<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
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 Section 240.14a-11(c) or Section
240.14a-12
P&F INDUSTRIES
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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:
------------------------------------------------------------------------
<PAGE>
P & F INDUSTRIES, INC.
300 SMITH STREET
FARMINGDALE, NEW YORK 11735
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 28, 1997
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 28, 1997 at 10:00 A.M., for the following purposes:
(1) To elect three directors to hold office for three years;
(2) To approve the Amended and Restated P & F Industries, Inc. 1992
Incentive Stock Option Plan;
(3) To ratify the selection of BDO Seidman, LLP, independent certified
public accountants, as auditors for the fiscal year ending December 31, 1997;
and
(4) To consider and act upon such other business as may properly come before
the 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 28, 1997 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,
LEON D. FELDMAN
SECRETARY
Dated: April 28, 1997
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 28, 1997 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 30, 1997.
As of April 28, 1997, there were 2,978,867 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 28, 1997 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
approval of the Amended and Restated P & F Industries, Inc. 1992 Incentive Stock
Option 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, 1997. 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 at 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 has the same effect as a negative vote. In
instances where nominee recordholders, such as brokers, are prohibited from
exercising discretionary authority for beneficial owners 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.
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 serves for the remaining term of the class in
which the vacancy exists. The Board of Directors presently consists of eight
members, with three members in each of two classes and two members in the third
class.
This year the term of a class consisting of three directors expires.
Management proposes that Messrs. Sidney Horowitz, Arthur Hug, Jr. and Dennis
Kalick, whose terms of office expire in 1997, be re-
1
<PAGE>
elected as directors to serve for terms to expire at the 2000 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 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 is 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 28, 1997.
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
CONTINUOUSLY
NAME AGE SINCE
- -------------------------------------------------------------------------- --- ---------------
<S> <C> <C>
NOMINEES TO SERVE IN OFFICE UNTIL 2000:
Sidney Horowitz........................................................... 76 1962
Arthur Hug, Jr............................................................ 74 1987
Dennis Kalick............................................................. 45 1997
DIRECTORS TO CONTINUE IN OFFICE UNTIL 1998:
Richard A. Horowitz....................................................... 47 1975
Earle K. Moore............................................................ 75 1987
DIRECTORS TO CONTINUE IN OFFICE UNTIL 1999:
Robert L. Dubofsky........................................................ 57 1990
Leon D. Feldman........................................................... 67 1967
Marc A. Utay.............................................................. 37 1992
</TABLE>
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 a partner in the accounting firm of Mindes, Roth and
Weinisch, LLP since 1993. For more than five years prior to 1993, Mr. Kalick was
engaged in the private practice of providing accounting and financial consulting
services.
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.
Earle K. Moore is counsel to, and a former member of, the law firm of Bondy
& Schloss.
2
<PAGE>
Robert L. Dubofsky has been Managing Director of BWD Group Limited (formerly
Blumencranz, Klepper, Wilkins & Dubofsky, Ltd.), an insurance brokerage group,
since April 1992.
Leon D. Feldman has been Treasurer of the Company since 1967, Executive Vice
President of the Company since 1981 and Secretary of the Company since 1986.
Marc A. Utay has been a Managing Director of Wasserstein Perella Co., Inc.,
an investment banking firm, since May 1993. From October 1991 until May 1993,
Mr. Utay was a Managing Director of BT Securities Corporation.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During 1996, 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 each of which are Messrs.
Arthur Hug, Jr., Earle K. Moore and Robert L. Dubofsky. The Audit Committee
recommends the selection of independent auditors to the Board of Directors,
reviews the overall scope and the results of the annual audit and reviews the
overall internal controls of the Company. During 1996, the Audit Committee met
once. The Stock Option Committee administers the Stock Option Plan. During 1996,
the Stock Option Committee did not meet. The Board does not have a nominating or
a compensation committee or a committee performing similar functions.
DIRECTOR COMPENSATION
During 1996, each director who was not an employee of the Company or any of
its subsidiaries received fees of $3,500 plus $1,250 for each meeting of the
Board of Directors or Audit Committee attended. Directors who are also officers
of the Company are not compensated for their duties as directors.
OWNERSHIP OF EQUITY SECURITIES
The following table shows the beneficial ownership of Class A Common Stock
as of April 28, 1997, 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
(the "Exchange Act"), by (i) each director and nominee for director, (ii) each
executive officer listed in the Summary Compensation Table, (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.
3
<PAGE>
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.
