Document:

EXHIBIT
10.1

AMENDMENT NO. 7

TO

CREDIT AGREEMENT

THIS AMENDMENT NO. 7 TO CREDIT
AGREEMENT, is entered
into as of February 12, 2007 (the “Amendment”), by and among P&F INDUSTRIES, INC., a Delaware
corporation  (“P&F”), FLORIDA PNEUMATIC MANUFACTURING CORPORATION,
a Florida corporation (“Florida Pneumatic”), EMBASSY
INDUSTRIES, INC., a New York corporation (“Embassy”), GREEN MANUFACTURING, INC., a Delaware
corporation (“Green”), COUNTRYWIDE HARDWARE,
INC., a Delaware corporation (“Countrywide”), NATIONWIDE INDUSTRIES, INC., a Florida
corporation (“Nationwide”), WOODMARK INTERNATIONAL,
L.P., a Delaware limited partnership (“Woodmark”), PACIFIC STAIR PRODUCTS, INC., a Delaware corporation (“Pacific”),
WILP HOLDINGS, INC., a Delaware
corporation (“WILP”), CONTINENTAL TOOL GROUP,
INC., a Delaware corporation (“Continental”) and HY-TECH MACHINE, INC., a Delaware corporation (“Hy-Tech”;
and collectively with P&F, Florida Pneumatic, Embassy, Green, Countrywide,
Nationwide, Woodmark, Pacific, WILP and Continental,  the
“Co-Borrowers”), CITIBANK, N.A. and HSBC BANK USA, NATIONAL ASSOCIATION (formerly known as HSBC
Bank USA) (collectively, the “Lenders”) and CITIBANK,
N.A., as Administrative Agent for the Lenders.

BACKGROUND

P&F, Florida Pneumatic, Embassy, Green,
Countrywide, Nationwide, Woodmark, Pacific and WILP (the “Original Co-Borrowers”),
the Lenders and the Administrative Agent are parties to a Credit Agreement,
dated as of June 30, 2004 (as same has been and may be further amended,
restated, supplemented or modified, the “Credit Agreement”), pursuant to which
the Lenders provide the Original Co-Borrowers with certain financial
accommodations.

The Original Co-Borrowers have requested, and the
Administrative Agent and the Lenders have agreed, subject to the terms and conditions
of this Amendment, to include Continental and Hy-Tech as Co-Borrowers under the
existing credit facility and to amend and waive certain provisions of the
Credit Agreement and the other Loan Documents, as herein set forth.  Capitalized terms used herein and not defined
herein shall have the meanings given to them in the Credit Agreement.

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

ARTICLE I.

Amendments to Credit Agreement.

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

CREDIT
AGREEMENT dated as of
June 30, 2004, by and among P&F
INDUSTRIES, INC., a Delaware corporation (“P&F”), FLORIDA PNEUMATIC MANUFACTURING CORPORATION,
a Florida corporation (“Florida Pneumatic”), EMBASSY
INDUSTRIES, INC., a New York corporation (“Embassy”), GREEN MANUFACTURING, INC., a Delaware
corporation, (“Green”), COUNTRYWIDE HARDWARE,
INC., a Delaware corporation (“Countrywide”), NATIONWIDE INDUSTRIES, INC., a Florida
corporation (“Nationwide”), WOODMARK INTERNATIONAL,
L.P., a Delaware limited partnership (“Woodmark”), PACIFIC STAIR PRODUCTS, INC., a Delaware corporation (“Pacific”),
WILP HOLDINGS,

 1
 

INC., a Delaware corporation (“WILP”), CONTINENTAL TOOL GROUP, INC., a Delaware corporation (“Continental”)
and HY-TECH MACHINE, INC., a Delaware
corporation (“Hy-Tech”; and collectively with P&F, Florida Pneumatic,
Embassy, Green, Countrywide, Nationwide, Woodmark, Pacific, WILP and
Continental  the “Co-Borrowers”), , the LENDERS which from time to time are parties to this
Agreement (individually a “Lender” and, collectively, the “Lenders”) and CITIBANK, N.A., a national banking association, as
Administrative Agent for the Lenders (the “Administrative Agent”).

Section 1.2.            The
following definitions in Section 1.01 of the Credit Agreement are hereby
amended and restated in their entirety to provide as follows:

“Amendment No. 7” shall mean
Amendment No. 7 to Credit Agreement, dated as of February 12, 2007, among
the Co-Borrowers, the Lenders and the Administrative Agent.

