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EXHIBIT 10.08
EXECUTION COPY
 
SECOND AMENDMENT, dated as of September 10, 2007 (“Amendment”), to and under
CREDIT AND SECURITY AGREEMENT, dated as of July 28, 2004 (as amended from time
to time, the “Credit Agreement”), by and among AMERICAN/UNIVERSAL SUPPLY, INC.,
a New York corporation (“American”), THE RAL SUPPLY GROUP, INC., a New York
corporation (“RAL”), UNIVERSAL SUPPLY GROUP, INC., a New York corporation
(“Universal”; American, RAL and Universal are each individually referred to as a
“Borrower” and are collectively referred to as the “Borrowers”), S&A PURCHASING
CORP., a New York corporation, to be renamed S&A Supply, Inc. immediately
following the consummation of the transactions contemplated by the Purchase
Agreement (as defined below) (“S&A”; each Borrower and S&A are individually
referred to as a “Loan Party” and are collectively referred to as the “Loan
Parties”), 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, the Borrowers and Colonial have made in favor of the 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, S&A is party to that certain Asset Purchase Agreement dated as of
September 10, 2007 (the “Purchase Agreement”), among S&A, S&A Supply, Inc., a
Massachusetts corporation, S&A Realty, Inc., a Massachusetts corporation, S&A
Management, Inc., a Massachusetts corporation, Nancy A. Mead (“Nancy”), Nancy
and Thomas H. Mead, as trustees of The Discretionary Trust under The Rodney P.
Mead Revocable Trust, dated January 12, 1999, Sarah Mead, Brian Mead, Adam Mead
and Colonial, pursuant to which S&A shall purchase certain assets of S&A Supply,
Inc. and S&A Management, Inc.;
 
WHEREAS, S&A desires to become a party to the Credit Agreement, the Guaranty and
the other Loan Documents to which any Borrower is a party; and
 
WHEREAS, the Loan Parties have requested, among other things, that the Lender
(i) increase the Maximum Line to Twenty-Five Million Dollars ($25,000,000) and
the inventory sublimit to Thirteen Million Five Hundred Thousand Dollars
($13,500,000), (ii) provide the Borrowers with an overadvance sublimit up to
Five Hundred Thousand Dollars ($500,000) and a Structural Sublimit up to One
Million Dollars ($1,000,000) and (iii) extend the maturity date of the Credit
Agreement, and the Lender has agreed to the foregoing requests, 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, the Loan Parties and the Lender hereby agree as
follows:
 
Section One.  Addition of S&A as a Borrower.  Effective upon satisfaction of the
conditions precedent set forth in Section Four hereof, S&A hereby agrees with
the Lender as follows:
 

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(i)           S&A hereby acknowledges, agrees and confirms that, by its
execution of this Amendment, S&A will be deemed to be a party to the Credit
Agreement, the Guaranty and each of the other Loan Documents to which any
Borrower is a party and a “Borrower” and a “Guarantor” for all purposes of the
Credit Agreement, the Guaranty and such other Loan Documents, and shall have all
of the obligations of a Borrower or a Guarantor, as the case may be, thereunder
as if it had executed the Credit Agreement, the Guaranty and such other Loan
Documents on the respective dates thereof.  S&A hereby ratifies, as of the date
hereof, and agrees to be bound by, all of the terms, provisions and conditions
applicable to the Borrowers and the Guarantors, as the case may be, contained in
the Credit Agreement, the Guaranty and such other Loan Documents.
 
(ii)           Without limiting generality of the foregoing terms of paragraph
(i), S&A hereby pledges, assigns and grants to the Lender a security interest in
and a Lien upon all of the Collateral, as security for the payment and
performance of the Obligations.  S&A acknowledges and agrees that, in applying
the law of any jurisdiction and the provisions of Article 9 of the Uniform
Commercial Code of any jurisdiction, the defined term Collateral covers all
assets of S&A.  The Lender may at any time and from time to time file, pursuant
to the provisions of Section 3.9 of the Credit Agreement, financing and
continuation statements and amendments thereto reflecting the same.
 
(iii)           S&A hereby represents and warrants to the Lender that:
 
(a)           During its existence, S&A has done business solely under the names
set forth in Schedule 1 hereto.  S&A’s chief executive office and principal
place of business is, and after giving effect to the transactions contemplated
by the Purchase Agreement will be, located at the address set forth in Schedule
1 hereto, and all of S&A’s records relating to its business or the Collateral
are kept at that location.  All Inventory and Equipment is, and after giving
effect to the transactions contemplated by the Purchase Agreement will be,
located at that location or at one of the other locations set forth in Schedule
1 hereto, which such locations are owned or leased by S&A, as indicated on
Schedule 1 hereto.  S&A’s tax identification number is correctly set forth in
Schedule 1 hereto.
 
(b)           Set forth on Schedule 2 hereto is a list of all Subsidiaries of
S&A.
 
(c)           Set forth on Schedule 3 is a list of all actions, suits or
proceedings pending, or to the knowledge of S&A, threatened against or affecting
S&A or the properties of S&A before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
which, if determined adversely to S&A, could have a Material Adverse Effect.
 
(d)           To the best of S&A’s knowledge, except as disclosed on Schedule 4
hereto, the Premises are not and never have been listed on the National
Priorities List, the Comprehensive Environmental Response, Compensation and
Liability Information System or any similar federal, state or local list,
schedule, log, inventory or database.

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(e)           The exact legal name and jurisdiction of formation of S&A on the
date hereof is as set forth in the first paragraph of this Amendment.
 
(f)           Except as set forth on Schedule 5 hereto, S&A has not during the
five years preceding the date hereof (i) changed its legal name, (ii) changed
its jurisdiction of formation or (iii) been party to a merger, consolidation or
other change in structure.
 
(g)           S&A possesses all of the licenses, permits, patents, copyrights,
trademarks and tradenames necessary to conduct its business, there has been no
assertion or claim of violation or infringement with respect thereto and all
such licenses, permits, patents, copyrights, trademarks and tradenames are
listed on Schedule 6 hereto.  S&A has paid all licensing and permit fees
required to maintain all of the licenses and permits necessary for it to conduct
its business as presently conducted.
 
(h)           Except as set forth on Schedule 7 hereto and except for Permitted
Liens, there are no Liens upon any of S&A’s assets.
 
(i)           Debt of S&A in existence on the date hereof and after giving
effect to the transactions contemplated by the Purchase Agreement  is listed on
Schedule 8 hereto.
 
(j)           Guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons, in existence on
the date hereof and after giving effect to the transactions contemplated by the
Purchase Agreement are listed on Schedule 9 hereto.
 
(k)           Loans and advances to, and investments and other interests in, any
other Person in existence on the date hereof and after giving effect to the
transactions contemplated by the Purchase Agreement are listed on Schedule 10
hereto.
 