<TABLE>
<CAPTION>
AMOUNT
AND NATURE PERCENT
BENEFICIAL OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS
- --------------------------------------------------------------------- ---------- -----------
<S> <C> <C>
Robert L. Dubofsky................................................... 20,000 *
Leon D. Feldman...................................................... 200,000 (2) 6.4
Sidney Horowitz...................................................... 293,875 (3) 9.6
Richard A. Horowitz.................................................. 1,017,800 (4) 32.0
Arthur Hug, Jr....................................................... 1,000 *
Dennis Kalick........................................................ -- --
Earle K. Moore....................................................... -- --
Marc A. Utay......................................................... 70,000(5) 2.3
Steel Partners II L.P................................................ 435,000(6) 14.6
Lawndale Capital Management, LLC..................................... 241,100(7) 8.1
All directors and executive officers as a group (8 persons).......... 1,602,675(8) 46.0
</TABLE>
- ------------------------
* Less than 1%.
(1) The address of Leon D. Feldman and Richard A. Horowitz is in care of the
Company, 300 Smith Street, Farmingdale, New York 11735 and the address of
Sidney Horowitz is 20596 Links Circle, Boca Raton, Florida 33434.
(2) Includes 50,000 shares held by the Feldman Family Living Trust and 150,000
shares issuable upon the exercise of stock options.
(3) 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, as to all of which Sidney Horowitz
disclaims beneficial ownership, and 85,000 shares issuable upon the exercise
of stock options.
(4) Includes 22,400 shares owned by Linda Horowitz, wife of Richard A. Horowitz,
individually and as Trustee for their daughter, and 660,000 shares owned by
Linda Horowitz, individually, as to all of which Richard A. Horowitz
disclaims beneficial ownership. Linda Horowitz has granted to her husband,
Richard A. Horowitz, a ten year irrevocable proxy to vote the 660,000 shares
owned by her. Also includes 200,000 shares issuable upon the exercise of
stock options.
(5) Includes warrants to purchase 70,000 shares.
(6) Information obtained from a Schedule 13D, dated August 13, 1996, filed with
the Securities and Exchange Commission by Steel Partners II, L.P. Steel
Partners II, L.P. has 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.
(7) Information obtained from a Schedule 13D, dated April 15, 1997, 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
Diamond A Partners, L.P. with respect to 205,600 shares and shares voting
and dispositive power with Diamond A Investors, L.P. with respect to 35,500
shares. The address of each of the foregoing entities is One Sansome Street,
Suite 3900, San Francisco California 94104.
(8) Includes 505,000 shares issuable upon the exercise of stock options and
warrants.
4
<PAGE>
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 $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSTION
ANNUAL COMPENSATION AWARDS
------------------------------------------------------ -----------------
OTHER ANNUAL SECURITIES
NAME AND PRINCIPAL FISCAL SALARY BONUS COMPENSATION UNDERLYING
OCCUPATION YEAR ($) ($)(1) ($)(2) OPTIONS/SARS(#)
- ------------------------------------------ ----------- --------- --------- ------------------- -----------------
<S> <C> <C> <C> <C> <C>
Richard A. Horowitz....................... 1996 420,000 275,000 -- --
Chairman of the Board and Chief 1995 385,000 184,000 -- --
Executive Officer 1994 353,100 158,000 -- 250,000
Leon D. Feldman........................... 1996 290,000 150,000 -- --
Executive Vice-President 1995 275,000 100,000 -- --
1994 261,450 86,000 -- --
<CAPTION>
NAME AND PRINCIPAL ALL OTHER
OCCUPATION COMPENSATION($)(3)
- ------------------------------------------ ---------------------
<S> <C>
Richard A. Horowitz....................... 20,799
Chairman of the Board and Chief 20,084
Executive Officer 19,404
Leon D. Feldman........................... 10,800
Executive Vice-President 10,800
10,800
</TABLE>
- ------------------------
(1) The Company has an incentive compensation bonus plan (the "Bonus Plan").
Under the terms of the Bonus Plan, the total bonuses paid to executive
officers may not exceed 15% of the Company's pre-tax, pre-bonus income prior
to any payments under the Bonus Plan. Allocations to the individuals set
forth above are made at the discretion of the Board of Directors. Amounts
are accrued in the year shown above and paid in the following year.
(2) No amounts for executive perquisites and other personal benefits are shown
because the aggregate dollar amount per executive is less than the lesser of
$50,000 or 10% of annual salary and bonus.
(3) The Company maintains a split-dollar life insurance policy on the life of
Mr. Richard Horowitz and paid $949 allocated to the term portion of the
split-dollar coverage for 1996. The actuarial equivalent of the value of the
premium paid by the Company for 1996, 1995 and 1994, based on certain
assumptions regarding interest rates and periods of coverage, was $9,999,
$9,284 and $8,604, respectively. It is anticipated that the Company will
recover the premiums on this policy or the cash surrender value thereof.
For Messrs. Horowitz and Feldman, for each year presented the amounts
include, for Mr. Horowitz, and represent, for Mr. Feldman, $10,800 in
Company contributions to the defined contribution retirement plan (the
"Plan"). The Plan covers all employees who do not receive pension benefits
under a collective bargaining agreement, have been in the employ of the
Company for at least one year and are at least 21 years of age.
