<PAGE>

                                 AMENDMENT NO. 1
                                       TO
                                CREDIT AGREEMENT

         THIS AMENDMENT NO. 1 is entered into as of September 16, 1998 (the
"Amendment"), by and among P&F INDUSTRIES, INC., a Delaware corporation ("P&F),
FLORIDA PNEUMATIC MANUFACTURING CORPORATION, a Florida corporation ("Florida
Pneumatic"), EMBASSY INDUSTRIES, INC., a New York corporation ("Embassy") and
GREEN MANUFACTURING, INC., a Delaware corporation ("Green") (P&F, Florida
Pneumatic, Embassy and Green, the "Co-Borrowers"), and EUROPEAN AMERICAN BANK, a
New York banking corporation (the "Bank").

                                   BACKGROUND

         P&F, Florida Pneumatic and Embassy (the "Original Co-Borrowers") and
the Bank are parties to a Credit Agreement, dated as of July 23, 1998 (as
amended, restated, supplemented or modified, from time to time, the "Credit
Agreement"), pursuant to which the Bank provides the Original Co-Borrowers with
certain financial accommodations.

         The Original Co-Borrowers have informed the Bank that (i) Green has
entered into an Asset Purchase Agreement, dated as of the date hereof, pursuant
to which Green will acquire certain assets of Green Manufacturing, Inc., an Ohio
corporation ("Old Green").

         The Co-Borrowers have requested that the Bank (i) include Green as a
Co-Borrower under the existing credit facility and (ii) amend certain provisions
of the Credit Agreement and the Bank is willing to do so on the terms and
conditions hereinafter set forth. Capitalized terms used herein and not defined
herein shall have the meanings given to them in the Credit Agreement.

         Accordingly, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:

                                   ARTICLE I.
                         Amendments to Credit Agreement.


         Section 1.1. The first paragraph of the Credit Agreement is hereby
amended in its entirety to provide as follows:

         "CREDIT AGREEMENT dated as of July 23, 1998, by and among P&F
         INDUSTRIES, INC., a Delaware corporation ("P&F"), FLORIDA PNEUMATIC
         MANUFACTURING CORPORATION, a Florida corporation ("Florida Pneumatic"),
         EMBASSY INDUSTRIES, INC., a New York corporation ("Embassy") and GREEN
         MANUFACTURING, INC., a Delaware



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         corporation ("Green", and, collectively, with P&F, Florida Pneumatic
         and Embassy, the "Co-Borrowers") and EUROPEAN AMERICAN BANK, a New York
         banking corporation (the "Bank").

         Section 1.2. Section 1.1 of the Credit Agreement is hereby amended as
follows:

                  a. the following defined terms are hereby added in their
         appropriate alphabetical order:

                  "Amendment No. 1" shall mean Amendment No. 1 to Credit
         Agreement among the Co-Borrowers and the Bank dated as of the Amendment
         No. 1 Effective Date.

                  "Amendment No. 1 Effective Date" shall mean September 16,
         1998.

                  "Asset Purchase Agreement" shall mean the Asset Purchase
         Agreement between Old Green and Green, dated as of the Amendment No. 1
         Effective Date, and all exhibits and schedules thereto.

                  "Green" shall mean Green Manufacturing, Inc., a Delaware
         corporation.

                  "Green Letter of Credit" shall mean that certain Letter of
         Credit issued by the Bank for the benefit of Green pursuant to and in
         accordance with the terms and conditions of the Reimbursement
         Agreement.

                  "Green Letter of Credit Outstanding" shall mean, at any time,
         the face amount of the Green Letter of Credit.

                  "Indenture" shall mean the Trust Indenture dated as of
         November 1, 1994, between the Issuer and the Trustee, as the same may
         hereafter be amended, restated, supplemented or otherwise modified from
         time to time.

                  "Issuer" shall mean the County of Wood, Ohio, and its
         successors.

