Document:

EXHIBIT 10.1

 

FOURTH
AMENDMENT TO CREDIT AGREEMENT

 

THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (this “Fourth
Amendment”), dated as of December 15, 2008, is entered into among
HELEN OF TROY L.P., a limited partnership duly organized under the laws of the
State of Texas (the “Borrower”), HELEN OF TROY LIMITED, a Bermuda
company (“Limited”), the lender listed on the signature pages hereof as
Lender (the “Lender”), and BANK OF AMERICA, N.A., as Administrative
Agent, L/C Issuer and Swing Line Lender.

 

BACKGROUND

 

A.                                   The
Borrower, Limited, the Lender and certain other lenders, the Administrative
Agent, the Swing Line Lender and the L/C Issuer are parties to that certain
Credit Agreement, dated as of June 1, 2004, as amended by that certain
First Amendment to Credit Agreement, dated as of June 29, 2004, that
certain Second Amendment to Credit Agreement, dated as of September 23,
2005, and that certain Third Amendment to Credit Agreement, dated as of November 15,
2005 (said Credit Agreement, as amended, the “Credit Agreement”).  The terms defined in the Credit Agreement and
not otherwise defined herein shall be used herein as defined in the Credit
Agreement.

 

B.                                     The
Borrower has requested (a) certain amendments to the Credit Agreement and (b) to
remove Amegy Bank National Association and Comerica Bank (collectively, the “Exiting
Lenders”) as lenders under the Credit Agreement.

 

C.                                     The
Lender, the Administrative Agent, the Swing Line Lender and the L/C Issuer
hereby agree to amend the Credit Agreement, subject to the terms and conditions
set forth herein.

 

NOW, THEREFORE, in consideration of the covenants,
conditions and agreements hereafter set forth, and for other good and valuable
consideration, the receipt and adequacy of which are all hereby acknowledged,
the Borrower, Limited, the Lender, the Swing Line Lender, the L/C Issuer and
the Administrative Agent covenant and agree as follows:

 

1.                                       AMENDMENTS.

 

(a)                                  The
definition of “Applicable Rate” set forth in Section 1.01 of
the Credit Agreement is hereby amended to read as follows:

 

“Applicable
Rate” means the following percentages per annum, based upon the Leverage
Ratio as set forth in the most recent Compliance Certificate received by the
Administrative Agent pursuant to Section 6.02(b):

 

	
  Pricing

  Level

  	
   

  	
  Leverage Ratio

  	
   

  	
  Commitment

  Fee

  	
   

  	
  Eurodollar Rate

  for Loans and

  Letters of Credit

  	
   

  	
  Base Rate

  for Loans

  	
   

  
	
  I

  	
   

  	
  Less than or equal to 1.00 to 1.00

  	
   

  	
  0.200

  	
  %

  	
  1.250

  	
  %

  	
  0.250

  	
  %

  
	
  II

  	
   

  	
  Greater than 1.00 to
  1.00 but less than or equal to 1.50 to 1.00

  	
   

  	
  0.250

  	
  %

  	
  1.375

  	
  %

  	
  0.375

  	
  %

  

 

 

	
  III

  	
   

  	
  Greater than 1.50 to
  1.00 but less than or equal to 2.00 to 1.00

  	
   

  	
  0.250

  	
  %

  	
  1.500

  	
  %

  	
  0.500

  	
  %

  
	
  IV

  	
   

  	
  Greater than 2.00 to
  1.00 but less than or equal to 2.50 to 1.00

  	
   

  	
  0.300

  	
  %

  	
  1.625

  	
  %

  	
  0.625

  	
  %

  
	
  V

  	
   

  	
  Greater than 2.50 to 1.00

  	
   

  	
  0.350

  	
  %

  	
  1.750

  	
  %

  	
  0.750

  	
  %

  

 

Any increase
or decrease in the Applicable Rate resulting from a change in the Leverage
Ratio shall become effective as of the first Business Day immediately following
the date a Compliance Certificate is delivered pursuant to Section 6.02(b);
provided, however, that if a Compliance Certificate is not
delivered when due in accordance with such Section 6.02(b), then,
upon the request of the Required Lenders, Pricing Level V shall apply as
of the first Business Day after the date on which such Compliance Certificate
was required to have been delivered and shall remain in effect until the first
Business Day immediately following the date such Compliance Certificate is
actually delivered to the Administrative Agent. 
Notwithstanding the foregoing, the Applicable Rate in effect from and
after the Fourth Amendment Closing Date through and including the date the
first Compliance Certificate is delivered pursuant to Section 6.02(b) for
the first fiscal quarter ending after the Fourth Amendment Closing Date shall
be Level III.

 

Notwithstanding
anything to the contrary contained in this definition, the determination of the
Applicable Rate for any period shall be subject to the provisions of Section 2.10(b).

 

(b)                                 The
definition of “Base Rate” set forth in Section 1.01 of the
Credit Agreement is hereby amended to read as follows:

 

“Base Rate”
means for any day a fluctuating rate per annum equal to the highest of (a) the
Federal Funds Rate in effect for such day plus 1/2 of 1%, (b) the rate of
interest in effect for such day as publicly announced from time to time by Bank
of America as its “prime rate” and (c) the rate of interest in effect for
such day, under this Agreement, for a Borrowing of Eurodollar Rate Loans with
an Interest Period of one month (or if such day is not a Business Day, the
immediately preceding Business Day) plus 1%. 
The “prime rate” is a rate set by Bank of America based upon various
factors including Bank of America’s costs and desired return, general economic
conditions and other factors, and is used as a reference point for pricing some
loans, which may be priced at, above, or below such announced rate.  Any change in the Base Rate due to a change
in the Federal Funds Rate, the prime rate or the rate for such Eurocurrency Rate
Loans shall be effective from and including the effective date of such change
in the Federal Funds Rate, the prime rate or the rate for such Eurodollar Rate
Loans.

 

(c)                                  The
definition of “Leverage Ratio” set forth in Section 1.01 of
the Credit Agreement is hereby amended to read as follows:

 

“Leverage
Ratio” means, as of any date of determination, the ratio of (a) Consolidated
Net Funded Indebtedness on such date to (b) Consolidated EBITDA for the
period of the four consecutive fiscal quarters most recently ended for which
Limited has delivered financial statements pursuant to Section 6.01.  For purposes of calculating 

 

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the Leverage Ratio as of any date, Consolidated EBITDA shall be
calculated on a pro  forma basis (as certified by a Responsible
Officer of Limited to the Administrative Agent and as approved by the
Administrative Agent) assuming that all Acquisitions made, and all Dispositions
completed, during the four consecutive fiscal quarters the most recently ended
has been made on the first day of such period (but without any adjustment for
projected cost savings or other synergies).

 

(d)                                 The
definition of “Maturity Date” set forth in Section 1.01 of
the Credit Agreement is hereby amended to read as follows:

 

“Maturity
Date” means (a) December 15, 2013 or (b) the date of
termination of the commitment of each Lender to make Loans and of the
obligation of the L/C Issuer to make L/C Credit Extensions pursuant to Section 8.02.

 

(e)                                  The
definition of “Restricted Payment” set forth in Section 1.01
of the Credit Agreement is hereby amended to read as follows:

 

“Restricted
Payment” means, collectively, (a) any Dividend, (b) any Treasury
Stock Purchase and (c) any payment or prepayment of principal, interest,
premium or penalty of or in respect of any Subordinated Indebtedness or any
defeasance, redemption, purchase, repurchase or other acquisition or retirement
for value, in whole or in part, of any Subordinated Indebtedness.

 

(f)                                    Section 1.01
of the Credit Agreement is being amended by adding the following defined terms
thereto in proper alphabetical order to read as follows:

 

“Cash and
Cash Equivalents” means, collectively (a) cash, (b) investments
in the form of direct obligations of the United States of America or any agency
thereof or obligations guaranteed by the United States of America or any agency
thereof, in any case maturing within one year after the acquisition thereof; (c) investments
in bankers’ acceptance, certificates of deposits, Eurodollar deposits or time
deposits maturing within 180 days from the date of acquisition thereof issued
or accepted by any commercial bank organized under the laws of the United
States of America, any state thereof, or the District of Columbia, and having
combined capital, surplus and undivided profits of at least $1,000,000,000 and
having (or having parent holding company that has) outstanding short term debt
rated P-1 by Moody’s Investor Service, Inc. or A-1 by Standard and Poor’s
Rating Group and long-term debt rated as least A by Moody’s Investor Service, Inc.
or Standard and Poor’s Rating Group; (d) investments in commercial paper
rated in one of the two highest rating categories by Moody’s Investor Service, Inc.
or by Standard and Poor’s Rating Group and maturing not more than 270 days from
the date of creation thereof; (e) repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clauses (b) and (c) above entered into with any financial
institution meeting the qualifications specified in clause (c) above;
and (f) investments in money market mutual funds that are classified as
current assets in accordance with generally accepted accounting principles and
that invest at least 95% of its assets in Investments described in
clauses (b) through (e) above maturing not more than one year
after the acquisition thereof, which funds are managed by Persons having, 

 

3

 

or who are members of holding companies having, capital and surplus in
excess of $100,000,000; provided, however, in no event shall
auction rate securities be considered to be “Cash and Cash Equivalents”.

 

“Consolidated
EBIT” means for any period the sum of Consolidated Net Earnings for such
period, plus to the extent deducted in calculating Consolidated Net
Earnings for such period: the total of (a) interest expense and (b) federal
and state income and franchise tax expense, for Limited and its Subsidiaries,
all determined in accordance with GAAP.

 

“Consolidated
Net Funded Indebtedness” means, as of any date determination, for Limited
and its Subsidiaries on a consolidated basis, the sum of (a) Consolidated
Funded Indebtedness as of such date minus (b) Unrestricted Cash as
of such date in excess of $15,000,000.

 

“Dividend”
means, with respect to any Person, any dividend or other distribution (whether
in cash, securities or other property) with respect to any capital stock or
other Equity Interests of such Person.

 

“Impacted
Lender” means (a) a Defaulting Lender or (b) a Lender as to which
(i) the L/C Issuer has a good faith belief that such Lender has defaulted
in fulfilling its obligations under one or more syndicated credit facilities or
(ii) an entity that Controls such Lender has been deemed insolvent or
become subject to any Debtor Relief Laws.

 

“Interest
Coverage Ratio” means, as of any date of determination, the ratio of (a) Consolidated
EBIT to (b) interest expense of Limited and its Subsidiaries, in each case
for the items set forth in clauses (a) and (b) for the period of
four consecutive fiscal quarters ending on such date.

 

“Liquidity”
means, as of any date of determination, the sum of (a) Unrestricted Cash
of Limited and its Subsidiaries plus (b) the amount, if any, by
which the Aggregate Commitments exceed the Total Outstandings.

 

“Treasury Stock
Purchase” means, with respect to any Person, any payment (whether in cash,
securities or other property), including any sinking fund or similar deposit,
on account of the purchase, redemption, retirement, acquisition, cancellation
or termination of any capital stock or other Equity Interests of such Person or
on account of any returns of Capital to such Person’s stockholders, partners or
members (or the equivalent Person thereof).