Contributions paid by the Company are 5% of the first $40,000 of each
employee's salary and 8% of the balance up to $150,000. Upon leaving the
Company, an employee may receive a lump sum payment of all amounts vested
for him under the Plan, including earnings thereon.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table shows information concerning the exercise of stock
options during 1996 by the executive officers set forth in the Summary
Compensation Table and the fiscal year-end value of unexercised options.
5
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/SAR'S
OPTIONS/SAR'S AT AT FISCAL YEAR END
FISCAL YEAR END (#) ($)
SHARES ------------------- --------------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE # REALIZED($) UNEXERCISABLE UNEXERCISABLE
- -------------------------------------------- ----------------- --------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Richard A. Horowitz......................... -- -- 150,000/100,000 244,687/163,125
Leon D. Feldman............................. -- -- 200,000/0 406,250/0
</TABLE>
EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS
Effective as of September 30, 1993, 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 September 30, 2000, 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 $458,000 for the year ending December 31, 1997. 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). Effective February 28, 1997, the Horowitz Employment
Agreement was amended to extend the term thereof until February 28, 2004.
Effective as of September 30, 1993, the Company entered into an employment
agreement (the "Feldman Employment Agreement") with Leon D. Feldman. The Feldman
Employment Agreement provides for Leon Feldman to serve as Executive Vice
President, Secretary and Treasurer of the Company for a term expiring on
September 30, 1998, unless sooner terminated pursuant to the provisions of the
Feldman Employment Agreement. Pursuant to the Feldman Employment Agreement, Leon
Feldman will receive an annual salary of $306,000 for the year ending December
31, 1997. Mr. Feldman 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 Feldman Employment Agreement) Leon
Feldman will receive his annual salary and all benefits to which he is entitled
under the Feldman 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).
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
1986, the Company established the Bonus Plan for its executive officers that
provides for the payment of a cash bonus not to exceed, in the aggregate, 15% of
the Company's pre-tax, pre-bonus income.
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'
6
<PAGE>
compensation, number of years of employment with the Company and the rate of
inflation. Aggregate increases for 1996 for Richard A. Horowitz and Leon D.
Feldman were 7.6%.
<TABLE>
<S> <C>
MEMBERS OF THE BOARD OF DIRECTORS
ROBERT DUBOFSKY ARTHUR HUG, JR.
LEON D. FELDMAN DENNIS KALICK
RICHARD A. HOROWITZ (Chairman) EARLE K. MOORE
SIDNEY HOROWITZ MARC A. UTAY
</TABLE>
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 for the fiscal year ended December
31, 1991. Such composite group was used because the Company 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 January 1,
1992 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>
P&F INDUSTRIES, INC. NASDAQ PEER GROUP
<S> <C> <C> <C>
12-31-91 100 100 100
12-31-92 71 117 144
12-31-93 100 135 158
12-31-94 121 132 108
12-31-95 136 186 133
12-31-96 207 229 183
</TABLE>
APPROVAL OF THE AMENDED AND RESTATED P & F INDUSTRIES, INC.
1992 INCENTIVE STOCK OPTION PLAN
Effective April 9, 1992, the Company adopted the P & F Industries, Inc. 1992
Incentive Stock Option Plan (the "Stock Option Plan"), and on March 13, 1997,
the Company amended and restated the Stock Option Plan (the "Amended Stock
Option Plan"). The Amended Stock Option Plan is being submitted for approval by
the Company's stockholders. The Amended Stock Option Plan provides for the grant
of Non-Qualified Stock Options (as defined below) in addition to the
tax-qualified Incentive Stock Options currently available under the Stock Option
Plan, allows for the discretionary grant of Non-Qualified Stock
7
<PAGE>
Options to members of the Board of Directors, and is intended to comply with
certain safe harbor provisions under Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code").
The following summary of the Amended Stock Option Plan is qualified in its
entirety by reference to the text of the Amended Stock Option Plan, a copy of
which has been filed with the Securities and Exchange Commission.
SUMMARY OF THE AMENDED STOCK OPTION PLAN
PURPOSE AND ELIGIBILITY
The primary purpose of the Amended Stock Option Plan is to induce directors,
key executives and other key employees to remain in the service of the Company,
to attract new directors and employees and to encourage such directors and
employees to acquire stock ownership in the Company. The Amended Stock Option
Plan contemplates the issuance of options that qualify as incentive stock
options under Section 422 of the Code ("Incentive Stock Options") as well as
options that do not qualify as incentive stock options under Section 422 of the
Code ("Non-Qualified Stock Options") (collectively, "Options"). Options may be
granted only to employees who hold positions of responsibility, are able to
contribute significantly to the Company's success and progress and are
determined to be key employees ("Employees") and to directors who are not also
Employees (collectively, "Eligible Persons"). However, Incentive Stock Options
may only be granted to Employees. At present, the approximate number of Eligible
Persons is 60.