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.  (1) The following defined terms
contained in Section 1.1 of the Credit Agreement are amended and restated as
follows:
 
“Banking Day” means a day on which the Lender is open for business that is not a
Saturday, Sunday or other day on which banks are required or permitted to be
closed in Minneapolis, Minnesota, or New York, New York and, if such day relates
to a LIBOR Advance, a day on which dealings are carried on in the London
interbank eurodollar market.
 
“Borrowing Base” means, with respect to any Borrower at any time, and subject to
change from time to time in the Lender’s sole discretion, which discretion shall
be exercised in a commercially reasonable manner, the lesser of:

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(a)           the Maximum Line, minus the L/C Amount, minus the aggregate
principal amount of outstanding Advances made to the other Borrowers; or
 
(b)           the sum of:
 
 
(i)
eighty-five percent (85%) of such Borrower’s Eligible Accounts, plus

 
 
(ii)
the lesser of: (A) up to fifty-seven percent (57%) of the lower of the cost or
fair market value, as determined in accordance with GAAP, of such Borrower’s
Eligible Inventory, but in no event to exceed Thirteen Million Five Hundred
Thousand Dollars ($13,500,000.00), minus the aggregate principal amount of
outstanding Advances made to the other Borrowers pursuant to this clause (ii),
and (B) up to ninety-five percent (95%) of the liquidation value of such
Borrower’s Eligible Inventory, net of liquidation and other related expenses, as
determined by the Lender in its sole discretion, which discretion shall be
exercised in a commercially reasonable manner, but in no event to exceed
Thirteen Million Five Hundred Thousand Dollars ($13,500,000.00), minus the
aggregate principal amount of outstanding Advances made to the other Borrowers
pursuant to this clause (ii), plus

 
 
(iii)
the amount of the Structural Sublimit then in effect, minus the aggregate
principal amount of outstanding Advances made to the other Borrowers pursuant to
this clause (iii), plus

 
 
(iv)
the amount of the Overadvance Sublimit then in effect, minus the aggregate
principal amount of outstanding Advances made to the other Borrowers pursuant to
this clause (iv), minus

 
 
(v)
the amount of the Landlord Reserve then in effect, apportioned among the
Borrowers in such manner as the Lender may determine from time to time in its
sole discretion, which discretion shall be exercised in a commercially
reasonable manner, minus

 
 
(vi)
the amount of the Availability Reserve then in effect, apportioned among the
Borrowers in such manner as the Lender may determine from time to time in its
sole discretion, which discretion shall be exercised in a commercially
reasonable manner, minus

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(vii)
the portion of the L/C Amount relating to Letters of Credit issued for such
Borrower’s account, plus, the aggregate L/C Amount relating to Letters of
Credit  issued for the other Borrowers, minus

 
 
(viii)
such other reserves as the Lender may establish from time to time in its sole
discretion, which discretion shall be exercised in a commercially reasonable
manner.

 
Notwithstanding the foregoing, in the event that dilution for all Accounts
during any ninety (90) consecutive day period, expressed as a percentage, as
determined by the Lender in its sole discretion, exercised in a commercially
reasonable manner, pursuant to its periodic examination of the Borrowers’
collateral reports and/or books and records, exceeds four percent (4%), then the
Lender, in its sole discretion, may implement and maintain such reserves and/or
reduce the advance percentages used in determining the Borrowing Base to adjust
for such excess.
 
“Default Rate” means an annual interest rate in effect during a Default Period
or following the Termination Date, which interest rate shall be equal to three
percent (3%) over the applicable Floating Rate or the LIBOR Advance Rate, as the
case may be, as such rate may change from time to time.
 
“Floating Rate” means, with respect to all Floating Rate Advances, an annual
rate equal to the Prime Rate minus one-quarter of one percent (¼ of 1%);
provided, that if the Borrowers’ Net Income for the fiscal year ending on or
about December 31, 2007 exceeds One Million Dollars ($1,000,000), the Floating
Rate shall be an annual rate equal to the Prime Rate minus one-half of one
percent (½ of 1%), which annual rate, in each case, shall change when and as the
Prime Rate changes.  Such reduction, if any, in the Floating Rate shall become
effective on the first calendar day of the month following the month of receipt
by the Lender of the unaudited financial statements for the fiscal year ending
on or about December 31, 2007 as required under Section 6.1(a); provided,
however, that such reduction shall become effective, retroactive, as of the
first calendar day of the month of receipt by the Lender of such financial
statements, if such financial statements are received by the Lender prior to the
25th day of such month; provided, further, that (i) no such reduction in the
Floating Rate will be made if a Default Period exists at the time that such
reduction would otherwise be made and (ii) if such financial statements are
amended or restated and such amended or restated financial statements do not
indicate that the Borrowers’ Net Income for the fiscal year ending on or about
December 31, 2007 exceeded One Million Dollars ($1,000,000), the Floating Rate
shall be increased to the Prime Rate minus one-quarter of one percent (¼ of 1%)
effective as of the date on which the Floating Rate was previously reduced and
the Borrowers shall immediately pay to the Lender interest on the outstanding
Advances at such higher Floating Rate from the effective date of such increase
to the extent such interest has not been paid.

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“Original Maturity Date” means August 1, 2012.
 
“Overadvance Sublimit” means, from the period beginning on April 1 and ending on
July 31 of each calendar year during the term of this Agreement, the amount of
Five Hundred Thousand Dollars ($500,000), which amount shall be automatically
reduced each week by the amount of One Hundred Thousand Dollars ($100,000) on
August 1 of such calendar year and on each corresponding day of each following
week thereafter, until reduced to zero (-0-).
 
“Structural Sublimit” means, on the Acquisition Date, the sum of One Million
Dollars ($1,000,000), which amount shall be automatically and permanently
reduced on the first day of each month, beginning with the month of November
2007, by the sum of Forty-One Thousand Six Hundred Sixty-Six Dollars and
Sixty-Seven Cents ($41,666.67), until reduced to zero (-0-).
 
(2)           The following defined terms are added to Section 1.1 of the Credit
Agreement in their proper alphabetical sequence:
 
“Acquisition Date” means the Closing Date as defined in the Purchase Agreement.
 
“Floating Rate Advance” means an Advance bearing interest at the Floating Rate.
 
“Interest Period” means the period that commences on (and includes) the Banking
Day on which either a LIBOR Advance is made or continued, or on which a Floating
Rate Advance is converted to a LIBOR Advance, and ending on (but excluding) the
Banking Day numerically corresponding to such date that is one, three, six, or
twelve months thereafter as designated by the Borrower, during which period the
outstanding principal balance of the LIBOR Advance shall bear interest at the
LIBOR Advance Rate; provided, however, that:
 
(a) no Interest Period may be selected for an Advance for a principal amount
less than Five Hundred Thousand Dollars ($500,000), and no more than three (3)
different Interest Periods may be outstanding at any one time;
 
(b) if an Interest Period would otherwise end on a day which is not a Banking
Day, then the Interest Period shall end on the next Banking Day thereafter,
unless that Banking Day is the first Banking Day of a month, in which case the
Interest Period shall end on the last Banking Day of the preceding month;

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(c) no Interest Period may end later than the Original Maturity Date; and
 
(d) in no event shall the Borrower select Interest Periods with respect to
Advances which, in the aggregate, would require payment of a contracted funds
breakage fee under this Agreement in order to make required principal payments.
 