“Commitments” shall mean,
collectively, the Revolving Credit Commitment (including the Equipment Loan
Commitment), the Term Loan Commitment and the New Term Loan Commitment.

“Consolidated EBITDA” shall
mean for P&F and its Subsidiaries for any period, the Consolidated Net
Income (or Consolidated net loss) of P&F and its Subsidiaries for such
period, plus the sum, without duplication, of (a) gross interest expense, (b)
depreciation and amortization expenses or charges, (c) all income taxes to any
government or governmental instrumentality, expensed on P&F’s or its
Subsidiaries’ books (whether paid or accrued), (d) non-cash extraordinary
losses resulting from a write-off of goodwill in the context of an acquisition,
and (e) non-cash charges incurred in connection with accounting for (i) stock
options and stock-based compensation under Financial Accounting Standards No.
123R and (ii) non-cash expenses under Financial Account Standards No. 141 minus
the sum of (a) all extraordinary gains, (b) all interest income and (c) all
non-cash income or gain, in each case determined on a Consolidated basis for
P&F and its Subsidiaries in accordance with GAAP.  All of the foregoing categories shall be
calculated (without duplication) over the four fiscal quarters next preceding
the date of calculation thereof, provided that, not withstanding anything to
the contrary,  EBITDA of Hy-Tech shall be
calculated on an annualized basis for (i) the fiscal first quarter ending March
31, 2007 by multiplying the actual EBITDA of Hy-Tech for the fiscal quarter
ending March 31, 2007 by a fraction, the numerator of which is 365 and the
denominator of which is the number of days between the transaction closing date
and March 31, 2007, (ii) the fiscal quarter ending June 30, 2007 by multiplying
the sum of the actual EBITDA of Hy-Tech for the fiscal quarter ending March 31,
2007 and fiscal quarter ending June 30, 2007 by the fraction, the numerator of
which is 365 and the denominator of which is the number of days between the
transaction closing date and June 30, 2007, (iii) the fiscal quarter ending
September 30, 2007 by multiplying the sum of the actual EBITDA of Hy-Tech for
the fiscal quarter ending March 31, 2007, the fiscal quarter ending June 30,
2007 and the fiscal quarter ending September 30, 2007 by the fraction, the
numerator of which is 365 and the denominator of which is the number of days
between the transaction closing date and September 30, 2007, (iv) the fiscal
quarter ending December 31, 2007 by multiplying the sum of the actual EBITDA of
Hy-Tech for the fiscal quarter ending March 31, 2007, the fiscal quarter ending
June 30, 2007, the fiscal quarter ending September 30, 2007 and the fiscal
quarter ending December 31, 2007 by the fraction, the numerator of which is 365
and the denominator of which is the number of days between the transaction
closing date and December 31, 2007.

 2
 

 

“Effective Date” shall mean
February 12, 2007.

“Loans” shall mean,
collectively, the Revolving Credit Loans, the Term Loans, the Equipment Loans
and the New Term Loans and shall refer to a Prime Rate Loan, a LIBOR Loan or a
Fixed Rate Loan, each of which shall be a “Type” of Loan.

“Mortgages” shall mean,
collectively, the (a) Mortgage and Security Agreement with respect to the
Embassy Premises, (b) Mortgage and Security Agreement with respect to the
Jupiter Premises, (c) Mortgage and Security Agreement with respect to the Tampa
Premises, and (d) Mortgage and Security Agreement with respect to the Cranberry
Premises, each in the form attached hereto as Exhibit K, each to be executed
and delivered on the Closing Date by the applicable Co-Borrower, as the same
may hereafter be amended, restated, supplemented or otherwise modified, from
time to time.

 “Required Lenders” shall mean Lenders owed
seventy five percent (75%) of the sum of the Aggregate Outstandings plus the
Term Loans and the New Term Loans, or if no such Loans are outstanding, Lenders
have seventy five percent (75%) of the Total Commitments.

“Total Revolving Credit
Commitment” shall mean, at any time, the aggregate of the Revolving Credit
Commitments in effect at such time, which, as of the Effective Date, shall be
$18,000,000.

Section 1.4.            The
following definitions are hereby added to Section 1.01 of the Credit Agreement
in their appropriate alphabetical order:

“Cranberry Premises” shall
mean the real property owned by Hy-Tech at 25 Leonberg Road, Cranberry
Township, Pennsylvania 16066.

