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EXHIBIT 10.04

THIRD AMENDMENT, dated as of November 12, 2009 (this “Amendment”), to and under
CREDIT AND SECURITY AGREEMENT, dated as of July 28, 2004 (as amended from time
to time, the “Credit Agreement”), among THE RAL SUPPLY GROUP, INC., a New York
corporation (both in its original capacity as a party thereto and as
successor-by-merger to American/Universal Supply, Inc., a New York corporation),
UNIVERSAL SUPPLY GROUP, INC., a New York corporation, and S&A SUPPLY, INC.
(formerly known as S&A Purchasing Corp.), a New York corporation (collectively,
the “Borrowers”) and WELLS FARGO BANK, NATIONAL ASSOCIATION, acting through its
Wells Fargo Business Credit operating division, as successor to Wells Fargo
Business Credit, Inc. (the “Lender”).  Terms which are capitalized in this
Amendment and not otherwise defined shall have the meanings ascribed to such
terms in the Credit Agreement.

WHEREAS, Borrowers and Colonial have made in favor of Lender that certain
Guaranty By Corporations, dated as of July 28, 2004 (as amended, modified,
supplemented or restated from time to time, the “Guaranty”);

WHEREAS, based on the financial statements of Colonial and its consolidated
Subsidiaries delivered to Lender pursuant to Section 6.1 of the Credit
Agreement, and as acknowledged by Borrowers in the most recent Compliance
Certificate delivered to Lender pursuant to Section 6.1 of the Credit Agreement,
Borrowers have failed to comply with certain of the financial covenants under
the Credit Agreement as follows:  (i) as of September 30, 2009, Borrowers have
failed to maintain the minimum Tangible Net Worth required pursuant to Section
7.18 of the Credit Agreement, (ii) for the fiscal quarter ended as of September
30, 2009, Borrowers have failed to maintain the minimum quarterly Net Income
required pursuant to Section 7.19 of the Credit Agreement and (iii) for the
fiscal quarter ended as of September 30, 2009, Borrowers have failed to maintain
the minimum quarterly Net Cash Flow required pursuant to Section 7.20 of the
Credit Agreement.  These failures of the Borrowers to comply with these
specified covenants under the Credit Agreement constitute Events of Default
under Section 8.1(c) of the Credit Agreement (the “Designated Events of
Default”).

WHEREAS, on October 29, 2009, Lender sent a formal notice of default and
reservation of rights letter (the “Default Notice”) to Borrowers and also to
certain “Subordinated Creditors” (as defined therein) who are party to certain
respective Subordination Agreements with Lender relating to certain “Junior
Indebtedness” (as defined therein) owing to such Subordinated Creditors.  Under
the Default Notice, inter alia, Lender gave notice to the Subordinated Creditors
that the Designated Events of Default also constituted “Payment Blockage Events”
under Section 3 of each of the respective Subordination Agreements, and that
Lender was invoking and exercising its rights under Section 3 of each
Subordination Agreement to require that no further payments of all or any
portion of the Junior Indebtedness owing to any Subordinated Creditor, whether
of interest, principal or otherwise, be made by Borrower or Colonial or accepted
by any Subordinated Creditor until such time as the Designated Events of Default
are no longer continuing.

 
 

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WHEREAS, the Borrower has requested that the Lender: (a) waive the Designated
Events of Default, and (b) modify certain other terms of the Credit Agreement,
and the Lender has agreed to the foregoing request, on the terms and conditions
set forth herein.

NOW, THEREFORE, in consideration of the mutual promises contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged by each party hereto, the Borrowers and the Lender
hereby agree as follows:

Section One.  Waivers of Designated Events of Default and Default Interest;
Agreement Regarding Consultant’s Report.

