Document:

<PAGE>

                          CREDIT SUISSE FIRST BOSTON
                             Eleven Madison Avenue
                              New York, NY  10010

APPLIED POWER INC.
(doing business as Actuant Corporation)
6100 North Baker Road
Glendale, WI  53209

                                                                   July 31, 2000

                          Letter of Credit Fee Letter

Ladies and Gentlemen:

          Reference is made to the Credit Agreement dated the date hereof (the
"Credit Agreement") among Credit Suisse First Boston as Lead Arranger and
-----------------
Administrative Agent ("CSFB"), the other Agents and Lenders named therein and
                       ----
Applied Power Inc. (doing business as Actuant Corporation) ("Actuant" or "you").
                                                             -------      ---
Terms used but not defined in this fee letter agreement (the "Fee Letter") have
                                                              ----------
the meanings assigned thereto in the Credit Agreement.

          You agree to pay to the Issuing Bank with respect to each Letter of
Credit, on the last Business Day of March, June, September and December of each
year and on the L/C Maturity Date, a fronting fee equal to (x) in the case of a
Letter of Credit issued by Credit Suisse First Boston as the Issuing Bank, 0.25%
per annum on the aggregate outstanding face amount of such Letter of Credit and
(y) in the case of a Letter of Credit issued by any Lender other than Credit
Suisse First Boston as the Issuing Bank, such amount as shall have been agreed
upon by you and such Lender.

          You agree that this Fee Letter is a Loan Document and your obligations
hereunder an Obligation under the Credit Agreement.

          This Fee Letter may be executed in any number of counterparts, each of
which shall be an original and all of which, when taken together, shall
constitute one agreement. Delivery of an executed counterpart of a signature
page of this Fee Letter by facsimile transmission shall be as effective as
delivery of a manually executed counterpart of this Fee Letter.
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                                      S-1

          If the foregoing correctly sets forth our understanding, please
indicate your acceptance of the terms hereof by signing in the appropriate space
below and returning to us the enclosed duplicate originals hereof, whereupon
this Fee Letter shall become a binding agreement between us.

                                             Very truly yours,

                                             CREDIT SUISSE FIRST BOSTON

                                             By:  ______________________________
                                                  Name:
                                                  Title:

                                             By:  ______________________________
                                                  Name:
                                                  Title:

Accepted and agreed to as of the date
first written above by:

APPLIED POWER INC.

By:  _________________________________
     Name:
     Title:<PAGE>

               INDEMNITY, SUBROGATION AND CONTRIBUTION AGREEMENT

                         INDEMNITY, SUBROGATION and CONTRIBUTION AGREEMENT
                    (together with instruments executed and delivered pursuant
                    to Section 12, this "Agreement") dated as of July 31, 2000,
                    among APPLIED POWER INC., a Wisconsin corporation (doing
                    business as Actuant Corporation) (the "Company"), each
                    subsidiary of the Company listed on Schedule I hereto (the
                    "Subsidiary Guarantors") and CREDIT SUISSE FIRST BOSTON, a
                    bank organized under the laws of Switzerland, acting through
                    its New York Branch ("CSFB"), as collateral agent (in such
                    capacity, the "Collateral Agent") for the Secured Parties
                    (as defined herein).

     Reference is made to (a) the Credit Agreement dated as of July 31, 2000 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Company, the Lenders (as defined in Article I thereof),
CSFB as administrative agent (in such capacity, the "Administrative Agent"), as
collateral agent (in such capacity, the "Collateral Agent") and as issuing bank
(in such capacity, the "Issuing Bank") for the Lenders, FIRST UNION NATIONAL
BANK as syndication agent (in such capacity, the "Syndication Agent"), and ING
(U.S.) CAPITAL LLC as documentation agent (in such capacity, the "Documentation
Agent"), (b) the Subsidiary Guarantee Agreement dated as of July 31, 2000 (as
amended, supplemented or otherwise modified from time to time, the "Subsidiary
Guarantee Agreement"), among the Subsidiary Guarantors and the Collateral Agent,
and (c) the Security Documents referred to in the Credit Agreement. Capitalized
terms used herein and not defined herein are used with the meanings assigned to
such terms in the Credit Agreement.

     The Lenders have agreed to make Loans to the Borrower, and the Issuing Bank
has agreed to issue Letters of Credit for the account of the Borrower, in each
case pursuant to, and upon the terms and subject to the conditions specified in,
the Credit Agreement. The Subsidiary Guarantors have guaranteed such Loans and
the other Obligations (as defined in the Credit Agreement) of the Borrower under
the Credit Agreement pursuant to the Credit Agreement and the Subsidiary
Guarantee Agreement and have granted Liens on and security interests in certain
of their assets pursuant to the Security Documents to secure the Obligations.
The obligations of the Lenders to make Loans and of the Issuing Bank to issue
Letters of Credit are conditioned on, among other things, the execution and
delivery by the Parents and the Subsidiary Guarantors of an agreement in the
form hereof.