 

“Unrestricted
Cash” of a Person means Cash and Cash Equivalents in Dollars of such Person
that would not be identified as “restricted” on a balance sheet of such Person
prepared in accordance with GAAP, and which are not subject to any Lien or
restriction on withdrawal or use.

 

(g)                                 Section 1.01
of the Credit Agreement is further amended by deleting the defined terms “Consolidated
Fixed Charges” and “Fixed Charge Coverage Ratio” therefrom.

 

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(h)                                 Section 2.03(a)(iii)(E) of
the Credit Agreement is hereby amended to read as follows:

 

(E)                                 a default of
any Lender’s obligation to fund under Section 2.03(c) exists
or any Lender is at such time an Impacted Lender hereunder, unless the L/C
Issuer has entered into arrangements satisfactory to the L/C Issuer with the
Borrower or such Lender to eliminate the L/C Issuer’s risk with respect to such
Lender.

 

(i)                                     Section 2.04(a) of
the Credit Agreement is hereby amended to read as follows:

 

(a)                                  The
Swing Line.  Subject to the terms and
conditions set forth herein, the Swing Line Lender agrees, in reliance upon the
agreements of the other Lenders set forth in this Section 2.04 but
in its sole discretion and without any obligation, to make loans (each such
loan, a “Swing Line Loan”) to the Borrower from time to time on any
Business Day during the Availability Period in an aggregate amount not to
exceed at any time outstanding the amount of the Swing Line Sublimit,
notwithstanding the fact that such Swing Line Loans, when aggregated with the
Applicable Percentage of the Outstanding Amount of Revolving Loans and L/C
Obligations of the Lender acting as Swing Line Lender, may exceed the amount of
such Lender’s Commitment; provided, however, that after giving
effect to any Swing Line Loan, (i) the Total Outstandings shall not exceed
the Aggregate Commitments, and (ii) the aggregate Outstanding Amount of
the Revolving Loans of any Lender, plus such Lender’s Applicable
Percentage of the Outstanding Amount of all L/C Obligations, plus such
Lender’s Applicable Percentage of the Outstanding Amount of all Swing Line
Loans shall not exceed such Lender’s Commitment, and provided, further,
that the Borrower shall not use the proceeds of any Swing Line Loan to
refinance any outstanding Swing Line Loan. 
Within the foregoing limits, and subject to the other terms and conditions
hereof including the sole discretion of the Swing Line Lender to make Swing
Line Loans, the Borrower may borrow under this Section 2.04, prepay
under Section 2.05, and reborrow under this Section 2.04.  Each Swing Line Loan shall be a Base Rate Loan.  Immediately upon the making of a Swing Line
Loan, each Lender shall be deemed to, and hereby irrevocably and
unconditionally agrees to, purchase from the Swing Line Lender a risk
participation in such Swing Line Loan in an amount equal to the product of such
Lender’s Applicable Percentage times the amount of such Swing Line Loan.

 

(j)                                     Section 2.10
of the Credit Agreement is hereby amended to read as follows:

 

2.10                        Computation
of Interest and Fees.

 

(a)                                  All
computations of interest for Base Rate Loans when the Base Rate is determined
by Bank of America’s “prime rate” shall be made on the basis of a year of 365
or 366 days, as the case may be, and actual days elapsed.  Subject to Section 10.09, all
other computations of fees and interest shall be made on the basis of a 360-day
year and actual days elapsed (which results in more fees or interest, as
applicable, being paid than if computed on the basis of a 365-day year).  Interest shall accrue on each Loan for the day
on which the Loan is made, and shall not accrue on a Loan, or any portion
thereof, for the day on which the Loan or such portion is paid, provided
that any Loan that is 

 

5

 

repaid on the same day on which it is made shall, subject to Section 2.12(a),
bear interest for one day.  Each
determination by the Administrative Agent of an interest rate or fee hereunder
shall be conclusive and binding for all purposes, absent manifest error.

 

(b)                                 If,
as a result of any restatement of or other adjustment to the financial
statements of Limited or for any other reason, the Borrower, Limited or the
Lenders determine that (i) the Leverage Ratio as of any applicable date
was inaccurate and (ii) a proper calculation of the Leverage Ratio would
have resulted in higher pricing for such period, the Borrower shall immediately
and retroactively be obligated to pay to the Administrative Agent for the
account of the Lenders or the L/C Issuer, as the case may be, promptly on
demand by the Administrative Agent (or, after the occurrence of an actual or
deemed entry of an order for relief with respect to the Borrower under the
Bankruptcy Code of the United States, automatically and without further action
by the Administrative Agent, any Lender or the L/C Issuer), an amount equal to
the excess of the amount of interest and fees that should have been paid for
such period over the amount of interest and fees actually paid for such
period.  This paragraph shall not limit
the rights of the Administrative Agent, any Lender, or the L/C Issuer, as the
case may be, under Sections 2.03(c)(iii), 2.03(i) or 2.08(b) or
under Article VIII.  The
Borrower’s obligations under this paragraph shall survive termination of the
Aggregate Commitments and the repayment of all other Obligations hereunder.

 

(k)                                  Section 2.13
of the Credit Agreement is hereby amended to read as follows:

 

2.13                        Sharing
of Payments by Lenders.  If any
Lender shall, by exercising any right of setoff or counterclaim or otherwise,
obtain payment in respect of any principal of or interest on any of the
Revolving Loans made by it, or the participations in L/C Obligations or in
Swing Line Loans held by it resulting in such Lender’s receiving payment of a
proportion of the aggregate amount of Revolving Loans or participations and accrued
interest thereon greater than its pro  rata share thereof as
provided herein, then the Lender receiving such greater proportion shall (a) notify
the Administrative Agent of such fact, and (b) purchase (for cash at face
value) participations in the Revolving Loans and subparticipations in L/C
Obligations and Swing Line Loans of the other Lenders, or make such other
adjustments as shall be equitable, so that the benefit of all such payments
shall be shared by the Lenders ratably in accordance with the aggregate amount
of principal of and accrued interest on their respective Revolving Loans and
other amounts owing them, provided that:

 

(i)                                     if
any such participations or subparticipations are purchased and all or any
portion of the payment giving rise thereto is recovered, such participations or
subparticipations shall be rescinded and the purchase price restored to the
extent of such recovery, without interest; and

 

(ii)                                  the
provisions of this Section shall not be construed to apply to (w) any
payment made by the Borrower pursuant to and in accordance with the express
terms of this Agreement, (x) any payment obtained by a Lender as
consideration for the assignment of or sale of a participation in any of its
Revolving Loans or subparticipations in L/C Obligations or Swing Line Loans to 

 

6

 

any assignee or participant, other than to the Borrower or any
Subsidiary thereof (as to which the provisions of this Section shall
apply) or (y) any payment obtained by the L/C Issuer or Swing Line Lender
in connection with cash collateral or other arrangements made in respect of an
Impacted Lender.

 

Each Loan
Party consents to the foregoing and agrees, to the extent it may effectively do
so under Applicable Law, that any Lender acquiring a participation pursuant to
the foregoing arrangements may exercise against such Loan Party rights of
setoff and counterclaim with respect to such participation as fully as if such
Lender were a direct creditor of such Loan Party in the amount of such
participation.

 

(l)                                     Section 2.14(a) of
the Credit Agreement is hereby amended by deleting “$25,000,000” from the
fourth line thereof and inserting “$50,000,000” in lieu thereof.

 

(m)                               Section 7.06
of the Credit Agreement is hereby amended to read as follows:

 

7.06                        Restricted
Payments.  Declare or make, directly
or indirectly, any Restricted Payment, or incur any obligation (contingent or
otherwise) to do so, except that, so long as no Default shall have occurred and
be continuing at the time of any action described below or would result
therefrom:

 

(a)                                  each
Subsidiary may make Dividends to Limited, the Guarantors and any other Person
that owns an Equity Interest in such Subsidiary, ratably according to their
respective holdings of the type of Equity Interest in respect of which such
Dividend is being made;

 

(b)                                 Limited
and each Subsidiary may declare and make Dividends payable solely in the common
stock or other Equity Interests of such Person (other than Redeemable Stock);

 

(c)                                  Limited
and each Subsidiary may pay, purchase, redeem or otherwise acquire Equity
Interests or Indebtedness issued or incurred by it with the proceeds received
from the substantially concurrent issue of new shares of its common stock or
other Equity Interests (other than Redeemable Stock) or Subordinated
Indebtedness;

 

(d)                                 Limited
may declare or pay cash Dividends to its stockholders in an aggregate amount
during any fiscal year not to exceed 25% of Consolidated Net Earnings for such
fiscal year;

 

(e)                                  Limited
may make Treasury Stock Purchases, so long as after giving effect to any such
Treasury Stock Purchase, (a) Liquidity as of the date of such Treasury
Stock Purchase is equal to or greater than the current maturities of long-term
Indebtedness for the twelve-month period immediately following such date, and (b) the
Total Outstandings (excluding L/C Obligations other than Unreimbursed Amounts
and L/C Borrowings) as of such date are zero; provided, however,
nothing in this clause (e) shall prohibit or restrict Treasury Stock
Purchases made pursuant to Limited’s employee stock option repurchase programs;
and

 

7

 

(f)                                    Limited
and each Subsidiary may make regularly scheduled payments of interest on any
Subordinated Indebtedness.

 

(n)                                 Section 7.11
of the Credit Agreement is hereby amended to read as follows:

 

7.11                        Financial
Covenants.

 

(a)                                  Consolidated
Net Worth.  Permit Consolidated Net
Worth at any time to be less than the sum of (i) 483,000,000, (ii) an
amount equal to 40% of the Consolidated Net Earnings of each full fiscal
quarter ending after February 29, 2008 (with no deduction for a net loss
in any such fiscal quarter), (iii) an amount equal to 100% of the
aggregate increases in Shareholders’ Equity of Limited and its Subsidiaries
after the date hereof by reason of the issuance and sale of Equity Interests of
Limited or any Subsidiary (other than issuances to Limited or a wholly-owned
Subsidiary), including upon any conversion of debt securities of Limited into
such Equity Interests, and (iv) 100% of the net worth of any Person that
becomes a Subsidiary or substantially all of the assets of which are acquired
by Limited or any Subsidiary to the extent the purchase price therefor is paid
in Equity Interests of Limited or any Subsidiary or pursuant to the conversion
or exchange of any convertible subordinated debt or redeemable preferred stock
into Equity Interests of Limited or any Subsidiary.

 

(b)                                 Interest
Coverage Ratio.  Permit the Interest
Charge Coverage Ratio as of the end of any fiscal quarter of Limited to be less
than 3.00 to 1.00.

 

(c)                                  Leverage
Ratio.  Permit the Leverage Ratio at
any time during any period of four fiscal quarters of Limited to be greater
than 3.00 to 1.00.

