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EXHIBIT 10.12
 
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Wells Fargo Capital Finance
100 Park Avenue, 3rd Floor
New York, NY 10017

WELLS FARGO BANK, NATIONAL ASSOCIATION,
acting through its Wells Fargo Business Credit operating division
100 Park Avenue
New York, NY 10017
 
October 18,2011
 
Via Facsimile
 
The RAL Supply Group, Inc.
Universal Supply Group, Inc.
S&A Supply, Inc.
(collectively the "Company")
275 WagarawRoad
Hawthorne, New Jersey 07506
 
Attn: 
William Pagano,

President
 
Re: Request of Company for termination of Credit and Security Agreement dated as
of July 28, 2004 (as amended, the "Credit Agreement") and payment of all
Obligations
 
Dear Company:
 
You have requested that Wells Fargo Bank, National Association ("Wells Fargo"),
accept payment in full of all Obligations of Company under the Credit Agreement
that are due and payable as of October 18, 2011 (the "Payoff Date"), and
terminate each credit facility extended to Company thereunder as well as Wells
Fargo's lien on and security interest (collectively "Security Interest") in all
Collateral, and in all assets and properties of any other Person which secure
the Obligations (collectively the "Third Party Collateral"). You have advised us
that concurrently with such payment, you will be entering into a new financing
arrangement with Key Bank ("Replacement Lender"). Capitalized terms not
otherwise defined in this letter agreement shall have the meaning set forth in
the Credit Agreement.
 
CONDITIONS TO TERMINATION OF CREDIT AGREEMENT AND SECURITY INTEREST
 
In order to meet your request, Wells Fargo must receive, no later than 3:00
p.m., New York time on the Payoff Date, delivery of the following:
 
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(i)         immediately available funds in the amount of $11,115,818.98 (the
"Payoff Amount"), representing all unpaid principal, interest, fees, costs and
expenses under the Credit Agreement, as fully set forth on attached Exhibit A;
 
(ii)        the Indemnity Cash Collateral (as defined below and included in
Payoff Amount);
 
and
 
(iii)       a fully executed counterpart to this letter agreement.
 
TERMINATION OF CREDIT AGREEMENT AND SECURITY INTEREST
 
Upon receipt of the foregoing,
 
1.          Wells Fargo shall release, terminate and satisfy its Security
Interest in the Collateral, and the Third Party Collateral, and execute and
deliver such releases, termination statements or directions to terminate as
Company or Replacement Lender may reasonably request, which must be prepared and
filed by Company at Company's sole cost and expense.
 
2.          Company and Replacement Lender are each authorized by Wells Fargo to
file UCC termination statements, and such other documents as are necessary, to
terminate Wells Fargo's Security Interest in all Collateral and all Third Party
Collateral, other than Wells Fargo's Security Interest in the Indemnity Cash
Collateral, which shall continue as provided under the terms of this letter.
 
3.          The Credit Agreement, the Loan Documents, and each credit facility
extended by Wells Fargo thereunder shall be terminated and the obligations of
each party thereunder shall cease to be of any further force or effect;
provided, however, that all provisions of the Credit Agreement and the other
Loan Documents which by their terms survive termination of the Credit Agreement
and the Loan Documents, including, without limitation, the Company's obligation
to repay all Obligations under the Credit Agreement and Company's obligation to
pay Wells Fargo's continuing costs and expenses and to indemnify and hold Wells
Fargo harmless, shall survive and not be deemed terminated, but shall remain in
full force and effect.
 
PAYMENT OF PAYOFF AMOUNTS AND ADJUSTMENTS
 
The Payoff Amount should be sent as follows:
 
Wells Fargo Bank, National Association
ABA 121000248
Account No. 4124923723
For Wells Fargo Bank N.A
for further credit to Universal Supply Group
Phone Advice: 646-728-3287
 
 
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In the event that Wells Fargo does not receive the Payoff Amount in immediately
available funds no later than 3:00 p.m., New York time on the Payoff Date, an
additional per diem charge of $1,092.63 shall be added to the Payoff Amount. The
Payoff Amount is subject to adjustment in the event that any checks,
instruments, and payment orders deposited to any of Company's accounts are
returned for insufficient funds or have not been processed or because of errors
in computation or other clerical or computer errors, or for any other reason.
 
If, by reason of adjustments made no more than seventy-five (75) days after the
Payoff Date, additional amounts are found to be due and owing to Wells Fargo,
you agree to promptly reimburse Wells Fargo for such additional indebtedness.
Our demand for such payment shall be conclusive upon you and Wells Fargo shall
not be obligated to make demand for payment upon any other indemnitor. This
letter shall be effective from the Payoff Date through and including November
1,2011, after which date it shall be null and void.
 
