EXECUTIVE EMPLOYMENT AGREEMENT

EXECUTIVE EMPLOYMENT AGREEMENT (the “ Agreement ”), effective as of   February 12, 2007, between P&F INDUSTRIES, INC. , a Delaware corporation (the “ Company ”), and RICHARD A. HOROWITZ (the “ Executive ”).

WHEREAS, the Executive is employed by the Company as its Chairman, President and Chief Executive Officer;

WHEREAS, the Company and the Executive desire to enter into the Agreement as to the terms of his employment with the Company;

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 (the “ Plan ”), or any successor annual bonus plan with a target of 90% of the Executive’s then-current Base Salary (the “ Target Bonus ”) (as prorated for partial years).

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 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.

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.

(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 . Subject to Section 25, 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 bonus earned but unpaid with respect to the fiscal year ending on or preceding the date of termination, paid when bonuses are paid to the Company’s senior executive officers for, but in any event not later than the March 15 following, the year that such bonus was earned; (iii) reimbursement for any unreimbursed expenses incurred through the date of termination 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 bonus for the fiscal year in which the Executive’s termination occurs based on actual results for the plan 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) payable at the time that bonuses are paid to other senior executives of the Company (the “ Pro Rata Bonus ”); (vi) full vesting of all equity awards granted to the Executive on or after the Effective Date; (vii) continued medical benefits (for the Executive and his eligible dependents) while the Executive is disabled (subject to offset for amounts the Executive receives from any other medical benefits available to the Executive) until the Executive’s 65 ^th birthday; and (viii) continued payment of the Make-Up Payments. 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 within 30 days following the Executive’s death; (ii) the Pro Rata Bonus; (iii) full vesting of all equity awards granted to the Executive on or after the Effective Date; and (iv) payment of monthly COBRA premiums until the earlier of 3 years from the date of the Executive’s death or when the Executive’s dependents are no longer 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 . Subject to Section 25, 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 to the Executive the Accrued Amounts within 30 days following such termination. 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 . Subject to Sections 8 and 25, in the event the Executive’s employment is terminated (x) by the Company other than for Cause or (y) by the Executive for Good Reason, the Company shall pay or provide the Executive with (i) the Accrued Amounts; (ii) continued payment of the Make-Up Payments; and (iii) subject to Section 9:

(A)   continued payments of Base Salary for 18 months paid in accordance with the Company’s normal payroll policies as if the Executive were an employee;

(B)   the Pro Rata Bonus; and

(C)   payment of monthly COBRA premiums until the earlier 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.

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(c) and 25, 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 or 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, a Change in Control which actually occurs, then the Company shall pay or provide to the Executive to the extent not theretofore provided pursuant to Section 7(d) above, (i) the Accrued Amounts; (ii) continued payment of the Make-Up Payments; and (iii) subject to Section 9:

(A)   Within 60 days following such termination, a lump sum 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 exercise price less than the consideration paid for the Company’s shares in the Change in Control);

(B)   the Pro Rata Bonus; and

(C)   payment of monthly COBRA premiums until the earliest to occur 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.

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)    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),

(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

(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.

(c)    Notwithstanding anything else herein, if any payment or benefit, within the meaning of Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (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