 

(o)                                 Article VII
of the Credit Agreement is hereby amended by adding a new Section 7.15
thereto to read as follows:

 

7.15                        Capital
Expenditures.  Make or become
legally obligated to make Capital Expenditures, except for Capital Expenditures
not exceeding $20,000,000 in the aggregate to Limited and its Subsidiaries
during any fiscal year; provided, however, that so long as no
default has occurred and is continuing or would result from such Capital
Expenditure, 50% of any portion of such amount not expended in a fiscal year
may be carried over for expenditure in the next following fiscal year; and provided,
further, if any such amount is so carried over, it will be deemed used
in the applicable subsequent fiscal year before the $20,000,000 permitted for
such fiscal year.

 

(p)                                 Exhibit E,
Compliance Certificate, is hereby amended to be in the form of Exhibit E
to this Fourth Amendment.

 

(q)                                 As
of the Fourth Amendment Closing Date, Schedule 2.01 of the Credit
Agreement shall be replaced by the form of Schedule 2.01 to this
Fourth Amendment, and the Lender’s Commitment and Applicable Percentage shall
be in the amount and the percentage set forth on such Schedule 2.01.

 

8

 

2.                                       REPRESENTATIONS
AND WARRANTIES TRUE; NO EVENT OF DEFAULT. 
By its execution and delivery hereof, each of the Borrower and Limited
represents and warrants that, as of the date hereof:

 

(a)                                  the
representations and warranties contained in the Credit Agreement and the other
Loan Documents are true and correct on and as of the date hereof as made on and
as of such date, except to the extent that such representations and warranties
specifically refer to an earlier date, in which case they shall be true and
correct on such earlier date;

 

(b)                                 no
event has occurred and is continuing which constitutes a Default or an Event of
Default;

 

(c)                                  (i) the
Borrower has full power and authority to execute and deliver this Fourth
Amendment and the replacement Revolving Loan Note for the Lender (the “Replacement
Note”), (ii) Limited has full power and authority to execute and deliver
this Fourth Amendment, (iii) this Fourth Amendment and the Replacement
Note have been duly executed and delivered by the Borrower and Limited, as
applicable, and (iv) this Fourth Amendment, the Replacement Note and the
Credit Agreement, as amended hereby, constitute the legal, valid and binding
obligations of the Borrower and Limited, as the case may be, enforceable in
accordance with their respective terms, except as enforceability may be limited
by applicable Debtor Relief Laws and by general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law) and except as rights to indemnity may be limited by federal or state
securities laws;

 

(d)                                 neither
the execution, delivery and performance of this Fourth Amendment, the
Replacement Note or the Credit Agreement, as amended hereby, nor the
consummation of any transactions contemplated herein or therein, will conflict
with any Law or Organization Documents of the Borrower or Limited, or any
indenture, agreement or other instrument to which the Borrower or Limited or
any of their respective property is subject; and

 

(e)                                  no
authorization, approval, consent, or other action by, notice to, or filing
with, any Governmental Authority or other Person not previously obtained is
required for (i) the execution, delivery or performance by the Borrower of
this Fourth Amendment or the Replacement Note, (ii) the execution,
delivery or performance by Limited of this Fourth Amendment, or (iii) the
acknowledgment by each Guarantor of this Fourth Amendment.

 

3.                                       CONDITIONS
TO EFFECTIVENESS.  This Fourth
Amendment shall be effective (and the revisions to the definition of “Applicable
Rate” set forth in Section 1(a) hereof will go into effect) upon
satisfaction or completion of the following:

 

(a)                                  the
Administrative Agent shall have received counterparts of this Fourth Amendment
executed by the Lender;

 

(b)                                 the
Administrative Agent shall have received counterparts of this Fourth Amendment
executed by the Borrower and Limited and acknowledged by each Guarantor;

 

(c)                                  the
Administrative Agent shall have received a certified resolution of the general
partner of the Borrower authorizing the execution, delivery and performance of
this Fourth Amendment and the Replacement Note by the general partner on behalf
of the Borrower;

 

9

 

(d)                                 the
Administrative Agent shall have received a duly executed Replacement Note for
each Lender whose Commitment is being amended by this Fourth Amendment;

 

(e)                                  the
Exiting Lenders shall have acknowledged and agreed to this Fourth Amendment for
the purposes of Section 4 hereof only and the Exiting Lenders shall have
received payment in full of all amounts due and owing to them under the Credit
Agreement;

 

(f)                                    the
Administrative Agent shall have received from the Borrower for the account of
the Lender which executes and delivers this Fourth Amendment to the
Administrative Agent by 5:00 p.m., Houston, Texas time, December 11,
2008, an amount equal to the product of (i) 0.30% and (ii) the Lender’s
Commitment, as amended by this Fourth Amendment; and

 

(g)                                 the
Administrative Agent shall have received, in form and substance satisfactory to
the Administrative Agent and its counsel, such other documents, certificates
and instruments as the Administrative Agent shall reasonably require.

 

4.                                       EXITING
LENDERS.  Upon satisfaction of the
conditions set forth in Section 3 hereof, the Exiting Lenders shall (a) not
be Lenders under the Credit Agreement, (b) not have any rights or
obligations with respect to being Lenders, except for those that expressly
survive termination of the Credit Agreement or any commitments thereunder and (c) mark
their respective Revolving Loan Notes “PAID IN FULL”, and promptly return their
respective Revolving Loan Notes to the Borrower.

 

5.                                       REFERENCE
TO THE CREDIT AGREEMENT.

 

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

 

(b)                                 The
Credit Agreement, as amended by the amendments referred to above, shall remain
in full force and effect and is hereby ratified and confirmed.

 

6.                                       COSTS,
EXPENSES AND TAXES.  The Borrower
agrees to pay on demand all reasonable costs and expenses of the Administrative
Agent in connection with the preparation, reproduction, execution and delivery
of this Fourth Amendment and the other instruments and documents to be
delivered hereunder (including the reasonable fees and out-of-pocket expenses
of counsel for the Administrative Agent with respect thereto).

 

7.                                       GUARANTOR’S
ACKNOWLEDGMENT.  By signing below,
each Guarantor (a) acknowledges, consents and agrees to the execution,
delivery and performance by the Borrower and Limited of this Fourth Amendment, (b) acknowledges
and agrees that its obligations in respect of its Guaranty (i) are not
released, diminished, waived, modified, impaired or affected in any manner by
this Fourth Amendment or any of the provisions contemplated herein, (c) ratifies
and confirms its obligations under its Guaranty, and (d) acknowledges and
agrees that it has no claims or offsets against, or defenses or counterclaims
to, its Guaranty.

 

10

 

8.                                       EXECUTION
IN COUNTERPARTS.  This Fourth
Amendment may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which when taken
together shall constitute but one and the same instrument.  For purposes of this Fourth Amendment, a
counterpart hereof (or signature page thereto) signed and transmitted by
any Person party hereto to the Administrative Agent (or its counsel) by facsimile
machine, telecopier or electronic mail is to be treated as an original.  The signature of such Person thereon, for
purposes hereof, is to be considered as an original signature, and the
counterpart (or signature page thereto) so transmitted is to be considered
to have the same binding effect as an original signature on an original
document.

 

9.                                       GOVERNING
LAW; BINDING EFFECT.  This Fourth
Amendment shall be governed by and construed in accordance with the laws of the
State of Texas applicable to agreements made and to be performed entirely
within such state, provided that each party shall retain all rights arising
under federal law, and shall be binding upon the parties hereto and their
respective successors and assigns.

 

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

 

11.                                 ENTIRE
AGREEMENT.  THE CREDIT AGREEMENT, AS
AMENDED BY THIS FOURTH AMENDMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE
PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.

 

REMAINDER OF PAGE LEFT
INTENTIONALLY BLANK

 

11

 

IN WITNESS WHEREOF, this Fourth Amendment is executed
as of the date first set forth above.

 

	
   

  	
  HELEN
  OF TROY L.P., a Texas limited

  partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  HELEN OF TROY
  NEVADA

  CORPORATION, a Nevada corporation,

  General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gerald J.
  Rubin

  
	
   

  	
   

  	
  Gerald J. Rubin

  
	
   

  	
   

  	
  Chairman, Chief
  Executive Officer and

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HELEN
  OF TROY LIMITED, a Bermuda

  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gerald J.
  Rubin

  
	
   

  	
   

  	
  Gerald J. Rubin

  
	
   

  	
   

  	
  Chairman, Chief
  Executive Officer and

  
	
   

  	
   

  	
  President

  

 

12

 

	
   

  	
  BANK OF
  AMERICA, N.A., as Administrative

  Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael
  Brashler

  
	
   

  	
   

  	
  Michael Brashler

  
	
   

  	
   

  	
  Vice President

  

 

13

 

	
   

  	
  BANK OF
  AMERICA, N.A., as the Lender, L/C

  Issuer and Swing Line Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gary Mingle

  
	
   

  	
   

  	
  Gary Mingle

  
	
   

  	
   

  	
  Senior Vice
  President

  

 

14

 

 

ACKNOWLEDGED AND AGREED FOR

PURPOSES OF SECTION 4 ONLY:

 

	
  AMEGY
  BANK NATIONAL ASSOCIATION

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Julia Y.
  Sudduth

  	
   

  
	
   

  	
  Julia Y. Sudduth

  	
   

  
	
   

  	
  Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  COMERICA
  BANK

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ De Von Lang

  	
   

  
	
   

  	
  De Von Lang

  	
   

  
	
   

  	
  Corporate
  Banking Officer

  	
   

  

 

15

 

 

ACKNOWLEDGED AND AGREED:

 

	
  HELEN OF TROY
  LIMITED, a Bermuda company

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Gerald J.
  Rubin

  	
   

  
	
   

  	
  Gerald J. Rubin

  	
   

  
	
   

  	
  Chairman, Chief
  Executive Officer and

  	
   

  
	
   

  	
  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  HELEN OF TROY
  LIMITED, a Barbados corporation

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Gerald J.
  Rubin

  	
   

  
	
   

  	
  Gerald J. Rubin

  	
   

  
	
   

  	
  Chairman, Chief
  Executive Officer and

  	
   

  
	
   

  	
  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  HOT NEVADA,
  INC., a Nevada corporation

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Gary B.
  Abromovitz

  	
   

  
	
   

  	
  Gary B.
  Abromovitz

  	
   

  
	
   

  	
  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  HELEN OF TROY
  NEVADA CORPORATION,

  a Nevada corporation

  	
   

  
	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Gerald J.
  Rubin

  	
   

  
	
   

  	
  Gerald J. Rubin

  	
   

  
	
   

  	
  Chairman, Chief
  Executive Officer and

  	
   

  
	
   

  	
  President

  	
   

  

 

16

 

 

	
  HELEN OF TROY TEXAS CORPORATION,

  a Texas corporation

  	
   

  
	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Gerald J.
  Rubin

  	
   

  
	
   

  	
  Gerald J. Rubin

  	
   

  
	
   

  	
  Chairman, Chief
  Executive Officer and

  	
   

  
	
   

  	
  President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  IDELLE LABS
  LTD., a Texas limited partnership

  	
   

  
	
   

  	
   

  
	
  By:

  	
  HELEN OF TROY
  NEVADA CORPORATION,

  	
   

  
	
  a Nevada
  corporation, General Partner

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Gerald J.
  Rubin

  	
   

  
	
   

  	
  Gerald J. Rubin

  	
   

  
	
   

  	
  Chairman, Chief
  Executive Officer and

  	
   

  
	
   

  	
  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  OXO
  INTERNATIONAL LTD., a Texas limited partnership

  	
   

  
	
   

  	
   

  
	
  By:

  	
  HELEN OF TROY
  NEVADA CORPORATION,

  	
   

  
	
  a Nevada
  corporation, General Partner

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Gerald J.
  Rubin

  	
   

  
	
   

  	
  Gerald J. Rubin

  	
   

  
	
   

  	
  Chairman, Chief
  Executive Officer and

  	
   

  
	
   

  	
  President

  	
   

  

 

17

 

SCHEDULE 2.01

 

COMMITMENTS

AND APPLICABLE PERCENTAGES

 

	
  Lender

  	
   

  	
  Revolving Commitment

  	
   

  	
  Applicable Percentage

  	
   

  
	
  Bank of America, N.A.