     Accordingly, the Borrower, each Subsidiary Guarantor and the Collateral
Agent agree as follows:

     SECTION 1.  Indemnity and Subrogation. In addition to all such rights of
indemnity and subrogation as the Subsidiary Guarantors may have under applicable
law (but subject to Section 3), the Borrower agrees that (a) in the event a
payment shall be made by any Subsidiary Guarantor under the Subsidiary Guarantee
Agreement, the Borrower shall indemnify such Subsidiary Guarantor for the full
amount of such payment and, until such indemnification obligation shall have
been satisfied, such Subsidiary Guarantor shall be subrogated to the rights of
the person to whom such payment shall have been made to the extent of such
payment and (b) in the event any assets of any Subsidiary Guarantor shall be
sold pursuant to any Security Document to satisfy a claim of any Secured Party,
the Borrower shall indemnify such Subsidiary Guarantor in an amount equal to the
greater of the book value or the fair market value of the assets so sold.

     SECTION 2.  Contribution and Subrogation.  Each Subsidiary Guarantor (a
"Contributing Guarantor") agrees (subject to Section 3) that, in the event a
payment shall be made by any other Subsidiary Guar-
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                                      -2-

antor under the Subsidiary Guarantee Agreement or assets of any other Subsidiary
Guarantor shall be sold pursuant to any Security Document to satisfy a claim of
any Secured Party, and, in either case, such other Subsidiary Guarantor (the
"Claiming Guarantor") shall not have been fully indemnified by the Borrower as
provided in Section 1, the Contributing Guarantor shall, to the extent the
Claiming Guarantor shall not have been so indemnified by the Borrower, indemnify
the Claiming Guarantor in an amount equal to the amount of such payment or the
fair market value of such assets, as the case may be, in each case multiplied by
a fraction of which the numerator shall be the net worth of the Contributing
Guarantor on the date hereof (or, in the case of any Subsidiary Guarantor
becoming a party hereto pursuant to Section 12, the date of the Supplement
hereto executed and delivered by such Subsidiary Guarantor) and the denominator
shall be the aggregate net worth of all the Subsidiary Guarantors on the date
hereof (or, in the case of any Subsidiary Guarantor becoming a party hereto
pursuant to Section 12, the date of the Supplement hereto executed and delivered
by such Subsidiary Guarantor). Any Contributing Guarantor making any payment to
a Claiming Guarantor pursuant to this Section 2 shall be subrogated to the
rights of such Claiming Guarantor under Section 1 to the extent of such payment.

     SECTION 3.  Subordination. Notwithstanding any provision of this Agreement
to the contrary, all rights of the Subsidiary Guarantors under Sections 1 and 2
and all other rights of indemnity, contribution or subrogation under applicable
law or otherwise shall be fully subordinated to the indefeasible payment in full
in cash of the Obligations. No failure on the part of either the Borrower or any
Subsidiary Guarantor to make the payments required by Sections 1 and 2 (or any
other payments required under applicable law or otherwise) shall in any respect
limit the obligations and liabilities of any Subsidiary Guarantor with respect
to its obligations hereunder, and each Subsidiary Guarantor shall remain liable
for the full amount of the obligations of such Subsidiary Guarantor hereunder.

     SECTION 4.  Termination. This Agreement shall survive and be in full force
and effect so long as the Subsidiary Guarantee Agreement has not been
terminated, and shall continue to be effective or be reinstated, as the case may
be, if at any time payment, or any part thereof, of any Obligation is rescinded
or must otherwise be restored by any Secured Party upon the bankruptcy or
reorganization of either the Borrower, any Subsidiary Guarantor or otherwise.

     SECTION 5.  Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

     SECTION 6.  No Waiver, Amendment. (a) No failure on the part of the
Collateral Agent or any Subsidiary Guarantor to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy by the Collateral Agent or any Subsidiary Guarantor preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
All remedies hereunder are cumulative and are not exclusive of any other
remedies provided by law. None of the Collateral Agent and the Subsidiary
Guarantors shall be deemed to have waived any rights hereunder unless such
waiver shall be in writing and signed by such parties.

     (b)  Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between the
Borrower, the Subsidiary Guarantors and the Collateral Agent, with any consent
required under the Credit Agreement.