The aggregate number of shares of Class A Common Stock with respect to which
Options may be granted under the Amended Stock Option Plan is 1,100,000. The
aggregate number of shares of Class A Common Stock with respect to which Options
may be granted to any Eligible Person in any single calendar year is 250,000. As
of the date of this Proxy Statement, approximately 648,700 shares of Class A
Common Stock remain available for issuance under the Amended Stock Option Plan
and approximately 401,300 shares of Class A Common Stock remain subject to
outstanding Options under the Amended Stock Option Plan.
ADMINISTRATION
The Amended Stock Option Plan is administered by a stock option committee
(the "Committee") consisting of not less than two directors who are neither
employees nor officers of the Company. The members of the Committee must be both
"non-employee directors" for purposes of Rule 16b-3 under the Exchange Act and
"outside directors" for purposes of Section 162(m) of the Code. The members of
the Committee are appointed by the Board of Directors and serve at the pleasure
of the Board of Directors. The Committee, in its sole discretion, has the
authority, among other things: to determine the terms and provisions of the
Options granted under the Amended Stock Option Plan, including such terms and
provisions as shall be required to provide that options intended to be Incentive
Stock Options will be so qualified under the Code; to determine the Eligible
Persons to whom Options will be granted ("Participants") and the time or times
at which grants will be made and become exercisable and forfeitable; to
determine the number of shares covered by an Option; to interpret the Amended
Stock Option Plan; and to make all other determinations deemed advisable for the
administration of the Amended Stock Option Plan. All determinations and
interpretations made by the Committee are final, binding and conclusive on all
Participants and on their legal representatives and beneficiaries. Pursuant to
the Amended Stock Option Plan, the Company will indemnify each member of the
Committee against all costs and expenses reasonably incurred by such member in
connection with any action, suit or proceeding to which such member may be a
party by reason of any action taken under the Amended Stock Option Plan, and
against all amounts paid by such member in satisfaction of a judgment in any
action, except a judgment based upon a finding of bad faith.
TERMS AND CONDITIONS OF OPTIONS
The purchase price of the shares of Class A Common Stock covered by Options
is determined by the Committee. In no event, however, will the purchase price of
the shares of Class A Common Stock covered
8
<PAGE>
by an Incentive Stock Option be less than 100% of the fair market value of each
share on the date of grant. The purchase price of the shares subject to an
Incentive Stock Option granted to an Employee who owns immediately after such
Option is granted ten percent (10%) or more of either the outstanding voting
shares of the Company or the value of all classes of stock of the Company ("10%
Shareholder") as defined in Sections 422 and 424 of the Code will not be less
than 110% of the fair market value of such shares at the time the Incentive
Stock Option is granted. The purchase price of the shares as to which an Option
shall be exercised must be paid in full: (i) in cash, (ii) in shares of Class A
Common Stock held by a Participant for at least six months at the time of
exercise, or (iii) by some other means as determined by the Committee. An Option
may be fully exercisable at the time of grant or may become exercisable during
the term of the Option, as determined by the Committee. The term of each Option
cannot exceed ten years from the date of grant. However, any Incentive Stock
Option granted to a 10% Shareholder cannot be exercisable after the expiration
of five years from the date the Incentive Stock Option is first granted. To the
extent the aggregate fair market value, determined as of the time the Incentive
Stock Option is granted, of the shares of Class A Common Stock subject to such
Incentive Stock Option which may become exercisable for the first time by any
Employee during any calendar year exceeds $100,000, such excess shall be treated
as a Non-Qualified Stock Option.
TERMINATION OF EMPLOYMENT
Unless otherwise determined by the Committee, if a Participant ceases to be
either an employee or director of the Company for any reason other than death or
disability, his Option shall terminate three months after the date he ceases to
be an employee or director, unless by its terms it expires sooner. Unless
otherwise determined by the Committee, if a Participant dies or becomes disabled
(as acknowledged by the Committee) while he is an employee or director of the
Company, his Option will terminate one year from the date of his death or
disability, unless by its term it expires sooner. Unless otherwise determined by
the Committee, during the three month period after a Participant ceases to be
either an employee or director or during the period after his death or
disability, all vesting with respect to his Option will cease and his Option may
be exercised only as to shares which he could have purchased at the time of such
cessation or at the time of his death or disability, as applicable.
ADJUSTMENT FOR RECAPITALIZATION, MERGER, ETC.
If any change is made to the shares of Class A Common Stock by reason of any
combination, subdivision, recapitalization, disposition, acquisition or merger,
a Participant will be entitled to purchase the securities exchangeable for the
securities purchasable under his Option with the purchase price per share or
other unit of securities proportionately adjusted. In the event of any other
material change in the capital structure of the Company, the Board of Directors
may make an equitable or proportionate adjustment of the terms of any Option,
and its decision thereon will be final, binding and conclusive.