(a)            Acknowledgement of Designated Events of Default.  Borrowers
hereby acknowledge, represent and warrant that, as of the date hereof
immediately prior to the effectiveness of this Amendment, (x) the Designated
Events of Default have occurred, have not been waived and remain outstanding and
continuing under the Credit Agreement and (y) no other Default or Event of
Default has occurred and is continuing which has not been waived by Lender.

(b)            Waiver of Specified Events of Default. Upon the effectiveness of
this Amendment as provided for in Section Five below, Lender hereby waives the
Designated Events of Default as of the date hereof.  Such waiver by Lender of
the Designated Events of Default shall in no way be construed as an agreement to
waive any other Events of Default under the Credit Agreement that may have
occurred prior to the date hereof other than the Designated Events of Default,
nor to waive any Events of Default arising after the date hereof, in either case
whether or not any such existing or future Event of Default is of the same type
and/or arises from the same or similar events or circumstances as the Designated
Events of Default, including without limitation, any other Event of Default
arising from a violation of any financial covenant provided for in the Credit
Agreement as in effect from time to time (any such existing or future Event of
Default other than the Designated Events of Default, an “Excluded
Default”).  Lender reserves all of its rights and remedies under the Credit
Agreement and the other Loan Documents, under applicable law and at equity as to
any such Excluded Default which may exist and/or may hereafter occur.  The
Lender shall have no obligation to grant any waivers with respect to any such
existing or future Excluded Default, and the granting of the waiver of the
Designated Events of Default under this Amendment shall not be construed as a
course of conduct or dealing on the part of the Lender that would obligate or
create any duty on the part of Lender to waive any such Excluded Default.

(c)            Borrowers and Lender acknowledge and agree that (i) pursuant to
the Default Notice, Lender elected to exercise the rights and remedies available
to it under Section 2.7(b) of the Credit Agreement to charge interest at the
Default Rate from and after October 1, 2009 until such time (if any) as Lender
may, in its sole, complete and absolute discretion, notify Borrowers in writing
that Designated Events of Default has been waived and (ii) as of the date
hereof, in accordance with the terms and provisions of the Default Notice,
Borrowers have not yet made any payments in respect of the “Default Interest
Amount” (as defined in the Default Notice).  In consideration of the amendments
to the Credit Agreement and other agreements provided for herein, Lender hereby
agrees to waive its rights to receive and be paid any of the Default Interest
Amount that has accrued through the date hereof.  Lender further acknowledges
that, as a result of the wavier of the Designated Events of Default provided for
herein, the Default Period that commenced upon the occurrence of the Designated
Events of Default has ended and interest shall no longer accrue at the Default
Rate.

 
 

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(d)            As consideration for the waivers of the Designated Events of
Default and Default Interest Amount provided for above, Borrowers hereby
covenant that Borrowers shall cause Phoenix Management Services, Inc., the
consulting firm retained by Borrowers, to deliver to Borrowers and to Lender a
report on Borrower’s business and financial condition, covering such subjects
and providing analysis as to such matters as Lender may require in its sole
discretion, no later than December 15, 2009.  Borrowers further agree and
acknowledge that any failure to fulfill their obligations under this paragraph
shall result in the immediate and automatic occurrence of an Event of Default
under the Credit Agreement.

(e)            Lender hereby acknowledges and agrees that,  as a result of the
wavier of the Designated Events of Default provided for herein, the Payment
Blockage Events under the Subordinated Agreements have ceased to exist and
payments on the Junior Indebtedness may once again be paid by Colonial and
accepted by Subordinated Creditors, in each case as and to the extent expressly
permitted by the terms and conditions of the respective Subordination
Agreements.

Section Two.  Amendments to Credit Agreement.  Effective upon satisfaction of
the conditions precedent set forth in Section Four hereof, the Credit Agreement
is hereby amended as follows:

(i)             Section 1.1.  Definitions.  The following defined terms
contained in Section 1.1 of the Credit Agreement are amended and restated as
follows.  Notwithstanding anything to the contrary provided for herein or in the
Credit Agreement, the parties hereto expressly agree that the changes to the
rates of interest applicable under the Credit Agreement resulting from these
amendments shall be retroactively effective as of October 1, 2009, and that all
interest with respect to the Advances outstanding from time to time from October
1, 2009 through the date hereof shall be calculated at the applicable interest
rates as so calculated.

