<Page>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<Table>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED
BY RULE 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-12
P&F INDUSTRIES, INC.
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</Table>
Payment of Filing Fee (Check the appropriate box):
<Table>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
----------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------
</Table>
<Page>
P & F INDUSTRIES, INC.
300 SMITH STREET
FARMINGDALE, NEW YORK 11735
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 29, 2002
------------------------
To the Stockholders of
P & F Industries, Inc.:
The Annual Meeting of Stockholders of P & F Industries, Inc. will be held at
the Huntington Hilton Hotel, 598 Broad Hollow Road, Melville, New York on
Wednesday, May 29, 2002 at 10:00 A.M., for the following purposes:
(1) To elect three directors to hold office for three years;
(2) To approve the P&F Industries, Inc. 2002 Stock Incentive Plan;
(3) To ratify the selection of BDO Seidman, LLP, independent certified
public accountants, as auditors for the fiscal year ending December 31,
2002; and
(4) To consider and act upon such other business as may properly come before
the Annual Meeting or any adjournment or postponement thereof.
In accordance with the provisions of the Company's By-Laws, the Board of
Directors has fixed the close of business on April 19, 2002 as the date for
determining stockholders of record entitled to receive notice of, and to vote
at, the Annual Meeting.
Your attention is directed to the accompanying Proxy Statement.
You are cordially invited to attend the Annual Meeting. If you do not expect
to attend the Annual Meeting in person, please vote, date, sign and return the
enclosed proxy as promptly as possible in the enclosed reply envelope.
By order of the Board of Directors,
JOSEPH A. MOLINO, JR.
SECRETARY
Dated: April 26, 2002
Farmingdale, New York
<Page>
P & F INDUSTRIES, INC.
300 SMITH STREET
FARMINGDALE, NEW YORK 11735
------------------------
PROXY STATEMENT
---------------------
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of P & F Industries, Inc. (the "Company") to
be used at the meeting of stockholders of the Company (the "Annual Meeting") to
be held on Wednesday, May 29, 2002 at 10:00 A.M., at the Huntington Hilton
Hotel, 598 Broad Hollow Road, Melville, New York, or at any adjournment or
postponement thereof, for the purposes set forth in the accompanying notice of
Annual Meeting of Stockholders. If the enclosed form of proxy is executed and
returned, it may nevertheless be revoked at any time before it is exercised,
either in person at the Annual Meeting or by written notice or by a duly
executed proxy, bearing a later date, sent to the Secretary of the Company. The
Company anticipates mailing this proxy statement and the accompanying proxy to
stockholders on or about April 26, 2002.
As of April 19, 2002, there were 3,504,148 shares of the Company's Class A
Common Stock, $1.00 par value (the "Class A Common Stock"), outstanding. Each
share of Class A Common Stock is entitled to one vote. Only holders of record of
Class A Common Stock at the close of business on April 19, 2002 will be entitled
to notice of, and to vote at, the Annual Meeting. The Company will bear the cost
of the Annual Meeting and the cost of soliciting proxies, including the cost of
mailing the proxy material. In addition to solicitation by mail, directors,
officers and regular employees of the Company (who will not be specifically
compensated for such service) may solicit proxies by telephone or otherwise.
All proxies received pursuant to this solicitation will be voted, except as
to matters where authority to vote is specifically withheld and, where a choice
is specified as to the proposal, such proxies will be voted in accordance with
such specification. If no instructions are given, the persons named in the
proxies solicited by the Board of Directors of the Company intend to vote for
the nominees for election as directors of the Company set forth herein, for the
adoption of the P&F Industries, Inc. 2002 Stock Incentive Plan and for the
confirmation of the appointment of BDO Seidman, LLP as independent certified
public accountants of the Company for the fiscal year ending December 31, 2002.
If any other matter should be presented at the Annual Meeting upon which a vote
may properly be taken, the shares represented by the proxy will be voted with
respect thereto in the discretion of the person or persons holding such proxy.
For purposes of determining whether a proposal has received the required
number of votes for approval, abstentions will be included in the vote totals
with the result that an abstention will have the same effect as a negative vote.
In instances where nominee recordholders, such as brokers, are prohibited from
exercising discretionary authority for beneficial owners of shares of Class A
Common Stock who have not returned a proxy ("broker non-votes"), those shares of
Class A Common Stock will not be included in the vote totals and, therefore,
will have no effect on the vote. If a quorum should not be present, the Annual
Meeting may be adjourned from time to time until a quorum is obtained.
<Page>
ELECTION OF DIRECTORS
As permitted by Delaware law, the Board of Directors is divided into three
classes, the classes being divided as equally as possible and each class having
a term of three years. Each year the term of office of one class expires. A
director elected to fill a vacancy, including a vacancy resulting from an
increase in the number of directors constituting the Board of Directors, serves
for the remaining term of the class in which the vacancy exists. The Board of
Directors presently consists of nine members, with three classes each consisting
of three directors.
During 2002, the term of a class consisting of three directors expires.
Management proposes that Messrs. Robert L. Dubofsky, Neil Novikoff and Marc A.
Utay, whose terms of office expire in 2002, be re-elected as directors to serve
for terms to expire at the 2005 Annual Meeting of Stockholders. Unless otherwise
indicated, the enclosed proxy will be voted for the election of such nominees.
Should any one or more of these nominees become unable to serve for any reason
or, for good cause, will not serve, which is not anticipated, the Board of
Directors may, unless the Board of Directors by resolution provides for a lesser
number of directors, designate substitute nominees, in which event the persons
named in the enclosed proxy will vote for the election of such substitute
nominee or nominees.
Directors will be elected by the plurality vote of the holders of the
Class A Common Stock entitled to vote at the Annual Meeting and present in
person or by proxy.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THE FOREGOING NOMINEES.
INFORMATION AS TO DIRECTORS AND NOMINEES FOR DIRECTORS
Set forth below are the name and age of each nominee for director and each
director currently in office and whose term continues, his principal occupation,
the year each became a director of the Company and a description of his
principal occupation for the past five years. The information set forth below is
as of April 19, 2002.
<Table>
<Caption>
SERVED AS
DIRECTOR
CONTINUOUSLY
NAME AGE SINCE
- ---- -------- ------------
NOMINEES TO CONTINUE IN OFFICE UNTIL 2005 ANNUAL MEETING OF STOCKHOLDERS:
Robert L. Dubofsky.......................................... 62 1990
Neil Novikoff............................................... 48 1998
Marc A. Utay................................................ 42 1992
DIRECTORS TO CONTINUE IN OFFICE UNTIL 2004 ANNUAL MEETING OF STOCKHOLDERS:
Richard A. Horowitz......................................... 52 1975
Alan I. Goldberg............................................ 52 1998
Robert M. Steinberg......................................... 59 2000
DIRECTORS TO SERVE IN OFFICE UNTIL 2003 ANNUAL MEETING OF STOCKHOLDERS:
Sidney Horowitz............................................. 82 1962
Arthur Hug, Jr.............................................. 79 1987
Dennis Kalick............................................... 49 1997
</Table>
Robert L. Dubofsky has been Managing Director of BWD Group LLC (formerly
Blumencranz, Klepper, Wilkins & Dubofsky, Ltd.), an insurance brokerage group,
since April 1992.
2
<Page>
Neil Novikoff has been a partner in the law firm of Willkie Farr & Gallagher
for more than the last five years.
Marc A. Utay has been a Managing Partner of Clarion Capital Partners, LLC,
an investment banking firm, since October 1999. From May 1993 to October 1999,
Mr. Utay was a Managing Director of Wasserstein Perella Co., Inc., an investment
banking firm.
Richard A. Horowitz has been Chairman of the Board of Directors and Chief
Executive Officer of the Company since November 1995 and has been President of
the Company since 1986.
Alan I. Goldberg has been President of Larkspur America, Inc., an apparel
manufacturing corporation, since 1977.
Robert M. Steinberg has been Chief Executive Officer of 1st in
Health, Inc., a healthcare services company, since June 2000. Mr. Steinberg
served as Chairman of the Board and Chief Executive Officer of Reliance
Insurance Company from 1984 to November 1999 and served as Vice Chairman of
Reliance Insurance Company from November 1999 to July 2000. On January 25, 2001,
Reliance Insurance Company consented to the entry of an Order of Supervision
pursuant to which it was placed under supervision of the Insurance Commissioner
of the Commonwealth of Pennsylvania.
Sidney Horowitz has been Chairman Emeritus of the Board of Directors since
November 1995 and was Chairman of the Board of Directors and Chief Executive
Officer of the Company from 1968 to November 1995. Sidney Horowitz is the father
of Richard A. Horowitz.
Arthur Hug, Jr., who is retired, was the President of Vanguard
Ventures, Inc. from 1987 to 1989 and was Chairman of North American Bancorp from
1974 to 1987.
Dennis Kalick has been engaged in the private practice of providing
accounting services with Gilman & Ciocia, Inc. (or a predecessor firm) since
1993.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During 2001, the Board of Directors held four meetings. No director attended
fewer than 75% of the total number of meetings of the Board of Directors and all
committees on which he served. The Board of Directors has an Audit Committee and
a Stock Option Committee. The current members of the Audit Committee are
Messrs. Hug, Dubofsky and Kalick and the current members of the Stock Option
Committee are Messrs. Hug and Kalick. The Audit Committee recommends the
selection of independent auditors to the Board of Directors, reviews the overall
scope and the results of the Company's annual audit and reviews the Company's
overall internal controls. During 2001, the Audit Committee met once. The Stock
Option Committee administers the Company's Stock Option Plan. The Stock Option
Committee did not meet during 2001. The Board of Directors does not have a
nominating or a compensation committee or a committee performing similar
functions.
DIRECTOR COMPENSATION
During 2001, each director who was not an employee of the Company or any of
its subsidiaries received an annual retainer fee of $3,500 plus $1,250 for each
meeting of the Board of Directors or Audit Committee attended. Upon election to
the Board of Directors, each director who is not an employee of the Company
receives an option to purchase 2,000 shares of Class A Common Stock. Directors
who are also officers of the Company are not compensated for their duties as
directors.
