-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BO9mt+B8qGv+Vtm795w2La/n5/Bp7WfeXoKoC0JFPL//PltcT3krdiLcWRrC+fK6 QHg/ahP/wOTSZpVCoHL+jw== 0001169232-03-003075.txt : 20030418 0001169232-03-003075.hdr.sgml : 20030418 20030418163435 ACCESSION NUMBER: 0001169232-03-003075 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 20030131 FILED AS OF DATE: 20030418 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUGHES SUPPLY INC CENTRAL INDEX KEY: 0000049029 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRICAL APPARATUS & EQUIPMENT, WIRING SUPPLIES [5063] IRS NUMBER: 590559446 STATE OF INCORPORATION: FL FISCAL YEAR END: 0125 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08772 FILM NUMBER: 03655924 BUSINESS ADDRESS: STREET 1: 20 N ORANGE AVE, STE 200 STREET 2: P O BOX 2273 CITY: ORLANDO STATE: FL ZIP: 32802-2273 BUSINESS PHONE: 4078414755 10-K 1 d55236_10k.htm ANNUAL REPORT

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

|X| Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended January 31, 2003

|_| Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ______________ to ______________

001-08772
Commission File Number

HUGHES SUPPLY, INC.

(Exact name of registrant as specified in its charter)

Florida
(State or other jurisdiction
of incorporation or organization)

59-0559446
(I.R.S. Employer
Identification No.)

20 North Orange Avenue
Suite 200
Orlando, Florida 32801
(Address of principal executive offices)

(407) 841-4755
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class
Common Stock ($1.00 Par Value)

Name of Each Exchange
on Which Registered
New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes |X| No |_|

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |_|

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

Yes |_| No |X|

The aggregate market value of the registrant’s voting stock held by non-affiliates as of the last business day of the registrant’s most recently completed second fiscal quarter ($34.04 per share as of August 2, 2002): $771,139,022.

There were 23,432,164 shares of the Registrant’s Common Stock ($1.00 par value) outstanding as of April 14, 2003.

DOCUMENTS INCORPORATED BY REFERENCE

Designated portions of the Definitive Proxy Statement for the 2003 Annual Meeting of Shareholders to be held on May 20, 2003 are incorporated by reference in Part III of this Report.

TABLE OF CONTENTS

Item		Page

PART I

1.	Business	3

2.	Properties	13

3.	Legal Proceedings	13

4.	Submission of Matters to a Vote of Security Holders	13

PART II

5.	Market for Registrant’s Common Equity and Related Stockholder Matters	13

6.	Selected Financial Data	14

7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

7A.	Quantitative and Qualitative Disclosures About Market Risk	29

8.	Financial Statements and Supplementary Data	30

9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	58

PART III

10.	Directors and Executive Officers of the Registrant	58

11.	Executive Compensation	58

12.	Security Ownership of Certain Beneficial Owners and Management	58

13.	Certain Relationships and Related Transactions	58

14.	Controls and Procedures	58

PART IV

15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K	58

SIGNATURES		64

CERTIFICATIONS		65

INDEX OF EXHIBITS FILED WITH THIS REPORT		67

PART I

ITEM 1. Business

Forward-Looking Statements

Certain statements set forth in this report constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended, and are subject to the safe harbor provisions created by such sections. When used in this report, the words “believe,” “anticipate,” “estimate,” “expect,” “may,” “will,” “should,” “plan,” “intend,” and similar expressions are intended to identify forward-looking statements. Although Hughes Supply, Inc. (as used throughout this report, “Hughes,” the “Company,” or the “Registrant” refers to Hughes Supply, Inc. and its subsidiaries, except where the context otherwise requires) believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Actual results or events may differ significantly from those indicated in such forward-looking statements as a result of various important factors. These factors are discussed further in the caption Risk Factors below. The Company assumes no obligation to publicly update or revise its forward-looking statements. The following should be read in conjunction with the Company’s consolidated financial statements and the notes thereto filed as part of this report.

Fiscal Year

The fiscal year of the Company is a 52 or 53-week period ending on the last Friday in January. Fiscal year 2003 contained 53 weeks while fiscal years 2002 and 2001 contained 52 weeks. The additional week in fiscal 2003 was included in the first quarter.

Business

Hughes Supply, Inc., founded in 1928, is a diversified wholesale distributor of construction and industrial materials, equipment, and supplies to commercial construction, residential construction, industrial, and public infrastructure markets in North America. Headquartered in Orlando, Florida, the Company distributes over 300,000 products, representing three major product groups, through 451 wholesale branches located in 34 states. The Company’s principal customers are electrical, plumbing, mechanical, fire protection, and underground utility contractors, electric utility customers, property management and property development companies, municipalities and government agencies, telecommunication companies, and industrial companies. Industrial companies include businesses in the petrochemical, food and beverage, pulp and paper, mining, pharmaceutical, and marine industries.

The Company’s mission is to be the best in customer service in each of the industries it serves, while also being the most efficient. To meet that challenge, the Company will use its strength of diversity. The Company’s primary focus is on offering customers the finest in Solutions, Supply and Service.

During the first quarter of fiscal 2003, the Company completed the reorganization of its management structure, which started in fiscal 2002 after the new president/chief operating officer had been with the Company for several months and a new strategic direction set. In connection with this reorganization, the Company initiated centralization programs in vendor relations, customer service, and support service areas. These programs are designed to leverage these functions across the entire Company. The branch operations were then reorganized under the management of three group (“Group”) presidents, as compared to being managed by five Group presidents in the prior fiscal year.

Based on the requirements of Statement of Financial Accounting Standards (“FAS”) 131, Disclosures about Segments of an Enterprise and Related Information, which aligns financial reporting with management structure and responsibility, the Company combined the operating results of its previous Electrical and Plumbing/HVAC Groups, to create a single Electrical & Plumbing segment, which reports to one Group president. The Company also combined the Water & Sewer and Building Materials Groups, to create a single Water & Sewer/Building Materials segment, which reports to one Group president. The Industrial Group president was not affected by the changes in management responsibility. These three Groups represent the Company’s reportable segments. This is the basis management uses for making operating decisions and assessing performance, and is on a basis consistent with how business activities are reported internally to management and the board of directors. This product-driven organizational structure is designed to enhance the Company’s competitive position in the marketplace by intensifying the Company’s focus on satisfying customer needs, strengthening vendor relationships, and streamlining the decision-making processes of the Company. Financial information about the Company’s operating segments is set forth in note 16 of the notes to the consolidated financial statements filed as part of this report.

Products

The Company focuses on distributing construction and industrial products that leverage its strengths in inventory management, purchasing, specialized sales forces by product category, distribution and logistics, credit management, and information technology. The Company has intensified its focus on providing value-added products and services, including integrated supply arrangements, high-density polyethylene fusion services, leak detection services, fabrication, rental equipment, maintenance and repair, facilities management, and the development of national accounts. The Company distributes products and offers services in the following three broad Groups:

Electrical & Plumbing. The Electrical & Plumbing Group, which accounted for 48.5% of the Company’s consolidated net sales in fiscal 2003, includes the Company’s electrical and electric utility products, plumbing/heating ventilation and air conditioning (“HVAC”) products, and its international business. This Group operates throughout the Midwestern, Southeastern, and Southwestern United States through 245 branches and six distribution centers located in 23 states.

The electrical product line is marketed to and used in the construction of industrial and commercial buildings, single and multi-family residential homes, manufacturing plants, underground utilities, electrical substations, power generation facilities, power line construction, and various other types of general construction. Products and services generally consist of transmission and electrical distribution equipment, wire management products, distribution equipment, wire and cable, automation equipment, tools and fasteners, lamp/lighting controls, energy products, data/communications products, meter repair and certification, pole line hardware, storeroom/job trailer management, vendor-managed inventory, collaborative emergency response, and job-site delivery. Key customers are electrical contractors, industrial companies, schools and institutions, hospitals, commercial businesses, municipalities, investor-owned facilities, and co-op and municipal-owned utilities.

The plumbing/HVAC product line serves various markets including commercial, industrial, municipal, single and multi-family residential, kitchen and bath dealers, building supply, hardware, and exports. Products and services primarily include residential and commercial water heaters, furnaces, heat pumps, various types of pipes and fittings (copper, steel, cast iron, poly, and pvc), air conditioning units, plumbing fixtures, faucets and accessories, pumps and sprinkler heads, commercial drains, mechanical valves, repair parts, and procurement services. Key customers are plumbing and HVAC contractors, remodeling contractors, mechanical contractors, commercial and industrial purchasing agents, municipalities, fabricators, OEM’s, industrial subcontractors, exporters, maintenance departments, engineering departments, and planners.

Industrial. The Industrial Group accounted for 10.2% of the Company’s consolidated net sales in fiscal 2003 and is focused primarily on the marketing and distribution of Company’s industrial pipe, valves, and fitting products. The Industrial Group primarily operates throughout the Southeastern and Southwestern United States throughout 35 branches located in 14 states. Markets served include special purpose piping systems (requiring exotic alloy pipe, nickel, or composite), manufacturing facilities, marine applications, flow control processing systems (high temperature and high corrosive types of fluids), process plants, phosphate, chemical, utility, pulp and paper, pharmaceutical, export, citrus, food and dairy, solid waste, engineering, commercial, institutional, and municipal. Key customers are industrial and mechanical contractors, fabricators, wholesale distributors, exporters, OEMs, and industrial concerns (food and beverage, pulp and paper, mining, petro-chemical, marine, pharmaceutical, etc.). Products in the Industrial Group include valves, fittings, pressure fittings, angle, flanges, plate, sheet, pipe (i.e. carbon, stainless and thermoplastic, etc.), tubing and bar, steam traps, actuators, valve positioners, and gauges. Services provided include valve automation and repair, piping fabrication, and pipe cutting and grooving.

Water & Sewer/Building Materials. The Water & Sewer/Building Materials Group, which represented 41.3% of the Company’s consolidated net sales in fiscal 2003, includes the Company’s water and sewer products, various building materials products, maintenance supplies, fire protection products, and concrete products. This Group primarily operates throughout the Midwestern, Northeastern, Southeastern, Southwestern, and Western United States through 171 branches located in 27 states.

The water and sewer and concrete product lines primarily serve the Company’s infrastructure market through customers such as underground utility contractors, utility companies, telecommunication companies, site developers, municipalities, and government agencies. The fire protection product line serves fire protection contractors in the commercial construction, residential construction, and industrial markets. Products and services in the water and sewer product category include all piping products (ductile iron, pvc, hdpe, and steel, etc.), fire hydrants, valves, fittings, storm drains, backflow prevention devices, water meters, leak detection, irrigation products, pumps, tanks, manhole rehab services, concrete sewer products, concrete electrical and telephone vaults, fire protection products (including sprinkler heads, steel pipe and fittings), and fire protection fabrication services.

The building materials product line focuses on commercial, industrial, multi-family and infrastructure projects. Key customers of the building materials product line are concrete, masonry caulking/waterproofing, and road and bridge contractors and subcontractors. Products and services in the building materials product line include concrete and masonry supplies and accessories, lumber, bridge rail, overhand brackets, erosion control products, bearing pads, tilt-up bracing rental and lifting/bracing inserts, sealants, waterproofing and fireproofing materials, commercial washroom specialties, tools, and accessories.

The maintenance supplies product line serves the multi-family housing market with after-market rehab and maintenance supplies, including plumbing, electrical, appliances/parts, hardware, door/window parts, HVAC equipment/parts, and janitorial supplies. Key end markets for these products include property management and property development firms, and apartment owner/operated properties.

Customers

The Company currently serves over 75,000 customers, and no single customer accounts for more than 1% of total annual sales. Unlike do-it-yourself home center retailers, the Company does not market its products to retail consumers. Consequently, the Company differentiates itself with respect to its customer base, breadth of products offered, and level of service provided. Management believes that the Company’s customers are typically professionals who choose their vendors primarily on the basis of product availability, price, relationships with sales personnel, and the quality and scope of services offered by such suppliers. Furthermore, professional customers generally buy in large volumes, are repeat buyers because of their involvement in longer-term projects, and require specialized services not typically provided by do-it-yourself home center retailers. The Company provides its customers with credit services, design assistance, material specifications, scheduled job site delivery, job site visits to ensure satisfaction, and technical product services (including blueprint take-off and computerized order quotes). Accordingly, the Company has been able to serve customer groups that do-it-yourself home center retailers generally do not emphasize.

Vendors

The Company has a centralized vendor development department, which is solely attentive to fostering key relationships, consolidating purchasing volume, and refining agreements with the Company’s vendors. The Company purchases from over 11,500 manufacturers and vendors, of which approximately 700 are part of the Company’s Preferred Vendor Program. This program leverages the Company’s existing relationships with a number of vendors and helps to increase sales of their products through various initiatives; including sales promotions, cooperative marketing efforts, and product exclusivity. The Company actively solicits volume-purchasing discounts and rebates from its preferred vendors and is constantly working to consolidate its purchases to more effectively manage inventories, accounts payable, and freight. This program has resulted in stronger, more strategic relationships with a more concentrated group of vendors. In addition, the Company has focused on converting vendors to electronic data interchange (“EDI”) to improve back-office efficiencies. The Company has a freight management program, with similar goals of reducing its number of freight vendors and controlling the cost of inbound and outbound freight. No single vendor accounted for more than 5% of the Company’s total purchases during fiscal 2003.