“LIBOR” means the rate per annum (rounded upward, if necessary, to the nearest
whole 1/16th of one percent (1%)) determined pursuant to the following formula:
 

LIBOR =
Base LIBOR
 
100% - LIBOR Reserve Percentage

(i) “Base LIBOR” means the rate per annum for United States dollar deposits
quoted by the Lender as the Inter-Bank Market Offered Rate, with the
understanding that such rate is quoted by the Lender for the purpose of
calculating effective rates of interest for loans making reference thereto, on
the first day of an Interest Period for delivery of funds on said date for a
period of time approximately equal to the number of days in such Interest Period
and in an amount approximately equal to the principal amount to which such
Interest Period applies.  The Borrowers understand and agree that the Lender may
base its quotation of the Inter-Bank Market Offered Rate upon such offers or
other market indicators of the Inter-Bank Market as the Lender in its discretion
deems appropriate including the rate offered for U.S. dollar deposits on the
London Inter-Bank Market.
 
(ii) “LIBOR Reserve Percentage” means the reserve percentage prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
“Eurocurrency Liabilities” (as defined in Regulation D of the Federal Reserve
Board, as amended), adjusted by the Lender for expected changes in such reserve
percentage during the applicable Interest Period.
 
“LIBOR Advance” means an Advance bearing interest at the LIBOR Advance Rate.
 
“LIBOR Advance Rate” means, with respect to all LIBOR Advances, an annual
interest rate equal to the sum of LIBOR plus two and one-half of one percent
(2.5%); provided, that if the Borrowers’ Net Income for the fiscal year ending
on or about December 31, 2007 exceeds One Million Dollars ($1,000,000), the
LIBOR Advance Rate shall be an annual rate equal to the sum of LIBOR plus two
and one-quarter of one percent (2.25%), such reduction, if any, in the LIBOR
Advance Rate to become effective on the first calendar day of the month
following the month of receipt by the Lender of the unaudited financial
statement for the fiscal year ending on or about December 31, 2007 as required
under Section 6.1(a); provided, however, that such reduction shall become
effective, retroactive, as of the first calendar day of the month of receipt by
the Lender of such financial statements, if such financial statements are
received by the Lender prior to the 25th day of such month; provided, further,
that (i) no such reduction in the LIBOR Advance Rate will be made if a Default
Period exists at the time that such reduction would otherwise be made and (ii)
if such financial statement is amended or restated and such amended or restated
financial statement does not indicate that the Borrowers’ Net Income for the
fiscal year ending on or about December 31, 2007 exceeded One Million Dollars
($1,000,000), the Lender may increase the LIBOR Advance Rate to LIBOR plus two
and one-half of one percent (2.5%) effective as of the date on which the LIBOR
Advance Rate was previously reduced and the Borrowers shall immediately pay to
the Lender interest on the outstanding Advances at such higher LIBOR Advance
Rate from the effective date of such increase to the extent such interest has
not been paid.

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“Purchase Agreement” means that certain Asset Purchase Agreement dated as of
September 10, 2007, among S&A Purchasing Corp., a New York corporation, S&A
Supply, Inc., a Massachusetts corporation, S&A Realty, Inc., a Massachusetts
corporation, S&A Management, Inc., a Massachusetts corporation, Nancy A. Mead
(“Nancy”), Nancy and Thomas H. Mead, as trustees of The Discretionary Trust
under The Rodney P. Mead Revocable Trust, dated January 12, 1999, Sarah Mead,
Brian Mead, Adam Mead and Colonial, pursuant to which S&A shall purchase certain
assets of S&A Supply, Inc.
 
(ii)           Section 2.1.  Revolving Advances.  Sections 2.1(a) and (b) of the
Credit Agreement are amended and restated as follows:
 
(a) The Borrowing Agent will not request any Advance on behalf of a Borrower
under this Section 2.1 if, after giving effect to such requested Advance, the
sum of the outstanding and unpaid Advances made to such Borrower under this
Section 2.1 would exceed such Borrower’s Borrowing Base.  Each Advance shall be
funded as either a Floating Rate Advance or a LIBOR Advance, as the Borrowing
Agent shall specify in a request delivered to the Lender conforming to the
requirements of Section 2.2(b); Floating Rate Advances and LIBOR Advances may be
outstanding at the same time.  Each request for a LIBOR Advance shall be in
multiples of One Hundred Thousand Dollars ($100,000), with a minimum request of
at least Five Hundred Thousand Dollars ($500,000), provided that the Borrowing
Agent may not request a LIBOR Advance if after giving effect thereto the
aggregate principal amount of outstanding LIBOR Advances would exceed
seventy-five percent (75%) of the aggregate principal amount of all outstanding
Advances.  LIBOR Advances shall not be available during Default Periods.

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(b) Each request by the Borrowing Agent for an Advance from the Lender shall be
made before 11:00 a.m. (New York time) of the day of the requested Advance.
Requests may be made in writing or by telephone, specifying the Borrower on
behalf of which such Advance is being requested, the date of the requested
Advance,  the amount thereof, whether the Advance shall be a Floating Rate
Advance or a LIBOR Advance and, with respect to any LIBOR Advance, the Interest
Period applicable thereto.  Each request shall be made by (A) any
Authorized  Officer of the Borrowing Agent; or (B) any person designated as the
Borrowing Agent’s agent by any Authorized Officer of the Borrowing Agent in a
writing delivered to the Lender; or (C) any person whom the Lender reasonably
believes to be an Authorized Officer of the Borrowing Agent or such a designated
agent.
 
(iii)           Section 2.3.  Reduction of Structural Sublimit; Mandatory
Prepayment of Structural Sublimit Advances.  Section 2.3 of the Credit Agreement
is amended and restated as follows:
 
Section 2.3  [RESERVED]
 
(iv)           Section 2.7.  Interest; Default Interest; Usury.  Section 2.7(a)
of the Credit Agreement is amended and restated as follows:
 
(a) Interest.  Except as set forth in paragraphs (b) and (c) below and in
Section 2.21, the outstanding principal amount of the Advances shall bear
interest at the Floating Rate.
 
(v)           Section 2.8.  Fees.  Sections 2.8(b) and (c) of the Credit
Agreement are amended and restated as follows:
 
(b) Collateral Monitoring Fees.  The Borrowers jointly and severally agree to
pay the Lender a monthly collateral monitoring fee of $500 per month.  Such fee
shall be payable and charged to the Borrowers’ accounts on the first day of each
month with respect to the prior month.
 
