**Exhibit 10.1**

**SECOND AMENDED AND RESTATEDEMPLOYMENT AGREEMENT**(the “Agreement”), dated as of May 30, 2001, among P&F INDUSTRIES, INC., aDelaware corporation (the “Company”), having its principal place of business at300 Smith Street, Farmingdale, New York 11735, and RICHARD A. HOROWITZ,residing at 5 Fir Drive, Kings Point, New York 11024 (the “Executive”).

**W I T N E S S E T H:**

WHEREAS, the Company and the Executive wish to amendand restate the Employment Agreement between the parties, dated as of May 28,1997 (the “Prior Agreement”), as set forth in this Agreement;

NOW, THEREFORE, it is hereby agreed by and betweenthe parties as follows:

1.             EMPLOYMENT, DUTIESAND ACCEPTANCE

Subject to the provisions of Article 4, theExecutive hereby agrees to continue his employment with the Company, and theCompany hereby agrees to continue its employment of the Executive, for the termof this Agreement, as defined in Article 2 hereof. The Executive shall renderservices as Chairman, President and Chief Executive Officer of the Company andshall perform such executive duties which are consistent with his position ashe may be reasonably directed to perform by the Board of Directors of theCompany.

2.             TERM OFEMPLOYMENT

The term of the Executive’s employment pursuant to thisAgreement (the “Term”) will commence on the date hereof (the “Effective Date”)and will continue until the seventh anniversary of the Effective Date, unlesssooner terminated pursuant to the provisions of Article 4. Such employmentwill, unless sooner terminated pursuant to the provisions of Article 4,continue from year to year thereafter (each such year, an “Additional Term”)until one party gives the other notice of its intention to terminate theExecutive’s employment at the end of the Term or an Additional Term, as thecase may be, which notice may not be given more than ninety or less than thirtydays prior to the last day of such Additional Term.

3.             COMPENSATION

                3.1. The minimumbase compensation of the Executive will be $675,000 per annum. All compensationwill be paid in installments as determined by the Company, but not lessfrequently than monthly.

                3.2. The Companywill pay or reimburse the Executive for all reasonable expenses actually incurred or paid by him during the Term andeach Additional Term in connection with the performance of his services underthis Agreement, upon presentation of expense statements or vouchers or suchother supporting information as it may reasonably require, it being understoodthat the character of and amount available for such expenses will be inaccordance with applicable policies of the Company and may be fixed in advanceby the Board of Directors of the Company. In addition, the Company shallprovide the Executive, at the Company’s expense, with a current modelautomobile similar to the automobile

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furnished to the Executive at the date hereof.

                3.3. The Executivewill also be eligible to receive such increases in base compensation as the Board of Directors of the Companymay from time to time grant to him (which shall not thereafter be reduced) andto receive such bonuses as the Board of Directors of the Company, in itsdiscretion, may allocate to him. In addition, so long as the Company continuesto provide pension, group insurance, medical insurance and vacation benefitsfor its senior management generally, the Executive will be entitled toparticipate therein as well as in any other employee benefit plan hereafterestablished for senior management.

                3.4. Throughoutthe Term, the Company shall maintain in effect at current levels thesplit-dollar life insurance policy currently maintained for the Executive, andshall continue to pay premiums on the supplemental disability insurancepolicies currently maintained by the Executive (or reimburse the Executive forpremiums paid by him).

4.             EVENTS OFTERMINATION

                4.1. In the eventof the Executive’s death, this Agreement will terminate. In that event, theExecutive’s estate will be entitled to his (i) full salary through the date ofdeath together with any bonus under the then current executive bonus planaccrued through the date of death; and (ii) an additional payment equal to histhen current salary for an additional twelve months.