                  "Old Green" shall mean Green Manufacturing, Inc., an Ohio
         corporation.

                  "Reimbursement Agreement" shall mean the Reimbursement
         Agreement, dated as of the Amendment No. 1 Effective Date, between the
         Bank and Green,

                  "Trustee" shall mean PNC Bank, Ohio, National Association.

                  b. the following defined terms are amended in their entirety
         to provide as follows:

                  "Loan Documents" shall mean, collectively, this Agreement, the
         Notes, the Security Agreements, the Corporate Guaranties, the Pledge
         Agreement, the Reimbursement Agreement, and each other agreement
         executed in connection with the transactions contemplated hereby or
         thereby, as each of the same may hereafter or thereafter be amended,
         supplemented or otherwise modified from time to time.



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                  "Revolving Credit Note" shall mean the amended and restated
         promissory note of the Co-Borrowers in the form attached as Exhibit A
         to Amendment No. 1 evidencing the Revolving Credit Loans, as the same
         may be amended, supplemented, restated or otherwise modified, from time
         to time.

                  "Term Loan Commitment" shall mean the Bank's obligation to
         make Term Loans to the Co-Borrowers pursuant to Section 2.04 hereof in
         an aggregate principal amount equal to the difference between (a)
         $15,000,000 and (b) the Green Letter of Credit Outstanding.

                  c. The definition of "Letter of Credit" is hereby amended by
(i) adding a period after the word "business" on the eighth line thereof and
(ii) by deleting the remainder of said definition.

         Section 1.3. Section 2.06(a) of the Credit Agreement is hereby amended
by deleting the third sentence thereof in its entirety and replacing it with the
following sentence in its place and stead:

         "Furthermore, in no event shall (i) the Aggregate Bankers Acceptances
         Outstanding, exceed an amount in excess of $8,000,000, at any time and
         (ii) (A) the Aggregate Letters of Credit Outstanding plus (B) the Green
         Letter of Credit Outstanding, exceed $8,000,000, at any time.

         Section 1.4. Subsections (i) and (j) of Section 7.01 of the Credit
Agreement are hereby amended in their entirety to read as follows:

                  "(i) Liens on assets acquired in a Permitted Acqusition,
         provided, that such Liens (i) only cover assets acquired thereunder and
         (ii) are the result of the continuation of Liens on such assets in
         existence of the date of closing of such Permitted Acquisition;

                  (j) Liens on assets acquired in the Green Acquisition,
         provided, that such Liens (i) only cover assets acquired thereunder and
         (ii) are the result of the continuation of Liens on such assets in
         existence of the date of closing of the



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Green Acquisition;"

         Section 1.5. Section 8.01 of the Credit Agreement is hereby amended by
(a) deleting the "or" at the end of subsection "(i)" thereof, (b) by deleting
the comma at the end of subsection "(j)" thereof and replacing it with "; or" in
its place and stead and (c) adding the following new subsection "(k)"
immediately thereafter:

                  "(k) an "Event of Default" as defined in the Reimbursement
Agreement shall have occurred,"

         Section 1.6. Schedules I, III, IV and VIII to the Credit Agreement are
hereby amended in their entirety and are replaced with Schedules I, III, IV and
VIII, respectively, attached to Amendment No. 1.

         Section 1.7. Exhibits A, B, C, D, E-1 and E-2 to the Credit Agreement
are hereby amended in their entirety and are replaced with Exhibits A, B, C, D,
E-1 and E-2, respectively, attached to Amendment No. 1.