  	
   

  	
  $

  	
  50,000,000

  	
   

  	
  100.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
  50,000,000

  	
   

  	
  100.00

  	
  %

  

 

18Exhibit 10.1

 

AMENDED AND RESTATED EXECUTIVE EMPLOYMENT
AGREEMENT (this “Agreement”), dated December 19,
2008, between P&F INDUSTRIES, INC., a
Delaware corporation (the “Company”), and RICHARD A.
HOROWITZ (the “Executive”).

 

W I T N E S S E T H

 

WHEREAS, the
Executive and the Company are parties to that certain Employment Agreement,
dated February 12, 2007 (the “Prior
Agreement”) pursuant to which the Executive is employed by the
Company as its Chairman, President and Chief Executive Officer; and

 

WHEREAS, the Company
and the Executive desire to amend and restate the Prior Agreement on the terms
and conditions set forth herein, including amendments that the parties agree
are intended to comply with the requirements of Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”), and the
regulations and guidance promulgated thereunder (collectively “Code Section 409A”);

 

NOW THEREFORE, in
consideration of the foregoing, the mutual promises contained herein and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:

 

1.                                       POSITION/DUTIES.

 

(a)                                  During the Employment Term (as
hereinafter defined), the Executive shall serve as the President and Chief
Executive Officer of the Company and, if elected by the Board of Directors of
the Company (the “Board”), Chairman. 
In this capacity, the Executive shall have such duties, authorities and
responsibilities commensurate with the duties, authorities and responsibilities
of persons in similar capacities in similarly sized companies, and such other
duties, authorities and responsibilities as the Board shall designate that are
consistent with the Executive’s positions. 
The Executive shall report to the Board.

 

(b)                                 During the Employment Term, the
Executive shall devote all of his business time, energy and skill and his best
efforts to the performance of his duties with the Company; provided, however,
that the foregoing shall not prevent the Executive from (i) serving on the
board of directors of non-profit organizations and, with the prior written
approval of the Board, other companies, (ii) participating in charitable,
civic, educational, professional, community or industry affairs or (iii) managing
his and his family’s passive personal investments so long as such activities in
the aggregate do not materially interfere or conflict with the performance of
his duties hereunder or create a potential business conflict.

 

2.                                       EMPLOYMENT TERM.  The Executive’s term of employment under this
Agreement shall be for a term commencing on January 1, 2007 (the “Effective
Date”) and, unless terminated earlier as provided in Section 6, ending
on December 31, 2011 (the “Employment Term”).

 

3.                                       BASE SALARY.  The Company agrees to pay the Executive a base
salary at an annual rate of not less than $975,000, payable in accordance with
the regular payroll practices of the Company. 
The Executive’s base salary shall be subject to annual review by the
Board (or a 

 

 

committee
thereof) and may be increased, but not decreased, from time to time by the
Board.  The base salary as determined
herein from time to time shall constitute “Base Salary” for purposes of this
Agreement.

 

4.                                       BONUS.  During the Employment Term, the Executive
shall be eligible for an annual discretionary incentive payment under the
Company’s Executive 162(m) Bonus Plan, as amended or as may be amended
from time to time, or any successor annual bonus plan (the “Bonus Plan”),
with a target of 90% of the Executive’s then-current Base Salary (the “Target
Bonus”) (as prorated for partial years). 
Any annual bonus shall be paid in accordance the terms and conditions of
the Plan.

 

5.                                       EMPLOYEE
BENEFITS.

 

(a)                                  Benefit Plans.  The Executive shall be entitled to
participate in any employee benefit plan that the Company has adopted or may
adopt, maintain or contribute to for the benefit generally of its senior
executives at a level commensurate with his position, subject to satisfying the
applicable eligibility requirements. 
Notwithstanding the foregoing, the Company may modify or terminate any
employee benefit plan at any time.

 

(b)                                 Make-Up
Payments.  Through the earlier of (i) December 31,
2016, (ii) the Executive’s death, or (iii) the Executive’s
termination for Cause (as hereinafter defined) or resignation without Good
Reason (as hereinafter defined), the Company will pay the Executive $45,064.37
(each a “Make Up Payment”) on or before March 15 of each calendar
year to cover premiums on a life insurance policy (reflecting the prior change
in the split dollar arrangement).  This
provision shall survive any expiration of the Employment Term and any
termination of the Executive’s employment (other than due to the Executive’s
death or a termination of the Executive’s employment prior to the expiration of
the Employment Term by the Company for Cause or by the Executive without Good
Reason).

 

(c)                                  Vacations.  The Executive shall be entitled to an annual
paid vacation of six weeks per calendar year (as prorated for partial years) in
accordance with the Company’s policy on accrual and use applicable to senior
executives.

 

(d)                                 Business and
Entertainment Expenses.  Upon presentation of appropriate
documentation, the Executive shall be reimbursed in accordance with the Company’s
expense reimbursement policy for all reasonable and necessary business and
entertainment expenses incurred in connection with the performance of his
duties hereunder.

 

(e)                                  Automobile.  During the Employment Term, the Company will
provide the Executive, at the Company’s expense, with a current model
automobile similar to the automobile currently furnished to the Executive.  In addition, upon submission of appropriate
documentation, the Company shall pay or reimburse the Executive for the cost of
insurance, maintenance and gas incurred for business purposes and other
business related operating expenses incurred for such automobile during the
Employment Term.  The Executive shall be
entitled to request a new automobile at the end of each three (3) year
period commencing on the Effective Date.

 

2

 

6.                                       TERMINATION. 
The Executive’s employment and the Employment Term shall terminate on
the first of the following to occur:

 

(a)                                  Disability.  Upon 30 days’ prior written notice by the
Company to the Executive of termination due to Disability if the Executive does
not return to full-time continuous employment with the Company within such 30
days.  For purposes of this Agreement, “Disability”
shall be defined as the Executive’s becoming physically or mentally disabled,
whether totally or partially, so that he has been unable to perform his
material duties hereunder for a period of 180 days (including weekends and
holidays) during any 365-day period.

 

(b)                                 Death. 
Automatically on the date of death of the Executive.

 

(c)                                  Cause.  The Company may terminate the Executive’s
employment hereunder for Cause immediately upon written notice by the Company
to the Executive of a termination for Cause. 
“Cause” shall mean the Executive’s:

 

(i)                                     refusal
or willful failure to attempt in good faith to perform his duties (other than
as a result of physical of mental incapacity);

 

(ii)                                  gross
negligence or willful misconduct with regard to the Company, its assets or
employees of a material nature or any fraud, theft or material dishonesty with
regard to the Company or in the performance of his duties;

 

(iii)                               willful
misconduct which in the good faith judgment of the Board has or may materially
damage the Company economically or reputation wise;

 

(iv)                              commission
of any felony or any other crime involving fraud, dishonesty, securities law
violations or moral turpitude, provided that any conviction for, or pleading
guilty or nolo contendere to, any such felony or other crime shall conclusively
be deemed acknowledgement by the Executive of commission thereof;

 

(v)                                 failure
to attempt in good faith to follow the written direction of the Board; or

 

(vi)                              material
breach of a material term of this Agreement or any other material agreement
with the Company that is not cured within 15 days of the giving of written
notice thereof.

 

The Executive may only be terminated for Cause by a vote of a majority
of the full Board (excluding the Executive for purposes of determining the
number necessary to constitute a majority) and, prior to any termination for
Cause, the Executive will be given 5 business days written notice specifying
the alleged Cause event and will be entitled to appear (with counsel) before
the full Board to present information regarding his views on the Cause event.  After providing the notice in foregoing
sentence, the Board may suspend the Executive with pay until a final
determination pursuant to this paragraph has been made.  In the event of a Cause termination after a
Change in Control, the Company shall bear the burden of proof by a preponderance
of the evidence.

 

3

 

(d)                                 Without Cause. 
Upon written notice by the Company to the Executive of an involuntary
termination without Cause, other than for death or Disability.

 

(e)                                  Good Reason.  Upon written notice by the Executive to the
Company of a termination for Good Reason provided that such notice is given
within 60 days of the Good Reason event. 
“Good Reason” shall mean the occurrence of any of the following
events, without the express written consent of the Executive, unless such
events are cured by the Company within 30 days following written notification
by the Executive to the Company that he intends to terminate his employment
hereunder for one of the reasons set forth below:

 

(i)                                     any reduction or diminution in
the Executive’s title, including non-election or removal from the position of
Chairman unless the separation of the positions of Chairman and Chief Executive
Officer is required by applicable law;

 

(ii)                                  any material reduction or diminution
in the Executive’s then authorities, duties, or responsibilities;

 

(iii)                               a material reduction in the
Executive’s Base Salary or benefits (but not including any reduction related to
a broader compensation reduction by the Company that is not limited to any
particular employee or executive);

 

(iv)                              a relocation of the Executive’s
principal business location to an area outside of a 35 mile radius of both the
Executive’s principal business location and the Executive’s principal residence
at the time of such relocation; or

 

(v)                                 a material breach of the
Agreement by the Company.

 

Notwithstanding the
foregoing, the Executive agrees that, during any period of incapacity, the
Company may appoint or temporarily assign his duties to another or others
without such action resulting in Good Reason.

 

(f)                                    Without Good
Reason.  Upon 60 days’ prior written notice by the
Executive to the Company of the Executive’s voluntary termination of employment
without Good Reason (which the Company may, in its sole discretion, make
effective earlier than any notice date).