Distribution and Logistics

The Company’s distribution network consists of 451 branches and six central distribution centers in the United States. The efficient operation of the Company’s distribution network is critical in providing quality service to the Company’s customer base. The Company’s central distribution centers and branches use technology in warehouse management to optimize receiving, inventory control, picking, packing, and shipping functions. The Company’s purchasing agents in its branches use a computerized inventory system to monitor stock levels, while central distribution centers in Arizona, Florida, Georgia, North Carolina, and Texas provide purchasing assistance as well as a broad stock of inventory which supplements the inventory of the branches. In addition, the Company uses several of its larger branches in other parts of the country as distribution points for certain product lines.

The substantial majority of customer orders are shipped from inventory at the Company’s branches. The Company also accommodates special orders from its customers and facilitates the shipment of certain large volume orders directly from the manufacturer to the customer. Orders for larger construction projects normally require long-term delivery schedules throughout the period of construction, which in some cases may continue for several years.

Sales and Marketing

The Company employs a specialized and experienced sales force for each of its product lines, including approximately 900 outside sales representatives who call on and work with professional buyers for contractors and subcontractors. They provide product specifications and usage data, design alternatives, and job quotes in an effort to assist them in fulfilling their material needs. Approximately 700 inside account and 300 counter associates expedite orders, deliveries, quotations, requests for pricing, and the release of products for delivery.

The sales and marketing department offers the sales force the tools they need to communicate the benefits of the Company to customers, prospects, and business partners. The department’s focus is to help drive sales and market the Company’s branches in numerous ways: from sales support in the Company’s focus areas, to brochures and catalogs sales representatives can take on customer calls, and from strategic sales and marketing planning to comprehensive promotional programs.

In order to reinforce the Company’s positioning as one of the premier distribution companies, a direct, simple tagline has been created for use in advertising and promotion, “Solutions. Supply. Service.” This statement embodies Hughes’ brand promise—“We will help find solutions to your business problems, supply the materials and skills to make these solutions a reality, and will provide the best service available to you, our customer.”

The sales and marketing department created two divisions to expand the Company’s business within the government and healthcare markets. Each of these efforts is supported by select vendors who have a special interest in growing in these areas. The government program is designed to effectively solicit and secure local, state, and national bids in the government area. By fall of fiscal 2004, the Company hopes to sign a general services administration (“GSA”) contract that will streamline the federal bid process. Further the government initiative has been awarded a prestigious national contract with U.S. Communities, the largest local government purchasing alliance in the country. At the same time, the Company is centralizing the preparation of bid packaging from the individual branches to the sales and marketing department. The healthcare sales initiative is aimed at identifying, developing, and pursuing current hospital, assisted living, and other related healthcare new construction and MRO opportunities along with cultivating key relationships within the healthcare community and its key contractors and subcontractors. The Company has aligned itself with several vendors to facilitate these initiatives.

Information Technology (“IT”)

The Company’s IT systems are capable of supporting numerous operational functions including purchasing, receiving, order processing, shipping, inventory management, sales analysis, and accounting. The Company’s customers and sales representatives rely on these systems for real-time information on product pricing, inventory availability, and order status. The systems also provide management with information relating to sales, inventory levels and customer payments, and with other data that is essential for the Company to operate efficiently and provide a high level of service to its customers. The Company believes that its continued investment in upgrading and consolidating its IT systems is necessary to provide a platform to continue its strategic growth, efficiency, and customer service initiatives.

The Company is implementing the Eclipse Distribution Management System, which is an e-commerce enabled, customer fulfillment, inventory management, logistics, and distribution management system. It is designed specifically for MRO- and contractor-oriented distributors. The Company began implementing this software, referred to as Hughes Unified, in December 2001 and expects implementation to be phased in over the next several years. The Company believes that this timeframe will enable it to reduce risk, minimize customer disruption, and spread implementation costs. As of March 31, 2003, the Company has 61 branches operating on the new Hughes Unified operating system. Once implementation is complete, the Company expects to be operating primarily under one platform, compared to its 23 current operating systems. The Company believes that consolidation of its operating systems allows for increased operational efficiencies, particularly in the area of working capital management, provides a means for decreasing transaction costs, and provides the Company with the infrastructure necessary to realize administrative synergies associated with past and future business acquisitions.

The Company continues its e-business initiative to provide its customers with the technological enhancements they need. The Hughes’ website, www.hughessupply.com, was greatly improved in fiscal 2003. On-line ordering capabilities were enhanced providing customers with the ability to review their account status and order products directly via the internet.

The Company continues to invest in technology infrastructure. These investments support the strategic initiatives of the Company and lay the groundwork for continuing future innovation.

Operating Strategy

The Company’s operating strategy is based on decentralizing, at the branch level, customer-related functions such as inventory management. Each of the Company’s branch managers has the authority and responsibility to set sales pricing and tailor the inventory offering and mix (as well as the nature of services offered) in order to meet local market demand. The Company has successfully merged its broad geographic scope with a local market feel and focus, allowing the Company to offer superior customer service and fulfill each specific need for its customers while maximizing product sales.

The administrative responsibilities for certain functions such as credit, human resources, finance and accounting, legal, and information technology are centralized at the corporate level.

All operating branches are assigned to one of the Company’s three Groups, each of which is led by a Group president. Under this structure, the Company’s branches are grouped into territories, territories into districts, districts into regions, and regions into Groups. Territory managers generally have oversight responsibility for branches within a territory as well as direct responsibility for a specific branch within the territory. District managers have responsibility over certain groups of branches but do not have direct responsibility for a specific branch. District and territory managers report to regional managers. Regional managers report to the Group presidents. Management believes its organizational structure is designed to enhance the Company’s competitive position in the marketplace by intensifying the Company’s focus on satisfying customer needs, strengthening vendor relationships, and streamlining the decision-making processes of the Company. Key elements of the Company’s operating strategy include:

Local Market Focus. Hughes has organized its branches as autonomous, decentralized branches capable of meeting local market needs and offering competitive prices. Each branch handles one or more of the Company’s product lines and operates as a separate profit center with its own specialized and experienced sales force. Each branch manager has the authority and responsibility to set pricing and tailor the inventory offering and mix (as well as the nature of services offered) in order to meet the local market demand. In addition, each branch manager is responsible for purchasing, maintaining adequate inventory levels, cost control, and customer relations. A substantial portion of a branch manager’s compensation is dependent on their branch’s financial performance. The Company has been able to tailor its branch size and product offerings to meet perceived market demand. As a result, the Company successfully operates branches in secondary cities where management believes it has achieved significant market share and in larger metropolitan areas where it has established a sound market presence.

Superior Customer Service. Substantially all of Hughes’ sales are to professional customers with whom the Company has developed long-term relationships. These relationships are based on the Company’s history of providing superior service, which in turn creates trust. Customer services provided by the Company include credit, design assistance, material specifications, scheduled job site delivery, job site visits to ensure satisfaction, technical product services (including blueprint take-off and computerized order quotes), and assistance with product returns.

In addition to the sales and marketing department initiatives discussed above, the Company operates under a focus of 12 Commitments to Customer Service. They are a compilation of essential principles that every member of the Hughes team should be guided by on a daily basis. The goal encompassed in every one of the 12 Commitments is for the Company to be the best in customer service in each of the industries it serves.

Comprehensive and Diversified Product Categories. As part of its emphasis on superior customer service, the Company offers more than 300,000 products at competitive prices. Distribution of a wide variety of products within each product category helps the Company’s customers manage their inventory, arrange for consolidated delivery requirements, and purchase a greater portion of total job specifications. The depth and breadth of the Company’s product categories allows Hughes to service all of its customers’ needs. The Company is diversified across multiple product categories, geographic regions, and various sectors of the construction industry (such as commercial, residential, public infrastructure, and industrial), which lessens its dependence upon market conditions applicable to any of its product categories or any single sector of the construction industry. This product diversification provides opportunities for the Company to participate in multiple phases of construction projects, capturing more of the total construction spending dollar and spanning the entire construction cycle.

Well-Trained and Experienced Workforce. The Company has implemented extensive employee recruiting and training programs to ensure that its employees have the skill levels necessary to compete effectively in today’s marketplace. The Company utilizes in-depth training seminars covering basic and advanced product knowledge, as well as multiple levels of selling, purchasing, negotiating, and management skills workshops. The Company has also developed a recruiting and training program to increase the number of qualified applicants introduced into its management and sales ranks.

The Company’s corporate management, branch managers, outside sales representatives, and inside sales account associates have considerable experience with the Company. Hughes has a proven executive management team with in-depth industry knowledge, which has demonstrated its ability to effectively lead the Company through periods of competitive pressures and industry change.

Centralized Administrative Functions. The Company has centralized administrative functions, including credit, human resources, payroll, finance and accounting, legal, and information technology. Centralization of human resources and finance and accounting functions ensures conformity in policy and lower costs of administration. The Company’s credit function is essential to its success. Dedicated credit managers are assigned to specific geographic areas in the United States. All credit decisions are researched, analyzed, and approved by the regional credit managers or regional credit directors to ensure conformity and quality of credit decisions across the Company’s operations.

Growth Strategy

Historically, the Company operated strictly as a Southeastern regional distributor with sales mostly dependent on new residential construction. In an effort to reduce its exposure to cyclical, seasonal, and regional fluctuations, Hughes began to pursue acquisitions and branch openings in new geographic locations and increased its focus on less cyclical replacement and repair services. Over the past decade, the Company has successfully diversified its geographic presence, product offering, and end-user mix. The Company currently operates 451 branches in 34 states and has a balanced end-user mix across a wide variety of products. In addition, the Company has successfully built a strong sales base and market presence that enables it to leverage its existing operations into previously untapped markets.

Many local and regional distributors are privately-owned, relationship-based companies. Such distributors often have limited purchasing power, lack sufficient resources to offer broad product lines and multiple brands, and lack the sophisticated inventory management and control systems necessary to operate multiple branches efficiently. As a result, such distributors target their services to a particular type or size of customer and/or a particular product category. To counter the limitations experienced by small distributors, certain wholesale distributors, including the Company, have grown considerably through acquisitions. This expansion has enabled the Company to service various sizes and types of customers with multiple product categories and to diversify its sales across various types of construction and end users of its products. Because of the Company’s strong competitive position, size, and management infrastructure, management believes that the Company is well positioned to continue to benefit from consolidation trends within the wholesale distribution business.

The Company’s strategy for growth has focused on both internal growth and growth through acquisitions. Historically, the Company has centered its internal growth and growth through acquisitions around customer groups and products which help it to diversify geographically and product-wise, capturing more of the total construction dollar. These products generally offer higher margins and are less dependent on new construction. Management believes that the Company’s product, market, and geographic diversification helps reduce the impact of economic cycles on its profitability. A summary of the Company’s internal growth and acquisition program follows.

Internal Growth. Over the last five years, the Company has grown internally through increases in comparable branch sales and the opening of new branches. Comparable branch sales increases have been attributable to new product introductions within existing branches, such as fire protection equipment and concrete fabrication products, fiber-optic products, and the higher value-added services such as integrated supply, national account business, and complete warehouse management contracts. Since January 31, 1998, the Company has opened 70 new branches (excluding branches opened and closed within this time period). During fiscal 2003 and 2002, the Company opened 7 and 16 branches, respectively. New branches are generally opened to fill in existing market areas or to accommodate the split out of branches handling multiple product lines. Over the past two years, the Company has slowed the pace of new branch openings as a result of the economic slowdown in the United States.

Since January 31, 1998, the Company has closed 51 branches, excluding branches that were opened and closed within this time period and branches that were sold as part of the divestiture of its pool and spa business in January 2001. The Company closed these branches because they did not strategically fit into the Company’s core businesses and/or they did not perform to expectations. During fiscal 2003 and 2002, the Company closed 7 and 43 under-performing branches, respectively, including its e-commerce venture. The Company will continue to evaluate the operations and performance of its branches over the next fiscal year.

Acquisitions. Historically, the Company has pursued an active acquisition strategy to capitalize on the large, growing, and highly-fragmented markets in which it competes. The Company’s acquisition strategy focuses on acquiring profitable, private, wholesale distribution businesses with strong management teams and well-developed market positions and customer relationships. The Company identifies acquisition targets that present growth opportunities and complement its existing structure, allowing the Company to benefit from synergies resulting from the integration of these targets’ operations with its own. Management believes that significant acquisition opportunities exist in each of its product categories. The Company categorizes its acquisitions as either fill-in or new market acquisitions.

Fill-in acquisitions represent acquisitions of primarily small companies that distribute some of the same product lines as the Company in geographic areas already served by Hughes. Since January 31, 1998, the Company has added 24 branches through the completion of 10 fill-in acquisitions. The Company’s management believes that significant additional fill-in acquisition opportunities are available.

New market acquisitions represent the addition of new product lines, primarily within the Company’s existing product categories, or the entry into new geographic markets, or both. The Company’s principal acquisition criteria with respect to new market acquisitions has been to:

• add products and product lines with higher gross margins;

• increase sales to the replacement and industrial markets (that tend to be less cyclical than new construction markets);

• achieve greater geographical diversification;

• develop additional opportunities for future fill-in acquisitions and new branch openings; and

• expand its current product offering from leading suppliers.

Since January 31, 1998, the Company has completed 16 new market acquisitions representing 85 branches, including the acquisition of Utiliserve Holdings, Inc. and its subsidiaries (“Utiliserve”), a wholesale distributor of electrical transmission and distribution products and services to the United States’ electric utility industry. Utiliserve was acquired in August 2002 and operates through 24 branches located in 10 states. As a result of the acquisition, the Company expects to be a leading provider of electrical transmission and distribution products and services in the United States. It also expects to expand the development of customer contracts as a result of Utiliserve’s value-added services, including vendor-managed inventory, collaborative emergency response, and job-site delivery. Through its supply chain management solutions, Utiliserve is able to assume full responsibility for its customers’ warehouse, work-flow, and inventory management needs.