(c) Unused Line Fee.  In the event the average closing daily unpaid aggregate
balance of all Advances hereunder during any calendar month is less than Twenty
Million Dollars ($20,000,000), the Borrowers jointly and severally agree to pay
to the Lender a fee at a rate per annum equal to one-quarter of one percent (¼
of 1%) on the amount by which Twenty Million Dollars ($20,000,000) exceeds such
average daily unpaid aggregate balance. Such fee shall be payable and charged to
the Borrowers’ accounts on the first day of each month with respect to the prior
month.  In the event that the Credit Facility is terminated on any day other
than the first day of a month, the unused line fee for the month in which the
Credit Facility is terminated shall be calculated for the portion of that month
which elapsed prior to termination and shall be payable on the Termination Date.

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(vi)         Section 2.9.  Computation of Interest and Fees; When Interest Due
and Payable.  Section 2.9 of the Credit Agreement is amended and restated as
follows:
 
Section 2.9  Computation of Interest and Fees; When Interest Due and
Payable.  Interest accruing on the outstanding principal balance of the Advances
and fees hereunder outstanding from time to time shall be computed on the basis
of actual number of days elapsed in a year of 360 days.  Interest shall be
payable in arrears on the first day of each month and on the Termination Date
(each an “Interest Payment Date”), or if any such day is not a Banking Day, on
the next succeeding Banking Day.  Interest will accrue from the most recent date
to which interest has been paid or, if no interest has been paid, from the date
of advance to the Interest Payment Date.  If an Interest Payment Date is not a
Banking Day, payment shall be made on the next succeeding Banking Day. Interest
accruing on each LIBOR Advance shall be due and payable on the last day of the
applicable Interest Period; provided, however, for Interest Periods that are
longer than one month, interest shall nevertheless be due and payable monthly on
the last day of each month, and on the last day of the Interest Period.
 
(vii)           Section 2.11.  Prepayment; Termination of Credit Facility by the
Borrowers; Termination Fees; Breakage Fees.  Section 2.11 of the Credit
Agreement is amended by (i) amending and restating paragraph (a) and (ii) adding
a new paragraph (d) to the end thereof as follows:
 
(a) Termination by the Borrowers.  Upon termination of the Credit Facility on
the Maturity Date, the Borrowers shall provide the Lender with an executed
release, in form and substance satisfactory to the Lender, of any and all claims
which each Borrower may have or thereafter have under this Agreement, any Loan
Document or otherwise.  The Borrowers may terminate the Credit Facility at any
time by: (A) giving at least thirty (30) days’ prior written notice to the
Lender of their intention to terminate the Credit Facility; (B) paying the
Lender termination fees and contracted funds breakage fees in accordance with
subsections (b) and (d), respectively, below if the Borrowers terminate the
Credit Facility effective as of any date other than the Maturity Date; and (C)
providing the Lender with an executed release in form and substance satisfactory
to the Lender, of any and all claims which each Borrower may have or thereafter
have under this Agreement, any Loan Document or otherwise.
 
(d) Breakage Fees.  The Borrowers may prepay the principal amount of the
Revolving Note at any time in any amount, whether voluntarily or by
acceleration, provided, however, that if the principal amount of any LIBOR
Advance is prepaid, the Borrowers shall pay to the Lender immediately upon
demand a contracted funds breakage fee equal to the sum of the discounted
monthly differences for each month from the month of prepayment through the
month in which the related Interest Period ends, calculated as follows for each
such month:

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(i)         Determine the amount of interest which would have accrued each month
on the amount prepaid at the interest rate applicable to such amount had it
remained outstanding until the last day of the applicable Interest Period.
 
(ii)           Subtract from the amount determined in (i) above the amount of
interest which would have accrued for the same month on the amount prepaid for
the remaining term of such Interest Period at LIBOR in effect on the date of
prepayment for new loans made for such term in a principal amount equal to the
amount prepaid.
 
(iii)           If the result obtained in (ii) for any month is greater than
zero, discount that difference by LIBOR used in (ii) above.
 
The Borrowers acknowledge that prepayment of the Revolving Note and any LIBOR
Advance may result in the Lender incurring additional costs, expenses or
liabilities, and that it is difficult to ascertain the full extent of such
costs, expenses or liabilities.  The Borrowers therefore agree to pay the
above-described contracted funds breakage fee and agrees that said amount
represents a reasonable estimate of the contracted funds breakage costs,
expenses and/or liabilities of the Lender.
 
(viii)           Section 2.12.  Section 2.12 of the Credit Agreement is amended
and restated as follows:
 
Section 2.12    Mandatory Prepayments.  Without notice or demand, if the
outstanding principal balance of the Advances made to any Borrower, plus the L/C
Amount allocable to such Borrower, shall at any time exceed such Borrower’s
Borrowing Base, the Borrowers shall immediately repay the Advances to the extent
necessary to eliminate such excess.  Any payment received by the Lender under
this Section 2.12 or under Section 2.11 may be applied to the Advances,
including interest thereon and any fees, commissions, costs and expenses
hereunder and under the other Loan Documents, in such order and in such amounts
as the Lender, in its discretion, may from time to time determine.  In
furtherance and not in limitation of Section 2.3, the Borrowers jointly and
severally agree to permanently repay the aggregate principal balance of the
Structural Sublimit Advances (i) on the first Banking Day of each month,
beginning with the month of November  2007, by an amount equal to Forty-One
Thousand Six Hundred Sixty-Six Dollars and Sixty-Seven Cents ($41,666.67), until
the aggregate principal balance of the Structural Sublimit Advances shall be
reduced to zero (-0-).  In furtherance and not in limitation of Section 2.3, the
Borrowers jointly and severally agree to repay the aggregate principal balance
of the outstanding Overadvances, if any, weekly by an amount equal to One
Hundred Thousand Dollars ($100,000.00) beginning on August 1 of each year and on
the corresponding day of each week thereafter, until the aggregate principal
balance of the Overadvances shall be reduced to zero (-0-).

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(ix)           Section 2.13.  Payments.  Section 2.13 of the Credit Agreement is
amended and restated as follows:
 
Section 2.13    Payments.  Any payments of principal, interest, fees or any
other amounts payable hereunder or under any other Loan Document shall be made
to the Lender prior to 12:00 noon New York time on the due date thereof in
immediately available funds.  All payments to the Lender shall be made in
immediately available funds. For purposes of determining the balance of the
Advances outstanding, the Lender will credit (conditional upon final collection)
all such payments to the  account of the Borrowers upon receipt by the Lender of
good funds in dollars of the United States of America in the Lender’s account,
provided, however, for purposes of computing interest on the Obligations, the
Lender will credit (conditional upon final collection) all such payments to the
Borrowers’ account one (1) day after receipt by Lender of such immediately
available funds in dollars of the United States of America in the Lender’s
account.  Any amount received by the Lender after 12:00 noon New York time on
any Banking Day shall be deemed received on the next Banking Day.  The Lender
may hold all payments not constituting immediately available funds for one (1)
additional day before applying them to the Obligations. Notwithstanding anything
in Section 2.1, the Borrowers hereby authorize the Lender, in its discretion at
any time or from time to time, without the request of any Borrower or the
Borrowing Agent and even if the conditions set forth in Section 4.2 would not be
satisfied, to make an Advance in an amount equal to the portion of the
Obligations from time to time due and payable. Any sums expended by the Lender
due to the failure of any Borrower to perform or comply with its obligations
under this Agreement or any other Loan Document, including, but not limited to
the payment of taxes, Liens, insurance premiums or leasehold obligations, shall
be charged to the account of the Borrowers as an Advance and added to the
Obligations; provided, that the Lender shall have no obligation to make any such
payment and shall not by so doing be deemed to have assumed any obligation or
liability of any Borrower.
 