“Hy-Tech Acquisition” shall
mean the purchase by Hy-Tech, a wholly owned subsidiary of Continental, of
substantially all of the operating assets of Hy-Tech Machine, Inc., a
Pennsylvania corporation, substantially all of the operating assets of Quality
Gear, Inc., a Pennsylvania corporation and certain real property from HTM
Associates, Inc., a Pennsylvania corporation

“New Term Loan Commitment”
shall mean, with respect to each Lender, the obligation of such Lender to make
the New Term Loan to the Co-Borrowers in an aggregate amount not to exceed the
amount set forth opposite such Lender’s name on the signature page to Amendment
No. 7 under the caption “New Term Loan Commitment”.

“New
Term Loan” shall have the meaning specified in Section 2.07.

“New
Term Loan Maturity Date” shall mean January 31, 2014.

“New Term Loan Note” shall
mean the promissory note of the Co-Borrowers in the form attached as Exhibit M
hereto evidencing the New Term Loans, as the same may be amended, supplemented
or otherwise modified from time to time.

“Premises” shall mean,
collectively, the Embassy Premises, the
Jupiter Premises, the Tampa Premises and the Cranberry Premises.

 3
 

 

“Total New Term Loan
Commitment” shall mean the aggregate of the New Term Loan Commitments in effect
on the Closing Date, which shall be $19,000,000.

Section 1.5.            The
definition of the term “Applicable Term Loan/Equipment Loan Margin” in Section
1.01 of the Credit Agreement is hereby amended to add the following sentence at
the end thereof:

For purposes of this
definition and the calculation of interest of the New Term Loan, references to
the term “Term Loan” shall be deemed to include the “New Term Loan”.

Section 1.6.            The
first sentence of the definition of the term “Borrowing Base” in Section 1.01
of the Credit Agreement is hereby amended and restated in its entirety to
provide as follows:

“Borrowing Base” shall mean
as of any Borrowing Date an amount equal to the sum of (a) 80% of the
value of the Obligor’s Eligible Accounts Receivable, and (b) the lesser of
(i) 50% of the aggregate value of the Obligor’s Eligible Inventory, and (ii)
$8,000,000; provided, however, such percentages and the foregoing
inventory limitation may be revised from time to time solely by the Required
Lenders in their Permitted Discretion (i) upon 30 days’ prior written notice to
the Co-Borrowers so long as no Default or Event of Default has occurred and is
then continuing or (ii) immediately upon written notice if a Default or Event
of Default has occurred and is then continuing. 
Without limiting the foregoing, the Required Lenders may revise such
percentages after review of each field audit of the Obligor’s receivables and
inventory.

Section 1.7.            The
definition of the term “Commitment Proportion” in Section 1.01 of the Credit
Agreement is hereby amended to add the phrase “and the New Term Loans” after
the reference to the term “Term Loans” in clause “(b)” thereof.

Section 1.8.            Clause
“(b)(iv)” of the definition of the term “Interest Period” in Section 1.01 of
the Credit Agreement is hereby amended and restated in its entirety to provide
as follows:

(iv)  no Interest Period may be selected with
respect to (a) a Revolving Credit Loan which ends later than the Revolving
Credit Commitment Termination Date, (b) the Term Loan which ends later than the
Term Loan Maturity Date, (c) an Equipment Loan which ends later than the
Equipment Loan Maturity Date or (d) the New Term Loan which ends later than the
New Term Loan Maturity Date; and

Section 1.9.            Article
II of the Credit Agreement is hereby amended to add the following new sections
2.07 and 2.08 immediately following Section 2.06 thereof:

SECTION
2.07.  New ­Term Loan. 
Subject to the terms and conditions hereof, each Lender severally agrees
to make a term loan (individually, a “New Term Loan” and, collectively,
the “New Term Loans”) to the Co-Borrowers on the Effective Date in an
amount not to exceed its New Term Loan Commitment.  The Co-Borrowers shall give the
Administrative Agent irrevocable written notice on or before the Effective Date
specifying (i) the amount to be borrowed, which shall not exceed the Total New
Term Loan Commitment, (ii) the Type or Types of such New Term Loan and the
related amounts for each, and (iii) if all or any portion of the New Term Loan
is a LIBOR Loan, the initial Interest Period selected for the New Term
Loan.  Upon receipt of such notice from
the Co-Borrowers, the Administrative Agent shall promptly notify each Lender
thereof.  The New Term Loans may, at the
election of the Co-Borrowers, be (i) LIBOR

 4
 

Loans, (ii) Prime Rate Loans
or (iii) a combination thereof.  The
Total New Term Loan Commitment shall terminate upon funding of the New Term
Loans on the Effective Date.