     SECTION 7.  Notices. All communications and notices hereunder shall be in
writing and given as provided in the Credit Agreement or the Subsidiary
Guarantee Agreement, as applicable, and addressed as specified therein.
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                                      -3-

     SECTION 8.  Binding Agreement, Assignments. Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of the parties that are contained in this Agreement
shall bind and inure to the benefit of their respective successors and assigns.
Neither the Borrower nor any Subsidiary Guarantor may assign or transfer any of
its rights or obligations hereunder (and any such attempted assignment or
transfer shall be void) without the prior written consent of the Required
Lenders. Notwithstanding the foregoing, at the time any Subsidiary Guarantor is
released from its obligations under the Subsidiary Guarantee Agreement in
accordance with the Subsidiary Guarantee Agreement and the Credit Agreement,
such Subsidiary Guarantor will cease to have any rights or obligations under
this Agreement.

     SECTION 9.  Survival of Agreement, Severability. (a) All covenants and
agreements made by the Borrower and each Subsidiary Guarantor herein and in the
certificates or other instruments prepared or delivered in connection with this
Agreement or the other Loan Documents shall be considered to have been relied
upon by the Collateral Agent, the other Secured Parties and each Subsidiary
Guarantor, shall survive the making by the Lenders of the Loans and the issuance
of the Letters of Credit by the Issuing Bank and shall continue in full force
and effect as long as the principal of or any accrued interest on any Loans or
any other fee or amount payable under the Credit Agreement, this Agreement or
any of the other Loan Documents is outstanding and unpaid, the L/C Exposure does
not equal zero or the Commitments have not been terminated.

     (b)  In case any one or more of the provisions contained in this Agreement
should be held invalid, illegal or unenforceable in any respect, no party hereto
shall be required to comply with such provision for so long as such provision is
held to be invalid, illegal or unenforceable, but the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.

     SECTION 10. Counterparts. This Agreement may be executed in counterparts
(and by different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Agreement shall be effective with respect to any
Subsidiary Guarantor when a counterpart bearing the signature of such Subsidiary
Guarantor shall have been delivered to the Collateral Agent. Delivery of an
executed signature page to this Agreement by facsimile transmission shall be as
effective as delivery of a manually signed counterpart of this Agreement.

     SECTION 11. Rules of Interpretation.  The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement.

     SECTION 12. Additional Subsidiary Guarantors. Subject to the provisions of
Section 5.11(b) of the Credit Agreement, each Domestic Subsidiary that was not
in existence on the date of the Credit Agreement is required to enter into this
Agreement as a Subsidiary Guarantor upon becoming such a Subsidiary. Upon
execution and delivery, after the date hereof, by the Collateral Agent and such
a Subsidiary of an instrument in the form of Annex 1 hereto, such Subsidiary
shall become a Subsidiary Guarantor hereunder with the same force and effect as
if originally named as a Subsidiary Guarantor hereunder. The execution and
delivery of any instrument adding an additional Subsidiary Guarantor as a party
to this Agreement shall not require the consent of any Subsidiary Guarantor
hereunder. The rights and obligations of each Subsidiary Guarantor hereunder
shall remain in full force and effect notwithstanding the addition of any new
Subsidiary Guarantor as a party to this Agreement.
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                                      -4-

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first appearing above.

                                   APPLIED POWER INC.
                                   (doing business as Actuant Corporation)

                                   By:  ____________________________________
                                        Name:
                                        Title:

                                   EACH OF THE SUBSIDIARIES LISTED
                                   ON SCHEDULE I HERETO

                                   By:  ____________________________________
                                        Name:
                                        Title:

                                   CREDIT SUISSE FIRST BOSTON, as
                                   Collateral Agent

                                   By:  ____________________________________
                                        Name:
                                        Title:

                                   By:  ____________________________________
                                        Name:
                                        Title:
<PAGE>

                                                                      SCHEDULE 1
                                                   to the Indemnity, Subrogation
                                                      and Contribution Agreement

<TABLE>
<CAPTION>
               Subsidiary Guarantors              Address
               ---------------------              -------
<S>                                          <C>
                                             c/o Applied Power Inc.
                                             6100 North Baker Road
                                             Glendale, WI 53209
                                             Attn: Andy Lampereur, Chief Financial Officer
                                             Fax No.:  (414) 247-5550

                                             and

                                             Quarles & Brady
                                             411 East Wisconsin Avenue
                                             Milwaukee, WI 53202-4497
                                             Attn:  Andrew M. Barnes
                                             Fax No.:  (414) 271-3552
</TABLE>
<PAGE>

                                       Annex 1 to the Indemnity, Subrogation and
                                       Contribution Agreement

                    SUPPLEMENT NO. (this "Supplement") dated as of [ ], 2000 to
               the Indemnity, Subrogation and Contribution Agreement dated as of
               July 31, 2000 (as the same may be amended, supplemented or
               otherwise modified from time to time, the "Indemnity, Subrogation
               and Contribution Agreement"), among APPLIED POWER INC., a
               Wisconsin corporation (doing business as Actuant Corporation)
               (the "Borrower"), each subsidiary of the Company listed on
               Schedule I thereto (the "Subsidiary Guarantors") and CREDIT
               SUISSE FIRST BOSTON, a bank organized under the laws of
               Switzerland, acting through its New York Branch ("CSFB"), as
               collateral agent (in such capacity, the "Collateral Agent") for
               the Secured Parties (as defined herein).