Seasonality

The Company’s operating results are impacted by seasonality. Generally, sales of the Company’s products are higher in the second and third quarters of each year due to more favorable weather conditions during these periods. Seasonal variations in operating results may also be significantly increased by inclement weather conditions, such as cold or wet weather, which can delay construction projects.

Competition

Management believes that the Company is one of the largest wholesale distributors of its range of products in the United States and that no other company competes against it across all of its product categories. However, there is strong competition in each product category distributed by the Company. The main sources of competition are other wholesalers, manufacturers who sell certain lines directly to contractors and, to a limited extent, retailers in the markets for plumbing, electrical fixtures and supplies, building materials, and contractors’ tools. The principal competitive factors in the Company’s business are product availability, pricing, technical knowledge as to application and usage, and advisory and other service capabilities, which develop the trust factor needed in successful customer relationships.

Inventories

The Company is a wholesale distributor of construction and industrial materials and maintains significant inventories to meet rapid delivery requirements and to ensure a continuous allotment of goods from suppliers. As of January 31, 2003, inventories totaled approximately $438.5 million and represented approximately 30.5% of the Company’s total assets.

Employees

As of January 31, 2003, the Company had 7,160 employees consisting of 17 executives, 676 managers, 2,106 sales personnel and 4,361 other employees, including truck drivers, warehouse personnel, office workers, and clerical workers. This included approximately 200 employees as a result of the acquisition of Utiliserve. Excluding the acquisition of Utiliserve, the Company’s workforce decreased 2.7% from fiscal 2002. This decrease was primarily the result of the elimination of various management and staff positions to bring headcount more in line with current economic conditions and to streamline the Company’s operations. The Company considers its relationships with its employees to be good.

The Company announced its plan for Chief Executive Officer (“CEO”) succession plans in March 2003. Effective at the Company’s annual meeting in May 2003, the Company will appoint its President and Chief Operating Officer (“COO”), Thomas Morgan, to the additional post of CEO. Mr. Morgan was recruited two years ago to serve as President and COO. In the Company’s 75-year history, the Company has only had three other CEOs. The first was Russell Hughes, the second was Harry Hughes, and in 1974, David Hughes was elected to the office of CEO. For continuity and for the Company to benefit from his years of experience, David Hughes will remain as Chairman of the Board.

In March 2003, the Company announced the creation of the department of strategic business development/mergers & acquisitions to be headed by J. Stephen Zepf. This represented a shift in his responsibilities from his previous role of Chief Financial Officer (“CFO”). The new department will consolidate tasks, currently managed through several departments, including the identification, evaluation, pricing, closing, and integration of strategic acquisitions; and the negotiation, establishment, and implementation of strategic alliances. Concurrent with this organizational change, the Company appointed David Bearman to the offices of Executive Vice President and CFO effective March 18, 2003. Most recently, Mr. Bearman served as CFO for NCR Corporation from 1998 to 2001, and previously served as CFO for nine years at Cardinal Health, Inc., a major pharmaceutical and medical products distributor and services provider.

Environmental Laws

Compliance with federal, state, and local environmental protection laws has not had in the past, and is not expected to have in the future, a material effect upon the Company’s consolidated financial statements.

Risk Factors

The following factors could significantly affect the Company’s operations and financial results and cause its results to differ from those anticipated by forward-looking statements in this report:

The Company’s operating results are linked to the strength of the construction markets.

Demand for the Company’s products depends highly on the commercial, residential, and industrial construction markets. The level of activity in the commercial construction market depends largely on vacancy rates, interest rates, regional economic outlooks, the availability of financing, and general economic conditions. The level of activity in the residential construction market depends on new housing starts and residential renovation projects. Factors influencing the demand for new housing starts and residential renovation projects include interest rates, availability of financing, housing affordability, unemployment, demographic trends, gross domestic product growth, and consumer confidence. The level of activity in the industrial construction market depends on the industrial economic outlook, corporate profitability, interest rates, and capacity utilization. The factors influencing each of the Company’s market segments are not within its control. Since each of the Company’s market segments is sensitive to cyclical changes in the economy, future downturns in the economy or lack of improvement in the economy may adversely affect its results of operations. The Company is especially susceptible to economic fluctuations in Florida, Texas, North Carolina, and Georgia, which accounted for approximately 24%, 16%, 9%, and 9% of its consolidated net sales, respectively, in fiscal 2003.

Fluctuating commodity prices and unexpected product shortages may impair the Company’s operating results.

The cost of stainless steel, aluminum, copper, nickel alloys, plastic, and other commodities used in products distributed by the Company can be volatile. Significant fluctuations in the cost of such commodities may adversely affect the Company’s results of operations and contribute to cyclicality in its operating performance. In total, the Company distributes construction materials and supplies from over 11,500 vendors, no one of which accounted for more than 5% of total material and supply purchases during fiscal 2003. Despite this widely diversified base of manufacturers and vendors, the Company may still experience shortages as a result of unexpected demand or production difficulties. If this were to occur and the Company was unable to obtain a sufficient allocation of products from manufacturers and vendors, there could be a short-term adverse effect on its results of operations. In addition, the Company has entered into strategic partnerships with certain vendors. The Company’s inability to maintain such partnerships, and the loss of the competitive pricing such partnerships offer the Company could adversely affect its results of operations.

The Company operates in a very competitive marketplace.

The wholesale construction supply industry is highly competitive and fragmented. The principal competitive factors in the Company’s business are:

• availability of materials and supplies;

• pricing of products;

• availability of credit;

• technical product knowledge as to application and usage; and

• advisory or other service capabilities.

The Company’s competition includes other wholesalers, manufacturers who sell certain products directly to its customer base, and certain customers. The Company also competes, to a limited extent, with retailers in the markets for plumbing, electrical fixtures and supplies, building materials, and contractors’ tools. Competition varies depending on product line, customer classification, and geographic market. The Company may not be successful in responding effectively to competitive pressures, particularly from competitors with substantially greater financial and other resources than the Company.

The Company relies heavily on its key personnel.

The Company is highly dependent upon the skills, experience, and efforts of its executive officers. The loss of one or more of its executive officers could have a material adverse effect on its business and development. Hughes’ growth also depends in part on its ability to attract and retain qualified managers, salespersons, and other key employees and on its ability to manage growth successfully. The Company may not be successful in attracting and retaining such employees or in managing its growth successfully, which may in turn have an adverse effect on its results of operations.

Dividend payments are restricted.

The decision to pay dividends and the amount of such payments depends on the Company’s results of operations, financial condition, capital requirements, and other factors that the board of directors deem relevant. The Company is also party to certain debt instruments and agreements that contain provisions limiting the amount of dividends that may be paid by the Company to its shareholders. In the future, the Company may become a party to debt instruments or agreements that may further restrict its ability to pay dividends.

The Company’s stock price may fluctuate substantially.

The market price for the Company’s common stock may fluctuate substantially based, among other factors, on:

• availability of credit;

• the Company’s operating results;

• the operating results of other companies in the wholesale construction supply industry;

• changes in general economic conditions;

• changes in the financial markets; and

• other developments affecting the Company or its competitors.

The Company’s sales are predominately on credit.

The Company distributes materials, equipment, and supplies for the construction and industrial markets primarily in the Southeastern, Southwestern, and Midwestern United States. Approximately 95% of the Company’s net sales are credit sales made primarily to customers whose ability to pay may depend on the economic strength of the construction industry. Cyclical changes in the economy, future downturns in the economy, or the ability of the Company to access capital markets could adversely affect the Company’s ability to extend credit or collect accounts receivable. These circumstances may adversely impact the Company’s results of operations. The Company obtains lien and bond rights to minimize its exposure for uncollectible accounts.

Quarterly results are seasonal.

The Company’s net sales and net income are seasonal. Hughes has historically experienced lower operating results in the first and fourth quarters than in the second and third quarters of its fiscal year. Seasonal variations in operating results may also be significantly increased by weather conditions, such as cold or wet weather, which can delay construction projects. Political and economic events can also affect revenues. If sales fall below expectations, the Company’s operating results may be adversely affected.

The Company’s operations may be impacted by the success of its system integration project.

The Company is continuing with its implementation of the new Hughes Unified operating system and expects implementation to be completed over the next several years. The Company believes that this timeframe will enable it to reduce risk, minimize customer disruption, and spread implementation costs. The Company may be adversely affected if the new operating system does not meet management’s expectations that it will offer a competitive and efficiency advantage.

Certain anti-takeover provisions may make the Company’s stock less attractive to investors.

Certain provisions of the Company’s Restated Articles of Incorporation, as amended, and Florida law may make it more difficult for a third party to acquire a controlling interest in the Company even if such change in control would benefit shareholders. These provisions may delay or prevent transactions in which shareholders would receive a substantial premium for their shares over then prevailing market prices. These provisions may also limit shareholders’ ability to approve transactions they may otherwise believe are in their best interests. Such provisions include:

• a provision dividing the board of directors into three classes of directors elected for staggered three-year terms;

• a provision authorizing the issuance of preferred stock without shareholder approval; and

• a provision requiring that certain business combinations receive approval by two-thirds of its voting stock.

Available Information

The Company makes available on its website, www.hughessupply.com, under “Investor Relations,” free of charge, its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after the Company electronically files or furnishes such materials to the SEC. During the period covered by this report, the Company posted its periodic reports on Form 10-K, Form 10-Q, and its current report on Form 8-K and any amendments to those documents to its website as soon as reasonably practicable after those reports were filed or furnished electronically with the SEC.

ITEM 2. Properties

The Company leases approximately 62,000 square feet of an office building in Orlando, Florida for its corporate headquarters. The Company also leases approximately 31,000 square feet of a computer center in Orlando, Florida for its IT operations. In addition, the Company owns or leases 451 branches in 34 states. The typical sales branch consists of a combined office and warehouse facility ranging in size from 2,000 to 150,000 square feet, with paved parking and storage areas. The Company also operates six central distribution centers, ranging in size from 54,000 to 160,000 square feet. The Company believes that its properties are in good condition and are suitable and adequate to carry on the Company’s business. None of the owned principal properties is subject to any encumbrance material to the consolidated operations of the Company. The Company is currently constructing a new corporate headquarters facility in Orlando, Florida, and anticipates completion by summer of fiscal 2004. The new corporate headquarters facility will enable the efficient consolidation of activities currently performed in three different locations. Additional information regarding owned and leased properties of the Company is set forth as Exhibit 99.1 to this report.

ITEM 3. Legal Proceedings

The Company is involved in various legal proceedings arising in the normal course of its business. In the opinion of management, none of the proceedings are material in relation to the Company’s consolidated financial statements.

ITEM 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of the Company’s security holders during the fourth quarter of the fiscal year ended January 31, 2003.

PART II

ITEM 5. Market for Registrant’s Common Equity and Related Stockholder Matters

The common stock of the Company is listed on the New York Stock Exchange under the symbol “HUG.” As of March 26, 2003, there were 849 holders of common stock and 23,432,164 shares outstanding. The following table presents the high and low sale prices for shares of the Company’s common stock for each quarterly period along with cash dividends per share in fiscal 2003 and 2002:

	First		Second		Third		Fourth		Full Year

Fiscal 2003
Market price per share:
High	$	42.98	$	44.98	$	35.30	$	34.55	$	44.98
Low	29.20		33.24		25.84		24.74		24.74

Dividends per share	$	0.085	$	0.085	$	0.085	$	0.100	$	0.355

Fiscal 2002
Market price per share:
High	$	18.78	$	26.30	$	27.35	$	31.62	$	31.62
Low	13.44		15.12		19.55		23.24		13.44

Dividends per share	$	0.085	$	0.085	$	0.085	$	0.085	$	0.340

Payment of future dividends, if any, will be at the discretion of the Company’s board of directors, after taking into account various factors, including earnings, capital requirements and surplus, financial position, contractual restrictions, and other relevant business considerations. There can be no assurance that dividends will be declared or paid any time in the future.

ITEM 6. Selected Financial Data

(in thousands, except per share data and ratios)	Fiscal Years Ended(1)

	2003			2002			2001			2000			1999

Statements of Income:
Net sales	$	3,066,341		$	3,037,708		$	3,310,163		$	2,994,877		$	2,536,265
Cost of sales	2,356,009			2,340,021			2,564,735			2,320,604			1,977,266
Gross margin	23.2		%	23.0		%	22.5		%	22.5		%	22.0		%

Selling, general and administrative expenses	$	561,733		$	554,710		$	581,205		$	508,009		$	416,642
Percentage of net sales	18.3		%	18.3		%	17.6		%	17.0		%	16.4		%
Depreciation and amortization	20,448			31,093			32,551			29,808			23,269
Operating income	119,050			100,085			105,489			132,392			117,206
Operating margin	3.9		%	3.3		%	3.2		%	4.4		%	4.6		%

Interest and other income	$	9,514		$	10,546		$	18,476	(2)	$	9,015		$	6,886
Interest expense	30,325			35,945			43,288			31,805			25,415

Income before income taxes	$	98,239		$	74,686		$	80,677		$	109,602		$	98,677
Percentage of net sales	3.2		%	2.5		%	2.4		%	3.7		%	3.9		%
Income taxes	40,155			30,621			34,162			43,731			37,234
Net income	58,084			44,065			46,515			65,871			61,443
Percentage of net sales	1.9		%	1.5		%	1.4		%	2.2		%	2.4		%

Earnings per share:
Basic	$	2.50		$	1.90		$	2.00		$	2.82		$	2.57
Diluted	2.45			1.88			1.97			2.80			2.55

Average shares outstanding:
Basic	23,212			23,175			23,238			23,398			23,889
Diluted	23,665			23,424			23,584			23,547			24,138

Balance Sheets:
Working capital (current assets less current liabilities)	$	558,782		$	588,275		$	679,130		$	657,500		$	567,435
Total assets	1,436,342			1,293,262			1,406,695			1,377,036			1,128,973
Property and equipment	157,772			145,702			152,079			144,945			127,632
Goodwill	320,133			263,808			249,826			243,367			181,622
Long-term debt	378,076			403,671			516,168			535,000			402,203
Shareholders’ equity	644,852			594,473			570,035			522,444			483,956

Current ratio	2.5 to 1			3.1 to 1			3.2 to 1			3.2 to 1			3.5 to 1
Long-term debt-to-capital	37.0		%	40.4		%	47.5		%	50.6		%	45.4		%

Other:
Cash dividends per share	$	0.355		$	0.340		$	0.340		$	0.340		$	0.330
Return on average assets	4.3		%	3.3		%	3.3		%	5.3		%	5.9		%
Return on average shareholders’ equity	9.4		%	7.6		%	8.5		%	13.1		%	13.6		%

(1) The Company’s fiscal year is a 52 or 53-week period ending on the last Friday in January. Fiscal year 2003 contained 53 weeks while the remaining fiscal years contained 52 weeks.