SECTION
2.08.   New Term Loan Notes.  The New Term Loan made by each Lender shall be evidenced by a New Term
Loan Note, appropriately completed, duly executed and delivered on behalf of
the Co-Borrowers and payable to the order of each Lender in a principal amount
equal to the New Term Loan Commitment of such Lender.  Each Lender is authorized to record the Type
of its New Term Loan and the date and amount of each payment or prepayment of
principal thereof in such Lender’s records or on the grid schedule annexed to
the New Term Loan Note; provided, however, that the failure of a
Lender to set forth each payment and other information shall not in any manner
affect the obligation of the Co-Borrowers to repay the New Term Loan made by
such Lender in accordance with the terms of its New Term Loan Note and this
Agreement.  The New Term Loan Note, the
grid schedule and the books and records of each Lender shall constitute
presumptive evidence of the information so recorded absent demonstrable
error.  Each New Term Loan Note shall (a)
be dated the Effective Date, (b) be stated to mature on the New Term Loan
Maturity Date and (c) be payable as to principal in twenty five (25)  consecutive quarterly installments commencing on January
31, 2008 and continuing on the last day of each January, April, July and
October thereafter as follows, each in an aggregate amount equal to $760,000,
all for the pro-rata distribution to the Lenders based upon their New Term Loan
Commitment, provided that the final payment on the New Term Loan Maturity Date
shall be in an amount equal to the outstanding unpaid principal amount of the
New Term Loan.  Each New Term Loan Note,
the grid schedule and the books and records of each Lender shall be prima facie
evidence of the information so recorded absent manifest error.  Notwithstanding anything to the contrary
herein, interest on the New Term Loan shall be payable in accordance with
Section 3.01 herein and shall commence with the first applicable Interest
Payment Date following the Effective Date.

Section 1.10.          Section
3.01(a) of the Credit Agreement is hereby amended and restated to provide as
follows:

(a)
Each Prime Rate Loan shall bear interest for the period from the date thereof
on the unpaid principal amount thereof at a fluctuating rate per annum equal to
the Prime Rate, plus, in the case of Revolving Credit Loans, the
applicable “Prime Rate Margin” as provided in the definition of “Applicable
Revolving Credit Loan Margin,” and in the case of Equipment Loans, Term Loans
and New Term Loans, the applicable “Prime Rate Margin” as provided in the
definition of “Applicable Term Loan/Equipment Loan Margin.

Section 1.11.          Section
3.01(b) of the Credit Agreement is hereby amended and restated to provide as
follows:

(b)           Each LIBOR Loan shall bear interest
for the Interest Period applicable thereto on the unpaid principal amount
thereof at a rate per annum equal to the Reserve Adjusted Libor determined for
each Interest Period thereof in accordance with the terms hereof, plus,
in the case of Revolving Credit Loans, the applicable “LIBOR Margin” as
provided in the definition of “Applicable Revolving Credit Loan Margin,” and in
the case of Equipment Loans, Term Loans and New Term Loans, the applicable “LIBOR
Margin” as provided in the definition of “Applicable Term Loan/Equipment Loan
Margin.”

 5
 

 

Section 1.12.          Section
3.01(h) of the Credit Agreement is hereby amended and restated to provide as
follows:

(h)  No Loan may be funded, converted to or
continued as a LIBOR Loan if the Interest Period would extend beyond the
Revolving Credit Commitment Termination Date, with respect to Revolving Credit
Loans, the Term Loan Maturity Date, with respect to the Term Loan, the
Equipment Loan Maturity Date, with respect to an Equipment Loan, or the New
Term Loan Maturity Date, with respect to the New Term Loan.

Section 1.13.          Section
3.02 of the Credit Agreement is hereby amended to add the following sentence at
the end thereof:

The proceeds of the New Term
Loan shall be used by the Company solely to finance all or a portion of the
cash portion of the purchase price of the Hy-Tech Acquisition.

