giving rise to such increased costs or reductions and
of such Lender’s or Issuing Bank’s intention to claim compensation therefor
(except that, if the Change in Law giving rise to such increased costs or
reductions is retroactive, then the nine-month period referred to above shall be
extended to include the period of retroactive effect thereof).

     

    3.8.       Mitigation.  If
any Lender gives a notice under Section 3.5 or requests
compensation under Section
3.7, or if Borrowers are required to pay additional amounts with respect
to a Lender under Section
5.9, then such Lender shall use reasonable efforts to designate a
different Lending Office or to assign its rights and obligations hereunder to
another of its offices, branches or Affiliates, if, in the judgment of such
Lender, such designation or assignment (a) would eliminate the need for such
notice or reduce amounts payable or to be withheld in the future, as applicable;
and (b) would not subject the Lender to any unreimbursed cost or expense and
would not otherwise be disadvantageous to it.  Borrowers shall pay all
reasonable costs and expenses incurred by any Lender in connection with any such
designation or assignment.

     

    3.9.       Funding
Losses.  If for any reason
(other than default by a Lender) (a) any Borrowing of, or conversion to or
continuation of, a LIBOR Loan does not occur on the date specified therefor in a
Notice of Borrowing or Notice of Conversion/Continuation (whether or not
withdrawn), (b) any repayment or conversion of a LIBOR Loan occurs on a day
other than the end of its Interest Period, or (c) Borrowers fail to repay a
LIBOR Loan when required hereunder, then Borrowers shall pay to each Lender all
losses and expenses that it sustains as a consequence thereof, including loss of
anticipated profits and any loss or expense arising from liquidation or
redeployment of funds or from fees payable to terminate deposits of matching
funds.  Lenders shall not be required to purchase Dollar deposits in
the London interbank market or any other offshore Dollar market to fund any
LIBOR Loan, but the provisions hereof shall be deemed to apply as if each Lender
had purchased such deposits to fund its LIBOR Loans.

     

    
      
        
        

      

      
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    3.10.     Maximum
Interest.  Notwithstanding
anything to the contrary contained in any Loan Document, the interest paid or
agreed to be paid under the Loan Documents shall not exceed the maximum rate of
non-usurious interest permitted by Applicable Law (“maximum
rate”).  If Agent or any Lender shall receive interest in an
amount that exceeds the maximum rate, the excess interest shall be applied to
the principal of the Obligations or, if it exceeds such unpaid principal,
refunded to Borrowers.  In determining whether the interest contracted
for, charged or received by Agent or a Lender exceeds the maximum rate, such
Person may, to the extent permitted by Applicable Law, (a) characterize any
payment that is not principal as an expense, fee or premium rather than
interest; (b) exclude voluntary prepayments and the effects thereof; and (c)
amortize, prorate, allocate and spread in equal or unequal parts the total
amount of interest throughout the contemplated term of the Obligations
hereunder.

     

    SECTION
4.      LOAN ADMINISTRATION

     

    4.1.       Manner of Borrowing and
Funding Revolver Loans.

     

    4.1.1.        Notice of
Borrowing.

     

    (a)           Whenever
Borrowers desire funding of a Borrowing of Revolver Loans, Borrower Agent shall
give Agent a Notice of Borrowing.  Such notice must be received by
Agent no later than 12:00 p.m. (New York time) (i) on the Business Day of the
requested funding date, in the case of Base Rate Loans, and (ii) at least three
Business Days prior to the requested funding date, in the case of LIBOR
Loans.  Notices received after 12:00 p.m. (New York time) shall be
deemed received on the next Business Day.  Each Notice of Borrowing
shall be irrevocable and shall specify (A) the amount of the Borrowing, (B) the
requested funding date (which must be a Business Day), (C) whether the Borrowing
is to be made as Base Rate Loans or LIBOR Loans, and (D) in the case of LIBOR
Loans, the duration of the applicable Interest Period (which shall be deemed to
be 30 days if not specified).

     

    (b)           Unless
payment is otherwise timely made by Borrowers, the becoming due of any
Obligations (whether principal, interest, fees or other charges, including
Extraordinary Expenses, LC Obligations, Cash Collateral and Secured Bank Product
Obligations) shall be deemed to be a request for Base Rate Revolver Loans on the
due date, in the amount of such Obligations.  The proceeds of such
Revolver Loans shall be disbursed as direct payment of the relevant
Obligation.  In addition, Agent may, at its option, charge such
Obligations against any operating, investment or other account of a Borrower
maintained with Agent or any of its Affiliates.

     

    (c)           If
Borrowers establish a controlled disbursement account with Agent or any
Affiliate of Agent, then the presentation for payment of any check or other item
of payment drawn on such account at a time when there are insufficient funds to
cover it shall be deemed to be a request for Base Rate Revolver Loans on the
date of such presentation, in the amount of the check and items presented for
payment.  The proceeds of such Revolver Loans may be disbursed
directly to the controlled disbursement account or other appropriate
account.

     

    4.1.2.        Fundings by
Lenders.  Each
Lender shall timely honor its Revolver Commitment by funding its Pro Rata share
of each Borrowing of Revolver Loans that is properly requested
hereunder.  Except for Borrowings to be made as Swingline Loans, Agent
shall endeavor to notify Lenders of each Notice of Borrowing (or deemed request
for a Borrowing) by 12:00 noon on the proposed funding date for Base Rate Loans
or by 3:00 p.m. at least two Business Days before any proposed funding of LIBOR
Loans.  Each Lender shall fund to Agent such Lender’s Pro Rata share
of the Borrowing to the account specified by Agent in immediately available
funds not later than 2:00 p.m. on the requested funding date, unless Agent’s
notice is received after the times provided above, in which event Lender shall
fund its Pro Rata share by 11:00 a.m. on the next Business
Day.  Subject to its receipt of such amounts from Lenders, Agent shall
disburse the proceeds of the Revolver Loans to the Operating Account or
otherwise, to an account or pursuant to direction of Borrower Agent, in each
case, reasonably satisfactory to Agent.  Unless Agent shall have
received (in sufficient time to act) written notice from a Lender that it does
not intend to fund its Pro Rata share of a Borrowing, Agent may assume that such
Lender has deposited or promptly will deposit its share with Agent, and Agent
may disburse a corresponding amount to Borrowers.  If a Lender’s share
of any Borrowing or of any settlement pursuant to Section 4.1.3(b) is not
received by Agent, then Borrowers agree to repay to Agent on demand the amount of such
share, together with interest thereon from the date disbursed until repaid, at
the rate applicable to the Borrowing.

     

    
      
        
        

      

      
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    4.1.3.        Swingline Loans;
Settlement.

     

    (a)           Agent
may, but shall not be obligated to, advance Swingline Loans to Borrowers, up to
an aggregate outstanding amount of $1,000,000, unless the funding is
specifically required to be made by all Lenders hereunder.  Each
Swingline Loan shall constitute a Revolver Loan for all purposes, except that
payments thereon shall be made to Agent for its own account.  The
obligation of Borrowers to repay Swingline Loans shall be evidenced by the
records of Agent and need not be evidenced by any promissory note.

     

    (b)           To
facilitate administration of the Revolver Loans, Lenders and Agent agree (which
agreement is solely among them, and not for the benefit of or enforceable by any
Borrower) that settlement among them with respect to Swingline Loans and other
Revolver Loans may take place on a date determined from time to time by Agent,
which shall occur at least once each week.  On each settlement date,
settlement shall be made with each Lender in accordance with the Settlement
Report delivered by Agent to Lenders.  Between settlement dates, Agent
may in its discretion apply payments on Revolver Loans to Swingline Loans,
regardless of any designation by Borrower or any provision herein to the
contrary.  Each Lender’s obligation to make settlements with Agent is
absolute and unconditional, without offset, counterclaim or other defense, and
whether or not the Commitments have terminated, an Overadvance exists or the
conditions in Section 6
are satisfied.  If, due to an Insolvency Proceeding with respect to a
Borrower or otherwise, any Swingline Loan may not be settled among Lenders
hereunder, then each Lender shall be deemed to have purchased from Agent a Pro
Rata participation in each unpaid Swingline Loan and shall transfer the amount
of such participation to Agent, in immediately available funds, within one
Business Day after Agent’s request therefor.

     

    4.1.4.        Notices.  Each
Borrower authorizes Agent and Lenders to extend, convert or continue Loans,
effect selections of interest rates, and transfer funds to or on behalf of
Borrowers based on telephonic or e-mailed instructions.  Borrowers
shall confirm each such request by prompt delivery to Agent of a Notice of
Borrowing or Notice of Conversion/Continuation, if applicable, but if it differs
in any material respect from the action taken by Agent or Lenders, the records
of Agent and Lenders shall govern.  Neither Agent nor any Lender shall
have any liability for any loss suffered by a Borrower as a result of Agent or
any Lender acting upon its understanding of telephonic or e-mailed instructions
from a person believed in good faith by Agent or any Lender to be a person
authorized to give such instructions on a Borrower’s behalf.

     

    4.2.       Defaulting
Lender.  Agent may (but
shall not be required to), in its discretion, retain any payments or other funds
received by Agent that are to be provided to a Defaulting Lender hereunder, and
may apply such funds to such Lender’s defaulted obligations or readvance the
funds to Borrowers in accordance with this Agreement.  The failure of
any Lender to fund a Loan, to make any payment in respect of LC Obligations or
to otherwise perform its obligations hereunder shall not relieve any
other Lender of its obligations, and no Lender shall be responsible for default
by another Lender.  Lenders and Agent agree (which agreement is solely
among them, and not for the benefit of or enforceable by any Borrower) that,
solely for purposes of determining a Defaulting Lender’s right to vote on
matters relating to the Loan Documents and to share in payments, fees and
Collateral proceeds thereunder, a Defaulting Lender shall not be deemed to be a
“Lender” until all its defaulted obligations have been cured.

     

    
      
        
        

      

      
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    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 5 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 minus any scheduled
principal payments of the Term Loans to be made pursuant to Section 5.3.1 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.

     

    4.4.       Borrower
Agent.  Each Obligor
hereby designates P&F (“Borrower Agent”) as
its representative and agent for all purposes under the Loan Documents,
including requests for Loans and Letters of Credit, designation of interest
rates, delivery or receipt of communications, preparation and delivery of
Borrowing Base and financial reports, receipt and payment of Obligations,
requests for waivers, amendments or other accommodations, actions under the Loan
Documents (including in respect of compliance with covenants), and all other
dealings with Agent, Issuing Bank or any Lender.  Borrower Agent
hereby accepts such appointment.  Agent and Lenders shall be entitled
to rely upon, and shall be fully protected in relying upon, any notice or
communication (including any notice of borrowing) delivered by Borrower Agent on
behalf of any Obligor.  Agent and Lenders may give any notice or
communication with an Obligor hereunder to Borrower Agent on behalf of such
Obligor.  Each of Agent, Issuing Bank and Lenders shall have the
right, in its discretion, to deal exclusively with Borrower Agent for any or all
purposes under the Loan Documents.  Each Obligor agrees that any
notice, election, communication, representation, agreement or undertaking made
on its behalf by Borrower Agent shall be binding upon and enforceable against
it.

     

    4.5.       One
Obligation.  The Loans, LC
Obligations and other Obligations shall constitute one general obligation of
Borrowers and (unless otherwise expressly provided in any Loan Document) shall
be secured by Agent’s Lien upon all Collateral; provided, however, that Agent
and each Lender shall be deemed to be a creditor of, and the holder of a
separate claim against, each Borrower to the extent of any Obligations jointly
or severally owed by such Borrower.

     

    4.6.       Effect of
Termination.  On the effective
date of any termination of the Commitments, all Obligations shall be immediately
due and payable, and any Lender may terminate its and its Affiliates’ Bank
Products (including, only with the consent of Agent, any Cash Management
Services).  All undertakings of Obligors contained in the Loan
Documents shall survive any termination, and Agent shall retain its Liens in the
Collateral and all of its rights and remedies under the Loan Documents until
Full Payment of the Obligations.  Notwithstanding Full Payment of the
Obligations, Agent shall not be required to terminate its Liens in any
Collateral unless, with respect to any damages Agent may incur as a result of
the dishonor or return of Payment Items applied to Obligations, Agent receives
(a) a written agreement, executed by Obligors and any Person whose advances are
used in whole or in part to satisfy the Obligations, indemnifying Agent and
Lenders from any such damages; or (b) such Cash Collateral as Agent, in its
discretion, deems necessary to protect against any such
damages.  Sections
2.3, 3.4, 3.6, 3.7, 3.9, 5.5, 5.9, 5.10, 12, 14.2 and this Section, and the
obligation of each Obligor and Lender with respect to each indemnity given by it
in any Loan Document, shall survive Full Payment of the Obligations and any
release relating to this credit facility.

     

    
      
        
        

      

      
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    SECTION
5.      PAYMENTS

     

    5.1.       General Payment
Provisions.  All payments of
Obligations shall be made in Dollars, without offset, counterclaim or defense of
any kind, free of (and without deduction for) any Taxes, and in immediately
available funds, not later than 2:00 p.m. on the due date.  Any
payment after such time shall be deemed made on the next Business
Day.  Any payment of a LIBOR Loan prior to the end of its Interest
Period shall be accompanied by all amounts due under Section 3.9.  Any
prepayment of Loans shall be applied first to Base Rate Loans and then to LIBOR
Loans.

     

    5.2.       Repayment of Revolver
Loans.  Revolver Loans
shall be due and payable in full on the Revolver Termination Date, unless
payment is sooner required hereunder.  Revolver Loans may be prepaid
from time to time, without penalty or premium.  If any Asset
Disposition includes the disposition of Accounts, Inventory or Equipment, then
Net Proceeds equal to the greater of (a) the net book value of such Accounts,
Inventory or Equipment, or (b) the reduction in the Borrowing Base upon giving
effect to such disposition, shall be applied to the Revolver
Loans.  Notwithstanding anything herein to the contrary, if an
Overadvance exists, Borrowers shall, on the sooner of Agent’s demand or the
first Business Day after any Borrower has knowledge thereof, repay the
outstanding Revolver Loans in an amount sufficient to reduce the principal
balance of Revolver Loans to the Borrowing Base.

     

    5.3.       Repayment of Term
Loans.

     

    5.3.1.        Payment of
Principal.  The
principal amount of the Term Loans shall be repaid on the first Business Day of
each month in consecutive monthly installments of $33,833.33, commencing on
December 1, 2010, until the Term Loan Maturity Date, on which date all
principal, interest and other amounts owing with respect to the Term Loans shall
be due and payable in full.  Each installment shall be paid to Agent
for the Pro Rata benefit of Lenders.  Once repaid, whether such
repayment is voluntary or required, Term Loans may not be
reborrowed.

     

    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
Term Loans in an amount equal to 25% of such Excess Cash Flow;

     

    (b)           Concurrently
with any Asset Disposition of Real Estate, Borrowers shall prepay Term Loans in
an amount equal to the Net Proceeds of such disposition;

     

    (c)           Concurrently
with the receipt of any proceeds of insurance or condemnation awards paid in
respect of any Real Estate,
Borrowers shall prepay Term Loans in an amount equal to such proceeds,
subject to Section 8.6.2;

     

    (d)           Concurrently
with any issuance of Equity Interests by a Borrower, Borrowers shall prepay Term
Loans in an amount equal to the net proceeds of such issuance; and

     

    (e)           On
the Commitment Termination Date, Borrowers shall prepay all Term Loans (unless
sooner repaid hereunder).

     

    5.3.3.        Optional
Prepayments.  Borrowers
may, at their option from time to time, prepay the Term Loans, which prepayment
must be at least $500,000, plus any increment of $500,000 in excess
thereof.  Borrowers shall give written notice to Agent of an intended
prepayment of Term Loans, 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.

     

    
      
        
        

      

      
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    5.3.4.        Premium; Interest;
Application of Prepayments.  Any
prepayment of Term Loans (whether mandatory or voluntary) shall be accompanied
by a prepayment premium equal to 1.00% of the principal amount prepaid during
the first Loan Year, and 0.50% of the principal amount prepaid during the second
Loan Year; provided, however, that no
premium shall be payable in connection with a prepayment under Section 5.3.2(a), (b), (c) and
(d).  Each
prepayment of Term Loans shall be accompanied by all interest accrued thereon
and any amounts payable under Section 3.9, and shall be
applied to principal in inverse order of maturity.

     

    5.4.       Payment of Other
Obligations.  Obligations other
than Loans, including LC Obligations and Extraordinary Expenses, shall be paid
by Borrowers as provided in the Loan Documents or, if no payment date is
specified, on
demand.

     

    5.5.       Marshaling; Payments Set
Aside.  None of Agent or
Lenders shall be under any obligation to marshal any assets in favor of any
Obligor or against any Obligations.  If any payment by or on behalf of
Obligors is made to Agent, Issuing Bank or any Lender, or Agent, Issuing Bank or
any Lender exercises a right of setoff, and such payment or the proceeds of such
setoff or any part thereof is subsequently invalidated, declared to be
fraudulent or preferential, set aside or required (including pursuant to any
settlement entered into by Agent, Issuing Bank or such Lender in its discretion)
to be repaid to a trustee, receiver or any other Person, then to the extent of
such recovery, the Obligation originally intended to be satisfied, and all
Liens, rights and remedies relating thereto, shall be revived and continued in
full force and effect as if such payment had not been made or such setoff had
not occurred.

     

    5.6.       Post-Default Allocation of
Payments.

     

    5.6.1.        Allocation.  Notwithstanding
anything herein to the contrary, during an Event of Default, monies to be
applied to the Obligations, whether arising from payments by Obligors,
realization on Collateral, setoff or otherwise, shall, at the option of Agent or
the direction of Required Lenders, be allocated as follows:

     

    (a)           first, to all costs
and expenses, including Extraordinary Expenses, owing to Agent;

     

    (b)          second, to all
amounts owing to Agent on Swingline Loans;

     

    (c)           third, to all amounts
owing to Issuing Bank on LC Obligations;

     

    (d)           fourth, to all
Obligations constituting fees (other than Bank Product
Obligations);

     

    (e)           fifth, to all
Obligations constituting interest (other than Bank Product
Obligations);

     

    (f)           sixth, to all Secured
Bank Product Obligations relating to Cash Management Services;

     

    (g)           seventh, to all
Loans, Letters of Credit, including Cash Collateralization of outstanding and LC
Obligations; and

     

    (h)           last, to all other
Obligations.

     

    
      
        
        

      

      
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    Amounts
shall be applied to each category of Obligations set forth above until Full
Payment thereof and then to the next category.  If amounts are
insufficient to satisfy a category, they shall be applied on a pro rata basis
among the Obligations in the category.  Amounts distributed with
respect to any Secured Bank Product Obligations owing to a Lender or an
Affiliate of a Lender shall be the lesser of the maximum Secured Bank Product
Obligations last reported to Agent and the actual Secured Bank Product
Obligations as calculated by the methodology reported to Agent for determining
the amount due.  Agent shall have no obligation to calculate the
amount to be distributed with respect to any Secured Bank Product Obligations,
and may request a reasonably detailed calculation of such amount from the
applicable Secured Party.  If a Secured Party fails to deliver such
calculation within ten days following request by Agent, Agent may assume the
amount to be distributed is zero.  The allocations set forth in this
Section are solely to determine the rights and priorities of Agent and Secured
Parties as among themselves, and may be changed by agreement among them without
the consent of any Obligor.  This Section is not for the benefit of or
enforceable by any Obligor.

     

    5.6.2.        Erroneous
Application.  Agent
shall not be liable for any application of amounts made by it in good faith and,
if any such application is subsequently determined to have been made in error,
the sole recourse of any Lender or other Person to which such amount should have
been made shall be to recover the amount from the Person that actually received
it (and, if such amount was received by any Lender, such Lender hereby agrees to
return it).

     

    5.7.       Application of
Payments.  Payments
of good funds received in  the Payment Account maintained at Agent
shall be applied to the Obligations on the Business Day of receipt. Amounts
otherwise received by Agent shall be applied to the Obligations on the Business
Day of receipt of good funds if received by 12:00 noon (New York time) on such
day, otherwise such funds may be applied to the Obligations on the next Business
Day.  If, as a result of such application, a credit balance exists,
the balance shall not accrue interest in favor of Borrowers and shall be made
available to Borrowers as long as no Default or Event of Default
exists.  Each Obligor irrevocably waives the right to direct the
application of any payments or Collateral proceeds, and agrees that Agent shall
have the continuing, exclusive right to apply and reapply same against the
Obligations, in such manner as Agent deems advisable.  In the absence
of a Default or Event of Default, any prepayment of Loans shall be applied first
to Base Rate Loans and then to LIBOR Loans.  Notwithstanding the
foregoing, if the amount of any prepayment of Loans required under this Section 5.7 shall be in excess
of the amount of the Base Rate Loans at the time outstanding (an “Excess Amount”), so
long as no Default or Event of Default shall have occurred and be continuing,
only the portion of the amount of such prepayment as is equal to the amount of
such outstanding Base Rate Loans shall be immediately prepaid and, at the
election of the Borrowers, the Excess Amount shall be made available to the
Borrowers to the extent an Overadvance would not be caused thereby.

     

    5.8.       Loan Account; Account
Stated.

     

    5.8.1.        Loan
Account.  Agent
shall maintain in accordance with its usual and customary practices an account
or accounts (“Loan
Account”) evidencing the Debt of Borrowers resulting from each Loan or
issuance of a Letter of Credit from time to time.  Any failure of
Agent to record anything in the Loan Account, or any error in doing so, shall
not limit or otherwise affect the obligation of Borrowers to pay any amount
owing hereunder.  Agent may maintain a single Loan Account in the name
of Borrower Agent, and each Obligor confirms that such arrangement shall have no
effect on the joint and several character of its liability for the
Obligations. Entries
Binding.  Entries
made in the Loan Account shall constitute presumptive evidence of the
information contained therein.  If any information contained in the
Loan Account is provided to or inspected by any Person, then such information
shall be conclusive and binding on such Person for all purposes absent manifest
error, except to the extent such Person notifies Agent in writing within 30 days
after receipt or inspection that specific information is subject to
dispute.

     

    
      
        
        

      

      
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    5.9.       Taxes.

     

    5.9.1.        Payments Free of
Taxes.  All
payments by Obligors of Obligations shall be free and clear of and without
reduction for any Taxes.  If Applicable Law requires any Obligor or
Agent to withhold or deduct any Tax (including backup withholding or withholding
Tax), the withholding or deduction shall be based on information provided
pursuant to Section 5.10
and Agent shall pay the amount withheld or deducted to the relevant Governmental
Authority.  If the withholding or deduction is made on account of
Indemnified Taxes or Other Taxes, the sum payable by Borrowers shall be
increased so that Agent, Lender or Issuing Bank, as applicable, receives an
amount equal to the sum it would have received if no such withholding or
deduction (including deductions applicable to additional sums payable under this
Section) had been made.  Without limiting the foregoing, Borrowers
shall timely pay all Other Taxes to the relevant Governmental
Authorities.

     

    5.9.2.        Payment.  Borrowers
shall indemnify, hold harmless and reimburse (within 10 days after demand
therefor) Agent, Lenders and Issuing Bank for any Indemnified Taxes or Other
Taxes (including those attributable to amounts payable under this Section)
withheld or deducted by any Obligor or Agent, or paid by Agent, any Lender or
Issuing Bank, with respect to any Obligations, Letters of Credit or Loan
Documents, whether or not such Taxes were properly asserted by the relevant
Governmental Authority, and including all penalties, interest and reasonable
expenses relating thereto, as well as any amount that a Lender or Issuing Bank
fails to pay indefeasibly to Agent under Section 5.10.  A
certificate as to the amount of any such payment or liability delivered to
Borrower Agent by Agent, or by a Lender or Issuing Bank (with a copy to Agent),
shall be conclusive, absent manifest error.  As soon as practicable
after any payment of Taxes by a Borrower, Borrower Agent shall deliver to Agent
a receipt from the Governmental Authority or other evidence of payment
satisfactory to Agent.

     

    5.10.     Lender Tax
Information.

     

    5.10.1.      Status of
Lenders.  Each
Lender shall deliver documentation and information to Agent and Borrower Agent,
at the times and in form required by Applicable Law or reasonably requested by
Agent or Borrower Agent, sufficient to permit Agent or Borrowers to determine
(a) whether or not payments made with respect to Obligations are subject to
Taxes, (b) if applicable, the required rate of withholding or deduction, and (c)
such Lender’s entitlement to any available exemption from, or reduction of,
applicable Taxes for such payments or otherwise to establish such Lender’s
status for withholding tax purposes in the applicable jurisdiction.

     

    5.10.2.      Documentation.  If
a Borrower is resident for tax purposes in the United States, any Lender that is
a “United States person” within the meaning of section 7701(a)(30) of the Code
shall deliver to Agent and Borrower Agent IRS Form W-9 or such other
documentation or information prescribed by Applicable Law or reasonably
requested by Agent or Borrower Agent to determine whether such Lender is subject
to backup withholding or information reporting requirements.  If any
Foreign Lender is entitled to any exemption from or reduction of withholding tax
for payments with respect to the Obligations, it shall deliver to Agent and
Borrower Agent, on or prior to the date on which it becomes a Lender hereunder
(and from time to time thereafter upon request by Agent or Borrower Agent, but
only if such Foreign Lender is legally entitled to do so), (a) IRS Form W-8BEN
claiming eligibility for benefits of an income tax treaty to which the United
States is a party; (b) IRS Form W-8ECI; (c) IRS Form W-8IMY and all required
supporting documentation; (d) in the case of a Foreign Lender claiming the
benefits of the exemption for portfolio interest under section 881(c) of the
Code, IRS Form W-8BEN and a certificate showing such Foreign Lender is not (i) a
“bank” within the meaning of section 881(c)(3)(A) of the Code, (ii) a “10
percent shareholder” of any Obligor within the meaning of section 881(c)(3)(B)
of the Code, or (iii) a “controlled foreign corporation” described in section
881(c)(3)(C) of the Code; or (e) any other form prescribed by Applicable Law as
a basis for claiming exemption from or a reduction in withholding tax, together
with such supplementary documentation necessary to allow Agent and Borrowers to
determine the withholding or deduction required to be made.

     

    
      
        
        

      

      
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    5.10.3.      Lender
Obligations.  Each
Lender and Issuing Bank shall promptly notify Borrowers and Agent of any change
in circumstances that would change any claimed Tax exemption or
reduction.  Each Lender and Issuing Bank shall indemnify, hold
harmless and reimburse (within 10 days after demand therefor) Borrowers and
Agent for any Taxes, losses, claims, liabilities, penalties, interest and
expenses (including reasonable attorneys’ fees) incurred by or asserted against
a Borrower or Agent by any Governmental Authority due to such Lender’s or
Issuing Bank’s failure to deliver, or inaccuracy or deficiency in, any
documentation required to be delivered by it pursuant to this
Section.  Each Lender and Issuing Bank authorizes Agent to set off any
amounts due to Agent under this Section against any amounts payable to such
Lender or Issuing Bank under any Loan Document.

     

    5.11.     Nature and Extent of Each
Borrower’s Liability.

     

    5.11.1.      Joint and Several
Liability.  Each
Borrower agrees that it is jointly and severally liable for, and absolutely and
unconditionally guarantees to Agent and Lenders the prompt payment and
performance of, all Obligations and all agreements under the Loan
Documents.  Each Borrower agrees that its guaranty obligations
hereunder constitute a continuing guaranty of payment and not of collection,
that such obligations shall not be discharged until Full Payment of the
Obligations, and that such obligations are absolute and unconditional,
irrespective of (a) the genuineness, validity, regularity, enforceability,
subordination or any future modification of, or change in, any Obligations or
Loan Document, or any other document, instrument or agreement to which any
Obligor is or may become a party or be bound; (b) the absence of any action to
enforce this Agreement (including this Section) or any other Loan Document, or
any waiver, consent or indulgence of any kind by Agent or any Lender with
respect thereto; (c) the existence, value or condition of, or failure to perfect
a Lien or to preserve rights against, any security or guaranty for the
Obligations or any action, or the absence of any action, by Agent or any Lender
in respect thereof (including the release of any security or guaranty); (d) the
insolvency of any Obligor; (e) any election by Agent or any Lender in an
Insolvency Proceeding for the application of Section 1111(b)(2) of the
Bankruptcy Code; (f) any borrowing or grant of a Lien by any other Borrower, as
debtor-in-possession under Section 364 of the Bankruptcy Code or otherwise; (g)
the disallowance of any claims of Agent or any Lender against any Obligor for
the repayment of any Obligations under Section 502 of the Bankruptcy Code or
otherwise; or (h) any other action or circumstances that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
except Full Payment of all Obligations.

     

    5.11.2.      Waivers.

     

    (a)           Each
Borrower expressly waives all rights that it may have now or in the future under
any statute, at common law, in equity or otherwise, to compel Agent or Lenders
to marshal assets or to proceed against any Obligor, other Person or security
for the payment or performance of any Obligations before, or as a condition to,
proceeding against such Borrower.  Each Borrower waives all defenses
available to a surety, guarantor or accommodation co-obligor other than Full
Payment of all Obligations.  It is agreed among each Borrower, Agent
and Lenders that the provisions of this Section 5.11 are of the
essence of the transaction contemplated by the Loan Documents and that, but for
such provisions, Agent and Lenders would decline to make Loans and issue Letters
of Credit.  Each Borrower acknowledges that its guaranty pursuant to
this Section is necessary to the conduct and promotion of its business, and can
be expected to benefit such business.