3
<Page>
OWNERSHIP OF EQUITY SECURITIES
The following table sets forth the beneficial ownership of Class A Common
Stock as of April 19, 2002, including shares as to which a right to acquire
ownership within 60 days exists (for example, through the exercise of stock
options) within the meaning of Rule 13d-3(d)(1) under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), by (i) each director and nominee
for director, (ii) the executive officers listed in the Summary Compensation
Table (Richard A. Horowitz and Joseph A. Molino, Jr. are the only executive
officers of the Company), (iii) each person known by the Company to be the
beneficial owner of more than 5% of the Class A Common Stock and (iv) all
directors and executive officers as a group. Except as indicated in the
applicable footnotes, each beneficial owner listed has sole voting power and
sole investment power over the shares of Class A Common Stock indicated. Except
as indicated in the applicable footnotes, the address of each beneficial owner
is in the care of the Company, 300 Smith Street, Farmingdale, New York 11735.
<Table>
<Caption>
AMOUNT
AND NATURE PERCENT
BENEFICIAL OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS
- ------------------------------------ ------------ --------
Robert L. Dubofsky........................................ 22,000(1)(2) *
Alan I. Goldberg.......................................... 2,000(2) *
Sidney Horowitz........................................... 264,731(3)(4) 7.6
Richard A. Horowitz....................................... 1,257,065(5) 33.6
Arthur Hug, Jr............................................ 3,000(2) *
Dennis Kalick............................................. 2,000(2) *
Joseph A. Molino, Jr...................................... 20,500(6) *
Neil Novikoff............................................. 2,000(2) *
Marc A. Utay.............................................. 72,000(2) 2.1
Robert M. Steinberg....................................... 2,000(2) *
FMR Corp.................................................. 359,300(7) 10.3
Steel Partners II L.P..................................... 371,785(8) 10.6
Lawndale Capital Management, LLC.......................... 344,350(9) 9.8
All directors and executive officers as a group (10
persons)................................................ 1,647,296(10) 43.6
</Table>
- ------------------------
* Less than 1%.
(1) Includes 5,000 shares owned by his child.
(2) Includes 2,000 shares issuable upon the exercise of stock options.
(3) The address of Sidney Horowitz is 20596 Links Circle, Boca Raton, Florida
33434.
(4) Includes 99,988 shares owned by Grace Horowitz, wife of Sidney Horowitz,
individually and as trustee for their daughter, and 400 shares owned by The
Sidney and Grace Horowitz Foundation. Sidney Horowitz disclaims beneficial
ownership of the 99,988 shares owned by Grace Horowitz individually and as
Trustee for the daughter of Grace Horowitz and Sidney Horowitz. Also
includes 2,000 shares issuable upon the exercise of stock options.
(5) Includes (i) 660,200 shares owned by Linda Horowitz, wife of Richard A.
Horowitz, individually, (ii) 22,200 shares owned jointly by Richard A.
Horowitz and his daughter, and (iii) 10,000 shares owned by The Linda and
Richard Horowitz Foundation. Linda Horowitz has granted Richard A. Horowitz
an irrevocable proxy to vote the 660,000 shares owned by her. Also includes
238,500 shares issuable upon the exercise of stock options.
(6) Includes 20,000 shares issuable upon the exercise of stock options. Joseph
A. Molino, Jr. has been Vice President and Chief Financial Officer of the
Company since December 1997. From July 1990
4
<Page>
to November 1997, Mr. Molino was chief financial officer of several small
private manufacturing and service companies.
(7) Information obtained from a Schedule 13G, dated June 11, 2001, filed with
the Securities and Exchange Commission by FMR Corp., Edward C. Johnson 3d
and Abigail P. Johnson. FMR Corp., Edward C. Johnson 3rd and Abigail P.
Johnson each have sole power to dispose or to direct the disposition of all
shares held. The address of FMR Corp. is 82 Devonshire Street, Boston,
Massachusetts 02109.
(8) Information obtained from a Schedule 13D, dated January 8, 2002, filed with
the Securities and Exchange Commission by Steel Partners II, L.P. and Warren
Lichtenstein. Steel Partners II, L.P. and Warren Lichtenstein have sole
voting and sole dispositive power over all shares held. The address of Steel
Partners II, L.P. is 750 Lexington Avenue, 27th Floor, New York, New York
10022.
(9) Information obtained from a Schedule 13G, dated February 6, 2002, filed with
the Securities and Exchange Commission by Lawndale Capital Management, LLC,
Andrew E. Shapiro, Diamond A Partners, L.P. and Diamond A Investors, L.P.
Lawndale Capital Management, LLC shares voting and dispositive power with
Andrew E. Shapiro with respect to 344,350 shares, Diamond A Partners, L.P.
with respect to 300,050 shares and Diamond A Investors, L.P. with respect to
44,300 shares. The address of each of the foregoing entities is One Sansome
Street, Suite 3900, San Francisco California 94104.
(10) Includes 274,500 shares issuable upon the exercise of stock options and
warrants.
EXECUTIVE COMPENSATION
The following table sets forth all cash and non-cash compensation for each
of the past three fiscal years awarded to or earned by the Chairman of the Board
and Chief Executive Officer and the other executive officer whose aggregate
compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
SALARY ---------------
------------------------------ SECURITIES
NAME AND PRINCIPAL SALARY BONUS UNDERLYING ALL OTHER
POSITION YEAR ($) ($)(1) OPTIONS/SARS(#) COMPENSATION($)(2)
- ---------------------------- -------- -------- -------- --------------- ------------------
Richard A. Horowitz......... 2001 675,000 298,977 -- 28,781
Chairman of the Board and 2000 610,000 640,000 -- 27,637
Chief Executive Officer 1999 550,000 740,000 -- 26,072
Joseph A. Molino, Jr........ 2001 220,000 64,995 -- 12,400
Vice-President and Chief 2000 201,000 150,000 -- 12,400
Financial Officer 1999 188,000 150,000 10,000 11,600
</Table>
- ------------------------
(1) In 2001, the Company established the P&F Industries, Inc. Executive
Incentive Bonus Plan (the "Incentive Bonus Plan"). Pursuant to the Incentive
Bonus Plan, each participant is entitled to payment from the Company of a
bonus based upon a percentage of the pre-tax profits of the Company for an
award period as set forth in the Incentive Bonus Plan. Prior to 2001, the
Company maintained a bonus plan (the "Prior Bonus Plan") pursuant to which
total bonuses paid to executive officers could not exceed 15% of the
Company's pre-tax, pre-bonus income prior to the payment under the Prior
Bonus Plan. Amounts are accrued in the year shown above and paid in the
following year.
5
<Page>
(2) The Company maintains a split-dollar life insurance policy on the life of
Mr. Richard Horowitz and paid $864, $821 and $1,081 allocated to the term
portion of the split-dollar coverage for 2001, 2000, and 1999, respectively.
The actuarial equivalent of the value of the premium paid by the Company for
2001, 2000 and 1999, based on certain assumptions regarding interest rates
and periods of coverage, was $15,517, $14,416 and $13,391, respectively. It
is anticipated that the Company will recover the premiums on this policy or
the cash surrender value thereof.
Mr. Horowitz and Mr. Molino are covered by a Company-sponsored retirement
plan (the "Plan"). The Plan covers all eligible employees of the Company who do
not receive retirement benefits under a collective bargaining agreement.
Contributions made on behalf of Mr. Horowitz were $12,400, $12,400 and $11,600
for 2001, 2000 and 1999, respectively. Contributions made on behalf of
Mr. Molino were $12,400, $12,400 and $11,600 for 2001, 2000 and 1999,
respectively.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
For the fiscal year ended December 31, 2001, no stock options were granted
to the executive officers named in the Summary Compensation Table.
The following table shows for the fiscal year ended December 31, 2001 the
number and value of unexercised options for the executive officers named in the
Summary Compensation Table. None of the executive officers named in the Summary
Compensation Table exercised any options during the last fiscal year.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<Table>
<Caption>
NUMBER OF SECURITIES
UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SAR'S AT IN-THE-MONEY OPTIONS/SAR'S
FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)
-------------------- --------------------------
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
- ---- -------------------- --------------------------
Richard A. Horowitz................................. 221,000/29,000 135,496.89/25,440.63
Joseph A. Molino, Jr................................ 20,000/0 0/0
</Table>
EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS
Effective as of May 30, 2001, the Company entered into an employment
agreement (the "Horowitz Employment Agreement") with Richard A. Horowitz. The
Horowitz Employment Agreement provides for Richard Horowitz to serve as
President of the Company for a term expiring on May 30, 2008, unless sooner
terminated pursuant to the provisions of the Horowitz Employment Agreement.
Pursuant to the Horowitz Employment Agreement, Richard Horowitz will receive an
annual salary of $710,000. Mr. Horowitz is also eligible to receive such
increases in base compensation as the Board of Directors may from time to time
grant to him and to receive such bonuses as the Board of Directors, in its
discretion, may allocate to him. In the event of a "discharge" following a
"change in control" of the Company (as each term is defined in the Horowitz
Employment Agreement) Richard Horowitz will receive his annual salary and all
benefits to which he is entitled under the Horowitz Employment Agreement for the
remainder of the term thereof or a lump sum severance allowance in an amount
equal to 2.99 times his "annualized includable compensation for the base period"
(as defined in the Internal Revenue Code of 1986, as amended).
6
<Page>
REPORT ON EXECUTIVE COMPENSATION
The Company does not have a compensation committee. The Board of Directors
reviews the annual compensation of the Company's executive officers. Each
executive officer's compensation includes salary and a performance bonus. In
2001, the Company established the Incentive Bonus Plan. Pursuant to the
Incentive Bonus Plan, each participant is entitled to payment from the Company
of a bonus based upon a percentage of the pre-tax profits of the Company for an
award period as set forth in the Incentive Bonus Plan. In 2001,
Messrs. Horowitz and Molino received bonuses of $298,977 and $64,995,
respectively, under the Incentive Bonus Plan.
In determining the executive officers' base compensation for the ensuing
fiscal year, the Board of Directors considers the individual officer's job
performance and level of responsibility, prior years' compensation, number of
years of employment with the Company and the rate of inflation. Mr. Horowitz's
and Mr. Molino's base compensation increased by 11% and 9%, respectively, for
2001. These increases were based on a subjective evaluation of the performance
of Mr. Horowitz and Mr. Molino during the prior year.
The Board of Directors believes that in order to compete effectively with
other similarly situated companies in the acquisition and retention of top
executive talent, the Company must have the flexibility to pay compensation that
may not be fully deductible under Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"). In the past, the Company has exercised this
flexibility. All compensation paid to the Company's executive officers for 2001
was fully deductible.
MEMBERS OF THE BOARD OF DIRECTORS
<Table>
ALAN I. GOLDBERG ARTHUR HUG, JR.