(2) Includes $11,000 gain on sale of pool and spa business in January 2001.

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion and analysis of certain significant factors that have affected the financial condition of Hughes Supply, Inc. and its subsidiaries (the “Company”) as of January 31, 2003, and the results of operations for fiscal 2003 and 2002. This information should be read in conjunction with the Company’s consolidated financial statements and notes thereto contained herein.

Forward-Looking Statements

Certain statements set forth in this report constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended, and are subject to the safe harbor provisions created by such sections. When used in this report, the words “believe,” “anticipate,” “estimate,” “expect,” “may,” “will,” “should,” “plan,” “intend,” and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance or achievements of the Company to be different from any future results, performance, and achievements expressed or implied by these statements. These risks and uncertainties include, but are not limited to, the strength of the construction market, fluctuating commodity prices and unexpected product shortages, competition, the Company’s reliance on key personnel, general economic conditions, success in integrating acquired business units, the Company’s dependence on credit sales, and other factors set forth from time to time in filings with the Securities and Exchange Commission. The Company does not have any obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances.

Business

Founded in 1928, the Company is a diversified wholesaler of construction and industrial materials, equipment, and supplies. The Company distributes its products to three primary end markets, including commercial, residential, and industrial public infrastructure markets throughout North America. The Company distributes over 300,000 products, representing three major product groups, through 451 wholesale branches and six central distribution centers located in 34 states. The Company’s principal customers are electrical, plumbing and mechanical contractors, electric utility customers, property management companies, municipalities, and industrial companies. Industrial companies include businesses in the petrochemical, food and beverage, pulp and paper, mining, pharmaceutical, and marine industries.

Fiscal Year

Segment Information

The Electrical & Plumbing Group includes the Company’s electrical and electric utility products, plumbing products, heating ventilation and air conditioning products (“HVAC”), and its international business. The Industrial Group includes the Company’s industrial pipe, valves, and fittings products. The Water & Sewer/Building Materials Group includes the Company’s water and sewer products, building materials products, maintenance supplies, fire protection products, and concrete products. The “Corporate & Other” category includes corporate level expenses not allocated to the Company’s operating Groups, along with revenues and expenses for bestroute.com (“bestroute”) in fiscal 2002 and 2001.

Results of Operations

Comparable Branch Sales Methodology

The Company computes and discloses comparable branch sales, which exclude net sales related to (a) acquired and newly-opened branches until operating results are included in the consolidated financial statements for all periods in the current and prior fiscal year, (b) branch combinations and splits unless within the same Group and physical location, and (c) closed and divested branches. All comparable branch sales amounts and percentages presented in this report exclude the impact of the additional week of net sales included in the first quarter of fiscal 2003.

Net Sales

Consolidated and comparable branch net sales by Group in fiscal 2003, 2002 and 2001 were as follows (dollars in thousands):

	Consolidated Net Sales

	Fiscal Years Ended						% Variance 2003 to 2002			% Variance 2002 to 2001

	2003		2002		2001

Electrical & Plumbing(1)	$	1,486,424	$	1,467,584	$	1,632,923		1.3	%		(10.1	)%
Industrial	313,942		330,375		315,315		(5.0		)%	4.8		%
Water & Sewer/Building Materials(1)	1,265,975		1,239,666		1,361,896		2.1		%	(9.0		)%
Corporate & Other	—		83		29		—			—

	$	3,066,341	$	3,037,708	$	3,310,163		0.9	%		(8.2	)%

	Comparable Branch Sales

	Fiscal Years Ended				Dollar Variance			% Variance 2003 to 2002

	2003		2002

Electrical & Plumbing(1)	$	1,337,453	$	1,400,062	$	(62,609	)		(4.5	)%
Industrial	311,516		334,301		(22,785		)	(6.8		)%
Water & Sewer/Building Materials(1)	1,166,083		1,162,760		3,323			0.3		%

	$	2,815,052	$	2,897,123	$	(82,071	)		(2.8	)%

	Comparable Branch Sales

	Fiscal Years Ended				Dollar Variance			% Variance 2002 to 2001

	2002		2001

Electrical & Plumbing(1)	$	1,359,370	$	1,462,419	$	(103,049	)		(7.0	)%
Industrial	327,092		306,517		20,575			6.7		%
Water & Sewer/Building Materials(1)	1,122,278		1,196,081		(73,803		)	(6.2		)%

	$	2,808,740	$	2,965,017	$	(156,277	)		(5.3	)%

______________

(1) Results of operations for the pool and spa business, which was sold in January 2001, were included in the Electrical & Plumbing and Water & Sewer/Building Materials Groups in fiscal 2001. In addition, prior year amounts have been restated to reflect the transfer of branches between the Electrical & Plumbing and Water & Sewer/Building Materials Groups, which resulted from the sale of the pool and spa business.

Consolidated net sales in fiscal 2003 increased $28.6 million or 0.9% compared to fiscal 2002. Acquired and newly-opened branches accounted for a $141.9 million increase in net sales. The majority of net sales for acquired and newly-opened branches related to the Electrical & Plumbing and Water & Sewer/Building Materials Groups, which accounted for $104.3 million and $35.1 million, respectively, of this increase. Included in the Electrical & Plumbing Group’s acquired and newly-opened branch sales was $95.3 million of net sales related to the acquisition of Utiliserve Holdings, Inc. and its subsidiaries (“Utiliserve”), which occurred on August 9, 2002. The additional week included in the first quarter of fiscal 2003 added $55.1 million in net sales. Partially offsetting these increases was a decline of $82.1 million or 2.8% in comparable branch sales largely as a result of a slow-down in the non-residential building and commercial construction sectors, including office buildings, hotels and motels, and other commercial buildings. Comparable branch sales were also unfavorably impacted by a decline in industrial sales as certain projects have been postponed and/or cancelled until economic conditions become more stable. The remaining decrease of $86.3 million was attributable to the closure and/or consolidation of branches, primarily in the Electrical & Plumbing and Water & Sewer/Building Materials Groups.

Consolidated net sales in fiscal 2002 decreased $272.5 million or 8.2% compared to fiscal 2001 due in large part to the sale of the Company’s pool and spa business in January 2001. This accounted for $144.0 million of the overall net sales decrease, of which approximately $27.9 million and $116.1 million related to the Electrical & Plumbing and Water & Sewer/Building Material Groups, respectively. Comparable branch sales declined $156.3 million or 5.3%, predominantly driven by a general slowdown in the economy in fiscal 2002, combined with deflationary pricing pressure in stainless steel, nickel alloy, pvc, and certain other commodity-based products. An additional $55.5 million of the decrease resulted from the closing of branches and the elimination or consolidation of customers and services. During fiscal 2002, the Company closed or decided to close 43 branches that were not performing to management’s expectations and/or did not strategically fit into the Company’s core businesses. The above net sales decreases were partially offset by acquired and newly-opened branches, which had net sales of $83.3 million in fiscal 2002. The majority of net sales for acquired and newly-opened branches related to the Water & Sewer/Building Materials Group, which accounted for $78.3 million of this increase. Of the $78.3 million of acquired and newly-opened branch sales for the Water & Sewer/Building Materials Group, $50.9 million related to an acquisition completed in May 2001.

The following discusses factors impacting comparable branch sales in fiscal 2003 and 2002 for the Company’s operating Groups:

Electrical & Plumbing. Comparable branch sales decreased $62.6 million or 4.5% in fiscal 2003 compared to fiscal 2002 largely as a result of the continuing economic slowdown in the electrical construction market, particularly in the Southeast and Texas. Competitive pressures in certain local markets, compounded by weak commercial, industrial, and OEM business, have adversely impacted net sales in the Electrical & Plumbing Group. Comparable branch sales in the Texas market were unfavorably impacted due to inclement weather conditions. The declines in comparable branch sales in the Eastern United States were partially offset by sales increases in the Group’s western plumbing region.

Comparable branch sales decreased $103.0 million or 7.0% in fiscal 2002 compared to fiscal 2001 primarily due to softening prices of certain commodity driven products coupled with an overall weakness in the electrical construction market as a result of a general slowdown in the United States economy, primarily in the western region. This Group supplied materials for several large infrastructure projects in fiscal 2001 with no corresponding activity in fiscal 2002. Sales performance was further impacted by a slowdown in international business resulting from the completion of a large oil and gas pipeline project in fiscal 2001 with no corresponding activity in fiscal 2002. Net sales for the Company’s international business decreased $20.0 million compared to fiscal 2001. These decreases were partially offset by strong commercial activity in the Southwest and increased sales of utility products in the Midwest.

Industrial. Comparable branch sales decreased $22.8 million or 6.8% in fiscal 2003 compared to fiscal 2002. This decrease reflected the postponement or cancellation of certain gas utility, petrochemical, and power generation plant construction and/or rehabilitation projects in late fiscal 2002 and throughout fiscal 2003. These projects were postponed and cancelled by the Company’s customers due to weakened economic conditions, which resulted in reduced plant utilization and reduced capital spending. The comparable branch sales decline was partially offset by increased sales prices for certain commodity-based products, including stainless steel and nickel alloys. Nickel pricing increased approximately 17% compared to fiscal 2002.

Comparable branch sales increased $20.6 million or 6.7% in fiscal 2002 compared to fiscal 2001 as a result of strong sales to customers in the chemical, gas utility, petrochemical, and power generation industries. Comparable branch sales also benefited in fiscal 2002 from several large new petrochemical plant rehabilitation and energy and power plant installation projects in the Texas market. The increase was partially offset by declining prices for certain commodity-based products, including stainless steel and nickel alloy products.

Water & Sewer/Building Materials. Comparable branch sales increased $3.3 million or 0.3% in fiscal 2003 compared to fiscal 2002 primarily due to the Company’s maintenance supply and water and sewer product lines, which had comparable branch sales growth of 8.4% and 2.6%, respectively. These product lines benefited from favorable public and multi-family residential construction in fiscal 2003. Partially offsetting these increases were declines in the building materials, concrete, and fire protection product lines due to a slowdown in non-residential and commercial construction sectors.

Comparable branch sales decreased $73.8 million or 6.2% in fiscal 2002 compared to fiscal 2001. This decrease was attributable to sales of complementary building materials products that were lost as a result of the sale of the pool and spa business. Additionally, comparable branch sales in the water and sewer product line decreased due to the (a) completion of several large infrastructure projects for municipalities in fiscal 2001 which did not recur in fiscal 2002 and (b) declining prices for certain pvc and domestic steel products.

Gross Profit and Gross Margin

Gross profit and gross margin by Group in fiscal 2003, 2002 and 2001 were as follows (dollars in thousands):

	Gross Profit

	Fiscal Years Ended

									% Variance			% Variance
	2003		2002			2001			2003 to 2002			2002 to 2001

Electrical & Plumbing	$	329,012	$	321,381		$	348,378		2.4		%	(7.7		)%
Industrial	86,076		84,146			83,137			2.3		%	1.2		%
Water & Sewer/Building Materials	295,244		293,633			314,849			0.5		%	(6.7		)%
Corporate & Other	—		(1,473		)	(936		)	—			—

	$	710,332	$	697,687		$	745,428			1.8	%		(6.4	)%

	Gross Margin

	Fiscal Years Ended						Basis Point Variance

	2003		2002		2001		2003 to 2002		2002 to 2001

Electrical & Plumbing	22.1	%	21.9	%	21.3	%	20		60
Industrial	27.4	%	25.5	%	26.4	%	190		(90	)
Water & Sewer/Building Materials	23.3	%	23.7	%	23.1	%	(40	)	60
Corporate & Other	—		—		—		—		—

	23.2	%	23.0	%	22.5	%	20		50

Gross profit in fiscal 2003 increased $12.6 million or 1.8% compared to fiscal 2002. This increase was primarily driven by acquired and newly-opened branches, which accounted for a $20.1 million increase in gross profit, of which Utiliserve added $13.6 million. The additional week of net sales included in the first quarter of fiscal 2003 added $13.0 million of gross profit. Comparable branch gross profit decreased $4.9 million or 0.7% primarily as a result of the slowdown in the commercial and non-residential construction sectors combined with competitive pricing pressures in the Electrical & Plumbing Group and deflationary pricing pressure on pvc and ductile pipe products in the Water & Sewer/Building Materials Group. The remaining decrease of $15.6 million related to the closure and/or consolidation of branches. Gross margin totaled 23.2% and 23.0% in fiscal 2003 and 2002, respectively. The net improvement in gross margin was the result of various factors. Gross margin benefited from increased vendor rebates, reduced reserve requirements under the Company’s new methodology for tracking dead stock, and improved margins from the 48 branches which are now on the Hughes Unified operating system, primarily resulting from the implementation of centralized price matrices. The Company also implemented a dead stock program, which identifies potential dead stock on a product by product basis and includes returning products to vendors, transferring products to other branches where the products are selling, reducing the price of the products, and disposing of any products that could not be returned, transferred, or sold. Gross margin was negatively impacted by the acquisition of Utiliserve, which generates lower gross margins than the Company’s average. Gross margin was reduced 28 basis points as a result of the acquisition of Utiliserve in fiscal 2003. In addition, pricing pressures brought about by the intensified competition resulting from the slowdown in the non-residential and commercial construction sectors and the adverse impact of deflationary pressures on pvc and ductile iron pipe products unfavorably impacted gross margin. The aggregation of all of these factors resulted in a net 20 basis point improvement in gross margin in fiscal 2003.