     

    
      
        
        

      

      
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    (b)           Agent
and Lenders may, in their discretion, pursue such rights and remedies as they
deem appropriate, including realization upon Collateral or any Real Estate by
judicial foreclosure or non-judicial sale or enforcement, without affecting any
rights and remedies under this Section 5.11.  If,
in taking any action in connection with the exercise of any rights or remedies,
Agent or any Lender shall forfeit any other rights or remedies, including the
right to enter a deficiency judgment against any Borrower or other Person,
whether because of any Applicable Laws pertaining to “election of remedies” or
otherwise, each Borrower consents to such action and waives any claim based upon
it, even if the action may result in loss of any rights of subrogation that any
Borrower might otherwise have had.  Any election of remedies that
results in denial or impairment of the right of Agent or any Lender to seek a
deficiency judgment against any Borrower shall not impair any other Borrower’s
obligation to pay the full amount of the Obligations.  Each Borrower
waives all rights and defenses arising out of an election of remedies, such as
nonjudicial foreclosure with respect to any security for the Obligations, even
though that election of remedies destroys such Borrower’s rights of subrogation
against any other Person.  Agent may bid all or a portion of the
Obligations at any foreclosure or trustee’s sale or at any private sale, and the
amount of such bid need not be paid by Agent but shall be credited against the
Obligations.  The amount of the successful bid at any such sale,
whether Agent or any other Person is the successful bidder, shall be
conclusively deemed to be the fair market value of the Collateral, and the
difference between such bid amount and the remaining balance of the Obligations
shall be conclusively deemed to be the amount of the Obligations guaranteed
under this Section 5.11,
notwithstanding that any present or future law or court decision may have the
effect of reducing the amount of any deficiency claim to which Agent or any
Lender might otherwise be entitled but for such bidding at any such
sale.

     

    5.11.3.      Extent of Liability;
Contribution.

     

    (a)           Notwithstanding
anything herein to the contrary, each Borrower’s liability under this Section 5.11 shall be limited
to the greater of (i) all amounts for which such Borrower is primarily liable,
as described below, and (ii) such Borrower’s Allocable Amount.


    (b)           If
any Borrower makes a payment under this Section 5.11 of any
Obligations (other than amounts for which such Borrower is primarily liable) (a
“Guarantor
Payment”) that, taking into account all other Guarantor Payments
previously or concurrently made by any other Borrower, exceeds the amount that
such Borrower would otherwise have paid if each Borrower had paid the aggregate
Obligations satisfied by such Guarantor Payments in the same proportion that
such Borrower’s Allocable Amount bore to the total Allocable Amounts of all
Borrowers, then such Borrower shall be entitled to receive contribution and
indemnification payments from, and to be reimbursed by, each other Borrower for
the amount of such excess, pro rata based upon their respective Allocable
Amounts in effect immediately prior to such Guarantor Payment.  The
“Allocable
Amount” for any Borrower shall be the maximum amount that could then be
recovered from such Borrower under this Section 5.11 without rendering
such payment voidable under Section 548 of the Bankruptcy Code or under any
applicable state fraudulent transfer or conveyance act, or similar statute or
common law.

     

    (c)           Nothing
contained in this Section
5.11 shall limit the liability of any Borrower to pay Loans made directly
or indirectly to that Borrower (including Loans advanced to any other Borrower
and then re-loaned or otherwise transferred to, or for the benefit of, such
Borrower), LC Obligations relating to Letters of Credit issued to support such
Borrower’s business, and all accrued interest, fees, expenses and other related
Obligations with respect thereto, for which such Borrower shall be primarily
liable for all purposes hereunder.  Agent and Lenders shall have the
right, at any time in their discretion, to condition Loans and Letters of Credit
upon a separate calculation of borrowing availability for each Borrower and to
restrict the disbursement and use of such Loans and Letters of Credit to such
Borrower.

     

    5.11.4.      Joint
Enterprise.  Each
Borrower has requested that Agent and Lenders make this credit facility
available to Borrowers on a combined basis, in order to finance Borrowers’
business most efficiently and economically.  Borrowers’ business is a
mutual and collective enterprise, and the successful operation of each Borrower
is dependent upon the successful performance of the integrated
group.  Borrowers believe that consolidation of their credit facility
will enhance the borrowing power of each Borrower and ease administration of the
facility, all to their mutual advantage.  Borrowers acknowledge that
Agent’s and Lenders’ willingness to extend credit and to administer the
Collateral on a combined basis hereunder is done solely as an accommodation to
Borrowers and at Borrowers’ request.

     

    
      
        
        

      

      
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    5.11.5.      Subordination.  Each
Borrower hereby subordinates any claims, including any rights at law or in
equity to payment, subrogation, reimbursement, exoneration, contribution,
indemnification or set off, that it may have at any time against any other
Obligor, howsoever arising, to the Full Payment of all Obligations.

     

    SECTION
6.      CONDITIONS PRECEDENT

     

    6.1.      
Conditions
Precedent to Initial Loans.  In
addition to the conditions set forth in Section 6.2, Lenders shall not
be required to fund any requested Loan, issue any Letter of Credit, or otherwise
extend credit to Borrowers hereunder, until the date (“Closing Date”) that
each of the following conditions has been satisfied:

     

    (a)           Notes
shall have been executed by Borrowers and delivered to each Lender that requests
issuance of a Note.  Each other Loan Document shall have been duly
executed and delivered to Agent by each of the signatories thereto, and each
Obligor shall be in compliance with all terms thereof.

     

    (b)           Agent
shall have received, in proper form for filing or recording, all filings or
recordations necessary to perfect its Liens in the Collateral, as well as UCC
and Lien searches and other evidence satisfactory to Agent that such Liens are
the only Liens upon the Collateral, except Permitted Liens.

     

    (c)           Agent
shall have received the Related Real Estate Documents for all Real Estate
subject to a Mortgage (including an assignment of the Countrywide
Lease).

     

    (d)           Agent
shall have received all certificates or instruments representing or evidencing
all Pledged Interests required by Section 7.4.1 accompanied by
all necessary instruments of transfer or assignment, duly executed in
blank.

     

    (e)           Agent
shall have received duly executed agreements establishing each Dominion Account
and related lockbox, in form and substance, and with financial institutions,
satisfactory to Agent.

     

    (f)           Agent
shall have received certificates, in form and substance satisfactory to it, from
a knowledgeable Senior Officer of Borrower Agent certifying that, after giving
effect to the initial Loans and transactions hereunder, (i) each Borrower, on an
individual basis, is Solvent and the Obligors, taken as a whole, are Solvent;
(ii) no Default or Event of Default exists; (iii) the representations and
warranties set forth in Section
9 that are qualified by materiality are true and correct and the
representations and warranties set forth in Section 9 that are not
qualified by materiality are true and correct in all material respects; and (iv)
each Obligor has complied with all agreements and conditions to be satisfied by
it under the Loan Documents.

     

    (g)           Agent
shall have received a certificate of a duly authorized officer of each Obligor,
certifying (i) that attached copies of such Obligor’s Organic Documents are true
and complete, and in full force and effect, without amendment except as shown;
(ii) that an attached copy of resolutions authorizing execution and delivery of
the Loan Documents is true and complete, and that such resolutions are in full
force and effect, were duly adopted, have not been amended, modified or revoked,
and constitute all resolutions adopted with respect to this credit facility; and
(iii) to the title, name and signature of each Person authorized to sign the
Loan Documents.  Agent may conclusively rely on this certificate until
it is otherwise notified by the applicable Obligor in writing.


    
      
         


      

      
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    (h)         Agent
shall have received (i) a written opinion of Certilman, Balin, Adler &
Hyman, LLP in the form of Exhibit F, (ii) a written
opinion of any local counsel to Obligors as Agent may reasonably request, and
(ii1) a written opinion of Certilman, Balin, Adler & Hyman, LLP with respect
to the Obigors responsibility for certain obligations of WMC, in each case, in
form and substance satisfactory to Agent.

     

    (i)           Agent
shall have received copies of the charter documents of each Obligor, certified
by the Secretary of State or other appropriate official of such Obligor’s
jurisdiction of organization.  Agent shall have received good standing
certificates for each Obligor, issued by the Secretary of State or other
appropriate official of such Obligor’s jurisdiction of organization and each
jurisdiction where such Obligor’s conduct of business or ownership of Property
necessitates qualification.

     

    (j)           Agent
shall have received copies of policies, certificates of insurance and
endorsements for the insurance policies carried by Obligors, all in compliance
with the Loan Documents.

     

    (k)          Borrowers
shall have paid all fees and expenses to be paid to Agent and Lenders on the
Closing Date.

     

    (l)           Agent
shall have received a Borrowing Base Certificate prepared as of October 15,
2010 demonstrating
that upon giving effect to the initial funding of Loans and issuance of Letters
of Credit, the repayment of the Specified Pay-off Debt , the Hy-Tech Closing
Date Payment, the RAH Closing Date Payment and the Schorr Closing Date Payment
(in each case, to the extent permitted hereunder) and the payment by Borrowers
of all fees and expenses incurred in connection herewith as well as any payables
stretched beyond their customary payment practices, Availability shall be at
least $2,000,000.

     

    (m)         Agent
shall have received a Compliance Certificate prepared as of August 31, 2010
demonstrating that upon giving effect to the initial funding of Loans and
issuance of Letters of Credit, the repayment of the Specified Pay-off Debt , the
Hy-Tech Closing Date Payment, the RAH Closing Date Payment and the Schorr
Closing Date Payment (in each case, to the extent permitted hereunder) and the
payment by Borrowers of all fees and expenses incurred in connection herewith as
well as any payables stretched beyond their customary payment practices, (i)
Adjusted EBITDA for the Measurement Period ended as of August 31, 2010 shall be
at least $3,000,000 and (ii) the Tangible Net Worth of P&F and its
Subsidiaries as of August 31, 2010 is no less than $14,300,000.

     

    (n)         Agent
shall have received evidence satisfactory to it that, concurrently with the
Closing Date, the Specified Pay-Off Debt is paid in full, the related credit
facilities and notes thereunder are terminated and any Liens securing the same
are released.

     

    (o)         Agent
shall have received a certificate executed by a Senior Officer of P&F
attaching a copy of the Sears Supply Agreement, which shall be in full force and
effect without modification thereto except as attached to such
certificate.

     

    (p)         Borrowers
shall have established their primary depository, operating and lockbox accounts
with Agent.


    
      
         


      

      
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    (q)         Agent
shall have received evidence satisfactory to it that, concurrently with the
Closing Date, each of the instruments evidencing the Hy-Tech Debt, the RAH Debt
and the Schorr Debt and any related UCC filing has been amended to include the
legend required by the applicable Subordination Agreement.

     

    (r)          Agent
shall have received the Representation Letter and such other assurances,
certificates, documents, consents or opinions as Agent may reasonably
require.

     

    6.2.         Conditions Precedent to All
Credit Extensions.  Agent,
Issuing Bank and Lenders shall not be required to fund any Loans, arrange for
issuance of any Letters of Credit or grant any other accommodation to or for the
benefit of Borrowers, unless the following conditions are
satisfied:

     

    (a)           No
Default or Event of Default shall exist at the time of, or result from, such
funding, issuance or grant;

     

    (b)           The
representations and warranties of each Obligor in the Loan Documents that are
qualified by materiality shall be true and correct on the date of, and upon
giving effect to, such funding, issuance or grant, and the representations and
warranties of each Obligor in the Loan Documents that are not qualified by
materiality shall be true and correct in all material respects on the date of,
and upon giving effect to, such funding, issuance or grant, except for
representations and warranties that expressly relate to an earlier date, in
which case they shall be true and correct (or true and correct in all material
respects, as the case may be) as of such earlier date;

     

    (c)           All
conditions precedent in any other Loan Document shall be satisfied;

     

    (d)           No
event shall have occurred or circumstance exist that has or could reasonably be
expected to have a Material Adverse Effect; and

     

    (e)           With
respect to issuance of a Letter of Credit, the LC Conditions shall be
satisfied.

     

    Each
request (or deemed request) by Borrowers for funding of a Loan, issuance of a
Letter of Credit or grant of an accommodation shall constitute a representation
by Borrowers that the foregoing conditions are satisfied on the date of such
request and on the date of such funding, issuance or grant.  As an
additional condition to any funding, issuance or grant, Agent shall have
received such other information, documents, instruments and agreements as it
deems appropriate in connection therewith.

     

    SECTION
7.    COLLATERAL

     

    7.1.       Grant of Security
Interest.  To secure the
prompt payment and performance of all Obligations, each Obligor hereby grants to
Agent, for the benefit of Secured Parties, a continuing security interest in and
Lien upon all Property of such Obligor, whether now owned or hereafter acquired,
and wherever located, including all of the following Property:

     

    (a)           all
Accounts;

     

    (b)           all
Chattel Paper, including electronic chattel paper;

     

    (c)           all
Commercial Tort Claims, including those shown on Schedule 9.1.16;

     

    (d)           all
Deposit Accounts;

     

    
      
         


      

      
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    (e)          all
Documents;

     

    (f)           all
General Intangibles, including Intellectual Property;

     

    (g)          all
Goods, including Inventory, Equipment and fixtures;

     

    (h)          all
Instruments;

     

    (i)           all
Investment Property;

     

    (j)           all
Letter-of-Credit Rights;

     

    (k)          all
Supporting Obligations;

     

    (l)           all
cash, Cash Collateral, Cash Equivalents or monies, whether or not in the
possession or under the control of Lender, or a bailee or Affiliate of
Lender;

     

    (m)         all
accessions to, substitutions for, and all replacements, products, and cash and
non-cash proceeds of the foregoing, including proceeds of and unearned premiums
with respect to insurance policies, and claims against any Person for loss,
damage or destruction of any Collateral; and

     

    (n)         
all books and records (including customer lists, files, correspondence, tapes,
computer programs, print-outs and computer records) pertaining to the
foregoing.

     

    7.2.         Lien on Deposit Accounts;
Cash Collateral.

     

    7.2.1.  Deposit
Accounts.  To
further secure the prompt payment and performance of all Obligations, each
Obligor hereby grants to Agent, for the benefit of Secured Parties, a continuing
security interest in and Lien upon all amounts credited to any Deposit Account
of such Obligor, including any sums in any blocked or lockbox accounts or in any
accounts into which such sums are swept.  Each Obligor hereby
authorizes and directs each bank or other depository to deliver to Agent, upon
request, all balances in any Deposit Account maintained by such Obligor, without
inquiry into the authority or right of Agent to make such request.

     

    7.2.2.  Cash
Collateral.  Any
Cash Collateral may be invested, at Agent’s discretion, in Cash Equivalents, but
Agent shall have no duty to do so, regardless of any agreement or course of
dealing with any Obligor, and shall have no responsibility for any investment or
loss.  Each Obligor hereby grants to Agent, for the benefit of Secured
Parties, a security interest in all Cash Collateral held from time to time and
all proceeds thereof, as security for the Obligations, whether such Cash
Collateral is held in a Cash Collateral Account or elsewhere.  Agent
may apply Cash Collateral to the payment of any Obligations, in such order as
Agent may elect, as they become due and payable.  Each Cash Collateral
Account and all Cash Collateral shall be under the sole dominion and control of
Agent.  No Obligor or other Person claiming through or on behalf of
any Obligor shall have any right to any Cash Collateral, until Full Payment of
all Obligations.

     

    7.3.         Real Estate
Collateral.

     

    7.3.1.  Lien on Real
Estate.  The
Obligations shall also be secured by Mortgages upon all Real Estate owned by
Obligors, including the Real Estate owned as of the Closing Date which is set
forth on Schedule
7.3.1.  The Mortgages shall be duly recorded, at Obligors’
expense, in each office where such recording is required to constitute a fully
perfected Lien on the Real Estate covered thereby.  If any Obligor
acquires Real Estate hereafter, Obligors shall, within 30 days, execute, deliver
and record a Mortgage sufficient to create a first priority Lien in favor of
Agent on such Real Estate, and shall deliver all Related Real Estate
Documents.

     

    
      
         


      

      
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    7.3.2.  Collateral Assignment of
Leases.  To
further secure the prompt payment and performance of all Obligations, each
Obligor hereby transfers and assigns to Agent, for the benefit of Secured
Parties, all of such Obligor’s right, title and interest in, to and under all
now or hereafter existing leases of real Property to which such Obligor is a
party, whether as lessor or lessee, and all extensions, renewals, modifications
and proceeds thereof.

     

    7.4.         Investment Property and
other Equity Interests.

     

    7.4.1.  Delivery of
Certificates.  All
certificates or instruments representing or evidencing any Investment Property
or other Equity Interests constituting Collateral hereunder (“Pledged Interests”),
including the Pledged Interests as of the Closing Date which are set forth on
Schedule 7.4.1 hereto,
shall be delivered to and held by or on behalf of Agent, for the benefit of
Secured Parties, pursuant hereto, shall be in suitable form for further transfer
by delivery, and shall be accompanied by all necessary instruments of transfer
or assignment, duly executed in blank.  The Pledged Interests
consisting of Equity Interests pledged hereunder have been duly authorized and
validly issued and are fully paid and, with respect to Equity Interests in
corporations, non-assessable.

     

    7.4.2.  Issuer
Agreements.  Each
Obligor that is the issuer of any Pledged Interests hereby (i) acknowledges the
security interest and Lien of Agent in such Collateral granted by the Obligor
owning such Pledged Interests and (ii) agrees that, with respect to any such
Pledged Interests, it will comply with the instructions originated by Agent in
accordance with this Agreement or the Security Documents without further consent
of any other Obligor.

     

    7.4.3.  Distributions on Investment
Property and other Equity Interests.  In
the event that any cash dividend or cash distribution (a “Dividend”) is
permitted to be paid on any Pledged Interests of any Obligor at a time when no
Event of Default has occurred and is continuing, such Dividend may be paid
directly to the applicable Obligor or to another Obligor designated by the
Borrower Agent.  If an Event of Default has occurred and is
continuing, then any such Dividend or payment (other than Upstream Payments)
shall be paid directly to Agent to be applied as set forth in Section 5.7.

     

    7.4.4.  Voting Rights with respect
to Equity Interests.  So
long as no Event of Default has occurred and is continuing, Obligors shall be
entitled to exercise any and all voting and other consensual rights pertaining
to any of the Pledged Interests or any part thereof. If an Event of Default
shall have occurred and be continuing, all rights of Obligors to exercise the
voting and other consensual rights that it would otherwise be entitled to
exercise shall, at Agent’s option upon notice to such Obligors, be suspended,
and all such rights shall, at Agent’s option upon notice to such Obligors,
thereupon become vested in Agent for the benefit of the Secured Parties during
the continuation of such Event of Default, and Agent shall, at its option upon
notice to such Obligors, thereupon have the sole right to exercise such voting
and other consensual rights and during the continuation of such Event of
Default, Agent shall have the right to act with respect thereto as though it
were the outright owner thereof.

     

    7.4.5.  Securities
Accounts.  Each
Obligor irrevocably authorizes and directs each securities intermediary or other
Person with which any securities account or similar investment property is
maintained, if any, upon written instruction of Agent, to dispose of such
Collateral at the direction of Agent and comply with the instructions originated
by Agent without further consent of any Obligor.  Agent agrees with
the Obligors that such instruction shall not be given by Agent unless a Default
or Event of Default has occurred and is continuing.

     

    
      
         


      

      
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    7.5.         Other Collateral; New
Subsidiaries.

     

    7.5.1.  Commercial Tort
Claims.  Borrower
Agent shall promptly notify Agent in writing if any Obligor has a Commercial
Tort Claim (other than, as long as no Default or Event of Default exists, a
Commercial Tort Claim for less than $100,000), shall promptly amend Schedule 9.1.16 to include
such claim, and shall take such actions as Agent deems appropriate to subject
such claim to a duly perfected, first priority Lien in favor of Agent (for the
benefit of Secured Parties).

     

    7.5.2.  Certificate of Title
Collateral.  Borrower
Agent shall deliver to Agent, as soon as practicable following a request
therefore by Agent, any and all evidence of ownership of any of the Equipment
(including, without limitation, certificates of title and applications for
title).

     

    7.5.3.  Certain After-Acquired
Collateral.  Borrower
Agent shall promptly notify Agent in writing if, after the Closing Date, any
Obligor obtains any interest in any Collateral consisting of Deposit Accounts,
Chattel Paper, Documents, Instruments, Intellectual Property, Investment
Property or Letter-of-Credit Rights with a value in excess of $10,000 and, upon
Agent’s request, shall promptly take such actions as Agent deems appropriate to
effect Agent’s duly perfected, first priority Lien upon such Collateral,
including obtaining any appropriate possession, control agreement or Lien
Waiver.  If any Collateral is in the possession of a third party, at
Agent’s request, Obligors shall obtain an acknowledgment that such third party
holds the Collateral for the benefit of Agent.

     

    7.5.4.  New
Subsidiaries.  Upon
the formation or acquisition of any new direct or indirect Domestic Subsidiary
(other than an Immaterial Subsidiary) by any Obligor, then the Borrower Agent
shall, at the Obligors’ expense, within 30 days after such formation or
acquisition (or such later date as the Agent may specify in its sole
discretion), (a)  cause it to become a Borrower under this agreement if it
is a wholly-owned Domestic Subsidiary of Parent, or, if none of the assets of
such subsidiary are to be included in the Borrowing Base or the Agent otherwise
consents (or requests) in writing, cause it to become a Guarantor and guaranty
the Obligations in a manner reasonably satisfactory to Agent, and (b) cause
such Subsidiary to duly execute and deliver to Agent such joinder agreements,
amendments or supplements to the Loan Documents as are reasonably requested by
the Agent, (if required under Section 8.5) control
agreements and a legal opinion in form and substance reasonably satisfactory to
Agent, to cause or authorize the filing of appropriate UCC financing statements,
and to take any other action as may be necessary to vest in Agent valid and
subsisting Liens on the properties purported to be subject thereto.

     

    7.5.5.  New Deposit Accounts and
Securities Accounts.  Concurrently
with or prior to the opening of a Deposit Account, securities account or
commodity account by any Obligor, other than any excluded account described in
Section 8.5, such
Obligor shall deliver to Agent a Deposit Account Control Agreement covering such
Deposit Account, or other control agreement covering such securities account or
commodity account, in each case, in form and substance reasonably satisfactory
to Agent, duly executed by such Obligor, Agent and the applicable bank,
securities intermediary or commodity intermediary, as the case may
be.

     

    7.6.         No Assumption of
Liability.  The Lien on
Collateral granted hereunder is given as security only and shall not subject
Agent or any Lender to, or in any way modify, any obligation or liability of
Obligors relating to any Collateral.

     

    
      
         


      

      
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    7.7.         Further
Assurances.  Promptly upon
request, Obligors shall deliver such instruments, assignments, title
certificates, or other documents or agreements, and shall take such actions, as
Agent deems appropriate under Applicable Law to evidence or perfect its Lien on
any Collateral, or otherwise to give effect to the intent of this
Agreement.  Each Obligor irrevocably authorizes Lender at any time and
from time to time to authenticate and file in any relevant jurisdiction any
financing statements (including fixture filings) and amendments thereto that
contain the information required by Article 9 of the Uniform Commercial Code of
each applicable jurisdiction for the filing of any financing statement or
amendment relating to the Collateral, including, without limitation (i) whether
such Obligor is an organization, the type of organization and any organizational
identification number issued to such Obligor, (ii) indicating the Collateral as
“all assets” or “all personal property” of such Obligor, or words to similar
effect, and (iii) filing any financing or continuation statements, amendments or
other documents without the signature of such Obligor where permitted by
law.  Each Obligor hereby ratifies any action taken by Lender before
the Closing Date to effect or perfect its Lien on any Collateral.  All
of Agent’s Liens on Collateral (and all evidences of such Liens), whether
effected hereunder or under any other Loan Document, are granted to Agent as
agent for the benefit of all Secured Parties

     

    7.8.         Foreign Subsidiary
Stock.  Notwithstanding
Section 7.1, the
Collateral shall include only 65% of the voting stock of any Foreign
Subsidiary.

     

    SECTION
8.    COLLATERAL ADMINISTRATION

     

    8.1.         Borrowing Base
Certificates  By
the 20th day of each month, Borrowers shall deliver to Lender a Borrowing Base
Certificate prepared as of the close of business of the previous month; provided, however, that during
a Trigger Period, Borrowers shall deliver to Agent a Borrowing Base Certificate
on a weekly basis, by the third Business Day of the week, as of the end of the
prior week, and at such other times as Agent may request.  All
calculations of Availability in any Borrowing Base Certificate shall originally
be made by Borrowers and certified by a Senior Officer, provided that Agent may
from time to time review and adjust any such calculation (a) to reflect its
reasonable estimate of declines in value of any Collateral, due to collections
received in the Dominion Account or otherwise; (b) to adjust advance rates to
reflect changes in dilution, quality, mix and other factors affecting
Collateral; and (c) to the extent the calculation is not made in accordance with
this Agreement or does not accurately reflect the Availability Reserve or the
Borrowing Base Reserve.

     

    8.2.         Administration of
Accounts.

     

    8.2.1.  Records and Schedules of
Accounts.  Each
Borrower shall keep accurate and complete records of its Accounts, including all
payments and collections thereon, and shall submit to Agent sales, collection,
reconciliation and other reports in form satisfactory to Agent, on such periodic
basis as Agent may request.  Each Borrower shall also provide to
Agent, on or before the 15th day of each month, a detailed aged trial balance of
all Accounts as of the end of the preceding month, specifying each Account’s
Account Debtor name and address, amount, invoice date and due date, showing any
discount, allowance, credit, authorized return or dispute, and including such
proof of delivery, copies of invoices and invoice registers, copies of related
documents, repayment histories, status reports and other information as Agent
may reasonably request.  If Accounts of any single Account Debtor in
an aggregate face amount of $100,000 or more cease to be Eligible Accounts,
Borrowers shall notify Agent of such occurrence promptly (and in any event
within three Business Days) after any Borrower has knowledge
thereof.

     

    8.2.2.  Taxes.  If
an Account of any Borrower includes a charge for any Taxes, Agent is authorized,
in its discretion, to pay the amount thereof to the proper taxing authority for
the account of such Borrower and to charge Borrowers therefor; provided, however, that neither
Agent nor Lenders shall be liable for any Taxes that may be due from Borrowers
or with respect to any Collateral.

     

    8.2.3.  Account
Verification.  Whether
or not a Default or Event of Default exists, Agent shall have the right at any
time, in the name of Agent, any designee of Agent or any Borrower, to verify the
validity, amount or any other matter relating to any Accounts of Borrowers by
mail, telephone or otherwise.  Borrowers shall cooperate fully with
Agent in an effort to facilitate and promptly conclude any such verification
process.

     

    
      
         


      

      
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    8.2.4.  Maintenance of Dominion
Account.  Borrowers
shall maintain Dominion Accounts pursuant to lockbox or other arrangements
acceptable to Agent.  Borrowers shall obtain an agreement (in form and
substance satisfactory to Agent) from each lockbox servicer and Dominion Account
bank, establishing Agent’s control over and Lien in the lockbox or Dominion
Account, requiring prompt (and in any event within two Business Days after
receipt) deposit of all remittances received in the lockbox to a Dominion
Account, and waiving offset rights of such servicer or bank, except for
customary administrative charges.  Agent and Lenders assume no
responsibility to Borrowers for any lockbox arrangement or Dominion Account,
including any claim of accord and satisfaction or release with respect to any
Payment Items accepted by any bank.

     

    8.2.5.  Proceeds of
Collateral.  Borrowers
shall request in writing and otherwise take all necessary steps to ensure that
all payments on Accounts or otherwise relating to Collateral are made directly
to a Dominion Account (or a lockbox relating to a Dominion
Account).  If any Borrower or Subsidiary receives cash or Payment
Items with respect to any Collateral, it shall hold same in trust for Agent and
promptly (not later than the next Business Day) deposit same into a Dominion
Account.

     

    8.3.         Administration of
Inventory.

     

    8.3.1.  Records and Reports of
Inventory.  Each
Borrower shall keep accurate and complete records of its Inventory, including
costs and daily withdrawals and additions, and shall submit to Agent inventory
and reconciliation reports in form satisfactory to Agent, on such periodic basis
as Agent may request.  Each Borrower shall (a) conduct a physical
inventory at least once per calendar year (and on a more frequent basis if
requested by Agent when an Event of Default exists) or (b) periodic cycle counts
consistent with historical practices, and shall provide to Agent a report based
on each such inventory and count promptly upon completion thereof, together with
such supporting information as Agent may request.  Agent may
participate in and observe each physical count.

     

    8.3.2.  Returns of
Inventory.  No
Borrower shall return any Inventory to a supplier, vendor or other Person,
whether for cash, credit or otherwise, unless (a) such return is in the Ordinary
Course of Business; (b) no Default, Event of Default or Overadvance exists or
would result therefrom; (c) Agent is promptly notified if the aggregate Value of
all Inventory returned in any month exceeds $25,000; and (d) any payment
received by a Borrower for a return is promptly remitted to Agent for
application to the Obligations.

     

    8.3.3.  Acquisition, Sale and
Maintenance.  No
Borrower shall acquire or accept any Inventory on consignment or approval, and
shall take all steps to assure that all Inventory is produced in accordance with
Applicable Law, including the FLSA.  Other than the customers and
locations listed in Schedule
8.3.3, no Borrower shall sell any Inventory on consignment or approval or
any other basis under which the customer may return or require a Borrower to
repurchase such Inventory.  Schedule 8.3.3 may be amended
or supplemented from time to time by Borrowers with the consent of
Agent.  Borrowers shall use, store and maintain all Inventory with
reasonable care and caution, in accordance with applicable standards of any
insurance and in conformity with all Applicable Law, and shall make current rent
payments (within applicable grace periods provided for in leases) at all
locations where any Collateral is located.

     

    
      
         


      

      
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    8.4.         Administration of
Equipment.

     

    8.4.1.  Records and Schedules of
Equipment.  Each
Borrower shall keep accurate and complete records of its Equipment, including
kind, quality, quantity, cost, acquisitions and dispositions thereof, and shall
submit to Agent, on such periodic basis as Agent may request, a current schedule
thereof, in form satisfactory to Agent.  Promptly upon request,
Borrowers shall deliver to Agent evidence of their ownership or interests in any
Equipment.

     

    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;
and (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.