(x)           Article II.  Amount and Terms of the Credit Facility.  Article II
of the Credit Agreement is amended by adding a new Section 2.21 thereto as
follows:
 
Section 2.21    LIBOR Advances.
 
(a) Converting Floating Rate Advances to LIBOR Advances; Procedures.  So long as
no Default Period is in effect, the Borrowers may convert all or any part of the
principal amount of any outstanding Floating Rate Advance into a LIBOR Advance
by requesting that the Lender convert the same no later than 11:00 a.m. (New
York time) on the Banking Day on which the Borrowers wish the conversion to
become effective; provided that the Borrowers may not convert any outstanding
Floating Rate Advance into a LIBOR Advance (i) if after giving effect thereto
the aggregate principal amount of outstanding LIBOR Advances would exceed
seventy-five percent (75%) of the aggregate principal amount of all outstanding
Advances or (ii)  during Default Periods.  Each request that conforms to the
terms of this Agreement shall be effective upon receipt by the Lender and shall
be confirmed in writing if the Lender so requests by any Officer or designated
agent identified in Section 2.1(b) or a Person reasonably believed by the Lender
to be such an Officer or designated agent, which request shall specify the
Banking Day on which the conversion is to occur, the total amount of the
Floating Rate Advance to be converted, and the applicable Interest Period.  Each
such conversion shall occur on a Banking Day, and the aggregate amount of
Floating Rate Advances converted to LIBOR Advances shall be in  multiples of One
Hundred Thousand Dollars ($100,000), with a minimum conversion amount of at
least Five Hundred Thousand Dollars ($500,000).

- 12 -

--------------------------------------------------------------------------------

(b) Procedures at End of an Interest Period.  Unless the Borrowers request a new
LIBOR Advance in accordance with the procedures set forth below, or prepay the
principal of an outstanding LIBOR Advance at the expiration of an Interest
Period, the Lender shall automatically and without request of the Borrowers
convert each LIBOR Advance to a Floating Rate Advance on the last day of the
relevant Interest Period.  So long as no Default exists, the Borrowers may cause
all or any part of any maturing LIBOR Advance to be renewed as a new LIBOR
Advance by requesting that the Lender continue the maturing Advance as a LIBOR
Advance no later than the Cut-off Time on the Banking Day constituting the first
day of the new Interest Period; provided that the Borrowers may not continue a
LIBOR Advance as such (i) if after giving effect thereto the aggregate principal
amount of outstanding LIBOR Advances would exceed seventy-five percent (75%) of
the aggregate principal amount of all outstanding Advances or (ii) during
Default Periods.  Each such request shall be confirmed in writing upon the
Lender’s request by any Officer or designated agent identified in Section 2.1(b)
or a Person reasonably believed by the Lender to be such an Officer or
designated agent, which confirmation shall specify the amount of the expiring
LIBOR Advance to be continued and the applicable Interest Period.  Each new
Interest Period shall begin on a Banking Day and the amount of each LIBOR
Advance shall be in multiples of One Hundred Thousand Dollars ($100,000), with a
minimum Advance of at least Five Hundred Thousand Dollars ($500,000).
 
(c) Setting and Notice of Rates.  The Lender shall, with respect to any request
for a LIBOR Advance under Section 2.1 or a conversion or renewal of a LIBOR
Advance under this Section 2.21, provide the Borrowers with a LIBOR quote for
each Interest Period identified by the Borrowers on the Banking Day on which the
request was made, if the request is received by the Lender prior 11:00 a.m. (New
York time), or for requests received by the Lender after 11:00 a.m. (New York
time), on the next Banking Day or on the Banking Day on which the Borrowers have
requested that the LIBOR Advance be made effective. If the Borrowers do not
immediately accept a LIBOR quote, the quoted rate shall expire and any
subsequent request from the Borrowers for a LIBOR quote shall be subject to
redetermination by the Lender of the applicable LIBOR for the LIBOR Advance.  

- 13 -

--------------------------------------------------------------------------------

(d) Taxes and Regulatory Costs.  The Borrowers shall pay the Lender with respect
to any LIBOR Advance, upon demand and in addition to any other amounts due or to
become due hereunder, any and all (i) withholdings, interest equalization taxes,
stamp taxes or other taxes (except income and franchise taxes) imposed by any
domestic or foreign governmental authority and related in any manner to LIBOR,
and (ii) future, supplemental, emergency or other changes in the LIBOR Reserve
Percentage, assessment rates imposed by the Federal Deposit Insurance
Corporation, or similar requirements or costs imposed by any domestic or foreign
governmental authority or resulting from compliance by the Lender with any
request or directive (whether or not having the force of law) from any central
bank or other governmental authority and related in any manner to LIBOR to the
extent they are not included in the calculation of LIBOR.  In determining which
of the foregoing are attributable to any LIBOR option available to the Borrowers
hereunder, any reasonable allocation made by the Lender among its operations
shall be conclusive and binding upon the Borrowers.
 
(xi)           Schedules to Credit Agreement.  Schedule 5.1, Schedule 5.4,
Schedule 5.6, Schedule 5.12, Schedule 5.16, Schedule 7.1, Schedule 7.2, Schedule
7.3 and Schedule 7.4 of the Credit Agreement are amended by annexing thereto and
making a part thereof Schedule 1, Schedule 2, Schedule 3, Schedule 4, Schedule
6, Schedule 7, Schedule 8, Schedule 9 and Schedule 10 hereto, respectively.
 
Section Three.  Representations and Warranties.  To induce the Lender to enter
into this Amendment, each Loan Party warrants and represents to the Lender as
follows:
 
(i)               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 by each Loan Party 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 (A) require any consent or approval of
such Loan Party’s stockholders; (B) 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; (C) 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 Loan Party or of such
Loan Party’s articles of incorporation or bylaws; (D) 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 (E) 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;

- 14 -

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(iii)              upon its execution, this Amendment shall constitute the
legal, valid and binding obligation of each Loan Party, enforceable against each
Loan Party in accordance with its terms;
 
(iv)             no Default or Event of Default has occurred and is continuing;
and
 
(v)              since the date of the audited financial statements of the
Borrowers for the fiscal year ended December 31, 2006, there has been no
material adverse change in any Borrower’s business, properties or condition
(financial or otherwise).
 