“Floating Rate” means, with respect to all Floating Rate Advances, an annual
rate equal to the Prime Rate plus one and one-quarter of one percent (1.25%).

(ii)            No LIBOR Option.  Notwithstanding the waiver of the Designated
Events of Default provided in this Amendment, and notwithstanding anything to
the contrary provided for in the Credit Agreement, Borrower hereby agrees that
from and after the effective date of this Amendment, LIBOR Advances shall not be
available either as an initial revolving Advance requested and made pursuant to
Section 2.1 of the Credit Agreement or as the conversion and/or continuation of
an existing  Advance to a LIBOR Advance under  Section 2.21 of the Credit
Agreement.

Section Three.  Amendment Fee.  In consideration for the waivers and amendments
provided herein, the Borrowers shall pay to the Lender a non-refundable fee in
the amount of $60,000 (the “Amendment Fee”), which fee shall be fully earned,
non-refundable, due and payable on the date hereof.

 
 

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Section Four.  Representations and Warranties.  To induce the Lender to enter
into this Amendment, each Loan Party warrants and represents to the Lender as
follows:

(i)             except for the representation and warranty that there has been
no material adverse change in any Borrower’s business, properties or condition
(financial or otherwise), for which no Loan Party makes any representation or
warranty in this Amendment, all of the representations and warranties contained
in the Credit Agreement and each other Loan Document, in each case, after giving
effect to this Amendment, continue to be true and correct in all material
respects as of the date hereof, as if repeated as of the date hereof, except for
such representations and warranties which, by their terms, are only made as of a
previous date;

(ii)            the execution, delivery and performance of this Amendment by
each  Borrower is within its corporate powers, has been duly authorized by all
necessary corporate action on its part, and each Borrower has received all
necessary consents and approvals (if any shall be required) for the execution
and delivery of this Amendment;

(iii)           the execution, delivery and performance by each Borrower of this
Amendment, the consummation of the transactions herein contemplated and the
compliance with the provisions hereof have been duly authorized by all necessary
corporate action and do not and will not (i) require any consent or approval of
such Borrower’s stockholders; (ii) require any authorization, consent, license,
permit or approval by, or registration, declaration or filing with, or notice
to, any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or any third party, except such
authorization, consent, license, permit, approval, registration, declaration,
filing or notice as has been obtained, accomplished or given prior to the date
hereof and such filings with the Securities and Exchange Commission as are
required by applicable law; (iii) violate any provision of any law, rule or
regulation (including, without limitation, Regulation X of the Board of
Governors of the Federal Reserve System) or of any order, writ, injunction or
decree presently in effect having applicability to such Borrower or of such
Borrower’s articles of incorporation or bylaws; (iv) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other material agreement, lease or instrument to which such Loan Party is a
party or by which it or its properties may be bound or affected; or (v) result
in, or require, the creation or imposition of any Lien (other than in favor of
the Lender) upon or with respect to any of the properties now owned or hereafter
acquired by such Loan Party;

(iv)           upon its execution, this Amendment shall constitute the legal,
valid and binding obligation of each Borrower, enforceable against each Borrower
in accordance with its terms; and

(v)            after giving effect to the waiver of the Designated Events of
Default as provided for in this Amendment above, no Default or Event of Default
has occurred and is continuing;

 
 

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Section Five.  Conditions Precedent.  This Amendment shall become effective upon
the date on which all of the following events shall have occurred:

(i)             the Lender shall have received this Amendment, duly executed by
each Borrower and acknowledged by Colonial and William Pagano;