                                   ARTICLE II.
                           Conditions of Effectiveness

         Section 2.1. This Amendment shall become effective as of the Amendment
No. 1 Effective Date, upon satisfaction of the following conditions precedent:

         a. The Bank shall have received each of the following, in form and
substance satisfactory to the Bank and its counsel:

               (1)  this Amendment and the amended and restated Revolving Credit
                    Note executed by each Co-Borrower in favor of the Bank;

               (2)  a certificate of the Secretary of Green, dated as of the
                    Amendment No. 1 Effective Date and certifying (A) that
                    neither the Certificates of Incorporation nor the By-laws of
                    Green has been amended since the date of their
                    certification; (B) that attached thereto is a true and a
                    complete copy of resolutions adopted by the Board of
                    Directors of Green authorizing the execution, delivery and
                    performance of this Amendment and each other Loan Document
                    to which it is a party and the borrowings thereunder; and
                    (C) the incumbency and specimen signature of each officer of
                    Green executing each Loan Document to which Green is a party
                    and any certificates or instruments furnished pursuant
                    hereto, and a certification by another officer of Green as
                    to the incumbency and signature of the Secretary, and
                    together with certified copies of the Certificate of
                    Incorporation and By-laws of Green;

               (3)  a certificate of good standing for Green from the Secretary
                    of the State of Delaware dated as of a recent date and a
                    certificate of authorization to do business for Green from
                    the Secretary of the State of Ohio;



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               (4)  a certificate of the Secretary of each of the Original
                    Borrowers, dated as of the Amendment No. 1 Effective Date,
                    certifying (A) the names and true signatures of the officers
                    of such entity authorized to sign this Amendment, the other
                    Loan Documents and any other documents to be delivered by
                    such entity under this Amendment, (B) that attached thereto
                    is a true and a complete copy of resolutions adopted by the
                    Board of Directors authorizing the execution, delivery and
                    performance of this Amendment and each other Loan Document
                    to which it is a party and (C) that neither its Certificate
                    of Incorporation nor By-laws have been amended since the
                    Closing Date;

               (5)  a certificate of a duly authorized officer of each of the
                    Co-Borrowers, dated as of the Amendment No. 1 Effective
                    Date, stating that the representations and warranties in
                    Article 4 are true and correct on such date as though made
                    on and as of such date and that no event has occurred and is
                    continuing which constitutes a Default or Event of Default;

               (6)  (A) a Security Agreement duly executed by Green together
                    with UCC-1 financing statements in a form acceptable to the
                    Bank for such jurisdictions as the Bank determines are
                    necessary to perfect the liens created by the Security
                    Agreement and (B) an amendment to Security Agreement duly
                    executed by each Original Borrower;

               (7)  an amendment to the Pledge Agreement, duly executed by P&F,
                    with respect the pledge of the shares of Green held by P&F,
                    along with share certificates evidencing such shares and
                    stock powers executed in blank;

               (8)  receipt of a copy of duly executed Asset Purchase Agreement
                    and all documents and instruments executed in connection
                    therewith, including but not limited to the Consulting
                    Agreement, Escrow Agreement, Automobile Storage Lease and
                    Bill of Sale;

               (9)  combined projections for the Co-Borrowers and Green, for a
                    period of five (5) years;

               (10) a pro forma balance sheet and income statements of P&F and
                    its Subsidiaries (after giving effect to the Asset Purchase
                    Agreement) demonstrating that the Co-Borrowers will be in
                    compliance with the financial condition covenants contained
                    in Section 7.12 of the Credit Agreement;

               (11) a favorable opinion of counsel for Green dated as of the
                    Amendment No. 1 Effective Date with respect to the
                    transactions contemplated hereby and pursuant to the
                    Reimbursement Agreement;

               (12) a certificates of insurance from an independent insurance
                    broker confirming the insurance required to be maintained
                    pursuant to Section 6.01 of the Credit Agreement;



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               (13) a schedule of all the lease agreements to which Green is a
                    party (other than leases of real property, leases of motor
                    vehicles and leases of equipment which do not require an
                    annual lease expenditure in excess of $50,000) and the Bank
                    shall have been satisfied with its review thereof or, in
                    lieu thereof, a copy of each lease agreement shall be
                    delivered to the Bank prior to the Amendment No. 1 Effective
                    Date;