Section Four.  Conditions Precedent.  The addition of S&A as a Borrower and a
Guarantor under and party to the Credit Agreement, the Guaranty and the other
Loan Documents pursuant to Section One hereof and the amendments to the Credit
Agreement set forth in Section Two hereof 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 Loan Party;
 
(ii)              the Lender shall have received payment of all fees and
disbursements incurred by the Lender in connection with the preparation,
negotiation and closing of this Amendment and the transactions contemplated to
occur hereunder;
 
(iii)              no event has occurred and is continuing which constitutes a
Default or an Event of Default, and no event or development which has had or is
reasonably likely to have a Material Adverse Effect shall have occurred since
the date of the Borrowers’ audited financial statements for the fiscal year
ended December 31, 2006;
 
(iv)             the Lender shall have received a certificate of each Loan
Party’s Secretary or Assistant Secretary certifying as to (A) the resolutions of
such Loan Party’s directors and, if required, shareholders, authorizing the
execution, delivery and performance of this Amendment, (B) such Loan Party’s
articles of incorporation and bylaws, and (C) the signatures of such Loan
Party’s officers or agents authorized to execute and deliver this Amendment and
other instruments, agreements and certificates to be delivered in connection
with this Amendment on such Loan Party’s behalf;

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(v)              the Lender shall have received a current good standing
certificate issued by the Secretary of State of each Loan Party’s state of
incorporation certifying that such Loan Party is in good standing in such state;
 
(vi)             the Lender shall have received a Revolving Note in the
principal amount of Twenty-Five Million Dollars ($25,000,000) duly executed and
delivered by each Loan Party, in exchange for the Revolving Note dated July 28,
2004, in the principal amount of Fifteen Million Dollars ($15,000,000);
 
(vii)            the Lender shall have received true and correct copies of all
leases pursuant to which S&A is leasing any of the Premises, together with a
landlord’s waiver and consent with respect to each such lease;
 
(viii)           the Lender shall have received true and correct copies of any
and all mortgages pursuant to which S&A has mortgaged any of the Premises,
together with a mortgagee’s disclaimer and consent with respect to each such
mortgage;
 
(ix)              the Lender shall have received true and correct copies of any
and all agreements pursuant to which S&A’s property is in the possession of any
Person other than S&A together with (a) an acknowledgment and waiver of liens
from each bailee, processor and subcontractor who has possession of S&A’s goods
from time to time, (b) UCC financing statements sufficient to protect S&A’s and
the Lender’s interests in such goods, and (c) UCC searches showing that no other
secured party has filed a financing statement covering such Person’s property
other than S&A, or if there exists any such secured party, evidence that each
such secured party has received notice from S&A and the Lender sufficient to
protect S&A’s and the Lender’s interests in S&A’s goods from any claim by such
secured party;
 
(x)               the Lender shall have received from William Pagano a duly
executed original (or an executed facsimile copy) of the Support Agreement
Confirmation in substantially the form attached hereto as Exhibit C;
 
(xi)              the Lender shall have received an amendment to the Stock
Pledge Agreement, dated as of July 28, 2004, made by Colonial in favor of the
Lender, duly executed and delivered by Colonial, together with the stock
certificates for all of the shares of issued and outstanding common stock of
S&A, together with undated stock powers;
 
(xii)             the Lender shall have received a duly executed original (or an
executed facsimile copy) Post-Closing Undertaking Letter, dated as of the dated
hereof, made by S&A in favor of the Lender;
 
(xiii)    the Lender’s Credit Committee shall have given its final credit
approval to the transactions contemplated to occur hereunder;
 
(xiv)    the Lender shall have completed to its satisfaction an examination and
inspection of the Collateral in which S&A has rights and the books and records
of S&A, and the results thereof shall be satisfactory to the Lender;

- 16 -

--------------------------------------------------------------------------------

(xv)            the Lender shall have received the results of current searches
of appropriate filing offices showing that (a) no state or federal tax liens
have been filed and remain in effect against S&A, (b) no financing statements
have been filed and remain in effect against S&A, and (c) the Lender has duly
filed all financing statements necessary to perfect the Liens of the Lender
under the Loan Documents with respect to the Collateral in which S&A has rights,
to the extent such Liens are capable of being perfected by filing;
 
(xvi)            the Lender shall have received evidence that S&A is duly
licensed or qualified to transact business in all jurisdictions where the
character of the property owned or leased or the nature of the business
transacted by it makes such licensing or qualification necessary;
 
(xvii)           the Lender shall have received a certificate of an officer of
S&A confirming the representations and warranties set forth in Article V of the
Credit Agreement, after giving effect to this Amendment;
 
(xviii)          the Lender shall have received an opinion of counsel to each
Loan Party, addressed to the Lender;
 
(xix)             the Lender shall have received certificates of the insurance
required under the Credit Agreement with respect to S&A, with all casualty, loss
and hazard insurance policies containing the Lender’s loss payable endorsement
in the Lender’s favor and with all liability insurance naming the Lender as an
additional insured;
 
(xx)              the Lender shall have received a copy of the fully executed
Purchase Agreement, together with the exhibits and schedules thereto, which
shall be satisfactory to the Lender;
 
(xxi)             the Lender shall have received from each Guarantor (including
S&A) a duly executed original (or an executed facsimile copy) of the Guarantor
Acknowledgment and Consent in substantially the form attached hereto as Exhibit
A;
 
(xxii)            the Lender shall have received from each holder of
Subordinated Debt a duly executed original (or an executed facsimile copy) of
the Subordinated Lender Acknowledgment and Consent in substantially the form
attached hereto as Exhibit B; and
 
(xxiii)           the Lender shall have received such other documents as the
Lender in its sole discretion, which discretion shall be exercised in a
commercially reasonable manner, may require.
 
Section Five.  General Provisions.
 
(i)           Except as herein expressly amended, the Credit Agreement, the
Guaranty 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.

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--------------------------------------------------------------------------------

(ii)         All references to the Credit Agreement, the Guaranty and the other
Loan Documents in the Loan Documents shall mean the Credit Agreement, the
Guaranty and the other Loan Documents as amended as of the effective date
hereof, and as amended hereby and as hereafter amended, supplemented and
modified from time to time.
 
(iii)         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.
 
(iv)        This Amendment shall be governed by and construed in accordance with
the internal laws of the State of New York, without regard to the conflicts of
law principles thereof.
 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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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.
 

 
AMERICAN/UNIVERSAL SUPPLY, INC. 
     
By:
/s/ William Pagano
   
Name: William Pagano
   
Title: Vice President
       
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 PURCHASING CORP. 
     
