Letter1

Andrew Shapiro 
President 
 
January 8, 2013 
By e-mail 
 
Mitch Solomon 
Lead Independent Director  
P&F Industries 
 
Dear Mitch: 
 
I hope you had an enjoyable holiday. 
 
Lawndale Capital Management, LLC, through the funds it manages, has added to its investment in P&F 
Industries, Inc. (“P&F” or the “Company”), increasing its ownership to 9.99% of the Company, making 
Lawndale and its affiliates (“Lawndale”) P&F’s largest independent shareowner.   This letter is to follow up and 
move forward upon our September 2012 dialogue with respect to Lawndale’s continuing concerns with respect 
to P&F’s Board composition and corporate governance practices as well as the company’s senior executive 
compensation programs and policies.   
 
We acknowledge that P&F’s stock price has increased meaningfully over the past year, stemming from an 
economic rebound in markets the Company serves.  However, P&F’s share price and Enterprise Value remain at 
sizable discounted valuation multiples to Revenues, EBITDA, Earnings as well as Book Value.  This “discount” 
should communicate to you and the Board that the investment community continues to penalize P&F’s valuation 
for corporate governance structures and executive compensation practices still too weak to appropriately protect 
shareholders from de-facto Horowitz family-control. 
 
Like the market’s, our concerns about P&F’s corporate governance and compensation practices remain high. In 
particular, we remain resolute that P&F needs to:  
 
• Further improve its Board composition via the retirement of certain conflicted and very long-term legacy 
directors; 
 
• Further implement best governance practices [e.g. Declassifying staggered board terms; establishing 
director stockownership requirements, consider term limits; eliminate the Shareholder Rights 
Plan/”Poison Pill”; Separate Board Chairmanship from CEO position, etc.] 
 
• Further improve Compensation Policy practices [e.g. shorten duration of options grants; establish true 
“reach” performance thresholds for restricted stock grants and other incentive bonus compensation taking 
into account cyclical nature of P&F’s targeted market, etc.];  
 
Our previous communications to this Board (found at <<http://www.issgovernance.com/files/Comment-2011-
13.pdf>>) exposed the inordinate amount of Board members personally connected to P&F Chairman/CEO 
Richard Horowitz via membership and Board/Committee roles at the Glen Oaks Country Club.  As you should 
know, the class of P&F directors whose 3-year term is maturing at this upcoming May 2013 Annual Meeting 
includes both Mr. Robert Dubofsky and Mr. Alan Goldberg, who have served on P&F’s Board since 1990 and 
P&F Lead Independent Director 
January, 8 2013 
 
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591 Redwood Highway, Suite 2345, Mill Valley, California 94941 
(415) 389-8258 Fax (415) 389-0180 • E-mail: [email protected] 
1998, respectively.  These gentlemen are both Horowitz’ “pals” from the Glen Oaks Country Club, who, until a 
few years ago, served on the P&F’s Compensation Committee.   
 
Perhaps it is due to this Compensation Committee work over the years that, despite Mr. Dubofsky’s 23 years on 
P&F’s board during long periods of undervaluation, he last purchased PFIN shares over 5 years ago.  
Remarkably, after Mr. Goldberg’s 15 years on the board, he only owns 966 shares, including 666 restricted 
shares recently granted to directors.  
 
We note that both Directors Dubofsky and Goldberg received a huge 30% “withhold” vote at their last re-
election in 2010.  30% voting “Withhold” is a remarkable tally when considering Mr. Horowitz, Board 
members, other affiliated entities and insider family members held upwards of 35% of all of P&F’s shares and 
Lawndale did not solicit other shareholder proxies in 2010.  
 
It is imperative for P&F to elect highly qualified and engaged directors whose interests and actions are aligned 
with shareholders and who are free of conflicts under both the letter and spirit of listing regulations.  In the past, 
Lawndale has provided your Governance/Nominating Committee with the names and background information of 
highly qualified independent director candidates that P&F would be lucky to have serve on its board.   In our 
opinion, the individuals we have nominated for your Board in the past, and are prepared to directly nominate for 
this May 2013 election, are far superior candidates for P&F’s Board than Directors Dubofsky and Goldberg.  
Should you choose to re-nominate these legacy directors for another 3-year term, we feel P&F’s other 
shareholders would see the obvious advantage of electing our nominees over your legacy directors 
 
It is not Lawndale’s goal or purpose to mount a distracting and costly proxy fight, forcing alternative directors 
onto your Board.  Such a campaign can be avoided with the Board’s formal commitment to a roadmap with 
measurable milestones showing continued progress toward further improved board composition and 
implementation of additional best practices in corporate governance and executive compensation.  
 
However, P&F’s special advance notice by-law deadline for shareholders to submit alternative director 
nominations is rapidly approaching.  This nomination deadline causes the need for our concerns to be formally 
addressed by the P&F Board sooner, rather than later.  Unless, P&F is prepared to formally waive its advance 
notice requirements for board nominations, Lawndale needs to know what actions will be taken toward 
addressing our concerns before the nomination deadline is upon us.  While it is our goal to dialogue over these 
issues privately, in light of the possibility of our nominating an alternative slate of directors and mounting a 
proxy contest, as a 13D filer, we are compelled to disclose this communication in an amendment to our 13D 
filing in the coming days. 
 
We believe it is in the best interests of P&F’s shareowners for you to work together with us to expeditiously 
improve the Board’s composition and the Company’s corporate governance and executive compensation 
practices.  I would appreciate you and/or Governance Committee Chair, Howard Brownstein, contact me at the 
earliest opportunity to move forward addressing the concerns we have previously discussed and outlined, above.

Sincerely, 
 
 
 
Andrew Shapiro 
President