TERMINATION OR AMENDMENT
The Board of Directors may terminate the Amended Stock Option Plan at any
time, provided that any Option outstanding under the Amended Stock Option Plan
at the time of the termination will remain in effect until such Option is
exercised or expires in accordance with its terms. Unless previously terminated,
the Amended Stock Option Plan will terminate on April 8, 2002. The Board of
Directors may at any time amend the Amended Stock Option Plan as it deems
advisable, to the extent permitted by law. However, no such action may, without
approval of a majority of the stockholders of the Company present in person or
by proxy at any special or annual meeting of stockholders, increase the number
of shares as to which Options may be granted under the Amended Stock Option
Plan, increase the number of shares with respect to which Options may be granted
in any single calendar year to any Eligible Person, or change the class of
persons eligible to receive Incentive Stock Options under the Amended Stock
Option Plan. No termination or amendment of the Amended Stock Option Plan shall
deprive a Participant of his rights under outstanding Options, without his
consent.
9
<PAGE>
OTHER IMPORTANT TERMS OF THE AMENDED STOCK OPTION PLAN
Pursuant to the Amended Stock Option Plan, no Option shall be assignable or
transferable except by will or the laws of descent and distribution and, during
the lifetime of a Participant, his Option may only be exercisable by him. In
addition, a Participant has no rights as a stockholder with respect to any
securities covered by an Option until such Option has been validly exercised.
Each Option granted under the Amended Stock Option Plan will be evidenced by an
agreement between the Company and the Participant which will set forth the
number of shares of Class A Common Stock subject to the Option. No Option may be
exercised and no shares of Class A Common Stock may be delivered to a
Participant under the Amended Stock Option Plan unless and until, in the opinion
of counsel for the Company, any applicable requirement of the Securities Act of
1933, as amended, any applicable state securities law, and any national
securities exchange on which Class A Common Stock is then listed, or other laws
or rules have been fully complied with.
WITHHOLDING OF TAXES
The Company, in its discretion, may require that a Participant pay to the
Company, at the time of exercise, such amount as the Company deems necessary to
satisfy its obligations to withhold federal, state, or local income or other
taxes incurred by reason of the exercise of an Option or the transfer of shares
thereupon. Procedures and permissible methods for satisfying withholding
obligations may be set forth in option agreements between the Company and a
Participant, and/or in tax withholding procedures adopted by the Committee. The
obligations of the Company under the Amended Stock Option Plan are conditional
on a Participant's compliance with withholding requirements. The Company, to the
extent permitted by law, will have the right to deduct any such taxes from any
payment otherwise due to the Participant.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief discussion of the Federal income tax consequences
of transactions under the Amended Stock Option Plan based on the Code, as in
effect as of the date hereof. This discussion is not intended to be exhaustive
and does not describe state or local tax consequences.
INCENTIVE STOCK OPTIONS. No taxable income is realized by the Participant
upon the grant or exercise of an Incentive Stock Option. If Class A Common Stock
is issued to a Participant pursuant to the exercise of an Incentive Stock
Option, and if no disqualifying disposition of such shares is made by such
Participant within two years after the date of grant or within one year after
the transfer of such shares to such Participant, then (1) upon sale of such
shares, any amount realized in excess of the exercise price will be taxed to
such Participant 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
Participant's employer for Federal income tax purposes.
If the Class A Common Stock acquired upon the exercise of an Incentive Stock
Option is disposed of prior to the expiration of either holding period described
above, generally (1) the Participant 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 exercise price paid for such shares, and (2) the
Participant's employer 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 Participant will be taxed as
short-term or long-term capital gain (or loss), as the case may be, and will not
result in any deduction by the employer.
NON-QUALIFIED STOCK OPTIONS. Except as noted below, with respect to
Non-Qualified Stock Options, (1) no income is realized by the Participant at the
time the Non-Qualified Stock Option is granted; (2) generally, at exercise,
ordinary income is realized by the Participant in an amount equal to the
difference between the exercise price paid for the shares and the fair market
value of the shares, if unrestricted, on the date of exercise, and the
Participant's employer is generally entitled to a tax deduction in the same
amount subject to applicable tax withholding requirements; and (3) at sale,
appreciation (or
10
<PAGE>
depreciation) after the date as of which amounts are includable in income is
treated as either short-term or long-term capital gain (or loss) depending on
how long the shares have been held.
NEW PLAN BENEFITS
Inasmuch as Options to all Participants under the Amended Stock Option Plan
will be granted at the sole discretion of the Committee, such benefits under the
Amended Stock Option Plan are not determinable. Compensation paid and other
benefits granted in respect of the 1996 fiscal year to the named executive
officers are set forth in the Summary Compensation Table on page 5. Certain
Options which have been granted to directors subject to stockholder approval of
the Amended Stock Option Plan are shown in the table below.