(ii)            the Lender shall have received a certificate of the secretary or
assistant secretary of each Borrower, certifying (i) as true and correct a copy
of resolutions adopted by Borrower’s board of directors approving and
authorizing the execution, delivery and performance by such Borrower of this
Amendment and of the transactions contemplated herein and therein, (ii) that
there have been no amendments, supplements, or other modifications to such
Borrower’s articles of incorporation and bylaws since the date of the closing on
the Second Amendment to the Credit Agreement between Borrowers and Lender dated
September 10, 2007 and that the copies of such articles of incorporation and
bylaws delivered to Lender on such date as a part of the secretary’s
certificates of each Borrower delivered by Borrowers on such date in connection
with such closing are true, correct and complete copies of such articles of
incorporation and bylaws as in full force and effect on the date hereof (or, if
there have been any such amendments, supplements, or other modifications to such
Borrower’s articles of incorporation and bylaws since the date of such closing,
attaching and certifying true, correct and complete copies of such articles of
incorporation and bylaws as in full force and effect on the date hereof) and
(iii) the name(s) and signature(s) of one or more officers or agents of such
Borrower authorized to execute and deliver this Amendment on behalf of such
Borrower pursuant to the resolutions referenced in clause (i) above; and

(iii)           Lender shall have received payment of (i) the Amendment Fee and
(ii) all fees, costs and expenses (including without limitation any and all
legal fees and expenses) incurred by the Lender in connection with the
preparation, negotiation and closing of this Amendment and the transactions
contemplated to occur hereunder (collectively, the “Amendment Fees and
Expenses”), and Borrowers hereby authorize Lender to charge the Borrowers’ loan
account with Lender with the aggregate amount of such Amendment Fees and
Expenses, and requests that Lender make one or more revolving Floating Rate
Advance(s) on or after the date hereof in an aggregate amount not to exceed the
aggregate amount of such Amendments Fees and Expenses and that Lender disburse
the proceeds of such revolving Floating Rate Advance(s) in satisfaction thereof.

Section Six.  General Provisions.

(i)             Except as herein expressly amended, the Credit Agreement and all
of the other Loan Documents are ratified and confirmed in all respects and shall
remain in full force and effect in accordance with their respective terms as so
amended.  Each Borrower hereby confirms its existing pledge, assignment and
grant to the Lender of a security interest and a Lien upon all of the
Collateral, as security for the payment and performance of all of the
Obligations (including any interest accruing under the Credit Agreement from and
after October 1, 2009 at the amended rate(s) provided for herein).  The Borrower
hereby confirms that all security interests at any time granted by it to the
Lender in any and all of the Borrower’s property and assets, including the
security interest and a Lien upon all of the Collateral, continue in full force
and effect and secure and shall continue to secure the Obligations and the
“Indebtedness” (as defined in the Guaranty) so long as any such Obligations and
Indebtedness remain outstanding and that all Collateral subject thereto remain
free and clear of any liens or encumbrances other than (i) those in favor of the
Lender provided for under the Loan Documents, and (ii) other Permitted
Liens.  Nothing herein contained is intended to in any manner impair or limit
the validity, priority and extent of the Lender’s existing security interest and
Lien in and upon the Collateral.

 
 

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(ii)            All references to the Credit Agreement in the Loan Documents
shall mean the Credit Agreement as amended as of the effective date hereof, and
as amended hereby and as hereafter amended, supplemented and modified from time
to time.

(iii)           Except as expressly provided in this Amendment, the execution,
delivery and effectiveness of this Amendment shall not operate as a waiver of
any right, power or remedy of the Lender under the Credit Agreement or any of
the other Loan Documents, nor constitute a waiver of any other provision of the
Credit Agreement or any of the other Loan Documents.

(iv)           This Amendment embodies the entire agreement between the parties
hereto with respect to the subject matter hereof and supercedes all prior
agreements, commitments, arrangements, negotiations or understandings, whether
written or oral, of the parties with respect thereto.