                4.2. If during theTerm or an Additional Term, the Executive becomes physically or mentallydisabled, whether totally or partially, so that he is prevented from performinghis usual duties for a period of 270 consecutive business days or for 360business days during any period of 450 business days, the Company may terminatehis employment under this Agreement by 60 days’ advance written notice to theExecutive. In that event, the Executive will be entitled to (i) his full salarythrough the date of termination, less any amount received by the Executiveunder any group policy of disability insurance carried by the Company in whichExecutive participates; (ii) an additional payment equal to his then currentsalary for an additional twelve months, without regard to any amount receivedby the Executive under any policy of disability insurance; and (iii) duringsuch additional twelve month period, continued use of his Company car and otherperquisites being provided to the Executive prior to such termination,including continuation of the split-dollar life insurance policy referenced inSection 3.4 hereof. In addition, during the period of disability and until (x)the death of the Executive or (y) the re-employment of the Executive, theCompany shall provide the Executive with medical benefits similar to thoseprovided for other executive officers of the Company, taking into accountmedical benefits provided to the Executive by other sources.

5.             PROTECTION OFINFORMATION: NONCOMPETITION

                5.1. In view ofthe fact that the Executive’s work with the Company will bring him into closecontact with many confidential affairs of the Company, including matters of abusiness nature such as information about costs, profits, markets, sales, plansfor future development and other information not readily available to thepublic, the Executive will:

                                5.1.1.keep secret all confidential information relating to the Company and notdisclose the same to anyone outside of the Company either during or after hisemployment with the Company, except with the Company’s written consent;

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                                5.1.2.deliver promptly to the Company on termination of his services hereunder, or at any time the Company may sorequest, all memoranda, notes, records, lists, reports and other documents (andall copies thereof) relating to the business of the Company which he may thenpossess or have under his control; and

                                5.1.3.during his employment and, provided that a “change in control” (as hereinafterdefined) has not occurred, for a period of three years following thetermination of his employment, not, directly or indirectly, (i) enter theemploy of, or render any services to, any person, firm or corporation engagedin any business competitive with the business of the Company, (ii) engage insuch a business for his own account, or (iii) become interested in such abusiness as an individual, partner, shareholder, director, officer, principal,agent, employee, trustee, consultant or in any other relationship or capacity.The provisions of this Section 5.1.3 shall not apply to the Executive followingany termination of employment which occurs in connection with or following a “changein control” (as hereinafter defined).

                5.2. “Businesscompetitive with the business of the Company” means, as of any date, anybusiness then being conducted by the Company in which Executive has beenactively engaged.

6.             CHANGE INCONTROL

                6.1.     The term “change in control” of theCompany shall mean:

                                6.1.1.an occurrence of a nature that would be required to be reported in response to(i) Item 6(e) of Schedule 14A of Regulation 14A promulgated under the SecuritiesExchange Act of 1934 (the “Exchange Act”) as in effect on the date of thisAgreement, or (ii) Item I(a) of Form 8-K under the Exchange Act, or (iii) ifItem 6(e) of Schedule 14A or Item I(a) of form 8-K is not longer in effect, anyregulations issued by the Securities and Exchange Commission pursuant to theExchange Act which serve similar purposes; or

                                6.1.2.an event in which (i) any “person,” as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act (a “Person”),other than the Executive, is or becomes a beneficial owner, directly orindirectly, of securities of the Company representing 20% or more of thecombined voting power of the Company’s then outstanding securities thenentitled to vote for the election of directors or (ii) individuals who, as ofthe date hereof, constitute the Board of Directors of the Company (the “IncumbentBoard”) cease for any reason to constitute at least a majority of the Board ofDirectors; provided, however, that any individual becoming a director subsequentto the date hereof whose election, or nomination for election by the Company’sshareholders, was approved by a vote of at least a majority of the directorsthen comprising the Incumbent Board shall be considered as though suchindividual were a member of the Incumbent Board, but excluding, for thispurpose, any such individual whose initial assumption of office occurs as aresult of an actual or threatened election contest with respect to the electionor removal of directors or other actual or threatened solicitation of proxiesor consents by or on behalf of a Person other than the Board of Directors; or

                                6.1.3.an event in which there shall be consummated (i) any consolidation, merger orrecapitalization of the Company or any similar transaction involving theCompany, whether or not the Company is the continuing or surviving corporation,pursuant to which shares of the Company’s common stock, par value $1.00 pershare (“Common Stock”), would be converted into cash, securities or otherproperty, other than a merger of the Company in which the holders of CommonStock immediately prior to the merger have the same proportionate ownership ofcommon stock of the surviving corporation immediately after the merger, (ii)any sale, lease, exchange or other transfer (in one transaction or a