Gross profit in fiscal 2002 decreased $47.7 million or 6.4% compared to fiscal 2001 primarily due to the sale of the Company’s pool and spa business in January 2001. This accounted for $34.0 million of the overall gross profit decrease, of which $5.9 million and $28.1 million related to the Electrical & Plumbing and Water & Sewer/Building Material Groups, respectively. Comparable branch gross profit decreased $21.1 million or 3.1% primarily as a result of the economic downturn in the United States, which intensified competition and placed pricing pressures on the Company. An additional $12.5 million of the gross profit decrease related to the closure and/or consolidation of branches. Partially offsetting this decrease was $19.9 million of gross profit related to acquired and newly-opened branches, of which the majority related to an acquisition in the Water & Sewer/Building Materials Group. Gross margin totaled 23.0% and 22.5% in fiscal 2002 and 2001, respectively. The net improvement in gross margin was due to a shift in sales mix, with a higher proportion of out-of stock sales in fiscal 2002 as compared to direct shipments, which typically generate lower margins. In addition, the pool and spa business generated lower gross margins than the Company’s average in fiscal 2001. Gross margins were also favorably impacted by company-wide inventory improvement initiatives implemented in fiscal 2002, which resulted in increased vendor rebates as a result of concentrated efforts to buy from preferred vendors.

Electrical & Plumbing. The 20 basis point improvement in gross margin in fiscal 2003 was largely the result of the closure of certain branches in fiscal 2002 coupled with the implementation of centralized price matrices on the new Hughes Unified operating system. During the third and fourth quarters of fiscal 2002, the Company closed approximately 30 branches in the Electrical & Plumbing Group because they did not strategically fit into the Company’s core businesses and/or they did not perform to expectations. In fiscal 2003, three additional branches were closed. These branches generally yielded lower gross margins in relation to other branches. Gross margin was also favorably impacted by margin improvement programs initiated during fiscal 2002, including increases in vendor rebate programs, focused purchasing, and reduced reserve requirements under the Company’s new methodology for tracking dead stock, which was initiated in the third quarter of fiscal 2002. The newly-acquired Utiliserve branches negatively impacted gross margins because of the lower margins typically earned in the utility business along with a higher proportion of direct shipments. Competitive pricing pressures in the commercial construction sector also unfavorably impacted gross margins.

The 60 basis point improvement in gross margin in fiscal 2002 was primarily driven by the Company’s efforts to improve margin on certain products and to a decline in lower-margin international business. Gross margin was also positively impacted by a shift in sales mix to out-of-stock sales as compared to direct shipments, which typically generate lower margins.

Industrial. The 190 basis point improvement in gross margin in fiscal 2003 was due to increased sales prices for certain commodity-based products, including stainless steel and nickel alloys. Nickel pricing increased approximately 17% compared to fiscal 2002. Gross margin also benefited from increases in vendor rebate programs and reduced reserve requirements under the Company’s new methodology for tracking dead stock, which was initiated in the third quarter of fiscal 2002.

The 90 basis point reduction in gross margin in fiscal 2002 was attributable to declining prices for certain commodity-based products, including stainless steel and nickel alloy products.

Water & Sewer/Building Materials. Gross margin decreased 40 basis points in fiscal 2003 primarily due to competitive pressures and deflationary pricing on pvc, lumber, plywood, and ductile iron pipe products. Several low margin infrastructure projects combined with a higher proportion of direct shipments in the water and sewer product line also negatively impacted gross margin. Partially offsetting these declines was an improvement in gross margin in the Company’s maintenance supply business as a result of enhanced buying power and sales price increases.

The 60 basis point improvement in gross margin in fiscal 2002 was primarily driven by a sales mix that included more high-margin fabricated products and the sale of the pool and spa business, which generated lower gross margins compared to gross margins as a whole for the Water & Sewer/Building Materials Group.

Operating Expenses

Operating expenses in fiscal 2003, 2002 and 2001 were as follows (dollars in thousands):

	Operating Expenses

	Fiscal Years Ended						% of Net Sales

	2003		2002		2001		2003			2002			2001

Personnel expenses	$	379,741	$	373,857	$	382,050	12.4		%	12.3		%	11.5		%
Other selling, general and administrative expenses	181,992		180,853		199,155		5.9		%	6.0		%	6.0		%
Depreciation and amortization	20,448		31,093		32,551		0.7		%	1.0		%	1.0		%
Provision for doubtful accounts	9,101		11,065		10,626		0.3		%	0.4		%	0.3		%
Impairment of long-lived assets	—		734		15,557		—			—			0.5		%

	$	591,282	$	597,602	$	639,939		19.3	%		19.7	%		19.3	%

Fiscal 2003 compared to Fiscal 2002. As a percentage of net sales, personnel expenses totaled 12.4% and 12.3% in fiscal 2003 and 2002, respectively. The Company’s workforce remained essentially flat with approximately 7,200 employees at January 31, 2003 and January 25, 2002. At January 31, 2003, this included approximately 200 employees as a result of the acquisition of Utiliserve, which increased personnel expenses by $5.6 million in fiscal 2003. The additional week in the first quarter of fiscal 2003 also added $7.2 million of personnel expenses. The primary factors contributing to the increase in personnel expenses as a percentage of net sales were higher employee health insurance expense ($2.4 million) and incentive compensation expense ($6.5 million) associated with bonus programs and restricted stock issued to key executives during fiscal 2002. These increases were partially offset by reductions in overtime ($1.3 million), contract labor ($2.6 million), and severance expense ($2.7 million). The Company is continuing with its hiring freeze and wage and salary management programs, which include limits on merit and promotional salary increases. These programs continue to generate savings for the Company; however, these savings were offset in fiscal 2003 by incremental personnel costs associated with the Hughes Unified implementation and increased employee health insurance as discussed above.

As a percentage of net sales, other selling, general and administrative expenses remained relatively flat at 5.9% and 6.0% in fiscal 2003 and 2002, respectively. The additional week in the first quarter of fiscal 2003 added $1.2 million of other selling, general and administrative expenses. The Company experienced higher losses totaling $1.5 million on its casualty insurance program and increased data processing expenses of $1.0 million primarily for consulting related to the new Hughes Unified operating system. The Company also made a non-recurring donation of $0.8 million in the second quarter of fiscal 2003 to the Hughes Supply Foundation, Inc., a not-for-profit charitable organization. Offsetting these increases were non-recurring expenses of $3.1 million that were incurred in fiscal 2002, primarily for lease obligations ($1.6 million) and other contractual obligations ($1.5 million), related to the closure and/or consolidation of branches in fiscal 2002.

Depreciation and amortization decreased $10.6 million or 34.2% in fiscal 2003 compared to fiscal 2002. Of the total decrease, $9.2 million related to the amortization of goodwill, which was eliminated in fiscal 2003 under FAS 142, Goodwill and Other Intangible Assets. The remaining decrease of $1.4 million was largely the result of reduced capital spending in fiscal 2003 along with the elimination of depreciation expense related to the Company’s forklift fleet and trailers. Certain of these assets were sold and subsequently leased-back by the Company in August 2001.

As a percentage of net sales, the provision for doubtful accounts totaled 0.3% and 0.4% in fiscal 2003 and 2002, respectively. The overall decrease was related to provisions in fiscal 2002 for uncollectible receivables related to the Company’s international business.

In the fourth quarter of fiscal 2002, the Company recorded an impairment loss of $0.7 million related to goodwill of one entity in its Electrical & Plumbing Group.

Fiscal 2002 compared to Fiscal 2001. As a percentage of net sales, personnel expenses totaled 12.3% and 11.5% in fiscal 2002 and 2001, respectively. The Company’s workforce decreased 7.1% from approximately 7,750 employees at January 26, 2001 to 7,200 employees at January 25, 2002. This decrease predominantly resulted from the sale of the pool & spa business in January 2001 combined with the elimination of various management and staff positions to bring headcount more in line with current economic conditions and to streamline the Company’s operations. Personnel expenses related to the pool & spa business totaled $14.2 million in fiscal 2001. The primary factors contributing to the increase in personnel expenses as a percentage of sales were increased employee health insurance expense ($4.7 million) and severance expense ($3.2 million). Approximately $1.5 million of severance expense in fiscal 2002 related to the Company’s separation agreement with its former president and an additional $0.5 million related to the closure and consolidation of branches. Partially offsetting these increases were reductions in discretionary type expenses, including overtime ($1.3 million) and contract labor ($2.0 million), as a result of the cost reduction programs initiated in fiscal 2002.

As a percentage of net sales, other selling, general and administrative expenses remained flat at 6.0% in fiscal 2002 and 2001. Other selling, general and administrative expenses related to the pool & spa business totaled $10.2 million in fiscal 2001. The decline in other selling, general and administrative expenses resulted from the overall net sales decrease coupled with the Company’s cost containment initiatives implemented in fiscal 2002. These initiatives included reductions in discretionary spending items, including advertising, travel, entertainment, and other variable expenses. In fiscal 2002, the Company also experienced lower losses of $2.5 million related to its casualty insurance program. Partially offsetting these decreases were non-recurring expenses of $3.1 million primarily for lease obligations ($1.6 million) and other contractual obligations ($1.5 million), related to the closure and/or consolidation of branches in fiscal 2002.

Depreciation and amortization decreased $1.5 million or 4.5% in fiscal 2002 compared to fiscal 2001. This decrease was due in large part to the sale of the Company’s pool & spa business in January 2001 along with the elimination of depreciation expense related to the Company’s forklift fleet and trailers. Certain of these assets were sold and subsequently leased-back by the Company in August 2001.

As a percentage of net sales, the provision for doubtful accounts totaled 0.4% and 0.3% in fiscal 2002 and 2001, respectively. The overall increase was related to an economic slowdown that affected the Company’s primary markets, particularly its international business, during late fiscal 2001.

Impairment of long-lived assets decreased $14.8 million in fiscal 2002 compared to fiscal 2001. In the fourth quarter of fiscal 2002, the Company recorded an impairment loss of $0.7 million related to goodwill of one entity in its Electrical & Plumbing Group. In fiscal 2001, the Company experienced continued operating losses in its e-commerce ventures and international operations. As a result of these losses and based on an analysis of future profitability and anticipated customer demand for these businesses, the Company recorded an impairment charge totaling $15.6 million relating to the write-down of long-lived assets and goodwill. Of the total $15.6 million impairment charge, $10.9 million represented amounts recorded for bestroute and included the impairment of goodwill ($7.3 million), capitalized development software costs and other intangibles ($3.2 million), other current assets ($0.2 million), and equipment ($0.2 million). Of the remaining $4.7 million of impairment charges, the components are goodwill associated with the Company’s international operations ($2.2 million), the Company’s investment in supplyForce.com ($2.0 million), and certain equipment ($0.5 million).

Non-Operating Income (Expenses)

Interest and Other Income. Interest and other income totaled $9.5 million, $10.5 million and $7.5 million in fiscal 2003, 2002 and 2001, respectively. Included in interest and other income were gains on sales of property and equipment, which totaled $1.4 million, $0.5 million and $0.1 million in fiscal 2003, 2002 and 2001, respectively. The overall increase in gains on sales of property and equipment in fiscal 2003 was due to the sale of land and building assets resulting from the closure and consolidation of branches. The decrease in interest and other income in fiscal 2003 was attributable to reduced interest income of $1.5 million, of which $0.9 million related to the $25.0 million short-term receivable recorded in connection with the sale of the Company’s pool and spa business in January 2001. Average cash balances and interest rates declined during fiscal 2003, which contributed to the remaining decrease in interest income. Further compounding the overall decrease in interest and other income was reduced foreign exchange gains related to the Company’s international operations in Mexico. The increase in interest and other income in fiscal 2002 was due to the elimination of $3.2 million of fiscal 2001 net losses related to the Company’s equity investments combined with interest income of $0.9 million related to a $25.0 million short-term note receivable recorded in connection with the sale of the Company’s pool and spa business. These increases were partially offset by $0.7 million of non-operating expenses primarily related to asset write-downs and other expenses from branch closures and reduced finance charge income.

Interest Expense. Interest expense totaled $30.3 million, $35.9 million and $43.3 million in fiscal 2003, 2002 and 2001, respectively. The decrease in interest expense of $5.6 million or 15.6% in fiscal 2003 was due to a reduction of average outstanding debt balances combined with lower interest rates in fiscal 2003. Borrowing levels were reduced in the first and second quarters of fiscal 2003 largely as a result of working capital improvements. In the third quarter of fiscal 2003, the Company made additional borrowings under its revolving credit agreement in order to fund the acquisition of Utiliserve. As a result, total debt increased from $422.8 million at January 25, 2002 to $441.9 million at January 31, 2003. The decrease in interest expense of $7.4 million or 17.1% in fiscal 2002 was also attributable to lower borrowing levels and reduced interest rates. Borrowing levels in fiscal 2002 were reduced as the Company utilized proceeds from the sale of its pool and spa business and working capital improvements program to reduce debt balances.