     

    8.4.3.  Condition of
Equipment.  The
Equipment is in good operating condition and repair, and all necessary
replacements and repairs have been made so that the value and operating
efficiency of the Equipment is preserved at all times, reasonable wear and tear
excepted.  Each Borrower shall ensure that the Equipment is
mechanically and structurally sound, and capable of performing the functions for
which it was designed, in accordance with manufacturer
specifications.  No Borrower shall permit any Equipment to become
affixed to real Property unless any landlord or mortgagee delivers a Lien
Waiver.

     

    8.5.         Administration of Deposit
Accounts.  Schedule 8.5 sets forth all
Deposit Accounts maintained by Borrowers, including all Dominion
Accounts.  Each Borrower shall take all actions necessary to establish
Agent’s control of each such Deposit Account (other than (a) an account
exclusively used for payroll, payroll taxes or employee benefits, (b) an account
containing not more than $10,000 at any time, (c) accounts maintained at
Wachovia Bank, National Association and First Niagara Bank, in each case,
containing not more than $25,000 at any time or (d) accounts maintained at
Citibank, N.A. for up to 120 days after the Closing Date
and  containing not more than $290,000 for more than two Business
Days), including, without limitation, the execution and delivery of a Deposit
Account Control Agreement for each such Deposit Account.  Each
Borrower shall be the sole account holder of each Deposit Account and shall not
allow any other Person (other than Agent) to have control over a Deposit Account
or any Property deposited therein.  Each Borrower shall promptly
notify Agent of any opening or closing of a Deposit Account and, with the
consent of Agent, will amend Schedule 8.5 to reflect
same.

     

    8.6.         General
Provisions.

     

    8.6.1.  Location of
Collateral.  All
tangible items of Collateral, other than Inventory in transit, shall at all
times be kept by Borrowers at the business locations set forth in Schedule 8.6.1, except that
Borrowers may (a) make sales or other dispositions of Collateral in accordance
with Section 10.2.6; and
(b) move Collateral to another location in the United States, upon 30 Business
Days prior written notice to Agent.

     

    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) 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 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.  If
an Event of Default exists, only Agent shall be authorized to settle, adjust and
compromise such claims.

     

    
      
         


      

      
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    (b)           Any
proceeds of insurance (other than proceeds from workers’ compensation or D&O
or employee practice insurance) and any awards arising from condemnation of any
Collateral shall be paid to Agent.  Any such proceeds or awards that
relate to Inventory or Equipment (subject to Section 8.6.2(c)) shall be
applied to payment of the Revolver Loans, and then to any other Obligations
outstanding, other than Term Loans.  Subject to clause (c) below, any
proceeds or awards that relate to Real Estate shall be applied first to Term
Loans, then to Revolver Loans and then to other Obligations.

     

    (c)           If
requested by Borrowers in writing within 90 days after Agent’s receipt of any
insurance proceeds or condemnation awards relating to any loss or destruction of
Real Estate or Equipment, Borrowers may use such proceeds or awards to repair or
replace such Real Estate or Equipment (and until so used, the proceeds shall be
held by Agent as Cash Collateral) 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 satisfactory to Agent; (iii) replacement buildings are
constructed on the sites of the original casualties 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
destroyed 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 $250,000 in the case of
Equipment and $1,500,000 in the case of Real Estate.

     

    8.6.3.  Protection of
Collateral.  All
expenses of protecting, storing, warehousing, insuring, handling, maintaining
and shipping any Collateral, all Taxes payable with respect to any Collateral
(including any sale thereof), and all other payments required to be made by
Agent to any Person to realize upon any Collateral, shall be borne and paid by
Borrowers.  Agent shall not be liable or responsible in any way for
the safekeeping of any Collateral, for any loss or damage thereto (except for
reasonable care in its custody while Collateral is in Agent’s actual
possession), for any diminution in the value thereof, or for any act or default
of any warehouseman, carrier, forwarding agency or other Person whatsoever, but
the same shall be at Borrowers’ sole risk.

     

    8.6.4.  Defense of Title to
Collateral.  Each
Borrower shall at all times defend its title to Collateral and Agent’s Liens
therein against all Persons, claims and demands whatsoever, except Permitted
Liens.

     

    8.7.         Power of
Attorney.  Each
Obligor hereby irrevocably constitutes and appoints Agent (and all Persons
designated by Agent) as such Obligor’s true and lawful attorney (and
agent-in-fact) for the purposes provided in this Section.  Agent, or
Agent’s designee, may, without notice and in either its or a Obligor’s name, but
at the cost and expense of Obligors:

     

    (a)           Endorse
a Obligor’s name on any Payment Item (including Chattel Paper and Instruments)
or other proceeds of Collateral (including proceeds of insurance) that come into
Agent’s possession or control; and

     

    
      
         


      

      
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    (b)           During
an Event of Default, (i) notify any Account Debtors of the assignment of their
Accounts, demand and enforce payment of Accounts by legal proceedings or
otherwise, and generally exercise any rights and remedies with respect to
Accounts; (ii) settle, adjust, modify, compromise, discharge or release any
Accounts or other Collateral, or any legal proceedings brought to collect
Accounts or Collateral; (iii) sell or assign any Accounts and other Collateral
upon such terms, for such amounts and at such times as Agent deems advisable;
(iv) collect, liquidate and receive balances in Deposit Accounts or investment
accounts, and take control, in any manner, of proceeds of Collateral; (v)
prepare, file and sign a Obligor’s name to a proof of claim or other document in
a bankruptcy of an Account Debtor, or to any notice, assignment or satisfaction
of Lien or similar document; (vi) receive, open and dispose of mail addressed to
a Obligor, and notify postal authorities to deliver any such mail to an address
designated by Agent; (vii) endorse any Chattel Paper, Document, Instrument, bill
of lading, or other document or agreement relating to any Accounts, Inventory or
other Collateral; (viii) use a Obligor’s stationery and sign its name to
verifications of Accounts and notices to Account Debtors; (ix) use information
contained in any data processing, electronic or information systems relating to
Collateral; (x) make and adjust claims under insurance policies; (xi) take any
action as may be necessary or appropriate to obtain payment under any letter of
credit, banker’s acceptance or other instrument for which a Obligor is a
beneficiary; and (xii) take all other actions as Agent deems appropriate to
fulfill any Obligor’s obligations under the Loan Documents.

     

    SECTION
9.    REPRESENTATIONS AND WARRANTIES

     

    9.1.         General Representations and
Warranties.  To induce Agent
and Lenders to enter into this Agreement and to make available the Commitments,
Loans and Letters of Credit, each Obligor represents and warrants
that:

     

    9.1.1.  Organization and
Qualification.  Each
Obligor and Subsidiary is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization.  Each Obligor
and Subsidiary is duly qualified, authorized to do business and in good standing
as a foreign corporation in each jurisdiction where failure to be so qualified
could reasonably be expected to have a Material Adverse Effect.

     

    9.1.2.  Power and
Authority.  Each
Obligor is duly authorized to execute, deliver and perform the Loan Documents
delivered by it or to which it is a party.  The execution, delivery
and performance of the Loan Documents have been duly authorized by all necessary
action, and do not (a) require any consent or approval of any holders of Equity
Interests of any Obligor, other than those already obtained; (b) contravene the
Organic Documents of any Obligor; (c) violate or cause a default under any
Applicable Law or Material Contract; or (d) result in or require the imposition
of any Lien (other than Permitted Liens) on any Property of any
Obligor.

     

    9.1.3.  Enforceability.  Each
Loan Document is a legal, valid and binding obligation of each Obligor party
thereto, enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency or similar laws affecting the enforcement
of creditors’ rights generally.

     

    9.1.4.  Capital
Structure.  Schedule 9.1.4 shows, for each
Obligor and Subsidiary, its name, its jurisdiction of organization, its
authorized and issued Equity Interests, the holders of its Equity Interests, and
all agreements binding on such holders with respect to their Equity
Interests.  Except as disclosed on Schedule 9.1.4, in the five
years preceding the Closing Date, no Obligor or Subsidiary has acquired any
substantial assets from any other Person nor been the surviving entity in a
merger or combination.  Each Obligor has good title to its Equity
Interests in its Subsidiaries, subject only to Agent’s Lien, and all such Equity
Interests are duly issued, fully paid and non-assessable.  There are
no outstanding purchase options, warrants, subscription rights, agreements to
issue or sell, convertible interests, phantom rights or powers of attorney
relating to Equity Interests of any Obligor or Subsidiary.

     

    
      
         


      

      
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    9.1.5.   Title to Properties;
Priority of Liens.  Each
Obligor and Subsidiary has good and marketable title to (or valid leasehold
interests in) all of its Real Estate, and good title to all of its personal
Property, including all Property reflected in any financial statements delivered
to Agent or Lenders, in each case free of Liens except Permitted
Liens.  Each Obligor and Subsidiary has paid and discharged all lawful
claims that, if unpaid, could become a Lien on its Properties, other than
Permitted Liens.  All Liens of Agent in the Collateral are duly
perfected, first priority Liens, subject only to Permitted Liens that are
expressly allowed to have priority over Agent’s Liens.

     

    9.1.6.   Accounts.  Agent
may rely, in determining which Accounts are Eligible Accounts, on all statements
and representations made by Borrowers with respect thereto.  Borrowers
warrant, with respect to each Account at the time it is shown as an Eligible
Account in a Borrowing Base Certificate, that:

     

    (a)           it
is genuine and in all respects what it purports to be, and is not evidenced by a
judgment;

     

    (b)           it
arises out of a completed, bona fide sale and delivery
of goods in the Ordinary Course of Business, and substantially in accordance
with any purchase order, contract or other document relating
thereto;

     

    (c)           it
is for a sum certain, maturing as stated in the invoice covering such sale, a
copy of which has been furnished or is available to Agent on
request;

     

    (d)           it
is not subject to any offset, Lien (other than Agent’s Lien), deduction,
defense, dispute, counterclaim or other adverse condition except as arising in
the Ordinary Course of Business and disclosed to Agent; and it is absolutely
owing by the Account Debtor, without contingency in any respect;

     

    (e)           no
purchase order, agreement, document or Applicable Law restricts assignment of
the Account to Agent (regardless of whether, under the UCC, the restriction is
ineffective), and the applicable Borrower is the sole payee or remittance party
shown on the invoice;

     

    (f)           no
extension, compromise, settlement, modification, credit, deduction or return has
been authorized with respect to the Account, except discounts or allowances
granted in the Ordinary Course of Business for prompt payment that are reflected
on the face of the invoice related thereto and in the written reports submitted
to Agent hereunder; and

     

    (g)           to
the best of Borrowers’ knowledge, except as reflected on the written reports
submitted to Agent hereunder, (i) there are no facts or circumstances that are
reasonably likely to impair the enforceability or collectability of such
Account; (ii) the Account Debtor had the capacity to contract when the Account
arose, continues to meet the applicable Borrower’s customary credit standards,
is Solvent, is not contemplating or subject to an Insolvency Proceeding, and has
not failed, or suspended or ceased doing business; and (iii) there are no
proceedings or actions threatened or pending against any Account Debtor that
could reasonably be expected to have a material adverse effect on the Account
Debtor’s financial condition.

     

    9.1.7.   Financial
Statements.  The
consolidated and consolidating balance sheets, and related statements of income,
cash flow and shareholder’s equity, of Borrowers and Subsidiaries that have been
and are hereafter delivered to Agent and Lenders, are prepared in accordance
with GAAP, and fairly present the financial positions and results of operations
of Borrowers and Subsidiaries at the dates and for the periods
indicated.  All projections delivered from time to time to Agent and
Lenders have been prepared in good faith, based on reasonable assumptions in
light of the circumstances at such time.  Since June 30, 2010, there
has been no change in the condition, financial or otherwise, of any Borrower or
Subsidiary that could reasonably be expected to have a Material Adverse
Effect.  No financial statement delivered to Agent or Lenders at any
time contains any untrue statement of a material fact, nor fails to disclose any
material fact necessary to make such statement not materially
misleading.  Each Borrower and Subsidiary is Solvent.

     

    
      
         


      

      
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    9.1.8.   Surety
Obligations.  No
Borrower or Subsidiary is obligated as surety or indemnitor under any bond or
other contract that assures payment or performance of any obligation of any
Person, except as permitted hereunder.

     

    9.1.9.   Taxes.  Each
Borrower and Subsidiary has filed all federal, state and local tax returns and
other reports that it is required by law to file, and has paid, or made
provision for the payment of, all Taxes upon it, its income and its Properties
that are due and payable, except to the extent being Properly
Contested.  The provision for Taxes on the books of each Borrower and
Subsidiary is adequate for all years not closed by applicable statutes, and for
its current Fiscal Year.

     

    9.1.10.  Brokers.  There
are no brokerage commissions, finder’s fees or investment banking fees payable
in connection with any transactions contemplated by the Loan
Documents.

     

    9.1.11.  Intellectual
Property. Except
as set forth on Schedule 9.1.11, each Borrower and Subsidiary owns or has the
lawful right to use all Intellectual Property necessary for the conduct of its
business, without conflict with any rights of others.  There is no
pending or, to any Borrower’s knowledge, threatened Intellectual Property Claim
with respect to any Borrower, any Subsidiary or any of their Property (including
any Intellectual Property).  Except as disclosed on Schedule 9.1.11, no Borrower
or Subsidiary pays or owes any Royalty or other compensation to any Person with
respect to any Intellectual Property.  All Intellectual Property
owned, used or licensed by, or otherwise subject to any interests of, any
Borrower or Subsidiary is shown on Schedule 9.1.11.

     

    9.1.12.  Governmental
Approvals.  Each
Borrower and Subsidiary has, is in compliance in all material respects with, and
is in good standing with respect to, all Governmental Approvals necessary to
conduct its business and to own, lease and operate its
Properties.  All necessary import, export or other licenses, permits
or certificates for the import or handling of any goods or other Collateral have
been procured and are in effect, and Borrowers and Subsidiaries have complied
with all foreign and domestic laws with respect to the shipment and importation
of any goods or Collateral, except where noncompliance could not reasonably be
expected to have a Material Adverse Effect.

     

    9.1.13.  Compliance with
Laws.  Each
Borrower and Subsidiary has duly complied, and its Properties and business
operations are in compliance, in all material respects with all Applicable Law,
except where noncompliance could not reasonably be expected to have a Material
Adverse Effect.  There have been no citations, notices or orders of
material noncompliance issued to any Borrower or Subsidiary under any Applicable
Law.  No Inventory has been produced in violation of the
FLSA.

     

    9.1.14.  Compliance with
Environmental Laws.  Except
as disclosed on Schedule
9.1.14, no Borrower’s or Subsidiary’s past or present operations, Real
Estate or other Properties are subject to any federal, state or local
investigation to determine whether any remedial action is needed to address any
environmental pollution, hazardous material or environmental clean-up that could
reasonably be expected to have a Material Adverse Effect or to exceed
$50,000.  No Borrower or Subsidiary has received any Environmental
Notice.  No Borrower or Subsidiary has any contingent liability with
respect to any Environmental Release, environmental pollution or hazardous
material on any Real Estate now or previously owned, leased or operated by it
that could reasonably be expected to have a Material Adverse Effect or to exceed
$50,000.  The representations and warranties contained in the
Environmental Agreement are true and correct on the Closing Date.

     

    
      
         


      

      
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    9.1.15.   Burdensome
Contracts.  No
Borrower or Subsidiary is a party or subject to any contract, agreement or
charter restriction that could reasonably be expected to have a Material Adverse
Effect.  No Obligor or Subsidiary is party or subject to any
Restrictive Agreement, except as shown on Schedule 9.1.15.  No
such Restrictive Agreement conditions, restricts or prohibits the execution,
delivery or performance of any Loan Document, the incurrence or repayment of any
Obligations or the granting of any Liens on any assets,  by an
Obligor.

     

    9.1.16.   Litigation.  Except
as shown on Schedule
9.1.16, there are no proceedings or investigations pending or, to any
Borrower’s knowledge, threatened against any Borrower or Subsidiary, or any of
their businesses, operations, Properties, prospects or conditions, that (a)
relate to any Loan Documents or transactions contemplated thereby; or (b) could
reasonably be expected to have a Material Adverse Effect if determined adversely
to any Borrower or Subsidiary.  Except as shown on such Schedule, no
Obligor has a Commercial Tort Claim (other than, as long as no Default or Event
of Default exists, a Commercial Tort Claim for less than
$100,000).  No Borrower or Subsidiary is in default with respect to
any order, injunction or judgment of any Governmental Authority.

     

    9.1.17.   No
Defaults.  No
event or circumstance has occurred or exists that constitutes a Default or Event
of Default.  No Borrower or Subsidiary is in default, and no event or
circumstance has occurred or exists that with the passage of time or giving of
notice would constitute a default, under any Material Contract to the best of
its knowledge or in the payment of any Borrowed Money.  There is no
basis upon which any party (other than a Borrower or Subsidiary) could terminate
a Material Contract prior to its scheduled termination date.

     

    9.1.18.   ERISA.  Except as
disclosed on Schedule
9.1.18:

     

    (i)           Each
Plan is in compliance in all material respects with the applicable provisions of
ERISA, the Code, and other federal and state laws.  Each Pension Plan
that is intended to be a qualified plan under Section 401(a) of the Code has
received a favorable determination letter from the IRS to the effect that the
form of such Plan is qualified under Section 401(a) of the Code and the trust
related thereto has been determined by the IRS to be exempt from federal income
tax under Section 501(a) of the Code, or an application for such a letter is
currently being processed by the IRS.  To the knowledge of Borrowers,
nothing has occurred that would prevent or cause the loss of such tax-qualified
status.

     

    (ii)          There
are no pending or, to the knowledge of Obligors, threatened claims, actions or
lawsuits, or action by any Governmental Authority, with respect to any Plan that
could reasonably be expected to have a Material Adverse Effect.  There
has been no prohibited transaction or violation of the fiduciary responsibility
rules with respect to any Plan that has resulted in or could reasonably be
expected to have a Material Adverse Effect.

     

    (iii)         (i)
No ERISA Event has occurred, and no Obligor or any ERISA Affiliate is aware of
any fact, event or circumstance that could reasonably be expected to constitute
or result in an ERISA Event with respect to any Pension Plan; (ii) each Obligor
and each ERISA Affiliate has met all applicable requirements under the Pension
Funding Rules in respect of each Pension Plan, no waiver of the minimum funding
standards under the Pension Funding Rules has been applied for or obtained;
(iii) as of the most recent valuation date for any Pension Plan, the funding
target attainment percentage (as defined in Section 430(d)(2) of the Code) is
60% or higher and no Obligor or any ERISA Affiliate knows of any facts or
circumstances that could reasonably be expected to cause the funding target
attainment percentage for any such plan to drop below 60% as of the most recent
valuation date; (iv) no Obligor or any ERISA Affiliate has incurred any
liability to the PBGC other than for the payment of premiums, and there are no
premium payments which have become due that are unpaid; (v) no Obligor or any
ERISA Affiliate has engaged in a transaction that could be subject to Section
4069 or Section 4212(c) of ERISA; and (vi) no Pension Plan has been terminated
by the plan administrator thereof nor by the PBGC, and no event or circumstance
has occurred or exists that could reasonably be expected to cause the PBGC to
institute proceedings under Title IV of ERISA to terminate any Pension
Plan.

     

    
      
         


      

      
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    (iv)           With
respect to any Foreign Plan, (i) all employer and employee contributions
required by law or by the terms of the Foreign Plan have been made, or, if
applicable, accrued, in accordance with normal accounting practices; (ii) the
fair market value of the assets of each funded Foreign Plan, the liability of
each insurer for any Foreign Plan funded through insurance, or the book reserve
established for any Foreign Plan, together with any accrued contributions, is
sufficient to procure or provide for the accrued benefit obligations with
respect to all current and former participants in such Foreign Plan according to
the actuarial assumptions and valuations most recently used to account for such
obligations in accordance with applicable generally accepted accounting
principles; and (iii) it has been registered as required and has been maintained
in good standing with applicable regulatory authorities.

     

    (v)           No
Obligor or any ERISA Affiliate maintains or contributes to, or has any
unsatisfied obligation to contribute to, or liability under, any active or
terminated Pension Plan other than those listed on Schedule 9.1.18
hereto.

     

    9.1.19.   Trade
Relations.  There
exists no actual or threatened termination, limitation or modification of any
business relationship between any Borrower or Subsidiary and any customer or
supplier, or any group of customers or suppliers, that individually or in the
aggregate would cause a Material Adverse Effect.  There exists no
condition or circumstance that could reasonably be expected to impair the
ability of any Borrower or Subsidiary to conduct its business at any time
hereafter in substantially the same manner as conducted on the Closing
Date.

     

    9.1.20.   Labor
Relations.  Except
as described on Schedule
9.1.20, no Borrower or Subsidiary is party to or bound by any collective
bargaining agreement, management agreement or consulting
agreement.  There are no material grievances, disputes or
controversies with any union or other organization of any Borrower’s or
Subsidiary’s employees, or, to any Borrower’s knowledge, any asserted or
threatened strikes, work stoppages or demands for collective bargaining that
could reasonably be expected to have a Material Adverse Effect.

     

    9.1.21.   Payable
Practices.  Except
in the Ordinary Course of Business, no Borrower or Subsidiary has made any
material change in its historical accounts payable practices from those in
effect on the Closing Date.

     

    9.1.22.   Not a Regulated
Entity.  No
Obligor is (a) an “investment company” or a “person directly or indirectly
controlled by or acting on behalf of an investment company” within the meaning
of the Investment Company Act of 1940; or (b) subject to regulation under the
Federal Power Act, the Interstate Commerce Act, any public utilities code or any
other Applicable Law regarding its authority to incur Debt.

     

    9.1.23.   Margin
Stock.  No
Borrower or Subsidiary is engaged, principally or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying any Margin Stock.  No Loan proceeds or Letters of Credit will
be used by Borrowers to purchase or carry, or to reduce or refinance any Debt
incurred to purchase or carry, any Margin Stock or for any related purpose
governed by Regulations T, U or X of the Board of Governors.

     

    
      
         


      

      
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    9.2.         Complete
Disclosure.  No Loan Document
contains any untrue statement of a material fact, nor fails to disclose any
material fact necessary to make the statements contained therein not materially
misleading.  There is no fact or circumstance that any Obligor has
failed to disclose to Agent in writing that could reasonably be expected to have
a Material Adverse Effect.

     

    SECTION
10.    COVENANTS AND CONTINUING AGREEMENTS

     

    10.1.       Affirmative
Covenants.  As long as any
Commitments or Obligations are outstanding, each Obligor shall, and shall cause
each Subsidiary to:

     

    10.1.1.   Inspections;
Appraisals.

     

    (a)           Permit
Agent, or its representatives or designees, from time to time, subject (except
when a Default or Event of Default exists) to reasonable notice and normal
business hours, to visit and inspect the Properties of any Obligor or
Subsidiary, inspect, audit and make extracts from any Obligor’s or Subsidiary’s
books and records, and discuss with its officers, employees, agents, advisors
and independent accountants such Obligor’s or Subsidiary’s business, financial
condition, assets, prospects and results of operations.  Lenders may
participate in any such visit or inspection, at their own
expense.  Neither Agent nor any Lender shall have any duty to any
Obligor to make any inspection, nor to share any results of any inspection,
appraisal or report with any Obligor.  Obligors acknowledge that all
inspections, appraisals and reports are prepared by Agent and Lenders for their
purposes, and Obligors shall not be entitled to rely upon them.

     

    (b)           Reimburse
Agent for all charges, costs and expenses of Agent in connection with (i)
examinations of any Obligor’s books and records or any other financial or
Collateral matters as Agent deems appropriate, up to three times per Loan Year;
and (ii) appraisals of Inventory and Equipment up to one time per Loan Year;
provided, however, that if an
examination or appraisal is initiated during a Default or Event of Default, all
charges, costs and expenses therefor shall be reimbursed by Borrowers without
regard to such limits.  Subject to and without limiting the foregoing,
Obligors specifically agree to pay Agent’s then standard charges for each day
that an employee of Agent or its Affiliates is engaged in any examination
activities, and shall pay the standard charges of Agent’s internal appraisal
group.  (The current standard per diem charge for an employee of Agent
or the third party currently utilized by Agent is $850 per day or part
thereof.)  This Section shall not be construed to limit Agent’s right
to conduct examinations or to obtain appraisals at any time in its discretion,
nor to use third parties for such purposes.

     

    10.1.2.   Financial and Other
Information.  Keep
adequate records and books of account with respect to its business activities,
in which proper entries are made in accordance with GAAP reflecting all
financial transactions; and furnish to Agent and Lenders:

     

    (a)           as
soon as available, and in any event within 120 days after the close of each
Fiscal Year, balance sheets as of the end of such Fiscal Year and the related
statements of income, cash flow and shareholders’ equity for such Fiscal Year,
on consolidated and consolidating bases for Borrowers and Subsidiaries, which
consolidated statements shall be audited and certified (without qualification)
by J.H. Cohn LLP or another firm of independent certified public accountants of
recognized standing selected by Borrowers and acceptable to Agent, and shall set
forth in comparative form corresponding figures for the preceding Fiscal Year
and other information acceptable to Agent, and a copy of the annual report on
Form 10-K if any Obligor is a reporting entity;

     

    
      
         


      

      
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    (b)           as
soon as available, and in any event within 30 days after the end of each month
(but within 60 days after the last month in a Fiscal Quarter and within 90 days
after the last month in a Fiscal Year), unaudited balance sheets as of the end
of such month and the related statements of income and cash flow for such month
and for the portion of the Fiscal Year then elapsed, on consolidated and
consolidating bases for Borrowers and Subsidiaries (which consolidating
statements shall be prepared by Borrowers), setting forth in comparative form
corresponding figures for the preceding Fiscal Year and certified by the chief
financial officer of Borrower Agent as prepared in accordance with GAAP and
fairly presenting the financial position and results of operations for such
month and period, subject to normal year-end adjustments and the absence of
footnotes, and a copy of the quarterly report on Form 10-Q if any Obligor is a
reporting entity;

     

    (c)           concurrently
with delivery of financial statements under clauses (a) and (b) above, or more
frequently if requested by Agent while a Default or Event of Default exists, a
Compliance Certificate executed by the chief financial officer of Borrower
Agent;

     

    (d)           concurrently
with delivery of financial statements under clause (a) above, copies of all
management letters and other material reports submitted to Borrowers by their
accountants in connection with such financial statements;

     

    (e)           not
later than 60 days prior to the end of each Fiscal Year, projections of
Borrowers’ consolidated balance sheets, results of operations, cash flow and
Availability for the next three Fiscal Years of Borrowers, in which the first
Fiscal Year shall be on a monthly basis and the next two Fiscal Years shall be
on an annual basis;

     

    (f)           within
20 days after the end of each month, each Obligor shall provide Agent with (i) a
detailed trade payable aging, as of the end of the prior month and at Agent’s
request, a listing of each such Obligor’s trade payables, specifying the trade
creditor and balance due, all in form reasonably satisfactory to Agent, and (ii)
a detailed listing of Inventory by location, including details of any inventory
in-transit to such Obligor, as of the end of the prior month, all in form
reasonably satisfactory to Agent;

     

    (g)           promptly
after the sending or filing thereof, copies of any proxy statements, financial
statements or reports that any Obligor has made generally available to its
shareholders; copies of any regular, periodic and special reports or
registration statements or prospectuses that any Obligor files with the
Securities and Exchange Commission or any other Governmental Authority, or any
securities exchange; and copies of any press releases or other statements made
available by an Obligor to the public concerning material changes to or
developments in the business of such Obligor;

     

    (h)           promptly
after the sending or filing thereof, copies of any annual report to be filed in
connection with each Plan or Foreign Plan;

     

    (i)           such
other reports and information (financial or otherwise) as Agent may request from
time to time in connection with any Collateral or any Borrower’s, Subsidiary’s
or other Obligor’s financial condition or business; and

     

    10.1.3.   Notices.  Notify
Agent and Lenders in writing, promptly after a Borrower’s obtaining knowledge
thereof, of any of the following that affects an Obligor:  (a) the
threat or commencement of any proceeding or investigation, whether or not
covered by insurance, if an adverse determination could have a Material Adverse
Effect; (b) any pending or threatened labor dispute, strike or walkout, or the
expiration of any material labor contract; (c) any default under or termination
of the Sears Supply Agreement or other Material Contract; (d) the existence of
any Default or Event of Default; (e) any judgment in an amount exceeding $50,000
not covered by insurance; (f) the assertion of any Intellectual Property Claim,
if an adverse resolution could have a Material Adverse Effect; (g) any violation
or asserted violation of any Applicable Law (including ERISA, OSHA, FLSA, or any
Environmental Laws), if an adverse resolution could have a Material Adverse
Effect; (h) any Environmental Release by an Obligor or on any Property owned,
leased or occupied by an Obligor; or receipt of any Environmental Notice; (i)
the occurrence of any ERISA Event; (j) the discharge of or any withdrawal or
resignation by Borrowers’ independent accountants; (k) any opening of a new
office or place of business, at least 30 days prior to such opening; or (l)
notices of any claims or actions against any Obligor in excess of $25,000
relating to WMC; and after the occurrence of any of the foregoing, provide
status updates and copies of documents as reasonably requested by
Agent.

     

    
      
         


      

      
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    10.1.4.   Landlord and Storage
Agreements.  Upon
request, provide Agent with copies of all existing agreements, and promptly
after execution thereof provide Agent with copies of all future agreements,
between an Obligor and any landlord, warehouseman, processor, shipper, bailee or
other Person that owns any premises at which any Collateral may be kept or that
otherwise may possess or handle any Collateral.