By:
/s/ William Pagano
   
Name: William Pagano
   
Title: President
       
WELLS FARGO BANK, NATIONAL ASSOCIATION, acting through its Wells Fargo Business
Credit operating division 
     
By:
/s/ Baraka Stewart
   
Name: Baraka Stewart
   
Title: Vice President

--------------------------------------------------------------------------------

Schedule 1

Names, Chief Executive Offices and Collateral Locations

Name:

S&A Purchasing Corp.

Chief Executive Office:

S&A Purchasing Corp.
275 Wagaraw Road
Hawthorne, NJ 07506

Collateral Locations:

S&A Purchasing Corp.
20 & 40 Maple Avenue
Great Barrington, MA 01230

S&A Purchasing Corp.
1131 East Street
Pittsfield, MA 01201

S&A Purchasing Corp.
992 Massachusetts Avenue
North Adams, MA 01247

Tax ID Number:

26-0778121

--------------------------------------------------------------------------------

Schedule 2

Subsidiaries

None

--------------------------------------------------------------------------------

Schedule 3

Litigation

None

--------------------------------------------------------------------------------

Schedule 4

Environmental Citations

None

--------------------------------------------------------------------------------

Schedule 5

Name and Structural Changes

None

--------------------------------------------------------------------------------

Schedule 6

Licenses, Permits and Intellectual Property

None

--------------------------------------------------------------------------------

Schedule 7

Existing Liens

See Schedule 8

--------------------------------------------------------------------------------

Schedule 8

Existing Debt

--------------------------------------------------------------------------------

S&A SUPPLY, INC.
 
VEHICLE LOANS PAYABLE (Per 7/31/07 TB)
 
7/31/07
 
 
 
 
 
 
 
Proj.
 
  
 
 
 
 
Bal.
G/L
Bank
Vehicle
CI
LT
T
9/10/07
 
 
 
 
 
 
 
242003
260603
Legacy
Ford F-650 Box Truck
9,934    
21,841    
31,775    
30,823    
 
 
 
 
 
 
 
242901
260901
Greylock
’05 Toyota Tundra
3,862    
5,492    
9,354    
8,974    
 
 
 
 
 
 
 
243001
267501
GMAC
’04 GMC Rack Body
6,470    
4,461    
10,931    
10,391    
 
 
 
 
 
 
 
243201
269001
GMAC
’04 Chevy Colorado
4,975    
3,732    
8,707    
7,878    
 
 
 
 
 
 
 
243203
267503
Greylock
’07 Toyota Tundra
7,111    
17,182    
24,293    
23,817    
 
 
 
 
 
 
 
243401
261501
GMAC
’04 Chev. PU/w/plow
(Silverado)
6,754    
2,030    
8,784    
8,216    
 
 
 
 
 
 
 
244501 
267801
Greylock
'05 Chev. ¾ ton (Silverado)
5,583    
4,713    
10,296    
9,293    
 
 
 
 
 
 
 
245005
267905
Greylock
’06 Ford F350 Rack
2,973    
18,134    
21,107    
20,509    
 
 
 
 
 
 
 
248603
Berkshire
’03 Chev.
493    
 
493    
-0-    
 
 
 
 
 
 
 
248703
262003
Greylock
’05 Chev. ½ ton (Silverado)
5,401    
4,543    
9,944    
8,954    
 
 
 
 
 
 
 
249003
270003
Greylock
’06 Ford F250 WH/RE
3,538    
11,552    
15,090    
14,421    
 
 
 
 
 
 
 
249203
268003
Ford Credit
’03 Ford WH Van (E-150)
3,799    
 (1,891)    
 1,908    
772    
 
 
 
 
 
 
 
250103
267303
Berkshire
’06 GMC ExCab (K-25)
4,794    
11,414    
16,208    
15,022    
 
 
 
 
 
 
 
251001
268101
Legacy
’05 Ford F650 Box Truck
9,934    
21,841    
31,775    
30,823    
 
 
 
 
 
 
 
######
260503
Ford Credit
’03 Ford F-250
-    
(753)    
(753)    
-0-    
 
 
 
 
 
 
 
######
267403
Berkshire
’07 GMC 3500 Rack
-    
24,442    
24,442    
25,119    
 
 
 
 
 
 
 
######
267603
Berkshire
’07 GMC 2500 P/UP
    -    
23,563    
23,563    
24,003    
 
 
Total
 
 
247,917    
239,015    

 

--------------------------------------------------------------------------------

 
Schedule 9

Existing Guaranties and Contingent Liabilities

None

--------------------------------------------------------------------------------

Schedule 10

Existing Investments and Loans

See Schedule 8

--------------------------------------------------------------------------------

Exhibit A

Guarantor Acknowledgment and Consent

The undersigned, each a guarantor with respect to the obligations of
American/Universal Supply, Inc., a New York corporation (“American”), The RAL
Supply Group, Inc., a New York corporation (“RAL”), Universal Supply Group,
Inc., a New York corporation (“Universal”; American, RAL and Universal are
collectively referred to as, the “Existing Borrowers”) and S&A Purchasing Corp.,
a New York corporation (the “New Borrower”; the Existing Borrowers and the New
Borrower are collectively referred to as the “Borrowers”), to Wells Fargo Bank,
National Association, acting through its Wells Fargo Business Credit operating
division, as successor to Wells Fargo Business Credit, Inc. (the “Lender”),
under the Credit and Security Agreement, dated as of July 28, 2004, as amended
by the First Amendment, dated as of May 11, 2006 (as further amended from time
to time, the “Credit Agreement”), by and among the Borrowers and the Lender,
hereby (i) acknowledges and consents to the execution, delivery and performance
by the Borrowers of the Second Amendment, dated as of September 10, 2007 (the
“Amendment”), to and under the Credit and Security Agreement, by and among, the
Borrowers and the Lender, attached hereto as Annex A, (ii) reaffirms and agrees
that the Guaranty by Corporations, dated as of July 28, 2004, as supplemented by
the Guarantor Acknowledgment and Consent, dated as of May 11, 2006 (as further
supplemented or amended from time to time, the “Guaranty”), made by the
undersigned (other than New Borrower) for the benefit of the Lender is in full
force and effect, without defense, offset or counterclaim, and will remain in
full force and effect from and after the effective date of the Amendment, and
the undersigned acknowledges and guarantees the Indebtedness (as defined in the
Guaranty), including, without limiting the generality of the foregoing, the
obligations of the Borrowers under the Credit Agreement, as amended by the
Amendment; and (iii) represents and warrants that the execution, delivery and
performance of this Guarantor Acknowledgment and the performance of the Guaranty
as supplemented by this Consent have been duly authorized by all necessary
corporate action and do not and will not require any consent or approval of such
undersigned’s stockholders, or 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, in order for this Consent or the Guaranty, as amended and supplemented
by this Consent, to be effective and enforceable against the undersigned with
respect to all of the Indebtedness (as defined in the Guaranty).
 