 

7.                                       CONSEQUENCES OF
TERMINATION.

 

(a)                                  Disability.  In the event the Executive’s employment is
terminated due to Disability the Company shall pay or provide the Executive (i) any
unpaid Base Salary through the date of termination paid in accordance with the
Company’s normal payroll policies as if the Executive were an employee; (ii) any
annual bonus earned but unpaid with respect to the fiscal year ending on or
preceding the date of termination, paid when such annual bonus would have
ordinarily been paid in accordance with the Bonus Plan; (iii) reimbursement
for any unreimbursed expenses through the date of termination incurred and paid
in accordance with the Company’s normal reimbursement procedures; (iv) any
other amounts and benefits the Executive is entitled to receive under any
employee benefit plan in accordance with the terms of the applicable plan
(collectively items (i) through (iv) shall be hereafter referred to
as the “Accrued Amounts”); (v) a pro-rata portion of the Executive’s
annual bonus for the fiscal year in 

 

4

 

which the Executive’s termination occurs
based on actual results for the fiscal year (determined by multiplying the
amount of such bonus which would be due for the full fiscal year by a fraction,
the numerator of which is the number of days during the fiscal year of
termination that the Executive is employed by the Company and the denominator
of which is 365), paid when such annual bonus would have ordinarily been paid
in accordance with the Bonus Plan (the “Pro Rata Bonus”); (vi) full
vesting of all equity awards granted to the Executive on or after the Effective
Date; (vii) Subject to Section 25(b) hereof and solely to the
extent the Executive does not otherwise receive such coverage under any other
medical benefits available to the Executive as a result of his Disability,
continued coverage at the Company’s expense (other than as set forth below)
under the Company’s group health insurance plans in which the Executive
participated immediately prior to the date of termination, with the Company
portion of the premium for any such coverage paid on a monthly basis, for the
Executive and the Executive’s dependents until the earliest of (i) the
Executive’s 65th birthday and (ii) the
Executive’s ceasing to have a physical or mental disability that would have
prevented him from performing his material duties hereunder, which coverage
period shall run concurrently with the applicable continuation coverage for the
Executive and the Executive’s dependents pursuant to the Consolidated Omnibus
Budget Reconciliation Act of 1985 (“COBRA”); provided that the Executive
pays the same premium amount for such coverage as the Executive would pay if an
active employee under the Company health plans (as determined based on the
premium rate in effect for the Executive on the Executive’s date of termination
and excluding, for purposes of calculating cost, an employee’s ability to pay
premiums with pre-tax dollars); and (viii) continued payment of the
Make-Up Payments in accordance with Section 5(b) (including payment
timing).  Following a termination due to
Disability all equity awards granted to the Executive prior to the Effective
Date shall be governed in accordance with the terms of the applicable grant
agreements.

 

(b)                                 Death. 
In the event the Executive’s employment is terminated due to the
Executive’s death, the Company shall pay or provide to the Executive’s estate (i) the
Accrued Amounts; (ii) the Pro Rata Bonus; (iii) full vesting of all
equity awards granted to the Executive on or after the Effective Date; and (iv) subject
to the Executive’s dependents timely election of continuation coverage under
COBRA, continued coverage pursuant to COBRA at the Company’s expense under the
Company’s group health insurance plans in which the Executive participated
immediately prior to the date of termination, with the premium for any such
coverage paid on a monthly basis, for the Executive’s dependents until the
earlier of (i) 3 years from the date of the Executive’s death and (ii) the
Executive’s dependents ceasing to be eligible for COBRA coverage.  Following a termination due to the Executive’s
death all equity awards granted to the Executive prior to the Effective Date
shall be governed in accordance with the terms of the applicable grant
agreements.

 

(c)                                  Termination For
Cause Or Without Good Reason.  In the event the Executive’s employment is
terminated (i) by the Company for Cause, or (ii) by the Executive
without Good Reason, the Company shall pay or provide to the Executive the
Accrued Amounts.  Following any such
termination all equity awards granted to the Executive shall be governed in
accordance with the terms of the applicable grant agreements.

 

(d)                                 Termination
Without Cause Or For Good Reason.  In the event the
Executive’s employment is terminated (x) by the Company other than for
Cause or (y) by the 

 

5

 

Executive for Good Reason, and Section 8(a) does
not apply, the Company shall pay or provide to the Executive (i) the
Accrued Amounts; (ii) continued payment of the Make-Up Payments paid in
accordance with Section 5(b) (including payment timing); and (iii) subject
to Section 9:

 

(A)                  subject to Section 25(b),
continued payments of Base Salary for 18 months following the date of
termination (the “Severance Payment”) paid in accordance with the
Company’s normal payroll policies as if the Executive were an employee (but off
employee payroll); provided, that unless subject to further
delay as set forth in Section 25(b), the first payment of the Severance
Payment will made on the sixtieth (60th)
day after the date of termination and will include payment of any amounts that
would otherwise be due prior thereto;

 

(B)                    the Pro Rata Bonus; and

 

(C)                    subject to the Executive’s
timely election of continuation coverage under COBRA, continued coverage of the
Executive and his dependents pursuant to COBRA at the Company’s expense under
the Company’s group health insurance plans in which the Executive participated
immediately prior to the date of termination, with the premium for any such
coverage paid on a monthly basis until the earliest of (I) 18 months from
the date of termination, (II) the Executive becoming eligible for medical
benefits from a subsequent employer, or (III) the Executive otherwise
becoming ineligible for COBRA (the “COBRA Benefit”).

 

Following any such termination all equity
awards granted to the Executive shall be governed in accordance with the terms
of the applicable grant agreements. 
Payments and benefits provided in this Section 7(d) shall be
in lieu of any termination or severance payments or benefits for which the
Executive may be eligible under any of the plans, policies or programs of the
Company.

 

8.                                       CHANGE IN
CONTROL.

 

(a)                                  Notwithstanding anything herein
to the contrary, subject to Sections 8(d), in the event the Executive’s
employment is terminated by the Company without Cause or the Executive resigns
for Good Reason within two years following a Change in Control, then in lieu of
the amounts and benefits under Section 7(d), the Company shall pay or
provide to the Executive (i) the Accrued Amounts; (ii) continued
payment of the Make-Up Payments paid in accordance with Section 5(b) (including
payment timing); and (iii) subject to Section 9:

 

(A)                              subject to Section 25(b),
payment in an amount equal to the greater of (I) and (II) where (I) equals
18 months Base Salary and (II) equals the lesser of:

 

(1)                                  two times the sum of (X) the
Executive’s Base Salary plus (Y) the amount of any annual bonus the
Executive received for the year prior to the Change in Control; or

 

(2)                                  3% of the value on the date of
the Change in Control of the Company’s outstanding shares on a fully diluted
basis on the date of such Change in Control (without regard for any outstanding
options with an 

 

6

 

exercise price less than the consideration
paid for the Company’s shares in the Change in Control);

 

such payment to be made as follows:  (x) if the Change in Control is not as a
result of an event that constitutes a “change in control event” within the
meaning of Code Section 409A (a “409A Change in Control”), then an amount
equal to 18 months Base Salary shall be paid to the Executive in the form and
manner set forth in Section 7(d)(iii)(A) above and the remainder of
such payment shall be paid to the Executive in a lump sum on the date that is
six months and one day after the date of termination, and (y) if the
Change in Control does result from an event that constitutes a 409A Change in
Control, then the full amount of such payment shall be paid to the Executive in
a lump sum on the 60th day after the date of termination;

 

(B)                                the Pro Rata Bonus; and

 

(C)                                the COBRA Benefit.

 

Following any such termination all equity
awards granted to the Executive shall be governed in accordance with the terms
of the applicable grant agreements.

 

(b)                                 Notwithstanding anything herein
to the contrary, subject to Sections 8(d), in the event the Executive’s
employment is terminated by the Company without Cause or the Executive resigns
for Good Reason within six months prior to a Change in Control but which the
Executive reasonably demonstrates (x) was at the request of a third party
who is the acquirer in the Change in Control or (y) otherwise arose in
connection with, or in anticipation of, the Change in Control which actually
occurs, then in addition to the amounts and benefits provided under Section 7(d),
the Company shall, subject to Sections 9 and 25(b), pay to the Executive the
excess of the amount that would be payable under Section 8(a)(iii)(A) above
18 months Base Salary, which excess amount shall be paid to the Executive in a
lump sum on the date that is six months and one day after the date of
termination.

 

(c)                                  For purposes of this Agreement, “Change
in Control” will mean the occurrence of one of the following events:

 

(i)                                     any “person” (as such term is
defined in Section 3(a)(9) of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”) and as
used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or
becomes, after the Effective Date, a “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company’s then
outstanding securities eligible to vote for the election of the Board (the “Company
Voting Securities”); provided, however, that an event described in this
subsection (i) shall not be deemed to be a Change in Control if any of
following becomes such a beneficial owner:

 

(A)                              the Company or any majority-owned subsidiary (provided, that
this exclusion applies solely to the ownership levels of the Company or the
majority-owned subsidiary),

 

7

 

(B)                                any tax-qualified, broad-based employee benefit plan
sponsored or maintained by the Company or any majority-owned subsidiary,

 

(C)                                any underwriter temporarily holding securities pursuant to
an offering of such securities, or

 

(D)                               any person pursuant to a Non-Qualifying Transaction (as
defined below);

 

(ii)                                  individuals who, on the
Effective Date, constitute the Board (the “Incumbent Directors”) cease for any reason to
constitute at least a majority of the Board, provided that any person becoming
a director subsequent to the Effective Date whose election or nomination for
election was approved by a vote of at least two-thirds of the Incumbent
Directors then on the Board (either by a specific vote or by approval of the
proxy statement of the Company in which such person is named as a nominee for
director, without objection to such nomination) shall be an Incumbent Director.

 

(iii)                               the consummation of a merger, consolidation, statutory share
exchange or similar form of corporate transaction involving the Company or any
of its Subsidiaries that requires the approval of the Company’s stockholders,
whether for such transaction or the issuance of securities in the transaction
(a “Business Combination”), unless immediately following such Business
Combination:

 

(A)                              50% or more of the total voting power of:

 

(x)                                   the corporation
resulting from such Business Combination (the “Surviving Corporation”),
or

 

(y)                                 if applicable, the
ultimate parent corporation that directly or indirectly has beneficial
ownership of 100% of the voting securities eligible to elect directors of the
Surviving Corporation (the “Parent Corporation”),

 

is represented by Company Voting Securities
that were outstanding immediately prior to such Business Combination (or, if
applicable, is represented by shares into which such Company Voting Securities
were converted pursuant to such Business Combination), and such voting power
among the holders thereof is in substantially the same proportion as the voting
power of such Company Voting Securities among the holders thereof immediately
prior to the Business Combination;

 

(B)                                no person (other than any employee benefit plan (or related
trust) sponsored or maintained by the Surviving Corporation or the Parent
Corporation), is or becomes the beneficial owner, directly or indirectly, of
50% or more of the total voting power of the outstanding voting securities
eligible to elect directors of the Parent Corporation (or, if there is no
Parent Corporation, the Surviving Corporation); and

 

8

 

(C)                                at least a majority of
the members of the board of directors of the Parent Corporation (or if there is
no Parent Corporation, the Surviving Corporation) following the consummation of
the Business Combination were Incumbent Directors at the time of the Board’s
approval of the execution of the initial agreement providing for such Business
Combination

 

(any Business Combination which satisfies all of the criteria specified
in (A), (B) and (C) above shall be deemed to be a “Non-Qualifying
Transaction”); or

 

(iv)                              consummation of the
sale of all or substantially all of the Company’s assets or stockholder
approval of a liquidation or dissolution of the Company, unless the voting
common equity interests of the acquirer of such assets or an ongoing entity
(other than a liquidating trust), as the case may be, based on total voting
power, are at least more than 50% beneficially owned, directly or indirectly,
by the Company’s shareholders in substantially the same proportions as such shareholders
owned the Company’s outstanding voting common equity interests immediately
prior to such sale or liquidation and, if a plan of liquidation or dissolution,
such ongoing entity assumes all existing obligations of the Company under this
Plan.