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series of related transactions) of all, or substantially all, of theassets of the Company or (iii) the adoption of a plan of complete liquidationof the Company (whether or not in connection with the sale of all or substantiallyall of the Company’s assets) or a series of partial liquidations of the Companythat is dejure or defacto part of a plan of complete liquidation of theCompany; provided, that the divestiture of less than substantially all of theassets of the Company in one transaction or a series of related transactions,whether effected by sale, lease, exchange, spin-off, sale of the stock ormerger of a subsidiary or otherwise, or a transaction solely for the purpose ofreincorporating the Company in another jurisdiction, shall not constitute achange in control.

                6.2. The “changedate” shall be the date on which a change in control of the Company (asdescribed in paragraph 6.1) occurs.

                6.3. The term “discharge”shall mean (i) any termination by the Company of the employment of theExecutive which occurs in connection with or following a change in control ofthe Company, or (ii) resignation by the Executive which occurs in connectionwith or following a change in control, which is based on a determination by theExecutive that, (A) as a result of a change in circumstances affecting hisposition, he is unable to exercise the authorities, powers, functions or dutiesattached to his position as contemplated by Article 1 of this Agreement, (B)the compensation, benefits or perquisites being provided to the Executive havebeen reduced or adversely affected, or (C) the Company (or its successor) hasbreached this Agreement in any material respect.

                6.4. In the eventof a discharge, the Company shall pay to the Executive and provide him with thefollowing:

                                6.4.1.during the remainder of the Term, the Company shall continue to pay theExecutive his salary as frequently as the Company then pays other executivesand at the same rate as payable immediately prior to the date of discharge plusthe estimated amount of any bonuses to which he would have been entitled had heremained in the employ of the Company;

                                6.4.2.during the remainder of the Term, the Executive shall continue to be entitled to all benefits and servicecredit for benefits under medical, insurance, life insurance and other employeebenefit plans, programs and arrangements of the Company as if he were stillemployed during such period under this Agreement;

                                6.4.3.if, despite the provisions of paragraph 6.4.2 above, benefits or servicecredits under any employee benefit plan shall not be payable or provided underany such plan to the Executive, or his dependents, beneficiaries or theCompany, the Company itself shall, to the extent necessary, pay or provide forpayment of such benefits and service credit so as to place the Executive, hisdependents, beneficiaries and estate in such financial position as if theExecutive were employed by the Company during the Term; and

                                6.4.4.any outstanding Incentive Stock Options held by the Executive shall beconverted to nonqualified stock options on the day after the last day of thethree month period following the date of discharge.

                6.5. SeveranceAllowance. In the event of discharge of the Executive during the Term, the Executivemay elect, within 60 days after such discharge, to be paid a lump sum severanceallowance, in lieu of payments to be made pursuant to 6.4.1 hereof, in anamount equal to 2.99 times the Executive’s “annualized includable compensationfor the base period,” as those terms are defined in section 280G of

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the Internal Revenue Code of 1986, as amended (the “Code”). Any paymentdue hereunder will be made within five days after the election by the Executiveto receive the lump sum payment.

                In the event ofdischarge by reason of an event described in paragraph 6.3, if the Executivemakes an election pursuant to the first sentence of this paragraph 6.5 toreceive a lump sum severance allowance, then, in addition to such amount, heshall receive (i) in addition to the benefits provided under any pension planmaintained by the Company, the pension benefits he would have accrued undersuch pension plan if he had remained in the employ of the Company for 36calendar months after his discharge, which benefits will be paid concurrentlywith, and in addition to, the benefits provided under such pension plan, (ii)incentive compensation (including, but not limited to, the right to receive andexercise stock options and stock appreciation rights and to receive restrictedstock and grants thereof and similar incentive compensation benefits) to whichhe would have been entitled under all incentive compensation plans maintainedby the Company if he had remained in the employ of the Company for 36 calendarmonths after his discharge, and (iii) the employee benefits (including, but notlimited to, coverage under any medical, disability and life insurancearrangements or programs) to which he would have been entitled under allemployee benefit plans, programs or arrangements maintained by the Company ifhe had remained in the employ of the Company for 36 calendar months after hisdischarge, or the value of the amounts described in clauses (i), (ii) and (iii)of this sentence. The amount of payments described in the preceding sentenceshall be determined and such payments shall be distributed as soon as it isreasonably possible.