Schedule 1.14.       The
fourth sentence of Section 3.03(a) of the Credit Agreement is hereby amended
and restated in its entirety to read as follows:

Partial prepayments of any
Term Loan, New Term Loan or Equipment Loan pursuant to this Section 3.03 shall
be (a) in an aggregate principal amount of (i) $50,000 or whole multiples of
$25,000 in excess thereof with respect to Prime Rate Loans or Fixed Rate Loans
and (ii) $250,000 or whole multiples of $50,000 in excess thereof with respect
to LIBOR Loans and (b) applied to the remaining installments of principal of
the Term Loan, the New Term Loan or Equipment Loan, as the case may be, in
inverse order of maturity.

Schedule 1.15.       The
first sentence of Section 6.14 of the Credit Agreement is hereby amended and
restated in its entirety to provide as follows:

Upon
the occurrence and continuance of an Event of Default the Administrative Agent
may, upon five (5) Business Days prior written notice to the Co-Borrowers,
record the Mortgages and, in connection therewith, the Co-Borrowers shall
provide to the Administrative Agent, within fifteen (15) Business Days
following such date, (a) a title policy and a lender’s title insurance binder
issued by an insurance company authorized to transact business in the State of
New York and the state in which the applicable Premises is located and
acceptable to the Administrative Agent naming the Administrative Agent as
insured and insuring that the Mortgages create continuing, valid liens on each
Premises, prior to all Liens (other than Permitted Liens), and each securing an
amount and on terms and conditions satisfactory to the Required Lenders at such
time, (b) a current legal description and updated survey of each Premises,
certified to the Administrative Agent and the title company, (c) a certificate
of insurance from an independent insurance broker confirming the insurance
required to be maintained pursuant to the Mortgages, with respect to each
Premises, each naming the Administrative Agent as mortgagee with respect to
such insurance, and (d) such other documents, promissory notes, agreements and
information, including opinions of counsel, that the Administrative Agent may
request.

                Section
1.16.          The table in Section
7.13(b) of the Credit Agreement is hereby amended and restated in its entirety
to provide as follows:

 6
 

 

	
  Period

  	
   

  	
  Amount

  	
   

  
	
  March 31, 2007
  through December 30, 2007

  	
   

  	
  $

  	
  14,000,000

  	
   

  
	
  December 31,
  2007 through December 30, 2008

  	
   

  	
  $

  	
  17,000,000

  	
   

  
	
  December 31,
  2008 through December 30, 2009

  	
   

  	
  $

  	
  21,500,000

  	
   

  
	
  December 31,
  2009 to December 30, 2010

  	
   

  	
  $

  	
  26,000,000

  	
   

  
	
  December 31, 2010 and
  thereafter

  	
   

  	
  $

  	
  33,000,000

  	
   

  

 

Schedule 1.17. The table in Section 7.13(c) of the
Credit Agreement is hereby amended and restated in its entirety to provide as
follows:

	
  Period

  	
   

  	
  Amount

  	
   

  
	
  December 31,
  2006 through December 30, 2007

  	
   

  	
  3.50:1.00

  	
   

  
	
  December 31,
  2007 through December 30, 2008

  	
   

  	
  3.25:1.00

  	
   

  
	
  December 31,
  2008 through December 30, 2009

  	
   

  	
  2.75:1.00

  	
   

  
	
  December 31,
  2009 to December 30, 2010

  	
   

  	
  2.50:1.00

  	
   

  
	
  December 31, 2010 and
  thereafter

  	
   

  	
  2.00:1.00

  	
   

  

 

Section 1.18.          Section
10.05(c) of the Credit Agreement is hereby amended to add the phrase “, the “New
Term Loan Commitment” immediately following the phrase “Equipment Loan
Commitment” on the penultimate line thereof.

Section 1.19.          Schedule
I to the Credit Agreement is hereby amended in its entirety and replaced with
Schedule I attached to this Amendment.

Section 1.20.          Exhibits
A, B and C to the Credit Agreement are hereby amended in their entirety and
replaced with Exhibits A, B and C, respectively, attached to this
Amendment.  Exhibit M attached to this
Amendment is hereby added as Exhibit M to the Credit Agreement.

ARTICLE
II.

Waiver.