     

    10.1.5.   Compliance with
Laws.  Comply
with all Applicable Laws, including ERISA, Environmental Laws, FLSA, OSHA,
Anti-Terrorism Laws, and laws regarding collection and payment of Taxes, and
maintain all Governmental Approvals necessary to the ownership of its Properties
or conduct of its business, unless failure to comply (other than failure to
comply with Anti-Terrorism Laws) or maintain could not reasonably be expected to
have a Material Adverse Effect.  Without limiting the generality of
the foregoing, if any Environmental Release occurs at or on any Properties of
any Borrower or Subsidiary, it shall act promptly and diligently to investigate
and report to Agent and all appropriate Governmental Authorities the extent of,
and to make appropriate remedial action to eliminate, such Environmental
Release, whether or not directed to do so by any Governmental
Authority.

     

    10.1.6.   Taxes.  Pay
and discharge all Taxes prior to the date on which they become delinquent or
penalties attach, unless such Taxes are being Properly Contested.

     

    10.1.7.   Insurance.  In
addition to the insurance required hereunder with respect to Collateral,
maintain insurance with insurers (with a Best Rating of at least A7, unless
otherwise approved by Agent) satisfactory to Agent, (a) with respect to the
Properties and business of Borrowers and Subsidiaries of such type (including
product liability, workers’ compensation, larceny, embezzlement, or other
criminal misappropriation insurance), in such amounts, and with such coverages
and deductibles as are customary for companies similarly situated; and (b)
business interruption insurance in an amount not less than $2,000,000, with
deductibles and subject to an Insurance Assignment satisfactory to
Agent.

     

    10.1.8.   Licenses.  Keep
each License affecting any Collateral (including the manufacture, distribution
or disposition of Inventory) or any other material Property of Borrowers and
Subsidiaries in full force and effect; promptly notify Agent of any proposed
modification to any such License, or entry into any new License, in each case at
least 30 days prior to its effective date; pay all Royalties when due; and
notify Agent of any default or breach asserted by any Person to have occurred
under any License.

     

    10.1.9.   Future
Subsidiaries.  Promptly
notify Agent upon any Person becoming a Subsidiary and, if such Person is not a
Foreign Subsidiary, cause it to guaranty the Obligations in a manner
satisfactory to Agent, and to execute and deliver such documents, instruments
and agreements and to take such other actions as Agent shall require to evidence
and perfect a Lien in favor of Agent (for the benefit of Secured Parties) on all
assets of such Person, including delivery of such legal opinions, in form and
substance satisfactory to Agent, as Agent shall deem appropriate.

     

    10.1.10.  Depository
Bank.  Maintain
Capital One as its principal depository bank, including for the maintenance of
operating, collection, disbursement and other deposit accounts and Cash
Management Services.

     

    
      
         


      

      
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    10.2.       Negative
Covenants.  As long as any
Commitments or Obligations are outstanding, each Obligor shall not, and shall
cause each Subsidiary not to:

     

    10.2.1.   Permitted
Debt.  Create,
incur, guarantee or suffer to exist any Debt, except:

     

    (a)         the
Obligations;

     

    (b)         Subordinated
Debt;

     

    (c)         Permitted
Purchase Money Debt;

     

    (d)         Borrowed
Money (other than the Obligations, Subordinated Debt and Permitted Purchase
Money Debt), but only to the extent outstanding on the Closing Date and not
satisfied with proceeds of the initial Loans;

     

    (e)          Bank
Product Debt;

     

    (f)           Debt
that is in existence when a Person becomes a Subsidiary or that is secured by an
asset when acquired by a Borrower or Subsidiary, as long as such Debt was not
incurred in contemplation of such Person becoming a Subsidiary or such
acquisition, and does not exceed $100,000 in the aggregate at any
time;

     

    (g)          Permitted
Contingent Obligations;

     

    (h)          Refinancing
Debt as long as each Refinancing Condition is satisfied; and

     

    (i)           Debt
that is not included in any of the preceding clauses of this Section, is not
secured by a Lien and does not exceed $250,000 in the aggregate at any
time.

     

    10.2.2.   Permitted
Liens.  Create
or suffer to exist any Lien upon any of its Property, except the following
(collectively, “Permitted
Liens”):

     

    (a)           Liens
in favor of Agent;

     

    (b)           Purchase
Money Liens securing Permitted Purchase Money Debt;

     

    (c)           Liens
for Taxes not yet due or being Properly Contested;

     

    (d)           non-consenual,
possessory or statutory Liens (other than Liens for Taxes or imposed under
ERISA) arising in the Ordinary Course of Business, but only if (i) payment of
the obligations secured thereby is not yet due or is being Properly Contested,
and (ii) such Liens do not materially impair the value or use of the Property or
materially impair operation of the business of any Borrower or
Subsidiary;

     

    (e)           Liens
incurred or deposits made in the Ordinary Course of Business to secure the
performance of tenders, bids, leases, contracts (except those relating to
Borrowed Money), statutory obligations and other similar obligations, or arising
as a result of progress payments under government contracts, as long as such
Liens are at all times junior to Agent’s Liens;

     

    (f)           Liens
arising in the Ordinary Course of Business that are subject to Lien
Waivers;

     

    (g)          Liens
arising by virtue of a judgment or judicial order against any Borrower or
Subsidiary, or any Property of a Borrower or Subsidiary, as long as such Liens
are (i) in existence for less than 20 consecutive days or being Properly
Contested, and (ii) at all times junior to Agent’s Liens;

     

    
      
         


      

      
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    (h)          easements,
rights-of-way, restrictions, covenants or other agreements of record, and other
similar charges or encumbrances on Real Estate, that do not secure any monetary
obligation and do not interfere with the Ordinary Course of
Business;

     

    (i)           Liens
in favor of Marc Schorr  (with respect to the Schorr Debt) and Richard
A. Horowitz (with respect to the RAH Debt), in each case, so long as subject to
and permitted by the terms of the applicable Subordination
Agreement;

     

    (j)           normal
and customary rights of setoff upon deposits in favor of depository
institutions, and Liens of a collecting bank on Payment Items in the course of
collection; and

     

    (k)          other
Liens existing on the  date hereof and shown on Schedule 10.2.2.

     

    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

                        	 	$	750,000	 
	
                          2012
      and thereafter

                        	 	$	1,000,000	 


                

              

            

          

        

      

    

     

    10.2.4.   Distributions; Upstream
Payments; Executive Compensation.  Declare
or make any Distributions or pay executive compensation, except (a) Upstream
Payments, (b) Distributions of Equity Interests that do not result in a Change
of Control and (c) executive compensation, including incentive compensation, and
management and directors’ fees and expenses consistent with past practice and,
in the case of incentive compensation, with any incentive plans approved by the
Board of Directors of P&F as set forth on Schedule 10.2.4 or as
subsequently approved by such Board (or a committee thereof) and such Board’s
independent compensation consultant reasonably satisfactory to Agent; or create
or suffer to exist any encumbrance or restriction on the ability of a Subsidiary
to make any Upstream Payment, except for restrictions under the Loan Documents,
under Applicable Law or in effect on the Closing Date as shown on Schedule 9.1.15.

     

    10.2.5.   Restricted
Investments.  Make
any Restricted Investment.

     

    10.2.6.   Disposition of
Assets.  Make
any Asset Disposition, except a Permitted Asset Disposition, a disposition of
Equipment under Section
8.4.2, or a transfer of Property by a Subsidiary or Obligor to a
Borrower.

     

    10.2.7.   Loans.  Make
any loans or other advances of money to any Person, except (a) advances to an
officer or employee for salary, travel expenses, commissions and similar items
in the Ordinary Course of Business; (b) prepaid expenses and extensions of trade
credit made in the Ordinary Course of Business; (c) deposits with financial
institutions permitted hereunder; (d) intercompany loans by a Borrower or
Guarantor to another Borrower or from a Guarantor to another Guarantor; and (e)
from a Borrower to a Guarantor in the Ordinary Course of Business and not to
exceed $250,000 at any time outstanding with respect to all loans from all
Borrowers to all Guarantors.

     

    
      
         


      

      
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    10.2.8.   Restrictions on Payment of
Certain Debt.  Make
any payments (whether voluntary or mandatory, or a prepayment, redemption,
retirement, defeasance or acquisition) with respect to any (a) Existing
Subordinated Debt except (i) the Hy-Tech Closing Date Payment, the RAH Closing
Date Payment and the Schorr Closing Date Payment (in each case, to the extent
permitted hereunder) and (ii) so long as no Default or Event of Default exists
or result therefrom, regularly scheduled payments of interest and payments of
principal to the extent permitted by the applicable Subordination Agreement; (b)
other Subordinated Debt, except regularly scheduled payments of principal,
interest and fees, but only to the extent permitted under any subordination
agreement relating to such Debt (and a Senior Officer of Borrower Agent shall
certify to Agent, not less than five Business Days prior to the date of payment,
that all conditions under such agreement have been satisfied); or (c) Borrowed
Money (other than the Obligations) prior to its due date under the agreements
evidencing such Debt as in effect on the Closing Date (or as amended thereafter
with the consent of Agent) except payments made in connection with a Permitted
Asset Disposition in satisfaction of Permitted Liens on the Equipment or Real
Estate that is the subject of such Asset Disposition.

     

    10.2.9.   Fundamental
Changes.  (a)
Merge, combine or consolidate with any Person, or liquidate, wind up its affairs
or dissolve itself, in each case whether in a single transaction or in a series
of related transactions, except for (i) mergers or consolidations of a
wholly-owned Subsidiary with another wholly-owned Subsidiary (provided that if
either Subsidiary is an Obligor, the surviving Subsidiary shall be an Obligor)
or into a Borrower and (ii) liquidations or dissolutions of Immaterial
Subsidiaries; (b) change its name or conduct business under any fictitious name;
(c) change its tax, charter or other organizational identification number; or
(d) change its form or state of organization.

     

    10.2.10.  Subsidiaries.  Form
or acquire any Subsidiary after the Closing Date, except in accordance with
Sections 10.1.9 and 10.2.5; or permit any
existing Subsidiary to issue any additional Equity Interests except director’s
qualifying shares.

     

    10.2.11.  Organic
Documents.  Amend,
modify or otherwise change any of its Organic Documents as in effect on the
Closing Date, except for new agreements, amendments, modifications or other
changes that do not adversely affect the rights and privileges of any Borrower
or Obligor, or its Subsidiaries, and do not adversely affect the ability of a
Borrower, Obligor or such Subsidiary to borrower hereunder or to amend, modify,
renew or supplement the terms of this Agreement or any of the other Loan
Documents, or otherwise adversely affect the interest of Agent or the Lenders
and so long as at the time of such amendment, modification or change, no Default
or Event of Default shall exist or have occurred and be continuing.

     

    10.2.12.  Tax
Consolidation.  File
or consent to the filing of any consolidated income tax return with any Person
other than Borrowers and Subsidiaries and WMC.

     

    10.2.13.  Accounting
Changes.  Make
any material change in accounting treatment or reporting practices, except as
required by GAAP and in accordance with Section 1.2; or change its
Fiscal Year.

     

    10.2.14.  Restrictive
Agreements.  Become
a party to any Restrictive Agreement, except a Restrictive Agreement (a) in
effect on the Closing Date and set forth on Schedule 9.1.15; (b) relating
to secured Debt permitted hereunder, as long as the restrictions apply only to
collateral for such Debt; or (c) constituting customary restrictions on
assignment in leases and other contracts.

     

    10.2.15.  Hedging
Agreements.  Enter
into any Hedging Agreement, except to hedge risks arising in the Ordinary Course
of Business and not for speculative purposes.

     

    10.2.16.  Conduct of
Business.  Engage
in any business, other than its business as conducted on the Closing Date and
any business reasonably related, ancillary or complimentary to such
business.

     

    
      
         


      

      
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    10.2.17.  Affiliate
Transactions.  Enter
into or be party to any transaction with an Affiliate, except (a) transactions
contemplated by the Loan Documents; (b) payment of reasonable compensation to
officers and employees for services actually rendered, and loans and advances
permitted by Section
10.2.7; (c) payment of customary directors’ fees and indemnities; (d)
transactions solely among Borrowers or solely among Guarantors; (e) transactions
among Borrowers and Guarantors provided that they do not involve in the
aggregate the transfer of assets or value to one or more Guarantors having a
value in excess of $250,000 at any one time outstanding; (f) transactions that
were consummated prior to the Closing Date, as shown on Schedule 10.2.17; and (g)
transactions with Affiliates (other than WMC, except as provided in Section 10.2.20) in the
Ordinary Course of Business, upon fair and reasonable terms fully disclosed to
Agent and no less favorable than would be obtained in a comparable arm’s-length
transaction with a non-Affiliate.

     

    10.2.18.  Plans.  Become
party to any Multiemployer Plan or Foreign Plan, other than any in existence on
the Closing Date.

     

    10.2.19.  Amendments to Subordinated
Debt.  Amend,
supplement or otherwise modify any document, instrument or agreement relating to
any Subordinated Debt, if such modification (a) increases the principal balance
of such Debt, or increases any required payment of principal or interest; (b)
accelerates the date on which any installment of principal or any interest is
due, or adds any additional redemption, put or prepayment provisions; (c)
shortens the final maturity date or otherwise accelerates amortization; (d)
increases the interest rate; (e) increases or adds any fees or charges; (f)
modifies any covenant in a manner or adds any representation, covenant or
default that is more onerous or restrictive in any material respect for any
Borrower or Subsidiary, or that is otherwise materially adverse to any Borrower,
any Subsidiary or Lenders; (g) results in the Obligations not being fully
benefited by the subordination provisions applicable thereto or (h) results in
the Obligations not constituting “Senior Debt” under the applicable
Subordination Agreement.

     

    10.2.20.  WMC.  No
Obligor shall (i) transfer any assets or make any loans to, or Investments in
WMC,  (ii) assume, become obligated for or satisfy any obligations of
WMC, (ii) resume any of the operations or business of WMC or (iv) use the names
or other assets of WMC in its business or operations except for payment of
reasonable expense, including without limitation legal and accounting fees, in
connection with the winding up or dissolution of WMC.

     

    10.2.21.  Post-Closing
Deliveries.  Fail
to satisfy any of the requirements set forth on Schedule 10.2.21 within the
time period(s) specified therein or such later time period(s) as may be approved
by Agent.

     

    10.3.       Financial
Covenants.  As
long as any Commitments or Obligations are outstanding, Borrowers
shall:

     

    10.3.1.    Leverage
Ratio.  Maintain a Leverage Ratio at all times not greater than
the applicable ratio set forth below:

     

    
      
        
          
            
              
                	
                        Measurement Date

                      	 	
                        Maximum Leverage Ratio

                      
	
                        Closing
      Date through March 31, 2011

                      	 	
                        6.00
      to 1.00

                      
	
                        April
      1, 2011 through June 30,
      2011

                      	 	
                        6.50
      to 1.00

                      
	
                        July
      1, 2011 through September 30, 2011

                      	 	
                        6.00
      to 1.00

                      
	
                        October
      1, 2011 and thereafter

                      	 	
                        5.00
      to
1.00

                      


              

            

          

        

      

    

     

    
      
         


      

      
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    10.3.2.    Fixed Charge Coverage
Ratio.  Maintain
a Fixed Charge Coverage Ratio as of the end of each Measurement Period not less
than the applicable ratio set forth below:

     

    
      
        
          
            
              	
                      Measurement Period Ending

                    	 	
                      Minimum Fixed Charge Coverage Ratio

                    
	
                      October
      31, 2010 through November 30, 2010

                    	 	
                      1.20
      to 1.00

                    
	
                      December
      31, 2010

                    	 	
                      1.50
      to 1.00

                    
	
                      January
      31, 2011 through May 31, 2011

                    	 	
                      1.60
      to 1.00

                    
	
                      June
      30, 2011 and thereafter

                    	 	
                      1.50
      to 1.00

                    


            

          

        

      

    

     

    10.3.3.    Tangible Net
Worth.  Maintain
a Tangible Net Worth as of the end of each Measurement Period not less than the
applicable amount set forth below:

     

    
      
        
          
            
              	
                      Measurement Period Ending

                    	 	
                      Minimum Tangible Net Worth

                    
	
                      December
      31, 2010

                    	 	
                      $13,873,500

                    
	
                      March
      31, 2011

                    	 	
                      $14,030,100

                    
	
                      June
      30, 2011

                    	 	
                      $14,355,900

                    
	
                      September
      30, 2011

                    	 	
                      $14,706,900

                    
	
                      December
      31, 2011

                    	 	
                      $14,850,900

                    
	
                      March
      31, 2012 and each Fiscal Quarter end thereafter

                    	 	
                      $14,850,900
      plus 50%
      of the consolidated net income (if positive) of P&F and its
      Subsidiaries for each Fiscal Quarter ended after December 31,
      2011

                    


            

          

        

      

    

     

    SECTION
11.    EVENTS OF DEFAULT; REMEDIES ON DEFAULT

     

    11.1.       Events of
Default.  Each of the
following shall be an “Event of Default”
hereunder, if the same shall occur for any reason whatsoever, whether voluntary
or involuntary, by operation of law or otherwise:

     

    (a)           A
Borrower fails to pay any Obligations when due (whether at stated maturity, on
demand, upon acceleration or otherwise);

     

    (b)           Any
representation, warranty or other written statement of an Obligor made in
connection with any Loan Documents or transactions contemplated thereby is
incorrect or misleading in any material respect when given;

     

    (c)           A
Borrower breaches or fail to perform any covenant contained in Section 7.2, 7.3, 7.4, 7
..5, 7.7, 8.1, 8.2.4, 8.2.5, 8.5, 8.6.2, 10.1.1, 10.1.2, 10.1.3 (d), 10.2
or 10.3;

     

    (d)           An
Obligor breaches or fails to perform any other covenant contained in any Loan
Documents, and such breach or failure is not cured within 30 days after a Senior
Officer of such Obligor has knowledge thereof or receives notice thereof from
Agent, whichever is sooner; provided, however, that such
notice and opportunity to cure shall not apply if the breach or failure to
perform is not capable of being cured within such period or is a willful breach
by an Obligor;

     

    (e)           A
Guarantor repudiates, revokes or attempts to revoke its Guaranty; an Obligor or
third party denies or contests the validity or enforceability of any Loan
Documents or Obligations, or the perfection or priority of any Lien granted to
Agent; or any Loan Document ceases to be in full force or effect for any reason
(other than a waiver or release by Agent and Lenders);

     

    
      
         


      

      
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    (f)           Any
breach or default of an Obligor occurs under any document, instrument or
agreement to which it is a party or by which it or any of its Properties is
bound, relating to any Debt (other than the Obligations) in excess of $250,000,
if the maturity of or any payment with respect to such Debt may be accelerated
or demanded due to such breach;

     

    (g)           Any
unsatisfied judgment or order for the payment of money is entered against an
Obligor in an amount that exceeds, individually or cumulatively with all
unsatisfied judgments or orders against all Obligors, $250,000 (net of any
insurance coverage therefor acknowledged in writing by the insurer), unless a
stay of enforcement of such judgment or order is in effect, by reason of a
pending appeal or otherwise;

     

    (h)           A
loss, theft, damage or destruction occurs with respect to any Collateral if the
amount not covered by insurance exceeds $250,000 ($400,000 in the case of
hurricane damage to Borrowers’ Real Estate in Jupiter, Florida);

     

    (i)           An
Obligor is enjoined, restrained or in any way prevented by any Governmental
Authority from conducting any material part of its business; an Obligor suffers
the loss, revocation or termination of any material license, permit, lease or
agreement necessary to its business; there is a cessation of any material part
of an Obligor’s business for a material period of time; any material Collateral
or Property of an Obligor is taken or impaired through condemnation; an Obligor
agrees to or commences any liquidation, dissolution or winding up of its
affairs; or an Obligor is not Solvent;

     

    (j)           An
Insolvency Proceeding is commenced by an Obligor; an Obligor makes an offer of
settlement, extension or composition to its unsecured creditors generally; a
trustee is appointed to take possession of any substantial Property of or to
operate any of the business of an Obligor; or an Insolvency Proceeding is
commenced against an Obligor and:  the Obligor consents to institution
of the proceeding, the petition commencing the proceeding is not timely
contested by the Obligor, the petition is not dismissed within 30 days after
filing, or an order for relief is entered in the proceeding;

     

    (k)           An
ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan that has
resulted or could reasonably be expected to result in liability of an Obligor to
a Pension Plan, Multiemployer Plan or PBGC, or that constitutes grounds for
appointment of a trustee for or termination by the PBGC of any Pension Plan or
Multiemployer Plan; an Obligor or ERISA Affiliate fails to pay when due any
installment payment with respect to its withdrawal liability under
Section 4201 of ERISA under a Multiemployer Plan; or any event similar to
the foregoing occurs or exists with respect to a Foreign Plan;

     

    (l)           An
Obligor or any of its Senior Officers is criminally indicted or convicted for
(i) a felony committed in the conduct of the Obligor’s business, or (ii)
violating any state or federal law (including the Controlled Substances Act,
Money Laundering Control Act of 1986 and Illegal Exportation of War Materials
Act) that could lead to forfeiture of any material Property or any
Collateral;

     

    (m)           A
Change of Control occurs; or any event occurs or condition exists that has a
Material Adverse Effect; or

     

    (n)           Any
material provision of any subordination provision applicable to any Subordinated
Debt (including any material provision of any Subordination Agreement), ceases
to be in full force and effect; or any Obligor contests in any manner the
validity or enforceability of any such provision; or any Obligor breaches any
such provision.

     

    
      
         


      

      
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    11.2.       Remedies upon
Default.  If an Event of
Default described in Section
11.1(j) occurs with respect to any Borrower, then to the extent permitted
by Applicable Law, all Obligations (other than Secured Bank Product Obligations)
shall become automatically due and payable and all Commitments shall terminate,
without any action by Agent or notice of any kind.  In addition, or if
any other Event of Default exists, Agent may in its discretion (and shall upon
written direction of Required Lenders) do any one or more of the following from
time to time:

     

    (a)           declare
any Obligations immediately due and payable, whereupon they shall be due and
payable without diligence, presentment, demand, protest or notice of any kind,
all of which are hereby waived by Obligors to the fullest extent permitted by
law;

     

    (b)           terminate,
reduce or condition any Commitment, or make any adjustment to the Borrowing
Base;

     

    (c)           require
Obligors to Cash Collateralize LC Obligations, Secured Bank Product Obligations
and other Obligations that are contingent or not yet due and payable, and, if
Obligors fail promptly to deposit such Cash Collateral, Agent may (and shall
upon the direction of Required Lenders) advance the required Cash Collateral as
Revolver Loans (whether or not an Overadvance exists or is created thereby, or
the conditions in Section
6 are satisfied); and

     

    (d)           exercise
any other rights or remedies afforded under any agreement, by law, at equity or
otherwise, including the rights and remedies of a secured party under the
UCC.  Such rights and remedies include the rights to (i) take
possession of any Collateral; (ii) require Obligors to assemble Collateral, at
Borrowers’ expense, and make it available to Agent at a place designated by
Agent; (iii) enter any premises where Collateral is located and store Collateral
on such premises until sold (and if the premises are owned or leased by an
Obligor, Obligors agree not to charge for such storage); and (iv) sell or
otherwise dispose of any Collateral in its then condition, or after any further
manufacturing or processing thereof, at public or private sale, with such notice
as may be required by Applicable Law, in lots or in bulk, at such locations, all
as Agent, in its discretion, deems advisable.  Each Obligor agrees
that 10 days notice of any proposed sale or other disposition of Collateral by
Agent shall be reasonable.  Agent shall have the right to conduct such
sales on any Obligor’s premises, without charge, and such sales may be adjourned
from time to time in accordance with Applicable Law.  Agent shall have
the right to sell, lease or otherwise dispose of any Collateral for cash, credit
or any combination thereof, and Agent may purchase any Collateral at public or,
if permitted by law, private sale and, in lieu of actual payment of the purchase
price, may credit bid and set off the amount of such price against the
Obligations.

     

    11.3.       License.  Agent is hereby
granted an irrevocable, non-exclusive license or other right to use, license or
sub-license (without payment of royalty or other compensation to any Person) any
or all Intellectual Property of Obligors, computer hardware and software, trade
secrets, brochures, customer lists, promotional and advertising materials,
labels, packaging materials and other Property, in advertising for sale,
marketing, selling, collecting, completing manufacture of, or otherwise
exercising any rights or remedies with respect to, any
Collateral.  Each Obligor’s rights and interests under Intellectual
Property shall inure to Agent’s benefit.

     

    11.4.       Setoff.  At any time
during an Event of Default, Agent, Issuing Bank, Lenders, and any of their
Affiliates are authorized, to the fullest extent permitted by Applicable Law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final, in whatever currency) at any time held and other
obligations (in whatever currency) at any time owing by Agent, Issuing Bank,
such Lender or such Affiliate to or for the credit or the account of an Obligor
against any Obligations, irrespective of whether or not Agent, Issuing Bank,
such Lender or such Affiliate shall have made any demand under this Agreement or
any other Loan Document and although such Obligations may be contingent or
unmatured or are owed to a branch or office of Agent, Issuing Bank, such Lender
or such Affiliate different from the branch or office holding such deposit or
obligated on such indebtedness; provided that in the
event any Defaulting Lender shall exercise any such right of setoff,
(a) all amounts so set off shall be paid over immediately to Agent for
further application in accordance with the provisions of Section 4.2 and, pending such
payment, shall be segregated by such Defaulting Lender from its other funds and
deemed to be held in trust for the benefit of Agent and the Lenders and
(b) the Defaulting Lender shall provide promptly to Agent a statement
describing in reasonable detail the Obligations owing to such Defaulting Lender
as to which it exercised such right of setoff.  The rights of Agent,
Issuing Bank, each Lender and each such Affiliate under this Section are in
addition to other rights and remedies (including other rights of setoff) that
such Person may have.

     

    
      
         


      

      
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    11.5.       Remedies Cumulative; No
Waiver.

     

    11.5.1.    Cumulative
Rights.  All
agreements, warranties, guaranties, indemnities and other undertakings of
Borrowers or Obligors under the Loan Documents are cumulative and not in
derogation of each other.  The rights and remedies of Agent and
Lenders are cumulative, may be exercised at any time and from time to time,
concurrently or in any order, and are not exclusive of any other rights or
remedies available by agreement, by law, at equity or otherwise.  All
such rights and remedies shall continue in full force and effect until Full
Payment of all Obligations.

     

    11.5.2.    Waivers.  No
waiver or course of dealing shall be established by (a) the failure or delay of
Agent or any Lender to require strict performance by Obligors with any terms of
the Loan Documents, or to exercise any rights or remedies with respect to
Collateral or otherwise; (b) the making of any Loan or issuance of any Letter of
Credit during a Default, Event of Default or other failure to satisfy any
conditions precedent; or (c) acceptance by Agent or any Lender of any payment or
performance by an Obligor under any Loan Documents in a manner other than that
specified therein.  It is expressly acknowledged by Obligors that any
failure to satisfy a financial covenant on a measurement date shall not be cured
or remedied by satisfaction of such covenant on a subsequent date.

     

    SECTION
12.    AGENT

     

    12.1.       Appointment, Authority and
Duties of Agent.

     

    12.1.1.    Appointment and
Authority.  Each
Secured Party appoints and designates Capital One Leverage Finance Corporation
as Agent under all Loan Documents.  Agent may, and each Secured Party
authorizes Agent to, enter into all Loan Documents to which Agent is intended to
be a party and accept all Security Documents, for the benefit of Secured
Parties.  Each Secured Party agrees that any action taken by Agent or
Required Lenders in accordance with the provisions of the Loan Documents, and
the exercise by Agent or Required Lenders of any rights or remedies set forth
therein, together with all other powers reasonably incidental thereto, shall be
authorized by and binding upon all Secured Parties.  Without limiting
the generality of the foregoing, Agent shall have the sole and exclusive
authority to (a) act as the disbursing and collecting agent for Lenders with
respect to all payments and collections arising in connection with the Loan
Documents; (b) execute and deliver as Agent each Loan Document, including any
intercreditor or subordination agreement, and accept delivery of each Loan
Document from any Obligor or other Person; (c) act as collateral agent for
Secured Parties for purposes of perfecting and administering Liens under the
Loan Documents, and for all other purposes stated therein; (d) manage, supervise
or otherwise deal with Collateral; and (e) take any Enforcement Action or
otherwise exercise any rights or remedies with respect to any Collateral under
the Loan Documents, Applicable Law or otherwise.  The duties of Agent
shall be ministerial and administrative in nature, and Agent shall not have a
fiduciary relationship with any Secured Party, Participant or other Person, by
reason of any Loan Document or any transaction relating
thereto.  Agent alone shall be authorized to determine whether any
Accounts or Inventory constitute Eligible Accounts, Eligible In-Transit
Inventory or Eligible Inventory, or whether to impose or release any reserve, or
whether any conditions to funding or to issuance of a Letter of Credit have been
satisfied, which determinations and judgments, if exercised in good faith, shall
exonerate Agent from liability to any Lender or other Person for any error in
judgment.

     

    
      
         


      

      
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    12.1.2.    Duties.  Agent
shall not have any duties except those expressly set forth in the Loan
Documents.  The conferral upon Agent of any right shall not imply a
duty on Agent’s part to exercise such right, unless instructed to do so by
Required Lenders in accordance with this Agreement.

     

    12.1.3.    Agent
Professionals.  Agent
may perform its duties through agents and employees.  Agent may
consult with and employ Agent Professionals, and shall be entitled to act upon,
and shall be fully protected in any action taken in good faith reliance upon,
any advice given by an Agent Professional.  Agent shall not be
responsible for the negligence or misconduct of any agents, employees or Agent
Professionals selected by it with reasonable care.