ROBERT DUBOFSKY DENNIS KALICK
RICHARD A. HOROWITZ (Chairman) ROBERT M. STEINBERG
SIDNEY HOROWITZ NEIL NOVIKOFF
MARC A. UTAY
</Table>
7
<Page>
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS(1)
The Audit Committee of the Board of Directors of P&F Industries, Inc. is
composed of three independent directors appointed by the Board of Directors
(each of which is independent under applicable rules of the National Association
of Securities Dealers, Inc.) and operates under a written charter adopted by the
Board of Directors during fiscal 2000. The members of the Audit Committee are
Messrs. Dubofsky, Hug and Kalick.
Management is responsible for the Company's internal accounting and
financial controls, the financial reporting process and the internal audit
function. The Company's independent certified public accountants are responsible
for performing an independent audit of the Company's consolidated financial
statements in accordance with generally accepted auditing standards and for
issuing a report thereon. The Audit Committee's responsibility is to monitor and
oversee these processes and report its findings to the full Board of Directors.
In this context, the Audit Committee has met and held discussions
separately, and jointly, with each of management and the Company's independent
certified public accountants. Management represented to the Audit Committee that
the Company's consolidated financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America, and
the Audit Committee has reviewed and discussed the consolidated financial
statements with management and the independent certified public accountants. The
Audit Committee discussed with the independent certified public accountants
matters required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees).
In connection with new standards for independence of the Company's external
auditors promulgated by the Securities and Exchange Commission, during the
Company's 2001 fiscal year the Audit Committee considered in advance of the
provision of any non-audit services by the Company's independent certified
public accountants whether the provision of such services is compatible with
maintaining the independence of the Company's external auditors. The Audit
Committee determined that provision of such services is compatible with
maintaining independence.
The Company's independent certified public accountants also provided to the
Audit Committee the written disclosures required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and the Audit
Committee discussed with the independent certified public accountants that
firm's independence.
Based on the Audit Committee's discussion with management and the
independent certified public accountants and the Audit Committee's review of the
representation of management and the report of the independent certified public
accountants to the Audit Committee, the Audit Committee recommended that the
Board of Directors include the audited consolidated financial statements in the
Company's Annual Report on Form 10-K for the year ended December 31, 2001 filed
with the Securities and Exchange Commission.
<Table>
Robert Dubofsky Dennis Kalick
Arthur Hug, Jr.
</Table>
- ------------------------
(1) This Section is not "soliciting material," is not deemed "filed" with the
Securities and Exchange Commission and is not to be incorporated by
reference in any filing of the Company under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, whether made
before or after the date hereof and irrespective of any general
incorporation language in any such filing.
8
<Page>
COMPANY STOCK PERFORMANCE GRAPH
The following performance graph compares the five-year cumulative return of
the Class A Common Stock to the total returns of the Nasdaq Stock Market
(U.S.A.) Index and a composite group comprised of companies with approximately
the same market capitalization as the Company at December 31, 1996. Such
composite group was used because the Company, through its three subsidiaries,
engages in several different lines of businesses and an applicable peer group
does not exist. In addition to the Company, the following companies are included
in the index: 4 Kids Entertainment, Inc., Driver Harris Co. Inc., Energy
West, Inc., Halsey Drug Corp., Harris & Harris Group, Inc., Presidential Realty
Corp., TSR, Inc. and Wendi-Bristol Health Corp. Each case assumes a $100
investment on December 31, 1996 and reinvestment of any dividends. Cumulative
returns are at December 31 of each year.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<Table>
<Caption>
CUMULATIVE GROWTH OF $100
Peer Group NASDAQ P&F Industries
12/31/96 $100 $100 $100
12/31/97 $73 $122 $200
12/31/98 $70 $171 $272
12/31/99 $160 $317 $178
12/29/00 $66 $193 $141
12/31/01 $100 $153 $198
</Table>
APPROVAL OF THE P&F INDUSTRIES, INC. 2002 STOCK INCENTIVE PLAN
On April 18, 2002, the Board of Directors adopted the Company's 2002 Stock
Incentive Plan (the "Incentive Plan"), under which 1,100,000 shares of Class A
Common Stock were reserved for issuance.
The Company is seeking stockholder approval of the Incentive Plan in order
to comply with the requirements of Sections 162(m) and 422 of the Code and the
requirements of the NASDAQ Stock Market ("NASDAQ"). The following summary of the
Incentive Plan is qualified in its entirety by express reference to the text of
the Incentive Plan, a copy of which has been filed with the Securities and
Exchange Commission as an Exhibit to this Proxy Statement. Under the Incentive
Plan, stock options may be granted which are qualified as "incentive stock
options" within the meaning of Section 422 of the Code ("ISOs") and which are
not so qualified ("NQSOs"). (ISOs and NQSOs are collectively and individually
referred to herein as "Options"). In addition, restricted shares of Class A
Common Stock ("Restricted Stock") and other Class A Common Stock-based awards
may be granted (collectively or individually, "Awards").
9
<Page>
PURPOSE AND ELIGIBILITY
The purpose of the Incentive Plan is to promote the long-term financial
success of the Company by enhancing the ability of the Company to attract,
retain and reward individuals who can and do contribute to such success and to
further align the interests of the Company's key personnel with its
stockholders. Officers, key employees, directors and consultants of the Company
and its subsidiaries are eligible to receive Awards under, and participate in,
the Incentive Plan. The approximate number of officers, key employees,
directors, and consultants eligible to participate in the Amended Incentive Plan
is forty persons. No eligible individual may receive options or stock
appreciation rights under the Incentive Plan with respect to more than 1,100,000
shares of Class A Common Stock in any one year.
ADMINISTRATION
The Incentive Plan is administered by the Board of Directors or a Committee
(the entity administering the Incentive Plan hereafter called the "Committee")
appointed by the Board of Directors from among its members. The Committee, in
its sole discretion, determines which individuals may participate in the
Incentive Plan and the type, extent and terms of the Awards to be granted. In
addition, the Committee interprets the Incentive Plan and makes all other
determinations with respect to the administration of the Incentive Plan.
AWARDS
The Incentive Plan allows for the discretionary grant of Options, Restricted
Stock and other stock-based Awards. The terms and conditions of Awards granted
under the Incentive Plan are set out from time to time in agreements between the
Company and the individuals receiving such Awards.
OPTIONS. The Committee may grant Options to any eligible person; PROVIDED,
HOWEVER, that only employees of the Company and its subsidiaries may receive
ISOs. The exercise price of the Options will be determined by the Committee at
the time of grant and will be set forth in a Stock Option Agreement between the
Company and the participant; PROVIDED, HOWEVER, that the exercise price of an
ISO will not be less than the fair market value of the Class A Common Stock on
the date of grant and the exercise price of a NQSO will not be less than the par
value of the Class A Common Stock. Furthermore, the exercise price of an Option
intended to qualify as "performance-based compensation" under Section 162(m) of
the Code will have an exercise price no less than the fair market value of the
Class A Common Stock on the date of grant. Options will vest and become
exercisable within such period or periods (not to exceed 10 years) as determined
by the Committee and set forth in the Stock Option Agreement. Unless otherwise
set forth in the Stock Option Agreement, all Options expire on the earliest of
(i) ten years after grant, (ii) three months after (A) retirement,
(B) termination of employment or service with the Company or a subsidiary due to
complete and permanent disability, (C) any termination of employment or service
with the written approval of the Committee, or (D) termination of employment or
service by the Company without cause (each a "Normal Termination"),
(iii) immediately upon termination of employment other than by Normal
Termination or death, (iv) twelve months after the death of the optionee while
still employed or within three months of a Normal Termination, or (v) the
expiration date set forth in the Stock Option Agreement. Unless otherwise set
forth in the Stock Option Agreement, Options will vest and become exercisable
only during the period of employment or service with the Company and its
subsidiaries such that upon such termination of employment or service the
unvested portion of any outstanding Option will expire. Options that have become
exercisable may be exercised by delivery of written notice of exercise to the
Committee accompanied by full payment of the Option exercise price and any
applicable withholding. The Option exercise price may be paid in cash, by check
and/or by shares of Class A Common Stock valued at the fair market value at the
time of exercise, or, in the discretion of the Committee, either (i) in other
property having a fair market value on the date of exercise equal to the Option
exercise price, or (ii) through a brokered exercise.
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RESTRICTED STOCK. The Committee may grant shares of Restricted Stock to
eligible persons and may establish terms, conditions and restrictions applicable
thereto.
Subject to the restrictions on such Restricted Stock as set forth below,
holders will generally have all the rights and privileges of a stockholder
including the right to vote such Restricted Stock. Shares of Restricted Stock
will be subject to restrictions on transferability set forth in the Award
agreement and will be subject to forfeiture as set forth below. To the extent
such shares are forfeited, the stock certificates shall be canceled, and all
rights of the holder to such shares and as a stockholder will terminate.
The restricted period for Restricted Stock will commence on the date of
grant and will expire from time to time as to that part of the Restricted Stock
Award indicated in a schedule established by the Committee and set forth in the
respective Award Agreement. The Committee, in its sole discretion, may remove
any or all restrictions on the Restricted Stock whenever it determines that such
action is appropriate.
The following forfeiture provisions will apply to Awards of Restricted
Stock. In the event the recipient of such Award resigns or is discharged from
employment or service with the Company or a subsidiary for cause, the non-vested
portion of the Award will be completely forfeited. Upon the Normal Termination
of the recipient of such Award, the non-vested portion of the Award will be
prorated for service during the restricted period and distributed as soon as
practicable after termination. If the recipient of such an Award dies, the
non-vested portion of the Award will be prorated for service during the
restricted period and distributed to the recipient's beneficiary as soon as
practicable following death.
Upon the expiration of the restricted period with respect to any shares of
Restricted Stock, a stock certificate evidencing the shares of Class A Common
Stock will be delivered without charge to the participant, or his beneficiary,
free of all restrictions under the Plan.
OTHER STOCK AWARDS. The Committee may grant any other cash, stock or
stock-related Awards to any eligible participant under the Incentive Plan that
the Committee deems appropriate, including, but not limited to, stock
appreciation rights, limited stock appreciation rights, phantom stock Awards,
the bargain purchase of Class A Common Stock and Class A Common Stock bonuses.
Any such Award will have such terms and conditions as the Committee, in its sole
discretion, so determines.
