Document:

Exhibit 10.15

 

Prepared
by and after

recording return to:

 

Thomas
G. Wilson, III, Esq.

Smith Hulsey & Busey

Post
Office Box 53315

Jacksonville, Florida 32201-3315

 

SECOND LOAN DOCUMENTS MODIFICATION AGREEMENT

 

THIS SECOND LOAN DOCUMENTS MODIFICATION AGREEMENT  (this “Agreement”) is made as of April 22, 2010 (the “Effective
Date”), by and between COUNTRYWIDE HARDWARE, INC., a Delaware
corporation (“Borrower”), whose address for notices
is 445 Broadhollow Road, Suite 100, Melville, New York 11747, and WELLS
FARGO BANK, NATIONAL ASSOCIATION,  a national banking
association (“Bank”), successor-by-merger to Wachovia Bank, National
Association, whose address for notices is 225 Water Street, Third Floor, FL0061,
Jacksonville, Florida 32202.

 

Recitals:

 

1.               In connection
with a loan from Bank to Borrower in the amount of $2,024,000.00 (the “Loan”),
Borrower executed and delivered to Bank that certain Promissory Note in the
original principal amount of $2,024,000.00 dated as of May 24, 2002 (as
modified by the Prior Modification (as defined below), and as the same may have
been otherwise amended from time to time, the “Note”). The Note is
secured by, among other things, that certain Mortgage, Security Agreement and
Absolute Assignment of Leases from Borrower to Bank dated as of May 24,
2002 and recorded in Official Records Book 11663, Page 770 (as modified by
the Prior Modification, and as the same may have been otherwise amended from
time to time, the “Mortgage”).

 

2.               The proceeds of
the Loan have been advanced in accordance with that certain Loan Agreement
dated as of May 24, 2002 by and between Borrower and Bank, as modified and
amended by that certain Amendment Letter dated as of December 31, 2006,
and that certain Amendment to Note and Loan Agreement dated as of May 24,
2009 (as further amended by the Prior Modification, and as the same may have
been otherwise amended from time to time, the “Loan Agreement”).

 

3.               The Note, the
Mortgage and the Loan Agreement were each amended and modified by, among other
things, that certain Loan Documents Modification Agreement dated as of February 24,
2010 and recorded in Official Records Book 19769, Page 429 of the public
records of Hillsborough County, Florida (the “Prior Modification”).

 

 

4.               The Note, the
Mortgage, the Loan Agreement and all other documents to which Bank is a party
or beneficiary now or in the future together with all amendments,
modifications, renewals or extensions thereof, including, but not limited to
the First Modification, that evidence, secure or otherwise relate to the Loan
are hereinafter collectively referred to as the “Loan Documents.”

 

5.               Borrower has
requested that Bank modify and amend certain of the Loan Documents and waive
Borrower’s default related to certain covenants, and Bank is willing to modify
and amend certain of the Loan Documents and provide such waivers, provided that
Borrower comply with and consent to the terms set forth in this Agreement and
not otherwise.

 

NOW, THEREFORE, in consideration of Bank
modifying and amending certain of the Loan Documents, Borrower and Bank hereby
agree as follows:

 

1.               Recitals. Borrower
warrants and represents to Bank that the foregoing Recitals are true and
correct. The Recitals are incorporated into this Agreement by this reference.

 

2.               Estoppel. Borrower represents
and warrants to Bank that, as of Effective Date, the outstanding principal
balance of the Note is $1,079,467.04 (which amount does not include the
principal payment described in Section 8 of this Agreement), that accrued
interest has been paid to March 24, 2010, and that accrued interest in the
amount of $-0- remains due and unpaid, that the funds have been disbursed in
accordance with the terms and conditions of the Loan Agreement, that no letters
of credit are outstanding from Bank on behalf of Borrower, that the outstanding
principal balance of the Note and accrued interest are secured by the Mortgage
and are due, owing and unpaid, without defense, setoff or counterclaim, and
that any defenses, setoffs or counterclaims, if any, held by Borrower presently
or which may be held by Bank in the future, whether known or unknown, are
hereby forever waived, released and discharged by Borrower.

 

3.               Ratification. Borrower
ratifies, approves and consents to all the disbursements of the Loan made by
Bank under the Loan Documents and acknowledges that Bank has fully complied
with the terms and conditions of the Loan Documents. Borrower acknowledges that
the Loan Documents are in full force and effect. Borrower hereby restates and
confirms the covenants, representations, agreements, grants and warranties in
the Loan Documents. Borrower ratifies, approves and consents to all action or
inaction of Bank with respect to the Loan, including, but not limited to, the
administering, disbursing, handling, servicing, securing, demanding, enforcing
and collecting of the Loan.

 

4.               Modification of
the Note. The Note is hereby amended and modified as
follows:

 

(a)           The Section entitled
“Repayment Terms” is deleted and replaced in its entirety to read as follows:

 

2

 

(i)            This Note shall
be due and payable in consecutive monthly payments of principal of $11,244.44,
plus accrued interest, commencing on May 22, 2010, and
continuing on the same day of each month thereafter until fully paid. In any
event, all principal and accrued interest shall be due and payable on January 1,
2011.

 

5.               Modification  of the Mortgage. The Mortgage
is hereby amended and modified such that the definition of the “Note” is hereby
modified and amended to include the Note, as amended, modified and extended by
this Agreement.

 

6.               Modification  of the Loan Agreement. The Loan
Agreement is hereby amended and modified as follows:

 

(a)           The definition
of the “Note” is hereby modified and amended to include the Note as amended,
modified and extended in this Agreement.

 

(b)           The following
provisions are hereby added to the section entitled “Affirmative Covenants” to
read as follows:

 

(i)            Additional
Financial Information. (a) Annual
Balance Sheet. As soon as available, but in any event within ninety
(90) days after the end of each fiscal year of Borrower, a copy of the audited
consolidated and unaudited consolidating balance sheet of Borrower and its
Subsidiaries as of the end of such year and the related audited consolidated
and unaudited consolidating statements of income, shareholders equity and cash
flow for such year, setting forth in each case in comparative form the
respective figures for the previous fiscal year end, and accompanied by a
report thereon of J.H. Cohn LLP in the case of such audited statement or other
independent certified public accountants of recognized standing selected by
Borrower and reasonably satisfactory to the Bank, which report shall be
unqualified, prepared in accordance with GAAP on a consistent basis; (b) Monthly Balance Sheet. As soon as available, but in
any event not later than twenty (20) days after the end of each calendar month
of each fiscal year of Borrower, commencing with the month ending April 30,
2010, a copy of the unaudited interim consolidated and consolidating balance
sheet of Borrower as of the end of each such month, and the related unaudited
interim consolidated and consolidating statements of income, shareholder equity
and cash flow (i) as of the end of each such month, and (ii) for the
portion of the fiscal year through such date, each delivered in the format
attached hereto as Exhibit “A” and prepared by the Chief Financial Officer
of Borrower in accordance with GAAP, applied on a consistent basis and
accompanied by a certificate to that effect executed by the Chief Financial
Officer of Borrower, provided the December monthly statements shall be
subject to customary year end adjustments; (c) Certificate. On or prior to the twentieth (20th) day of each
calendar month, a certificate prepared and signed by the Chief Financial
Officer, Chief Executive Officer or Vice President of Finance of Borrower as to
whether or not, as of the close of such preceding calendar month, and at all
times during such preceding calendar month, Borrower was in compliance with all
the provisions in this Agreement showing computation of financial covenants and
attesting to compliance with negative covenants and the actual versus
forecasted results of operations with respect to the covenants set forth in
section 7.13 of the Credit Agreement related to the subordinate financing from
CitiBank, N.A. and

 

3

 

HSBC
Bank, USA, National Association to Borrower; (d) Cash Flow Forecast. Prior to the close of business
on the business day immediately following the last business day of each week, a
rolling 13-week cash flow forecast of Borrower in the format attached hereto as
Exhibit “B.”

 

7.               Limited
Financial Covenant Waiver. Bank hereby waives the
application of the covenant in the Loan Agreement entitled “Fixed Charge
Coverage Ratio” and cross defaults to the extent that such defaults have been
waived by CitiBank, N.A. and HSBC Bank, USA, National Association
(collectively, the “Subordinate Lenders”) related to
their subordinate financing with Borrower, but not otherwise, until the
maturity date of the Note as extended by this Agreement, upon which date such
waiver shall expire automatically. From and after the date hereof, and provided
that Borrower is not in default under any Loan Document, Borrower’s failure to
comply with such covenant shall not constitute a default under the Loan
Agreement or any other Loan Document. Borrower acknowledges and agrees that the
waiver described in this Section 7 does not constitute a waiver of any of
Bank’s rights under any other document delivered in connection with the Loan or
otherwise. Notwithstanding anything to the contrary in this Agreement, future
unwaived defaults by the Subordinate Lenders, their successors or assigns, will
constitute defaults under the Loan Documents resulting from the existing cross
default language in the Loan Documents.

 

8.               Principal
Payment. Prior to the effectiveness of this Agreement, Borrower shall make a
principal payment to Bank to be applied to the Note in the amount of
$150,000.00.

 

9.               Reconfirmation. Borrower hereby
restates and reconfirms all representations, warranties, covenants, agreements
and stipulations contained in the Loan Documents, as if set out herein in full
and further acknowledges and agree that the Loan Documents are valid, binding
and legally enforceable against Borrower in accordance with their terms, as
modified.

 

10.             Warranties and
Representations. Borrower warrants and represents as follows:

 

(a)           This Agreement
and the Loan Documents constitute legally binding obligations and are
enforceable against Borrower in accordance with their respective terms;

 

(b)           Neither this
Agreement nor any other document delivered in connection herewith or action
taken in connection herewith shall be deemed or construed to be a satisfaction,
novation, or release of any obligations of Borrower under the Loan Documents,
and the execution of this Agreement shall not constitute a waiver of any of the
Bank’s rights thereunder except as set forth in Section 7 above, and as
otherwise provided herein;

 

4

 

(c)           Bank has no
further obligation to Borrower under the terms of the Loan Documents or with
respect to any transaction contemplated thereby or related thereto except as
expressly set forth herein; and

 

(d)           Borrower is not
a party to, or subject of, any lawsuit, complaint, counterclaim, cross-claim,
adversary proceeding, arbitration proceeding, bankruptcy or insolvency
proceeding, administrative claim or other legal action or proceeding.

 

11.             General Release
of Bank. Borrower, in consideration of the premises herein contained and other
good and valuable consideration, the adequacy and sufficiency of which is
hereby acknowledged hereby releases and discharges Bank, its agents, officers,
directors, employees, affiliates, attorneys, successors and assigns, jointly
and severally, from any and all manner of action and actions, cause or causes
of action, suits, debts, sums of money, accounts, covenants, contracts, controversies,
obligations, liabilities, agreements, promises, expenses, damages, claims or
demand of every nature and kind whatsoever, if any, at law or in equity,
whether now accrued or hereafter maturing and whether known or unknown which
Borrower now has or hereafter can, shall, or may have by reason of any matter,
cause or thing from the beginning of the world to and including the date hereof
which may arise or could arise by reason of the making, administration,
disbursement, documentation, demand for payment, foreclosure or modification of
the Loan.

 

12.             Impairment. Nothing
herein invalidates or shall invalidate any security now held by Bank for the
aforesaid indebtedness as herein modified nor impair or release any covenant,
modification, condition, agreement or stipulation in the Loan Documents and the
same shall continue in full force and effect, and Borrower covenants and agrees
to keep, perform, comply with, and abide by, each and every of the covenants,
conditions, agreements and stipulations of this Agreement and the Loan
Documents.

 

13.             Costs, Expenses
and Attorneys’ Fees. Borrower agrees to pay all costs and expenses
incurred by Bank in connection with the negotiation, preparation and
administration of this Agreement.

 

14.             Taxes. It is the
intent of Borrower and Bank that this Agreement only modify the terms of the
Loan Documents in a manner so that no additional title insurance premiums,
documentary stamp tax or intangible personal property tax shall be due and
payable. In the event additional title insurance premiums, documentary stamp
tax, intangible personal property tax or other taxes or costs are assessed,
imposed or, in Bank’s sole opinion, are due and payable, Borrower shall
immediately pay the same, including any interest and penalties imposed in
connection therewith, and Borrower hereby agrees to indemnify, defend and hold
Bank harmless from any liability, loss, costs, damages, interest and penalties,
including attorneys’ fees, that Bank may incur thereby. Any sums paid by Bank
shall be immediately due and payable by Borrower. This provision shall survive
the repayment of the Note.

 

15.             Default. If any of
Borrower’s representations contained herein or in the Note or in the Mortgage
shall prove to be incorrect or untrue in any material manner or if

 

5

 

Borrower
fails to perform any of its covenants and agreements contained herein, the
occurrence of any such event shall constitute a default under the Note and the
Mortgage entitling Bank to the exercise of all of its rights and remedies under
the Note and the Mortgage.

 

16.             Survival. Notwithstanding the execution of this Agreement, Borrower acknowledges
that all remedies of Bank under the terms of the Loan Documents shall survive
the execution hereof and that each and every remedy shall be cumulative and
concurrent and shall be in addition to each and every other right, power and
remedy given hereunder. Except as expressly set forth herein, nothing contained
in this Agreement shall constitute a waiver of any rights or remedies of the
Bank under the terms of the Loan Documents.

 

17.             No
Novation. Borrower and Lender hereby
acknowledge and agree that this Agreement shall not constitute a novation of
the indebtedness evidenced by the Loan Documents, and further that the terms
and provisions of the Loan Documents shall remain valid and in full force and
effect except as may be hereinabove modified and amended.

 

18.             Invalidity. In case any one or more of the provisions contained in this Agreement
shall for any reason be held to be invalid, illegal or unenforceable in any
respect, the same shall not affect any other provision of this Agreement and
this Agreement shall be construed as if such invalid or illegal or
unenforceable provision had never been contained herein.

 

19.             Governing
Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida without regard to
choice of law rules thereunder.