Gain on Sale of Pool and Spa Business. Non-operating income (expenses) in fiscal 2002 included an $11.0 million pre-tax ($6.7 million after-tax) gain relating to the sale of the Company’s pool and spa business, which was sold for $48.0 million in January 2001. The Company received cash proceeds of $23.0 million with the remaining $25.0 million of consideration in the form of a short-term note receivable, which was fully collected in fiscal 2002.

Income Taxes

The Company’s effective tax rate was 40.9%, 41.0% and 42.3% in fiscal 2003, 2002 and 2001, respectively. The decrease in the effective tax rate in fiscal 2003 reflects the absence of goodwill amortization. The higher effective tax rate in fiscal 2001 was due to the elimination of nondeductible goodwill related to the Company’s international operations and the sale of its pool and spa business.

Net Income

Net income totaled $58.1 million, $44.1 million and $46.5 million in fiscal 2003, 2002 and 2001, respectively. Diluted earnings per share was $2.45, $1.88 and $1.97 in fiscal 2003, 2002 and 2001, respectively. In fiscal 2003, the Company adopted FAS 142, Goodwill and Other Intangible Assets, which eliminated the amortization of goodwill. Had the Company accounted for goodwill consistent with the provisions of FAS 142 in prior periods, the Company’s net income and diluted earnings per share would have been $58.1 million, $49.5 million and $51.9 million and $2.45, $2.11 and $2.20, in fiscal 2003, 2002 and 2001, respectively. Included in net income in fiscal 2001 was $5.2 million related to the pool and spa business, which was sold in January 2001. Other factors impacting net income and diluted earnings per share have been discussed above.

Financial Condition

Liquidity and Capital Resources

The following sets forth certain measures of the Company’s liquidity (dollars in thousands):

	Fiscal Years Ended

	2003			2002			2001

Cash flows provided by operating activities	$	112,425		$	143,002		$	56,039
Cash flows used in investing activities	(42,247		)	(22,457		)	(38,970		)
Cash flows used in financing activities		(75,324	)		(136,177	)		(4,620	)

	January 31, 2003			January 25, 2002			January 26, 2001

Working capital	$	558,782		$	588,275		$	679,130
Current ratio	2.5 to 1			3.1 to 1			3.2 to 1
Long-term debt-to-capital		37.0	%		40.4	%		47.5	%

Lower levels of cash and other current assets combined with increases in current maturities of long-term debt, accounts payable, and accrued compensation and benefits balances drove the working capital decrease of $29.5 million in fiscal 2003. These changes were partially offset by increases in accounts receivable and inventories. Other current assets decreased primarily due to the collection of income tax receivables in the first quarter of fiscal 2003. The higher accounts receivable, inventories, and accounts payable reflect the acquisition of Utiliserve, which added $30.4 million of working capital at January 31, 2003. Inventories and accounts payable increased due to strategic purchases, primarily in the Industrial Group. The increase in accrued compensation and benefits is due to higher accrued bonuses from increased profitability in fiscal 2003 combined with the timing of bi-weekly payroll payments.

The working capital decrease of $90.9 million in fiscal 2002 resulted from lower accounts receivable and inventory balances and a decrease in other current assets. These changes were partially offset by lower accounts payable, which correspond with the reduction in inventory levels. The decrease in inventories reflected company-wide initiatives to reduce inventory levels to be more in line with current market demand. The decrease in other current assets was due to the collection of the $25.0 million note receivable related to the sale of the Company’s pool and spa business, which was partially offset by higher income tax receivables in fiscal 2002.

Operating Activities

The decrease of $30.6 million in cash provided by operations in fiscal 2003 resulted from increases in inventories and accounts receivable and a decrease in depreciation and amortization. These decreases were partially offset by increases in net income, accounts payable, accrued compensation and benefits, and a decrease in other current assets. Accounts receivable increased as a result of higher sales volumes in January 2003 compared to January 2002. Overall, days sales outstanding for accounts receivable remained essentially flat in both periods. Inventories and accounts payable increased as a result of strategic purchases, primarily in the Industrial Group. Other current assets primarily decreased due to the collection of income tax receivables in fiscal 2003. The increase in net income of $14.0 million was partially offset by a decrease in depreciation and amortization primarily resulting from the elimination of goodwill amortization under FAS 142. The increase of $87.0 million in cash provided by operations in fiscal 2002 was primarily the result of reductions in inventories as part of the Company’s inventory management program and lower accounts receivable levels caused by the year over year sales decline in fiscal 2002.

Investing Activities

Capital expenditures totaled $15.3 million, $16.9 million and $23.9 million in fiscal 2003, 2002 and 2001, respectively. Of these expenditures, $2.6 million, $3.9 million and $8.3 million, respectively, were for new facilities and leasehold improvements on existing facilities and $9.7 million, $7.6 million and $3.2 million, respectively, related to information technology (“IT”) outlays. Included in the IT outlays were $7.5 million and $4.7 million related to the new Hughes Unified operating system in fiscal 2003 and 2002, respectively. The Company continues to closely monitor and control capital expenditures, and instituted a freeze on most new building projects during fiscal 2002. Fiscal 2004 capital expenditures are expected to be approximately $20.9 million, of which approximately $4.8 million relates to the new Hughes Unified operating system. The Hughes Unified capital expenditures were primarily for personal computers and related hardware along with capitalized software upgrades. Projected capital expenditures for fiscal 2004 excludes approximately $23.0 million related to the Company’s new corporate headquarters facility in Orlando, Florida and a new warehouse in Miami, Florida, as discussed in the Financing Activities section below.

Proceeds from the sale of property and equipment totaled $4.4 million, $8.7 million and $1.8 million in fiscal 2003, 2002 and 2001, respectively. The decrease in fiscal 2003 was due to the sale and subsequent lease-back of substantially all of the Company’s forklift fleet and certain of the Company’s trailers in August 2001, which generated cash proceeds of $5.7 million. Partially offsetting this decrease were proceeds from sales of certain land and building assets in fiscal 2003 resulting from the closure and consolidation of branches.

Cash payments for business acquisitions totaled $33.4 million, $32.0 million and $34.1 million in fiscal 2003, 2002 and 2001, respectively. In August 2002, the Company acquired one hundred percent of the capital stock of Utiliserve, a wholesale distributor of electrical transmission and distribution products and services to the United States electric utility industry. The Company paid $33.4 million for the equity value of Utiliserve and assumed $54.5 million and $33.2 million of long-term debt and other liabilities, respectively.

On December 30, 2002, the Company sold its remaining 49.0% equity investment in Anasteel Supply Company, LLC. for $2.3 million. The Company received cash proceeds of $2.0 million with the remaining $0.3 million of consideration in the form of a long-term note receivable due July 31, 2005. The note receivable bears interest at a fixed rate of 7.0%.

On March 2, 2001, in connection with the closure of bestroute, one of the Company’s e-commerce ventures, the Company entered into an agreement with the holders of 723,183 of the Company’s stock rights originally issued as consideration for the acquisition. This agreement cancelled 347,541 of the stock rights and enabled the remaining stock rights to be redeemed for $7.3 million in cash, all of which was paid by the end of the second quarter of fiscal 2002.

In connection with the sale of the assets of the Company’s pool and spa business in January 2001, the Company received $23.0 million of cash proceeds with the remaining $25.0 million of consideration in the form of a short-term note receivable, which bore interest at 7.0% and was fully collected in fiscal 2002.

Financing Activities

Total debt was $441.9 million and $422.8 million as of January 31, 2003 and January 25, 2002, respectively, reflecting an increase of $19.1 million or 4.5%. The increase in total debt was due to borrowings made under the Company’s revolving credit agreement to fund the acquisition of Utiliserve partially offset by payments made throughout the year with cash flows generated by operating activities. Net borrowings (payments) on the Company’s revolving credit agreement totaled $19.6 million, ($100.3 million) and ($153.9 million) in fiscal 2003, 2002 and 2001, respectively. Scheduled payments on the Company’s senior notes totaled $18.7 million and $14.9 million in fiscal 2003 and 2002, respectively. There were no repayments on senior notes in fiscal 2001. Other principal payments, including debt of acquired entities, totaled $54.3 million, $8.9 million and $2.5 million in fiscal 2003, 2002 and 2001, respectively.

Unsecured Bank Notes and Line of Credit Agreements

The Company’s borrowing capacity under its revolving credit agreement totaled $275.0 million (subject to borrowing limitations under the revolving credit agreement) at January 31, 2003. Under the revolving credit agreement, interest is payable at market rates plus applicable margins. Facility fees of 0.15% are paid on the revolving credit agreement. On March 26, 2003, the Company replaced its existing $275.0 million revolving credit agreement, which was scheduled to mature on January 25, 2004, with a new $252.5 million revolving credit agreement (the “new credit agreement”), subject to borrowing limitations, which matures on March 26, 2007. The new credit agreement is unsecured and contains financial and other covenants, including limitations on dividends and maintenance of certain financial ratios. Interest is payable at market rates plus margins and commitment fees of 0.25% are paid on the new credit agreement.

The Company has two short-term lines of credit with borrowing capacities of $10.0 million and $15.0 million, respectively. On July 25, 2002, both line of credit agreements were amended to extend the maturity dates to June 30, 2003. Concurrent with this amendment, the funds under the $15.0 million line of credit agreement were allocated to an operating lease agreement. On August 30, 2002, the operating lease agreement was amended to increase borrowing capacity from $15.0 million to $18.7 million. Under the terms of the operating lease agreement, the Company leases certain equipment, including vehicles, forklifts, and trailers from various companies with funds provided by the $18.7 million line of credit. Monthly payments are made to the bank in accordance with the terms of each specific equipment lease. There was no remaining availability under the operating lease agreement at January 31, 2003. Concurrent with the execution of the new credit agreement, the $10.0 million line of credit agreement, which was uncommitted, was terminated.

Other Notes Payable

On June 22, 2001, the Company entered into an agreement (“lease facility agreement”) with Atlantic Financial Group, Ltd. (“AFG”), certain financial parties as lenders, and SunTrust Bank as agent (“SunTrust”) in which AFG and SunTrust agreed to fund up to $40.0 million for the acquisition and development of real estate projects chosen by the Company, including up to $25.0 million for the Company’s new corporate headquarters building in Orlando, Florida (“Orlando property”) which is expected to cost approximately $23.0 million. Concurrently, the Company entered into an agreement with AFG, certain financial parties as lenders, and SunTrust as agent for the construction of a new warehouse in Miami, Florida (“Miami property”). Pursuant to this agreement, AFG and SunTrust agreed to fund up to $15.0 million for the construction of this facility, which is expected to cost approximately $13.0 million.

Orlando Property. Under the terms of the loan agreement (“Orlando loan agreement”) between AFG and SunTrust for the Orlando property, AFG was required to fund the lease facility through a nominal equity investment, with the remainder funded through non-recourse borrowings from SunTrust. Concurrent with the execution of the Orlando loan agreement, the Company executed a master lease agreement (“Orlando lease agreement”) with AFG under which the Company would lease the Orlando property for a five-year term, including the construction period and a lease period. The Orlando lease agreement required interest only payments that began at the earlier of the completion of construction or eighteen months following the acquisition of the Orlando property. Payments were interest only at LIBOR rates plus applicable credit spreads. Although AFG has partially funded the lease facility through equity contributions, AFG does not have sufficient residual equity at risk. Accordingly, the Company has included the assets and liabilities related to AFG’s Orlando loan agreement in the consolidated balance sheet at January 25, 2002. The outstanding borrowings and related assets of $1.1 million are reflected in long-term debt and construction in progress at January 25, 2002.

On June 5, 2002, the Company terminated its Orlando loan agreement with AFG and SunTrust. Concurrently, the Company executed a new real estate term credit agreement (the “credit agreement”) with SunTrust, and the outstanding principal balance of $1.7 million under the Orlando loan agreement was paid off and rolled into the credit agreement. Under the terms of the credit agreement, SunTrust agreed to fund up to a maximum of $25.0 million for the acquisition and development of the Company’s new corporate headquarters building in Orlando, Florida. The credit agreement bears interest based on LIBOR plus applicable credit spreads (estimated to be 102.5 basis points at January 31, 2003) and matures July 31, 2005. At January 31, 2003, the total outstanding borrowings and related assets of $10.1 million under the credit agreement are recorded in long-term debt and construction in progress.

Miami Property. Under the terms of the loan agreement (“Miami loan agreement”) between AFG and SunTrust for the Miami property, AFG was required to fund the Miami property through an equity investment of approximately 20% with the remainder funded through non-recourse borrowings from SunTrust. Concurrent with the execution of the Miami loan agreement, the Company executed a master lease agreement (the “Miami lease agreement”) with AFG. Under the terms of the Miami lease agreement, the Company will lease the Miami property with rent payments beginning in September 2003. Rent payments for the first four years are interest only at a rate based on LIBOR plus applicable credit spreads (estimated to be 125 basis points at January 31, 2003). Beginning in the fifth year, rents are re-amortized and rates for the remainder of the term increase to 12.5% plus applicable consumer price index adjustments. During the first four years of the Miami lease agreement, the Company may elect to purchase the property for the existing lease balance or convert it into the Company’s lease facility agreement referenced above. Although AFG has sufficient equity at risk with respect to the Miami property, the assets and liabilities related to AFG’s Miami loan agreement have been included in the consolidated balance sheets based on the required consolidation of the assets and liabilities related to AFG’s lease facility referenced above. The outstanding borrowings and related assets of $6.7 million and $5.5 million are recorded in long-term debt and construction in progress at January 31, 2003 and January 25, 2002, respectively.