ADJUSTMENTS FOR RECAPITALIZATION, MERGER, ETC. OF THE COMPANY
Awards granted under the Incentive Plan and any agreements evidencing such
Awards, the maximum number of shares of Class A Common Stock subject to all such
Awards under the Incentive Plan, the number of shares of Class A Common Stock
subject to outstanding Awards and the maximum number of shares of Class A Common
Stock with respect to which any one person may be granted Options or stock
appreciation rights during any year may be subject to adjustment or
substitution, as determined by the Committee in its sole discretion, as to the
number, price or kind of a share of Class A Common Stock or other consideration
subject to such Awards or as otherwise determined by the Committee to be
equitable (i) in the event of changes in the outstanding Class A Common Stock or
in the capital structure of the Company by reason of stock dividends, stock
splits, reverse stock splits, recapitalizations, reorganizations, mergers,
consolidations, combinations, exchanges, or other relevant changes in
capitalization occurring after the date of grant of any such Award or (ii) in
the event of any change in applicable laws or any change in circumstances which
results in or would result in any substantial dilution or enlargement of the
rights granted to, or available for, participants in the Incentive Plan, or
which otherwise warrants equitable adjustment because it interferes with the
intended operation of the Incentive Plan. The Company shall give each
participant notice of an adjustment under the Incentive Plan and, upon notice,
such adjustment shall be conclusive and binding for all purposes. In addition,
in certain merger situations or upon the sale of all or substantially all of
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the assets of the Company or the liquidation of the Company, the Committee may,
in its sole discretion, cancel any or all outstanding Awards and pay to the
holders the value of the Awards in cash.
EFFECT OF CHANGE IN CONTROL
In the event of a Change in Control (as defined below), notwithstanding any
vesting schedule provided for in the Incentive Plan or by the Committee with
respect to an Award of Options, such Options shall become immediately
exercisable with respect to 100 percent of the shares subject to such Option,
and the restricted period for Restricted Stock shall expire immediately with
respect to 100 percent of the shares of Restricted Stock subject to
restrictions.
In the event of a Change in Control, all other Awards shall become fully
vested and or payable to the fullest extent of any Award or portion thereof that
has not then expired and any restrictions with respect thereto shall expire. The
Committee has full authority and discretion to interpret and implement such
accelerated vesting.
"Change in Control" will, unless the Board of Directors otherwise directs by
resolution adopted prior thereto or, in the case of a particular Award, the
applicable Award agreement states otherwise, be deemed to occur if (i) any
"person" (as that term is used in Sections 13 and 14(d)(2) of the Exchange Act)
other than a Founder (as defined below) is or becomes the beneficial owner (as
that term is used in Section 13(d) of the Exchange Act), directly or indirectly,
of 50% or more of either the outstanding shares of Class A Common Stock or the
combined voting power of the Company's then outstanding voting securities
entitled to vote generally, (ii) during any period of two consecutive years,
individuals who constitute the Board of Directors at the beginning of such
period cease for any reason to constitute at least a majority thereof, unless
the election or the nomination for election by the Company's stockholders of
each new director was approved by a vote of at least three-quarters of the
directors then still in office who were directors at the beginning of the period
or (iii) the Company undergoes a liquidation or dissolution or a sale of all or
substantially all of its assets. No merger, consolidation or corporate
reorganization in which the owners of the combined voting power of the Company's
then outstanding voting securities entitled to vote generally prior to said
combination, own 50% or more of the resulting entity's outstanding voting
securities will, by itself, be considered a Change in Control. As used herein,
"Founder" means Richard A. Horowitz and any of his affiliates.
MARKET VALUE
The closing price of the Class A Common Stock on NASDAQ on April 19, 2002
was $6.495 per share.
AMENDMENT AND TERMINATION
The Board of Directors may at any time terminate the Incentive Plan. With
the express written consent of an individual participant (subject to any other
allowable adjustments under the Incentive Plan to outstanding Awards without the
consent of any participant), the Board of Directors or the Committee may cancel
or reduce or otherwise alter the outstanding Awards thereunder if, in its
judgment, the tax, accounting, or other effects of the Incentive Plan or
potential payouts thereunder would not be in the best interest of the Company.
The Board of Directors or the Committee may, at any time, or from time to time,
amend or suspend and, if suspended, reinstate, the Incentive Plan in whole or in
part, subject to any limitations set forth in the Incentive Plan; PROVIDED,
HOWEVER, that the Committee may not, without stockholder approval, make any
amendment to the Incentive Plan that would increase the number of shares of
Class A Common Stock available thereunder, extend the maximum Option period,
extend the termination date of the Incentive Plan or change the class of persons
eligible to receive Awards.
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FEDERAL TAX CONSEQUENCES
The following is a brief discussion of the Federal income tax consequences
of transactions with respect to Options under the Incentive Plan based on the
Code, as in effect as of the date of this summary. This discussion is not
intended to be exhaustive and does not describe any state or local tax
consequences.
ISOS. No taxable income is realized by the optionee upon the grant or
exercise of an ISO. If Class A Common Stock is issued to an optionee pursuant to
the exercise of an ISO, and if no disqualifying disposition of such shares is
made by such optionee within two years after the date of grant or within one
year after the transfer of such shares to such optionee, then (1) upon the sale
of such shares, any amount realized in excess of the Option price will be taxed
to such optionee as a long-term capital gain and any loss sustained will be a
long-term capital loss, and (2) no deduction will be allowed to the Company for
Federal income tax purposes.
If the Class A Common Stock acquired upon the exercise of an ISO is disposed
of prior to the expiration of either holding period described above, generally,
(1) the optionee will realize ordinary income in the year of disposition in an
amount equal to the excess (if any) of the Fair Market Value of such shares at
exercise (or, if less, the amount realized on the disposition of such shares)
over the Option price paid for such shares and (2) the Company will be entitled
to deduct such amount for Federal income tax purposes if the amount represents
an ordinary and necessary business expense. Any further gain (or loss) realized
by the optionee upon the sale of the Class A Common Stock will be taxed as
short-term or long-term capital gain (or loss), depending on how long the shares
have been held, and will not result in any deduction by the Company.
If an ISO is exercised more than three months following termination of
employment (subject to certain exceptions for disability or death), the exercise
of the Option will generally be taxed as the exercise of a NQSO, as described
below.
For purposes of determining whether an optionee is subject to an alternative
minimum tax liability, an optionee who exercises an ISO generally would be
required to increase his or her alternative minimum taxable income, and compute
the tax basis in the stock so acquired, in the same manner as if the optionee
had exercised a NQSO. Each optionee is potentially subject to the alternative
minimum tax. In substance, a taxpayer is required to pay the higher of his/her
alternative minimum tax liability or his/her "regular" income tax liability. As
a result, a taxpayer has to determine his/her potential liability under the
alternative minimum tax.
NQSOS. With respect to NQSOs: (1) no income is realized by the optionee at
the time the Option is granted; (2) generally, at exercise, ordinary income is
realized by the optionee in an amount equal to the excess, if any, of the Fair
Market Value of the shares on such date over the exercise price, and the Company
is generally entitled to a tax deduction in the same amount, subject to
applicable tax withholding requirements; and (3) at sale, appreciation (or
depreciation) after the date of exercise is treated as either short-term or
long-term capital gain (or loss) depending on how long the shares have been
held.
SPECIAL RULES APPLICABLE TO CORPORATE INSIDERS
As a result of the rules under Section 16(b) of the Exchange Act
("Section 16(b)"), and depending upon the particular exemption from the
provisions of Section 16(b) utilized, officers and directors of the Company and
persons owning more than 10 percent of the outstanding shares of stock of the
Company ("Insiders") may not receive the same tax treatment as set forth above
with respect to the grant and/or exercise of Options. Generally, Insiders will
not be subject to taxation until the expiration of any period during which they
are subject to the liability provisions of Section 16(b) with respect to any
particular Option.
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NEW PLAN BENEFITS
Inasmuch as Awards to all participants under the Incentive Plan will be
granted at the sole discretion of the Committee, such benefits under the
Incentive Plan are not determinable. Compensation paid and other benefits
granted in respect of the 2001 fiscal year to the named executive officers are
set forth in the Summary Compensation Table.
RECOMMENDATION AND VOTE
Approval of the Incentive Plan proposal requires the affirmative vote of a
majority of the shares of Class A Common Stock present, in person or by proxy,
at the Annual Meeting, and entitled to vote thereon.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
INCENTIVE PLAN.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of a registered class of
the Company's equity securities, to file with the Securities and Exchange
Commission (the "Commission") initial reports of ownership and reports of
changes in ownership of Class A Common Stock and other equity securities of the
Company. Officers, directors and greater than 10% stockholders are required by
the Commission to furnish the Company with copies of all Section 16(a) forms
they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company or written representations that no other
reports were required, all Section 16(a) filing requirements applicable to its
officers, directors and greater than 10% beneficial owners were complied with
during, or in respect of, the fiscal year ended December 31, 2001.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Company and Sidney Horowitz are parties to a Consulting Agreement, which
will terminate on October 31, 2003, pursuant to which Mr. Horowitz receives
$75,000 in annual consulting fees.
SELECTION OF AUDITORS
The Board of Directors, upon the recommendation of its Audit Committee, has
selected BDO Seidman, LLP as independent certified public accountants for the
Company, to audit and report upon the Company's consolidated financial
statements for the 2002 fiscal year, and the Board of Directors is submitting
this matter to the stockholders for their ratification. The affirmative vote of
a majority of the shares of Class A Common Stock present or represented and
entitled to vote on the proposal at the Annual Meeting is required for the
ratification of the selection of BDO Seidman, LLP. Representatives of BDO
Seidman, LLP are expected to be present at the Annual Meeting, to make a
statement if they desire to do so and to be available to respond to appropriate
questions that may be asked by stockholders.
AUDIT FEES. The aggregate fees billed for professional services rendered
for the audit of the Company's annual consolidated financial statements and the
review of the Company's quarterly consolidated financial statements for the
fiscal year ended December 31, 2001 were $170,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION. The Company did
not engage BDO Seidman, LLP to provide advice to the Company regarding financial
information systems design and implementation during the fiscal year ended
December 31, 2001.
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ALL OTHER FEES. The aggregate fees billed for services rendered by BDO
Seidman, LLP for the fiscal year ended December 31, 2001, other than the audit
fees disclosed above, were $48,300.
For the year ended December 31, 2001, the Audit Committee has determined
that the provision of services unrelated to the audit of the Company's annual
consolidated financial statements and the review of the Company's quarterly
consolidated financial statements was compatible with maintaining the
independence of the Company's independent certified public accountants.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
FOR APPROVAL OF THE SELECTION OF BDO SEIDMAN, LLP AS
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.
STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
Stockholder proposals intended for inclusion in the proxy material for the
2003 Annual Meeting of Stockholders must be received by the Secretary of the
Company at the Company's offices at 300 Smith Street, Farmingdale, New York
11735 not later than December 27, 2002 in order for such proposals to be
included in the proxy materials for the 2003 Annual Meeting of Stockholders.
Such proposals must also meet the requirements of Rule 14a-8 of the Exchange Act
relating to stockholders' proposals. Any stockholder interested in bringing a
proposal before the 2003 Annual Meeting of Stockholders outside of the processes
of Rule 14a-8 is referred to the advance notice provisions contained in the
Company's By-Laws, which require receipt of such proposals by the Secretary of
the Company at the Company's offices not prior to October 29, 2002 and not later
than December 27, 2002. Since the Company did not receive timely notice of any
stockholder proposal for the 2002 Annual Meeting of Stockholders, it will have
discretionary authority to vote on any stockholder proposals presented at such
Meeting.
ADDITIONAL INFORMATION AND OTHER MATTERS
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2001 (WITHOUT EXHIBITS) AS FILED WITH THE COMMISSION MAY BE
OBTAINED FREE OF CHARGE BY WRITING TO THE COMPANY, 300 SMITH STREET,
FARMINGDALE, NEW YORK 11735; ATTENTION: SECRETARY OF THE COMPANY.
Management of the Company is not aware of any matters to be presented for
action at the Annual Meeting other than the matters mentioned above, and does
not intend to bring any other matters before the Annual Meeting. However, if any
other matters should come before the Annual Meeting, it is intended that the
holders of the proxies will vote them in their discretion.
By order of the Board of Directors,
JOSEPH A. MOLINO, JR.
SECRETARY
Date: April 26, 2002
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P&F INDUSTRIES, INC.
2002 STOCK INCENTIVE PLAN
1. PURPOSE
The purpose of the Plan is to provide a means through which the Company
and its Subsidiaries may attract able persons to become and remain directors of
the Company and enter and remain in the employ of the Company and its
Subsidiaries and to provide a means whereby employees, directors and consultants
of the Company and its Subsidiaries can acquire and maintain Common Stock
ownership, or be paid incentive compensation measured by reference to the value
of Common Stock, thereby strengthening their commitment to the welfare of the
Company and its Subsidiaries and promoting an identity of interest between
stockholders and these employees, directors and consultants.
So that the appropriate incentive can be provided, the Plan allows for
the grant of Incentive Stock Options, Nonqualified Stock Options, Restricted
Stock Awards, and other Stock-based Awards, or any combination of the foregoing.
2. DEFINITIONS
The following definitions shall be applicable throughout the Plan.
(a) "Affiliate" of any individual or entity means an individual or
entity that is directly or indirectly through one or more intermediaries
controlled by or under common control with the individual or entity specified.
(b) "Award" means, individually or collectively, any Incentive Stock
Option, Nonqualified Stock Option, Restricted Stock Award, or other Stock-based
Award.
(c) "Board" means the Board of Directors of the Company.
(d) "Cause" means the Company or a Subsidiary having cause to terminate
a Participant's employment or service under any existing employment, consulting
or any other agreement between the Participant and the Company or a Subsidiary.
In the absence of any such employment, consulting or other agreement, a
Participant shall be deemed to have been terminated for Cause if the Committee
determines that his termination of employment with the Company or a Subsidiary
is on account of (A) incompetence, fraud, personal dishonesty, embezzlement,
defalcation or acts of gross negligence or gross misconduct on the part of the
Participant in the course of his employment or services, (B) a material breach
of the Participant's fiduciary duty of loyalty to the Company or a Subsidiary,
(C) the Participant's engagement in conduct that is materially injurious to the
Company or a Subsidiary, (D) the Participant's conviction by a court of
competent jurisdiction of, or pleading "guilty" or "no contest" to, (x) a
felony, or (y) any other criminal charge (other than minor traffic violations)
which could reasonably be expected to have a material adverse impact on
Company's or a Subsidiary's reputation and standing in the community; (E) public
or consistent drunkenness by the
Participant or his illegal use of drugs which is, or could reasonably be
expected to become, materially injurious to the reputation or business of the
Company or a Subsidiary or which impairs, or could reasonably be expected to
impair, the performance of the Participant's duties to the Company or a
Subsidiary; or (F) willful failure by the Participant to follow the lawful
directions of a superior officer or the Board, representing disloyalty to the
goals of the Company or a Subsidiary.
(e) "Change in Control" shall, unless the Board otherwise directs by
resolution adopted prior thereto or, in the case of a particular award, the
applicable Award agreement states otherwise, be deemed to occur if (i) any
"person" (as that term is used in Sections 13 and 14(d)(2) of the Exchange Act)
other than a Founder (as defined below) is or becomes the beneficial owner (as
that term is used in Section 13(d) of the Exchange Act), directly or indirectly,
of 50% or more of either the outstanding shares of Common Stock or the combined
voting power of the Company's then outstanding voting securities entitled to
vote generally, (ii) during any period of two consecutive years, individuals who
constitute the Board at the beginning of such period cease for any reason to
constitute at least a majority thereof, unless the election or the nomination
for election by the Company's stockholders of each new director was approved by
a vote of at least three-quarters of the directors then still in office who were
directors at the beginning of the period or (iii) the Company undergoes a
liquidation or dissolution or a sale of all or substantially all of its assets.
No merger, consolidation or corporate reorganization in which the owners of the
combined voting power of the Company's then outstanding voting securities
entitled to vote generally prior to said combination, own 50% or more of the
resulting entity's outstanding voting securities shall, by itself, be considered
a Change in Control. As used herein, "Founder" means Richard A. Horowitz and any
of his Affiliates.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
Reference in the Plan to any section of the Code shall be deemed to include any
amendments or successor provisions to such section and any regulations under
such section.
(g) "Committee" means the Board, the Compensation Committee of the
Board or such other committee of at least two people as the Board may appoint to
administer the Plan.
(h) "Common Stock" means the Class A Common Stock, par value $1.00 per
share, of the Company.
(i) "Company" means P&F Industries, Inc.
(j) "Date of Grant" means the date on which the granting of an Award is
authorized or such other date as may be specified in such authorization.
(k) "Disability", with respect to any particular Participant, means
disability as defined in such Participant's employment, consulting or other
relevant agreement with the Company or a Subsidiary or, in the absence of any
such agreement, disability as defined in the long-term disability plan of the
Company or a Subsidiary, as may be applicable to the Participant in question,
or, in the absence of such a plan, the complete and permanent inability by
reason of illness or accident to perform the duties of the occupation at which
the Participant was employed
2
or served when such disability commenced or, if the Participant was retired when
such disability commenced, the inability to engage in any substantial gainful
activity, in either case as determined by the Committee based upon medical
evidence acceptable to it.
(l) "Disinterested Person" means a person who is (i) a "non-employee
director" within the meaning of Rule 16b-3 under the Exchange Act, or any
successor rule or regulation, and (ii) an "outside director" within the meaning
of Section 162(m) of the Code; PROVIDED, HOWEVER, that clause (ii) shall apply
only with respect to grants of Awards with respect to which the Company's tax
deduction could be limited by Section 162(m) of the Code if such clause did not
apply.
(m) "Eligible Person" means any (i) person regularly employed by the
Company or a Subsidiary; PROVIDED, HOWEVER, that no such employee covered by a
collective bargaining agreement shall be an Eligible Person unless and to the
extent that such eligibility is set forth in such collective bargaining
agreement or in an agreement or instrument relating thereto; (ii) director of
the Company or a Subsidiary; or (iii) consultant to the Company or a Subsidiary.
(n) "Exchange Act" means the Securities Exchange Act of 1934.
(o) "Fair Market Value" on a given date means (i) if the Stock is
listed on a national securities exchange, the closing price on the primary
exchange with which the Stock is listed and traded on the date prior to such
date, or, if there is no such sale on that date, then on the last preceding date
on which such a sale was reported; (ii) if the Stock is not listed on any
national securities exchange but is quoted in the NASDAQ National Market System
on a last sale basis, the closing price reported on the date prior to such date,
or, if there is no such sale on that date, then on the last preceding date on
which a sale was reported; or (iii) if the Stock is not listed on a national
securities exchange nor quoted in the NASDAQ National Market System on a last
sale basis, the amount determined by the Committee to be the fair market value
based upon a good faith attempt to value the Stock accurately and computed in
accordance with applicable regulations of the Internal Revenue Service.
(p) "Holder" means a Participant who has been granted an Award.
(q) "Incentive Stock Option" means an Option granted by the Committee
to a Participant under the Plan which is designated by the Committee as an
Incentive Stock Option pursuant to Section 422 of the Code.
(r) "Nonqualified Stock Option" means an Option granted under the Plan
which is not designated as an Incentive Stock Option.
(s) "Normal Termination" means termination of employment or service
with the Company and all Subsidiaries:
(i) Upon retirement pursuant to the retirement plan of the
Company or a Subsidiary, as the same may be applicable at the time to
the Participant in question;
(ii) On account of Disability;
3
(iii) With the written approval of the Committee; or
(iv) By the Company or a Subsidiary without Cause.
(t) "Option" means a stock option to purchase shares of Stock granted
under Section 7 of the Plan.
(u) "Option Period" means the period described in Section 7(c).
(v) "Option Price" means the exercise price set for an Option described
in Section 7(a).
(w) "Participant" means an Eligible Person who has been selected by the
Committee to participate in the Plan and to receive an Award.
(x) "Plan" means the Company's 2002 Stock Incentive Plan.
(y) "Restricted Period" means, with respect to any share of Restricted
Stock, the period of time determined by the Committee during which such Award is
subject to the restrictions set forth in Section 8.
(z) "Restricted Stock" means shares of Stock issued or transferred to a
Participant subject to forfeiture and the other restrictions set forth in
Section 8.
(aa) "Restricted Stock Award" means an Award of Restricted Stock
granted under Section 8 of the Plan.
(bb) "Securities Act" means the Securities Act of 1933, as amended.
(cc) "Stock" means the Common Stock or such other authorized shares of
stock of the Company as from time to time may be authorized for use under the
Plan.
(dd) "Stock Option Agreement" means the agreement between the Company
and a Participant who has been granted an Option pursuant to Section 7 which
defines the rights and obligations of the parties as required in Section 7(d).
(ee) "Subsidiary" means any subsidiary of the Company as defined in
Section 424(f) of the Code.
3. EFFECTIVE DATE, DURATION AND SHAREHOLDER APPROVAL
The Plan is effective as of April __, 2002, the date on which the Plan
was adopted by the Board.