 

20.             Modifications. The terms of this Agreement may not be changed, modified, waived,
discharged or terminated orally, but may only be done so by instruments in
writing signed by the party against whom enforcement of the change,
modification, waiver, discharge or termination is asserted.

 

21.             Paragraph
Headings. Paragraph headings are
inserted for convenience of reference only and shall not be involved or
considered in the interpretation of this Agreement.

 

22.             Entire
Agreement. Except as specifically set
forth herein, there are no other modifications of any of the Loan Documents nor
any other agreements between the parties relating to the modification,
amendment or extension of the Note.

 

23.             Counterparts. This Agreement may be executed in any number of counterparts and each
counterpart taken together shall constitute a single instrument.

 

24.             Binding
Agreement. The covenants and
agreements contained herein shall be binding upon and inure to the benefit of
Borrower and Bank, and their respective heirs, successors, assigns, personal
representatives and legal representatives.

 

6

 

25.           Waiver of Jury
Trial. BANK AND BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION INVOLVING THE LOAN DOCUMENTS, THIS AGREEMENT, THE INDEBTEDNESS
EVIDENCED BY THE NOTE AND SECURED BY THE MORTGAGE OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTION OF ANY
PARTY RELATED TO OR INVOLVING THE LOAN DOCUMENTS, THIS AGREEMENT OR THE INDEBTEDNESS
EVIDENCED BY THE NOTE AND SECURED BY THE MORTGAGE. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR BANK ENTERING INTO THIS AGREEMENT.

 

[signatures on following pages]

 

7

 

IN WITNESS WHEREOF, the parties
have caused this Agreement to be executed and delivered as of the Effective
Date.

 

	
   

  	
   

  	
   

  	
                  “BORROWER”

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  COUNTRYWIDE HARDWARE, INC., a

  Delaware corporation

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/
  Joseph A. Molino, Jr.

  
	
   

  	
   

  	
   

  	
   

  	
  Joseph A. Molino, Jr.

  
	
   

  	
   

  	
   

  	
   

  	
  Vice President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  STATE OF  New York

  	
   

  	
   

  	
   

  
	
  COUNTY OF Suffolk

  	
   

  	
   

  	
   

  

 

 

The foregoing instrument was acknowledged before me this 21st day of April 2010, by Joseph A. Molino, Jr.,
as Vice President of Countrywide Hardware, Inc., a Delaware corporation, on
behalf of the corporation, who is personally known to me or who has produced
                   as
identification.

 

	
   

  	
   

  	
  /s/ Robert C. Weiden

  
	
   

  	
   

  	
  Print
  Name:

  	
  Robert C. Weiden

  
	
   

  	
   

  	
  Notary
  Public, State and County Aforesaid

  
	
   

  	
   

  	
  My
  Commission Expires:

  	
  12-22-10

  
	
   

  	
   

  	
  Commission
  Number:

  	
  4875900

  
					

 

	
   

  	
   

  	
  ROBERT C. WEIDEN

  
	
   

  	
   

  	
  Notary Public, State of New York

  
	
   

  	
   

  	
  No. 4875900

  
	
   

  	
   

  	
  Qualified in Suffolk County

  
	
   

  	
   

  	
  Commission Expires

  	
  12-22-10

  

 

8

 

	
   

  	
   

  	
  “BANK”

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  WELLS FARGO BANK, NATIONAL

  ASSOCIATION, a national banking

  association, successor by merger to

  Wachovia Bank, National Association

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/
  Michael L Williamson

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Michael
  L Williamson

  
	
   

  	
   

  	
   

  	
  Title:

  	
  SR
  Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  STATE OF Florida

  	
   

  	
   

  
	
  COUNTY OF VOLUSIA

  	
   

  	
   

  

 

The foregoing instrument was acknowledged before me this 22 day of
April 2010, by Michael L Williamson               ,
as Senior V. P. of Wells Fargo Bank, National Association, a national
banking association, successor-by-merger toWachovia Bank, National Association,
on behalf of the association, who is personally known to me or who has produced
                   as
identification.

 

 

	
   

  	
   

  	
  /s/ Sandy C. Barber

  
	
   

  	
   

  	
  Print
  Name:  

  	
  Sandy C. Barber

  
	
  [SEAL]

  	
   

  	
  Notary
  Public, State and County Aforesaid

  
	
   

  	
   

  	
  Commission
  Number:

  	
  DD797576

  
	
   

  	
   

  	
  My
  Commission Expires:

  	
  July
  21, 2012

  
					

 

9

 

	
   

  	
  INSTR # 2002177275

  
	
  PREPARED
  BY: Michael D. Morelly, Esq.

  	
  OR BK 11663 PG 0770

  
	
  Michael
  D. Morelly, Esq.

  	
  RECORDED 05/24/2002 03: 24 PM

  
	
  1200
  S. Pine Island Rd., Ste 220

  	
  RICHARD
  AKE CLERK OF COURT

  
	
  Plantation,
  Florida 33324

  	
  HILLSBOROUGH COUNTY

  
	
   

  	
  DOC TAX PD (F.S.201.08) 7,084.00

  
	
   

  	
  INT. TAX PD (F.S.199) 4,048.00

  
	
  RETURN
  TO:

  	
  DEPUTY CLERK P Beckham

  

 

Gibbons Cohn

2/8

 

FLORIDA
DOCUMENTARY STAMP TAXES IN THE AMOUNT OF $7,048.00 AND FLORIDA NON-RECURRING
INTANGIBLE TAXES IN THE AMOUNT OF $4,048.00 ARE BEING PAID UPON RECORDATION OF
THIS INSTRUMENT.

 

MORTGAGE, SECURITY AGREEMENT AND ABSOLUTE ASSIGNMENT
OF

LEASES

 

This
MORTGAGE (hereafter referred to as “Mortgage”) made May 24, 2002, by
and between, Countrywide Hardware, Inc., whose address is 300 Smith
Street, Farmingdale, New York 11735 (“Mortgagor”) and Wachovia Bank, National
Association, a national banking association, whose address is 214 North Hogan
Street - FL0070, Jacksonville, Florida 32202 (“Bank”).

 

W I T N E S S E T H:

 

To secure payment and performance of
obligations under a Promissory Note (the “Note”) dated May 24, 2002, in the
amount of $2,024,000.00, made by Mortgagor payable to Bank, this Mortgage,
other loan documents as defined in the Note (the “Loan Documents”), and swap
agreements (as defined in 11 U.S.C. § 101) between Bank and Mortgagor, and any
renewals, extensions, novations, or modifications of the foregoing
(collectively the “Obligations”), and in consideration of these premises and
for other consideration, Mortgagor does mortgage, grant and convey unto Bank,
its successors and assigns, all of Mortgagor’s right, title and interest now
owned or hereafter acquired in and to each of the following (collectively, the “Property”):
(i) all those certain tracts of land in the County of Hillsborough, State
of Florida described in EXHIBIT A attached hereto and made part hereof (the “Land”);
(ii) all buildings and improvements now or hereafter erected on the Land; (iii) all
fixtures, machinery, equipment and other articles of real, personal or mixed
property attached to, situated or installed in or upon, or used in the
operation or maintenance of, the Land or any buildings or improvements situated
thereon, whether or not such real, personal or mixed property is or shall be
affixed to the Land; (iv) all building materials, building machinery and
building equipment delivered on site to the Land during the course of, or in
connection with, any construction, repair or renovation of the buildings and
improvements situated or to be situated thereon; (v) all leases, licenses
or occupancy agreements of all or any part of the Land and all extensions,
renewals, and modifications thereof, and any options, rights of first refusal
or guarantees relating thereto; all rents, income, revenues, security deposits,
issues, profits, awards and payments of any kind payable under the leases or
otherwise arising from the Land; (vi) all contract rights, accounts
receivable and general intangibles relating to the Land or the use,
occupancy, maintenance, construction, repair or operation thereof; all
management agreements, franchise agreements, utility agreements and deposits;
all maps, plans, surveys and specifications; all warranties and guaranties; all
permits, licenses and approvals; and all insurance policies; (vii) all
estates, rights, tenements, hereditaments, privileges, easements, and
appurtenances of any kind benefiting the Land; all means of access to and from
the Land, whether public or private; and all water and mineral rights; and (viii) all
“Proceeds” of any of the above-described property, which term shall have the
meaning given to it in the Uniform Commercial Code of the jurisdiction where
this Mortgage is recorded (the “UCC”), whether cash or non-cash, and including

 

 

insurance
proceeds and condemnation awards; and all replacements, substitutions and
accessions thereof.

 

TO
HAVE AND TO HOLD the Property and all the estate, right, title and interest, in law and in equity, of
Mortgagor in and to the Property unto Bank, its successors and assigns,
forever.

 

Mortgagor
WARRANTS AND REPRESENTS that Mortgagor is lawfully seized of the Property, in
fee simple, absolute, that Mortgagor has the legal right to convey and encumber
the same, and that the Property is free and clear of all liens and
encumbrances. Mortgagor further warrants and will forever defend all and
singular the Property and title thereto to Bank and Bank’s successors and
assigns, against the lawful claims of all persons whomsoever.

 

PROVIDED
ALWAYS that if all Obligations are timely paid and performed each and every
representation, warranty, agreement, and condition of this Mortgage, the other
Loan Documents and any swap agreements, are complied with and abided by, this
Mortgage and the estate hereby created shall cease and be null, void, and
canceled of record.

 

To
protect the security of this Mortgage, Mortgagor further represents and agrees
with Bank as follows:

 

Payment of Obligations. That the Obligations shall be
timely paid and performed.

 

Future Advances. This Mortgage is given to
secure not only existing Obligations, but also future advances made within 20
years of the date of this Mortgage to the same extent as if such future
advances are made on the date of the execution of this Mortgage. The principal
amount (including any swap agreements and future advances) that may be so
secured may decrease or increase from time to time, but the total amount so
secured at any one time shall not exceed the maximum principal amount of
$4,048,000.00, plus all interest, costs, reimbursements, fees and expenses due
under this Mortgage and secured hereby. Mortgagor shall not execute any
document that impairs or otherwise impacts the priority of any future advances
secured by this Mortgage.

 

Grant of Security Interest in Personal Property. This Mortgage
constitutes a security agreement under the UCC and shall be deemed to
constitute a fixture financing statement. Mortgagor hereby grants a security
interest in any personal property included in the Property. On request of Bank,
Mortgagor will execute one or more Financing Statements in form satisfactory to
Bank and will pay all costs and expenses of filing the same in all public
filing offices, where filing is deemed  desirable by Bank. Bank is
authorized to file Financing Statements relating to the Property without
Mortgagor’s signature where permitted by law. Mortgagor appoints Bank as its
attorney-in-fact to execute such documents necessary to perfect Bank’s security
interest on Mortgagor’s behalf. The appointment is coupled with an interest and
shall be irrevocable as long as any Obligations remain outstanding.

 

Leases, Subleases and Easements. Mortgagor shall
maintain, enforce and cause to be performed all of the terms and conditions
under any lease, sublease or easement which may constitute a portion of the
Property. Mortgagor shall not, without the consent of Bank, enter into any new
lease of all or any portion of the Property, agree to the cancellation or
surrender under any lease of all or any portion of the Property, agree to
prepayment of rents, issues or profits (other than rent paid at the signing of
a lease or sublease), modify any such lease so as to shorten the term, decrease
the rent, accelerate the payment of rent, or change the terms of any renewal
option; and any such purported new lease, cancellation, surrender, prepayment
or modification made without the consent of Bank shall be void as against Bank.

 

Required Insurance. Mortgagor shall maintain with
respect to the Property: (i) during construction of any improvements on
the Property, “all-risk” builders risk insurance (non-reporting Completed Value
with Special Cause of Loss form), in an amount not less than the total value of
the improvements under construction, naming Bank as mortgagee and loss payee; (ii) upon
completion of construction and at all other times, insurance against loss or
damage by fire and other casualties and

 

2

 

hazards by insurance
written on an “all risks” basis, including specifically windstorm and/or hail
damage, in an amount not less than the replacement cost thereof, naming Bank as
loss payee and mortgagee; (iii) if the Property is required to be insured
pursuant to the National Flood Reform Act of 1994, and the regulations
promulgated thereunder, flood insurance is required in the amount equal to the
lesser of the loan amount or maximum available under the National Flood
Insurance Program, but in no event should the amount of coverage be less than
the value of the improved structure, naming Bank as mortgagee and loss payee;
and (iv) liability insurance providing coverage in such amount as Bank may
require but in no event less than $1,000,000.00 combined single limit, naming
Bank as an additional insured; and (v) such other insurance as Bank may
require from time to time.

 

All casualty insurance
policies shall contain an endorsement or agreement by the insurer in form
satisfactory to Bank that any loss shall be payable in accordance with the
terms of such policy notwithstanding any act or negligence of Mortgagor and the
further agreement of the insurer waiving rights of subrogation against Bank,
and rights of set-off, counterclaim or deductions against Mortgagor.

 

All insurance policies
shall be in form, provide coverages, be issued by companies and be in amounts
satisfactory to Bank. At least 30 days prior to the expiration of each such
policy, Mortgagor shall furnish Bank with evidence satisfactory to Bank that
such policy has been renewed or replaced or is no longer required hereunder.
All such policies shall provide that the policy will not be canceled or
materially amended without at least 30 days prior written notice to Bank. In
the event Mortgagor fails to provide, maintain, keep in force, and furnish to
Bank the policies of insurance required by this paragraph, Bank may procure
such insurance or single-interest insurance in such amounts, at such premium,
for such risks and by such means as Bank chooses, at Mortgagor’s expense;
provided however, Bank shall have no responsibility to obtain any insurance,
but if Bank does obtain insurance, Bank shall have no responsibility to assure
that the insurance obtained shall be adequate or provide any protection to
Mortgagor.

 

Insurance Proceeds. After occurrence of any loss to any of the Property,
Mortgagor shall give prompt written notice thereof to Bank.