     (A)  Reference is made to (a) the Credit Agreement dated as of July 31,
2000 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among the Borrower, the Lenders (as defined in Article I
thereof, CSFB as administrative agent (in such capacity, the "Administrative
Agent"), as collateral agent (in such capacity, the "Collateral Agent") and as
issuing bank (in such capacity, the "Issuing Bank") for the Lenders, FIRST UNION
NATIONAL BANK as syndication agent (the "Syndication Agent"), and ING (U.S.)
CAPITAL LLC as documentation agent (in such capacity, the "Documentation
Agent"), (b) the Subsidiary Guarantee Agreement dated as of July 31, 2000 (as
amended, supplemented or otherwise modified from time to time, the "Subsidiary
Guarantee Agreement"), among the Subsidiary Guarantors and the Collateral Agent,
and (c) the Security Documents referred to in the Credit Agreement.

     (B)  Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Indemnity, Subrogation and
Contribution Agreement and the Credit Agreement.

     (C)  The Borrower and the Subsidiary Guarantors have entered into the
Indemnity, Subrogation and Contribution Agreement in order to induce the Lenders
to make Loans and the Issuing Bank to issue Letters of Credit. Subject to the
provisions of to Section 5.11(b) of the Credit Agreement, each Domestic
Subsidiary that was not in existence or was not such a Subsidiary on the date of
the Credit Agreement is required to enter into the Indemnity, Subrogation and
Contribution Agreement as a Subsidiary Guarantor upon becoming such a
Subsidiary. Section 12 of the Indemnity, Subrogation and Contribution Agreement
provides that additional Subsidiaries may become Subsidiary Guarantors under the
Indemnity, Subrogation and Contribution Agreement by execution and delivery of
an instrument in the form of this Supplement. The undersigned Subsidiary (the
"New Guarantor") is executing this Supplement in accordance with the
requirements of the Credit Agreement to become a Subsidiary Guarantor under the
Indemnity, Subrogation and Contribution Agreement in order to induce the Lenders
to make additional Loans and the Issuing Bank to issue additional Letters of
Credit and as consideration for Loans previously made and Letters of Credit
previously issued.

     Accordingly, the Collateral Agent and the New Guarantor agree as follows:

SECTION 1. In accordance with Section 12 of the Indemnity, Subrogation and
Contribution Agreement, the New Guarantor by its signature below becomes a
Subsidiary Guarantor under the Indemnity, Subrogation and Contribution Agreement
with the same force and effect as if originally named therein as a Subsidiary
Guarantor and the New Guarantor hereby agrees to all the terms and provisions of
the Indemnity, Subrogation and Contribution Agreement applicable to it as a
Subsidiary Guarantor thereunder. Each reference to a "Sub-
<PAGE>

                                      -2-

sidiary Guarantor" in the Indemnity, Subrogation and Contribution Agreement
shall be deemed to include the New Guarantor.

     SECTION 2. The New Guarantor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.

     SECTION 3. This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the Collateral
Agent shall have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Guarantor and the Collateral Agent.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.

     SECTION 4. Except as expressly supplemented hereby, the Indemnity,
Subrogation and Contribution Agreement shall remain in full force and effect .

     SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

     SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Indemnity, Subrogation and Contribution Agreement shall not in
any way be affected or impaired. The parties hereto shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.

     SECTION 7. All communications and notices hereunder shall be in writing and
given as provided in Section 7 of the Indemnity, Subrogation and Contribution
Agreement. All communications and notices hereunder to the New Guarantor shall
be given to it at the address set forth under its signature.

     SECTION 8. The New Guarantor agrees to reimburse the Collateral Agent for
its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, other charges and disbursements of counsel for
the Collateral Agent.
<PAGE>

                                      -3-

     IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent have duly
executed this Supplement to the Indemnity, Subrogation and Contribution
Agreement as of the day and year first above written.

                              [Name Of New Guarantor]

                              By:  ____________________________________
                                   Name:
                                   Title:
                                   Address:

                              CREDIT SUISSE FIRST BOSTON, as
                              Collateral Agent

                              By:  ____________________________________
                                   Name:
                                   Title:

                              By:  ____________________________________
                                   Name:
                                   Title:

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