The expiration date of the Plan, after which no Awards may be granted
hereunder, shall be April __, 2012; PROVIDED, HOWEVER, that the administration
of the Plan shall continue in effect until all matters relating to the payment
of Awards previously granted have been settled.
4. ADMINISTRATION
4
The Committee shall administer the Plan. Unless otherwise determined by
the Board, each member of the Committee shall, at the time he takes any action
with respect to an Award under the Plan, be a Disinterested Person. The majority
of the members of the Committee shall constitute a quorum. The acts of a
majority of the members present at any meeting at which a quorum is present or
acts approved in writing by a majority of the Committee shall be deemed the acts
of the Committee.
Subject to the provisions of the Plan, the Committee shall have
exclusive power to:
(a) Select the Eligible Persons to participate in the Plan;
(b) Determine the nature and extent of the Awards to be made to each
Eligible Person;
(c) Determine the time or times when Awards will be made to Eligible
Persons;
(d) Determine the duration of each Option Period and Restricted Period;
(e) Determine the terms and conditions to which Awards may be subject;
(f) Prescribe the form of Stock Option Agreement or other form or forms
evidencing Awards; and
(g) Cause records to be established in which there shall be entered,
from time to time as Awards are made to Participants, the date of each Award,
the number of Incentive Stock Options, Nonqualified Stock Options, shares of
Restricted Stock and other Stock-based Awards granted by the Committee to each
Participant, the expiration date, the Option Period and the duration of any
applicable Restricted Period.
The Committee shall have the authority to interpret the Plan and,
subject to the provisions of the Plan, to establish, adopt or revise such rules
and regulations and to make all such determinations relating to the Plan as it
may deem necessary or advisable for the administration of the Plan. The
Committee's interpretation of the Plan or any documents evidencing Awards
granted pursuant thereto and all decisions and determinations by the Committee
with respect to the Plan shall be final, binding and conclusive on all parties
unless otherwise determined by the Board.
5. GRANT OF AWARDS; SHARES SUBJECT TO THE PLAN
The Committee may, from time to time, grant Awards of Options,
Restricted Stock and other Stock-based Awards to one or more Eligible Persons;
PROVIDED, HOWEVER, that:
(a) Subject to Section 11, the aggregate number of shares of
Stock reserved and available for issuance pursuant to Awards under the
Plan is 1,100,000;
(b) Except as set forth in Section 5(d), such shares shall be
deemed to have been used in payment of Awards only to the extent they
are actually delivered and not where the Fair Market Value equivalent
of such shares for a Stock-based Award is paid
5
in cash. In the event any Award shall be surrendered, terminate, expire
or be forfeited, the number of shares of Stock no longer subject
thereto shall thereupon be released and shall thereafter be available
for new Awards under the Plan;
(c) Stock delivered by the Company in settlement of Awards
under the Plan may be authorized and unissued Stock or Stock held in
the treasury of the Company or may be purchased on the open market or
by private purchase; and
(d) No Participant may receive Options or stock appreciation
rights under the Plan with respect to more than 1,100,000 shares of
Stock in any one year. For this purpose, such shares shall be deemed to
have been used in payment of Awards whether they are actually delivered
or where the Fair Market Value equivalent of such shares for a stock
appreciation right is paid in cash.
6. ELIGIBILITY
Participation shall be limited to Eligible Persons who have received
written notification from the Committee, or from a person designated by the
Committee, that they have been selected to participate in the Plan.
7. STOCK OPTION AWARDS
The Committee is authorized to grant one or more Incentive Stock
Options or Nonqualified Stock Options to any Eligible Person; PROVIDED, HOWEVER,
that no Incentive Stock Options shall be granted to any Eligible Person who is
not an employee of the Company or a Subsidiary. Each Option so granted shall be
subject to the following conditions, or to such other conditions as may be
reflected in the applicable Stock Option Agreement.
(a) OPTION PRICE. The exercise price ("Option Price") per share of
Stock for each Option shall be set by the Committee at the time of grant but
shall not be less than (i) in the case of an Incentive Stock Option, and subject
to Section 7(e), the Fair Market Value of a share of Stock at the Date of Grant,
and (ii) in the case of a Non-Qualified Stock Option, the par value per share of
Stock; PROVIDED, HOWEVER, that all Options intended to qualify as
"performance-based compensation" under Section 162(m) of the Code shall have an
Option Price per share of Stock not less than the Fair Market Value of a share
of Stock on the Date of Grant.
(b) MANNER OF EXERCISE AND FORM OF PAYMENT. Options which have become
exercisable may be exercised by delivery of written notice of exercise to the
Committee accompanied by payment of the Option Price. The Option Price may be
payable in cash, by bank check (acceptable to the Committee) and/or shares of
Stock (valued at the Fair Market Value at the time the Option is exercised),
having in the aggregate a value equal to the aggregate Option Price or, in the
discretion of the Committee, either (i) in other property having a fair market
value on the date of exercise equal to the aggregate Option Price, or (ii) by
delivering to the Committee a copy of irrevocable instructions to a stockbroker
to deliver promptly to the Company an amount of sale or loan proceeds sufficient
to pay the aggregate Option Price.
(c) OPTION PERIOD AND EXPIRATION. Options shall vest and become
exercisable in such manner and on such date or dates determined by the Committee
and shall expire after such
6
period, not to exceed ten years, as may be determined by the Committee (the
"Option Period"); PROVIDED, HOWEVER, that notwithstanding any vesting dates set
by the Committee, the Committee may in its sole discretion accelerate the
exercisability of any Option, which acceleration shall not affect the terms and
conditions of any such Option other than with respect to exercisability. Unless
otherwise specifically determined by the Committee, the vesting of an Option
shall occur only while the Participant is employed or rendering services to the
Company or its Subsidiaries and all vesting shall cease upon a Holder's
termination of employment or services for any reason. If an Option is
exercisable in installments, such installments or portions thereof which become
exercisable shall remain exercisable until the Option expires. Unless otherwise
stated in the applicable Option Agreement, the Option shall expire earlier than
the end of the Option Period in the following circumstances:
(i) If prior to the end of the Option Period, the Holder shall
undergo a Normal Termination, the Option shall expire on the earlier of
the last day of the Option Period or the date that is three months
after the date of such Normal Termination. In such event, the Option
shall remain exercisable by the Holder until its expiration, but only
to the extent the Option was vested and exercisable at the time of such
Normal Termination.
(ii) If the Holder dies prior to the end of the Option Period
and while still in the employ or service of the Company or a
Subsidiary, or within three months of Normal Termination, the Option
shall expire on the earlier of the last day of the Option Period or the
date that is twelve months after the date of death of the Holder. In
such event, the Option shall remain exercisable by the person or
persons to whom the Holder's rights under the Option pass by will or
the applicable laws of descent and distribution until its expiration,
but only to the extent the Option was vested and exercisable by the
Holder at the time of death.
(iii) If the Holder ceases employment or service with the
Company and all Subsidiaries for reasons other than Normal Termination
or death, the Option shall expire immediately upon such cessation of
employment or service.
(d) STOCK OPTION AGREEMENT - OTHER TERMS AND CONDITIONS. Each Option
granted under the Plan shall be evidenced by a Stock Option Agreement, which
shall contain such provisions as may be determined by the Committee and, except
as may be specifically stated otherwise in such Stock Option Agreement, which
shall be subject to the following terms and conditions:
(i) Each Option issued pursuant to this Section 7 or portion
thereof that is exercisable shall be exercisable for the full amount or
for any part thereof.
(ii) Each share of Stock purchased through the exercise of an
Option issued pursuant to this Section 7 shall be paid for in full at
the time of the exercise. Each Option shall cease to be exercisable, as
to any share of Stock, when the Holder purchases the share or when the
Option expires.
7
(iii) Options issued pursuant to this Section 7 shall not be
transferable by the Holder except by will or the laws of descent and
distribution and shall be exercisable during the Holder's lifetime only
by him; PROVIDED, HOWEVER, that the Committee may at any time upon the
request of a Holder allow for the transfer of any Option, subject to
such conditions or limitations as it may establish.
(iv) Each Option issued pursuant to this Section 7 shall vest
and become exercisable by the Holder in accordance with the vesting
schedule established by the Committee and set forth in the Stock Option
Agreement.
(v) Each Stock Option Agreement may contain a provision that,
upon demand by the Committee for such a representation, the Holder
shall deliver to the Committee at the time of any exercise of an Option
issued pursuant to this Section 7 a written representation that the
shares to be acquired upon such exercise are to be acquired for
investment and not for resale or with a view to the distribution
thereof. Upon such demand, delivery of such representation prior to the
delivery of any shares issued upon exercise of an Option issued
pursuant to this Section 7 shall be a condition precedent to the right
of the Holder or such other person to purchase any shares. In the event
certificates for shares of Stock are delivered under the Plan with
respect to which such investment representation has been obtained, the
Committee may cause a legend or legends to be placed on such
certificates to make appropriate reference to such representation and
to restrict transfer in the absence of compliance with applicable
federal or state securities laws.
(vi) Each Incentive Stock Option Agreement shall contain a
provision requiring the Holder to notify the Company in writing
immediately after the Holder makes a disqualifying disposition of any
Stock acquired pursuant to the exercise of such Incentive Stock Option.
A disqualifying disposition is any disposition (including any sale) of
such Stock before the later of (a) two years after the Date of Grant of
the Incentive Stock Option and (b) one year after the date the Holder
acquired the Stock by exercising the Incentive Stock Option.
(e) INCENTIVE STOCK OPTION GRANTS TO 10% STOCKHOLDERS. Notwithstanding
anything to the contrary in this Section 7, if an Incentive Stock Option is
granted to a Holder who owns stock representing more than 10% of the voting
power of all classes of stock of the Company or of a Subsidiary, the Option
Period shall not exceed five years from the Date of Grant of such Option and the
Option Price shall be at least 110% of the Fair Market Value (on the Date of
Grant) of the Stock subject to the Option.
(f) $100,000 PER YEAR LIMITATION FOR INCENTIVE STOCK OPTIONS. To the
extent the aggregate Fair Market Value (determined as of the Date of Grant) of
Stock for which Incentive Stock Options are exercisable for the first time by
any Participant during any calendar year
8
(under all plans of the Company and its Subsidiaries) exceeds $100,000, such
excess Incentive Stock Options shall be treated as Nonqualified Stock Options.