 

In the event of such loss
all insurance proceeds shall be payable to Bank, and Mortgagor hereby
authorizes and  directs any affected insurance company to make payment of such proceeds
directly to Bank. Bank is hereby authorized by Mortgagor to settle, adjust or
compromise any claims for loss or damage under any policy or policies of
insurance and Mortgagor appoints Bank as its attorney-in-fact to receive and
endorse any insurance proceeds to Bank, which appointment is coupled with an
interest and shall be irrevocable as long as any Obligations remain
unsatisfied.

 

In the event of any
damage to or destruction of the Property, Bank shall have the option of
applying or paying all or part of the insurance proceeds to (i) the
Obligations in such order as Bank may determine, (ii) restoration of the
Property, or (iii) Mortgagor. Nothing herein shall be deemed to excuse
Mortgagor from restoring, repairing and maintaining the Property as required
herein.

 

Impositions; Escrow Deposit. Mortgagor will pay all taxes, levies, assessments and
other fees and charges imposed upon or which may become a lien upon the
Property under any law or ordinance (all of the foregoing collectively “Impositions”)
before they become delinquent and in any event in the same calendar year in
which they first become due. Upon request of Bank (but only if Mortgagor has
failed to timely pay same when and as due), Mortgagor shall add to each
periodic payment required under the Note the amount estimated by Bank to be
sufficient to enable Bank to pay, as they come due, all Impositions and
insurance premiums which Mortgagor is required to pay hereunder. Payments
requested under this provision shall be supplemented or adjusted as required by
Bank from time to time. Such funds may be commingled with the general funds of
Bank and shall not earn interest. Upon the occurrence of a Default, Bank may
apply such funds to pay any of the Obligations.

 

Use of Property. Mortgagor shall use and operate, and require its
lessees or licensees to use and operate, the Property in compliance with all
applicable laws and ordinances, covenants, and restrictions, and with all
applicable requirements of any lease or sublease now or hereafter
affecting the

 

3

 

Property. Mortgagor shall
not permit any unlawful use of the Property or any use that may give rise to a
claim of forfeiture of any of the Property. Mortgagor shall not allow changes
in the stated use of Property from that disclosed to Bank at the time of
execution hereof. Mortgagor shall not initiate or acquiesce to a zoning change
of the Property without prior notice to, and written consent of, Bank.

 

Maintenance, Repairs and Alterations. Mortgagor shall keep and maintain the
Property in good condition and repair and fully protected from the elements to
the satisfaction of Bank. Mortgagor will not materially remove, demolish or
structurally alter more than twenty-five (25%) percent of any of the buildings
or other improvements on the Property (except such alterations as may be
required by laws, ordinances or regulations) without the prior written consent
of Bank. Mortgagor shall promptly notify Bank in writing of any material loss,
damage or adverse condition affecting the Property.

 

Eminent Domain. Should the Property or any interest therein be taken
or damaged by reason of any public use or improvement or condemnation
proceeding (“Condemnation”), or should Mortgagor receive any notice or other
information regarding such Condemnation, Mortgagor shall give prompt written notice
thereof to Bank. Bank shall be entitled to all compensation, awards and other
payments or relief granted in connection with such Condemnation and, at its
option, may commence, appear in and prosecute in its own name any action or
proceedings relating thereto. Bank shall be entitled to make any compromise or
settlement in connection with such taking or damage. All compensation, awards,
and damages awarded to Mortgagor related to any Condemnation (the “Proceeds”)
are hereby assigned to Bank and Mortgagor agrees to execute such further
assignments of the Proceeds as Bank may require. Bank shall have the option of
applying or paying the Proceeds in the same manner as insurance proceeds as
provided herein. Mortgagor appoints Bank as its attorney-in-fact to receive and
endorse the Proceeds to Bank, which appointment is coupled with an interest and
shall be irrevocable as long as any Obligations remain unsatisfied.

 

Environmental Condition of Property and Indemnity. Mortgagor warrants and represents to
Bank, except as reported by Mortgagor to Bank in writing, that: (i) Mortgagor
has inspected and is familiar with the environmental condition of the Property;
(ii) the Property and Mortgagor, and any occupants of the Property, are in
compliance with and shall continue to be in compliance with all applicable
federal, state and local laws and regulations intended to protect the
environment and public health and safety as the same may be amended from time
to time (“Environmental Laws”); (iii) to the best of Mortgagor’s knowledge
and belief, the Property is not and has never been used to generate, handle,
treat, store or dispose of, in any quantity, oil, petroleum products, hazardous
or toxic substances, hazardous waste, regulated substances or hazardous air
pollutants (“Hazardous Materials”) in violation of any Environmental Laws; and (iv) no
Hazardous Materials (including asbestos or lead paint in any form) are located
on or under the Property or emanate from the Property, except those that are
properly handled and disposed of in accordance with all federal and state laws.
Further, Mortgagor represents to Bank that no portion of the Property is a
protected wetland. Mortgagor agrees to notify Bank immediately upon receipt of
any citations, warnings, orders, notices, consent agreements, process or claims
alleging or relating to violations of any Environmental Laws or to the
environmental condition of the Property.

 

Mortgagor shall
indemnify, hold harmless, and defend Bank from and against any and all damages,
penalties, fines, claims, suits, liabilities, costs, judgments and expenses,
including attorneys’, consultants’ or experts’ fees of every kind and nature
incurred, suffered by or asserted against Bank as a direct or indirect result
of: (i) representations made by Mortgagor in this Section being or
becoming untrue in any material respect; (ii) Mortgagor’s violation of or
failure to meet the requirements of any Environmental Laws; or (iii) Hazardous
Materials which, while the Property is subject to this Mortgage, exist on the
Property. Bank shall have the right to arrange for or conduct environmental
inspections of the Property from time to time (including the taking of soil,
water, air or material samples). The cost of such inspections made after
Default or which are required by laws or regulations applicable to Bank shall
be borne by Mortgagor. Mortgagor’s obligations under this Section shall
continue, survive and remain in full force and effect notwithstanding
foreclosure, satisfaction of this Mortgage or full satisfaction of the
Obligations. However, Mortgagor’s indemnity shall not apply to any negligent or
intentional act of Bank which takes place after foreclosure or satisfaction of
this Mortgage.

 

4

 

Appraisals. Mortgagor agrees that Bank may obtain an appraisal of
the Property when required by the regulations of the Federal Reserve Board or
the Office of the Comptroller of the Currency or at such other times as Bank
may reasonably require. Such appraisals shall be performed by an independent
third party appraiser selected by Bank. The cost of such appraisals shall be
borne by Mortgagor. If requested by Bank, Mortgagor shall execute an engagement
letter addressed to the appraiser selected by Bank. Mortgagor failure or refusal
to sign such an engagement letter, however, shall not impair Bank’s right to
obtain such an appraisal. Mortgagor agrees to pay the cost of such appraisal
within 10 days after receiving an invoice for such appraisal.

 

Inspections. Bank, or its representatives or agents, are authorized
to enter at any reasonable time upon any part of the Property for the purpose
of inspecting the Property and for the purpose of performing any of the acts it
is authorized to perform under the terms of this Mortgage at their own risk.

 

Liens and Subrogation. Mortgagor shall pay and promptly discharge all liens,
claims and encumbrances upon the Property. Mortgagor shall have the right to
contest in good faith the validity of any such lien, claim or encumbrance,
provided: (i) such contest suspends the collection thereof or there is no
danger of the Property being sold or forfeited while such contest is pending; (ii) Mortgagor
first deposits with Bank a bond or other security satisfactory to Bank in such
amounts as Bank shall reasonably require; and (iii) Mortgagor thereafter
diligently proceeds to cause such lien, claim or encumbrance to be removed and
discharged.

 

Bank shall be subrogated
to any liens, claims and encumbrances against Mortgagor or the Property that
are paid or discharged through payment by Bank or with loan proceeds,
notwithstanding the record cancellation or satisfaction thereof.

 

Waiver of Mortgagor’s Rights. To the fullest extent permitted by law, Mortgagor
waives any: (i) rights of homestead or other exemption with regard to any
of the Property; (ii) rights or claims of equitable or statutory
redemption; (iii) rights of appraisal; and (iv) rights to require
marshaling of assets except as same is permitted by law.

 

Payments by Bank; Indemnification. In the event of default in the timely
payment or performance of any of the Obligations, Bank, at its option and
without any duty on its part to determine the validity or necessity thereof,
but with notice to Borrower, may pay the sums for which Mortgagor is obligated.
Further, Bank may pay such sums as Bank deems appropriate for the protection
and maintenance of the Property including, without limitation, sums to pay
Impositions and other levies, assessments or liens, maintain insurance, make
repairs, secure the Property, maintain utility service, intervene in any
condemnation and pay attorneys’ fees and other fees and costs to enforce this
Mortgage or protect the lien hereof (including foreclosure) or collect the
Obligations, without limitation, including those incurred in any proceeding
including Bankruptcy or arbitration. Any amounts so paid shall bear interest at
the default rate stated in the Note and shall be secured by this Mortgage.

 

In the event Bank shall
become party to any suit or legal proceeding by reason of its status as holder
of this Mortgage, Mortgagor shall indemnify and hold harmless Bank and
reimburse Bank for any amounts paid or incurred by Bank, including all
reasonable costs, charges and attorneys’ fees in any such suit or proceeding.

 

Assignment of Rents. Mortgagor hereby absolutely assigns and transfers to
Bank all the leases, rents, issues and profits of the Property (collectively “Rents”).
Although this assignment is effective immediately, so long as no Default
exists, Bank gives to and confers upon Mortgagor the privilege under a
revocable license to collect as they become due, but not prior to accrual, the
Rents and to demand, receive and enforce payment, give receipts, releases and
satisfactions, and sue in the name of Mortgagor for all such Rents. Mortgagor
represents there has been no prior assignment of leases or Rents, and agrees
not to further assign such leases or Rents. Upon any occurrence of Default, the
license granted to Mortgagor herein shall be automatically revoked without further
notice to or demand upon Mortgagor, and Bank shall have the right, in its
discretion, without notice, by agent or by a receiver appointed by a court, and
without regard to the adequacy of any security for the Obligations, (i) to
enter

 

5

 

upon and take possession of the Property, (ii) notify
tenants, subtenants and any property manager to pay Rents to Bank or its
designee, and upon receipt of such notice such persons are authorized and
directed to make payment as specified in the notice and disregard any contrary
direction or instruction by Mortgagor, and (iii) in its own name, sue for
or otherwise collect Rents, including those past due, and apply Rents, less
costs and expenses of operation and collection, including attorneys’ fees, to
the Obligations in such order and manner as Bank may determine or as otherwise
provided for herein. Bank’s exercise of any one or more of the foregoing rights
shall not cure or waive any Default or notice of Default hereunder.

 

Due on Sale or Further Encumbrance. The direct or indirect sale, assignment,
or conveyance of the Property, or any interest therein, or the further
encumbrance of the Property, without Bank’s written consent shall, at Bank’s
option, constitute a Default under this Mortgage. Transfer of control of or a
controlling interest in the Mortgagor shall be deemed a transfer of the
Property except that a transfer or merger with Guarantor shall not constitute a
default hereunder.

 

Remedies of Bank on Default. Failure of Mortgagor or any other person liable to
timely pay or perform any of the Obligations is a default (“Default”) under
this Mortgage. Upon the occurrence of Default the following remedies are
available, without limitation, to Bank: (i) Bank may exercise any or all
of Bank’s remedies under this Mortgage or other Loan Documents including,
without limitation, acceleration of maturity of all payments and Obligations,
other than Obligations under any swap agreements (as defined in 11 U.S.C. §
101) with Bank, which shall be governed by the default and termination
provisions of said swap agreements; (ii) Bank may take immediate
possession of the Property or any part thereof (which Mortgagor agrees to
surrender to Bank) and manage, control or lease the same to such persons and at
such rental as it may deem proper and collect and apply Rents to the payment
of: (a) the Obligations, together with all costs and attorneys’ fees; (b) all
Impositions and any other levies, assessments or liens which may be prior in
lien or payment to the Obligations, and premiums for insurance, with interest
on all such items; and (c) the cost of all alterations, repairs,
replacements and expenses incident to taking and retaining possession of the
Property and the management and operation thereof; all in such order or
priority as Bank in its sole discretion may determine. The taking of possession
shall not prevent concurrent or later proceedings for the foreclosure sale of
the Property; (iii) Bank may apply to any court of competent jurisdiction
for the appointment of a receiver for all purposes including, without
limitation, to manage and operate the Property or any part thereof, and to
apply the Rents therefrom as hereinabove provided. In the event of such
application, Mortgagor consents to the appointment of a receiver, and agrees
that a receiver may be appointed without notice to Mortgagor, without regard to
whether Mortgagor has committed waste or permitted deterioration of the
Property, without regard to the adequacy of any security for the Obligations,
and without regard to the solvency of Mortgagor or any other person, firm or
corporation who or which may be liable for the payment of the Obligations.

 

Miscellaneous Provisions. Mortgagor agrees to the following: (i) All
remedies available to Bank with respect to this Mortgage or available at law or
in equity shall be cumulative and may be pursued concurrently or successively.
No delay by Bank in exercising any remedy shall operate as a waiver of that
remedy or of any Default. Any payment by Bank or acceptance by Bank of any
partial payment shall not constitute a waiver by Bank of any Default; (ii) The
provisions hereof shall be binding upon and inure to the benefit of Mortgagor,
its heirs, personal representatives, successors and assigns including, without
limitation, subsequent owners of the Property or any part thereof, and shall be
binding upon and inure to the benefit of Bank, its successors and assigns and
any future holder of the Note or other Obligations; (iii) Any notices,
demands or requests shall be sufficiently given Mortgagor if in writing and
mailed or delivered to the address of Mortgagor shown above or to another
address as provided herein and to Bank if in writing and mailed or delivered to
Bank’s office address shown above, or such other address as Bank may specify
from time to time and in the event that either party hereto changes its address
at any time prior to the date the Obligations are paid in full, that party
shall promptly give written notice of such change of address by registered or
certified mail, return receipt requested, all charges prepaid; (iv) This
Mortgage may not be changed, terminated or modified orally or in any manner
other than by an instrument in writing signed by the parties hereto; (v) The
captions or headings at the beginning of each paragraph hereof are for the
convenience of the parties and are not a part of this

 

6

 

Mortgage; (vi) If
the lien of this Mortgage is invalid or unenforceable as to any part of the
Obligations, the unsecured portion of the Obligations shall be completely paid
(and all payments made shall be deemed to have first been applied to payment of
the unsecured portion of the Obligations) prior to payment of the secured
portion of the Obligations and if any clause, provision or obligation hereunder
is determined invalid or unenforceable the remainder of this Mortgage shall be
construed and enforced as if such clause, provision or obligation had not been
contained herein; (vii) This Mortgage shall be governed by and construed
under the laws of the jurisdiction where this Mortgage is recorded; (viii) Mortgagor
by execution and Bank by acceptance of this Mortgage agree to be bound by the
terms and provisions hereof.

