FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

EXHIBIT 10.1

FIFTH AMENDMENT

TO LOAN AND SECURITY AGREEMENT

FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT dated as of July 1, 2014 (this “Amendment”), is among P&F INDUSTRIES, INC., a Delaware corporation (“P&F”), FLORIDA PNEUMATIC MANUFACTURING CORPORATION, a Florida corporation (“Florida Pneumatic”), HY-TECH MACHINE, INC., a Delaware corporation (“Hy-Tech”), and NATIONWIDE INDUSTRIES, INC., a Florida corporation (“Nationwide”, and together with P&F, Florida Pneumatic and Hy-Tech, collectively, “Borrowers” and each, a “Borrower”), CONTINENTAL TOOL GROUP, INC., a Delaware corporation (“Continental”), COUNTRYWIDE HARDWARE, INC., a Delaware corporation (“Countrywide”), EMBASSY INDUSTRIES, INC., a New York corporation (“Embassy”), GREEN MANUFACTURING, INC., a Delaware corporation (“Green”), PACIFIC STAIR PRODUCTS, INC., a Delaware corporation (“Pacific”), WILP HOLDINGS, INC., a Delaware corporation (“WILP”), and WOODMARK INTERNATIONAL, L.P., a Delaware limited partnership (“Woodmark”, and together with Continental, Countrywide, Embassy, Green, Pacific and WILP, collectively, “Guarantors” and each, a “Guarantor”), CAPITAL ONE BUSINESS CREDIT CORP. (f/k/a Capital One Leverage Finance Corp.), as agent for the Lenders (“Agent”), and each of the Lenders party hereto.

RECITALS:

A.                 Borrowers, Guarantors, the lenders from time to time party thereto (collectively, the “Lenders”) and Agent have entered into a Loan and Security Agreement dated as of October 25, 2010 (as amended by the First Amendment to Loan and Security Agreement dated as of September 21, 2011, the Second Amendment to Loan and Security Agreement dated as of November 21, 2011, the Third Amendment to Loan and Security Agreement dated as of December 19, 2012 and the Fourth Amendment to Loan and Security Agreement dated May 22, 2013, the “Loan Agreement”). Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Loan Agreement.

B.                 Borrowers have requested that Agent and the Lenders amend certain provisions of the Loan Agreement and to permit certain transactions.

C.                 Subject to the terms and conditions set forth below, Agent and the Lenders party hereto are willing to amend the Loan Agreement.

In furtherance of the foregoing, the parties agree as follows:

Section 1. AMENDMENTS. Subject to the covenants, terms and conditions set forth herein and in reliance upon the representations and warranties set forth herein, the Loan Agreement is amended as follows:

(a)                The following new definition is inserted in Section 1.1 in the appropriate alphabetical position therein:

Exhaust Acquisition: the Acquisition, by merger, of all of the Equity Interests of Exhaust Technologies, Inc., a Washington corporation, for an adjusted purchase price of approximately $10.4 million.

Exhaust Transactions: in connection with the Exhaust Acquisition (i) the formation of Flying Tiger Acquisition Corp, a Washington corporation (“Merger Sub”), (ii) the entry by Merger Sub and Florida Pneumatic Manufacturing Corporation into the Agreement and Plan of Merger dated as of July 1, 2014 (the “Merger Agreement”) with Exhaust Technologies, Inc. and its stockholders named therein, (iii) pursuant to the Merger Agreement, the merger of the Merger Sub with and into Exhaust Technologies, Inc. with Exhaust Technologies, Inc. being the surviving entity, (iv) the potential incurrence of indemnity and other potential liabilities by Merger Sub and/or Florida Pneumatic Manufacturing Corporation under and as a party to the Merger Agreement and (iv) subsequent to such merger, the conversion of Exhaust Technologies, Inc. into a Delaware corporation.

FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

(b)               The existing definition of “Restricted Investment,” in Section 1.1 is deleted in its entirety and the following definition is inserted in lieu thereof:

Restricted Investment: any Investment by an Obligor or Subsidiary, other than (a) Investments in Subsidiaries to the extent existing on the Closing Date or made in connection with the Exhaust Acquisition; (b) Cash Equivalents that are subject to Agent’s Lien and control, pursuant to documentation in form and substance satisfactory to Agent; (c) loans and advances permitted under Section 10.2.7; (d) to the extent constituting Distributions, Distributions permitted under Section 10.2.4, Permitted Acquisitions and the Exhaust Acquisition; and (e) Investments made when no Default or Event of Default has occurred and is continuing in an aggregate amount not to exceed $1,000,000 in the aggregate at any time outstanding for all Obligors.

(c)                The existing Section 10.1.9 of the Loan Agreement is deleted in its entirety and the following is inserted in lieu thereof:

10.1.9 Future Subsidiaries. Promptly notify Agent upon any Person becoming a Subsidiary and, if such Person is not a Foreign Subsidiary, promptly (but within 30 days or such later date as is agreed by the Agent) cause it to be joined to this Agreement, at the option of the Agent, as a Borrower or a Guarantor of the Obligations in a manner satisfactory to Agent, and to execute and deliver such documents, instruments and agreements and to take such other actions as Agent shall require to evidence and perfect a Lien in favor of Agent (for the benefit of Secured Parties) on all assets of such Person, including delivery of such legal opinions, in form and substance satisfactory to Agent, as Agent shall deem appropriate

The amendments to the Loan Agreement are limited to the extent specifically set forth above and no other terms, covenants or provisions of the Loan Agreement are intended to be affected hereby.