(g) VOLUNTARY SURRENDER. The Committee may permit the voluntary
surrender of all or any portion of any Nonqualified Stock Option issued pursuant
to this Section 7 to be conditioned upon the granting to the Holder of a new
Option for the same or a different number of shares as the Option surrendered or
require such voluntary surrender as a condition precedent to a grant of a new
Option to such Participant. Such new Option shall be exercisable at an Option
Price, during an Option Period, and in accordance with any other terms or
conditions specified by the Committee at the time the new Option is granted, all
determined in accordance with the provisions of the Plan without regard to the
Option Price, Option Period, or any other terms and conditions of the
Nonqualified Stock Option surrendered.
8. RESTRICTED STOCK AWARDS
(a) AWARD OF RESTRICTED STOCK.
(i) The Committee shall have the authority to (1) grant
Restricted Stock, (2) issue or transfer Restricted Stock to Eligible
Persons, and (3) establish terms, conditions and restrictions
applicable to such Restricted Stock, including the Restricted Period,
which may differ with respect to each grantee, the time or times at
which Restricted Stock shall be granted or become vested and the number
of shares to be covered by each grant.
(ii) The Holder of a Restricted Stock Award shall execute and
deliver to the Company an Award agreement with respect to the
Restricted Stock setting forth the restrictions applicable to such
Restricted Stock. If the Committee determines that the Restricted Stock
shall be held in escrow rather than delivered to the Holder pending the
release of the applicable restrictions, the Holder additionally shall
execute and deliver to the Company (i) an escrow agreement satisfactory
to the Committee and (ii) the appropriate blank stock powers with
respect to the Restricted Stock covered by such agreements. If a Holder
shall fail to execute a Restricted Stock agreement and, if applicable,
an escrow agreement and stock powers, the Award shall be null and void.
Subject to the restrictions set forth in Section 8(b), the Holder shall
generally have the rights and privileges of a stockholder as to such
Restricted Stock, including the right to vote such Restricted Stock. At
the discretion of the Committee, cash dividends and stock dividends, if
any, with respect to the Restricted Stock may be either currently paid
to the Holder or withheld by the Company for the Holder's account.
Unless otherwise determined by the Committee, no interest will accrue
or be paid on the amount of any cash dividends withheld. Unless
otherwise determined by the Committee, cash dividends or stock
dividends so withheld by the Committee shall be subject to forfeiture
to the same degree as the shares of Restricted Stock to which they
relate.
9
(iii) Upon the Award of Restricted Stock, the Committee shall
cause a stock certificate registered in the name of the Holder to be
issued and, if it so determines, deposited together with the stock
powers with an escrow agent designated by the Committee. If an escrow
arrangement is used, the Committee shall cause the escrow agent to
issue to the Holder a receipt evidencing any stock certificate held by
it registered in the name of the Holder.
(b) RESTRICTIONS.
(i) Restricted Stock awarded to a Participant shall be subject
to the following restrictions until the expiration of the Restricted
Period, and to such other terms and conditions as may be set forth in
the applicable Award agreement: (1) if an escrow arrangement is used,
the Holder shall not be entitled to delivery of the stock certificate;
(2) the shares shall be subject to the restrictions on transferability
set forth in the Award agreement; (3) the shares shall be subject to
forfeiture to the extent provided in Section 8(d) and the Award
Agreement and, to the extent such shares are forfeited, the stock
certificates shall be returned to the Company, and all rights of the
Holder to such shares and as a shareholder shall terminate without
further obligation on the part of the Company.
(ii) The Committee shall have the authority to remove any or
all of the restrictions on the Restricted Stock whenever it may
determine that, by reason of changes in applicable laws or other
changes in circumstances arising after the date of the Restricted Stock
Award, such action is appropriate.
(c) RESTRICTED PERIOD. The Restricted Period of Restricted Stock shall
commence on the Date of Grant and shall expire from time to time as to that part
of the Restricted Stock indicated in a schedule established by the Committee and
set forth in a written Award agreement.
(d) FORFEITURE PROVISIONS. Except to the extent determined by the
Committee and reflected in the underlying Award agreement, in the event a Holder
terminates employment with the Company and all Subsidiaries during a Restricted
Period, that portion of the Award with respect to which restrictions have not
expired ("Non-Vested Portion") shall be treated as follows:
(i) Upon the voluntary resignation of a Participant or
discharge by the Company or a Subsidiary for Cause, the Non-Vested
Portion of the Award shall be completely forfeited.
(ii) Upon Normal Termination, the Non-Vested Portion of the
Award shall be prorated for service during the Restricted Period and
shall be distributed free of all restrictions as soon as practicable
following termination.
(iii) Upon death, the Non-Vested Portion of the Award shall be
prorated for service during the Restricted Period and shall be
distributed free of all
10
restrictions to the Participant's beneficiary as soon as practicable
following death.
(e) DELIVERY OF RESTRICTED STOCK. Upon the expiration of the Restricted
Period with respect to any shares of Stock covered by a Restricted Stock Award,
the restrictions set forth in Section 8(b) and the Award agreement shall be of
no further force or effect with respect to shares of Restricted Stock which have
not then been forfeited. If an escrow arrangement is used, upon such expiration,
the Company shall deliver to the Holder, or his beneficiary, without charge, the
stock certificate evidencing the shares of Restricted Stock which have not then
been forfeited and with respect to which the Restricted Period has expired (to
the nearest full share) and any cash dividends or stock dividends credited to
the Holder's account with respect to such Restricted Stock and the interest
thereon, if any.
(f) STOCK RESTRICTIONS. Each certificate representing Restricted Stock
awarded under the Plan shall bear the following legend until the end of the
Restricted Period with respect to such Stock:
"Transfer of this certificate and the shares represented
hereby is restricted pursuant to the terms of a Restricted Stock
Agreement, dated as of _________, between P&F Industries, Inc. and
_________. A copy of such Agreement is on file at the offices of P&F
Industries, Inc."
Stop transfer orders shall be entered with the Company's transfer agent and
registrar against the transfer of any such legended securities.
9. OTHER STOCK-BASED AWARDS
The Committee may grant any other cash, stock or stock-related Awards
to any eligible individual under this Plan that the Committee deems appropriate,
including, but not limited to, stock appreciation rights, limited stock
appreciation rights, phantom stock Awards, the bargain purchase of Stock and
Stock bonuses. Any such benefits and any related agreements shall contain such
terms and conditions as the Committee deems appropriate. Such Awards and
agreements need not be identical. With respect to any benefit under which shares
of Stock are or may in the future be issued for consideration other than prior
services, the amount of such consideration shall not be less than the amount
(such as the par value of such shares) required to be received by the Company in
order to comply with applicable state law.
11
10. GENERAL
(a) ADDITIONAL PROVISIONS OF AN AWARD. Awards under the Plan also may
be subject to such other provisions (whether or not applicable to the benefit
awarded to any other Participant) as the Committee determines appropriate
including, without limitation, provisions to assist the Participant in financing
the purchase of Stock upon the exercise of Options, provisions for the
forfeiture of or restrictions on resale or other disposition of shares of Stock
acquired under any Award, provisions giving the Company the right to repurchase
shares of Stock acquired under any Award in the event the Participant elects to
dispose of such shares, and provisions to comply with Federal and state
securities laws and Federal and state tax withholding requirements. Any such
provisions shall be reflected in the applicable Award agreement.
(b) PRIVILEGES OF STOCK OWNERSHIP. Except as otherwise specifically
provided in the Plan, no person shall be entitled to the privileges of stock
ownership in respect of shares of Stock which are subject to Awards hereunder
until such shares have been issued to that person.
(c) GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company to
make payment of Awards in Stock or otherwise shall be subject to all applicable
laws, rules and regulations, and to such approvals by governmental agencies as
may be required. Notwithstanding any terms or conditions of any Award to the
contrary, the Company shall be under no obligation to offer to sell or to sell
and shall be prohibited from offering to sell or selling any shares of Stock
pursuant to an Award unless such shares have been properly registered for sale
pursuant to the Securities Act with the Securities and Exchange Commission or
unless the Company has received an opinion of counsel, satisfactory to the
Company, that such shares may be offered or sold without such registration
pursuant to an available exemption therefrom and the terms and conditions of
such exemption have been fully complied with. The Company shall be under no
obligation to register for sale under the Securities Act any of the shares of
Stock to be offered or sold under the Plan. If the shares of Stock offered for
sale or sold under the Plan are offered or sold pursuant to an exemption from
registration under the Securities Act, the Company may restrict the transfer of
such shares and may legend the Stock certificates representing such shares in
such manner as it deems advisable to ensure the availability of any such
exemption.
(d) TAX WITHHOLDING. Notwithstanding any other provision of the Plan,
the Company or a Subsidiary, as appropriate, shall have the right to deduct from
all Awards cash and/or Stock, valued at Fair Market Value on the date of
payment, in an amount necessary to satisfy all Federal, state and local taxes as
required by law to be withheld with respect to such Awards and, in the case of
Awards paid in Stock, the Holder or other person receiving such Stock may be
required to pay to the Company or a Subsidiary, as appropriate, prior to
delivery of such Stock, the amount of any such taxes, if any, which the Company
or Subsidiary is required to withhold with respect to such Stock. Subject in
particular cases to the disapproval of the Committee, the Company may accept
shares of Stock of equivalent Fair Market Value in payment of such withholding
tax obligations if the Holder of the Award elects to make payment in such
manner.
(e) CLAIM TO AWARDS AND EMPLOYMENT RIGHTS. No individual shall have any
claim or right to be granted an Award under the Plan or, having been selected
for the grant of an
12
Award, to be selected for a grant of any other Award. Neither the Plan nor any
action taken hereunder shall be construed as giving any individual any right to
be retained in the employ or service of the Company or a Subsidiary.
(f) DESIGNATION AND CHANGE OF BENEFICIARY. Each Participant may file
with the Committee a written designation of one or more persons as the
beneficiary who shall be entitled to receive the rights or amounts payable with
respect to an Award due under the Plan upon his death. A Participant may, from
time to time, revoke or change his beneficiary designation without the consent
of any prior beneficiary by filing a new designation with the Committee. The
last such designation received by the Committee shall be controlling; PROVIDED,
HOWEVER, that no designation, or change or revocation thereof, shall be
effective unless received by the Committee prior to the Participant's death, and
in no event shall it be effective as of a date prior to such receipt. If no
beneficiary designation is filed by the Participant, the beneficiary shall be
deemed to be his or her spouse or, if the Participant is unmarried at the time
of death, his or her estate.