 

Mortgagor has signed and
sealed this instrument as of the day and year first above written.

 

	
   

  	
  Mortgagor

  
	
   

  	
  Countrywide
  Hardware, Inc.

  
	
   

  	
   

  
	
  CORPORATE

  	
  By:

  	
  /s/
  Joseph A.
  Molino, Jr

  
	
  SEAL

  	
   

  	
  Joseph A.
  Molino, Jr., Vice Preside

  

 

STATE OF NEW YORK 

COUNTY OF NASSAU

 

Corporate Acknowledgment

 

The foregoing instrument
was acknowledged this day by Joseph A. Molino, Jr., Vice President of
Countrywide Hardware, Inc., a Delaware corporation on behalf of the
corporation, who is personally known to me.

 

Witness my hand
and official seal, this 6th day of May 2002.

 

	
  Notary Seal

  	
  /s/ GEORGE DeMOTT

  	
  , Notary Public

  

 

 

	
  GEORGE DeMOTT

  	
   

  
	
  Notary Public, State of New York

  	
   

  
	
  No. 01DE6036862

  	
   

  
	
  Qualified in
  Suffolk County

  	
   

  
	
  Commission Expires
  February 07, 2006

  	
   

  

 

7

 

EXHIBIT A

 

Lot 5, FISHER’S FARMS, according to the plat thereof,
recorded in Plat Book 26, Page 1, of the Public Records of Hillsborough
County, Florida, LESS the North 100 feet of the South 475.60 feet of the West
125 feet and LESS the South 70 feet of said Lot 5, AND

 

The North 100 feet of the South 475.60 feet of the West 125
feet of Lot 5, FISHER’S FARMS, according to the plat thereof, recorded in Plat
Book 26, Page 1, of the Public Records of Hillsborough County, Florida.

 

 

PROMISSORY
NOTE

 

	
  $2,024,000.00

  	
  May 24, 2002

  

 

FLORIDA DOCUMENTARY STAMP
TAX IN THE AMOUNT OF $7,084.00 HAS BEEN AFFIXED TO THE RECORDED INSTRUMENT
PURSUANT TO SECTION 201.08, FLORIDA STATUTE.

 

Countrywide Hardware, Inc.

300 Smith Street

Farmingdale, New York
11735

Hereinafter referred to
as “Borrower”)

 

Wachovia Bank, National
Association 

214 North Hogan Street - FL0070

Jacksonville, Florida 32202

Hereinafter referred to as “Bank”)

 

Borrower promises to pay
to the order of Bank, in lawful money of the United States of America, at its
office indicated above or wherever else Bank may specify, in writing, the sum
of Two Million, Twenty-Four Thousand and No/100 Dollars ($2,024,000.00) or such
sum as may be advanced and outstanding from time to time, with interest on the
unpaid principal balance at the rate and on the terms provided in this
Promissory Note (including all renewals, extensions or modifications hereof, this
“Note”).

 

LOAN AGREEMENT. This Note is subject to the provisions
of that certain Loan Agreement between Bank and Borrower of even date herewith,
as modified from time to time.

 

USE OF PROCEEDS. Borrower shall use the proceeds of the
loan(s) evidenced by this Note for the commercial purposes of Borrower, as
follows: to finance the acquisition of certain real property located at 10333
Windhorst Road, Tampa, Florida,

 

SECURITY. Borrower has granted Bank a security
interest in the collateral described in the Loan Documents, including, but not
limited to, real property collateral described in that certain Mortgage of even
date herewith.

 

INTEREST RATE. Interest shall accrue on the unpaid
principal balance of this Note from the date hereof at 1-month LIBOR plus 1.55%
(“Interest Rate”), as determined by Bank prior to the commencement of each
consecutive interest period of 1 month (each, an “Interest Period”) during the
term of the Note; provided, the first Interest Period shall commence on the
date of this Note and end on the first date thereafter that interest is due. Each
Interest Rate shall remain in effect for the entire Interest Period until
redetermined for the next successive Interest Period. “LIBOR” is the rate for U.
S. dollar deposits with a maturity equal to the number of months specified
above, as reported on Telerate page 3750 as of 11:00 a.m., London time, on
the second London business day before the relevant Interest Period begins (or
if not so reported, then as determined by the Bank from another recognized
source or interbank quotation).

 

INDEMNIFICATION. Borrower shall indemnify Bank against
Bank’s loss or expense as a consequence of (a) Borrower’s failure to make
any payment when due under this Note, after any applicable grace period
hereunder, (b) intentionally omitted, or (c) any failure to make a
borrowing or conversion after giving notice thereof (“Indemnified Loss or
Expense”). The amount of such Indemnified Loss or Expense shall be determined
by Bank based upon the assumption that Bank funded 100% of that portion of the
loan in the London interbank market.

 

DEFAULT RATE. In addition to all other rights
contained in this Note, if a Default (as defined herein) occurs and as long as
a Default continues, all outstanding Obligations shall bear interest at the
Interest

 

 

Rate plus 3% (“Default
Rate”). The Default Rate shall also apply from acceleration until the
Obligations or any judgment thereon is paid in full.

 

INTEREST AND FEE(S) COMPUTATION
(ACTUALI/360). Interest
and fees, if any, shall be computed on the basis of a 360-day year for the
actual number of days in the applicable period (“Actual/360 Computation”). The
Actual/360 Computation determines the annual effective yield by taking the
stated (nominal) rate for a year’s period and then dividing said rate by 360 to
determine the daily periodic rate to be applied for each day in the applicable
period. Application of the Actual/360 Computation produces an annualized
effective interest rate exceeding the nominal rate.

 

REPAYMENT TERMS. This Note shall be due and payable in
consecutive monthly payments of principal of $11,244.44, plus accrued interest,
commencing on June 24, 2002, and continuing on the same day of each month
thereafter until fully paid. In any event, all principal and accrued interest
shall be due and payable on May 24, 2009.

 

APPLICATION OF PAYMENTS. Monies received by Bank from any source
for application toward payment of the Obligations shall be applied to accrued
interest and then to principal. If a Default occurs, monies may be applied to
the Obligations in any manner or order deemed appropriate by Bank.

 

If any payment received
by Bank under this Note or other Loan Documents is rescinded, avoided or for
any reason returned by Bank because of any adverse claim or threatened action, the
returned payment shall remain payable as an obligation of all persons liable
under this Note or other Loan Documents as though such payment had not been
made.

 

DEFINITIONS. Loan Documents. The term “Loan Documents” used in this
Note and the other Loan Documents refers to all documents executed in
connection with or related to the loan evidenced by this Note and any prior
notes which evidence all or any portion of the loan evidenced by this Note, and
any letters of credit issued pursuant to any loan agreement to which this Note
is subject, any applications for such letters of credit and any other documents
executed in connection therewith or related thereto, and may include, without
limitation, a commitment letter that survives closing, a loan agreement, this
Note, guaranty agreements, security agreements, security instruments, financing
statements, mortgage instruments, any renewals or modifications, whenever any
of the foregoing are executed, but does not include swap agreements (as defined
in 11 U.S.C. § 101). Obligations. The
term “Obligations” used in this Note refers to any and all indebtedness and
other obligations under this Note, all other obligations under any other Loan
Document(s), and all obligations under any swap agreements (as defined in 11 U.S.C.
§ 101) between Borrower and Bank whenever executed. Certain
Other Terms. All terms that are used but not otherwise defined in
any of the Loan Documents shall have the definitions provided in the Uniform
Commercial Code.

 

LATE CHARGE. If any payments are not timely made, Borrower
shall also pay to Bank a late charge equal to 5% of each payment past due for
10 or more days.

 

Acceptance by Bank of any
late payment without an accompanying late charge shall not be deemed a waiver
of Bank’s right to collect such late charge or to collect a late charge for any
subsequent late payment received.

 

ATTORNEYS’ FEES AND OTHER
COLLECTION COSTS.
Borrower shall pay all of Bank’s reasonable expenses incurred to enforce or
collect any of the Obligations including, without limitation, reasonable
arbitration, paralegals’, attorneys’ and experts’ fees and expenses, whether
incurred without the commencement of a suit, in any trial, arbitration, or
administrative proceeding, or in any appellate or bankruptcy proceeding.

 

USURY. If at any time the effective interest
rate under this Note would, but for this paragraph, exceed the maximum lawful
rate, the effective interest rate under this Note shall be the maximum lawful
rate, and any amount received by Bank in excess of such rate shall be applied
to principal and then to fees and expenses, or, if no such amounts are owing, returned
to Borrower.

 

 

CURE PERIOD. Except as provided below, a Default
based upon Nonpayment, as defined herein, may be cured within 5 days of the
date such payment is due and any other Default may be cured within 10 days
after written notice thereof is mailed to the Borrower by Bank. The Borrower’s
right to cure shall be applicable only to curable defaults and shall not apply,
without limitation, to Defaults based upon False Warranty or Cessation; Bankruptcy.
Borrower shall have the right to cure a Default requiring mailing of notice
only once during any 12 month period. Bank shall not exercise its remedies to
collect the Obligations except as Bank reasonably deems necessary to protect
its interest in collateral securing the Obligations during a cure period.

 

DEFAULT. If any of the following occurs and is
not cured within the applicable Cure Period, a default (“Default”) under this
Note shall exist: Nonpayment; Nonperformance.
The failure of timely payment or performance of the Obligations or Default
under this Note or any other Loan Documents. False
Warranty. A warranty or representation made or deemed made in the
Loan Documents or furnished Bank in connection with the loan evidenced by this
Note proves materially false, or if of a continuing nature, becomes materially
false. Cross Default. At Bank’s option, any
default in payment or performance of any obligation under any other loans, contracts
or agreements of Borrower, any Subsidiary or Affiliate of Borrower, any general
partner of or the holder (s) of the majority ownership interests of
Borrower with Bank or its affiliates (“Affiliate” shall have the meaning as
defined in 11 U.S.C. § 101, except that the term “Borrower” shall be
substituted for the term “Debtor” therein; “Subsidiary” shall mean any business
in which Borrower holds, directly or indirectly, a controlling interest). Cessation; Bankruptcy. The death of, appointment of a
guardian for, dissolution of, termination of existence of, loss of good
standing status by, appointment of a receiver for, assignment for the benefit
of creditors of, or commencement of any bankruptcy or insolvency proceeding by
or against Borrower, its Subsidiaries or Affiliates, if any, or any general
partner of or the holder(s) of the majority ownership interests of
Borrower, or any party to the Loan Documents. Material
Business Alteration. Without prior written consent of Bank, a
material alteration in the kind or type of Borrowers business. Material Capital  Structure or Business
Alteration. Without prior written consent of Bank, (i) a
material alteration in the kind or type of Borrower’s business or that of
Borrower’s Subsidiaries or Affiliates, if any; (ii) the sale of
substantially all of the business or assets of Borrower, any of Borrower’s
Subsidiaries or Affiliates or any
guarantor, or a material portion (10% or more) of such business or assets if such a sale is outside
the ordinary course of business of Borrower, or any of Borrower’s Subsidiaries
or Affiliates or any guarantor, or more than 50% of the outstanding stock or
voting power of or in any such entity in a single transaction or a series of
transactions; (iii) the acquisition of substantially all of the business
or assets or more than 50% of the outstanding stock or voting power of any
other entity; or (iv) should any Borrower or any of Borrower’s
Subsidiaries or Affiliates or any guarantor enter into any merger or
consolidation. Notwithstanding the foregoing, Borrower may be merged into
Guarantor without default upon prior written notice of same to Bank.

 

REMEDIES UPON DEFAULT. If a Default occurs under this Note or
any Loan Documents, Bank may at any time thereafter, take the following actions:
Bank Lien. Foreclose its security
interest or lien against Borrower’s accounts without notice. Acceleration Upon Default. Accelerate the maturity of this
Note and, at Bank’s option, any or all other Obligations, other than
Obligations under any swap agreements (as defined in 11 U.S.C. § 101) between
Borrower and Bank, which shall be governed by the default and termination
provisions of said swap agreements; whereupon this Note and the accelerated
Obligations shall be immediately due and payable; provided, however, if the
Default is based upon a bankruptcy or insolvency proceeding commenced by or
against Borrower or any guarantor or endorser of this Note, all Obligations (other
than Obligations under any swap agreement as referenced above) shall
automatically and immediately be due and payable. Cumulative.
Exercise any rights and remedies as provided under the Note and other Loan
Documents, or as provided by law or equity.

 

FINANCIAL AND OTHER INFORMATION. Borrower shall deliver to Bank such
information as Bank may reasonably request from time to time, including without
limitation, financial statements and information pertaining to Borrower’s
financial condition. Such information shall be true, complete, and accurate.