(v)            This Amendment shall be governed by and construed in accordance
with the substantive laws (other than conflict laws) of the State of New
York.  The provisions of Section 9.15 of the Credit Agreement regarding consents
to jurisdiction and venue, consents and waivers regarding service of process and
waivers of rights to jury trial, of Section 9.7 of the Credit Agreement
regarding costs and expenses and of Section 9.8 of the Credit Agreement
regarding indemnities are incorporated herein by reference.

(vi)           This Amendment shall be binding upon and inure to the benefit of
each Borrower and Lender and their respective successors and assigns, except
that no Borrower shall have the right to assign its rights hereunder or any
interest herein without the Lender’s prior written consent.

(vii)          Any provision of this Amendment which is prohibited or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof

(viii)         Each Borrower hereby confirms and agrees, and represents and
warrants, that all Obligations (whether representing outstanding principal,
accrued and unpaid interest, accrued and unpaid fees or any other Obligations of
any kind or nature) currently owing by each and all Borrowers under the Credit
Agreement and the other Loan Documents, as reflected in the books and records of
Lender as of the date hereof, are unconditionally owing from and payable by each
and all Borrowers to Lender and that Borrowers are jointly and severally
indebted to Lender with respect thereto, all without any set-off, deduction,
counterclaim or defense.  Each Borrower acknowledges and agrees that it has no
actual or potential claim or cause of action against Lender relating to the
Credit Agreement or any Loan Document and/or the Obligations arising thereunder
or related thereto, in any such case arising on or before the date hereof.As
further consideration for Lender’s agreements to grant the waivers, amendments
and accommodations set forth herein, each Borrower hereby waives and releases
and forever discharges Lender and each of its officers, directors, attorneys,
agents, professionals and employees (the “Released Parties”) from any liability,
damage, claim, loss or expense of any kind that such Borrower had, may now have
or may hereafter haveagainst any one or more of the Released Parties arising out
of or relating to the Loan Documents, (including this Amendment and any
documents, agreements being executed in connection herewith), any and all
Advances made through the date hereof, any other Obligations heretofore made
and/or now outstanding under the Loan Documents, any transactions related to any
of the foregoing or contemplated by the Loan Documents and/or any other action
(or failure to act) taken (or, as applicable, not taken or taken only after any
delay or satisfaction of any conditions) by any of the Released Parties in
connection with any of the foregoing or contemplated by the Loan Documents or in
connection with the negotiation or administration thereof.

 
 

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Section Seven.  Acknowledgement of Guarantors. By executing this Amendment, each
Borrower and Colonial (by its signature below), each in its capacity as a
“Guarantor” under the Guaranty, hereby acknowledges and agrees to all the terms
and provisions of this Amendment, and agrees that its obligations under the
Guaranty are unaffected, undiminished and unmodified hereby, and also hereby
ratifies, reaffirms and restates all of the provisions, terms and conditions,
covenants, representations and warranties made and all of the obligations
undertaken by such Guarantor in the Guaranty.  Each Guarantor further
acknowledges and agrees that the foregoing acknowledgements, agreements,
ratifications and reaffirmations are being given in an abundance of caution and
for the avoidance of any doubt, and that nothing contained in the foregoing is
intended to limit or contradict the provisions of and agreements and waivers
contained in Section 7 and 8 of the Guaranty, and further that the giving by
such Guarantor of the foregoing acknowledgements, agreements, ratifications and
reaffirmations shall not be interpreted or construed under any circumstances as
having established a course of dealing or course of conduct binding upon the
Lender in the future or otherwise creating any future obligations on the Lender
to obtain any similar acknowledgements, agreements, ratifications and
reaffirmations in connection with any future amendments to the Credit Agreement
and/or any other Loan Document.