The Co-Borrowers have advised the Lenders that
Hy-Tech intends to consummate the Hy-Tech Acquisition for a Permitted
Acquisition Purchase Price not to exceed $19,100,000.  The Lenders hereby waive compliance by the
Co-Borrowers with the provisions in the Credit Agreement regarding Permitted
Acquisitions which restrict the Permitted Acquisition Purchase Price in
connection with any single Permitted Acquisition to exceed $5,000,000, provided
that all other requirements for a Permitted Acquisition with respect to the
Hy-Tech Acquisition have been satisfied.  
In addition, the Lenders hereby waive compliance by the Co-Borrowers
with Section 7.06 of the Credit Agreement which restricts the Co-Borrowers’
ability to (i) make more than one (1) Permitted Acquisition in any twelve month
period and (ii) make any Permitted Acquisition if the aggregate Permitted
Acquisition Purchase Price paid in connection with all Permitted Acquisitions
would exceed $15,000,000. 
Notwithstanding anything to the contrary herein, the waivers set forth
in this Section 2.1 shall apply only to the Hy-Tech Acquisition.

ARTICLE III.

Conditions of Effectiveness;
Further Conditions.

Section 3.1.            This Amendment shall become effective
as of the date hereof, upon receipt by the Administrative Agent of the
following:

(a)
          this Amendment, duly executed by
each Co-Borrower;

 

 7

 

(b)           an
amended and restated Revolving Credit Note, substantially in the form of
Exhibit A attached hereto, duly executed by each Co-Borrower in favor of each
Lender;

(c)           an
amended and restated Term Note, substantially in the form of Exhibit C attached
hereto, duly executed by each Co-Borrower in favor of each Lender;

(d)           a
New Term Loan, substantially in the form of Exhibit B attached hereto, duly
executed by each Co-Borrower in favor of each Lender;

(e)           Amendments
to Pledge Agreement, substantially in the forms of Exhibit 1(a) and 1(b)
attached hereto, duly executed by P&F, accompanied by the original stock
certificate for Continental, and a duly executed stock power;

(f)            a
Joinder Agreement, substantially in the form of Exhibit 2 attached hereto, duly
executed by Continental and Hy-Tech and acknowledged by each other Co-Borrower;

(g)           a
certificate of the Secretary or Assistant Secretary of each Co-Borrower,
substantially in the form of Exhibit 3 attached hereto;

(h)           a
Pledge Agreement, substantially in the form of Exhibit I to the Credit
Agreement, duly executed by Continental and accompanied by the original stock
certificate of Hy-Tech, along with a duly executed stock power;

(i)            an
opinion of counsel with respect to Continental and Hy-Tech, in form and substance
satisfactory to the Administrative Agent and its counsel;

(j)            a
certificate of insurance indicating insurance coverage for Continental and
Hy-Tech, in form and substance satisfactory to the Administrative Agent;

(k)           those
documents and information required to be delivered to the Administrative Agent
and the Lenders in order for the acquisition of the assets from Hy-Tech
Machine, Inc. to be deemed a Permitted Acquisition;

(l)            a
title report issued by a title insurance company authorized to transact
business in Pennsylvania, with respect to the Cranberry Premises; and

(m)          a
landlord’s waiver, in form and substance satisfactory to the Administrative
Agent, with respect to the premises located at 188 Blose Drive, Punxsutawney,
Pennsylvania.

 8
 

 

ARTICLE IV.

Representations
and Warranties; Effect on Credit Agreement.

Section 4.1. 
Each Co-Borrower hereby represents and warrants as follows:

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

b.             Upon
the effectiveness of this Amendment, the Co-Borrowers hereby reaffirm all
covenants, representations and warranties made in the Credit Agreement to the
extent that the same are not amended hereby and each Co-Borrower agrees that
all such covenants, representations and warranties shall be deemed to have been
remade as of the date hereof.

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

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

Section 4.2.            Effect
on Credit Agreement and Loan Documents.

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

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

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

d.             The
other Loan Documents and all agreements, instruments and documents executed and
delivered in connection with the Credit Agreement and any other Loan Documents
shall each be deemed to be amended and supplemented hereby to the extent
necessary, if any, to give effect to the provisions of this Amendment.

ARTICLE V.

Miscellaneous.

Section 5.1.            This
Amendment shall be governed by and construed in accordance with the laws of the
State of New York.

Section 5.2.            Section
headings in this Amendment are included herein for convenience of reference
only and shall not constitute a part of this Amendment for any other purpose.

 9
 

 

Section 5.3.            This
Amendment may be executed in one or more counterparts, each of which shall
constitute an original, and all of which, taken together, shall be deemed to
constitute one and the same agreement.