 

 

parties hereto (a “Dispute”)
shall be resolved by binding arbitration conducted under and governed by the
Commercial Financial Disputes Arbitration Rules (the “Arbitration Rules”) of
the American Arbitration Association (the “AAA”) and the Federal Arbitration
Act. Disputes may include, without limitation, tort claims, counterclaims, a
dispute as to whether a matter is subject to arbitration, claims brought as
class actions, or claims arising from documents executed in the future. A
judgment upon the award may be entered in any court having jurisdiction. Notwithstanding
the  foregoing, this arbitration
provision does not apply to disputes under or related to swap agreements. Special Rules. All arbitration hearings shall be conducted
in the city named in the address of Bank first stated above. A hearing shall
begin within 90 days of demand for arbitration and all hearings shall conclude
within 120 days of demand for arbitration. These time limitations may not be
extended unless a party shows cause for extension and then for no more than a
total of 60 days. The expedited procedures set forth in Rule 51 et seq,  of the Arbitration Rules shall be
applicable to claims of less than $1,000,000.00. Arbitrators shall be licensed
attorneys selected from the Commercial Financial Dispute Arbitration Panel of
the AAA. The parties do not waive applicable Federal or state substantive law
except as provided herein. Preservation and
Limitation of Remedies. Notwithstanding the preceding binding
arbitration provisions, the parties agree to preserve, without diminution, certain
remedies that any party may exercise before or after an arbitration proceeding
is brought. The parties shall have the right to proceed in any court of proper
jurisdiction or by self-help to exercise or prosecute the following remedies, as
applicable: (i) all rights to foreclose against any real or personal
property or other security by exercising a power of sale or under applicable
law by judicial foreclosure including a proceeding to confirm the sale; (ii) all
rights of self-help including peaceful occupation of real property and
collection of rents, set-off, and peaceful possession of personal property; (iii) obtaining
provisional or ancillary remedies including injunctive relief, sequestration, garnishment,
attachment, appointment of receiver and filing an involuntary bankruptcy
proceeding; and (iv) when applicable, a judgment by confession of judgment.
Any claim or controversy with regard to any party’s entitlement to such
remedies is a Dispute. Waiver of Exemplary
Damages. The parties agree that they shall not have a remedy of
punitive or exemplary damages against other parties in any Dispute and hereby
waive any right or claim to punitive or exemplary damages they have now or
which may arise in the future in connection with any Dispute whether the
Dispute is resolved by arbitration or judicially. Waiver of
Jury Trial. THE PARTIES ACKNOWLEDGE THAT BY AGREEING TO BINDING
ARBITRATION THEY HAVE IRREVOCABLY WAIVED ANY RIGHT THEY MAY HAVE TO JURY
TRIAL WITH REGARD TO A DISPUTE.

 

IN WITNESS WHEREOF, Borrower, on the day and year first
above written, has caused this Note to be executed under seal.

 

	
   

  	
  Countrywide
  Hardware, Inc.

  
	
   

  	
  Taxpayer
  Identification Number.

  	
  82-0542665

  	
   

  

 

	
   

  	
  By:

  	
  /s/ Joseph
  A. Molino, Jr.

  	
  (SEAL)

  
	
   

  	
  Joseph
  A. Molino, Jr., Vice President

  

 

 

LOAN
AGREEMENT

 

Wachovia Bank, National
Association

214 North Hogan Street - FL01070

Jacksonville, Florida 32202

Hereinafter referred to
as the “Bank”)

 

Countrywide Hardware, Inc.

300 Smith Street

Farmingdale, New York
11735

Hereinafter referred to
as the “Borrower”)

 

This Loan Agreement (“Agreement”)
is entered into May 24, 2002, by and between Bank and Borrower.

 

This Agreement applies to
the loan or loans (individually and collectively, the “Loan”) evidenced by one
or more promissory notes dated May 24, 2002 or other notes subject hereto, as
modified from time to time (whether one or more, the “Note”) and all Loan Documents.
The terms “Loan Documents” and “Obligations,” as used in this Agreement, are
defined in the Note.

 

Relying upon the
covenants, agreements, representations and warranties contained in this
Agreement, Bank is willing to extend credit to Borrower upon the terms and
subject to the conditions set forth herein, and Bank and Borrower agree as
follows:

 

REPRESENTATIONS. Borrower represents that from the date
of this Agreement and until final payment in full of the Obligations: Accurate Information. All information now and hereafter
furnished to Bank is and will be true, correct and complete. Any such
information relating to Borrower’s financial condition will accurately reflect
Borrower’s financial condition as of the date(s) thereof, (including all
contingent liabilities of every type), and Borrower further represents that its
financial condition has not changed materially or adversely since the date(s) of
such documents. Authorization; Non-Contravention. The
execution, delivery and performance by Borrower and any guarantor, as
applicable, of this Agreement and other Loan Documents to which it is a party
are within its power, have been duly authorized as may be required and, if
necessary, by making appropriate filings with any governmental agency or unit and
are the legal, binding, valid and enforceable obligations of Borrower and any
guarantors; and do not (i) contravene, or constitute (with or without the
giving of notice or lapse of time or both) a violation of any provision of
applicable law, a violation of the organizational documents of Borrower or any
guarantor, or a default under any agreement, judgment, injunction, order, decree
or other instrument binding upon or affecting Borrower or any guarantor, (ii) result
in the creation or imposition of any lien (other than the lien(s) created
by the Loan Documents) on any of Borrower’s or any guarantor’s assets, or (iii) give
cause for the acceleration of any obligations of Borrower or any guarantor to
any other creditor. Asset Ownership.
Borrower has good and marketable title to all of the properties and assets
reflected on the balance sheets and financial statements supplied Bank by
Borrower, and all such properties and assets are free and clear of mortgages, security
deeds, pledges, liens, charges, and all other encumbrances, except as otherwise
disclosed to Bank by Borrower in writing and approved by Bank (“Permitted Liens”).
To Borrower’s knowledge, no default has occurred under any Permitted Liens and
no claims or interests adverse to Borrower’s present rights in its properties
and assets have arisen. Discharge of Liens and
Taxes. Borrower has duly filed, paid and/or discharged all taxes or
other claims which may become a lien on any of its property or assets, except
to the extent that such items are being appropriately contested in good faith
and an adequate reserve for the payment thereof is being maintained. Sufficiency of Capital. Borrower is not, and after
consummation of this Agreement and after giving effect to all indebtedness
incurred and liens created by Borrower in connection with the Note and any
other Loan Documents, will not be, insolvent within the meaning of 11 U.S.C. §
101(32). Compliance with Laws. Borrower is in
compliance in all respects with all federal, state and local laws, rules and
regulations applicable to its properties, operations, business, and finances, including,
without limitation, any federal or state laws relating to liquor (including 18
U.S.C. § 3617, et seq.) or narcotics (including 21

 

 

U. S. C. § 801, et seq.) and/or
any commercial crimes; all applicable federal, state and local laws and
regulations intended to protect the environment; and the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”), if applicable. Organization and Authority. Each corporate
or limited liability company Borrower and/or guarantor, as applicable, is duly
created, validly existing and in good standing under the laws of the state of
its organization, and has all powers, governmental licenses, authorizations, consents
and approvals required to operate its business as now conducted. Each corporate
or limited liability company Borrower and/or guarantor, as applicable, is duly
qualified, licensed and in good standing in each jurisdiction where
qualification or licensing is required by the nature of its business or the
character and location of its property, business or customers, and in which the
failure to so qualify or be licensed, as the case may be, in the aggregate, could
have a material adverse effect on the business, financial position, results of
operations, properties or prospects of Borrower or any such guarantor. No Litigation. There are no pending or
threatened suits, claims or demands against Borrower or any guarantor that have
not been disclosed to Bank by Borrower in writing, and approved by Bank.

 

AFFIRMATIVE
COVENANTS. Borrower
agrees that from the date hereof and until final payment in full of the
Obligations, unless Bank shall otherwise consent in writing, Borrower will: Access to Books and Records. Allow Bank, or
its agents, during normal business hours, access to the books, records and such
other documents of Borrower as Bank shall reasonably require, and allow Bank, at
Borrower’s expense, to inspect, audit and examine the same and to make extracts
therefrom and to make copies thereof. Business
Continuity. Conduct its business in substantially the same manner
and locations as such business is now and has previously been conducted. Compliance with Other Agreements. Comply
with all terms and conditions contained in this Agreement, and any other Loan
Documents, and swap agreements, if applicable, as defined in the 11 U. S. C. §
101. Estoppel Certificate. Furnish,
within 15 days after request by Bank, a written statement duly acknowledged of
the amount due under the Loan and whether offsets or defenses exist against the
Obligations. Insurance. Maintain
adequate insurance coverage with respect to its properties and business against
loss or damage of the kinds and in the amounts customarily insured against by
companies of established reputation engaged in the same or similar businesses
including, without limitation, commercial general liability insurance, workers
compensation insurance, and business interruption insurance; all acquired in
such amounts and from such companies as Bank may reasonably require. Maintain Properties. Maintain, preserve and
keep its property in good repair, working order and condition, making all
needed replacements, additions and improvements thereto, to the extent allowed
by this Agreement. Non-Default Certificate
From Borrower. Deliver to Bank, with the Financial Statements
required to be delivered to Bank by the Guarantor, a certificate signed by
Borrower, in the form attached hereto as Exhibit A, if Borrower is an
individual, or by a principal
financial officer of Borrower warranting that no “Default” as specified in the
Loan Documents nor any event which, upon the giving of notice or lapse of time
or both, would constitute such a Default, has occurred and demonstrating
Borrower’s compliance with the financial covenants contained herein. Notice of Default and Other Notices. (a) Notice
of Default. Furnish to Bank immediately upon becoming aware of the
existence of any condition or event which constitutes a Default (as defined in the Loan Documents) or any event which, upon
the giving of notice or lapse of time or both, may become a Default, written
notice specifying the nature and period of existence thereof and the action
which Borrower is taking or proposes to take with respect thereto. (b) Other Notices. Promptly notify Bank in
writing of (and as to items (i), (ii), (iii), if such matter is a claim in
excess of $50,000.00) (i) any material adverse change in its financial
condition or its business; (ii) any default under any material agreement, contract
or other instrument to which it is a party or by which any of its properties
are bound, or any acceleration of the maturity of any indebtedness owing by
Borrower; (iii) any material adverse claim against or affecting Borrower
or any part of its properties; (iv) the commencement of, and any material
determination in, any litigation with any third party or any proceeding before
any governmental agency or unit affecting Borrower; and (v) at least 30
days prior thereto, any change in Borrower’s name or address as shown above, and/or
any change in Borrower’s structure. Other
Financial Information. Deliver promptly such other information
regarding the operation, business affairs, and financial condition of Borrower
which Bank may reasonably request. Payment of Debts.
Pay and discharge when due, and before subject to penalty or further charge, and
otherwise satisfy before maturity or delinquency, all obligations, debts, taxes,
and liabilities of whatever nature or amount, except those which Borrower in
good faith disputes. Reports and Proxies. Deliver
to Bank, promptly, a copy of all financial statements,

 

2

 

reports, notices, and
proxy statements, sent by Borrower to stockholders, and all regular or periodic
reports required to be filed by Borrower with any governmental agency or
authority.

 

NEGATIVE COVENANTS. Borrower agrees that from the date of
this Agreement and until final payment in full of the Obligations, unless Bank
shall otherwise consent in writing, Borrower will not: Change in
Fiscal  Year. Change
its fiscal year. Change of Control. Make or suffer
a change of ownership that effectively changes control of Borrower from current
ownership. Notwithstanding the foregoing, Borrower may be merged into Guarantor
without
default upon prior written notice of same to Bank. Default on
Other Contracts or Obligations. Default on any material contract
with or obligation when due to a third party or default in the performance of
any obligation to a third party incurred for money borrowed. Government Intervention. Permit the assertion or making of
any seizure, vesting or intervention by or under
authority of any government by which the management of Borrower or any
guarantor is displaced of its authority in the conduct of its respective
business or its such business is curtailed or materially impaired. Judgment Entered. Permit the entry of any monetary judgment
or the assessment against, the filing of any tax lien against, or the issuance
of any writ of garnishment or attachment against any property of or debts due. Retire or Repurchase  Capital Stock. Retire
or otherwise acquire any of its capital stock except as part of a merger with
Guarantor.

 

TAX RETURNS. Borrower shall deliver to Bank, within
30 days of filing, complete copies of federal and state tax returns, as
applicable, together with all schedules thereto, each of which shall be signed
and certified by Borrower to be true and complete copies of such returns. In
the event an extension is filed, Borrower shall deliver a copy of the extension
within 30 days of filing. This provision may also be met by the delivery to the
Bank of copies of any consolidated and consolidating returns filed by Borrower’s
parent corporation.

 

CONDITIONS PRECEDENT. The obligations of Bank to make the loan
and any advances pursuant to this Agreement are subject to the following
conditions precedent: Additional Documents.
Receipt by Bank of such additional supporting documents as Bank or its counsel
may reasonably request.

 

IN WITNESS WHEREOF, Borrower and Bank, on the day and year
first written above, have caused this Agreement to be executed under seal.

 

 

	
   

  	
  Countrywide
  Hardware, Inc.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Joseph A. Molino, Jr.

  	
  (SEAL)

  
	
   

  	
   

  	
  Joseph A.
  Molino, Jr. Vice President

  	
   

  

 

 

	
   

  	
  Wachovia Bank, National
  Association

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Dena Bombard, Vice
  President

  	
  (SEAL)

  
	
   

  	
   

  	
  Dena Bombard, Vice
  President

  	
   

  

 

3

 

AMENDMENT LETTER

 

December 31,
2006

 

COUNTRYWIDE
HARDWARE, INC.

300
Smith Street

Farmingdale,
New York 11735

 

FLORIDA
PNEUMATIC MANUFACTURING CORPORATION

851
Jupiter Park Lane

Jupiter,
Florida 33458

 

and

 

EMBASSY
INDUSTRIES, INC.

300
Smith Street

Farmingdale,
New York 11735

 

Attn:
Joseph A. Molino, Jr.