In addition to the foregoing, Colonial Commercial Corp. (“Colonial”) hereby (i)
reaffirms and agrees that each of the General Security Agreement, dated as of
July 28, 2004 (as amended from time to time, the “Security Agreement”), entered
into by Colonial and the Lender and the Securities Pledge Agreement, dated as of
July 28, 2004, as amended by the First Amendment to the Securities Pledge
Agreement, dated as of September 10, 2007 (as further amended from time to time,
the “Pledge Agreement” and, together with the Security Agreement, the
“Collateral Documents”), made by Colonial in favor of the Lender is in full
force and effect, and will remain in full force and effect from and after the
effective date of the Amendment, and acknowledges that the Collateral (as
defined in the Security Agreement) and the Pledged Collateral (as defined in the
Pledge Agreement) will secure the Indebtedness (as defined in the Guaranty), and
(ii) represents and warrants to the Lender that as of the date hereof, all of
the representations and warranties of Colonial contained in the Collateral
Documents, as supplemented by this Consent, 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. Unless otherwise specified herein,
capitalized terms used herein have the meanings specified in the Amendment.
 

--------------------------------------------------------------------------------

 

 
AMERICAN/UNIVERSAL SUPPLY, INC. 
     
By:
/s/ William Pagano
   
Name: William Pagano
   
Title: Vice President
       
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 PURCHASING CORP. 
     
By:
/s/ William Pagano
   
Name: William Pagano
   
Title: President
       
COLONIAL COMMERCIAL CORP. 
     
By:
/s/ William Pagano
   
Name: William Pagano
   
Title: Chief Executive Officer

--------------------------------------------------------------------------------

Annex A to Guarantor
Acknowledgment and Consent
 
Second Amendment

--------------------------------------------------------------------------------

Exhibit B

Subordinated Lender Acknowledgment and Consent

The undersigned, each a holder of Subordinated Debt (as defined in the Credit
and Security Agreement, dated as of July 28, 2004 (as amended from time to time,
the “Credit Agreement”)), by and among American/Universal Supply, Inc., a New
York corporation (“American”), The RAL Supply Group, Inc., a New York
corporation (“RAL”), Universal Supply Group, Inc., a New York corporation
(“Universal”), and S&A Purchasing Corp., a New York corporation (“S&A”; American
together with RAL, Universal and S&A are collectively referred to as, 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., hereby (i) acknowledges and consents to the execution,
delivery and performance by the Borrowers of the Second Amendment, dated as of
September 10, 2007 (the “Amendment”), to and under the Credit Agreement,
attached hereto as Annex A, (ii) reaffirms and agrees that the Subordination
Agreement set forth on Annex B attached hereto to which it is a party (each as
amended from time to time, the “Subordination Agreement”), is in full force and
effect, and will remain in full force and effect from and after the effective
date of the Amendment, and (iii) acknowledges that the execution, delivery and
performance of this Subordinated Lender Acknowledgment and Consent (the
“Consent”) and the performance of the Subordination Agreement, as amended and
supplemented by this Consent, do not and will not require any consent or
approval of any other Person, or 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, in order for this Consent or the Subordination Agreement, as amended and
supplemented by this Consent, to be effective and enforceable against the
undersigned. Unless otherwise specified herein, capitalized terms used herein
have the meanings specified in the Amendment.

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HILDEBRANDT PROPERTIES, LLC 
     
By:
/s/ John A. Hildebrandt
   
Name: John A. Hildebrandt
   
Title:
         
/s/ Paul H. Hildebrandt
   
Paul H. Hildebrandt
       
COLONIAL COMMERCIAL CORP. 
     
By:
/s/ William Pagano
   
Name: William Pagano
   
Title: Chief Executive Officer
       
GOLDMAN ASSOCIATES OF NEW YORK, INC. 
     
By:
/s/ Melissa Goldman-Williams
   
Name: Melissa Goldman-Williams
   
Title: Vice President of Operations
       
For Rita Folger, William Pagano, Paul H. Hildebrandt, John A. Hildebrandt,
Eileen Goldman, William Salek, James Fallon, Richard A. Cancelosi and Margaret
Friedrich by Power of Attorney 
         
/s/ William Pagano
   
William Pagano, Attorney-in-Fact

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Annex A to Subordinated Lender
Acknowledgment and Consent
 
Second Amendment

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Annex B to Subordinated Lender
Acknowledgment and Consent

Subordination Agreements

Subordination Agreement, dated as of the 28th day of July, 2004, as amended from
time to time, made by Hildebrandt Properties, LLC, for the benefit of Wells
Fargo Business Credit, Inc.
 
Subordination Agreement, dated as of the 28th day of July, 2004, as amended from
time to time, made by Paul H. Hildebrandt, for the benefit of Wells Fargo
Business Credit, Inc.
 
Subordination Agreement, dated as of the 28th day of July, 2004, as amended from
time to time, made by Colonial Commercial Corp. for the benefit of Wells Fargo
Business Credit, Inc.
 
Subordination Agreement, dated as of the 28th day of July, 2004, as amended from
time to time, made by Goldman Associates of New York, Inc., a New York
corporation, for the benefit of Wells Fargo Business Credit, Inc.
 
Subordination Agreement, dated as of the 28th day of July, 2004, as amended from
time to time, made by Rita Folger, William Pagano, Paul H. Hildebrandt, John A.
Hildebrandt, Eileen Goldman, William Salek, James Fallon, Richard A. Cancelosi
and Margaret Friedrich, for the benefit of Wells Fargo Business Credit, Inc.

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Exhibit C

Support Agreement Confirmation

The undersigned, each a party to that certain Support Agreement, dated as July
28, 2004 (as the same may be amended from time to time, the “Support
Agreement”), by and among American/Universal Supply, Inc. (“American”), The RAL
Supply Group, Inc. (“RAL”), Universal Supply Group, Inc. (“Universal”), and S&A
Purchasing Corp., a New York corporation (“New Borrower”; American together with
RAL, Universal and New Borrower are collectively referred to as, 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”), hereby (i) acknowledges and consents to
the execution, delivery and performance by the Borrowers of the Second
Amendment, dated as of September 10, 2007 (the “Amendment”), to and under the
Credit and Security Agreement, by and among, the Borrowers and the Lender,
attached hereto as Annex A, and (ii) reaffirms and agrees that the Support
Agreement, made by the undersigned for the benefit of the Lender is in full
force and effect, and will remain in full force and effect from and after the
effective date of the Amendment. Unless otherwise specified herein, capitalized
terms used herein have the meanings specified in the Amendment.
 

   
/s/ William Pagano
   
William Pagano
       
AMERICAN/UNIVERSAL SUPPLY, INC. 
 
By:
/s/ William Pagano
   
Name: William Pagano
   
Title: Vice President
       
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 PURCHASING CORP. 
 
By:
/s/ William Pagano
   
Name: William Pagano
   
Title: President

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Annex A to Support Agreement
Confirmation
 
Second Amendment

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