ARTICLE V.

Joinder.

Each of Continental and Hy-Tech hereby acknowledges
and agrees that from and after the date hereof, (i) it shall be and become a
Co-Borrower under, and in accordance with and subject to the Credit Agreement,
(ii) it shall be bound by the terms of the Credit Agreement and each other Loan
Agreement to which it is a party, (iii) it will perform in accordance with the
terms of the Credit Agreement and the other Loan Documents to which it is a
party, and (iv) it shall be jointly and severally liable with the other
Co-Borrowers for all of the Obligations including without limitation those
incurred prior to the date hereof.

[next page is signature page]

 10
 

 

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

	
   

  	
  P&F INDUSTRIES, INC.

  
	
   

  	
  FLORIDA
  PNEUMATIC MANUFACTURING

  
	
   

  	
  CORPORATION

  
	
   

  	
  EMBASSY INDUSTRIES, INC.

  
	
   

  	
  GREEN MANUFACTURING, INC.

  
	
   

  	
  COUNTRYWIDE HARDWARE, INC.

  
	
   

  	
  NATIONWIDE INDUSTRIES, INC.

  
	
   

  	
  WOODMARK INTERNATIONAL, L.P.

  
	
   

  	
  By:

  	
  Countrywide Hardware, Inc., its General Partner

  
	
   

  	
  PACIFIC
  STAIR PRODUCTS, INC.

  
	
   

  	
  WILP
  HOLDINGS, INC.

  
	
   

  	
  CONTINENTAL
  TOOL GROUP, INC.

  
	
   

  	
  HY-TECH
  MACHINE, INC.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ JOSEPH A. MOLINO, JR.

  
	
   

  	
   

  	
   

  	
  Joseph A. Molino, Jr., the President of Green
  Manufacturing, Inc. and the Vice President of each of the other corporations
  named above

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  CITIBANK,
  N.A., as a Lender and as

  
	
   

  	
  Administrative
  Agent

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ STEPHEN KELLY

  
	
   

  	
  Name:

  	
  Stephen Kelly

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  HSBC
  BANK USA, NATIONAL

  
	
   

  	
  ASSOCIATION,
  as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ RAYMOND FINCKEN

  
	
   

  	
  Name:

  	
  Raymond Fincken

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  
						

 

 11EXHIBIT 10.2

SECOND AMENDED AND RESTATED TERM LOAN NOTE

$8,840,000                                                                                                                                              February
12, 2007

FOR VALUE RECEIVED,  P&F
INDUSTRIES, INC., a Delaware corporation (“P&F”), FLORIDA PNEUMATIC MANUFACTURING CORPORATION,
a Florida corporation (“Florida Pneumatic”), EMBASSY
INDUSTRIES, INC., a New York corporation (“Embassy”), GREEN MANUFACTURING, INC., a Delaware
corporation (“Green”), COUNTRYWIDE HARDWARE,
INC., a Delaware corporation (“Countrywide”), NATIONWIDE INDUSTRIES, INC., a Florida
corporation (“Nationwide”), WOODMARK INTERNATIONAL,
L.P., a Delaware limited partnership (“Woodmark”), PACIFIC STAIR PRODUCTS, INC., a Delaware corporation (“Pacific”)
, WILP HOLDINGS, INC., a Delaware
corporation (“WILP”), CONTINENTAL TOOL GROUP,
INC., a Delaware corporation (“Continental”) and HY-TECH MACHINE, INC., a Delaware corporation (“Hy-Tech”;
and collectively with P&F, Florida Pneumatic, Embassy, Green, Countrywide,
Nationwide, Woodmark, Pacific, WILP and Continental the “Co-Borrowers”),
jointly and severally promise to pay to the order of CITIBANK,
N.A. (the “Lender”), on or before the Term Loan Maturity Date, the
principal amount of EIGHT MILLION EIGHT
HUNDRED FORTY THOUSAND ($8,840,000)
DOLLARS.  The outstanding
principal amount hereof is payable in installments in the amounts and on the
dates set forth in the Credit Agreement referred to below, provided that the
final installment, on the Term Loan Maturity Date, shall be in an amount equal
to the remaining principal amount outstanding on the Term Loan Maturity Date.