Section Eight.  Acknowledgment of Liens by Colonial.  Colonial (by its signature
below), in its capacity as the “Guarantor” under the General Security Agreement
dated as of July 28, 2004 (as amended, modified, supplemented or restated from
time to time, the “Colonial Security Agreement”) by Colonial in favor of Lender
and as the “Pledgor” under the Securities Pledge Agreement dated as of July 28,
2004 (as amended, modified, supplemented or restated from time to time, the
“Colonial Pledge Agreement”), hereby confirms that all security interests at any
time granted by it to the Lender in any and all of Colonial’s property and
assets, including the security interest and a Lien upon all of the “Collateral”
(as defined under the Colonial Security Agreement) and the “Pledged Collateral”
(as defined under the Colonial Pledge Agreement) (collectively, the “Colonial
Collateral”), continue in full force and effect and secure and shall continue to
secure the Obligations and the “Indebtedness” (as defined under the Guaranty)
and the “Indebtedness” (as defined under the Colonial Security Agreement) so
long as any such Obligations, Indebtedness and Indebtedness remain outstanding
and that all Colonial Collateral subject thereto remain free and clear of any
liens or encumbrances other than (i) those in favor of the Lender provided for
under the Loan Documents, and (ii) other Liens expressly permitted under the
Colonial Security Agreement and the Colonial Pledge Agreement.  Nothing herein
contained is intended to in any manner impair or limit the validity, priority
and extent of the Lender’s existing security interest and Lien in and upon the
Colonial Collateral.

 
 

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Section Nine.   Acknowledgement of Guarantors. By executing this Amendment, each
Borrower and William Pagano (by his signature below), each in its/its capacity
as a party (in such capacity, a “Support Party”) to that certain Support
Agreement dated as of July 28, 2004 (as amended, modified, supplemented or
restated from time to time, the “Support Agreement”) among Borrowers, Mr. Pagano
and Lender, hereby acknowledges and agrees to all the terms and provisions of
this Amendment, and agrees that its obligations under the Support Agreement are
unaffected, undiminished and unmodified hereby, and also hereby ratifies,
reaffirms and restates all of the provisions, terms and conditions, covenants,
representations and warranties made and all of the obligations undertaken by
such Support Party under the Support Agreement.  Each Support Party further
acknowledges and agrees that the foregoing acknowledgements, agreements,
ratifications and reaffirmations are being given in an abundance of caution and
for the avoidance of any doubt, and that nothing contained in the foregoing is
intended to limit or contradict the provisions of and agreements and waivers
contained in the Support Agreement, and further that the giving by such Support
Party of the foregoing acknowledgements, agreements, ratifications and
reaffirmations shall not be interpreted or construed under any circumstances as
having established a course of dealing or course of conduct binding upon the
Lender in the future or otherwise creating any future obligations on the Lender
to obtain any similar acknowledgements, agreements, ratifications and
reaffirmations in connection with any future amendments to the Credit Agreement
and/or any other Loan Document.

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IN WITNESS WHEREOF, the Loan Parties and the Lender have signed below to
indicate their agreement with the foregoing and their intent to be bound
thereby.

 
THE RAL SUPPLY GROUP, INC.
       
By:
/s/ William Pagano
   
Name: William Pagano
   
Title: Executive Vice President
       
UNIVERSAL SUPPLY GROUP, INC.
       
By:
/s/ William Pagano
   
Name: William Pagano
   
Title: President
       
S&A SUPPLY, INC..
       
By:
/s/ William Pagano
   
Name: William Pagano
   
Title: President
       
WELLS FARGO BANK, NATIONAL ASSOCIATION, acting through its Wells Fargo Business
Credit operating division
       
By:
     
Name:
   
Title:

ACKNOWLEDGED AND AGREED TO:

COLONIAL COMMERCIAL CORP.

By:
/s/ William Pagano
 
Name:
William Pagano
 
Title:
Chief Executive Officer
                   
/s/ William Pagano
 
WILLIAM PAGANO
 

 
 

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