(g) PAYMENTS TO PERSONS OTHER THAN PARTICIPANTS. If the Committee shall
find that any person to whom any amount is payable under the Plan is unable to
care for his affairs because of illness or accident, or is a minor, or has died,
then any payment due to such person or his estate (unless a prior claim therefor
has been made by a duly appointed legal representative) may, if the Committee so
directs the Company, be paid to his spouse, child, relative, an institution
maintaining or having custody of such person, or any other person deemed by the
Committee to be a proper recipient on behalf of such person otherwise entitled
to payment. Any such payment shall be a complete discharge of the liability of
the Committee and the Company therefor.
(h) NO LIABILITY OF COMMITTEE MEMBERS. No member of the Committee shall
be personally liable by reason of any contract or other instrument executed by
such member or on his behalf in his capacity as a member of the Committee nor
for any mistake of judgment made in good faith, and the Company shall indemnify
and hold harmless each member of the Committee and each other employee, officer
or director of the Company to whom any duty or power relating to the
administration or interpretation of the Plan may be allocated or delegated,
against any cost or expense (including counsel fees) or liability (including any
sum paid in settlement of a claim) arising out of any act or omission to act in
connection with the Plan unless arising out of such person's own fraud or
willful bad faith; PROVIDED, HOWEVER, that approval of the Board shall be
required for the payment of any amount in settlement of a claim against any such
person. The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled under the
Company's Articles of Incorporation or By-Laws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
(i) GOVERNING LAW. The Plan shall be governed by and construed in
accordance with the internal laws of the State of Delaware without regard to the
principles of conflicts of law thereof.
(j) FUNDING. No provision of the Plan shall require the Company, for
the purpose of satisfying any obligations under the Plan, to purchase assets or
place any assets in a trust or other
13
entity to which contributions are made or otherwise to segregate any assets, nor
shall the Company maintain separate bank accounts, books, records or other
evidence of the existence of a segregated or separately maintained or
administered fund for such purposes. Holders shall have no rights under the Plan
other than as unsecured general creditors of the Company, except that insofar as
they may have become entitled to payment of additional compensation by
performance of services, they shall have the same rights as other employees
under general law.
(k) NONTRANSFERABILITY. A person's rights and interest under the Plan,
including amounts payable, may not be sold, assigned, donated, transferred or
otherwise disposed of, mortgaged, pledged or encumbered except, in the event of
a Holder's death, to a designated beneficiary to the extent permitted by the
Plan, or in the absence of such designation, by will or the laws of descent and
distribution; PROVIDED, HOWEVER, the Committee may, in its sole discretion,
allow for transfer of Awards other than Incentive Stock Options to other persons
or entities, subject to such conditions or limitations as it may establish.
(l) RELIANCE ON REPORTS. Each member of the Committee and each member
of the Board shall be fully justified in relying, acting or failing to act, and
shall not be liable for having so relied, acted or failed to act in good faith,
upon any report made by the independent public accountant of the Company and its
Subsidiaries and upon any other information furnished in connection with the
Plan by any person or persons other than himself.
(m) RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be
taken into account in determining any benefits under any pension, retirement,
profit sharing, group insurance or other benefit plan of the Company or any
Subsidiary except as otherwise specifically provided in such other plan.
(n) EXPENSES. The expenses of administering the Plan shall be borne by
the Company and its Subsidiaries.
(o) PRONOUNS. Masculine pronouns and other words of masculine gender
shall refer to both men and women.
(p) TITLES AND HEADINGS. The titles and headings of the sections in the
Plan are for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles or headings, shall control.
(q) TERMINATION OF EMPLOYMENT. For all purposes herein, a person who
transfers from employment or service with the Company to employment or service
with a Subsidiary or vice versa shall not be deemed to have terminated
employment or service with the Company or a Subsidiary.
11. CHANGES IN CAPITAL STRUCTURE
Awards granted under the Plan and any agreements evidencing such
Awards, the maximum number of shares of Stock subject to all Awards under the
Plan, the number of shares of Stock subject to outstanding Awards and the
maximum number of shares of Stock with respect to which any one person may be
granted Options or stock appreciation rights during any year may be subject to
adjustment or substitution, as determined by the Committee in its sole
14
discretion, as to the number, price or kind of a share of Stock or other
consideration subject to such Awards or as otherwise determined by the Committee
to be equitable (i) in the event of changes in the outstanding Stock or in the
capital structure of the Company by reason of stock dividends, stock splits,
reverse stock splits, recapitalizations, reorganizations, mergers,
consolidations, combinations, exchanges, or other relevant changes in
capitalization occurring after the Date of Grant of any such Award or (ii) in
the event of any change in applicable laws or any change in circumstances which
results in or would result in any substantial dilution or enlargement of the
rights granted to, or available for, Participants in the Plan, or (iii) for any
other reason which the Committee, in its sole discretion, determines otherwise
warrants equitable adjustment because it interferes with the intended operation
of the Plan. Any adjustment to Incentive Stock Options under this Section 11
shall take into account that adjustments which constitute a "modification"
within the meaning of Section 424(h)(3) of the Code may have an adverse tax
impact on such Incentive Stock Options and the Committee may, in its sole
discretion, provide for a different adjustment or no adjustment in order to
preserve the tax effects of Incentive Stock Options. Unless otherwise determined
by the Committee, in its sole discretion, any adjustments or substitutions under
this Section 11 shall be made in a manner which does not adversely affect the
exemption provided pursuant to Rule 16b-3 under the Exchange Act. Further, with
respect to Awards intended to qualify as "performance-based compensation" under
Section 162(m) of the Code, such adjustments or substitutions shall, unless
otherwise determined by the Committee in its sole discretion, be made only to
the extent that the Committee determines that such adjustments or substitutions
may be made without a loss of deductibility for such Awards under Section 162(m)
of the Code. The Company shall give each Participant notice of an adjustment
hereunder and, upon notice, such adjustment shall be conclusive and binding for
all purposes.
Notwithstanding the above, in the event of any of the following:
A. The Company is merged or consolidated with another
corporation or entity;
B. All or substantially all of the assets of the
Company or the Common Stock are acquired by another person or
entity;
C. The reorganization or liquidation of the Company;
or
D. The Company shall enter into a written agreement
to undergo an event described in clauses A, B or C above,
then the Committee may, in its discretion and upon at least 10 day's advance
notice to the affected persons, cancel any outstanding Awards and pay to the
Holders thereof, in cash or Stock, the value of such Awards based upon the price
per share of Stock received or to be received by other stockholders of the
Company in the event. The terms of this Section 11 may be varied by the
Committee in any particular Award agreement.
15
12. EFFECT OF CHANGE IN CONTROL
Except to the extent reflected in a particular Award agreement:
(a) In the event of a Change in Control, notwithstanding any vesting
schedule with respect to an Award of Options or Restricted Stock, such Option
shall become immediately exercisable with respect to 100% of the shares subject
to such Option, and the Restricted Period shall expire immediately with respect
to 100% of such shares of Restricted Stock.
(b) In the event of a Change in Control, all other Awards shall become
fully vested and or payable to the fullest extent of any Award or portion
thereof that has not then expired and any restrictions with respect thereto
shall expire. The Committee shall have full authority and discretion to
interpret this Section 12 and to implement any course of action with respect to
any Award so as to satisfy the intent of this provision.
(c) The obligations of the Company under the Plan shall be binding upon
any successor corporation or organization resulting from the merger,
consolidation or other reorganization of the Company, or upon any successor
corporation or organization succeeding to substantially all of the assets and
business of the Company.
13. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of this Plan by the Board nor the submission of
this Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under this Plan, and such arrangements
may be either applicable generally or only in specific cases.
14. AMENDMENTS AND TERMINATION
The Board may at any time terminate the Plan. Subject to Section 11,
with the express written consent of an individual Participant, the Board or the
Committee may cancel or reduce or otherwise alter outstanding Awards if, in its
judgment, the tax, accounting, or other effects of the Plan or potential payouts
thereunder would not be in the best interest of the Company. The Board or the
Committee may, at any time, or from time to time, amend or suspend and, if
suspended, reinstate, the Plan in whole or in part; PROVIDED, HOWEVER, that
without further stockholder approval neither the Board nor the Committee shall
make any amendment to the Plan which would:
(a) Materially increase the maximum number of shares of Stock which may
be issued pursuant to Awards, except as provided in Section 11;
(b) Extend the maximum Option Period;
(c) Extend the termination date of the Plan; or
(d) Change the class of persons eligible to receive Awards under the
Plan.
16
* * *
As adopted by the Board of Directors
of P&F Industries, Inc. as of April 18, 2002
By:
--------------------
Title:
-----------------
17
PROXY
P&F INDUSTRIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS
MAY 29, 2002
The undersigned hereby appoints RICHARD A. HOROWITZ and JOSEPH A.
MOLINO, JR., or either one of them, attorney with full power of substitution and
revocation to each, for and in the name of the undersigned, with all powers the
undersigned would possess if personally present, to vote the Class A Common
Stock of the undersigned in P&F Industries, Inc. at the Annual Meeting of
Stockholders to be held at the Huntington Hilton Hotel, 598 Broad Hollow Road,
Melville, New York on Wednesday, May 29, 2002 at 10 a.m. and at any adjournment
thereof, for the following matters.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" PROPOSALS 1, 2 AND 3.
(Continued, and to be signed on reverse side)
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR THE NOMINEES LISTED WITHHOLD AUTHORITY
(EXCEPT AS MARKED TO THE TO VOTE FOR THE NOMINEES
CONTRARY BELOW) LISTED BELOW
/ / / /
NOMINEES: Robert L. Dubofsky
Neil Novikoff
Marc A. Utay
1. Election of three
directors, as set
forth to right, for
a term of three years
(expiring in 2005) and until their
successors are duly elected and qualified.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR
ANY INDIVIDUAL NOMINEE, PRINT THAT NOMINEE'S
NAME ON THE LINE PROVIDED BELOW.
- --------------------------------------------------------
2. Approval of the P&F Industries, Inc. FOR AGAINST ABSTAIN
2002 Stock Incentive Plan / / / / / /
3. Ratification of the selection of auditors. FOR AGAINST ABSTAIN
/ / / / / /
4. In their discretion upon any other matters FOR AGAINST ABSTAIN
which may properly come before the meeting. / / / / / /
THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE.
IMPORTANT - PLEASE VOTE, SIGN AND RETURN THE PROXY AS SOON AS POSSIBLE
SO THAT IT WILL ARRIVE BEFORE THE ANNUAL MEETING ON MAY 29, 2002.
SIGNATURE(S)____________________________________ DATE____________, 2002
NOTE: Please sign as your name(s) appear(s) hereon. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such. If
more than one name shown, including the case of joint tenants, each party should
sign.