 

Re:                              Wachovia
Bank, National Association (the “Bank”) $1,800,000.00 loan to FLORIDA PNEUMATIC
MANUFACTURING CORPORATION, a Florida corporation (“Florida Pneumatic”), as
guaranteed by P&F INDUSTRIES, INC., a Delaware corporation (“P&F
Industries”);

$2,024,000.00 loan to COUNTRYWIDE HARDWARE, INC., a
Delaware corporation (“Countrywide Hardware”), as guaranteed by P&F
Industries; and

$1,697,300.74 amended and restated loan to EMBASSY
INDUSTRIES, INC., a New York corporation (“Embassy Industries”) as guaranteed
by P&F Industries

 

Dear
Mr. Molino:

 

Reference
is made to that certain loan from the Bank to Florida Pneumatic (the “Florida
Pneumatic Loan”), as evidenced by certain loan documents (the “Florida
Pneumatic Loan Documents”), which Florida Pneumatic Loan Documents include, but
are not limited to, that certain Loan Agreement dated as of January 23,
1999, by and between the Bank and Florida Pneumatic, as amended by that certain
Amendment Letter dated as of January 24, 2003, as further amended by that
certain Amendment Letter dated as of April 7, 2005 (as the same may be
amended or restated, the “Florida Pneumatic Loan Agreement”), and that certain
$1,800,000.00 Promissory Note dated as of February 26, 1999, made by
Florida Pneumatic to the order of the Bank in the original principal amount of
$1,800,000.00, as modified by that certain Amendment Letter dated as of April 7,
2005, by and between the Bank and Florida Pneumatic (as the same may be amended
or restated, the “Florida Pneumatic Note”).

 

Reference
is also made to that certain loan from the Bank to Countrywide Hardware (the “Countrywide
Hardware Loan”), as evidenced by certain loan documents (the “Countrywide
Hardware Loan Documents”), which Countrywide Hardware Loan Documents include,
but are not limited to, that certain Loan Agreement dated as of May 24,
2002, by and between the Bank and Countrywide Hardware, as amended by that
certain Amendment Letter dated as of April 7, 2005 (as the same may be
amended or restated the “Countywide Hardware Loan Agreement”), and that certain
$2,024,000.00 Promissory Note dated as of May 31, 2002 made by Countrywide
Hardware in favor of the Bank in the original principal amount of
$2,024,000.00, as

 

 

modified
by that certain Amendment Letter dated as of April 7, 2005 by and between
the Bank and Countrywide Hardware (as the same may be amended or restated, the “Countrywide
Hardware Note”).

 

Reference
is also made to that certain loan from the Bank to Embassy Industries (the “Embassy
Industries Loan”), as evidenced by certain loan documents (the “Embassy
Industries Loan Documents”), which Embassy Industries Loan Documents include,
but are not limited to, that certain Consolidated Loan Agreement dated as of January 24,
2003, by and between the Bank and Embassy Industries, as amended by that
certain Letter Agreement dated as of April 7, 2005 (as the same may be
amended or restated, the “Embassy Industries Loan Agreement”), and that certain
Amended, Restated and Consolidated Promissory Note dated as of January 24,
2003, made by Embassy Industries to the order of the Bank in the original
principal amount of $1,697,300.74, as modified by that certain Amendment Letter
dated as of April 7, 2005 by and between the Bank and Embassy Industries
(as the same may be amended or restated, the “Embassy Industries Note”).

 

P&F
Industries guaranteed all obligations to the Bank under the Florida Pneumatic
Loan pursuant to that certain Unconditional Guaranty dated as of February 26,
1999, as amended by that certain Amendment Letter dated as of January 24,
2003 by and between Florida Pneumatic, P&F Industries and the Bank (the “Florida
Pneumatic Guaranty”). P&F Industries also guaranteed all obligations under
the Countrywide Hardware Loan pursuant to that certain Unconditional Guaranty
(Replacement and Restated) dated as of April 23, 2003, as amended by that
certain Amendment Letter dated as of April 7, 2005 (the “Countrywide
Hardware Guaranty”). P&F Industries also guaranteed all obligations under
the Embassy Industries Loan pursuant to that certain Unconditional Guaranty
dated as of January 24, 2003, as amended by that certain Amendment Letter
dated as of April 7, 2005 (the “Embassy Industries Guaranty”).

 

The
Florida Pneumatic Note, the Countrywide Hardware Note and the Embassy
Industries Note are hereinafter collectively referred to as the “Note”. The
Florida Pneumatic Guaranty, the Countrywide Hardware Guaranty and the Embassy
Industries Guaranty are hereinafter collectively referred to as the “Guaranty”.
The Florida Pneumatic Loan Agreement, the Countrywide Hardware Loan Agreement
and the Embassy Industries Loan Agreement are hereinafter collectively referred
to as the “Loan Agreement”. The Note, the Loan Agreement, the Guaranty, the
Florida Pneumatic Loan Documents, the Countrywide Hardware Loan Documents and
the Embassy Industries Loan Documents are hereinafter collectively referred to
as the “Loan Documents.”

 

Florida
Pneumatic, Countrywide Hardware and Embassy Industries have requested and the
Bank has agreed to delete the Debt Service Coverage Ratio, the Senior
Liabilities to Effective Tangible Net Worth Ratio, and the Minimum Capital Base
requirement in the Florida Pneumatic Loan Agreement, the Countrywide Hardware
Loan Agreement, the Embassy Industries Loan Agreement, the Florida Pneumatic
Guaranty, the Countrywide Hardware Guaranty and the Embassy Industries
Guaranty.

 

Florida
Pneumatic, Countrywide Hardware and Embassy Industries have also requested and
the Bank has agreed to delete the Tax Returns reporting requirement in the
Florida Pneumatic Loan Agreement, the Countrywide Hardware Loan Agreement, the
Embassy Industries Loan Agreement, the Florida Pneumatic Guaranty, the
Countrywide Hardware Guaranty and the Embassy Industries Guaranty. This covenant
shall be deleted in its entirety in each agreement, as applicable.

 

Florida
Pneumatic, Countrywide Hardware and Embassy Industries have also requested and
the Bank has agreed to amend the Annual Financial Statements covenant in the
Florida Pneumatic Loan Agreement, the Countrywide Hardware Loan Agreement, the
Embassy Industries Loan Agreement, the Florida Pneumatic Guaranty, the
Countrywide Hardware Guaranty and the Embassy Industries Guaranty. This
covenant shall be deleted in its entirety in each agreement, as applicable, and
replaced with the following covenant by operation of this Letter Agreement:

 

 

ANNUAL FINANCIAL STATEMENTS.  Borrower shall deliver to
Bank, within 120 days after the close of each fiscal year, audited financial
statements of P & F Industries, Inc., a Delaware corporation (“P&F
Industries”) reflecting the operations of P&F Industries during such fiscal
year, including, without limitation, a balance sheet, profit and loss statement
and statement of cash flows, with supporting schedules and in reasonable
detail, prepared in conformity with generally accepted accounting principles,
applied on a basis consistent with that of the preceding year. All such
statements shall be examined by an independent certified public accountant acceptable
to Bank. The opinion of such independent certified public accountant shall not
be acceptable to Bank if qualified due to any limitations in scope imposed by
Borrower, P&F Industries, or any other person or entity. Any other
qualification of the opinion by the accountant shall render the acceptability
of the financial statements subject to Bank’s approval. Borrower shall also
deliver any loan covenant compliance certificate executed by P&F Industries
for the preceding fiscal year.

 

Florida
Pneumatic, Countrywide Hardware and Embassy Industries have also requested and
the Bank has agreed to amend the Financial Covenant section in the Florida
Pneumatic Guaranty, the Countrywide Hardware Guaranty and the Embassy
Industries Guaranty. This section shall be deleted in its entirety in each
agreement, as applicable, and replaced with the following covenant by operation
of this Letter Agreement:

 

Cross Default.  Any default in the payment
or performance of any obligation under any other loans, contracts or agreements
of Guarantor, any Subsidiary or Affiliate of Guarantor (“Affiliate” shall have
the meaning as defined in 11 U.S.C. § 101, as in effect from time to time,
except that the term “Guarantor” shall be substituted for the term “Debtor”
therein; “Subsidiary” shall mean any corporation of which more than 50% of the
issued and outstanding voting stock is owned directly or indirectly by
Guarantor), with Citibank or its affiliates (or a substitute lender), which is
not cured or waived within ninety (90) days of the date of the subject default
shall constitute a default hereunder, without the necessity of further notice.
Guarantor shall provide Bank with copies of all default notifications from such
lenders within five (5) days of its receipt of the same.

 

Florida
Pneumatic acknowledges, represents, warrants and confirms to the Bank that the
Florida Pneumatic Note, the Florida Pneumatic Loan Agreement, and the other
Florida Pneumatic Loan Documents, as amended or modified to date, (i) are
valid and binding upon Florida Pneumatic and enforceable in accordance with the
respective terms thereof; (ii) all of the terms, covenants, conditions,
representations, warranties and agreements contained in the Loan Documents are
hereby ratified and confirmed in all respects; (iii) there are no
defenses, setoffs, counterclaims, cross-actions or equities in favor of Florida
Pneumatic to or against the enforcement of the Florida Pneumatic Note, the
Florida Pneumatic Loan Agreement, or the other Florida Pneumatic Loan
Documents; (iv) no oral representations, statements, or inducements have
been made by the Bank with respect to the Florida Pneumatic Loan, this Letter
Agreement or any Florida Pneumatic Loan Document; and (v) the Bank is
under no obligation to further amend or modify the Florida Pneumatic Loan
Agreement or any other Florida Pneumatic Loan Document.

 

Florida
Pneumatic, Countrywide Hardware and Embassy Industries have also requested and
the Bank has agreed to approve any acquisition(s) made by P&F
Industries of entities within P&F Industries’ current industry, provided
that any such acquisition does not create a default or event of default under
any of the Citibank Loan Documents.

 

 

Countrywide
Hardware acknowledges, represents, warrants and confirms to the Bank that the
Countrywide Hardware Note, the Countrywide Hardware Loan Agreement, and the
other Countrywide Hardware Loan Documents, as amended or modified to date, (i) are
valid and binding upon Countrywide Hardware and enforceable in accordance with
the respective terms thereof; (ii) all of the terms, covenants,
conditions, representations, warranties and agreements contained in the Loan
Documents are hereby ratified and confirmed in all respects; (iii) there
are no defenses, setoffs, counterclaims, cross-actions or equities in favor of
Countrywide Hardware to or against the enforcement of the Countrywide Hardware
Note, the Countrywide Hardware Loan Agreement, or the other Countrywide
Hardware Loan Documents; (iv) no oral representations, statements, or
inducements have been made by the Bank with respect to the Countrywide Hardware
Loan, this Letter Agreement or any Countrywide Hardware Loan Document; and (v) the
Bank is under no obligation to further amend or modify the Countrywide Hardware
Loan Agreement or any other Countrywide Hardware Loan Document.

 

Embassy
Industries acknowledges, represents, warrants and confirms to the Bank that the
Embassy Industries Note, the Embassy Industries Loan Agreement, and the other
Embassy Industries Loan Documents, as amended or modified to date, (i) are
valid and binding upon Embassy Industries and enforceable in accordance with
the respective terms thereof; (ii) all of the terms, covenants,
conditions, representations, warranties and agreements contained in the Loan
Documents are hereby ratified and confirmed in all respects; (iii) there
are no defenses, setoffs, counterclaims, cross-actions or equities in favor of
Embassy Industries to or against the enforcement of the Embassy Industries
Note, the Embassy Industries Loan Agreement, or the other Embassy Industries
Loan Documents; (iv) no oral representations, statements, or inducements
have been made by the Bank with respect to the Embassy Industries Loan, this
Letter Agreement or any Embassy Industries Loan Document; and (v) the Bank
is under no obligation to further amend or modify the Embassy Industries Loan
Agreement or any other Embassy Industries Loan Document.

 

P&F
Industries acknowledges, represents, warrants and confirms to Bank that (i) the
Florida Pneumatic Guaranty, the Countrywide Guaranty and the Embassy Industries
Guaranty are valid and binding upon P&F Industries and enforceable in
accordance with the respective terms thereof; (ii) all of the terms,
covenants, conditions, representations, warranties and agreements contained in
the Florida Pneumatic Guaranty, the Countrywide Guaranty and the Embassy
Industries Guaranty are hereby ratified and confirmed in all respects; and (iii) the
Bank is under no obligation to amend or modify the Florida Pneumatic Guaranty,
the Countrywide Guaranty or the Embassy Industries Guaranty.

 

Except
as specifically modified herein, all other terms, conditions and provisions of
the Loan Documents remain unchanged and in full force and effect. The Bank
shall be under no obligation to further modify or amend any of the Loan
Documents.

 

[CONTINUES ON FOLLOWING PAGE]

 

 

Very Truly Yours,

 

Wachovia Bank, National
Association

 

 

	
  By:

  	
  /s/ Frank Salomone

  	
   

  
	
  Name:

  	
  Frank
  Salomone

  	
   

  
	
  Title:

  	
  Vice
  President

  	
   

  
				

 

[SIGNATURE APPEARS
ON NEXT PAGE]

 

 

AGREED
TO AND ACKNOWLEDGED BY:

 

FLORIDA
PNEUMATIC MANUFACTURING

CORPORATION,
a Florida corporation

 

 

	
  By:

  	
  /s/ Joseph A. Molino, Jr.

  	
   

  
	
  Name:

  	
  Joseph
  A. Molino, Jr.

  	
   

  
	
  Title:

  	
  Vice
  President

  	
   

  
				

 

[SIGNATURE APPEARS
ON NEXT PAGE]

 

 

COUNTRYWIDE
HARDWARE, INC., a

Delaware
corporation

 

 

	
  By:

  	
  /s/ Joseph A. Molino, Jr.

  	
   

  
	
  Name:

  	
  Joseph
  A. Molino, Jr.

  	
   

  
	
  Title:

  	
  Vice
  President

  	
   

  
				

 

[SIGNATURE APPEARS
ON NEXT PAGE]

 

 

EMBASSY INDUSTRIES, INC.,

a New York corporation

 

 

	
  By:

  	
  /s/ Joseph A. Molino, Jr.

  	
   

  
	
  Name:

  	
  Joseph
  A. Molino, Jr.

  	
   

  
	
  Title:

  	
  Vice
  President

  	
   

  
				

 

[SIGNATURE APPEARS
ON NEXT PAGE]

 

 

P&F
INDUSTRIES, INC., a Delaware corporation

 

 

	
  By:

  	
  /s/ Joseph A. Molino, Jr.