     

    12.1.4.    Instructions of Required
Lenders.  The
rights and remedies conferred upon Agent under the Loan Documents may be
exercised without the necessity of joinder of any other party, unless required
by Applicable Law.  Agent may request instructions from Required
Lenders or other Secured Parties with respect to any act (including the failure
to act) in connection with any Loan Documents, and may seek assurances to its
satisfaction from any or all Secured Parties of their indemnification
obligations against all Claims that could be incurred by Agent in connection
with any act.  Agent shall be entitled to refrain from any act until
it has received such instructions or assurances, and Agent shall not incur
liability to any Person by reason of so refraining.  Instructions of
Required Lenders shall be binding upon all Secured Parties, and no Secured Party
shall have any right of action whatsoever against Agent as a result of Agent
acting or refraining from acting in accordance with the instructions of Required
Lenders.  Notwithstanding the foregoing, instructions by and consent
of Secured Parties shall be required in the circumstances described in Section 14.1.1.  In
no event shall Agent be required to take any action that, in its opinion, is
contrary to Applicable Law or any Loan Documents or could subject any Agent
Indemnitee to personal liability.

     

    12.2.       Agreements Regarding
Collateral and Field Examination Reports.

     

    12.2.1.    Lien Releases; Care of
Collateral.  Secured
Parties authorize Agent to release any Lien with respect to any Collateral (a)
upon Full Payment of the Obligations; (b) that is the subject of an Asset
Disposition which Borrowers certify in writing to Agent is a Permitted Asset
Disposition or a Lien which Borrowers certify is a Permitted Lien entitled to
priority over Agent’s Liens (and Agent may rely conclusively on any such
certificate without further inquiry); (c) that does not constitute a material
part of the Collateral; or (d) with the written consent of all
Lenders.  Secured Parties authorize Agent to subordinate its Liens to
any Purchase Money Lien permitted hereunder.  Agent shall have no
obligation to assure that any Collateral exists or is owned by a Borrower, or is
cared for, protected or insured, nor to assure that Agent’s Liens have been
properly created, perfected or enforced, or are entitled to any particular
priority, nor to exercise any duty of care with respect to any
Collateral.

     

    12.2.2.    Possession of
Collateral.  Agent
and Secured Parties appoint each Lender as agent (for the benefit of Secured
Parties) for the purpose of perfecting Liens in any Collateral held or
controlled by such Lender, to the extent such Liens are perfected by possession
or control.  If any Lender obtains possession or control of any
Collateral, it shall notify Agent thereof and, promptly upon Agent’s request,
deliver such Collateral to Agent or otherwise deal with it in accordance with
Agent’s instructions.

     

    12.2.3.    Reports.  Agent
shall promptly forward to each Lender, when complete, copies of any field audit,
examination or appraisal report prepared by or for Agent with respect to any
Obligor or Collateral (“Report”).  Each
Lender agrees (a) that neither Capital One Leverage Finance Corporation nor
Agent makes any representation or warranty as to the accuracy or completeness of
any Report, and shall not be liable for any information contained in or omitted
from any Report; (b) that the Reports are not intended to be comprehensive
audits or examinations, and that Agent or any other Person performing any audit
or examination will inspect only specific information regarding Obligations or
the Collateral and will rely significantly upon Borrowers’ books and records as
well as upon representations of Borrowers’ officers and employees; and (c) to
keep all Reports confidential and strictly for such Lender’s internal use, and
not to distribute any Report (or the contents thereof) to any Person (except to
such Lender’s Participants, attorneys and accountants) or use any Report in any
manner other than administration of the Loans and other
Obligations.  Each Lender shall indemnify and hold harmless Agent and
any other Person preparing a Report from any action such Lender may take as a
result of or any conclusion it may draw from any Report, as well as from any
Claims arising as a direct or indirect result of Agent furnishing a Report to
such Lender.

     

    
      
         


      

      
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    12.3.       Reliance By
Agent.  Agent shall be
entitled to rely, and shall be fully protected in relying, upon any
certification, notice or other communication (including those by telephone,
telex, telegram, telecopy or e-mail) believed by it to be genuine and correct
and to have been signed, sent or made by the proper Person, and upon the advice
and statements of Agent Professionals.

     

    12.4.       Action Upon
Default.  Agent shall not
be deemed to have knowledge of any Default or Event of Default, or of any
failure to satisfy any conditions in Section 6, unless it has
received written notice from a Borrower or a Lender specifying the occurrence
and nature thereof.  If any Lender acquires knowledge of a Default,
Event of Default or failure of such conditions, it shall promptly notify Agent
and the other Lenders thereof in writing.  Each Secured Party agrees
that, except as otherwise provided in any Loan Documents or with the written
consent of Agent and Required Lenders, it will not take any Enforcement Action,
accelerate Obligations (other than Secured Bank Product Obligations), or
exercise any right that it might otherwise have under Applicable Law to credit
bid at foreclosure sales, UCC sales or other similar dispositions of Collateral
or to assert any rights relating to any Collateral.  Notwithstanding
the foregoing, however, a Secured Party may take action to preserve or enforce
its rights against an Obligor where a deadline or limitation period is
applicable that would, absent such action, bar enforcement of Obligations held
by such Secured Party, including the filing of proofs of claim in an Insolvency
Proceeding.

     

    12.5.       Ratable
Sharing.  If any Lender
shall obtain any payment or reduction of any Obligation, whether through set-off
or otherwise, in excess of its share of such Obligation, determined on a Pro
Rata basis or in accordance with Section 5.6.1, as applicable,
such Lender shall forthwith purchase from Agent, Issuing Bank and the other
Lenders such participations in the affected Obligation as are necessary to cause
the purchasing Lender to share the excess payment or reduction on a Pro Rata
basis or in accordance with Section 5.6.1, as
applicable.  If any of such payment or reduction is thereafter
recovered from the purchasing Lender, the purchase shall be rescinded and the
purchase price restored to the extent of such recovery, but without
interest.  No Lender shall set off against any Dominion Account
without the prior consent of Agent.  The Pro Rata sharing provisions
of this Section shall not be construed to apply to (a) any payment made by
or on behalf of Borrowers pursuant to and in accordance with the express terms
of this Agreement (including the application of funds arising from the existence
of a Defaulting Lender), (b) the application of Cash Collateral provided
for in Section 2.3.3,
(c) any payment obtained by a Lender as consideration for the assignment of
or sale of a participation in any of its Revolver Loans or subparticipations in
LC Obligations or Swingline Loans to any assignee or participant (to the extent
permitted hereunder) or (d) any payment made in respect of, and to any Lender
participating in, any additional loan facility arising under any amendment of
this Agreement.

     

    12.6.       Indemnification of Agent
Indemnitees.  EACH LENDER SHALL INDEMNIFY AND HOLD
HARMLESS AGENT INDEMNITEES AND ISSUING BANK INDEMNITEES, TO THE EXTENT NOT
REIMBURSED BY OBLIGORS (BUT WITHOUT LIMITING THE INDEMNIFICATION OBLIGATIONS OF
CREDIT PARTIES UNDER ANY LOAN DOCUMENTS), ON A PRO RATA BASIS, AGAINST ALL
CLAIMS THAT MAY BE INCURRED BY OR ASSERTED AGAINST ANY AGENT INDEMNITEE OR
ISSUING BANK INDEMNITEE, PROVIDED THAT ANY CLAIM AGAINST AN AGENT INDEMNITEE
RELATES TO OR ARISES FROM ITS ACTING AS OR FOR AGENT (IN THE CAPACITY OF
AGENT).  In Agent’s discretion, it may reserve for any Claims
made against an Agent Indemnitee or Issuing Bank Indemnitee, and may satisfy any
judgment, order or settlement relating thereto, from proceeds of Collateral
prior to making any distribution of Collateral proceeds to Secured
Parties.  If Agent is sued by any receiver, bankruptcy trustee,
debtor-in-possession or other Person for any alleged preference or fraudulent
transfer, then any monies paid by Agent in settlement or satisfaction of such
proceeding, together with all interest, costs and expenses (including attorneys’
fees) incurred in the defense of same, shall be promptly reimbursed to Agent by
each Lender to the extent of its Pro Rata share.

     

    
      
         


      

      
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    12.7.       Limitation on
Responsibilities of Agent.  Agent shall not
be liable to any Secured Party for any action taken or omitted to be taken under
the Loan Documents, except for losses directly and solely caused by Agent’s
gross negligence or willful misconduct.  Agent does not assume any
responsibility for any failure or delay in performance or any breach by any
Obligor, Lender or other Secured Party of any obligations under the Loan
Documents.  Agent does not make to Secured Parties any express or
implied warranty, representation or guarantee with respect to any Obligations,
Collateral, Loan Documents or Obligor.  No Agent Indemnitee shall be
responsible to Secured Parties for any recitals, statements, information,
representations or warranties contained in any Loan Documents; the execution,
validity, genuineness, effectiveness or enforceability of any Loan Documents;
the genuineness, enforceability, collectability, value, sufficiency, location or
existence of any Collateral, or the validity, extent, perfection or priority of
any Lien therein; the validity, enforceability or collectability of any
Obligations; or the assets, liabilities, financial condition, results of
operations, business, creditworthiness or legal status of any Obligor or Account
Debtor.  No Agent Indemnitee shall have any obligation to any Secured
Party to ascertain or inquire into the existence of any Default or Event of
Default, the observance or performance by any Obligor of any terms of the Loan
Documents, or the satisfaction of any conditions precedent contained in any Loan
Documents.

     

    12.8.       Successor Agent and
Co-Agents.

     

    12.8.1.    Resignation; Successor
Agent.  Subject
to the appointment and acceptance of a successor Agent as provided below, Agent
may resign at any time by giving at least 30 days written notice thereof to
Lenders and Borrower Agent.  Upon receipt of such notice, Required
Lenders shall have the right to appoint a successor Agent which shall be (a) a
Lender or an Affiliate of a Lender; or (b) a commercial bank that is organized
under the laws of the United States or any state or district thereof, has a
combined capital surplus of at least $200,000,000 and (provided no Default or
Event of Default exists) is reasonably acceptable to Borrower
Agent.  If no successor agent is appointed prior to the effective date
of the resignation of Agent, then Agent may appoint a successor agent from among
Lenders or, if no Lender accepts such role, Agent may appoint Required Lenders
as successor agent.  Upon acceptance by a successor Agent of an
appointment to serve as Agent hereunder, or upon appointment of Required Lenders
as successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the powers and duties of the retiring Agent without further act,
and the retiring Agent shall be discharged from its duties and obligations
hereunder but shall continue to have the benefits of the indemnification set
forth in Sections 12.6
and 14.2.  Notwithstanding
any Agent’s resignation, the provisions of this Section 12 shall continue in
effect for its benefit with respect to any actions taken or omitted to be taken
by it while Agent.  Any successor to Capital One Leverage Finance
Corporation by merger or acquisition of stock or this loan shall continue to be
Agent hereunder without further act on the part of the parties hereto, unless
such successor resigns as provided above.

     

    
      
         


      

      
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    12.8.2.    Separate Collateral
Agent.  It
is the intent of the parties that there shall be no violation of any Applicable
Law denying or restricting the right of financial institutions to transact
business in any jurisdiction.  If Agent believes that it may be
limited in the exercise of any rights or remedies under the Loan Documents due
to any Applicable Law, Agent may appoint an additional Person who is not so
limited, as a separate collateral agent or co-collateral agent.  If
Agent so appoints a collateral agent or co-collateral agent, each right and
remedy intended to be available to Agent under the Loan Documents shall also be
vested in such separate agent.  Every covenant and obligation
necessary to the exercise thereof by such agent shall run to and be enforceable
by it as well as Agent.  Secured Parties shall execute and deliver
such documents as Agent deems appropriate to vest any rights or remedies in such
agent.  If any collateral agent or co-collateral agent shall die or
dissolve, become incapable of acting, resign or be removed, then all the rights
and remedies of such agent, to the extent permitted by Applicable Law, shall
vest in and be exercised by Agent until appointment of a new agent.

     

    12.9.       Due Diligence and
Non-Reliance.  Each Lender
acknowledges and agrees that it has, independently and without reliance upon
Agent or any other Lenders, and based upon such documents, information and
analyses as it has deemed appropriate, made its own credit analysis of each
Obligor and its own decision to enter into this Agreement and to fund Loans and
participate in LC Obligations hereunder.  Each Secured Party has made
such inquiries as it feels necessary concerning the Loan Documents, Collateral
and Obligors.  Each Secured Party acknowledges and agrees that the
other Secured Parties have made no representations or warranties concerning any
Obligor, any Collateral or the legality, validity, sufficiency or enforceability
of any Loan Documents or Obligations.  Each Secured Party will,
independently and without reliance upon any other Secured Party, and based upon
such financial statements, documents and information as it deems appropriate at
the time, continue to make and rely upon its own credit decisions in making
Loans and participating in LC Obligations, and in taking or refraining from any
action under any Loan Documents.  Except for notices, reports and
other information expressly requested by a Lender, Agent shall have no duty or
responsibility to provide any Secured Party with any notices, reports or
certificates furnished to Agent by any Obligor or any credit or other
information concerning the affairs, financial condition, business or Properties
of any Obligor (or any of its Affiliates) which may come into possession of
Agent or its Affiliates.

     

    12.10.     Replacement of Certain
Lenders.  If a Lender (a)
is a Defaulting Lender, or (b) fails to give its consent to any amendment,
waiver or action for which consent of all Lenders was required and Required
Lenders consented, then, in addition to any other rights and remedies that any
Person may have, Agent may, by notice to such Lender within 120 days after such
event, require such Lender to assign all of its rights and obligations under the
Loan Documents to Eligible Assignee(s) specified by Agent, pursuant to
appropriate Assignment and Acceptance(s) and within 20 days after Agent’s
notice.  Agent is irrevocably appointed as attorney-in-fact to execute
any such Assignment and Acceptance if the Lender fails to execute
same.  Such Lender shall be entitled to receive, in cash, concurrently
with such assignment, all amounts owed to it under the Loan Documents, including
all principal, interest and fees through the date of assignment (but excluding
any prepayment charge).

     

    12.11.     Remittance of Payments and
Collections.

     

    12.11.1.  Remittances
Generally.  All
payments by any Lender to Agent shall be made by the time and on the day set
forth in this Agreement, in immediately available funds.  If no time
for payment is specified or if payment is due on demand by Agent and request for
payment is made by Agent by 11:00 a.m. on a Business Day, payment shall be made
by Lender not later than 2:00 p.m. on such day, and if request is made after
11:00 a.m., then payment shall be made by 11:00 a.m. on the next Business
Day.  Payment by Agent to any Secured Party shall be made by wire
transfer, in the type of funds received by Agent.  Any such payment
shall be subject to Agent’s right of offset for any amounts due from such payee
under the Loan Documents.

     

    12.11.2.  Failure to
Pay.  If
any Secured Party fails to pay any amount when due by it to Agent pursuant to
the terms hereof, such amount shall bear interest from the due date until paid
at the rate determined by Agent as customary in the banking industry for
interbank compensation.  In no event shall Borrowers be entitled to
receive credit for any interest paid by a Secured Party to Agent, nor shall any
Defaulting Lender be entitled to interest on any amounts held by Agent pursuant
to Section
4.2.

     

    
      
         


      

      
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    12.11.3.  Recovery of
Payments.  If
Agent pays any amount to a Secured Party in the expectation that a related
payment will be received by Agent from an Obligor and such related payment is
not received, then Agent may recover such amount from each Secured Party that
received it.  If Agent determines at any time that an amount received
under any Loan Document must be returned to an Obligor or paid to any other
Person pursuant to Applicable Law or otherwise, then, notwithstanding any other
term of any Loan Document, Agent shall not be required to distribute such amount
to any Lender.  If any amounts received and applied by Agent to any
Obligations are later required to be returned by Agent pursuant to Applicable
Law, each Lender shall pay to Agent, on demand, such Lender’s Pro
Rata share of the amounts required to be returned.

     

    12.12.     Agent in its Individual
Capacity.  As a Lender,
Capital One Leverage Finance Corporation shall have the same rights and remedies
under the other Loan Documents as any other Lender, and the terms “Lenders,”
“Required Lenders” or any similar term shall include Capital One Leverage
Finance Corporation in its capacity as a Lender.  Each of Capital One
Leverage Finance Corporation and its Affiliates may accept deposits from,
maintain deposits or credit balances for, invest in, lend money to, provide Bank
Products to, act as trustee under indentures of, serve as financial or other
advisor to, and generally engage in any kind of business with, Obligors and
their Affiliates, as if Capital One Leverage Finance Corporation were any other
lender, without any duty to account therefor (including any fees or other
consideration received in connection therewith) to the other
Lenders.  In their individual capacity, Capital One Leverage Finance
Corporation and its Affiliates may receive information regarding Obligors, their
Affiliates and their Account Debtors (including information subject to
confidentiality obligations), and each Secured Party agrees that Capital One
Leverage Finance Corporation and its Affiliates shall be under no obligation to
provide such information to any Secured Party, if acquired in such individual
capacity and not as Agent hereunder.

     

    12.13.     Agent
Titles.  Each
Lender, other than Capital One Leverage Finance Corporation, that is designated
(on the cover page of this Agreement or otherwise) by Capital One Leverage
Finance Corporation as an “Agent” or “Arranger” of any type shall not have any
right, power, responsibility or duty under any Loan Documents other than those
applicable to all Lenders, and shall in no event be deemed to have any fiduciary
relationship with any other Lender.

     

    12.14.     Bank Product
Providers.  Each
Secured Bank Product Provider, by delivery of a notice to Agent of a Bank
Product, agrees to be bound by Section 5.6 and this Section 12.  Each
Secured Bank Product Provider shall indemnify and hold harmless Agent
Indemnitees, to the extent not reimbursed by Obligors, against all Claims that
may be incurred by or asserted against any Agent Indemnitee in connection with
such provider’s Secured Bank Product Obligations.

     

    12.15.     No Third Party
Beneficiaries.  This Section 12 is an agreement
solely among Secured Parties and Agent, and shall survive Full Payment of the
Obligations.  This Section 12 does not confer any
rights or benefits upon Obligors or any other Person.  As between
Obligors and Agent, any action that Agent may take under any Loan Documents or
with respect to any Obligations shall be conclusively presumed to have been
authorized and directed by Secured Parties.

     

    SECTION
13.    BENEFIT OF AGREEMENT; ASSIGNMENTS AND
PARTICIPATIONS

     

    13.1.        Successors and
Assigns.  This Agreement
shall be binding upon and inure to the benefit of Obligors, Agent, Lenders,
Secured Parties, and their respective successors and assigns, except that (a) no
Borrower shall have the right to assign its rights or delegate its obligations
under any Loan Documents; and (b) any assignment by a Lender must be made in
compliance with Section
13.3.  Agent may treat the Person which made any Loan as the
owner thereof for all purposes until such Person makes an assignment in
accordance with Section
13.3.  Any authorization or consent of a Lender shall be
conclusive and binding on any subsequent transferee or assignee of such
Lender.

     

    
      
         


      

      
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    13.2.        Participations.

     

    13.2.1.    Permitted Participants;
Effect.  Any
Lender may, in the ordinary course of its business and in accordance with
Applicable Law, at any time sell to a financial institution (other than a
Defaulting Lender, an Obligor or an Affiliate of an Obligor) (“Participant”) a
participating interest in the rights and obligations of such Lender under any
Loan Documents.  Despite any sale by a Lender of participating
interests to a Participant, such Lender’s obligations under the Loan Documents
shall remain unchanged, such Lender shall remain solely responsible to the other
parties hereto for performance of such obligations, such Lender shall remain the
holder of its Loans and Commitments for all purposes, all amounts payable by
Borrowers shall be determined as if such Lender had not sold such participating
interests, and Borrowers and Agent shall continue to deal solely and directly
with such Lender in connection with the Loan Documents.  Each Lender
shall be solely responsible for notifying its Participants of any matters under
the Loan Documents, and Agent and the other Lenders shall not have any
obligation or liability to any such Participant.  A Participant that
would be a Foreign Lender if it were a Lender shall not be entitled to the
benefits of Section 5.9
unless Borrowers agree otherwise in writing.

     

    13.2.2.    Voting
Rights.  Each
Lender shall retain the sole right to approve, without the consent of any
Participant, any amendment, waiver or other modification of any Loan Documents
other than that which forgives principal, interest or fees, reduces the stated
interest rate or fees payable with respect to any Loan or Commitment in which
such Participant has an interest, postpones the Commitment Termination Date or
any date fixed for any regularly scheduled payment of principal, interest or
fees on such Loan or Commitment, or releases any Borrower, Guarantor or
substantial portion of the Collateral.

     

    13.2.3.    Benefit of
Set-Off.  Borrowers
agree that each Participant shall have a right of set-off in respect of its
participating interest to the same extent as if such interest were owing
directly to a Lender, and each Lender shall also retain the right of set-off
with respect to any participating interests sold by it.  By exercising
any right of set-off, a Participant agrees to share with Lenders all amounts
received through its set-off, in accordance with Section 12.5 as if such
Participant were a Lender.

     

    13.3.        Assignments.

     

    13.3.1.    Permitted
Assignments.  A
Lender may assign to an Eligible Assignee any of its rights and obligations
under the Loan Documents, as long as (a) each assignment is of a constant, and
not a varying, percentage of the transferor Lender’s rights and obligations
under the Loan Documents and, in the case of a partial assignment, is in a
minimum principal amount of $5,000,000 (unless otherwise agreed by Agent in its
discretion) and integral multiples of $1,000,000 in excess of that amount; (b)
except in the case of an assignment in whole of a Lender’s rights and
obligations, the aggregate amount of the Commitments retained by the transferor
Lender is at least $5,000,000 (unless otherwise agreed by Agent in its
discretion); and (c) the parties to each such assignment shall execute and
deliver to Agent, for its acceptance and recording, an Assignment and
Acceptance.  Nothing herein shall limit the right of a Lender to
pledge or assign any rights under the Loan Documents to (i) any Federal Reserve
Bank or the United States Treasury as collateral security pursuant to Regulation
A of the Board of Governors and any Operating Circular issued by such Federal
Reserve Bank, or (ii) counterparties to swap agreements relating to any Loans;
provided, however, that any
payment by Borrowers to the assigning Lender in respect of any Obligations
assigned as described in this sentence shall satisfy Borrowers’ obligations
hereunder to the extent of such payment, and no such assignment shall release
the assigning Lender from its obligations hereunder.

     

    
      
         


      

      
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    13.3.2.    Effect; Effective
Date.  Upon
delivery to Agent of an assignment notice in the form of Exhibit D and a processing fee
of $3,500 (unless otherwise agreed by Agent in its discretion), the assignment
shall become effective as specified in the notice, if it complies with this
Section
13.3.  From such effective date, the Eligible Assignee shall
for all purposes be a Lender under the Loan Documents, and shall have all rights
and obligations of a Lender thereunder.  Upon consummation of an
assignment, the transferor Lender, Agent and Borrowers shall make appropriate
arrangements for issuance of replacement and/or new Notes, as
applicable.  The transferee Lender shall comply with Section 5.10 and deliver, upon
request, an administrative questionnaire satisfactory to Agent.

     

    SECTION
14.    MISCELLANEOUS

     

    14.1.        Consents, Amendments and
Waivers.

     

    14.1.1.    Amendment.  No
modification of any Loan Document, including any extension or amendment of a
Loan Document or any waiver of a Default or Event of Default, shall be effective
without the prior written agreement of Agent (with the consent of Required
Lenders) and each Obligor party to such Loan Document, provided, however, that
only the consent of the parties to a Bank Product agreement shall be required
for any modification of such agreement and that

     

    (a)           without
the prior written consent of Agent, no modification shall be effective with
respect to any provision in a Loan Document that relates to any rights, duties
or discretion of Agent;

     

    (b)           without
the prior written consent of Issuing Bank, no modification shall be effective
with respect to any LC Obligations, Section 2.3 or any other
provision in a Loan Document that relates to any rights, duties or discretion of
Issuing Bank;

     

    (c)           without
the prior written consent of each affected Lender, no modification shall be
effective that would (i) increase the Commitment of such Lender; (ii) reduce the
amount of, or waive or delay payment of, any principal, interest or fees payable
to such Lender; or (iii) extend the Revolver Termination Date or Term Loan
Maturity Date;

     

    (d)           without
the prior written consent of all Lenders (except a Defaulting Lender as provided
in Section 4.2), no
modification shall be effective that would (i) alter Section 5.6, 7.1 (except to
add Collateral) or 14.1.1; (ii) amend the
definition of Borrowing Base (or any defined term used in such definition), Pro
Rata or Required Lenders; (iii) release Collateral with a book value greater
than $1,000,000 during any calendar year, except as currently contemplated by
the Loan Documents; or (iv) release any Obligor from liability for any
Obligations, if such Obligor is Solvent at the time of the release;
and

     

    (e)           without
the prior written consent of a Secured Bank Product Provider, no modification
shall be effective that affects its relative payment priority under Section 5.6.

     

    14.1.2.    Limitations.  The
agreement of any Obligor shall not be necessary to the effectiveness of any
modification of a Loan Document that deals solely with the rights and duties of
Lenders, Agent and/or Issuing Bank as among themselves.  Only the
consent of the parties to the Commitment Letter or any agreement relating to a
Bank Product shall be required for any modification of such agreement, and any
non-Lender that is party to a Bank Product agreement shall have no right to
participate in any manner in modification of any other Loan
Document.  Any waiver or consent granted by Agent or Lenders hereunder
shall be effective only if in writing and only for the matter
specified.

     

    14.1.3.    Payment for
Consents.  No
Obligor will, directly or indirectly, pay any remuneration or other thing of
value, whether by way of additional interest, fee or otherwise, to any Lender
(in its capacity as a Lender hereunder) as consideration for agreement by such
Lender with any modification of any Loan Documents, unless such remuneration or
value is concurrently paid, on the same terms, on a Pro Rata basis to all
Lenders providing their consent.

     

    
      
         


      

      
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    14.2.        Indemnity.  EACH OBLIGOR SHALL INDEMNIFY AND HOLD
HARMLESS THE INDEMNITEES AGAINST ANY CLAIMS THAT MAY BE INCURRED BY OR ASSERTED
AGAINST ANY INDEMNITEE, INCLUDING CLAIMS ARISING FROM THE NEGLIGENCE OF AN
INDEMNITEE OR ASSERTED BY ANY OBLIGOR OR OTHER PERSON.  In no
event shall any party to a Loan Document have any obligation thereunder to
indemnify or hold harmless an Indemnitee with respect to a Claim that is
determined in a final, non-appealable judgment by a court of competent
jurisdiction to result from the gross negligence or willful misconduct of such
Indemnitee.

     

    14.3.        Notices and
Communications.

     

    Notice
Address.  Subject to Section 4.1.4, all notices and
other communications by or to a party hereto shall be in writing and shall be
given to any Obligor, at Borrower Agent’s address shown on the signature pages
hereof, and to any other Person at its address shown on the signature pages
hereof (or, in the case of a Person who becomes a Lender after the Closing Date,
at the address shown on its Assignment and Acceptance), or at such other address
as a party may hereafter specify by notice in accordance with this Section 14.3.  Each
such notice or other communication shall be effective only (a) if given by
facsimile transmission, when transmitted to the applicable facsimile number, if
confirmation of receipt is received; (b) if given by mail, three Business Days
after deposit in the U.S. mail, with first-class postage pre-paid, addressed to
the applicable address; or (c) if given by personal delivery, when duly
delivered to the notice address with receipt
acknowledged.  Notwithstanding the foregoing, no notice to Agent
pursuant to Section 2.1.4,
2.3,
3.1.2, 4.1.1 or 5.3.3 shall be effective until
actually received by the individual to whose attention at Agent such notice is
required to be sent.  Any written notice or other communication that
is not sent in conformity with the foregoing provisions shall nevertheless be
effective on the date actually received by the noticed party.  Any
notice received by Borrower Agent shall be deemed received by all
Obligors.

     

    Electronic Communications;
Voice Mail.  Electronic mail and internet websites may be used
only for routine communications, such as financial statements, Borrowing Base
Certificates and other information required by Section 10.1.2, administrative
matters, distribution of Loan Documents for execution, and matters permitted
under Section
4.1.4.  Agent and Lenders make no assurances as to the privacy
and security of electronic communications.  Electronic and voice mail
may not be used as effective notice under the Loan Documents.

     

    Non-Conforming
Communications.  Agent and Lenders may rely upon any notices
purportedly given by or on behalf of any Obligor even if such notices were not
made in a manner specified herein, were incomplete or were not confirmed, or if
the terms thereof, as understood by the recipient, varied from a later
confirmation.  Each Obligor shall indemnify and hold harmless each
Indemnitee from any liabilities, losses, costs and expenses arising from any
telephonic communication purportedly given by or on behalf of a
Obligor.

     

    14.4.        Performance of Borrowers’
Obligations.  Agent may, in its
discretion at any time and from time to time, at Borrowers’ expense, pay any
amount or do any act required of a Borrower under any Loan Documents or
otherwise lawfully requested by Agent to (a) enforce any Loan Documents or
collect any Obligations; (b) protect, insure, maintain or realize upon any
Collateral; or (c) defend or maintain the validity or priority of Agent’s Liens
in any Collateral, including any payment of a judgment, insurance premium,
warehouse charge, finishing or processing charge, or landlord claim, or any
discharge of a Lien.  All payments, costs and expenses (including
Extraordinary Expenses) of Agent under this Section shall be reimbursed to Agent
by Borrowers, on demand,
with interest from the date incurred to the date of payment thereof at the
Default Rate applicable to Base Rate Revolver Loans.  Any payment made
or action taken by Agent under this Section shall be without prejudice to any
right to assert an Event of Default or to exercise any other rights or remedies
under the Loan Documents.

     

    
      
         


      

      
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    14.5.        Credit
Inquiries.  Each Obligor
hereby authorizes Agent and Lenders (but they shall have no obligation) to
respond to usual and customary credit inquiries from third parties concerning
any Borrower or Subsidiary.

     

    14.6.        Severability.  Wherever
possible, each provision of the Loan Documents shall be interpreted in such
manner as to be valid under Applicable Law.  If any provision is found
to be invalid under Applicable Law, it shall be ineffective only to the extent
of such invalidity and the remaining provisions of the Loan Documents shall
remain in full force and effect.