Amended and Restated P & F Industries, Inc. 1992 Incentive Stock Option Plan
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE ($)* NUMBER OF UNITS
- ---------------------------------------------------------- --------------------- ---------------
<S> <C> <C>
Non-Executive Director Group.............................. -- 12,000
</TABLE>
- ------------------------
* On March 13, 1997, Messrs. Sidney Horowitz, Arthur Hug, Jr., Dennis Kalick,
Earle K. Moore, Robert L. Dubofsky and Marc A. Utay each received a
Non-Qualified Stock Option to purchase 2,000 shares of Class A Common Stock
at a purchase price of $5.25, per share, the fair market value of the Class
A Common Stock on the date of grant. These grants are subject to stockholder
approval of the Amended Stock Option Plan. The dollar value of the Options
is based on the potential increase in the value of the Class A Common Stock
and is not readily determinable.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
APPROVAL OF THE AMENDED STOCK OPTION 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, 1996.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
In October 1992, the Company made an unsecured loan to Mr. Richard A.
Horowitz, evidenced by a promissory note (the "Note") in the amount of $125,000,
for the purchase by Mr. Horowitz of Class A Common Stock from an unaffiliated
third party. The Note was payable on demand with interest at the annual rate
charged by the Company's lender at the time the Note was issued. The $40,000
outstanding balance on the Note was repaid on March 17, 1977.
The Company and Sidney Horowitz are parties to a Consulting Agreement, which
will terminate on October 31, 1998, pursuant to which Mr. Horowitz receives
$200,000 in annual consulting fees.
11
<PAGE>
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 consolidated financial statements for the
1997 fiscal year, and the Board 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.
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 AND NOMINATIONS FOR DIRECTOR
Stockholder proposals intended for inclusion in the proxy material for the
1998 Annual Meeting of Stockholders, and nominations for directors to be elected
at the 1997 Annual Meeting of Stockholders, each must be received by the
Secretary of the Company at the Company's offices at 300 Smith Street,
Farmingdale, New York 11735 not prior to October 30, 1997 and not later than
December 29, 1997 in order for such proposals and nominations to be included in
the proxy materials for the 1998 Annual Meeting of Stockholders. Any stockholder
interested in making a proposal or nominating a director is referred to the
Company's By-laws.
ADDITIONAL INFORMATION AND OTHER MATTERS
A copy of the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 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 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,
LEON D. FELDMAN
SECRETARY
Date: April 28, 1997
12
<PAGE>
PROXY
P&F INDUSTRIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Annual Meeting of Stockholders
May 28, 1997
The undersigned hereby appoints RICHARD A. HOROWITZ and LEON D. FELDMAN,
or any 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 28, 1997 at 10:00 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)
<PAGE>
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
P & F INDUSTRIES, INC.
May 28, 1997
/ / Please mark your votes as
in this example.
FOR all nominees WITHHOLD AUTHORITY
listed (except as to vote for all
marked to the nominees listed at
contrary below.) right.
1. Election of three / / / /
directors, as set
forth to right, for
a term of three
years (expiring in
2000) and until
their successors are
duly elected and
qualified.
NOMINEES:
Sidney Horowitz
Arthur Hug, Jr.
Dennis Kalick
INSTRUCTION: To withhold authority to vote for any individual nominee, print
that nominee's name on the line provided below.
- --------------------------------------------------
For Against Abstain
2. Approval of the
Amended and Restated
P&F Industries, Inc.
1992 Incentive Stock
Option Plan. / / / / / /
3. Ratification of the
selection of
auditors. / / / / / /
4. In their discretion upon any other matters which may properly come before
the meeting.
This proxy will be voted as specified above.
Important - Please vote, sign and return this proxy as soon as possible,
so that it will arrive before the Annual Meeting on May 28, 1997.
<PAGE>
EX-??
P&F INDUSTRIES, INC.
1992 INCENTIVE STOCK OPTION PLAN
(Amended and Restated as of March 13, 1997)
1. PURPOSE.
The purpose of the P&F Industries, Inc. 1992 Incentive Stock Option Plan
(the "Plan) is to induce directors, key executives and other key employees to
remain in the service of P&F Industries, Inc. (the "Company"), to attract new
directors and employees and to encourage such directors and employees to acquire
stock ownership in the Company. The Board of Directors of the Company (the
"Board") believes that the granting of stock options ("Options") under the Plan
will promote continuity of the Board and management and increased incentive and
personal interest in the welfare of the Company by those who are or may become
primarily responsible for shaping and carrying out the long range plans of the
Company and securing its continued growth and financial success. It is intended
that certain Options granted hereunder will qualify as "incentive stock options"
under Section 422 of the Internal Revenue Code of 1986, as amended (the
<PAGE>
"Code") ("Incentive Stock Options") while other Options will not be so qualified
("Nonqualified Stock Options").
2. EFFECTIVE DATE OF THE PLAN.
The effective date of the Plan, as amended and restated, is March 13, 1997,
the date on which the Plan was amended and restated by the Board, but the Plan
is subject to approval by the holders of a majority of the outstanding shares of
common stock of the Company participating in the vote. If by no later than
March 12, 1998 the Plan is not so approved, then the Plan shall continue as it
existed prior to the amendment and restatement and all Options granted hereunder
shall be pursuant to the terms of the Plan as it existed prior to the amendment
and restatement.