 

Notwithstanding the foregoing, a Change in
Control of the Company shall not be deemed to occur solely because any person
acquires beneficial ownership of more than 50% of the Company Voting
Securities, based on total voting power, as a result of the acquisition of
Company Voting Securities by the Company which reduces the number of Company
Voting Securities outstanding; provided, that, if after such acquisition by the
Company such person becomes the beneficial owner of Company Voting Securities
that increases the percentage of outstanding Company Voting Securities
beneficially owned by such person, a Change in Control of the Company shall
then occur.

 

(d)                                 Notwithstanding anything else
herein, if any payment or benefit, within the meaning of Section 280G(b)(2) of
the Code, to the Executive or for Executive’s benefit paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise in connection with, or arising out of, Executive’s employment with
the Company or a change in ownership or effective control of the Company or of
a substantial portion of its assets, would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as
the “Excise Tax”), the amounts and benefits provided under this
Agreement or otherwise that are subject to Section 280G of the Code as a
result of the transaction will be automatically reduced to an amount that
equals the product of 2.99 multiplied by the Executive’s “base amount” (as
determined in accordance with Sections 280G and 4999 of the Code by the Company’s
certified public accountants unless the Company and the Executive mutually
agree to the appointment of an independent certified public accounting firm),
such that the Executive will not be subject to the Excise Tax.  Unless otherwise elected by the Executive, to
the extent permitted under Code Section 409A, such reduction shall first
be applied to any severance payments payable to the Executive under this
Agreement in reverse order of receipt, then to the vesting on any equity, with
underwater stock options first net withholding, and thereafter any in-the-money
stock options starting from the 

 

9

 

stock options with smallest spread between
fair market value and exercise price, and thereafter any restricted stock or
restricted stock units.

 

9.                                       RELEASE.  Any and all amounts payable and benefits or
additional rights provided pursuant to Sections 7(d)(iii), 8(a)(iii) or 8(b) shall
only be payable or provided if the Executive executes and delivers to the
Company a general release of all claims against the Company in the form
attached to the Agreement as Appendix A (the “Release”) (with
such changes as the Company may request to support the legality and
effectiveness of the Release).  The
Company shall provide the Executive with a copy of the Release within seven (7) days
following the Executive’s date of termination and the Executive will be
required to provide the Company with an executed copy of the Release that has become effective within
sixty (60) days following the Executive’s date of termination.

 

10.                                 RESTRICTIVE
COVENANTS.

 

(a)                                  Confidentiality. 
The Executive agrees that he shall not, directly or indirectly, use,
make available, sell, disclose or otherwise communicate to any person, other
than in the reasonable good faith performance of his duties and for the benefit
of the Company, either during the period of the Executive’s employment or at
any time thereafter, any nonpublic, proprietary or confidential information,
knowledge or data relating to the Company, any of its subsidiaries, affiliated
companies or businesses, which shall have been obtained by the Executive during
the Executive’s employment by the Company. 
The foregoing shall not apply to information that (i) was known to
the public prior to its disclosure to the Executive; (ii) becomes
generally known to the public subsequent to disclosure to the Executive through
no wrongful act of the Executive or any representative of the Executive; or (iii) the
Executive is required to disclose by applicable law, regulation or legal
process (provided that the Executive provides the Company with prior notice of
the contemplated disclosure and reasonably cooperates with the Company at its
expense in seeking a protective order or other appropriate protection of such
information).

 

(b)                                 Nonsolicitation.  During the Executive’s employment with the
Company and for the 18 month period thereafter, the Executive agrees that he
will not, except in the furtherance of his duties hereunder, directly or
indirectly, individually or on behalf of any other person, firm, corporation or
other entity, (i) solicit or hire any employees, representatives or agents
of the Company (or any of its affiliates) or (ii) solicit any of the
Company’s customers.

 

(c)                                  Noncompetition.  The Executive acknowledges that he performs
services of a unique nature for the Company that are irreplaceable, and that
his performance of such services to a competing business will result in
irreparable harm to the Company. 
Accordingly, during the Executive’s employment hereunder and for the 18
month period thereafter, the Executive agrees that the Executive will not, (i) enter
the employ of (whether as an employee, consultant, independent contractor or
otherwise, and whether or not for compensation), or render any services to, any
person, firm, corporation or other entity, in whatever form, engaged or
actively planning to be engaged in any Competitive Business, (ii) directly
or indirectly, own, manage, operate, control or otherwise engage in such a
Competitive Business for his own account, or (iii) directly or indirectly,
become interested in a Competitive Business as an individual, partner,
shareholder, director, officer, principal, agent, trustee or in any other
relationship or capacity.  “Competitive
Business” will mean, as of any date, any business competitive with any
business 

 

10

 

then being conducted by the Company and
operating in some or all of the same geographic areas; provided that, upon the
termination of the Executive’s employment such determinations shall thereafter
be determined as of the date of the termination.  The foregoing shall not be violated by the
Executive’s providing services to a noncompetitive portion of a group of
related businesses which noncompetitive portion consists of less than 20% of the
overall revenues of such group of related businesses measured based on the
fiscal year prior to the fiscal year in which the Executive had his initial
relationship with such noncompetitive portion, nor by ownership of less than 2%
of public company stock or debt or a passive interest of less than 2% in a
pooled account, such as a hedge fund, private equity fund or mutual fund.

 

(d)                                 Nondisparagment. During the Employment Term and
thereafter, the Executive agrees not to disparage or encourage or induce others
to disparage the Company or any of its affiliates or any of its and their past
and present officers, directors, employees, products or services.  For purposes of this Agreement, the term “disparage”
includes, without limitation, comments or statements to the press, to the
Company or any of its affiliates or any of its or thier officers, directors, or
employees or to any individual or entity with whom the Company or any of its
affiliates has a business relationship (including, without limitation, any vendor,
supplier, customer or distributor of the Company or any of its affiliates) that
would adversely affect in any manner: (i) the conduct of any business of
the Company or any of its affiliates (including, without limitation, any
business plans or prospects) or (ii) the business reputation of the
Company or any of its affiliates or any of its and their officers, directors,
employees, products or services. 
Notwithstanding the foregoing, this Section 10(d) shall not
apply to truthful statements made in the course of sworn testimony in
administrative, judicial or arbitral proceedings or normal competitive
statements.

 

(e)                                  Reformation.  If it is determined by a court of competent
jurisdiction in any state that any restriction in this Section 10 is
excessive in duration or scope or is unreasonable or unenforceable under the
laws of that state, it is the intention of the parties that such restriction
may be modified or amended by the court to render it enforceable to the maximum
extent permitted by the law of that state.

 

(f)                                    Survival of
Provisions.  The obligations contained in this Section 10
shall survive the termination or expiration of the Executive’s employment with
the Company and shall be fully enforceable thereafter.

 

11.                                 COOPERATION.  Upon the receipt of reasonable notice from
the Company (including outside counsel), the Executive agrees that while
employed by the Company and thereafter, the Executive will respond and provide
information with regard to matters in which he has knowledge as a result of his
employment with the Company, and will provide reasonable assistance to the
Company, its affiliates and their respective representatives in defense of any
claims that may be made against the Company or its affiliates, and will assist
the Company and its affiliates in the prosecution of any claims that may be
made by the Company or its affiliates, to the extent that such claims may
relate to the period of the Executive’s employment with the Company.  The Executive agrees to promptly inform the
Company if he becomes aware of any lawsuits involving such claims that may be
filed or threatened against the Company or its affiliates.  The Executive also agrees to promptly inform
the Company (to the extent he is legally permitted to do so) if he is asked to
assist in any investigation of the Company or its affiliates (or 

 

11

 

their
actions), regardless of whether a lawsuit or other proceeding has then been
filed against the Company or its affiliates with respect to such investigation,
and shall not do so unless legally required. 
Upon presentation of appropriate documentation, the Company shall pay or
reimburse the Executive for all reasonable out-of-pocket travel, duplicating or
telephonic expenses incurred by the Executive in complying with this Section 11.

 

12.                                 EQUITABLE
RELIEF AND OTHER REMEDIES.

 

(a)                                  The Executive acknowledges and
agrees that the Company’s remedies at law for a breach or threatened breach of
any of the provisions of Section 10 or Section 11 would be inadequate
and, in recognition of this fact, the Executive agrees that, in the event of
such a breach or threatened breach, in addition to any remedies at law, the
Company, without posting any bond, shall be entitled to obtain equitable relief
in the form of specific performance, temporary restraining order, a temporary
or permanent injunction or any other equitable remedy which may then be
available.

 

(b)                                 In the event of a violation of Section 10
or 11 of this Agreement, any severance being paid to the Executive by the
Company pursuant to this Agreement (or any successor agreement) or otherwise
shall immediately cease.

 

13.                                 NO ASSIGNMENTS.

 

(a)                                  This Agreement is personal to
each of the parties hereto.  Except as
provided in Section 13(b) below, no party may assign or delegate any
rights or obligations hereunder without first obtaining the written consent of
the other party hereto.

 

(b)                                 The Company may assign this
Agreement to any successor to all or substantially all of the business and/or
assets of the Company provided the Company shall require such successor to
expressly assume and agree to perform this Agreement and, if applicable, any
Change in Control Agreement (but without creating any rights on a second change
in control), in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place.

 

14.                                 NOTICE. 
For the purpose of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given (i) on the date of delivery if delivered by hand, (ii) on
the date of transmission, if delivered by confirmed facsimile, (iii) on
the first business day following the date of deposit with the overnight
delivery service if delivered by guaranteed overnight delivery service, or (iv) on
the fourth business day following the date mailed by United States registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:

 

If to the Executive:

 

At the last address (or to the facsimile number) shown on the records
of the Company;

 

With a copy to:

 

Sonnenschein Nath & Rosenthal LLP

 

12

 

1301 K Street, N.W.

Suite 600, East Tower

Washington, DC  20005

Facsimile: (202) 408-6399

Attn:  Michael R. Maryn, Esq.

 

If to the Company:

 

P&F Industries, Inc.

445 Broadhollow Road

Suite 100

Melville, New York  11747

Facsimile: (631) 773-4230

Attn:  Chief Operating Officer

 

With a copy to:

 

Certilman Balin Adler & Hyman, LLP

90 Merrick Avenue

East Meadow, New York  11554

Facsimile: (516) 296-7111

Attn:  Steven J. Kuperschmid, Esq.

 

and

 

Proskauer Rose LLP

1585 Broadway

New York, New York  10036-8299

Facsimile: (212) 969-2900

Attn:  Michael Sirkin, Esq.

 

or to such other address as either party may
have furnished to the other in writing in accordance herewith, except that
notices of change of address shall be effective only upon receipt.