     

    14.7.        Cumulative Effect; Conflict
of Terms.  The provisions of
the Loan Documents are cumulative.  The parties acknowledge that the
Loan Documents may use several limitations, tests or measurements to regulate
similar matters, and they agree that these are cumulative and that each must be
performed as provided.  Except as otherwise provided in another Loan
Document (by specific reference to the applicable provision of this Agreement),
if any provision contained herein is in direct conflict with any provision in
another Loan Document, the provision herein shall govern and
control.

     

    14.8.        Counterparts.  Any Loan Document
may be executed in counterparts, each of which shall constitute an original, but
all of which when taken together shall constitute a single
contract.  This Agreement shall become effective when Agent has
received counterparts bearing the signatures of all parties
hereto.  Delivery of a signature page of any Loan Document by telecopy
or other electronic means shall be effective as delivery of a manually executed
counterpart of such agreement.

     

    14.9.        Entire
Agreement.  Time is of the
essence of the Loan Documents.  The Loan Documents constitute the
entire contract among the parties relating to the subject matter hereof, and
supersede any and all previous agreements and understandings, oral or written,
relating to the subject matter hereof.

     

    14.10.      Relationship with
Lenders.  The obligations
of each Lender hereunder are several, and no Lender shall be responsible for the
obligations or Commitments of any other Lender.  Amounts payable
hereunder to each Lender shall be a separate and independent debt.  It
shall not be necessary for Agent or any other Lender to be joined as an
additional party in any proceeding for such purposes.  Nothing in this
Agreement and no action of Agent, Lenders or any other Secured Party pursuant to
the Loan Documents or otherwise shall be deemed to constitute Agent and any
Secured Party to be a partnership, association, joint venture or any other kind
of entity, nor to constitute control of any Obligor.

     

    14.11.      No Control; No Advisory or
Fiduciary Responsibility.  Nothing in any
Loan Document and no action of Agent or any Lender pursuant to any Loan Document
shall be deemed to constitute control of any Obligor by Agent or
Lenders.  In connection with all aspects of each transaction
contemplated by any Loan Document, Obligors acknowledge and agree that (a)(i)
this credit facility and any related arranging or other services by Agent, any
Lender, any of their Affiliates or any arranger are arm’s-length commercial
transactions between Obligors and such Person; (ii) Obligors have consulted
their own legal, accounting, regulatory and tax advisors to the extent they have
deemed appropriate; and (iii) Obligors are capable of evaluating and
understanding, and do understand and accept, the terms, risks and conditions of
the transactions contemplated by the Loan Documents; (b) each of Agent, Lenders,
their Affiliates and any arranger is and has been acting solely as a principal
in connection with this credit facility, is not the financial advisor, agent or
fiduciary for Obligors, any of their Affiliates or any other Person, and has no
obligation with respect to the transactions contemplated by the Loan Documents
except as expressly set forth therein; and (c) Agent, Lenders, their Affiliates
and any arranger may be engaged in a broad range of transactions that involve
interests that differ from those of Obligors and their Affiliates, and have no
obligation to disclose any of such interests to Obligors or their
Affiliates.  To the fullest extent permitted by Applicable Law, each
Obligor hereby waives and releases any claims that it may have against Agent,
Lenders, their Affiliates and any arranger with respect to any breach or alleged
breach of agency or fiduciary duty in connection with any aspect of any
transaction contemplated by a Loan Document.

     

    
      
         


      

      
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    14.12.      Confidentiality.  Each
of Agent, Lenders and Issuing Bank shall maintain the confidentiality of all
Information (as defined below), except that Information may be disclosed (a) to
its Affiliates, and to its and their partners, directors, officers, employees,
agents, advisors and representatives (provided such Persons are informed of the
confidential nature of the Information and instructed to keep it confidential);
(b) to the extent requested by any governmental, regulatory or self-regulatory
authority purporting to have jurisdiction over it or its Affiliates; (c) to the
extent required by Applicable Law or by any subpoena or other legal process; (d)
to any other party hereto; (e) in connection with any action or proceeding, or
other exercise of rights or remedies, relating to any Loan Documents or
Obligations; (f) subject to an agreement containing provisions substantially the
same as this Section, to any Transferee or any actual or prospective party (or
its advisors) to any Bank Product; (g) with the consent of Borrower Agent; or
(h) to the extent such Information (i) becomes publicly available other than as
a result of a breach of this Section or (ii) is available to Agent, any Lender,
Issuing Bank or any of their Affiliates on a nonconfidential basis from a source
other than Borrowers.  Notwithstanding the foregoing, Agent and
Lenders may publish or disseminate general information describing this credit
facility, including the names and addresses of Obligors and a general
description of Obligors’ businesses, and may use Obligors’ logos, trademarks or
product photographs in advertising materials.  As used herein, “Information” means
all information received from an Obligor or Subsidiary relating to it or its
business that is identified as confidential when delivered.  Any
Person required to maintain the confidentiality of Information pursuant to this
Section shall be deemed to have complied if it exercises the same degree of care
that it accords its own confidential information.  Each of Agent,
Lenders and Issuing Bank acknowledges that (i) Information may include material
non-public information concerning an Obligor or Subsidiary; (ii) it has
developed compliance procedures regarding the use of material non-public
information; and (iii) it will handle such material non-public information in
accordance with Applicable Law, including federal and state securities
laws.

     

    14.13.      GOVERNING
LAW.  THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS, UNLESS OTHERWISE SPECIFIED, SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY
CONFLICT OF LAW PRINCIPLES (BUT GIVING EFFECT TO FEDERAL LAWS RELATING TO
NATIONAL BANKS).

     

    14.14.      Consent to
Forum.

     

    14.14.1.  Forum.  EACH OBLIGOR HEREBY CONSENTS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY FEDERAL OR STATE COURT SITTING IN OR WITH
JURISDICTION OVER NEW YORK, IN ANY PROCEEDING OR DISPUTE RELATING IN ANY WAY TO
ANY LOAN DOCUMENTS, AND AGREES THAT ANY SUCH PROCEEDING SHALL BE BROUGHT BY IT
SOLELY IN ANY SUCH COURT.  EACH OBLIGOR IRREVOCABLY WAIVES ALL CLAIMS,
OBJECTIONS AND DEFENSES THAT IT MAY HAVE REGARDING SUCH COURT’S PERSONAL OR
SUBJECT MATTER JURISDICTION, VENUE OR INCONVENIENT FORUM.  EACH PARTY
HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR
NOTICES IN SECTION 14.3.1.  Nothing herein shall limit the
right of Agent or any Lender to bring proceedings against any Obligor in any
other court, nor limit the right of any party to serve process in any other
manner permitted by Applicable Law.  Nothing in this Agreement shall
be deemed to preclude enforcement by Agent of any judgment or order obtained in
any forum or jurisdiction.

     

    
      
         


      

      
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    14.15.      Waivers by
Obligors.  To the fullest extent
permitted by Applicable Law, each Obligor waives (a) the right to trial by jury
(which Agent and each Lender hereby also waives) in any proceeding or dispute of
any kind relating in any way to any Loan Documents, Obligations or Collateral;
(b) presentment, demand, protest, notice of presentment, default, non-payment,
maturity, release, compromise, settlement, extension or renewal of any
commercial paper, accounts, documents, instruments, chattel paper and guaranties
at any time held by Agent on which a Obligor may in any way be liable, and
hereby ratifies anything Agent may do in this regard; (c) notice prior to taking
possession or control of any Collateral; (d) any bond or security that might be
required by a court prior to allowing Agent to exercise any rights or remedies;
(e) the benefit of all valuation, appraisement and exemption laws; (f) any claim
against Agent or any Lender, on any theory of liability, for special, indirect,
consequential, exemplary or punitive damages (as opposed to direct or actual
damages) in any way relating to any Enforcement Action, Obligations, Loan
Documents or transactions relating thereto; and (g) notice of acceptance
hereof.  Each Obligor acknowledges that the foregoing waivers
are a material inducement to Agent and Lenders entering into this Agreement and
that Agent and Lenders are relying upon the foregoing in their dealings with
Obligors.  Each Obligor has reviewed the foregoing waivers with its
legal counsel and has knowingly and voluntarily waived its jury trial and other
rights following consultation with legal counsel.  In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.

     

    14.16.      Patriot Act
Notice.  Agent
and Lenders hereby notify Obligor s that pursuant to the requirements of the
Patriot Act, Agent and Lenders are required to obtain, verify and record
information that identifies each Obligor, including its legal name, address, tax
ID number and other information that will allow Agent and Lenders to identify it
in accordance with the Patriot Act.  Agent and Lenders will also
require information regarding each personal guarantor, if any, and may require
information regarding Obligor s’ management and owners, such as legal name,
address, social security number and date of birth.

     

    SECTION
15.    GUARANTY OF OBLIGATIONS

     

    15.1.         Guaranty; Limitation of
Liability.  In
order to induce Agent and Lenders to enter into this Agreement and to induce the
Lenders to extend credit hereunder and to induce the Lenders or their affiliates
provide Bank Products, and in recognition of the direct benefit received by the
Guarantors from the extension of such credit and provision of such Bank
Products, each Guarantor hereby absolutely, unconditionally and irrevocably
guarantees (the undertaking by each Guarantor under this Section 15 being, as
amended from time to time, the “Facility Guaranty”)
the punctual payment when due, whether at scheduled maturity or on any date of a
required prepayment or by acceleration, demand or otherwise, of all Obligations
of each other Obligor now or hereafter existing under or in respect of the Loan
Documents (including, without limitation, any extensions, modifications,
substitutions, amendments or renewals of any or all of the foregoing
Obligations), whether direct or indirect, absolute or contingent, and whether
for principal, interest, premiums, fees, indemnities, contract causes of action,
costs, expenses or otherwise (such Obligations being the “Guaranteed
Obligations”), and agrees to pay any and all expenses (including, without
limitation, reasonable fees and expenses of counsel) incurred by Agent or any
other Secured Party in enforcing any rights under this Facility Guaranty or any
other Loan Document.  Without limiting the generality of the
foregoing, each Guarantor’s liability shall extend to all amounts that
constitute part of the Guaranteed Obligations and would be owed by any other
Obligor to any Secured Party under or in respect of the Loan Documents but for
the fact that they are unenforceable or not allowable due to the existence of
any Insolvency Proceeding involving such other Obligor.

     

    15.1.1.    No Fraudulent
Transfer.  Each
Guarantor, Agent and each other Secured Party, hereby confirms that it is the
intention of such Persons that this Facility Guaranty and the obligations of
each Guarantor hereunder not constitute a fraudulent transfer or conveyance for
purposes of the Bankruptcy Code, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar foreign, federal or state law to
the extent applicable to this Facility Guaranty and the Obligations of each
Guarantor hereunder.  To effectuate the foregoing intention, each
Guarantor, Agent and each of the other Secured Parties hereby irrevocably agree
that such Guaranteed Obligations and other liabilities shall be limited to the
maximum amount as will, after giving effect to such maximum amount and all other
contingent and fixed liabilities of each Guarantor that are relevant under the
laws referred to in the first sentence hereof, and after giving effect to any
collections from, any rights to receive contributions from, or payments made by
or on behalf of, any of the other Obligors in respect of the Obligations under
any Loan Document, result in the Guaranteed Obligations and all other
liabilities of each Guarantor under this Facility Guaranty not constituting a
fraudulent transfer or conveyance.

     

    
      
         


      

      
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    15.1.2.    Contribution.  Each
Guarantor hereby unconditionally and irrevocably agrees that in the event any
payment shall be required to be made to any Secured Party under this Facility
Guaranty, any other Loan Document or any other guaranty, each Guarantor will
contribute, to the maximum extent permitted by law, such amounts to each other
Guarantor and each other guarantor so as to maximize the aggregate amount paid
to the Secured Parties under or in respect of the Loan Documents.

     

    15.2.         Guaranty
Absolute.

     

    15.2.1.    Each
Guarantor guarantees that the Guaranteed Obligations will be paid strictly in
accordance with the terms of the Loan Documents, regardless of any Applicable
Law, now or hereafter in effect in any jurisdiction affecting any of such terms
or the rights of any Secured Party with respect thereto.  The
obligations of each Guarantor under or in respect of this Facility Guaranty are
independent of the Guaranteed Obligations or any other Obligations of any other
Obligor under or in respect of the Loan Documents, and a separate action or
actions may be brought and prosecuted against each Guarantor to enforce this
Facility Guaranty, irrespective of whether any action is brought against any
Borrower or any other Obligor or whether any Borrower or any other Obligor is
joined in any such action or actions.  The liability of each Guarantor
under this Facility Guaranty shall be irrevocable, absolute and unconditional
irrespective of, and each Guarantor hereby irrevocably waives any defenses it
may now have or hereafter acquire in any way relating to, any or all of the
following:

     

    (a)           any
lack of validity or enforceability of any Loan Document or any agreement or
instrument relating thereto;

     

    (b)           any
change in the time, manner or place of payment of, or in any other term of,
including any increase in the amount of, all or any of the Guaranteed
Obligations or any other Obligations of any other Obligor under or in respect of
the Loan Documents, or any other amendment or waiver of or any consent to
departure from any Loan Document, including, without limitation, any increase in
the Guaranteed Obligations resulting from the extension of additional credit to
any Obligor or otherwise;

     

    (c)           any
taking, exchange, release or non-perfection of any Collateral or any other
collateral, or any taking, release or amendment or waiver of, or consent to
departure from, any other guaranty, for all or any of the Guaranteed
Obligations;

     

    (d)           any
manner of application of Collateral or any other collateral, or proceeds
thereof, to all or any of the Guaranteed Obligations, or any manner of sale or
other disposition of any Collateral or any other collateral for all or any of
the Guaranteed Obligations or any other Obligations of any Obligor under the
Loan Documents or any other assets of any Obligor; the failure of Agent, any
other Secured Party or any other person to exercise diligence or reasonable care
in the preservation, protection, enforcement, sale or other handling or
treatment of all or any part of such Collateral, property or
security;

     

    (e)           the
fact that any Collateral, security, security interest or lien contemplated or
intended to be given, created or granted as security for the repayment of the
Guaranteed Obligations shall not be properly perfected or created, or shall
prove to be unenforceable or subordinate to any other security interest or lien,
it being recognized and agreed by each Guarantor that such Guarantor is not
entering into this Facility Guaranty in reliance on, or in contemplation of the
benefits of, the validity, enforceability, collectability or value of any such
Collateral;

     

    
      
         


      

      
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    (f)           any
change, restructuring or termination of the corporate structure or existence of
any Obligor or any of its Subsidiaries;

     

    (g)           any
failure of any Secured Party to disclose to any Obligor any information relating
to the business, condition (financial or otherwise), operations, performance,
properties or prospects of any other Obligor now or hereafter known to such
Secured Party (each Guarantor waiving any duty on the part of the Secured
Parties to disclose such information);

     

    (h)           the
failure of any other Person to execute or deliver any Loan Document or any
supplement thereto or any other guaranty or agreement or the release or
reduction of liability of any Guarantor or other guarantor or surety with
respect to the Guaranteed Obligations; or

     

    (i)           any
other circumstance (including, without limitation, any statute of limitations)
or any existence of or reliance on any representation by any Secured Party that
might otherwise constitute a defense available to, or a discharge of, any
Obligor or any other guarantor or surety, other than Full Payment of the
Guaranteed Obligations.

     

    15.2.2.    Reinstatement.  This
Facility Guaranty shall continue to be effective or be reinstated, as the case
may be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by Agent or any Secured Party or any
other Person upon the insolvency, bankruptcy or reorganization of any Borrower
or any other Obligor or otherwise, all as though such payment had not been
made.

     

    15.2.3.    Guarantied Obligations
Due.  Each
Guarantor hereby further agrees that, as between each Guarantor on the one hand,
and Agent and the other Secured Parties, on the other hand, (i) the
Guaranteed Obligations of each Guarantor may be declared to be forthwith due and
payable as provided in Section 11.2 (and shall
be deemed to have become automatically due and payable in the circumstances
provided in Section 11.2) for
purposes of Section 15.1,
notwithstanding any stay, injunction or other prohibition preventing such
declaration in respect of the Obligations of any of the Obligors guaranteed
hereunder (or preventing such Guaranteed Obligations from becoming automatically
due and payable) as against any other Person and (ii) in the event of any
declaration of acceleration of such Guaranteed Obligations (or such Guaranteed
Obligations being deemed to have become automatically due and payable) as
provided in Section 11.2, such
Guaranteed Obligations (whether or not due and payable by any other Person)
shall forthwith become due and payable by each Guarantor for all purposes of
this Facility Guaranty.

     

    15.3.         Waivers and
Acknowledgments.  Each
Guarantor hereby unconditionally and irrevocably waives promptness, diligence,
notice of acceptance, presentment, demand for performance, notice of
nonperformance, default, acceleration, protest or dishonor and any other notice
with respect to any of the Guaranteed Obligations and this Facility Guaranty and
any requirement that Agent or any Secured Party protect, secure, perfect or
insure any Lien or any property subject thereto or exhaust any right or take any
action against any Obligor or any other Person or any Collateral.

     

    15.3.1.    Waiver of Right of
Revocation.  Each
Guarantor hereby unconditionally and irrevocably waives any right to revoke this
Facility Guaranty and acknowledges that this Facility Guaranty is continuing in
nature and applies to all Guaranteed Obligations, whether existing now or in the
future.

     

    
      
         


      

      
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    15.3.2.    Waiver of
Defenses.  Each
Guarantor hereby unconditionally and irrevocably waives (i) any defense
arising by reason of any claim or defense based upon an election of remedies by
Agent or any Secured Party that in any manner impairs, reduces, releases or
otherwise adversely affects the subrogation, reimbursement, exoneration,
contribution or indemnification rights of each Guarantor or other rights of each
Guarantor to proceed against any of the other Obligors, any other guarantor or
any other Person or any Collateral and (ii) any defense based on any right
of set-off or counterclaim against or in respect of the Obligations of each
Guarantor hereunder.

     

    15.3.3.    Foreclosure.  Each
Guarantor acknowledges that Agent may, without notice to or demand upon each
Guarantor and without affecting the liability of each Guarantor under this
Facility Guaranty, foreclose under any mortgage by nonjudicial sale, and each
Guarantor hereby waives any defense to the recovery by Agent and the other
Secured Parties against each Guarantor of any deficiency after such nonjudicial
sale and any defense or benefits that may be afforded by applicable
law.

     

    15.3.4.    Waiver of Duty to
Disclose.  Each
Guarantor hereby unconditionally and irrevocably waives any duty on the part of
Agent or any Secured Party to disclose to each Guarantor any matter, fact or
thing relating to the business, financial condition, operations, or performance
of any other Obligor or any of its Subsidiaries now or hereafter known by Agent
or such Secured Party.

     

    15.3.5.    Knowing
Waivers.  Each
Guarantor acknowledges that it will receive substantial direct and indirect
benefits from the financing arrangements contemplated by the Loan Documents and
that the waivers set forth in Section 15.2 and this
Section 15.3 are
knowingly made in contemplation of such benefits.

     

    15.4.         Subrogation.  Each
Guarantor hereby unconditionally and irrevocably agrees not to exercise any
rights that it may now have or hereafter acquire against any Borrower, any other
Obligor or any other insider guarantor that arise from the existence, payment,
performance or enforcement of each Guarantor’s Obligations under or in respect
of this Facility Guaranty or any other Loan Document, including, without
limitation, any right of subrogation, reimbursement, exoneration, contribution
or indemnification and any right to participate in any claim or remedy of Agent
or any Secured Party against any Borrower, any other Obligor or any other
insider guarantor or any Collateral, whether or not such claim, remedy or right
arises in equity or under contract, statute or common law, including, without
limitation, the right to take or receive from any Borrower, any other Obligor or
any other insider guarantor, directly or indirectly, in cash or other property
or by set-off or in any other manner, payment or security on account of such
claim, remedy or right, unless and until Full Payment of all of the Guaranteed
Obligations and all other amounts payable under this Facility
Guaranty.  If any amount shall be paid to each Guarantor in violation
of the immediately preceding sentence at any time prior to the Full Payment of
the Guaranteed Obligations and all other amounts payable under this Facility
Guaranty, such amount shall be received and held in trust for the benefit of the
Secured Parties, shall be segregated from other property and funds of each
Guarantor and shall forthwith be paid or delivered to Agent in the same form as
so received (with any necessary endorsement or assignment) to be credited and
applied to the Guaranteed Obligations and all other amounts payable under this
Facility Guaranty, whether matured or unmatured, in accordance with the terms of
the Loan Documents, or to be held as Collateral for any Guaranteed Obligations
or other amounts payable under this Facility Guaranty thereafter
arising.  If any Guarantor shall make payment to any Secured Party of
all or any part of the Guaranteed Obligations, and Full Payment of the
Guaranteed Obligations shall occur, then the Secured Parties will, at such
Guarantor’s request and expense, execute and deliver to such Guarantor
appropriate documents, without recourse and without representation or warranty,
necessary to evidence the transfer by subrogation to such Guarantor of an
interest in the Guaranteed Obligations resulting from such payment made by such
Guarantor pursuant to this Facility Guaranty.

     

    
      
         


      

      
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    15.4.1.    Subordination.  Each
Guarantor hereby subordinates any and all debts, liabilities and other
obligations in the nature of borrowed money owed to each Guarantor by each other
Obligor (as used in this Section 15, the “Intercompany
Obligations”) to the Guaranteed Obligations to the extent and in the
manner hereinafter set forth in this Section 15.4:

     

    15.4.2.    Prohibited Payments,
Etc.  Except
(a) during the continuance of any Event of Default under Sections 11.1(a) or (j) or (b) after
notice from Agent or any Lender of any other Event of Default under this
Agreement, each Guarantor may receive regularly scheduled payments from any
other Obligor on account of the Intercompany Obligations.  During the
continuance of any Event of Default under Sections 11.1(a) or (j) or after notice from
Agent or any Lender of any other Event of Default under this Agreement, however,
each Guarantor shall not demand, accept or take any action to collect any
payment on account of the Intercompany Obligations unless the Required Lenders
otherwise agree.

     

    15.4.3.    Prior Payment of Guaranteed
Obligations.  In
any Insolvency Proceeding relating to any other Obligor, each Guarantor agrees
that the Secured Parties shall be entitled to receive Full Payment in cash of
all Guaranteed Obligations (including all interest, expenses and fees (including
legal fees) accruing after the commencement of any Insolvency Proceeding,
whether or not constituting an allowed claim in such proceeding (as used in this
Section 15, “Post Petition
Interest”)) before each Guarantor receives payment of any Intercompany
Obligations.

     

    15.4.4.    Turn-Over.  After
the occurrence and during the continuance of any Event of Default (including the
commencement and continuation of any Insolvency Proceeding relating to any other
Obligor), each Guarantor shall, if Agent so requests, collect, enforce and
receive payments on account of the Intercompany Obligations as trustee for the
Secured Parties and deliver such payments to Agent on account of the Guaranteed
Obligations (including all Post Petition Interest), together with any necessary
endorsements or other instruments of transfer, but without reducing or affecting
in any manner the liability of each Guarantor under the other provisions of this
Facility Guaranty.

     

    15.4.5.    Agent
Authorization.  After
the occurrence and during the continuance of any Event of Default (including the
commencement and continuation of any Insolvency Proceeding relating to any other
Obligor), Agent is authorized and empowered (but without any obligation to so
do), in its discretion, (i) in the name of each Guarantor, to collect and
enforce, and to submit claims in respect of, Intercompany Obligations and to
apply any amounts received thereon to the Guaranteed Obligations (including any
and all Post Petition Interest), and (ii) to require each Guarantor
(A) to collect and enforce, and to submit claims in respect of,
Intercompany Obligations and (B) to pay any amounts received on such
obligations to Agent for application to the Guaranteed Obligations (including
any and all Post Petition Interest).

     

    15.4.6.    Continuing Guaranty;
Assignments.  This
Facility Guaranty is a continuing guaranty and shall (a) remain in full
force and effect until the Full Payment of the Guaranty Obligations, (b) be
binding upon each Guarantor, its successors and assigns and (c) inure to
the benefit of and be enforceable by the Secured Parties and their successors,
transferees and assigns.  Without limiting the generality of clause
(c) of the immediately preceding sentence, any Secured Party may assign or
otherwise transfer all or any portion of its rights and obligations under this
Agreement (including, without limitation, all or any portion of its Commitments,
the Loans owing to it and the Note or Notes held by it) to any other Person, and
such other Person shall thereupon become vested with all the benefits in respect
thereof granted to such Secured Party herein or otherwise, in each case as and
to the extent provided in Section 13.3.  No
Guarantor shall have the right to assign its rights hereunder or any interest
herein without the prior written consent of the Secured Parties

     

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of page intentionally left blank; signatures begin on following
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        -85-

        
          

        

      

      
         


      

    

     

    

      IN WITNESS WHEREOF, this
Agreement has been executed and delivered as of the date set forth
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

                    
	 
      	 
      	 
      
	 
      	 
      	
                       
      Attention: Joseph A. Molino, Jr.

                    
	 
      	 
      	
                       
      Telecopy:
631-773-4230

                    


            

          

        

      

      


      
        
          
            
              	 
      	
                      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

                    
	 
      	 
      	 
      
	 
      	 
      	
                       
      Attention: Joseph A. Molino, Jr.

                    
	 
      	 
      	
                       
      Telecopy:
631-773-4230

                    


            

          

        

      

      


      
        
          
            
              	 
      	
                      WOODMARK
      INTERNATIONAL, L.P.

                    
	 	 
	 
      	
                      By:

                    	
                      Countrywide
      Hardware, Inc.

                    
	 	 	 
	 
      	
                      By: 

                    	
                      /s/ Joseph A. Molino,
Jr.

                    
	 
      	
                      Name:
      Joseph A. Molino, Jr.

                    
	 
      	
                      Title:  Vice
      President

                    
	 
      	 
      	 
      
	 
      	 
      	
                       
      Attention: Joseph A. Molino, Jr.

                    
	 
      	 
      	
                       
      Telecopy:
631-773-4230

                    


            

          

        

      

      


      LOAN AND
SECURITY AGREEMENT

      Signature
Page


      
        
           


        

        
           


          
            

          

        

        
           


        

      

      


      
        
          
            	 
      	
                    AGENT AND LENDERS:

                  
	 
      	 
      
	 
      	
                    CAPITAL ONE LEVERAGE
      FINANCE

                    CORPORATION, as Agent
      and Lender

                  
	 
      	 
      
	 
      	
                    By: 

                  	
                    /s/ Michael S. Burns

                  
	 
      	
                    Name:
      Michael S. Burns

                  
	 
      	
                    Title:
      Senior Vice President

                  
	 
      	 
      	 
      
	 
      	 
      	
                     
      Attention: Michael S. Burns

                  
	 
      	 
      	
                     
      Telecopy: 800-986-0323

                  


          

        

      

      


      LOAN AND
SECURITY AGREEMENT

      Signature
Page



      
        
           


        

        
           


          
            

          

        

        
           


        

      


      EXHIBIT
A

      to

      Loan and
Security Agreement

      


      REVOLVER
NOTE

       

      
        	
                October
      25, 2010

              	
                $___________________

              	
                New
      York, New York

              


      

      


      P&F INDUSTRIES,
INC., a Delaware
corporation (“P&F”), FLORIDA PNEUMATIC
MANAFUACTURING 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”),
for value received, hereby unconditionally promise to pay, on a joint and
several basis, to the order of ____________________________ (“Lender”), the
principal sum of ______________________________ DOLLARS ($___________), or such
lesser amount as may be advanced by Lender as Revolver Loans and owing as LC
Obligations from time to time under the Loan Agreement described below, together
with all accrued and unpaid interest thereon.  Terms are used herein
as defined in the Loan and Security Agreement dated as of October 25, 2010,
among Borrowers, the Guarantors from time to time party thereto, Capital One
Leverage Finance Corporation, as Agent, Lender and certain other financial
institutions, as such agreement may be amended, modified, renewed or extended
from time to time (“Loan
Agreement”).

       

      Principal of and interest on this Note
from time to time outstanding shall be due and payable as provided in the Loan
Agreement.  This Note is issued pursuant to and evidences Revolver
Loans and LC Obligations under the Loan Agreement, to which reference is made
for a statement of the rights and obligations of Lender and the duties and
obligations of Borrowers.  The Loan Agreement contains provisions for
acceleration of the maturity of this Note upon the happening of certain stated
events, and for the borrowing, prepayment and reborrowing of amounts upon
specified terms and conditions.

       

      The holder of this Note is hereby
authorized by Borrowers to record on a schedule annexed to this Note (or on a
supplemental schedule) the amounts owing with respect to Revolver Loans and LC
Obligations, and the payment thereof.  Failure to make any notation,
however, shall not affect the rights of the holder of this Note or any
obligations of Borrowers hereunder or under any other Loan
Documents.

       

      Time is of the essence of this
Note.  Each Borrower and all endorsers, sureties and guarantors of
this Note hereby severally waive demand, presentment for payment, protest,
notice of protest, notice of intention to accelerate the maturity of this Note,
diligence in collecting, the bringing of any suit against any party, and any
notice of or defense on account of any extensions, renewals, partial payments,
or changes in any manner of or in this Note or in any of its terms, provisions
and covenants, or any releases or substitutions of any security, or any delay,
indulgence or other act of any trustee or any holder hereof, whether before or
after maturity.  Borrowers jointly and severally agree to pay, and to
save the holder of this Note harmless against, any liability for the payment of
all costs and expenses (including without limitation reasonable attorneys’ fees)
if this Note is collected by or through an attorney-at-law.

       

      In no contingency or event whatsoever
shall the amount paid or agreed to be paid to the holder of this Note for the
use, forbearance or detention of money advanced hereunder exceed the highest
lawful rate permitted under Applicable Law.  If any such excess amount
is inadvertently paid by Borrowers or inadvertently received by the holder of
this Note, such excess shall be returned to Borrowers or credited as a payment
of principal, in accordance with the Loan Agreement.  It is the intent
hereof that Borrowers not pay or contract to pay, and that holder of this Note
not receive or contract to receive, directly or indirectly in any manner
whatsoever, interest in excess of that which may be paid by Borrowers under
Applicable Law.