Other

The Company’s debt agreements contain covenants that require the Company, among other things, to maintain certain financial ratios and minimum net worth levels. The covenants also restrict the Company’s activities regarding investments, liens, borrowing and leasing, and payment of dividends other than stock. At January 31, 2003, the Company was in compliance with all financial covenants.

As of January 31, 2003, the Company had approximately $1.7 million of cash and $212.6 million of unused borrowing capacity (subject to borrowing limitations, under debt covenants) to fund ongoing operating requirements and anticipated capital expenditures. The Company believes it has sufficient borrowing capacity and cash on hand to take advantage of growth and business acquisition opportunities and to fund share repurchases in the near term. The Company expects to continue to finance future expansion on a project-by-project basis through additional borrowing or the issuance of common stock.

On March 15, 1999, the Company’s Board of Directors authorized the Company to repurchase up to 2,500,000 shares of its outstanding common stock to be used for general corporate purposes. Since March 15, 1999, the Company has repurchased 1,572,800 shares at an average price of $22.83 per share, of which 257,000 shares at an average price of $27.78 per share were repurchased in fiscal 2003 and 394,700 shares at an average price of $19.10 per share were repurchased in fiscal 2002. Subsequent to year-end, the Company has repurchased an additional 258,600 shares at an average price per share of $23.39 through March 31, 2003.

The following table presents the Company’s approximate obligations to make future payments under contractual obligations as of January 31, 2003 (in thousands):

	Payments Due by Period

	Total		Less Than 1 Year		1–3 Years		4–5 Years		After 5 Years

Long-term debt	$	441,891	$	63,815	$	99,210	$	168,441	$	110,425
Non-cancelable operating leases	136,003		41,158		60,312		25,202		9,331

Total contractual cash obligations	$	577,894	$	104,973	$	159,522	$	193,643	$	119,756

The Company has certain guarantees of residual values under operating leases. The Company believes that the likelihood of any significant amounts being funded in connection with these commitments is remote. The following table shows the Company’s approximate commitments as of January 31, 2003 (in thousands):

	Total Amounts Committed		Less Than 1 Year		1–3 Years		4–5 Years		After 5 Years

Residual guarantees under operating leases	$	3,019	$	69	$	1,532	$	1,418	$	—

Critical Accounting Policies

The Company’s significant accounting policies are more fully described in the notes to the consolidated financial statements. Certain of the Company’s accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. As with all judgments, they are subject to an inherent degree of uncertainty. These judgments are based on the Company’s historical experience, current economic trends in the industry, information provided by customers, vendors and other outside sources, and management’s estimates, as appropriate. The Company’s significant accounting policies include:

Allowance for Doubtful Accounts

The Company evaluates the collectibility of accounts receivable based on numerous factors, including past transaction history with customers, their credit worthiness, and an assessment of the Company’s lien and bond rights. Initially, the Company estimates an allowance for doubtful accounts as a percentage of net sales based on historical bad debt experience and on a quarterly basis, the Company writes-off uncollectible receivables. This estimate is periodically adjusted when the Company becomes aware of a specific customer’s inability to meet its financial obligations (e.g. bankruptcy filing) or as a result of changes in the overall aging of accounts receivable. While the Company has a large customer base that is geographically dispersed, a slowdown in the markets in which the Company operates may result in higher than expected uncollectible accounts, and therefore, the need to revise estimates for bad debts. To the extent historical credit experience is not indicative of future performance or other assumptions used by management do not prevail, the allowance for doubtful accounts could differ significantly, resulting in either higher or lower future provisions for doubtful accounts. At January 31, 2003 and January 25, 2002, the allowance for doubtful accounts totaled $8.5 million and $8.4 million, respectively.

Inventories

Inventories are carried at the lower of cost or market. The cost of substantially all inventories is determined by the moving average cost method. The Company evaluates its inventory value at the end of each quarter to ensure that it is carried at the lower of cost or market. This evaluation includes an analysis of a branch’s physical inventory results over the last two years, a review of potential dead stock based on historical product sales and forecasted sales, and an overall consolidated analysis of potential excess inventory. Periodically, the branch’s perpetual inventory records are adjusted to reflect permanent declines in market value. To the extent historical physical inventory results are not indicative of future results and if future events impact, either favorably or unfavorably, the saleability of the Company’s products or its relationship with certain key vendors, the Company’s inventory reserves could differ significantly, resulting in either higher or lower future inventory provisions.

During the third quarter of fiscal 2002, the Company created an inventory management department to better manage potential dead stock and excess inventories. This department has focused on implementing programs aimed at reducing the Company’s dead stock, slow-moving, and excess inventory products. These programs identify potential dead stock on a product by product basis and include returning products to manufacturers, transferring products to other branches where the products are selling, reducing the price of the products, and disposing of any products that could not be returned, transferred, or sold. As a result of these initiatives, during fiscal 2003, the Company wrote-off $2.5 million of dead stock from its perpetual inventory records and reduced its overall inventory reserves from $9.8 million at January 25, 2002 to $6.0 million at January 31, 2003.

Consideration Received From Vendors

At the beginning of each calendar year, the Company enters into agreements with many of its vendors providing for inventory purchase rebates (“vendor rebates”) upon achievement of specified volume purchasing levels. The Company accrues the receipt of vendor rebates as part of its cost of sales for products sold based on progress towards earning the vendor rebates taking into consideration cumulative purchases of inventory to date and projected purchases through the end of the year. An estimate of unearned vendor rebates is included in the carrying value of inventory at a period end for vendor rebates received on products not yet sold. Substantially all vendor rebate receivables are collected within three months immediately following fiscal year-end. While management believes the Company will continue to receive consideration from vendors in fiscal 2004 and thereafter, there can be no assurance that vendors will continue to provide comparable amounts of vendor rebates in the future.

Impairment of Long-Lived Assets

Long-lived assets, including property and equipment, are reviewed for possible impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. To analyze recoverability, the Company projects undiscounted future cash flows over the remaining life of the asset. If these projected cash flows are less than the carrying amount, an impairment loss is recognized based on the fair value of the asset less any costs of disposition. The Company’s judgments regarding the existence of impairment indicators are based on market and operational performance. Future events could cause the Company to conclude that impairment indicators exist and that assets are impaired. Evaluating the impairment also requires the Company to estimate future operating results and cash flows that require judgment by management. If different estimates were used, the amount and timing of asset impairments could be affected. In the fourth quarter of fiscal 2002, the Company recorded an impairment loss of $0.7 million related to goodwill of one entity in its Electrical & Plumbing Group. In fiscal 2001, the Company experienced continued operating losses in its e-commerce ventures and international operations. As a result of these losses and based on an analysis of future profitability and anticipated customer demand for these businesses, the Company recorded an impairment charge totaling $15.6 million relating to the write-down of long-lived assets. Of the total $15.6 million impairment charge, $10.9 million represented amounts recorded for bestroute and included the impairment of goodwill ($7.3 million), capitalized development software costs and other intangibles ($3.2 million), other current assets ($0.2 million), and equipment ($0.2 million). Of the remaining $4.7 million of impairment charges, the components are goodwill associated with the Company’s international operations ($2.2 million), the Company’s investment in supplyForce.com ($2.0 million), and certain equipment ($0.5 million).

Self-Insurance

The Company is self-insured for certain losses relating to workers’ compensation, automobile, general, and product liability claims. The Company also maintains stop loss coverage to limit the exposure arising from such claims. Self-insurance losses for claims filed and claims incurred but not reported are accrued based upon the Company’s estimates of the aggregate liability for uninsured claims using loss development factors and actuarial assumptions followed in the insurance industry and the Company’s historical loss development experience. To the extent the projected future development of the losses resulting from workers’ compensation, automobile, general, and product liability claims incurred as of January 31, 2003 differs from the actual development of such losses in future periods, the Company’s insurance reserves could differ significantly, resulting in either higher or lower future insurance expense. At January 31, 2003 and January 25, 2002, self-insurance reserves totaled $5.6 million and $3.1 million, respectively.

Recent Accounting Pronouncements

Effective January 26, 2002, the Company adopted FAS 141, Business Combinations, and FAS 142, Goodwill and Other Intangible Assets. FAS 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting. FAS 141 also specifies the criteria which must be met in order for certain acquired intangible assets to be recorded separately from goodwill. Under FAS 142, goodwill is no longer amortized but rather tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. This new approach requires the use of valuation techniques and methodologies significantly different from the undiscounted cash flow policy previously followed by the Company.

Within the Company’s three operating segments, the Company identified five reporting units as defined in FAS 142. The reporting units’ goodwill was tested for impairment during the first quarter of fiscal 2003 based upon the expected present value of future cash flows approach. As a result of this valuation process as well as the application of the remaining provisions of FAS 142, the Company concluded that there was no impairment of goodwill related to any of the Company’s five reporting units.

Prior to the adoption of FAS 142, the Company amortized goodwill over estimated useful lives ranging from 15 to 40 years. Had the Company accounted for goodwill consistent with the provisions of FAS 142 in prior periods, the Company’s net income, basic earnings per share, and diluted earnings per share would have been as follows (in thousands except per share data):

	Fiscal Years Ended

	2003		2002		2001

Net income, as reported	$	58,084	$	44,065	$	46,515
Add: goodwill amortization, net of tax	—		5,445		5,359

Adjusted net income	$	58,084	$	49,510	$	51,874

Basic earnings per share, as reported	$	2.50	$	1.90	$	2.00
Add: goodwill amortization, net of tax	—		0.23		0.23

Adjusted basic earnings per share	$	2.50	$	2.13	$	2.23

Diluted earnings per share, as reported	$	2.45	$	1.88	$	1.97
Add: goodwill amortization, net of tax	—		0.23		0.23

Adjusted diluted earnings per share	$	2.45	$	2.11	$	2.20

FAS 143, Accounting for Asset Retirement Obligations, was issued in June 2001. FAS 143, which is effective for the Company beginning in fiscal 2004, addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The Company does not expect the adoption of FAS 143 will have a material impact on its consolidated financial statements.

FAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets, was issued in August 2001. This standard establishes a single accounting model for long-lived assets to be disposed of, including segments, and supercedes FAS 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and the accounting and reporting provisions of Accounting Principles Board (“APB”) Opinion No. 30, Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. Under FAS 144, goodwill is no longer allocated to long-lived assets, and, therefore, no longer subjected to testing for impairment as part of those assets, but tested separately as prescribed by FAS 142. In addition, FAS 144 broadens the presentation of discontinued operations to include components of an entity rather than being limited to a segment of a business. The Company adopted FAS 144 as of January 26, 2002. The adoption of FAS 144 in fiscal 2003 had no impact on the Company’s consolidated financial statements.

FAS 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections, was issued in April 2002. This standard rescinds FAS 4, Reporting Gains and Losses from Extinguishment of Debt—an amendment of APB Opinion No. 30, which required all gains and losses from the extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. As a result, the criteria set forth by APB 30 will now be used to classify those gains and losses. FAS 145 also amends FAS 13, Accounting for Leases, to require that certain lease modifications that have economic effects similar to sale-leaseback transactions be accounted for in the same manner as sale-leaseback transactions. In addition, FAS 145 amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. For the provisions related to the rescission of FAS 4, FAS 145 is effective for the Company beginning in fiscal 2004. The remaining provisions of FAS 145 were effective for the Company in fiscal 2003 and the adoption of these provisions had no impact on the Company’s consolidated financial statements. The Company does not expect the adoption of the provisions related to the rescission of FAS 4 will have a material impact on its consolidated financial statements.

FAS 146, Accounting for Costs Associated with Exit or Disposal Activities, was issued in June 2002 and addresses financial accounting and reporting for costs associated with exit or disposal activities. This standard requires recording costs associated with exit or disposal activities at their fair values when a liability has been incurred. Under the previous guidance of Emerging Issues Task Force (“EITF”) Issue 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring), certain exit costs were recorded upon management’s commitment to an exit plan. Adoption of this standard is effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In November 2002, the EITF reached consensus on Issue 02-16, Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor. The consensus was reached that cash consideration received by a customer from a vendor is presumed to be a reduction of the prices of the vendor’s products or services and should be treated as a reduction of cost of sales when recognized in the customer’s income statement. This presumption can be overcome if the consideration can be shown to represent either a payment for assets or services delivered to the vendor or a reimbursement of costs incurred by the reseller to sell the vendor’s products. It also reached consensus on when a customer should recognize a rebate or refund that is payable only if the customer completes a specified level of purchases. Recognition should occur when the rebate or refund is probable and reasonably estimable and should be based on a systematic and rational method. As the Company already accounts for such consideration as a reduction of cost of sales when the vendor rebate is probable and reasonably estimable and based on a systematic and rational allocation of the cash consideration to be received, this EITF has no impact on the Company’s consolidated financial statements.

Financial Accounting Standards Board Interpretation (“FIN”) 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, was issued in November 2002. FIN 45 requires an entity to disclose in its interim and annual financial statements information with respect to its obligations under certain guarantees that it has issued. It also requires an entity to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The disclosure requirements of FIN 45 are effective for interim or annual periods ending after December 15, 2002. These disclosures are presented in note 10 of the notes to the consolidated financial statements. The initial recognition and measurement requirements of FIN 45 are effective prospectively for guarantees issued or modified after December 31, 2002, irrespective of the guarantor’s fiscal year-end. The Company is currently assessing the initial measurement requirements of FIN 45. However, management does not believe that the recognition requirements will have a material impact on the Company’s consolidated financial statements.