 

15.                                 SECTION HEADINGS; INCONSISTENCY.  The section headings
used in this Agreement are included solely for convenience and shall not
affect, or be used in connection with, the interpretation of this
Agreement.  In the event of any
inconsistency between the terms of this Agreement and any form, award, plan or
policy of the Company, the terms of this Agreement shall control.

 

16.                                 SEVERABILITY.  The provisions of this Agreement shall be
deemed severable and the invalidity of unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.

 

17.                                 COUNTERPARTS. 
This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original but all of which together will constitute one
and the same instruments.

 

13

 

18.                                 ARBITRATION.  Any dispute or controversy arising under or
in connection with this Agreement or the Executive’s employment with the
Company, other than injunctive relief under Section 12 hereof, shall be
settled exclusively by arbitration, conducted before a single arbitrator in New
York, New York (applying New York law) in accordance with the National Rules for
the Resolution of Employment Disputes of the American Arbitration Association
then in effect.  The decision of the
arbitrator will be final and binding upon the parties hereto.  Judgment may be entered on the arbitrator’s
award in any court having jurisdiction. 
The parties acknowledge and agree that in connection with any such
arbitration and regardless of outcome (a) each party shall pay all its own
costs and expenses, including without limitation its own legal fees and
expenses, and (b) joint expenses shall be borne equally among the parties;
provided, however, in the event that the arbitrator determines that the
Executive is the prevailing party, then the Company shall pay or reimburse all
reasonable legal fees and expenses incurred by the Executive.

 

19.                                 INDEMNIFICATION.  The Company hereby agrees to indemnify the
Executive and hold him harmless to the extent provided under the by-laws of the
Company against and in respect to any and all actions, suits, proceedings,
claims, demands, judgments, costs, expenses (including reasonable attorney’s
fees), losses, and damages resulting from the Executive’s good faith
performance of his duties and obligations with the Company.  This obligation shall survive the termination
of the Executive’s employment with the Company.

 

20.                                 LIABILITY
INSURANCE.  The Company shall cover the Executive under
directors and officers liability insurance both during and, while potential
liability exists, after the term of this Agreement in the same amount and to
the same extent as the Company covers its other officers and directors.

 

21.                                 MISCELLANEOUS. 
No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing and
signed by the Executive and such officer or director as may be designated by
the Board.  No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.  This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto (including
without limitation the Prior Agreement) with respect to the employment of the
Executive by the Company and, together with all exhibits hereto sets forth the
entire agreement of the parties hereto in respect of the subject matter
contained herein.  No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly
set forth in this Agreement.  The
validity, interpretation, construction and performance of this Agreement shall
be governed by the laws of the State of New York without regard to its
conflicts of law principles.

 

22.                                 NO MITIGATION;
TERMINATION CLAIM LIMIT.  In no event shall the Executive be obliged to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement,
nor shall the amount of any payment hereunder be reduced by any compensation
earned by the Executive as a result of employment by another employer, except
as provided in Section 12(b) hereof. 
Any claim by the Executive for damages as a result of a termination
based on Section 6(c)(iv) shall 

 

14

 

not
be brought prior to resolution of the criminal case and the Executives damages
shall be limited to (a) the monetary amounts the Executive would have
received in the event of a termination without Cause and (b) the intrinsic
value on the termination date of any equity vested at, or upon, such
termination that the Executive forfeited or did not receive because of the
classification of the termination for Cause (and the Executive shall have no
right to the equity, which shall be cancelled upon the termination for Cause).

 

23.                                 REPRESENTATIONS.  The Executive represents and warrants to the
Company that he has the legal right to enter into this Agreement and to perform
all of the obligations on his part to be performed hereunder in accordance with
its terms and that he is not a party to any agreement or understanding, written
or oral, which could prevent him form entering into this Agreement or
performing all of his obligations hereunder.

 

24.                                 WITHHOLDING. 
The Company may withhold from any and all amounts payable under this
Agreement such federal, state and local taxes as may be required to be withheld
pursuant to any applicable law or regulation.

 

25.                                 SECTION 409A
COMPLIANCE.

 

(a)                                  The intent of the parties is
that payments and benefits under this Agreement comply with, or be exempt from,
Code Section 409A and, accordingly, to the maximum extent permitted, this
Agreement shall be limited, construed and interpreted in accordance with such
intent.  If the Executive notifies the
Company (with specificity as to the reason therefore) that the Executive
believes that any provision of this Agreement (or of any award of compensation,
including equity compensation or benefits) would cause the Executive to incur
any additional tax or interest under Code Section 409A and the Company
concurs with such belief or the Company (without any obligation whatsoever to
do so) independently makes such determination, and modifying such provision
would avoid such additional tax or interest, the Company shall, after
consulting with the Executive, reform such provision to try to comply with Code
Section 409A through good faith modifications to the minimum extent
reasonably appropriate to conform with Code Section 409A.  To the extent that any provision hereof is
modified in order to comply with Code Section 409A, such modification
shall be made in good faith and shall, to the maximum extent reasonably
possible, maintain the original intent and economic benefit to the Executive
and the Company of the applicable provision without violating the provisions of
Code Section 409A.

 

(b)                                 A termination of employment
shall not be deemed to have occurred for purposes of any provision of this
Agreement providing for the payment of any amounts or benefits upon or
following a termination of employment unless such termination is also a “Separation
from Service” within the meaning of Code Section 409A and, for purposes of
any such provision of this Plan, references to a “termination,” “termination of
employment” or like terms shall mean Separation from Service.  Notwithstanding any provision to the contrary
in this Agreement, if the Executive is deemed on the date of his termination to
be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B) and
using the identification methodology selected by the Company from time to time,
or if none, the default methodology set forth in Code Section 409A, then
with regard to any payment or the providing of any benefit that constitutes “non-qualified
deferred compensation” pursuant to Code Section 409A that is 

 

15

 

payable due to the Executive’s Separation
from Service, to the extent required to be delayed in compliance with Code Section 409A(a)(2)(B),
such payment or benefit shall not be made or provided to the Executive (subject
to the last sentence of this Section 25(b)) prior to the earlier of (i) the
expiration of the six (6)-month period measured from the date of the Executive’s
Separation from Service, and (ii) the date of the Executive’s death (the “Delay
Period”).  For avoidance of doubt, the
Severance Payment shall not be treated as non-qualified deferred compensation
that is required to be delayed in compliance with Code Section 409A(a)(2)(B) to
the extent that it meets the exemption set forth in Department of Treasury
Regulation Section 1.409A-1(b)(9)(iii) (for separation pay due to
involuntary separation from service) and only that portion, if any, of the
Severance Payment that exceeds the exempt amount shall be subject the delay, if
any, required pursuant to the preceding sentence.  On the first day of the seventh month
following the date of the Executive’s Separation from Service or, if earlier,
on the date of the Executive’s death, all payments delayed pursuant to this Section 25(b) (whether
they would have otherwise been payable in a single sum or in installments in
the absence of such delay) shall be paid or reimbursed to the Executive in a
lump sum, and any remaining payments and benefits due to the Executive under
this Agreement shall be paid or provided in accordance with the normal payment
dates specified for them herein. 
Notwithstanding the foregoing, to the extent that the provision of any
welfare benefits provided to the Executive following his Separation from
Service will be treated as non-qualified deferred compensation that is required
to be delayed (after taking into account the exemption in Department of
Treasury Regulation Section 1.409A-1(b)(9)(v)) but would not be required
to be delayed if the premiums therefor were paid by the Executive, the
Executive shall pay the full cost of the premiums for such welfare benefits
during the Delay Period and the Company shall pay the Executive an amount equal
to the amount of such premiums paid by the Executive during the Delay Period
promptly after its conclusion.

 

(c)                                  In no event whatsoever shall the
Company be liable for any additional tax, interest or penalties that may be
imposed on the Executive by Code Section 409A or any damages for failing
to comply with Code Section 409A.

 

(d)                                 To the extent any reimbursement
of costs and expenses provided for under this Agreement constitutes taxable
income to the Executive for Federal income tax purposes, such reimbursements
shall be made no later than December 31 of the calendar year next
following the calendar year in which the expenses to be reimbursed are
incurred.

 

(e)                                  With regard to any provision
herein that provides for reimbursement of expenses or in-kind benefits, except
as permitted by Code Section 409A, (i) the right to reimbursement or
in-kind benefits is not subject to liquidation or exchange for another benefit,
(ii) the amount of expenses eligible for reimbursement, or in-kind
benefits, provided during any taxable year shall not affect the expenses eligible
for reimbursement, or in-kind benefits to be provided, in any other taxable
year, provided that the foregoing clause (ii) shall not be violated
with regard to expenses reimbursed under any arrangement covered by Section 105(b) of
the Code solely because such expenses are subject to a limit related to the
period the arrangement is in effect.

 

(f)                                    If under this Agreement, an
amount is to be paid in two or more installments, for purposes of Code Section 409A,
each installment shall be treated as a separate payment.

 

16

 

(g)                                 Whenever a payment under the
Agreement specifies a payment period with reference to a number of days, the
actual date of payment within the specified period shall be within the sole
discretion of the Company.

 

(h)                                 To the extent that this
Agreement provides for your indemnification by the Company and/or the payment
or advancement of costs and expenses associated with indemnification, any such
amounts shall be paid or advanced to the Executive only in a manner and to the
extent that such amounts are exempt from the application of Code Section 409A
in accordance with the provisions of Treasury Regulation 1.409A-1(b)(10) or
that are provided in accordance with Code Section 409A.

 

26.                                 SARBANES-OXLEY.  The Executive hereby acknowledges and agrees
that he is subject to Section 304 of the Sarbanes-Oxley Act of 2002, and
that pursuant thereto he may under certain circumstances be obligated to pay
back to the Company certain amounts previously received by him.

 

[End of text - Signature page follows]

 

17

 

IN WITNESS WHEREOF,
the parties hereto have executed this Agreement as of the date first written
above.

 

	
   

  	
   

  	
  P&F
  INDUSTRIES, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Joseph
  A. Molino, Jr.

  
	
   

  	
   

  	
  Name:

  	
  Joseph A.
  Molino, Jr.

  
	
   

  	
   

  	
  Its:

  	
  VP and Chief Operating
  Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Richard
  A. Horowitz

  
	
   

  	
   

  	
  Richard A.
  Horowitz

  

 

18

 

APPENDIX A

 

FORM OF RELEASE

 

AGREEMENT  AND GENERAL RELEASE AND WAIVER, dated as of
                            
(the “Agreement”), by and between RICHARD A. HOROWITZ
(the “Employee”) and P&F INDUSTRIES, INC.,
a Delaware corporation (the “Company”).

 

The Employee and the Company mutually want to enter into this Agreement
concerning the Employee’s separation from the Company.  Where appropriate in the context of this
Agreement, the term “Company” includes, the Company’s past, present and future
subsidiaries, affiliates, divisions, parents, and any of its or their
respective predecessors, successors, assigns, assets, employee benefit plans or
funds and its or their past, present and future directors, officers,
fiduciaries, trustees, administrators, representatives, shareholders, agents,
employees, and independent contractors, whether acting on behalf of the Company
or in their individual capacities.