                6.6. ParachutePayment. If any payment to be made by the Company to the Executive pursuant toArticle 6 of this Agreement, after taking into account any other payments to bemade by the Company to the Executive, is not deductible by the Company pursuantto section 280G(a) of the Code, then any payment to be made pursuant to Article6 of this agreement shall be reduced by the smallest amount necessary so thatno such payment shall fail to be deductible pursuant to section 280G(a) of theCode. If the Company determines that any payment to the Executive is subject tolimitation pursuant to this paragraph 6.6, it shall provide the Executive witha written determination within 30 days of the Executive’s discharge during theterms of this Agreement. If the Executive disagrees with the Company’sdetermination, he shall provide the Company with written notice of hisobjection within 15 days of receipt of the Company’s determination. The mattershall then be promptly submitted by either the Executive or the Company to a “Big6” accounting firm, not otherwise associated with the Company or the Executive,for a determination within 30 days after the date of such submission. Thedetermination of such accounting firm shall be binding on both the Executiveand the Company. The expenses incurred in connection with any determinationwill be shared equally by the parties. Any payment due hereunder shall be paidwithin five days of the determination by the Company or the “Big 6” accountingfirm, as the case may be.

7.             MISCELLANEOUS.

                7.1.If any of the provisions contained in this Agreement is hereafter construed tobe invalid or unenforceable, such event will not affect the remainder of thisAgreement, which will be given full effect, without regard to the invalidportions.

                7.2. If any of thecovenants contained in Article 5, or any part thereof, is held to beunenforceable because of the duration or scope of such provision or the areacovered thereby, the parties agree that the court making such determinationwill have the power to reduce the duration, scope and/or area of such provisionand in its reduced form, such provision will then be enforceable.

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                7.3. ThisAgreement has been negotiated and executed in the State of New York, and willbe construed and enforced in accordance with the laws of the State of New Yorkapplicable to agreements made and to be performed entirely in New York.

                7.4. All notices,requests, consents and other communications, required or permitted to be givenhereunder, shall be in writing and shall be deemed to have been duly given ifdelivered personally or sent by prepaid telegram, or mailed first class,postage prepaid, by registered or certified mail (if possible), addressed toeither party at the address set forth in the preamble to this Agreement (or tosuch other address as either party shall designate by notice in writing to theother in accordance herewith).

                7.5. The articleheadings contained herein are for reference purposes only and shall not in anyway affect the meaning or interpretation of this Agreement.

                7.6. ThisAgreement sets forth the entire agreement and understanding of the partiesrelating to the subject matter hereof, and supersedes and will supersede allprior agreements, arrangements and understandings, written or oral, relating tothe subject matter including, without limitation, the Prior Agreement.

                7.7. ThisAgreement may be amended, modified, superseded, canceled, renewed or extendedand the terms or covenants hereof may be waived, only by a written instrumentexecuted by each of the parties hereto, or in the case of a waiver, by theparty waiving compliance. The failure of either party at any time or times torequire performance of any provision hereof will in no manner affect the rightat a later time to enforce the same. No waiver by either party of the breach ofany term or covenant contained in this Agreement, whether by conduct orotherwise, in any one or more instances, will be deemed to be, or construed asa further or continuing waiver of, any such breach, or a waiver of the breachof any other term or covenant contained in this Agreement.

IN WITNESS WHEREOF, the parties have duly executedthis Agreement as of the date first above written.

 
|        | P & F INDUSTRIES, INC. |                  |
|--------|----------------------------|-----------------------|
|   |                       |                  |
|   |                       |
|   | By:                        | /s/ Richard  Horowitz |
|   |                       | Richard Horowitz      |
|        |                            |                       |  |

 

 

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