3. STOCK SUBJECT TO PLAN.
Subject to adjustment as provided in Section 12 hereof, the number of
shares of the common stock, $1.00 par value, of the Company (the "Common Stock")
available for delivery upon the exercise of Options under the Plan shall not
exceed 1,100,000 shares of Common Stock, which are hereby reserved for issuance
upon exercise of Options. The shares of Common Stock to be delivered upon
exercise of Options may be authorized and unissued shares or treasury shares.
If any Options expire or terminate for any reason without having been exercised
in full,
-2-
<PAGE>
the unissued shares subject thereto shall again become available for the
purposes of the Plan.
4. ADMINISTRATION.
(a) The Plan shall be administered by a stock option committee (the
"Committee") consisting of not less than two members of the Board, each of whom,
at the time action is taken with respect to the Plan, shall be a "non-employee
director" within the meaning of Rule 16b-3 of the Securities Exchange Act of
1934, as amended, and an "outside director" within the meaning of Section 162(m)
of the Code. The members of the Committee shall be appointed by the Board and
shall serve at the pleasure of the Board.
(b) The Committee shall have the authority in its discretion (i) to
construe and interpret the Plan and all Options granted thereunder, and to
determine the terms and provisions (and amendments thereof) of the Options
granted under the Plan (which need not be identical), including such terms and
provisions of (and amendments) as shall be required in the judgment of the
Committee to provide that Options intended to be Incentive Stock Options under
the Plan will be so qualified under the Code as it now exists or may from time
to time be amended and/or superseded or to conform to any change in any law or
-3-
<PAGE>
regulations applicable thereto; (ii) to define the terms used in the Plan and in
the Options granted thereunder; (iii) to prescribe, amend and rescind rules and
regulations relating to the Plan; (iv) to determine the individuals to whom and
the time or times at which Options shall be granted, the number of shares to be
subject to each Option, the vesting schedule, the term of each Option, and the
option price, taking into consideration any requirements of the Code applicable
to Incentive Stock Options; and (v) to make all other determinations necessary
or advisable for the administration of the Plan. All determinations and
interpretations made by the Committee shall be final, binding and conclusive on
all participants in the Plan and on their legal representatives and
beneficiaries.
(c) Any action of the Committee with respect to the Plan shall be taken by
majority vote at a meeting of the Committee or by written consent of a majority
of the members of the Committee without a meeting.
5. SELECTION OF GRANTEES.
(a) Options may be granted only to employees (which term as used herein
includes officers) who hold positions of responsibility, are able to contribute
significantly to the Company's success and progress and are determined to be key
-4-
<PAGE>
employees ("Employees"), and to directors of the Company who are not also
Employees ("Eligible Persons"); provided, however, that Incentive Stock Options
may only be granted to Employees. In determining the Eligible Persons to whom
Options shall be granted and the number of shares to be covered by any such
Options, the Committee may take into account the nature of the services rendered
by the proposed optionees, their present and potential contributions to the
success of the Company and such other factors as the Committee in its discretion
shall deem relevant; provided, however, that no Eligible Person may receive
Options with respect to more than 250,000 shares of Common Stock in any single
calendar year.
(b) Incentive Stock Options may be granted hereunder to an Employee who
owns immediately after such option is granted ten (10%) percent or more of
either the outstanding voting shares of the Company or the value of all classes
of stock of the Company ("10% Shareholder") as defined in Sections 422 and 424
of the Code, only in accordance with the provisions of Sections 6(a) and 7
hereof. For purposes of this Plan, an Employee will be considered as owning the
stock in accordance with Section 424 of the Code.
-5-
<PAGE>
6. OPTION PRICE.
(a) The purchase price of the shares covered by each Option shall be
determined by the Committee, but, with respect to Incentive Stock Options, shall
not be less than 100% of the fair market value of such shares at the time of
granting the Option. The purchase price of the shares under Incentive Stock
Options granted pursuant to the Plan to a 10% Shareholder shall not be less than
110% of the fair market value of such shares at the time the Option is granted.
(b) The purchase price of the shares as to which an Option shall be
exercised shall be paid in full in cash, or shares of Common Stock held by an
Option holder for at least six months at the time of exercise, or by such other
means as shall be determined by the Committee.
7. TERM OF OPTIONS.
An Option may provide for exercise in full at any time or from time to time
during the term of the Option, or in installments at such times as the Committee
may determine. The term of each Option shall be not more than 10 years form the
date of grant. Notwithstanding the above, any Incentive Stock Option granted
pursuant to the Plan to a 10% Shareholder shall not be exercisable after the
expiration of 5 years from the date the Incentive Stock Option is first granted.
-6-
<PAGE>
8. $100,000 LIMITATION ON EXERCISE OF INCENTIVE STOCK OPTIONS.