 

1.                                       The
Employee acknowledges and agrees that (a) his last date of employment with
the Company was                     
(the “Termination Date”), (b) the Termination Date was the
termination date of his employment with the Company for purposes of
participation in and coverage under all benefit plans and programs sponsored by
or through the Company, (c) the Company shall have no obligation to rehire
the Employee, or to consider him for employment, after the Termination Date,
and (d) he will not seek employment with the Company at any time in the
future.

 

2.                                       The
Employee acknowledges that he has carefully read this Agreement in its
entirety, the terms and implications of this Agreement have been fully
explained to the Employee, the Employee has had answered to his satisfaction
any questions he has asked with regard to the meaning and significance of any
provision of this Agreement, and that he fully understands the significance of
all of the terms and conditions of this Agreement.

 

3.                                       The
Employee acknowledges that he has been given the opportunity to consider this
Agreement for twenty-one (21) days and decide for himself whether or not he
wants to sign it.

 

4.                                       The
Employee acknowledges that he has been advised to consult with an attorney of
his choice concerning this Agreement and the implications to the Employee of
signing or not signing it.

 

5.                                       The
Employee acknowledges that he has carefully considered other alternatives to executing
this Agreement, and has decided that he wants to sign it.

 

6.                                       The
Employee may accept this Agreement by signing it and returning it to
                          ,
P&F Industries, Inc., 445
Broadhollow Road, Suite 100, Melvile, New York, 11747, within twenty-one (21) days of his
receipt of this Agreement.  The Employee
is entitled to change his mind and revoke this Agreement by indicating his
desire to do so in writing 

 

 

delivered to
                    
at the address above (or by fax at (     )
   -     ) by no later than 5:00 p.m.
EST on the seventh (7th) day after the date he signs this Agreement (the “Revocation
Period”).  This Agreement will not become
effective and the Employee will not receive any of the benefits set out below
until the eighth (8th) day after the Employee signs it (the “Effective Date”).  If the last day of the Revocation Period
falls on a Saturday, Sunday or holiday, the last day of the Revocation Period
will be deemed to be the next business day.

 

7.                                       In
consideration for the Employee’s signing and not revoking this Agreement, the
Company has agreed to pay the Employee the consideration set forth in Section [IF
TERMINATION IS NOT IN CONNECTION WITH A CHANGE IN CONTROL - 7(d)(iii) and
if applicable, 8(b)] [IF TERMINATION IS IN CONNECTION WITH A CHANGE IN CONTROL –
8(a)(iii)] of that certain Executive Employment Agreement, dated as of December     ,
2008, by and between the Company and the Employee (the “Employment Agreement”).  The Company and the Employee expressly agree
that the Company is not otherwise obligated to pay such consideration; that the
Employee is not otherwise entitled to receive any of such consideration; and
that, if the Employee does not sign this Agreement or revokes this Agreement
during the Revocation Period, the Company will have no further obligations to
the Employee under this Agreement, including, without limitation, the
obligation to make the payments set forth in Section 7 of this Agreement.

 

8.                                       By
entering into this Agreement, the parties do not admit, and specifically deny,
any liability or wrongdoing, or violation of any law, statute, order,
regulation or policy.  It is expressly
understood and agreed that this Agreement is being entered into solely for the purpose
of avoiding the costs of litigation and amicably resolving all matters in
controversy, disputes, causes of action, claims, contentions and differences of
any kind whatsoever which have been or could have been alleged by the
respective parties against each other.

 

9.                                       The
Employee acknowledges that he knows that there are various state and federal
laws which prohibit employment discrimination on the basis of age, sex, race,
color, creed, national origin, marital status, religion, disability or veteran
status and that these laws are enforced through the Federal Equal Employment
Opportunity Commission, the New York State Division of Human Rights and various
city, county and local human rights agencies.  In addition, the Employee
acknowledges that he knows that there are other federal, state, and local laws
of other types or description regarding employment, including, but not limited
to, claims arising from or derivative of the Employee’s employment with the
Company.

 

10.                                 The
consideration set forth in Section 7 of this Agreement is in full and
complete satisfaction of all claims whatsoever the Employee may have against
the Company arising from the Employee’s employment and/or separation from
employment with the Company, or from any other matter whatsoever up to and
including the date of this Agreement, whether known or unknown.  Without limiting the generality of the
foregoing, the Employee hereby releases, waives, and forever discharges any and
all claims of any kind against the Company arising from the Employee’s
employment and/or separation from employment with the Company, or from any
other matter whatsoever up to and including the date of this Agreement, whether
known or unknown, that he may have or had, including, but not limited to,
fraud, claims arising under Age Discrimination in Employment Act of 1967, as
amended, 29 U.S.C. §621 et. 

 

 

seq., Title VII of the Civil Rights Act of
1964, as amended, 42 U.S.C. §2000 et. seq., the Civil Rights Act
of 1866, 42 U.S.C. §1981, 42 U.S.C. §1983, The Equal Pay Act, as amended, 29
U.S.C. §206(d)(1), the Fair Labor Standards Act of 1938, as amended, 29 U.S.C.
§201 et. seq., the Family and Medical Leave Act of 1993, 29
U.S.C. §2601 et. seq., the Employee Retirement Income Security
Act of 1974, as amended, 29 U.S.C. §1001 et. seq., the Americans
with Disabilities Act, 42 U.S.C. §12101 et. seq., the Civil
Rights Act of 1991, 105 Stat. 1071, Executive Order 11246, the Sarbanes-Oxley
Act of 2002 (a federal whistleblower law), the New York State Human Rights Law,
New York City Human Rights Law, New York Equal Pay Law and N.Y. Lab. Law,
Section’s 201-c (adoptive parent leave) and 740 (whistle blower statute
(private employees)), all as amended, and any other federal, state and local
fair employment practice law, workers’ compensation law, unemployment insurance
law, and any other employee relations duties and obligations, whether imposed
by express or implied contract, tort (including, but not limited to, all
intentional torts, negligence, negligent hiring, training, supervision or
retention), common law, equity, public policy statute, executive order or law,
any claims for physical or emotional distress or injuries, or any other duty
obligation of any kind or description, as well as any rights or claims the
Employee or his attorney or other representative have or may have for costs,
expenses, attorneys’ fees or otherwise. 
The foregoing shall not apply to the Employee’s right to receive the
payments and benefits provided under Sections [IF TERMINATION IS NOT IN
CONNECTION WITH A CHANGE IN CONTROL - 7(d)(i) and (ii)] [IF TERMINATION IS
IN CONNECTION WITH A CHANGE IN CONTROL – 8(a)(i) and (ii)] of the
Employment Agreement, nor to the Employee’s rights, if any, to indemnification
as an officer of the Company or a fiduciary of any Company benefit plan.  In addition, nothing in this Agreement shall
be construed to prevent the Employee from filing a charge with, or
participating in an investigation conducted by, any governmental agency,
including, without limitation, the Equal Employment Opportunity Commission or
applicable state/city fair employment practices agency, to the extent required
or permitted by law, or to prevent any challenge by the Employee to the waiver
and release of any claims as set forth herein.

 

11.                                 The
Employee agrees to keep this Agreement confidential and not to reveal its
contents to anyone except his attorney, his immediate family or his financial
consultant, or as required by law.  The
Employee will be responsible for any disclosure by them.  The Company agrees to keep this Agreement
confidential and not to reveal the contents to anyone except its attorneys,
accountants, officers, directors and human resources director.  The foregoing will not prohibit disclosure of
this Agreement as required by law or regulation, including, but not limited to,
those of the U.S. Securities And Exchange Commission and the rules of any
exchange, quotation system and/or self regulatory organization on which or with
which the Company’s securities are quoted, listed and/or traded, as the case
may be; provided that if the Employee is required to make a disclosure pursuant
to the foregoing he agrees to give the Company prompt written notice thereof
and cooperate with the Company’s efforts to seek a protective order.

 

12.                                 The
Employee represents and warrants that he has returned all property belonging to
the Company and has deleted from his home or personal computer, personal e-mail
accounts and electronic filings all Company information.

 

13.                                 The
parties hereto agree and acknowledge that Sections [IF 

 

 

TERMINATION IS NOT IN CONNECTION WITH A CHANGE IN CONTROL - 7(d)] [IF
TERMINATION IS IN CONNECTION WITH A CHANGE IN CONTROL – 8(a)], 10, 11, 12, 16,
18, 19, 20, 21, 22, 25 and 26 of the Employment Agreement shall remain in full
force and effect and shall remain fully enforceable following the Effective
Date.

 

14.                                 The
payments set forth in Section 7 of this Agreement are subject to taxes and
all applicable withholding requirements.

 

15.                                 Except
as specifically set forth in this Agreement, this Agreement constitute the
entire agreement between the Employee and the Company with respect to the
subject matter hereof and may only be modified, altered or changed in writing,
signed by both the Company and the Employee.

 

16.                                 This
Agreement has been executed freely, knowingly and voluntarily by the Employee
without duress, coercion, or undue influence, with a full understanding of its
terms.  The Employee acknowledges and
agrees that, prior to executing this Agreement, he has been provided with sufficient
time in which to consider this Agreement and that, in deciding to execute this
Agreement, he has relied on his own judgment and further acknowledges that he
is fully aware of its contents and of its legal effects.  The parties to this Agreement agree that no
fact, evidence or transaction currently unknown to them but which may hereafter
become known to them shall affect in any way or manner the final or
unconditional nature of this Agreement.

 

17.                                 This
Agreement shall be interpreted and construed and enforced in accordance with
the laws of the State of New York, excluding choice of law principles thereof.

 

18.                                 This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors, assigns and legal representatives.

 

19.                                 The
waiver by either party of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach. If any provision
of this Agreement, or part thereof, shall be held to be invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and not in any way affect or render invalid or unenforceable any
other provisions of this Agreement, and this Agreement shall be carried out as
if such invalid or unenforceable provision, or part thereof, had been reformed,
and any court of competent jurisdiction is authorized to so reform such invalid
or unenforceable provision, so that it would be valid, legal and enforceable to
the fullest extent permitted by applicable law.

 

20.                                 BY SIGNING THIS AGREEMENT, THE EMPLOYEE STATES THAT: HE HAS READ IT; HE
UNDERSTANDS IT AND KNOWS THAT HE IS GIVING UP IMPORTANT RIGHTS; HE AGREES WITH
EVERYTHING IN IT; HE WAS TOLD, IN WRITING, TO CONSULT AN ATTORNEY BEFORE
SIGNING IT; HE HAS HAD [21] [45] DAYS TO REVIEW THE AGREEMENT AND THINK ABOUT
WHETHER OR NOT HE WANTED TO SIGN IT; AND HE HAS SIGNED IT KNOWINGLY AND
VOLUNTARILY.

 

[Remainder of page intentionally
left blank.]

 

 

WHEREFORE, the
Employee and the Company now voluntarily and knowingly execute this Agreement
as of the day and year first written above.

 

	
   

  	
  P&F INDUSTRIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  (Please print)

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Richard A. Horowitz

  
					

 

Sworn to by Richard A. Horowitz before me this
         day of
                            ,
200      .

 

 

	
   

  	
   

  
	
  Notary Public

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