CONTINUATION OF DEPOSIT ACCOUNTS AND TREASURY MANAGEMENT PRODUCTS
 
Notwithstanding anything to the contrary in this letter, Company has requested,
and Wells Fargo hereby agrees, that Wells Fargo will continue to offer Company,
on an interim basis only, depository account services ("Deposit Accounts") and
treasury management products ("Treasury Management Products") pursuant to the
terms of the Commercial Account Agreement and Master Agreement for Treasury
Services and any other agreements for banking services that are currently in
existence between Wells Fargo and Company.
 
The Replacement Lender agrees that so long as any Deposit Accounts and Treasury
Management Products are outstanding, the Replacement Lender shall have no
security interest or claim of any kind in same or any deposit accounts or
brokerage accounts maintained with any affiliate of Wells Fargo. Company agrees
to close the Deposit Accounts and terminate its Treasury Management Products
with Wells Fargo within seventy-five (75) days of the date of this letter;
provided, however, that Wells Fargo reserves the right to close the Deposit
Accounts and terminate all Treasury Management Products at any time in its
discretion in accordance with its normal policies and procedures.
 
Company further agrees that Wells Fargo has no obligation to consider requests
for overdraft advances with respect to the Deposit Accounts, and that checks,
instruments, and payment orders drawn thereon will be honored only to the extent
that sufficient available funds are deposited therein at the time that any such
checks, instruments, and payment orders are presented for payment. In addition
to and not in limitation of any and all rights of offset that Wells Fargo may
have under applicable law, Wells Fargo has a Security Interest in all Deposits
Accounts that Company maintains with Wells Fargo and any monies or cash in Wells
Fargo's possession, and may apply same to the payment of all Obligations, as
well as any unpaid fees, costs or expenses owing by Company to Wells Fargo.
 
 
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Notwithstanding anything to the contrary in this letter agreement, Wells Fargo
also reserves all of its rights with respect to any checks, instruments, and
payment orders received by it in connection with the Deposit Accounts. Company
acknowledges and agrees that Wells Fargo may not have yet received full and
final credit for all checks, instruments, and payment orders deposited by us for
collection, which may nevertheless have been credited to Company in the
computation of the Payoff Amount. Company agrees to promptly indemnify and hold
Wells Fargo harmless for and from any losses arising from Wells Fargo's failure
or inability to collect the full face amount of any such checks, instruments,
and payment orders payable to Company, including without limitation, all usual
bank charges and direct costs and expenses relating to same which have been
credited to any of Company's credit facilities under the Credit Agreement or to
its deposit accounts.
 
In order to secure Company's indemnity obligations described in the preceding
paragraph, Company shall deliver to Wells Fargo no later than 3:00 p.m. New York
time on the Payoff Date cash collateral in the amount of $75,000 (the "Indemnity
Cash Collateral"'), which amount shall be deposited to a non interest bearing
blocked account maintained with Wells Fargo, with respect to which Company
hereby grants Wells Fargo a Security Interest, together with all amounts
deposited thereto, the balance of which Indemnity Cash Collateral shall be
returned to Company no earlier than twenty-one (21) days after all checks and
other items described in the preceding paragraph have been fully collected and
all costs and expenses described in the preceding paragraph have been paid in
full.
 
It is understood and agreed that our cancellation and termination of the Credit
Agreement, and the termination of the Security Interest of Wells Fargo in the
Collateral of Company and in the Third Party Collateral, is being undertaken in
consideration of and in reliance upon the agreement of Company to indemnify
Wells Fargo as provided in this letter. After satisfaction of all of Company's
obligations to Wells Fargo, we shall remit to you any proceeds or items that we
subsequently receive in connection with Company's Collateral, but we shall be
under no obligation to further pursue any collection and/or exercise any
remedies respecting any such collateral, other than delivering it to you,
endorsed or assigned, as necessary, without recourse to Wells Fargo.
 
This letter agreement may be signed and exchanged in counterparts, all of which
when taken together shall constitute one and the same agreement. This letter
agreement shall be governed by and construed in accordance with the internal
laws of the State of New York. Signature by facsimile will also bind the parties
to this letter agreement.
 

 
Very truly yours,
        WELLS FARGO BANK,   NATIONAL ASSOCIATION, acting through              
By: /s/ Christopher Hill   Name: Christopher Hill   Title: Authorized Signatory
SVP

 
 
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ACKNOWLEDGED AND AGREED TO:         The RAL Supply Group, Inc.   Universal
Supply Group, Inc.   S&A Supply, Inc.    
 
  By: /s/ William Salck   Name: William Salck   Title: Secretary  

 
 
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