To the extent the aggregate fair market value per share (determined as
of the time the Option is granted) with respect to which any Options granted
hereunder which are intended to be Incentive Stock Options may be exercisable
for the first time by the Option holder in any calendar year (under this Plan or
any other stock option plan of the Company or any parent or subsidiary thereof)
exceeds $100,000, the excess of such Options shall not be considered Incentive
Stock Options but rather shall be Nonqualified Stock Options.
9. NON-TRANSFERABILITY OF OPTIONS.
No Option granted under the Plan shall be transferable or assignable
otherwise than by will or the laws of descent and distribution and an Option may
be exercised, during the lifetime of the holder thereof, only by him.
-7-
<PAGE>
10. TERMINATION OF EMPLOYMENT.
Unless otherwise determined by the Committee, if a holder of an Option
ceases to be either an employee or a director of the Company for any reason
other than death or disability, his Option shall terminate three months after
the date he ceases to be an employee or director, unless by its terms it expires
sooner. Unless otherwise determined by the Committee, during the three month
period after an Option holder ceases to be either an employee or a director, all
vesting with respect to his Options shall cease and his Options may be exercised
only as to shares which he could have purchased at the time of such cessation
and no more.
11. DEATH OR DISABILITY OF OPTION HOLDER.
Unless otherwise determined by the Committee, if a holder of an Option
shall die or become disabled (as acknowledged by the Committee) while he is an
employee or a director of the Company, his Option shall terminate one year from
the date of his death or disability, unless by its terms it expires sooner.
Unless otherwise determined by the Committee, during the period after his death
or disability, all vesting with respect to his Options shall cease and his
Options may be exercised only as to shares which he could have purchased at the
time of his death or disability and no more.
-8-
<PAGE>
12. ADJUSTMENTS.
In the event of (a) a combination or subdivision of shares purchasable
under any Option, (b) other recapitalization affecting such shares, or (c) an
exchange of such shares for other securities in any plan of disposition,
acquisition or merger, a holder of an Option shall be entitled to purchase the
securities exchangeable for the securities theretofore purchasable under his
Option with the purchase price per share or other unit of securities
proportionately adjusted. In the event of any other material change in the
capital structure of the Company, the Board may make an equitable and
proportionate adjustment of the terms of any Option, and its decision thereon
shall be final, binding and conclusive.
-9-
<PAGE>
13. AMENDMENT OF PLAN.
The Board may at any time make such amendments to the Plan as it shall deem
advisable; PROVIDED, HOWEVER, that the Board may not without further approval of
the holders of a majority of the shares of the Common Stock present in person or
by proxy at any special or annual meeting of stockholders, increase the number
of shares as to which Options may be granted under the Plan (as adjusted in
accordance with the provisions of Section 12 hereof), increase the maximum
number of shares with respect to which Options may be granted in any single
calendar year to any Eligible Person, or change the class of persons eligible to
receive Incentive Stock Options under the Plan. Except as otherwise provided in
Section 14 hereof, no termination or amendment of the Plan may, without the
consent of the participant to whom any Option shall theretofore have been
granted, adversely affect the rights of such participant under such Option.
14. EXPIRATION AND TERMINATION OF THE PLAN.
The Board may at any time terminate the Plan; PROVIDED, HOWEVER, any Option
outstanding under the Plan at the time of termination of the Plan shall remain
in effect until such Option shall have been exercised or shall have expired in
accordance with its terms. Options may be granted under the Plan at any
-10-
<PAGE>
time and from time to time prior to its termination. Unless previously
terminated, the Plan shall terminate on April 8, 2002.
15. PRIVILEGES OF STOCK OWNERSHIP.
No person entitled to exercise any Option granted under the Plan shall have
any of the rights or privileges of a stockholder of the Company in respect of
any shares issuable upon exercise of such Option until such Option shall have
been validly exercised.
16. REGISTRATION REQUIREMENTS.
All Options shall include such provisions as are necessary or advisable in
the opinion of counsel for the Company to comply with the requirements of the
Securities Act of 1933, as amended. No shares shall be issued and delivered
upon exercise of any Option unless and until, in the opinion of counsel for the
Company, any applicable requirements of the Securities Act of 1933, any national
securities exchange on which stock of the Company is then listed, or other laws
or rules have been fully complied with.
17. INDEMNIFICATION OF COMMITTEE.
In addition to such other rights of indemnification as they may have as
members of the Board or as members of the Committee, the Company shall indemnify
each member of the
-11-
<PAGE>
Committee against all costs and expenses reasonably incurred by such member in
connection with any action, suit or proceeding to which such member may be party
by reason of any action taken or failure to act under or in connection with the
Plan or any award made under the Plan, and against all amounts paid by such
member in satisfaction of a judgment in any action, except a judgment based upon
a finding of bad faith.
* * * * * *
As adopted by the Board of Directors
of P&F Industries, Inc. on April 9, 1992
and amended and restated as of March 13, 1997
-12-