               (14) Receipt and satisfactory review by the Bank of all (A)
                    documents with respect to any Plans of Green or Old Green
                    (which are to be assumed by Green) and (B) material
                    agreements of Green or Old Green (which are to be assumed by
                    Green);

               (15) the Reimbursement Agreement duly executed by Green, and any
                    other documents executed in connection with the foregoing;
                    and

               (16) such other documents, instruments, agreements, approvals,
                    opinions and evidence as the Bank may reasonably require.

                  b. All conditions precedent set forth in the Reimbursement
Agreement shall have been satisfied and the transactions thereunder, including,
but not limited to the issuance of the Green Letter of Credit, shall occur
simultaneously with the consummation of the transactions contemplated by this
Amendment.

                  c. The indebtedness of Green to MidAmerican National Bank &
Trust Co. shall have been paid in full simultaneously with the consummation of
the transactions contemplated by this Amendment and all existing documentation
with respect to said indebtedness shall have been terminated.


                  d. The assets to be acquired pursuant to the Asset Purchase
Agreement shall be free and clear of all Liens, except those Liens permitted
pursuant to Section 7.01 of the Credit Agreement.


                                  ARTICLE III.
           Representations and Warranties; Effect on Credit Agreement.

         Section 3.1. Each Co-Borrower hereby represents and warrants as
follows:

                  a. This Amendment and the Credit Agreement, as amended hereby,
constitute legal, valid and binding obligations of the Co-Borrowers and are
enforceable against the Co-Borrowers in accordance with their respective terms.

                  b. Upon the effectiveness of this Amendment, the Original
Co-Borrowers hereby reaffirm all covenants, representations and warranties made
in the Credit Agreement to the extent that the same are not amended hereby and
each Co-Borrower agrees that all such covenants, representations and warranties
shall be deemed to have been remade as of the Amendment No. 1 Effective Date.



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                  c. No Default or Event of Default has occurred and is
continuing or would exist after giving effect to this Amendment.

                  d. No Co-Borrower has any defense, counterclaim or offset with
respect to the Credit Agreement.

         Section 3.2. Effect on Credit Agreement.

                  a. Upon the effectiveness of this Amendment, each reference in
the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or
words of like import shall mean and be a reference to the Credit Agreement as
amended hereby.

                  b. Except as specifically amended herein, the Credit
Agreement, and all other documents, instruments and agreement executed and/or
delivered in connection therewith, shall remain in full force and effect, and
are hereby ratified and confirmed.

                  c. The execution, delivery and effectiveness of this Amendment
shall not operate as a waiver of any right, power or remedy of the Bank, nor
constitute a waiver of any provision of the Credit Agreement, or any other
documents, instruments or agreements executed and/or delivered under or in
connection therewith.

                                   ARTICLE IV.
                                 Miscellaneous.

         Section 4.1. This Amendment shall be governed by and construed in
accordance with the laws of the State of New York.

         Section 4.2. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.

         Section 4.3. This Amendment may be executed in one or more
counterparts, each of which shall constitute an original, and all of which,
taken together, shall be deemed to constitute one and the same agreement.

         IN WITNESS WHEREOF, the Co-Borrowers and the Bank have caused this
Amendment to be duly executed by their duly authorized officers as of the day
and year first above written.

                              P&F INDUSTRIES, INC.


                              By: /s/ Joseph A. Molino
                                 -----------------------------
                              Title: Vice President

                              FLORIDA PNEUMATIC MANUFACTURING
                              CORPORATION




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                              By: /s/ Joseph A. Molino
                                 -----------------------------
                              Title: Vice President

                              EMBASSY INDUSTRIES, INC.


                              By: /s/ Joseph A. Molino
                                 -----------------------------
                              Title: Vice President

                              GREEN MANUFACTURING, INC.


                              By: /s/ Joseph A. Molino
                                 -----------------------------
                              Title: Vice President

                              EUROPEAN AMERICAN BANK


                              By: /s/ Richard Romano
                                 -----------------------------
                              Title: Vice President


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