  	
   

  
	
  Name:

  	
  Joseph
  A. Molino, Jr.

  	
   

  
	
  Title:

  	
  Vice
  President

  	
   

  
				

 

 

INSTRUMENT#:
2010089501, BK: 19769 PG: 429 PGS: 429 — 435 03/17/2010 at 10:13:55 AM,  DEPUTY CLERK:BLOGGANS Pat Frank, Clerk of the
Circuit Court Hillsborough County

 

Prepared
by and after

recording
return to:

 

Thomas
G. Wilson, III, Esq.

Smith
Hulsey & Busey

Post
Office Box 53315

Jacksonville,
Florida 32201-3315

 

LOAN DOCUMENTS MODIFICATION AGREEMENT

 

THIS LOAN DOCUMENTS MODIFICATION AGREEMENT (this “Agreement”)
is made as of February 24, 2010 (the “Effective Date”), by and
between COUNTRYWIDE HARDWARE, INC., a Delaware
corporation (“Borrower”), whose address for notices is 445 Broadhollow
Road, Suite 100, Melville 11747, and WACHOVIA BANK, NATIONAL
ASSOCIATION, a national banking association (“Bank”), whose
address for notices is 225 Water Street, Third Floor, FLO061, Jacksonville,
Florida 32202.

 

Recitals:

 

1.             In connection with
a loan from Bank to Borrower in the amount of $2,024,000.00 (the “Loan”),
Borrower executed and delivered to Bank that certain Promissory Note in the
original principal amount of $2,024,000.00 dated as of May 24, 2002 (the “Note”).
The Note is secured by, among other things, that certain Mortgage, Security
Agreement and Absolute Assignment of Leases from Borrower to Bank dated as of May 24,
2002 and recorded in Official Records Book 11663, Page 770, of the public
records of Hillsborough County, Florida (the “Mortgage”).

 

2.             The proceeds of the
Loan have been advanced in accordance with that certain Loan Agreement dated as
of May 24, 2002 by and between Borrower and Bank, as modified and amended
by that certain Amendment Letter dated as of December 31, 2006 (as the
same may be further amended from time to time, collectively, the “Loan
Agreement”).

 

3.             The Note, the
Mortgage, the Loan Agreement and all other documents to which Bank is a party
or beneficiary now or in the future together with all amendments,
modifications, renewals or extensions thereof, that evidence, secure or
otherwise relate to the Loan are hereinafter collectively referred to as the “Loan
Documents.”

 

4.             Borrower has
requested that Bank modify and amend certain of the Loan Documents, and Bank is
willing to modify and amend certain of the Loan Documents, provided that
Borrower comply with and consent to the terms set forth in this Agreement and
not otherwise.

 

 

NOW, THEREFORE, in consideration of Bank modifying and
amending certain of the Loan Documents, Borrower and Bank hereby agree as
follows:

 

1.             Recitals. Borrower
warrants and represents to Bank that the foregoing Recitals are true and
correct. The Recitals are incorporated into this Agreement by this reference.

 

2.             Estoppel. Borrower
represents and warrants to Bank that, as of Effective Date, the outstanding
principal balance of the Note is $1,090,711.48, that accrued interest has been
paid to January 21, 2010, and that accrued interest in the amount of $-0-
remains due and unpaid, that the funds have been disbursed in accordance with
the terms and conditions of the Loan Agreement, that no letters of credit are
outstanding from Bank to Borrower, that the outstanding principal balance of
the Note and accrued interest are secured by the Mortgage and are due, owing
and unpaid, without defense, setoff or counterclaim, and that any defenses,
setoffs or counterclaims, if any, held by Borrower presently or which may be held
by Bank in the future, whether known or unknown, are hereby forever waived,
released and discharged by Borrower.

 

3.             Ratification.
Borrower ratifies, approves and consents to all the disbursements of
the Loan made by Bank under the Loan Documents and acknowledges that Bank has
fully complied with the terms and conditions of the Loan Documents. Borrower
acknowledges that the Loan Documents are in full force and effect. Borrower
hereby restates and confirms the covenants, representations, agreements, grants
and warranties in the Loan Documents. Borrower ratifies, approves and consents
to all action or inaction of Bank with respect to the Loan, including, but not
limited to, the administering, disbursing, handling, servicing, securing,
demanding, enforcing and collecting of the Loan.

 

4.             Modification of
the Note. The Note is hereby amended and modified as follows:

 

(a)           The Section entitled
“Repayment Terms” is deleted and replaced in its entirety to read as follows:

 

(i)            This Note shall be
due and payable in consecutive monthly payments of principal of $11,244.44,
plus accrued interest, commencing on March 24, 2010, and continuing on the
same day of each month thereafter until fully paid. In any event, all principal
and accrued interest shall be due and payable on June 1, 2010.

 

5.             Modification of
the Mortgage. The Mortgage is hereby amended and modified such
that the definition of the “Note” is hereby modified and amended to include the
Note, as amended, modified and extended by this Agreement.

 

6.             Modification of
the Loan Agreement. The Loan Agreement is hereby modified and amended
such that the definition of the “Note” is hereby modified and amended to
include the Note as amended, modified and extended in this Agreement.

 

2

 

7.             Reconfirmation.
Borrower hereby restates and reconfirms all representations, warranties,
convenants, agreements and stipulations contained in the Loan
Documents, as if set our herein in full and further acknowledges and agree that
the Loan Documents, are valid, binding and legally enforceable against Borrower in accordance with
their terms, as modified.

 

8.             Warranties and
Representations. Borrower warrants and represents as follows:

 

(a)          This Agreement and the Loan Documents constitute legally
binding obligations and are enforceable against Borrower in accordance with
their respective terms;

 

(b)         Neither this Agreement nor any other document delivered in
connection herewith or action taken in connection herewith shall be deemed or
construed to be a satisfaction, novation, or release of any obligations of
Borrower under the Loan Documents, and the execution of this Agreement shall
not constitute a waiver of any of the Bank’s rights thereunder except as
provided herein;

 

(c)          Bank has no further obligation to Borrower under the terms
of the Loan Documents or with respect to any transaction contemplated thereby
or related thereto except as expressly set forth herein; and

 

(d)         Borrower is not a party to, or subject of, any lawsuit,
complaint, counterclaim, cross-claim, adversary proceeding, arbitration
proceeding, bankruptcy or insolvency proceeding, administrative claim or other
legal action or proceeding.

 

9.             General Release
of Bank.  Borrower, in consideration of the premises herein contained and
other good and valuable consideration, the adequacy and sufficiency of which is
hereby acknowledged hereby releases and discharges Bank, its agents, officers,
directors, employees, affiliates, attorneys, successors and assigns, jointly
and severally, from any and all manner of action and actions, cause or causes
of action, suits, debts, sums of money, accounts, covenants, contracts,
controversies, obligations, liabilities, agreements, promises, expenses,
damages, claims or demand of every nature and kind whatsoever, if any, at law
or in equity, whether now accrued or hereafter maturing and whether known or
unknown which Borrower now has or hereafter can, shall, or may have by reason
of any matter, cause or thing from the beginning of the world to and including
the date hereof which may arise or could arise by reason of the making,
administration, disbursement, documentation, demand for payment, foreclosure or
modification of the Loan.

 

10.           Impairment. Nothing herein
invalidates or shall invalidate any security now held by Bank for the aforesaid
indebtedness as herein modified nor impair or release any covenant,
modification, condition, agreement or stipulation in the Loan Documents and the
same shall continue in full force and effect, and Borrower covenants and agrees
to keep, perform, comply with, and abide by, each and every of the covenants,
conditions, agreements and stipulations of this Agreement and the Loan
Documents.

 

3

 

11.           Costs, Expenses
and Attorneys’ Fees. Borrower agrees to pay all costs and expenses incurred
by Bank in connection with the negotiation, preparation and administration of
this Agreement, including, but not limited to, a
$5,000.00 modification fee to Bank.

 

12.           Taxes. It is the
intent of Borrower and Bank that this Agreement only modify the terms of the
Loan Documents in a manner so that no additional title insurance premiums,
documentary stamp tax or intangible personal property tax shall be due and
payable. In the event additional title insurance premiums, documentary stamp
tax, intangible personal property tax or other taxes or costs are assessed,
imposed or, in Bank’s sole opinion, are due and payable, Borrower shall
immediately pay the same, including any interest and penalties imposed in
connection therewith, and Borrower hereby agrees to indemnify, defend and hold
Bank harmless from any liability, loss, costs, damages, interest and penalties,
including attorneys’ fees, that Bank may incur thereby. Any sums paid by Bank
shall be immediately due and payable by Borrower. This provision shall survive
the repayment of the Note.

 

13.           Default. If any of
Borrower’s representations contained herein or in the Note or in the Mortgage
shall prove to be incorrect or untrue in any material manner or if Borrower
fails to perform any of its covenants and agreements contained herein, the
occurrence of any such event shall constitute a default under the Note and the
Mortgage entitling Bank to the exercise of all of its rights and remedies under
the Note and the Mortgage.

 

14.           Survival.
Notwithstanding the execution of this Agreement, Borrower acknowledges that all
remedies of Bank under the terms of the Loan Documents shall survive the
execution hereof and that each and every remedy shall be cumulative and
concurrent and shall be in addition to each and every other right, power and
remedy given hereunder. Except as expressly set forth herein, nothing contained
in this Agreement shall constitute a waiver of any rights or remedies of the
Bank under the terms of the Loan Documents.

 

15.           No Novation. Borrower and
Lender hereby acknowledge and agree that this Agreement shall not constitute a
novation of the indebtedness evidenced by the Loan Documents, and further that
the terms and provisions of the Loan Documents shall remain valid and in full
force and effect except as may be hereinabove modified and amended.

 

16.           Invalidity. In case any
one or more of the provisions contained in this Agreement shall for any reason
be held to be invalid, illegal or unenforceable in any respect, the same shall
not affect any other provision of this Agreement and this Agreement shall be
construed as if such invalid or illegal or unenforceable provision had never
been contained herein.

 

17.           Governing Law. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Florida without regard to choice of law rules thereunder.

 

4

 

18.           Modifications.
The terms of this Agreement may not be changed, modified, waived, discharged or
terminated orally, but may only be done so by instruments in
writing signed by the party against whom enforcement of the change,
modification, waiver, discharge or termination is asserted.

 

19.           Paragraph
Headings. Paragraph headings are inserted for convenience of
reference only and shall not be involved or considered in the interpretation of
this Agreement.

 

20.           Entire Agreement. Except as
specifically set forth herein, there are no other modifications of any of the
Loan Documents nor any other agreements between the parties relating to the
modification, amendment or extension of the Note.

 

21.           Counterparts. This Agreement
may be executed in any number of counterparts and each counterpart taken
together shall constitute a single instrument.

 

22.           Binding Agreement. The covenants
and agreements contained herein shall be binding upon and inure to the benefit
of Borrower and Bank, and their respective heirs, successors, assigns, personal
representatives and legal representatives.

 

23.           Waiver of Jury
Trial. BANK AND BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION INVOLVING THE LOAN DOCUMENTS, THIS AGREEMENT, THE INDEBTEDNESS
EVIDENCED BY THE NOTE AND SECURED BY THE MORTGAGE OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTION OF ANY
PARTY RELATED TO OR INVOLVING THE LOAN DOCUMENTS, THIS AGREEMENT OR THE
INDEBTEDNESS EVIDENCED BY THE NOTE AND SECURED BY THE MORTGAGE. THIS PROVISION
IS A MATERIAL INDUCEMENT FOR BANK ENTERING INTO THIS AGREEMENT.

 

[signatures on following pages]

 

5

 

IN WITNESS WHEREOF, the parties have caused
this Agreement to be executed and delivered as of the Effective Date.

 

 

	
   

  	
  “BORROWER”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COUNTRYWIDE
  HARDWARE, INC., a 

  Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Joseph A. Molino, Jr.

  
	
   

  	
   

  	
  Joseph
  A. Molino, Jr.

  
	
   

  	
   

  	
  Vice
  President

  

 

 

STATE
OF NEW YORK

 

COUNTY
OF SUFFOLK

 

 

The foregoing instrument was acknowledged before me this 23rd day of February 2010, by Joseph A. Molino, Jr.,
as Vice President of Countrywide Hardware, Inc., a Delaware corporation,
on behalf of the corporation, who is personally known to me or who has
produced                          as
identification.

 

	
   

  	
  /s/
  Robert C. Weiden

  
	
   

  	
  Print
  Name: 

  	
  Robert
  C. Weiden

  
	
   

  	
  Notary
  Public, State and County Aforesaid

  
	
   

  	
  My
  Commission Expires:

  	
  12-22-10

  
	
   

  	
  Commission
  Number: 

  	
  4875900

  
				

 

6

 

	
   

  	
  “BANK”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WACHOVIA BANK, NATIONAL  ASSOCIATION, a national banking  association

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ralph L Kelly

  
	
   

  	
  Name:

  	
  Ralph L Kelly

  
	
   

  	
  Title:

  	
  SVP

  

 

 

STATE OF FLORIDA

 

COUNTY OF DUVAL

 

The foregoing
instrument was acknowledged before me this 24th day of February 2010 by Ralph L Kelly, as
Senior Vice President of Wachovia Bank, National Association, a national
banking association, on behalf of the association, who is personally known to
me or has
produced                                        as
identification.

 

 

	
   

  	
  /s/
  Thomas G. Wilson III

  
	
   

  	
  Print
  Name:

  	
   

  
	
  [SEAL]

  	
  Notary
  Public, State and County Aforesaid

  
	
   

  	
  Commission
  Number:

  	
   

  
	
   

  	
  My
  Commission Expires:

  	
   

  
				

 

7EXHIBIT 10.16

 

INDEMNIFICATION AGREEMENT

 

THIS
INDEMNIFICATION AGREEMENT (the “Agreement”), made as of the 23rd day of April, 2010 by P&F Industries, Inc.,
a Delaware corporation, with an office located at 445 Broadhollow Road, Suite 100, Melville, New York (the “Indemnitor”)
in favor of Marc Schorr, with an address at One Hughs Center Drive, Penthouse 1904, Las Vegas,
Nevada  89109 (“Schorr”) and Richard A.
Horowitz, with an address at 90 Wheatley Road, Old Westbury, NY 11568 (“Horowitz”
and together with “Schorr”, each a “Lender” and collectively the “Lenders”).