       

      
        
           


        

        
           


          
            

          

        

        
           


        

      

       

      This Note shall be governed by the laws
of the State of New York, without giving effect to any conflict of law
principles (but giving effect to federal laws relating to national
banks).

       

      IN WITNESS WHEREOF, this
Revolver Note is executed as of the date set forth above.

       

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                	 
      	 
      	
                                                        P&F
      INDUSTRIES, INC.

                                                      
	 	 	 
	
                                                        Attest:

                                                      	 
      	
                                                        By:

                                                      	 
      
	 
      	 
      	
                                                        Name:

                                                      	 
        
	   
      	 
      	
                                                        Title:

                                                      	 
        
	
                                                        Secretary

                                                      	 
      	 
      
	 
      	 
      	 
      
	
                                                        [Seal]

                                                      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
                                                        FLORIDA
      PNEUMATIC MANUFACTURING CORPORATION

                                                      
	 
      	 
      	 
      	 
      
	
                                                        Attest:

                                                      	 
      	
                                                        By:

                                                      	 
        
	 
      	 
      	
                                                        Name:

                                                      	 
        
	 
        	 
      	
                                                        Title:

                                                      	 
        
	
                                                        Secretary

                                                      	 
      	 
      
	 
      	 
      	 
      
	
                                                        [Seal]

                                                      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
                                                        HY-TECH
      MACHINE, INC.

                                                      
	 
      	 
      	 
      
	
                                                        Attest:

                                                      	 
      	
                                                        By:

                                                      	 
        
	 
      	 
      	
                                                        Name:

                                                      	 
        
	 
        	 
      	
                                                        Title:

                                                      	 
        
	
                                                        Secretary

                                                      	 
      	 
      
	 
      	 
      	 
      
	
                                                        [Seal]

                                                      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
                                                        NATIONWIDE
      INDUSTRIES, INC.

                                                      
	 
      	 
      	 
      
	
                                                        Attest:

                                                      	 
      	
                                                        By:

                                                      	 
        
	 
      	 
      	
                                                        Name:

                                                      	 
        
	 
        	 
      	
                                                        Title:

                                                      	 
        
	
                                                        Secretary

                                                      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	
                                                        [Seal]

                                                      	 
      	 
      	 
      


                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      


      
        
           


        

        
          -- 2
--

          
            

          

        

        
           


        

      


      EXHIBIT
B

      to

      Loan and
Security Agreement

      


      TERM LOAN
NOTE

       

      
        	
                October
      25, 2010

              	
                $___________________

              	
                New
      York, New York

              


      

      


      P&F INDUSTRIES,
INC., a Delaware
corporation (“P&F”), FLORIDA PNEUMATIC
MANAFUACTURING 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”),
for value received, hereby unconditionally promise to pay, on a joint and
several basis, to the order of ____________________________ (“Lender”), the
principal sum of ______________________________ DOLLARS ($___________), or such
lesser amount as may be advanced by Lender as a Term Loan under the Loan
Agreement described below, together with all accrued and unpaid interest
thereon.  Terms are used herein as defined in the Loan and Security
Agreement dated as of October 25, 2010, among Borrowers, the Guarantors from
time to time party thereto, Capital One Leverage Finance Corporation, as Agent,
Lender, and certain other financial institutions, as such agreement may be
amended, modified, renewed or extended from time to time (“Loan
Agreement”).

       

      Principal of and interest on this Note
from time to time outstanding shall be due and payable as provided in the Loan
Agreement.  This Note is issued pursuant to and evidences Lender’s
Term Loan under the Loan Agreement, to which reference is made for a statement
of the rights and obligations of Lender and the duties and obligations of
Borrowers.  The Loan Agreement contains provisions for acceleration of
the maturity of this Note upon the happening of certain stated events, and for
the prepayment of amounts upon specified terms and conditions.

       

      The holder of this Note is hereby
authorized by Borrowers to record on a schedule annexed to this Note (or on a
supplemental schedule) the amounts owing with respect to the Term Loan,
including payments thereon.  Failure to make any notation, however,
shall not affect the rights of the holder of this Note or any obligations of
Borrowers hereunder or under any other Loan Documents.

       

      Time is of the essence of this
Note.  Each Borrower and all endorsers, sureties and guarantors of
this Note hereby severally waive demand, presentment for payment, protest,
notice of protest, notice of intention to accelerate the maturity of this Note,
diligence in collecting, the bringing of any suit against any party, and any
notice of or defense on account of any extensions, renewals, partial payments,
or changes in any manner of or in this Note or in any of its terms, provisions
and covenants, or any releases or substitutions of any security, or any delay,
indulgence or other act of any trustee or any holder hereof, whether before or
after maturity.  Borrowers jointly and severally agree to pay, and to
save the holder of this Note harmless against, any liability for the payment of
all costs and expenses (including without limitation reasonable attorneys’ fees)
if this Note is collected by or through an attorney-at-law.

       

      In no contingency or event whatsoever
shall the amount paid or agreed to be paid to the holder of this Note for the
use, forbearance or detention of money advanced hereunder exceed the highest
lawful rate permitted under Applicable Law.  If any such excess amount
is inadvertently paid by Borrowers or inadvertently received by the holder of
this Note, such excess shall be returned to Borrowers or credited as a payment
of principal, in accordance with the Loan Agreement.  It is the intent
hereof that Borrowers not pay or contract to pay, and that holder of this Note
not receive or contract to receive, directly or indirectly in any manner
whatsoever, interest in excess of that which may be paid by Borrowers under
Applicable Law.

       

      
        
           


        

        
           


          
            

          

        

        
           


        

      

       

      This Note shall be governed by the laws
of the State of New York, without giving effect to any conflict of law
principles (but giving effect to federal laws relating to national
banks).

       

      IN WITNESS WHEREOF, this Term
Loan Note is executed as of the date set forth above.

       

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          	 
      	 
      	
                                                  P&F
      INDUSTRIES, INC.

                                                
	 
      	 
      	 
      	 
      
	
                                                  Attest:

                                                	 
      	
                                                  By:

                                                	 
        
	 
      	 
      	
                                                  Name:

                                                	 
        
	 
        	 
      	
                                                  Title:

                                                	 
        
	
                                                  Secretary

                                                	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	
                                                  [Seal]

                                                	 
      	 
      	 
      
	 
      	 
      	
                                                  FLORIDA
      PNEUMATIC MANUFACTURING CORPORATION

                                                
	 
      	 
      	 
      	 
      
	
                                                  Attest:

                                                	 
      	
                                                  By:

                                                	 
        
	 
      	 
      	
                                                  Name:

                                                	 
        
	  
        	 
      	
                                                  Title:

                                                	 
        
	
                                                  Secretary

                                                	 
      	 
      
	 
      	 
      	 
      
	
                                                  [Seal]

                                                	 
      	 
      
	 
      	 
      	
                                                  HY-TECH
      MACHINE, INC.

                                                
	 
      	 
      	 
      	 
      
	
                                                  Attest:

                                                	 
      	
                                                  By:

                                                	 
        
	 
      	 
      	
                                                  Name:

                                                	 
        
	 
        	 
      	
                                                  Title:

                                                	 
        
	
                                                  Secretary

                                                	 
      	 
      
	 
      	 
      	 
      
	
                                                  [Seal]

                                                	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
                                                  NATIONWIDE
      INDUSTRIES, INC.

                                                
	 
      	 
      	 
      	 
      
	
                                                  Attest:

                                                	 
      	
                                                  By:

                                                	 
        
	 
      	 
      	
                                                  Name:

                                                	 
        
	 
        	 
      	
                                                  Title:

                                                	 
        
	
                                                  Secretary

                                                	 
      	 
      
	 
      	 
      	 
      
	
                                                  [Seal]

                                                	 
      	 
      


                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      EXHIBIT
C

      to

      Loan and
Security Agreement

       

      ASSIGNMENT AND
ACCEPTANCE

       

      Reference
is made to the Loan and Security Agreement dated as of October 25, 2010, as
amended (“Loan
Agreement”), among P&F INDUSTRIES,
INC., a Delaware
corporation (“P&F”), FLORIDA PNEUMATIC
MANAFUACTURING 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”),
the Guarantors from time to time party thereto, CAPITAL ONE LEVERAGE FINANCE
CORP., as agent (“Agent”) for the
financial institutions from time to time party to the Loan Agreement (“Lenders”), and such
Lenders.  Terms are used herein as defined in the Loan
Agreement.

       

      ______________________________________
(“Assignor”)
and _________________________ _____________ (“Assignee”) agree as
follows:

       

      1.           Assignor
hereby assigns to Assignee and Assignee hereby purchases and assumes from
Assignor (a) a principal amount of $________ of Assignor’s outstanding Revolver
Loans and $___________ of Assignor’s participations in LC Obligations, (b) the
amount of $__________ of Assignor’s Revolver Commitment (which represents ____%
of the total Revolver Commitments), and (c) a principal amount of $________ of
Assignor’s outstanding Term Loan (the foregoing items being, collectively, the
“Assigned
Interest”), together with an interest in the Loan Documents corresponding
to the Assigned Interest.  This Agreement shall be effective as of the
date (“Effective
Date”) indicated in the corresponding Assignment Notice delivered to
Agent, provided such Assignment Notice is executed by Assignor, Assignee, Agent
and Borrower Agent, if applicable.  From and after the Effective Date,
Assignee hereby expressly assumes, and undertakes to perform, all of Assignor’s
obligations in respect of the Assigned Interest, and all principal, interest,
fees and other amounts which would otherwise be payable to or for Assignor’s
account in respect of the Assigned Interest shall be payable to or for
Assignee’s account, to the extent such amounts accrue on or after the Effective
Date.

       

      2.           Assignor
(a) represents that as of the date hereof, prior to giving effect to this
assignment, its Revolver Commitment is $__________, the outstanding balance of
its Revolver Loans and participations in LC Obligations is $__________, and the
outstanding balance of its Term Loans is $__________; (b) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the Loan
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Loan Agreement or any other instrument or document
furnished pursuant thereto, other than that Assignor is the legal and beneficial
owner of the interest being assigned by it hereunder and that such interest is
free and clear of any adverse claim; and (c) makes no representation or warranty
and assumes no responsibility with respect to the financial condition of
Borrowers or the performance by Borrowers of their obligations under the Loan
Documents.  [Assignor is attaching the Note[s] held by it and requests
that Agent exchange such Note[s] for new Notes payable to Assignee [and
Assignor].]

       

      
        
           


        

        
          -- 2 --

          
            

          

        

        
           


        

      


      3.           Assignee
(a) represents and warrants that it is legally authorized to enter into this
Assignment and Acceptance; (b) confirms that it has received copies of the Loan
Agreement and such other Loan Documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (c) agrees that it shall, independently and without
reliance upon Assignor and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Loan Documents; (d) confirms that it is an
Eligible Assignee; (e) appoints and authorizes Agent to take such action as
agent on its behalf and to exercise such powers under the Loan Agreement as are
delegated to Agent by the terms thereof, together with such powers as are
incidental thereto; (f) agrees that it will observe and perform all obligations
that are required to be performed by it as a “Lender” under the Loan Documents;
and (g) represents and warrants that the assignment evidenced hereby will not
result in a non-exempt “prohibited transaction” under Section 406 of
ERISA.

       

      4.           This
Agreement shall be governed by the laws of the State of New York.  If
any provision is found to be invalid under Applicable Law, it shall be
ineffective only to the extent of such invalidity and the remaining provisions
of this Agreement shall remain in full force and effect.

       

      5.           Each
notice or other communication hereunder shall be in writing, shall be sent by
messenger, by telecopy or facsimile transmission, or by first-class mail, shall
be deemed given when sent and shall be sent as follows:

       

      
        	
                 
      

              	
                (a)

              	
                If
      to Assignee, to the following address (or to such other address as
      Assignee may designate from time to
time):

              


      

       

      __________________________

      __________________________

      __________________________

       

      
        	
                 
      

              	
                (b)

              	
                If
      to Assignor, to the following address (or to such other address as
      Assignor may designate from time to
time):

              


      

      __________________________

      __________________________

      __________________________

      __________________________

       

      Payments
hereunder shall be made by wire transfer of immediately available Dollars as
follows:

       

      If to
Assignee, to the following account (or to such other account as Assignee may
designate from time to time):

       

      ______________________________

      ______________________________

      ABA
No._______________________

      ______________________________

      Account
No.____________________

      Reference:  _____________________

       

      If to
Assignor, to the following account (or to such other account as Assignor may
designate from time to time):

       

      ______________________________

      ______________________________

      ABA
No._______________________

      ______________________________

      Account
No.____________________

      Reference:  _____________________


      
        
           


        

        
          -- 2
--

          
            

          

        

        
           


        

      


      IN WITNESS WHEREOF, this
Assignment and Acceptance is executed as of _____________.

       

      
        
          
            
              
                
                  
                    
                      	 
      	
                               
        

                            	 
	 
      	
                              (“Assignee”)

                            	 
	 
      	 
      	 
	 
      	
                              By 

                            	
                               
        

                            	 
	 
      	 
      	
                              Title:

                            	 
	 	 	 	 
	 
      	
                               
      

                            	 
	 
      	
                              (“Assignor”)

                            	 
	 
      	 
      	 
      	 
	 
      	
                              By

                            	
                               
        

                            	 
	 
      	 
      	
                              Title:

                            	 


                    

                  

                

              

            

          

        

      


      
        
           


        

        
          -- 3
--

          
            

          

        

        
           


        

      


      EXHIBIT
D

      to

      Loan and
Security Agreement

      


      ASSIGNMENT
NOTICE

       

      Reference
is made to (1) the Loan and Security Agreement dated as of October 25, 2010, as
amended (“Loan
Agreement”), among P&F INDUSTRIES,
INC., a Delaware
corporation (“P&F”), FLORIDA PNEUMATIC
MANAFUACTURING 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”),
the Guarantors from time to time party thereto, CAPITAL ONE LEVERAGE FINANCE
CORP., as agent (“Agent”) for the
financial institutions from time to time party to the Loan Agreement (“Lenders”), and such
Lenders; and (2) the Assignment and Acceptance dated as of ____________, 20__
(“Assignment
Agreement”), between __________________ (“Assignor”) and
____________________ (“Assignee”).  Terms
are used herein as defined in the Loan Agreement.

       

      Assignor
hereby notifies Borrowers and Agent of Assignor’s intent to assign to Assignee
pursuant to the Assignment Agreement (a) a principal amount of $________ of
Assignor’s outstanding Revolver Loans and $___________ of Assignor’s
participations in LC Obligations, (b) the amount of $__________ of Assignor’s
Revolver Commitment (which represents ____% of the total Revolver Commitments),
and (c) a principal amount of $________ of Assignor’s outstanding Term Loan (the
foregoing items being, collectively, the “Assigned Interest”),
together with an interest in the Loan Documents corresponding to the Assigned
Interest.  This Agreement shall be effective as of the date (“Effective Date”)
indicated below, provided this Assignment Notice is executed by Assignor,
Assignee, Agent and Borrower Agent, if applicable.  Pursuant to the
Assignment Agreement, Assignee has expressly assumed all of Assignor’s
obligations under the Loan Agreement to the extent of the Assigned Interest, as
of the Effective Date.

       

      For
purposes of the Loan Agreement, Agent shall deem Assignor’s Revolver Commitment
to be reduced by $_________, and Assignee’s Revolver Commitment to be increased
by $_________.

       

      The
address of Assignee to which notices and information are to be sent under the
terms of the Loan Agreement is:

       

      ________________________

      ________________________

      ________________________

      ________________________

       

      The
address of Assignee to which payments are to be sent under the terms of the Loan
Agreement is shown in the Assignment and Acceptance.

       

      This
Notice is being delivered to Borrowers and Agent pursuant to Section 13.3 of the Loan
Agreement.  Please acknowledge your acceptance of this Notice by
executing and returning to Assignee and Assignor a copy of this
Notice.

       

      
        
           


        

        
           


          
            

          

        

        
           


        

      


      IN WITNESS WHEREOF, this
Assignment Notice is executed as of _____________.

       

      
        
          
            
              
                
                  	 
      	
                           
        

                        	 
	 
      	
                          (“Assignee”)

                        	 
	 
      	 
      	 
	 
      	
                          By 

                        	
                           
        

                        	 
	 
      	 
      	
                          Title:

                        	 
	 
      	 
      	 
      	 
	 
      	
                              
      

                        	 
	 
      	
                          (“Assignor”)

                        	 
	 
      	 
      	 
	 
      	
                          By

                        	
                           
        

                        	 
	 
      	 
      	
                          Title:

                        	 


                

              

            

          

        

      

      


      ACKNOWLEDGED
AND AGREED,

      AS OF THE
DATE SET FORTH ABOVE:

       

      
        
          
            
              
                	
                        BORROWER
      AGENT:*

                      
	 
      
	
                        P&F
      INDUSTRIES, INC.

                      
	 
      
	
                        By  

                      	
                           
      

                      
	 
      	
                        Title:

                      


              

            

          

        

      

      


      * No
signature required if Assignee is a Lender, U.S.-based Affiliate of a Lender or
Approved Fund, or if an Event of Default exists.

       

      
        CAPITAL ONE LEVERAGE FINANCE
CORPORATION,

      

      as
Agent

       

      
        
          
            	
                    By

                  	
                     
        

                  	 
      
	 
      	
                    Title:

                  	 
      


          

        

      


      
        
           


        

        
          -- 2
--

          
            

          

        

        
           


        

      


      EXHIBIT
E

      to

      Loan and
Security Agreement

      


      NON-RECURRING LEGAL,
ACCOUNTING AND CONSULTING EXPENSES

       

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            	 
      	 	 	 	 
      	 	
                                    YTD

                                  	 	 	
                                    January

                                  	 	 	
                                    February

                                  	 	 	
                                    March

                                  	 	 	
                                    April

                                  	 	 	
                                    May

                                  	 	 	
                                    June

                                  	 
	 
      	 	 	 	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                    6111

                                  	 	
                                    1

                                  	 	
                                    JH
      Cohn - Accounting

                                  	 	$	40,000	 	 	$	-	 	 	$	-	 	 	$	40,000	 	 	$	-	 	 	$	-	 	 	$	-	 
	 
      	 	 	 	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                    6112

                                  	 	
                                    2

                                  	 	
                                    Certilman,
      Balin - Legal

                                  	 	$	125,000	 	 	 	10,000	 	 	 	15,000	 	 	 	30,000	 	 	 	45,000	 	 	 	25,000	 	 	 	-	 
	 
      	 	 	 	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                    6113

                                  	 	
                                    3

                                  	 	
                                    Moriss,
      Nichols - Legal

                                  	 	$	149,133	 	 	 	-	 	 	 	-	 	 	 	117,062	 	 	 	10,412	 	 	 	10,000	 	 	 	11,659	 
	 
      	 	 	 	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
      	 	
                                    4

                                  	 	
                                    Rifkin
      Radler - Legal

                                  	 	$	135,000	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	135,000	 
	 
      	 	 	 	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                    6114

                                  	 	
                                    5

                                  	 	
                                    RSR
      Consulting

                                  	 	$	94,378	 	 	 	-	 	 	 	60,986	 	 	 	32,644	 	 	 	748	 	 	 	 	 	 	 	 	 
	 
      	 	 	 	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                    6526

                                  	 	
                                    6

                                  	 	
                                    DLA
      Piper and, others -Legal

                                  	 	$	117,271	 	 	 	9,832	 	 	 	14,879	 	 	 	39,311	 	 	 	9,647	 	 	 	5,000	 	 	 	38,602	 
	 
      	 	 	 	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
      	 	
                                    7

                                  	 	
                                    Welkin
      Capital group

                                  	 	$	15,000	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	15,000	 
	 
      	 	 	 	 
      	 	$	675,782	 	 	$	19,832	 	 	$	90,865	 	 	$	259,017	 	 	$	65,807	 	 	$	40,000	 	 	$	200,261	 


                          

                        

                      

                    

                  

                

              

            

          

        

      

      


      
        	
                 
      

              	
                 1

              	
                Resulting
      from delay in filing, which in turn was due to Banking
      crisis

              


      

      
        	
                 
      

              	
                 2

              	
                Due
      primarily to: (i) - WMC / PNC; (ii) - 3-31-10 CITIBANK matter (including
      Waiver &
Amendment)

              


      

      
        	
                 
      

              	
                 3

              	
                Retained
      as special counsel to the BOD primarily relating to equity infusions and
      WMC disposal

              


      

      
        	
                 
      

              	
                 4

              	
                Bank
      legal fees for Waiver & Amendment, and other matters recorded in June
      2010 covering 1-1-10 through
  6-30-10

              


      

      
        	
                 
      

              	
                 5

              	
                Retained
      as required by CITIBANK to provide "comfort" to the
      Banks

              


      

      
        	
                 
      

              	
                 6

              	
                Corporate
      governance related
matters

              


      


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      EXHIBIT
F

      to

      Loan and
Security Agreement

      


      FORM OF
OPINION

      


      (See
attached.)



      
        
           


        

        
           


          
            

          

        

        
           


        

      


      SCHEDULE
1.1

      to

      Loan and
Security Agreement

      


      COMMITMENTS OF
LENDERS

       

      
        
          
            	
                    Lender

                  	 	
                    Revolver 

                    Commitment

                  	 	 	
                    Term Loan

                    Commitment

                  	 	 	
                    Total 

                    Commitments

                  	 
	
                    Capital
      One Leverage Finance Corporation

                  	 	$	15,910,000.00	 	 	$	6,090,000.00	 	 	$	22,000,000.00	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                    Total

                  	 	$	15,910,000.00	 	 	$	6,090,000.00	 	 	$	22,000,000.00	 


          

        

      

       

      
        
           


        

        
           


          
            

          

        

        
           


        

      


      SCHEDULE
1.2

      to

      Loan and
Security Agreement

      


      IMMATERIAL
SUBSIDIARIES

       

      Woodmark
International, L.P.

      Pacific
Stair Products, Inc.

      WILP
Holdings, Inc.

      Embassy
Industries, Inc.

      Green
Manufacturing, Inc.


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      SCHEDULE
7.3.1

      to

      Loan and
Security Agreement

      


      OWNED REAL
ESTATE

       

      1.           25
Leonberg Road, Mashuda Industrial Park, Cranberry Township, Pennsylvania
16066

      


      2.           10333
Windhorst Road, Tampa, Florida 33619

      


      3.           851
Jupiter Park Lane, Jupiter, Florida 33458


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      SCHEDULE
7.4.1

      to

      Loan and
Security Agreement

      


      PLEDGED
INTERESTS

       

      All
shares of stock disclosed on Schedule 9.1.4 other than shares of P&F
Industries, Inc.

       

      
        
           


        

        
           


          
            

          

        

        
           


        

      


      SCHEDULE
8.3.3

      to

      Loan and
Security Agreement

      


      SALE ON CONSIGNEMENT OR
APPROVAL

       

      Hy-Tech Machine,
Inc.

       

      Stanley
Tool

      3810 SE
Naef Road

      Milwaukee
Oregon 97267

       

      Florida Pneumatic
Manufacturing Corporation

       

      Ingersoll
Rand Company

      Logistics
and Distribution Center

      9801 Twin
Lakes Parkway

      Charlotte,
North Carolina 28269

       

      
        
           


        

        
           


          
            

          

        

        
           


        

      


      SCHEDULE
8.5

      to

      Loan and
Security Agreement

      


      DEPOSIT
ACCOUNTS

       

      
        
          	
                  Depository Bank

                	 
      	
                  Type of Account

                	 
      	
                  Account Number

                
	 
      	 
      	 
      	 
      	 
      
	
                  Citibank

                	 
      	
                  Operating
      (P&F)

                	 
      	
                  020052536

                
	 
      	 
      	 
      	 
      	 
      
	
                  Citibank

                	 
      	
                  Operating
      (Embassy)

                	 
      	
                  020052478

                
	 
      	 
      	 
      	 
      	 
      
	
                  Citibank

                	 
      	
                  Operating
      (Florida Pneumatic)

                	 
      	
                  020052544

                
	 
      	 
      	 
      	 
      	 
      
	
                  Citibank

                	 
      	
                  Import
      Account (Florida Pneumatic)

                	 
      	
                  020052783

                
	 
      	 
      	 
      	 
      	 
      
	
                  Wachovia

                	 
      	
                  Operating
      (Florida Pneumatic)

                	 
      	
                  2000006787134

                
	 
      	 
      	 
      	 
      	 
      
	
                  Wachovia

                	 
      	
                  Payroll
      - hourly (Florida Pneumatic)

                	 
      	
                  2000006787150

                
	 
      	 
      	 
      	 
      	 
      
	
                  Wachovia

                	 
      	
                  Payroll
      – salaried (Florida Pneumatic)

                	 
      	
                  2000006787147

                
	 
      	 
      	 
      	 
      	 
      
	
                  Citibank

                	 
      	
                  Operating
      (Nationwide Industries)

                	 
      	
                  022089480

                
	 
      	 
      	 
      	 
      	 
      
	
                  Wachovia

                	 
      	
                  Operating
      (Nationwide Industries)

                	 
      	
                  20000010988437

                
	 
      	 
      	 
      	 
      	 
      
	
                  Citibank

                	 
      	
                  Operating
      (Countrywide Hardware)

                	 
      	
                  022089472

                
	 
      	 
      	 
      	 
      	 
      
	
                  Citibank

                	 
      	
                  Operating
      (Woodmark International)

                	 
      	
                  84118718

                
	 
      	 
      	 
      	 
      	 
      
	
                  Citibank

                	 
      	
                  Operating
      (Hy-Tech)

                	 
      	
                  9965462894

                
	 
      	 
      	 
      	 
      	 
      
	
                  First
      Niagara

                	 
      	
                  Operating
      (Hy-Tech)

                	 
      	
                  986086372

                
	 
      	 
      	 
      	 
      	 
      
	
                  First
      Niagara

                	 
      	
                  Payroll
      (Hy-Tech)

                	 
      	
                  986086380

                
	 
      	 
      	 
      	 
      	 
      
	
                  Capital
      One

                	 
      	
                  Florida
      Pneumatic Manufacturing Corporation – lockbox account

                	 
      	
                  7047552928

                
	 
      	 
      	 
      	 
      	 
      
	
                  Capital
      One

                	 
      	
                  Hy-Tech
      Machine, Inc. – lockbox account

                	 
      	
                  7047552960

                
	 
      	 
      	 
      	 
      	 
      
	
                  Capital
      One

                	 
      	
                  Nationwide
      Industries, Inc. – lockbox account

                	 
      	
                  7047552944

                
	 
      	 
      	 
      	 
      	 
      
	
                  Capital
      One

                	 
      	
                  P&F
      Industries, Inc. - clearing account

                	 
      	
                  7047552898

                
	 
      	 
      	 
      	 
      	 
      
	
                  Capital
      One

                	 
      	
                  P&F
      Industries, Inc. – concentration account

                	 
      	
                  7047552871

                


        

      

       

      
        
           


        

        
           


          
            

          

        

        
           


        

      

      


      
        
          	
                  Depository Bank

                	 
      	
                  Type of Account

                	 
      	
                  Account Number

                
	 
      	 
      	 
      	 
      	 
      
	
                  Capital
      One

                	 
      	
                  Florida
      Pneumatic Manufacturing Corporation – Operating Account

                	 
      	
                  7047552901

                
	 
      	 
      	 
      	 
      	 
      
	
                  Capital
      One

                	 
      	
                  Nationwide
      Industries, Inc. – Operating Account

                	 
      	
                  7047552936

                
	 
      	 
      	 
      	 
      	 
      
	
                  Capital
      One

                	
                    

                	
                  Hy-Tech
      Machine, Inc. – Operating Account

                	
                    

                	
                  7047552952

                


        

      

       

      
        
           


        

        
          -- 2
--

          
            

          

        

        
           


        

      


      SCHEDULE
8.6.1

      to

      Loan and
Security Agreement

      


      BUSINESS
LOCATIONS

       

      
        	
                1.

              	
                Borrowers
      currently have the following business locations, and no
      others:

              


      

       

      Chief Executive
Offices:

      


      P&F
Industries, Inc.

      445
Broadhollow Road

      Suite
100

      Melville,
New York 11747

      


      Hy-Tech
Machine, Inc.

      25
Leonberg Road

      Mashuda
Industrial Park

      Cranberry
Township, Pennsylvania 16066

      


      Florida
Pneumatic Manufacturing Corporation

      851
Jupiter Park Lane

      Jupiter,
Florida 33458

      


      Nationwide
Industries, Inc.

      10333
Windhorst Road

      Tampa,
Florida 33619

      


      Other
Locations:

      


      None.

      


      
        	
                2.

              	
                In
      the five years preceding the Closing Date, Borrowers have had no office or
      place of business located in any county other than as set forth above,
      except:

              


      

      


      None.

      


      
        	
                3.

              	
                Each
      Subsidiary currently has the following business locations, and no
      others:

              


      

       

      Chief Executive Office of
each Subsidiary (other than Borrowers):

       

      c/o
P&F Industries, Inc.

      445
Broadhollow Road

      Suite
100

      Melville,
New York 11747



      
        
           


        

        
           


          
            

          

        

        
           


        

      


      Other
Locations:

      


      None.

      


      
        	
                4.

              	
                The
      following bailees, warehouseman, similar parties and consignees hold
      inventory of a Borrower or
Subsidiary:

              


      

      


      
        
          
            
              
                
                  
                    
                      
                        	
                                Name and Address 

                                of Party

                              	 	
                                Nature of

                                Relationship

                              	 	
                                Amount of 

                                Inventory as of 

                                August 31, 2010

                              	 	
                                Owner of Inventory

                              
	
                                Certain
      Teed

                                500
      West 1st Street

                                McPherson,
      KS 67460

                              	 	
                                Finished
      Goods warehouse.  Customer owned building
      complex.  Lease one building to
      Nationwide.  Nationwide employee on-site to handle
      goods.