Section 2. CONSENT. The Agent and Lenders hereby consent to (i) the Exhaust Acquisition and Exhaust Transactions, subject to fulfillment of the conditions set forth in Section 3 hereof and (ii) the sale by Exhaust Technologies, Inc. of Accounts owing from The Stanley Works to Citibank, N.A. pursuant to the Supplier Agreement dated as of March 11, 2005 between Exhaust Technologies, Inc. and Citibank, N.A. and to the Lien of Citibank, N.A. on such Accounts owing from The Stanley Works, provided that such Supplier Agreement and Lien of Citibank, N.A. are terminated within 60 days of the date hereof (or such later date as approved by the Agent). For the avoidance of doubt, nothing herein is intended to be a waiver of the requirements of Section 10.1.9, as amended hereby, and Borrowers shall comply with the provisions thereof within the time period set forth therein.

Section 3. CONDITIONS PRECEDENT. The parties hereto agree that the amendments set forth in Section 1 and the consent set forth in Section 2 above are subject to the satisfaction of each of the following conditions precedent:

FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

Section 4. REPRESENTATIONS AND WARRANTIES.

(a) In order to induce Agent and the Lenders to enter into this Amendment, each Borrower represents and warrants to Agent and the Lenders as follows:

(i) The representations and warranties made by such Borrower in Section 9 of the Loan Agreement are true and correct on and as of the date hereof, except to the extent that such representations and warranties expressly relate to an earlier date in which case such representations and warranties are true and correct on and as of such earlier date.

(ii) Since December 31, 2013, no act, event, condition or circumstance has occurred or arisen which, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect.

(iii) No Default or Event of Default has occurred and is continuing or will exist after giving effect to this Amendment.

FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

(b) In order to induce Agent and the Lenders to enter into this Amendment, each Borrower and each Guarantor represents and warrants to Agent and the Lenders that this Amendment has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation.

Section 5. MISCELLANEOUS.

(a) Ratification and Confirmation of Loan Documents. Each Borrower and each Guarantor hereby consents, acknowledges and agrees to the amendments set forth herein and hereby confirms and ratifies in all respects the Loan Documents to which such Person is a party (including without limitation, with respect to each Guarantor, the continuation of its payment and performance obligations under the guaranties set forth in Section 15 of the Loan Agreement upon and after the effectiveness of the amendments contemplated hereby and, with respect to each Borrower and each Guarantor, the continuation and extension of the liens granted under the Loan Agreement and Security Documents to secure the Obligations).

(b) Fees and Expenses. Borrowers shall pay on demand all reasonable costs and expenses of Agent in connection with the preparation, reproduction, execution, and delivery of this Amendment and any other documents prepared in connection herewith, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for Agent.

(c) Headings. Section and subsection headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect.

(d) Governing Law; Waiver of Jury Trial. This Amendment shall be governed by and construed in accordance with the laws of the State of New York, and shall be further subject to the provisions of Sections 14.13, 14.14 and 14.15 of the Loan Agreement.

(e) Counterparts. This Amendment may be executed in any number of counterparts, each of which when executed and delivered shall be deemed to be an original, and all of which when taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page of this Amendment by facsimile or electronic transmission (including .pdf file) shall be effective as delivery of a manually executed counterpart hereof.

(f) Entire Agreement. This Amendment, together with all the Loan Documents (collectively, the “Relevant Documents”), sets forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior negotiations and agreements among the parties relating to such subject matter. No promise, condition, representation or warranty, express or implied, not set forth in the Relevant Documents shall bind any party hereto, and no such party has relied on any such promise, condition, representation or warranty. Each of the parties hereto acknowledges that, except as otherwise expressly stated in the Relevant Documents, no representations, warranties or commitments, express or implied, have been made by any party to the other. None of the terms or conditions of this Amendment may be changed, modified, waived or canceled orally or otherwise except in a writing signed by Agent for such purpose.

(g) Enforceability. Should any one or more of the provisions of this Amendment be determined to be illegal or unenforceable as to one or more of the parties hereto, all other provisions nevertheless shall remain effective and binding on the parties hereto.

FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

(h) Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of each Borrower, each Guarantor, Agent, each Lender and their respective successors and assigns (subject to Section 13 of the Loan Agreement).

The following parties have caused this Fifth Amendment to Loan and Security Agreement to be executed as of the date first written above.

BORROWERS:

P&F INDUSTRIES, INC.

FLORIDA PNEUMATIC MANUFACTURING

CORPORATION

HY-TECH MACHINE, INC.

NATIONWIDE INDUSTRIES, INC.

By:  /s/ Joseph A. Molino, Jr.

Name: Joseph A. Molino, Jr.

Title: Vice President

GUARANTORS:

CONTINENTAL TOOL GROUP, INC.

COUNTRYWIDE HARDWARE, INC.

EMBASSY INDUSTRIES, INC.

GREEN MANUFACTURING, INC.

PACIFIC STAIR PRODUCTS, INC.

WILP HOLDINGS, INC.

By:  /s/ Joseph A. Molino, Jr.

Name: Joseph A. Molino, Jr.

Title: Vice President

WOODMARK INTERNATIONAL, L.P.

By: Countrywide Hardware, Inc., its General Partner

By:  /s/ Joseph A. Molino, Jr.

Name: Joseph A. Molino, Jr.

Title: Vice President

FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

Signature Page

AGENT AND LENDERS:

CAPITAL ONE BUSINESS CREDIT CORP. (f/k/a

Capital One Leverage Finance Corp.), as Agent and Lender

By:  /s/ Michael Lockery

Name: Michael Lockery

Title: Director

FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

Signature Page