 

W I T N E S S E T H :

 

WHEREAS,
the Indemnitor and each of its subsidiaries (the “Obligors”), entered into a Credit
Agreement with Citibank, N.A. (“Citibank”) and HSBC Bank USA, National
Association (“HSBC” and together with Citibank, each a “Bank” and collectively,
the “Banks”), dated as of June 30, 2004 (the “Loan Agreement”) pursuant to
which the Banks extended certain financial accommodation to the Obligors,
including a line of credit to the Obligors (the “Line of Credit”);

 

WHEREAS,
the Banks have alleged a default under the Loan Agreement based upon, among
other things, the Obligors failure to pay all amounts outstanding under the
Line of Credit on the original maturity date of March 30, 2010;

 

WHEREAS,
the Obligors have sought financing from other sources, but to date, have been
unable to obtain commitments for any additional equity or debt financing;

 

WHEREAS,
the Obligors have requested that the Banks extend the maturity date of the Line
of Credit from March 30, 2010 until January 1, 2011;

 

WHEREAS,
as a condition to the Banks’ agreement to extend the maturity date on the Line
of Credit, the Banks require, among other things, that the Lenders advance an
aggregate of $750,000.00 in the form of equity and/or subordinated debt;

 

WHEREAS,
the Lenders and the Obligors have engaged in good faith, arm’s-length
negotiations regarding the form of such $750,000.00 advance and the Lenders
have agreed to fund such advance in the form of subordinated loans in the total
sum of $750,000.00 to the Obligors (together the “Loan”);

 

WHEREAS,
the Lenders have conditioned making the Loan on (a) obtaining a lien on
all or substantially all of the assets of the Obligors, which lien shall be
junior in all respects to the lien in favor of the Banks, and (b) the
Indemnitor’s provision of this limited indemnity with respect to the Loan, as
described more fully below;

 

WHEREAS,
without the Loan and the resulting extension of the maturity date on the Line
of Credit and other accommodations extended by the Banks, some or all of the
Obligors would likely be forced to immediately discontinue operating or
otherwise liquidate and would likely suffer material and irreparable harm.

 

 

NOW,
THEREFORE, in consideration for the premises herein set forth, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:

 

1.                                       Subordination
in Favor of Banks. 
Notwithstanding anything to the contrary in this Agreement, the payment
and priority of all claims of either Lender under this Agreement are
subordinate in right, time, and priority to the claims of the Banks, and all
such amounts payable to either Lender, shall not be paid or payable, except as
set forth in the Subordination and Intercreditor Agreement dated April 23,
2010 between the Banks and the Lenders (as amended, restated, supplemented or
modified from time to time, the “Subordination Agreement”).  The Subordination Agreement is incorporated
by reference as if set forth in full.  To
the extent the Subordination Agreement requires, Indemnitor shall pay the Banks
any sums this document otherwise requires Indemnitor to pay either Lender.

 

2.                                       Indemnification
of Claims.  If any
claim, litigation, demand, suit, action or proceeding is made or commenced by any
person or entity against the Lenders arising from or relating to the Loan (a “Proceeding”),
and the Lenders provide the Indemnitor with notice of such Proceeding and
cooperate with the Indemnitor as required by Section 8 of this Agreement, the
Indemnitor shall elect one of the following options, with such election to be
made in the Indemnitor’s sole discretion promptly following receipt of the
notice and cooperation of the Lenders as contemplated in Section 8 of this
Agreement:

 

(a)  The Indemnitor
shall indemnify the Lenders by paying $750,000.00; provided, however, that, if
the Indemnitor so elects to make such payment under this Section 2(a),
then (i) the
Lenders shall effect an assignment of the Loan to the Indemnitor or to another
party designated by the Indemnitor (the “Assignment”), (ii) the Indemnitor
shall be entitled to assume and control the defense of any such Proceeding,
including in connection with any discussions, negotiations, proceedings or
decisions relating to settlement of such Proceeding, and (iii) the Lenders
shall have no further right to indemnity or otherwise charge the Indemnitor for
any costs or losses and the Indemnitor shall not be liable for any costs or losses subsequently incurred by the Lenders in
connection with such Proceeding; provided further, that if the Lenders fail to
effect the Assignment for any reason, the Indemnitor shall be relieved of all
liabilities and obligations under this Agreement; or

 

(b) The Indemnitor shall
indemnify, protect and hold the Lenders harmless from and against any and all
damages, losses, liabilities, obligations, penalties, judgments, costs or
expenses, including, without limitation, reasonable attorneys’ and experts’
fees and disbursements of any kind or of any nature whatsoever (the “Expenses”)
in connection with such Proceeding in a total, aggregate amount not to exceed
$800,000.00, provided, however, that, if the Indemnitor so elects to provide
indemnification under this Section 2(b) up to such amount, then (i) the
Indemnitor shall not take assignment of the Loan or assume and control the
defense of any such Proceeding, (ii) the Indemnitor shall not in any event be responsible
for any Expenses incurred by the Lenders beyond such amount and (iii) the Lenders
shall not enter into any 

 

2

 

settlement of such
Proceeding without the prior written consent of the Indemnitor, which consent
shall not be unreasonably withheld.

 

3.                                       Exclusions.  The Indemnitor shall not be required to make
any payment or indemnity:

 

(a) under Section 2(b) of
this Agreement for any loss, direct or indirect, of principal and/or interest
that may be suffered by the Lenders (which loss, for the avoidance of doubt,
includes the failure of the Lenders to obtain repayment of the Loan);

 

(b) under Section 2(a) or Section 2(b) of this
Agreement in connection with any allegation in a Proceeding of a breach by any
Lender seeking indemnification hereunder of any agreement or instrument entered
into in connection with the Loan or the subordination agreement between Lenders
and the Banks or of any obligation of the Lenders to the Indemnitor, or the
Banks in connection with the Loan or the subordination agreement; or

 

(c) under
Section 2(a) or Section 2(b) of this Agreement if, with respect to a Proceeding,  a court of competent jurisdiction
ultimately determines in a final judgment, not subject to appeal, that any
Lender seeking indemnification hereunder has committed fraud or a knowing violation
of law, acted with gross negligence, engaged in willful misconduct, breached a
fiduciary duty or engaged in conduct that would otherwise not be subject to
indemnification under Section 145 of the Delaware General Corporation Law.

 

4.                                       No Effect Upon
Certain Changes.  The
liability of the Indemnitor under this Agreement shall in no way be limited or
impaired nor shall it be expanded by: (a) any amendment or modification of
the provisions of the Loan Agreement, the Line of Credit and/or the Loan; (b) any
extensions of time for performance; (c) any sale, assignment or
foreclosure with respect to the collateral under the Loan Agreement and/or the
Loan; or (d) the release or substitution in whole or in part of any
security under the Loan Agreement and/or the Loan.

 

5.                                       Payment by the
Indemnitor.  With respect
to a Proceeding for which the Indemnitor has elected to indemnify the Lenders
under Section 2(b) of this Agreement, defense costs incurred by any
Lender shall be payable by the Indemnitor in advance of the final disposition
of such Proceeding upon the Indemnitor’s receipt of an undertaking by or on
behalf of the Lender providing that the Lender undertakes to the fullest extent
permitted by law to repay such amount if it shall ultimately be determined that
the Lender is not entitled to be indemnified by the Indemnitor under this
Agreement and upon reasonably satisfactory evidence of such Lender’s ability to
make such repayment.  In the event a
Lender is entitled to indemnity under this Agreement (following a final
judgment by a court of competent jurisdiction, not subject to appeal), the
Indemnitor agrees that any such payments shall become due within ten (10) days
of written demand together with reasonably requested supporting documentation.

 

6.                                       Control of
Proceeding.  If the
Indemnitor elects option 1.(b), above, then the Lenders shall have the right to
defend such Proceeding with their own counsel and take all actions in the
defense and compromise of such Proceeding.

 

3

 

7.                                       No Waiver by
the Lenders.  No delay by
the Lenders in exercising any right, power or privilege hereunder or under any
of the loan documents executed in connection with the Loan shall operate as a
waiver of any such right, power or privilege, nor shall the release of the
Indemnitor or any other party liable upon or in respect of this Agreement
affect the liability of any party not so released.

 

8.                                 Notice and Cooperation by Indemnitee. 
In case there shall be threatened or made any claim, litigation, demand,
suit, action or proceeding for which the Lenders may seek indemnification
hereunder (a “Potential Action”), the Lenders shall promptly give notice of the
Potential Action to Indemnitor and shall cooperate fully in any effort by the
Indemnitor to evaluate and determine the nature of the Potential Action for
purposes of Sections 2 and 3 of this Agreement, including providing to the
Indemnitor, upon reasonable advance request, any documentation or information
which is not privileged or otherwise protected from disclosure and which is
reasonably available to the Lenders and reasonably necessary to such evaluation
or determination.

 

9.                                 Subrogation.  Notwithstanding
any other provision of this Agreement to the contrary, in the event of any
payment under this Agreement, the Indemnitor shall be subrogated to the extent
of such payment to all of the rights of recovery of the Lenders, which shall
execute all papers required and take all action necessary to secure such
rights, including execution of such documents as are necessary to enable the
Indemnitor to bring suit to enforce such rights.

 

10.                                 Other
Advancement and Indemnity Rights.  As a condition to any advancement or
indemnity under this Agreement, the Lenders must take such actions as are
reasonably necessary to perfect and pursue any other rights of indemnity and/or
advancement, including to the extent applicable any available insurance (the “Other
Rights”).  The Indemnitor’s obligation to
provide advancement or indemnity under this Agreement shall be for the net loss
suffered by the Lenders with respect to a cost or expense for which advancement
or indemnification is provided under this Agreement after giving effect to all
other recoveries or economic benefits received by the Lenders in connection
with such Other Rights.

 

11.                                 Binding Effect.  This Agreement has been duly authorized by
the Indemnitor and represents a valid and binding obligation of the Indemnitor,
enforceable in accordance with its terms. 
Except as herein provided, this Agreement shall be binding upon and
inure to the benefit of the Indemnitor and the Lenders and their respective
heirs, personal representatives, successors and assigns.  No other person shall be entitled to claim
any right or benefit hereunder, including, without limitation, to claim status
as a third-party beneficiary of this Agreement.

 

12.                                 Notices. All notices,
exercises of right, requests, demands and other communications provided for in
this Agreement shall be in writing and unless otherwise specifically provided
for herein, shall be deemed to have been given at the time when personally
delivered, one day after deposit with a reputable overnight courier service for
next day delivery or three (3) days after being sent by regular mail, at
the address of the Indemnitor and each 

 

4

 

Lender
as set forth at the head of this Agreement or such other changed address of the
Indemnitor as may have been fixed by notice. 
A copy of any communication delivered pursuant to this Agreement shall
be simultaneously sent to Citibank, N.A., as Administrative Agent for the
Banks, at 750 Washington Boulevard, Stamford, Connecticut  06901, Attention:  John C. King.

 

13.                                 No
Modification.  No provision
of this Agreement may be modified, waived, discharged or terminated, except by
an instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.

 

14.                                 Applicable Law;
Jurisdiction.  This
Agreement and the rights and obligations of the parties hereunder shall in all
respects be governed by, and construed and enforced in accordance with, the
laws of the State of New York. The Indemnitor hereby irrevocably submits to the
exclusive jurisdiction of any state or federal court sitting in Nassau or
Suffolk County, State of New York and consents to any methods of service of
process provided for under applicable law.

 

15.                                 Counterparts;
Facsimile. This Agreement may be executed by the parties
hereto in one or more counterparts, each of which shall be deemed an original
and all of which when taken together shall constitute one and the same
agreement.  Any signature delivered by a
party by facsimile transmission shall be deemed to be an original signature
hereto.

 

16.                                 Severability. 
If any provision or provisions of this Agreement shall be held to be
invalid, illegal, unenforceable or would conflict with or
result in a breach of any agreement or instrument to which the Indemnitor is a
party or by which it or its properties are bound for any reason whatsoever: (a) the validity,
legality and enforceability of the remaining provisions of this Agreement
(including, without limitation, each portion of any section of this Agreement
containing any such provision held to be invalid, illegal or unenforceable, that
is not itself invalid, illegal or unenforceable) shall not in any way be
affected or impaired thereby and shall remain enforceable to the fullest extent
permitted by law; (b) such provision or provisions shall be deemed
reformed to the extent necessary to conform to applicable law and to give the
maximum effect to the intent of the parties hereto; and (c) to the fullest
extent possible, the provisions of this Agreement (including, without
limitation, each portion of any section of this Agreement containing any such
provision held to be invalid, illegal or unenforceable, that is not itself
invalid, illegal or unenforceable) shall be construed so as to give effect to
the intent manifested thereby.

 

17.                                 Entire Agreement.  This
Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
understandings, oral, written and implied, between the parties hereto with
respect to the subject matter hereof.

 

18.                                 Duration of Agreement.  This Agreement shall continue until the
expiration of the statute of limitations for any potential claim that is
subject to indemnity under this Agreement.

 

5

 

IN
WITNESS WHEREOF, the parties have caused this Agreement to be duly executed on
the date first written above.

 

 

	
   

  	
  P&F
  INDUSTRIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph A. Molino,
  Jr.

  
	
   

  	
  Name:

  	
  Joseph A. Molino, Jr.

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
  AGREED
  AND ACCEPTED:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Marc Schorr

  	
   

  	
   

  
	
  Marc
  Schorr

  	
   

  
	
   

  	
   

  
	
  /s/ Richard A.
  Horowitz

  	
   

  	
   

  
	
  Richard
  A. Horowitz

  	
   

  
					

 

6

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