                              	 	$	213,257.91	  	
                                Nationwide
      Industries, Inc.

                              
	
                                Certain
      Teed

                                231
      Ship Canal Parkway

                                Buffalo,
      New York 14218

                              	 	
                                Finished
      Goods warehouse.  Customer owned building.  Space
      provided to store just-in-time inventory.  No employees
      on-site.

                              	 	$	68,730	 	
                                Nationwide
      Industries, Inc.

                              
	
                                Ingersoll
      Rand Company

                                Logistics
      and Distribution Center

                                9801
      Twin Lakes Parkway

                                Charlotte,
      North Carolina 28269

                              	 	
                                Consignment
      Arrangement

                              	 	$	41,829.39	 	
                                Florida
      Pneumatic Manufacturing Corporation

                              
	
                                B&B
      Warehouse, Inc.

                                1020
      Sampson Street

                                Houston,
      Texas 77003

                              	 	
                                Third
      party owned warehouse/distribution center

                              	 	$	94,035.98	 	
                                Florida
      Pneumatic Manufacturing Corporation

                              
	
                                Venture
      Sales, Inc.

                                515
      N. Smith Avenue

                                Ste.
      108

                                Corona,
      California 92880

                              	 	
                                Third
      party owned warehouse/distribution center

                              	 	$	49,159.37	 	
                                Florida
      Pneumatic Manufacturing Corporation

                              
	
                                D&L
      Sales, Inc.

                                310
      Meyer Road

                                Bensenville,
      Illinois 60106

                              	 	
                                Third
      party owned warehouse/distribution center

                              	 	$	5,199.58	 	
                                Florida
      Pneumatic Manufacturing Corporation

                              
	
                                B&B
      Warehouse, Inc.

                                9402
      N. Loop East

                                Houston,
      Texas 77003

                              	 	
                                Third
      party owned warehouse/distribution center

                              	 	$	403,247.85	 	
                                Hy-Tech
      Machine, Inc.

                              
	
                                Stanley
      Toolworks

                                3810
      SE Naef Road

                                Milwaukee,
      Oregon 97267

                              	 	
                                Consignment
      Arrangement

                              	 	$	192,401.60	 	
                                Hy-Tech
      Machine,
Inc.

                              


                      

                    

                  

                

              

            

          

        

      

       

      
        
           


        

        
          -- 2
--

          
            

          

        

        
           


        

      


      SCHEDULE
9.1.4

      to

      Loan and
Security Agreement

      


      NAMES AND CAPITAL
STRUCTURE

       

      
        	
                1.

              	
                The
      corporate names, jurisdictions of incorporation, and authorized and issued
      Equity Interests of each Borrower and Subsidiary are as
      follows:

              


      

       

      
        
          
            
              	
                      Name

                    	 
      	
                      Jurisdiction

                    	 
      	
                      Number and Class

                      of Authorized Shares

                    	 
      	
                      Number and Class

                      of Issued and

                      Outstanding Shares

                    
	
                      P&F
      Industries, Inc.

                    	 
      	
                      Delaware

                    	 
      	
                      Class
      A Common Stock (7,000,000 shares)

                    	 
      	
                      3,614,652
      shares of Class A

                    
	 
      	 
      	 
      	 
      	
                      Class
      B Common Stock (2,000,000 shares)

                    	 
      	
                      0
      shares of Class B

                    
	 
      	 
      	 
      	 
      	
                      Preferred
      Stock

                    	 
      	
                      0
      shares of Preferred

                    
	 
      	 
      	 
      	 
      	
                       (2,020,000
      shares)

                    	 
      	
                       
      

                    
	
                      Florida
      Pneumatic Manufacturing Corporation

                    	 
      	
                      Florida

                    	 
      	
                      Common
      Stock (1,000 shares)

                    	 
      	
                      1,000
      shares

                    
	
                      Nationwide
      Industries, Inc.

                    	 
      	
                      Florida

                    	 
      	
                      Common
      Stock (100 shares)

                    	 
      	
                      100
      shares

                    
	
                      Hy-Tech
      Machine, Inc.

                    	 
      	
                      Delaware

                    	 
      	
                      Common
      Stock (1,500 shares)

                    	 
      	
                      100
      shares

                    
	
                      Countrywide
      Hardware, Inc.

                    	 
      	
                      Delaware

                    	 
      	
                      Common
      Stock (100 shares)

                    	 
      	
                      100
      shares

                    
	
                      Continental
      Tool Group, Inc.

                    	 
      	
                      Delaware

                    	 
      	
                      Common
      Stock (1,500 shares)

                    	 
      	
                      100
      shares

                    
	
                      Green
      Manufacturing, Inc.

                    	 
      	
                      Delaware

                    	 
      	
                      Common
      Stock (1,000 shares)

                    	 
      	
                      1
      share

                    
	
                      Embassy
      Industries, Inc.

                    	 
      	
                      New
      York

                    	 
      	
                      Common
      Stock (1,000 shares)

                    	 
      	
                      1,000
      shares

                    
	
                      Pacific
      Stair Products, Inc.

                    	 
      	
                      Delaware

                    	 
      	
                      Common
      Stock (1,000 shares)

                    	 
      	
                      100
      shares

                    
	
                      WILP
      Holdings, Inc.

                    	 
      	
                      Delaware

                    	 
      	
                      Common
      Stock (1,500 shares)

                    	 
      	
                      10
      shares

                    
	
                      Woodmark
      International, L.P.

                    	
                        

                    	
                      Delaware

                    	
                        

                    	
                      General
      Partner units

                      Limited
      Partner units

                    	
                        

                    	
                      1
      unit

                      I
      unit

                    


            

          

        

      

       

      
        
           


        

        
           


          
            

          

        

        
           


        

      


      
        	
                2. 

              	
                The
      record holders of Equity Interests of each Borrower and Subsidiary are as
      follows:

              


      

       

      
        
          
            	
                    Name

                  	 
      	
                    Class of Stock

                  	 
      	
                    Number

                    of Shares

                  	 
      	
                    Record Owner

                  
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                    P&F
      Industries, Inc.

                  	 
      	
                    Class
      A Common Stock

                  	 
      	
                    3,614,652

                  	 
      	
                    Publicly
      Held Company

                  
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                    Florida
      Pneumatic Manufacturing Corporation

                  	 
      	
                    Common
      Stock

                  	 
      	
                    1,000
      shares

                  	 
      	
                    Continental
      Tool Group, Inc.

                  
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                    Nationwide
      Industries, Inc.

                  	 
      	
                    Common
      Stock

                  	 
      	
                    100
      shares

                  	 
      	
                    Countrywide
      Hardware, Inc.

                  
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                    Hy-Tech
      Machine, Inc.

                  	 
      	
                    Common
      Stock

                  	 
      	
                    100
      shares

                  	 
      	
                    Continental
      Tool Group, Inc.

                  
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                    Countrywide
      Hardware, Inc.

                  	 
      	
                    Common
      Stock

                  	 
      	
                    100
      shares

                  	 
      	
                    P&F
      Industries, Inc.

                  
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                    Continental
      Tool Group, Inc.

                  	 
      	
                    Common
      Stock

                  	 
      	
                    100
      shares

                  	 
      	
                    P&F
      Industries, Inc.

                  
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                    Green
      Manufacturing, Inc.

                  	 
      	
                    Common
      Stock

                  	 
      	
                    1
      share

                  	 
      	
                    P&F
      Industries, Inc.

                  
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                    Embassy
      Industries, Inc.

                  	 
      	
                    Common
      Stock

                  	 
      	
                    1,000
      shares

                  	 
      	
                    P&F
      Industries, Inc.

                  
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                    Pacific
      Stair Products, Inc.

                  	 
      	
                    Common
      Stock

                  	 
      	
                    100
      shares

                  	 
      	
                    Countrywide
      Hardware, Inc.

                  
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                    WILP
      Holdings, Inc.

                  	 
      	
                    Common
      Stock

                  	 
      	
                    10
      shares

                  	 
      	
                    Countrywide
      Hardware, Inc.

                  
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                    Woodmark
      International, L.P.

                  	
                      

                  	
                    Limited/General
      Partnership Units

                  	
                      

                  	
                    1
      General Partnership Unit

                  	
                      

                  	
                    Countywide
      Hardware, Inc.

                  
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	
                    1
      Limited Partnership Unit.

                  	 
      	
                    WILP
      Holdings, Inc.

                  


          

        

      

      


      
        	
                3.

              	
                All
      agreements binding on holders of Equity Interests of Borrowers and
      Subsidiaries with respect to such interests are as
  follows:

              


      

      


      None.

       

      
        	
                4.

              	
                In
      the five years preceding the Closing Date, no Borrower or Subsidiary has
      acquired any substantial assets from any other Person nor been the
      surviving entity in a merger or combination,
  except:

              


      

      


      
        	
                 
      

              	
                a.

              	
                In
      February 2007, Hy-Tech Machine, Inc., a Delaware corporation
      (“Purchaser”), an indirect subsidiary of P&F Industries, Inc.,
      acquired substantially all of the assets of Hy-Tech Machine, Inc., a
      Pennsylvania corporation, and Quality Gear & Machine, Inc., a
      Pennsylvania corporation (collectively, the “Sellers”). The purchase price
      consisted of $16,900,000 in cash, assumption of certain payables and
      liabilities and the obligation to make certain contingent
      payments.

              


      


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      
        	
                 
      

              	
                In
      connection with this acquisition, the Purchaser contemporaneously entered
      into an Agreement of Sale with HTM Associates, a Pennsylvania general
      partnership comprised of certain shareholders of the Sellers (“HTM”),
      pursuant to which the Purchaser purchased certain real property located in
      Cranberry Township, Pennsylvania from HTM for $2,200,000 in
      cash.

              


      

      


      
        	
                 
      

              	
                b.

              	
                In
      January 2006, Pacific Stair Products, Inc., a Delaware corporation, an
      indirect subsidiary of P&F Industries, Inc., acquired substantially
      all of the assets of Pacific Stair Products, Inc., a California
      corporation.

              


      

       

      
        
           


        

        
           


          
            

          

        

        
           


        

      


      SCHEDULE
9.1.11

      to

      Loan and
Security Agreement

      


      PATENTS, TRADEMARKS,
COPYRIGHTS AND LICENSES

       

      
        	
                1.

              	
                Borrowers’
      and Subsidiaries’ patents:

              


      

      


      
        
          
            
              	
                      Patent

                    	 
      	
                      Owner

                    	 
      	
                      Status in

                      Patent Office

                    	 
      	
                      Federal

                      Registration No.

                    	 
      	
                      Registration

                      Date

                    
	
                      Magnetic
      Latch System

                    	 
      	
                      Nationwide  Industries,
      Inc. (“Nationwide”)

                    	 
      	
                      Issued

                    	 
      	
                      7,044,511
      B2

                    	 
      	
                      May
      16, 2006

                    
	
                      Gate
      Lock Device

                    	 
      	
                      Nationwide

                    	 
      	
                      Issued

                    	 
      	
                      7,201,030
      B2

                    	 
      	
                      April
      10, 2007

                    
	
                      Two-Point
      Mortise Lock

                    	 
      	
                      Nationwide

                    	 
      	
                      Issued

                    	 
      	
                      7,418,845
      B2

                    	 
      	
                      September
      2, 2008

                    
	
                      Door
      Handle

                    	 
      	
                      Nationwide

                    	 
      	
                      Issued

                    	 
      	
                      D514,423
      S

                    	 
      	
                      February
      7, 2006

                    
	
                      Baluster
      Shoe

                    	 
      	
                      Nationwide

                    	 
      	
                      Issued

                    	 
      	
                      D544,106
      S

                    	 
      	
                      June
      5, 2007

                    
	
                      Baluster
      Shoe

                    	 
      	
                      Nationwide

                    	 
      	
                      Issued

                    	 
      	
                      D544,107
      S

                    	 
      	
                      June
      5, 2007

                    
	
                      FAD
      design

                    	 
      	
                      Nationwide

                    	 
      	
                      Applied
      For April 20, 2006

                    	 
      	
                      Application
      No. 11/379,425

                    	 
      	
                      n/a

                    
	
                      Stair
      Rail Assembly (baluster shoe utility patent)

                    	 
      	
                      Nationwide

                    	 
      	
                      Applied
      For January 8, 2008

                    	 
      	
                      Application
      No. 11/969,548

                    	 
      	
                      n/a

                    
	
                      Manta

                    	 
      	
                      Nationwide

                    	 
      	
                      Applied
      For March 24, 2009

                    	 
      	
                      Application
      No. 12/410,060

                    	 
      	
                      n/a

                    
	
                      Keystone
      X

                    	 
      	
                      Nationwide

                    	 
      	
                      Applied
      For November 18, 2009

                    	 
      	
                      Application
      No. 12/621,080

                    	 
      	
                      n/a

                    
	
                      Aqualatch

                    	 
      	
                      Nationwide

                    	 
      	
                      Applied
      For February 8, 2010

                    	 
      	
                      Application
      No. 12/658,534

                    	 
      	
                      n/a

                    
	
                      New
      Cleat (Macro-Micro)

                    	 
      	
                      Nationwide

                    	 
      	
                      Applied
      For February 16, 2007

                    	 
      	
                      Application
      No. 60/890272

                    	 
      	
                      n/a

                    
	
                      Mini
      Magnetic Latch

                    	 
      	
                      Nationwide

                    	 
      	
                      Applied
      For August 25, 2010

                    	 
      	
                      Application
      No. 61/376,748

                    	 
      	
                      n/a

                    
	
                      Gate
      Post Stiffener

                    	
                        

                    	
                      Nationwide

                    	
                        

                    	
                      Applied
      For February 4, 2009

                    	
                        

                    	
                      Application
      No. 12/365,628

                    	
                        

                    	
                      n/a

                    


            

          

        

      

      



      
        
           


        

        
           


          
            

          

        

        
           


        

      


      
        	
                2.

              	
                Borrowers’
      and Subsidiaries’ trademarks:

              


      

       

      
        
          
            
              	
                      Trademark

                    	 
      	
                      Owner

                    	 
      	
                      Status in

                      Trademark Office

                    	 
      	
                      Federal

                      Registration No.

                    	 
      	
                      Registration

                      Date

                    
	
                      Eliminator

                    	 
      	
                      Nationwide

                    	 
      	
                      Issued

                    	 
      	
                      2,658,650

                    	 
      	
                      December
      10, 2002

                    
	
                      Protector

                    	 
      	
                      Nationwide

                    	 
      	
                      Issued

                    	 
      	
                      3,183,900

                    	 
      	
                      December
      12, 2007

                    
	
                      Keystone

                    	 
      	
                      Nationwide

                    	 
      	
                      Issued

                    	 
      	
                      3,327,266

                    	 
      	
                      October
      30, 2007

                    
	
                      Keystone
      Advantage

                    	 
      	
                      Nationwide

                    	 
      	
                      Issued

                    	 
      	
                      3,332,010

                    	 
      	
                      November
      6, 2007

                    
	
                      Cornerstone

                    	 
      	
                      Nationwide

                    	 
      	
                      Issued

                    	 
      	
                      3,332,583

                    	 
      	
                      November
      6, 2007

                    
	
                      Klaw

                    	 
      	
                      Nationwide

                    	 
      	
                      Issued

                    	 
      	
                      3,396,561

                    	 
      	
                      March
      11, 2008

                    
	
                      Aqualatch

                    	 
      	
                      Nationwide

                    	 
      	
                      Applied
      for December 7, 2009

                    	 
      	
                      77/887321

                    	 
      	
                      n/a

                    
	
                      Safe-Alert

                    	 
      	
                      Nationwide

                    	 
      	
                      Applied
      for December 7, 2009

                    	 
      	
                      77/887335

                    	 
      	
                      n/a

                    
	
                      THOR
      (word mark)

                    	 
      	
                      Hy-Tech
      Machine, Inc. (“Hy-Tech”)

                    	 
      	
                      Issued

                    	 
      	
                      2,616,155

                    	 
      	
                      April
      5, 1982

                    
	
                      THOR
      (stylized)

                    	 
      	
                      Hy-Tech

                    	 
      	
                      Issued

                    	 
      	
                      57,742

                    	 
      	
                      November
      27, 1906

                    
	
                      THOR

                    	 
      	
                      Hy-Tech

                    	 
      	
                      Issued

                    	 
      	
                      1,266,129

                    	 
      	
                      September
      10, 2002

                    
	
                      THOR

                    	 
      	
                      Hy-Tech

                    	 
      	
                      Issued
      (Canada)

                    	 
      	
                      TMA542456

                    	 
      	
                      March
      15, 2001

                    
	
                      UT
      (logo)

                    	 
      	
                      Florida
      Pneumatic Manufacturing Corporation (“Florida Pneumatic”)

                    	 
      	
                      Issued

                    	 
      	
                      3,328,426

                    	 
      	
                      November
      6, 2007

                    
	
                      Florida
      Pneumatic

                    	 
      	
                      Florida
      Pneumatic

                    	 
      	
                      Issued
      (Canada)

                    	 
      	
                      208,801

                    	 
      	
                      July
      11, 1975

                    
	
                      FP
      Plus design

                    	 
      	
                      Florida
      Pneumatic

                    	 
      	
                      Issued

                    	 
      	
                      1,263,411

                    	 
      	
                      January
      10, 1984

                    
	
                      Florida
      Pneumatic

                    	 
      	
                      Florida
      Pneumatic

                    	 
      	
                      Issued

                    	 
      	
                      0998,684

                    	 
      	
                      November
      14, 2004

                    
	
                      Rapid
      Reverse

                    	
                        

                    	
                      Florida
      Pneumatic

                    	
                        

                    	
                      Issued

                    	
                        

                    	
                      2,958.824

                    	
                        

                    	
                      May
      31, 2005

                    


            

          

        

      


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      
        	
                3.

              	
                Borrowers’
      and Subsidiaries’ copyrights:

              


      

      


      
        None.

      

      


      
        	
                4.

              	
                Borrowers’
      and Subsidiaries’ licenses (other than routine business licenses,
      authorizing them to transact business in local
    jurisdictions):

              


      

      


      
        Hy-Tech Machine,
Inc.

      

      


      
        
          	
                	
                  a.

                	
                  The
      licensed use of the brand name “Arnessen” pursuant to that certain
      Purchase Agreement, dated May 27, 2003, by and among The Arnessen
      Corporation, Eric Arnessen and Hy-Tech Machine, Inc. (Hy-Tech has no
      royalty obligations)

                


        

      

      


      
        
          	
                	
                  b.

                	
                  Software
      license created under that certain Custom Software Development Agreement
      dated June 17, 2004, by and between ATP and MIS Group, Inc. pursuant to
      which MIS Group, Inc. was retained to develop computer software for
      ATP.

                


        

      

      


      
        
          	
                	
                  c.

                	
                  Software
      license created under that certain Custom Software Development Agreement,
      by and between Hy-Tech Machine, Inc. and MIS Group, Inc., dated June 4,
      2004, to retain MIS Group, Inc. as an independent contractor to develop
      computer software (internet distribution and
  information).

                


        

      

      


      
        
          	
                	
                  d.

                	
                  DA
      Services, LLC hardware, software and licenses and warranty rights
      purchased by Hy-Tech Machine,
Inc.

                


        

      

      


      Nationwide Industries,
Inc.

       

      
        	
                 
      

              	
                a.

              	
                Non-exclusive,
      non-royalty bearing license created under that certain Settlement
      Agreement, by and between Modern Fence Technologies, Inc. and Nationwide
      Industries, Inc., dated as of October 19, 2005 relating to trade dress
      rights in the V-notched design of a fence hinge associated with Federal
      Registration No. 2,917,000.

              


      

      


      
        	
                 
      

              	
                b.

              	
                Non-exclusive
      patent license rights under that certain Second Endorsement and Amendment
      to Royalty and Patent License Agreement, by and between Nationwide
      Industries, Inc. and Delair Group, L.L.C. dated as of January 9, 2009
      relating to Patent No. 5,715,574.

              


      

      


      
        	
                 
      

              	
                c.

              	
                Development
      fee under that certain letter agreement between Mike Brown and Nationwide
      Industries, Inc., dated as of August 29, 2006,  relating to the
      Eliminator handle product.

              


      


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      SCHEDULE
9.1.14

      to

      Loan and
Security Agreement

      


      ENVIRONMENTAL
MATTERS

       

      None.


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      SCHEDULE
9.1.15

      to

      Loan and
Security Agreement

      


      RESTRICTIVE
AGREEMENTS

       

      None.



      
        
           


        

        
           


          
            

          

        

        
           


        

      


      SCHEDULE
9.1.16

      to

      Loan and
Security Agreement

      


      LITIGATION

       

      
        	
                1.

              	
                Proceedings
      and investigations pending against Borrowers or
    Subsidiaries:

              


      

       

      D&D Group Pty Ltd, et al
v.. Nationwide Industries, Inc., U.S. District Court, Southern District
of California.  This matter relates to Nationwide’s alleged
infringement of D&D’s U.S. Patent No. 5,584,100 relating to a resin gate
hinge.  Nationwide denies that its product infringes such
patent.

      


      Nationwide
moved for, and was granted, summary judgment
of  non-infringement.  D&D is in the process of
appealing such decision.

      


      While
this proceeding, if determined adversely to Nationwide, may be material to
Nationwide on an individual basis, P&F’s management believes that it would
not be material to the Obligors taken as a whole.

       

      
        	
                2.

              	
                Threatened
      proceedings or investigations of which any Borrower or Subsidiary is
      aware:

              


      

       

      
        	
                 
      

              	
                None.

              


      

       

      
        	
                3.

              	
                Pending
      Commercial Tort Claim of any
Obligor:

              


      

       

      J. D’Addario & Company,
Inc. v. Embassy Industries, Inc., Supreme Court of the State of New York,
Appellant Division – Second Department.  This is an action by J.
D’Addario & Company, Inc. (“D’Addario”) to recover a down payment paid by
D’Addario pursuant to a real estate purchase agreement, and iwhich defendant
Embassy Industries, Inc. (“Embassy”) counterclaimed to recover damages for
breach of contract.

      


      In a
judgment dated January 11, 2010 and entered on June 1, 2010, the court awarded
Embassy principal and interest in the sum of $877,406.77.  This
judgment is being appealed by D’Addario.


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      SCHEDULE
9.1.18

      to

      Loan and
Security Agreement

      


      PENSION PLAN
DISCLOSURES

       

      None.


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      SCHEDULE
9.1.20

      to

      Loan and
Security Agreement

      


      LABOR
CONTRACTS

       

      Borrowers
and Subsidiaries are party to the following collective bargaining agreements,
management agreements and consulting agreements:

      


      
        	
                Parties

              	 
      	
                Type of Agreement

              	 
      	
                Term of Agreement

              
	
                P&F
      Industries Inc. and Richard A. Horowitz

              	 
      	
                Employment
      Agreement

              	 
      	
                Expires
      December 31, 2011

              
	
                Hy-Tech
      Machine, Inc. and Robert Ober

              	 
      	
                Employment
      Agreement

              	 
      	
                Expires
      February 12, 2011

              
	
                Hy-Tech
      Machine, Inc. and Elizabeth Smail

              	 
      	
                Employment
      Agreement

              	 
      	
                Expires
      February 12, 2011

              
	
                Nationwide
      Industries, Inc.. and Christopher Kliefoth

              	
                  

              	
                Severance
      Agreement

              	
                  

              	
                Expires
      August 31, 2012

              


      

       

      
        
           


        

        
           


          
            

          

        

        
           


        

      


      SCHEDULE
10.2.2

      to

      Loan and
Security Agreement

       

      EXISTING
LIENS

       

      
        
          	
                  Debtor

                	 
      	
                  Secured Party

                	 
      	
                  Jurisdiction

                	 
      	
                  File Date

                	 
      	
                  File Number

                	 
      	
                  Collateral

                
	
                  P&F
      Industries, Inc.

                	 
      	
                  Marc
      Schorr and Richard Horowitz

                	 
      	
                  Delaware

                	 
      	
                  4/28/10

                	 
      	
                  01486061

                	 
      	
                  All
      assets

                
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                  Continental
      Tool Group, Inc.

                	 
      	
                  Marc
      Schorr and Richard Horowitz

                	 
      	
                  Delaware

                	 
      	
                  4/28/10

                	 
      	
                  01486103

                	 
      	
                  All
      assets

                
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                  Countrywide
      Hardware, Inc.

                	 
      	
                  Marc
      Schorr and Richard Horowitz

                	 
      	
                  Delaware

                	 
      	
                  4/28/10

                	 
      	
                  01486079

                	 
      	
                  All
      assets

                
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                  Embassy
      Industries, Inc.

                	 
      	
                  Marc
      Schorr and Richard Horowitz

                	 
      	
                  New
      York

                	 
      	
                  4/20/10

                	 
      	
                  201004290226100

                	 
      	
                  All
      assets

                
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                  Florida
      Pneumatic Manufacturing Corporation

                	 
      	
                  Marc
      Schorr and Richard Horowitz

                	 
      	
                  Florida

                	 
      	
                  4/29/10

                	 
      	
                  201002423188

                	 
      	
                  All
      assets

                
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                  Green
      Manufacturing, Inc.

                	 
      	
                  Marc
      Schorr and Richard Horowitz

                	 
      	
                  Delaware

                	 
      	
                  4/28/10

                	 
      	
                  01486244

                	 
      	
                  All
      assets

                
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                  Hy-Tech
      Machine, Inc.

                	 
      	
                  Marc
      Schorr and Richard Horowitz

                	 
      	
                  Delaware

                	 
      	
                  4/28/10

                	 
      	
                  01486137

                	 
      	
                  All
      assets

                
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                  Nationwide
      Industries, Inc.

                	 
      	
                  Marc
      Schorr and Richard Horowitz

                	 
      	
                  Florida

                	 
      	
                  4/29/10

                	 
      	
                  20100243196

                	 
      	
                  All
      assets

                
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                  Pacific
      Stair Products, Inc.

                	 
      	
                  Marc
      Schorr and Richard Horowitz

                	 
      	
                  Delaware

                	 
      	
                  4/28/10

                	 
      	
                  01486359

                	 
      	
                  All
      assets

                
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                  WILP
      Holdings, Inc.

                	 
      	
                  Marc
      Schorr and Richard Horowitz

                	 
      	
                  Delaware

                	 
      	
                  4/28/10

                	 
      	
                  01486285

                	 
      	
                  All
      assets

                
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                  Woodmark
      International, L.P.

                	
                    

                	
                  Marc
      Schorr and Richard Horowitz

                	
                    

                	
                  Delaware

                	
                    

                	
                  4/28/10

                	
                    

                	
                  01486087

                	
                    

                	
                  All
      assets

                


        

      


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      SCHEDULE
10.2.4

      to

      Loan and
Security Agreement

      


      APPROVED INCENTIVE
COMPENSATION PLANS

       

      
        	
                 
      

              	
                1.

              	
                P&F
      Industries, Inc. 2002 Stock Incentive
Plan

              


      

      


      
        	
                 
      

              	
                2.

              	
                P&F
      Industries Executive 162(m) Bonus
Plan

              


      

      


      
        	
                 
      

              	
                3.

              	
                The
      items disclosed on Schedule
9.1.20

              


      


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      SCHEDULE
10.2.17

      to

      Loan and
Security Agreement

      


      EXISTING AFFILIATE
TRANSACTIONS

       

      
        	
                 
      

              	
                1.

              	
                BWD
      Group LLC ("BWD"), an insurance brokerage group of which Robert L.
      Dubofsky, one of the Company's directors, is Managing Director and a
      principal, provides certain insurance brokerage services to the Company.
      Total insurance premiums and fees paid through BWD in 2009 were
      approximately $545,000. It is presently anticipated that such firm will
      continue to provide such services and will continue to receive payments
      for its services at rates and in amounts not greater than would be paid to
      unrelated insurance brokerage performing similar
  services.

              


      

      


      
        	
                 
      

              	
                2.

              	
                As
      a condition of advancing funds to the Company pursuant to the subordinated
      promissory note (the “Horowitz Loan”) in April 2010, the Company and
      Richard A. Horowitz entered into:

              


      

      


      
        	
                 
      

              	
                (a)

              	
                an
      indemnification agreement (the "Indemnification Agreement") dated as of
      April 23, 2010. Pursuant to the Indemnification Agreement, the Company
      agreed to indemnify Mr. Horowitz if any claim, litigation, demand, suit,
      action or proceeding is made or commenced by any person or entity against
      the Mr. Horowitz arising from or relating to the Horowitz
      Loan.

              


      

      


      
        	
                 
      

              	
                (b)

              	
                a
      series of security agreements dated as of April 23, 2010 among each of the
      Obligors and Richard A. Horowitz in connection with the Horowitz
      Loan.

              


      


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      SCHEDULE
10.2.21

      to

      Loan and
Security Agreement

      


      POST-CLOSING
DELIVERIES

       

      Except to
the extent waived by Agent in writing after the Closing Date, Obligors shall
cause to be delivered to Agent as soon as possible, but in any event within 10
Business Days after the Closing Date (or such longer period as Agent may
otherwise agree):

       

      1.  a
tax certificate for Embassy Industries, Inc. issued by the New York Secretary of
State; and

       

      2.  a
revised certificate of flood insurance and a revised certificate of boiler and
machinery insurance, in each case, in form and substance satisfactory to
Agent.

       

      Except to
the extent waived by Agent in writing after the Closing Date, Obligors shall
cause to be delivered to Agent as soon as possible, but in any event within 45
days after the Closing Date (or such longer period as Agent may otherwise
agree), evidence satisfactory to it that each of the instruments evidencing the
RAH Debt and the Schorr Debt, including without limitation each security
agreement and the indemnification agreement, has been amended to include the
legend required by the applicable Subordination Agreement.