The Co-Borrowers jointly and severally promise to
pay interest on the unpaid principal amount hereof from the date hereof until
paid in full at the rates and at the times which shall be determined in
accordance with the provisions of the Credit Agreement referred to below.

This Note is one of the “Term Loan Notes” referred
to in the Credit Agreement, dated as of June 30, 2004, by and among the
Co-Borrowers, Citibank, N.A., as Administrative Agent, and the Lenders
(including the Lender) as are, or may from time to time become, parties thereto
(as same has been and may be further amended, restated, supplemented or
modified, the “Credit Agreement”) and is issued pursuant to and entitled to the
benefits of the Credit Agreement to which reference is hereby made for a more
complete statement of the terms and conditions under which the Term Loan
evidenced hereby was made and is to be repaid. 
Capitalized terms used herein without definition shall have the meanings
set forth in the Credit Agreement.

Each of the Lender and any subsequent holder of this
Note shall record the date, Type and amount of each payment or prepayment of
principal of the Loans on the grid schedule annexed to this Note; provided,
however, that the failure of the Lender or any holder to set forth the
Term Loan, payments and other information on the attached grid schedule shall
not in any manner affect the obligation of the Co-Borrowers to repay the Term
Loan made by the Lender in accordance with the terms of this Note.

This Note is subject to prepayment as provided in
Section 3.03 of the Credit Agreement.

Upon the occurrence of an Event of Default the
unpaid balance of the principal amount of this Note, together with all accrued
but unpaid interest thereon, may become, or may be declared to be, due and
payable in the manner, upon the conditions and with the effect provided in the
Credit Agreement.

 1
 

 

All payments of principal and interest in respect of
this Note shall be made in lawful money of the United States of America in
immediately available funds at the office of Citibank, N.A., as Administrative
Agent for the Lenders under the Credit Agreement, located at 730 Veterans
Memorial Highway, Hauppauge, New York 11788 or at such other place as shall be
designated in writing for such purpose in accordance with the terms of the
Credit Agreement.

No reference herein to the Credit Agreement and no
provision of this Note or the Credit Agreement shall alter or impair the
obligation of the Co-Borrowers, which is absolute and unconditional, to pay the
principal of and interest on this Note at the place, at the respective times,
and in the currency herein prescribed.

Each Co-Borrower and each endorser of this Note
waive diligence, presentment, protest, demand, and notice of any kind in
connection with this Note.

This Note is an amendment and restatement of, and is
being issued in replacement of and substitution for, the Amended and Restated
Term Loan Note dated February 13, 2006 in the original principal amount of
$11,310,000 issued by the Co-Borrowers (other than Continental and Hy-Tech) in
favor of the Lender (the “Original Note”). 
The execution and delivery of this Note shall not be construed to have
constituted a repayment of any principal of, or interest on, the Original Note.

THIS NOTE SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OR CHOICE OF LAW.

[next page is signature page]

 2
 

 

IN WITNESS WHEREOF, each Co-Borrower has caused this Note to be
executed and delivered by its duly authorized officer, as of the day and year
and at the place first above written.

	
  

  	
   

  	
  P&F INDUSTRIES, INC.

  
	
   

  	
   

  	
  FLORIDA PNEUMATIC MANUFACTURING

  
	
   

  	
   

  	
   

  	
  CORPORATION

  
	
   

  	
   

  	
  EMBASSY INDUSTRIES, INC.

  
	
   

  	
   

  	
  GREEN MANUFACTURING, INC.

  
	
   

  	
   

  	
  COUNTRYWIDE HARDWARE, INC.

  
	
   

  	
   

  	
  NATIONWIDE INDUSTRIES, INC.

  
	
   

  	
   

  	
  WOODMARK INTERNATIONAL, L.P.

  
	
   

  	
   

  	
  By:

  	
  Countrywide Hardware, Inc., its General

  
	
   

  	
   

  	
   

  	
  Partner

  
	
   

  	
   

  	
  PACIFIC STAIR PRODUCTS, INC.

  
	
   

  	
   

  	
  WILP HOLDINGS, INC.

  
	
   

  	
   

  	
  CONTINENTAL TOOL GROUP, INC.

  
	
   

  	
   

  	
  HY-TECH MACHINE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Joseph A.
  Molino, Jr.

  
	
   

  	
   

  	
   

  	
  Joseph A. Molino, Jr., the President of Green
  Manufacturing, Inc. and the Vice President of each of the other corporations
  named above

  
						

 

 

 3

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