FAS 148, Accounting for Stock-Based Compensation—Transition and Disclosure, was issued in December 2002 and amends FAS 123, Accounting for Stock-Based Compensation. This standard provides two additional alternative transition methods for recognizing an entity’s voluntary decision to change its method of accounting for stock-based employee compensation to the fair-value method. In addition, the standard amends the disclosure requirements of FAS 123 so that entities will have to make more prominent disclosures regarding the pro forma effects of using the fair-value method of accounting for stock-based compensation and present those disclosures in a more accessible format in the footnotes to the annual and interim financial statements. FAS 148’s amendment of the transition and annual disclosure requirements are effective for fiscal years ending after December 15, 2002. The additional disclosures required under FAS 148 are presented in note 1 under Stock-Based Compensation of the notes to the consolidated financial statements.

FIN 46, Consolidation of Variable Interest Entities, was issued in January 2003. FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective for all new variable interest entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period beginning after June 15, 2003. The Company does not expect the adoption of FIN 46 will have a material impact on its consolidated financial statements.

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk

Commodity Rate Risk

The Company is aware of the potentially unfavorable effects inflationary pressures may create through higher asset replacement costs and related depreciation, higher interest rates, and higher material costs. In addition, the Company’s operating performance is affected by price fluctuations in stainless steel, nickel alloy, copper, aluminum, plastic, lumber, and other commodities. The Company seeks to minimize the effects of inflation and changing prices through economies of purchasing and inventory management resulting in cost reductions and productivity improvements as well as price increases to maintain reasonable profit margins.

Management believes that inflation (which has been moderate over the past few years) did not significantly affect the Company’s operating results or markets in fiscal 2003, 2002 or 2001. As discussed above, however, the Company’s results of operations in fiscal 2003 and 2002 were both favorably and unfavorably impacted by increases and decreases in the pricing of certain commodity-based products. Such commodity price fluctuations have from time to time created cyclicality in the financial performance of the Company and could continue to do so in the future.

Interest Rate Risk

At January 31, 2003, the Company had approximately $97.6 million of outstanding variable-rate debt. Based upon a hypothetical 10% increase or decrease in interest rates from their January 31, 2003 levels, the market risk with respect to the Company’s variable-rate debt would not be material. The Company manages its interest rate risk by maintaining a combination of fixed rate and variable-rate debt and by entering into interest rate swaps.

ITEM 8. Financial Statements and Supplementary Data

Index to Financial Statements	Page(s)


Consolidated Statements of Income for Fiscal Years Ended January 31, 2003, January 25, 2002 and January 26, 2001	31

Consolidated Balance Sheets as of January 31, 2003 and January 25, 2002	32

Consolidated Statements of Shareholders’ Equity for Fiscal Years Ended January 31, 2003, January 25, 2002 and January 26, 2001	33

Consolidated Statements of Cash Flows for Fiscal Years Ended January 31, 2003, January 25, 2002 and January 26, 2001	34

Notes to Consolidated Financial Statements	35-56

Report of Independent Certified Public Accountants	57

Management’s Responsibility for Financial Statements	57

HUGHES SUPPLY, INC.

CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)

	Fiscal Years Ended

	January 31, 2003			January 25, 2002			January 26, 2001

Net Sales	$	3,066,341		$	3,037,708		$	3,310,163
Cost of Sales	2,356,009			2,340,021			2,564,735

Gross Profit	710,332			697,687			745,428

Operating Expenses:
Selling, general and administrative	561,733			554,710			581,205
Depreciation and amortization	20,448			31,093			32,551
Provision for doubtful accounts	9,101			11,065			10,626
Impairment of long-lived assets	—			734			15,557

Total operating expenses	591,282			597,602			639,939

Operating Income	119,050			100,085			105,489

Non-Operating Income (Expenses):
Interest and other income	9,514			10,546			7,476
Interest expense	(30,325		)	(35,945		)	(43,288		)
Gain on sale of pool and spa business	—			—			11,000

	(20,811		)	(25,399		)	(24,812		)

Income Before Income Taxes	98,239			74,686			80,677
Income Taxes	40,155			30,621			34,162

Net Income	$	58,084		$	44,065		$	46,515

Earnings Per Share:
Basic	$	2.50		$	1.90		$	2.00

Diluted	$	2.45		$	1.88		$	1.97

Average Shares Outstanding:
Basic	23,212			23,175			23,238

Diluted	23,665			23,424			23,584

Dividends Per Share	$	0.355		$	0.340		$	0.340

The accompanying notes are an integral part of these consolidated financial statements.

HUGHES SUPPLY, INC.

CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)

	January 31, 2003			January 25, 2002

Assets
Current Assets:
Cash and cash equivalents	$	1,671		$	6,817
Accounts receivable, less allowance for doubtful accounts of $8,533 and $8,388	423,128			387,953
Inventories	438,451			396,441
Deferred income taxes	19,719			15,420
Other current assets	48,565			56,809

Total current assets	931,534			863,440
Property and Equipment	157,772			145,702
Goodwill	320,133			263,808
Other Assets	26,903			20,312

	$	1,436,342		$	1,293,262

Liabilities and Shareholders’ Equity
Current Liabilities:
Current portion of long-term debt	$	63,815		$	19,175
Accounts payable	230,045			188,447
Accrued compensation and benefits	43,157			32,790
Other current liabilities	35,735			34,753

Total current liabilities	372,752			275,165
Long-Term Debt	378,076			403,671
Deferred Income Taxes	33,973			13,872
Other Noncurrent Liabilities	6,689			6,081

Total liabilities	791,490			698,789
Commitments and Contingencies (Note 10)
Shareholders’ Equity:
Preferred stock, no par value; 10,000,000 shares authorized; none issued; preferences, limitations, and relative rights to be established by the Board of Directors	—			—
Common stock, par value $1 per share; 100,000,000 shares authorized; 23,935,764 and 23,774,600 shares issued	23,936			23,775
Capital in excess of par value	222,380			217,609
Retained earnings	416,724			367,726
Treasury stock, 245,700 and 24,251 shares, at cost	(6,818		)	(531		)
Unearned compensation related to outstanding restricted stock	(11,370		)	(14,106		)

Total shareholders’ equity	644,852			594,473

	$	1,436,342		$	1,293,262

The accompanying notes are an integral part of these consolidated financial statements.

HUGHES SUPPLY, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands, except share and per share data)

	Common Stock					Capital in Excess of Par Value			Retained Earnings			Treasury Stock					Unearned Compen- sation			Total

	Shares		Dollars									Shares		Dollars

Balance at January 28, 2000	24,249		$	24,249		$	221,284		$	300,144		(669	)	$	(15,434	)	$	(7,799	)	$	522,444
Net income	—		—			—			46,515			—		—			—			46,515
Cash dividends—$0.340 per share	—		—			—			(8,088		)	—		—			—			(8,088		)
Shares issued under stock option plans and related tax benefits	—		—			—			(425		)	92		2,127			—			1,702
Purchase and retirement of common shares	(32	)	(32		)	(319		)	(1,002		)	—		—			—			(1,353		)
Issuance of restricted stock, net of cancellations	(6	)	(6		)	(135		)	5			—		—			136			—
Amortization of restricted stock	—		—			—			—			—		—			1,542			1,542
Consideration for bestroute.com acquisition	—		—			7,273			—			—		—			—			7,273

Balance at January 26, 2001	24,211		$	24,211		$	228,103		$	337,149		(577	)	$	(13,307	)	$	(6,121	)	$	570,035
Net income	—		—			—			44,065			—		—			—			44,065
Cash dividends—$0.340 per share	—		—			—			(7,964		)	—		—			—			(7,964		)
Purchase of treasury stock	—		—			—			—			(395	)	(7,537		)	—			(7,537		)
Shares issued under stock option plans and related tax benefits	—		—			300			(1,726		)	266		5,634			—			4,208
Purchase and retirement of common shares	(90	)	(90		)	(854		)	(1,111		)	—		—			—			(2,055		)
Retirement of treasury stock	(343	)	(343		)	(3,160		)	(3,985		)	343		7,488			—			—
Issuance of restricted stock, net of cancellations	(3	)	(3		)	493			1,298			339		7,191			(9,498		)	(519		)
Amortization of restricted stock	—		—			—			—			—		—			1,513			1,513
Cancellation of stock rights issued to bestroute.com	—		—			(7,273		)	—			—		—			—			(7,273		)

Balance at January 25, 2002	23,775		$	23,775		$	217,609		$	367,726		(24	)	$	(531	)	$	(14,106	)	$	594,473
Net income	—		—			—			58,084			—		—			—			58,084
Cash dividends—$0.355 per share	—		—			—			(8,462		)	—		—			—			(8,462		)
Purchase of treasury stock	—		—			—			—			(257	)	(7,140		)	—			(7,140		)
Shares issued under stock option plans and related tax benefits	217		217			5,736			(76		)	15		349			—			6,226
Purchase and retirement of common shares	(26	)	(26		)	(473		)	(666		)	—		—			—			(1,165		)
Issuance of restricted stock, net of cancellations	(30	)	(30		)	(492		)	118			20		504			(98		)	2
Amortization of restricted stock	—		—			—			—			—		—			2,834			2,834

Balance at January 31, 2003	23,936		$	23,936		$	222,380		$	416,724		(246	)	$	(6,818	)	$	(11,370	)	$	644,852

The accompanying notes are an integral part of these consolidated financial statements.

HUGHES SUPPLY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

	Fiscal Years Ended

	January 31, 2003			January 25, 2002			January 26, 2001

Cash Flows from Operating Activities:
Net income	$	58,084		$	44,065		$	46,515
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	20,448			31,093			32,551
Provision for doubtful accounts	9,101			11,065			10,626
Impairment of long-lived assets	—			734			15,557
Gain on sale of pool and spa business	—			—			(11,000		)
Amortization of restricted stock	2,820			984			1,542
Income tax benefit of stock options exercised	1,352			300			—
Deferred income taxes	14,940			10,442			(7,766		)
Other	(1,123		)	(613		)	2,426
Changes in assets and liabilities, net of businesses acquired or sold:
Accounts receivable	(24,342		)	50,087			(43,224		)
Inventories	(11,563		)	55,019			34,567
Other current assets	9,203			(12,252		)	1,795
Other assets	(331		)	(1,831		)	(7,776		)
Accounts payable	25,150			(41,316		)	(34,035		)
Accrued compensation and benefits	8,853			(921		)	4,433
Other current liabilities	(775		)	(4,326		)	9,484
Other noncurrent liabilities	608			472			344

Net cash provided by operating activities	112,425			143,002			56,039

Cash Flows from Investing Activities:
Capital expenditures	(15,273		)	(16,850		)	(23,871		)
Proceeds from sale of property and equipment	4,418			8,673			1,772
Business acquisitions, net of cash	(33,422		)	(32,007		)	(34,086		)
Proceeds from sale of investment in affiliated entity	2,030			—			—
Purchase of bestroute.com stock rights	—			(7,273		)	—
Proceeds from sale of pool and spa business	—			25,000			22,972
Investment in affiliated entities	—			—			(5,757		)

Net cash used in investing activities	(42,247		)	(22,457		)	(38,970		)

Cash Flows from Financing Activities:
Net borrowings (payments) under short-term debt arrangements	19,593			(100,328		)	(153,900		)
Proceeds from issuance of long-term debt	—			—			150,000
Principal payments on other debt	(73,030		)	(23,809		)	(2,476		)
Change in book overdrafts	(10,343		)	1,761			10,109
Purchase of treasury shares	(7,140		)	(7,537		)	—
Dividends paid	(8,112		)	(7,946		)	(8,083		)
Other	3,708			1,682			(270		)

Net cash used in financing activities	(75,324		)	(136,177		)	(4,620		)

Net (Decrease) Increase in Cash and Cash Equivalents	(5,146		)	(15,632		)	12,449
Cash and Cash Equivalents, Beginning of Year	6,817			22,449			10,000

Cash and Cash Equivalents, End of Year	$	1,671		$	6,817		$	22,449

The accompanying notes are an integral part of these consolidated financial statements.

HUGHES SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

Founded in 1928, Hughes Supply, Inc. and its subsidiaries (the “Company”) is a diversified wholesaler of construction and industrial materials, equipment, and supplies. The Company distributes its products to three primary end markets, including commercial, residential, and industrial public infrastructure markets throughout North America. The Company distributes over 300,000 products, representing three broad product groups, through 451 wholesale branches and six central distribution centers located in 34 states. The Company’s principal customers are electrical, plumbing and mechanical contractors, electric utility customers, property management companies, municipalities, and industrial companies. Industrial companies include businesses in the petrochemical, food and beverage, pulp and paper, mining, pharmaceutical, and marine industries.

Principles of Consolidation

The consolidated statements of the Company include the accounts of the Company and its wholly-owned subsidiaries. Significant intercompany balances and transactions have been eliminated. Results of operations of companies acquired and accounted for using the purchase method of accounting are included from their respective dates of acquisition. Investments in 50% or less owned affiliates over which the Company has the ability to exercise significant influence are accounted for using the equity method. During fiscal 2003, 2002 and 2001, the Company did not have any “less than 20% owned” investments in affiliates accounted for under the equity method.

Fiscal Year

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates and the differences could be material.

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents.

Allowance for Doubtful Accounts

Inventories

Consideration Received From Vendors

Property and Equipment

Property and equipment are recorded at cost and depreciated using both straight-line and declining-balance methods based on the following estimated useful lives of the assets:

Buildings and improvements		5–40 years
Transportation equipment		2–20 years
Furniture, fixtures and equipment		1–12 years

Maintenance and repair costs are charged to expense as incurred. Renewals and improvements that extend the useful lives of assets are capitalized. Gains or losses are recognized upon disposition. Interest costs related to assets under construction are capitalized during the construction period and totaled $0.4 million, $0.3 million and $0.5 million in fiscal 2003, 2002 and 2001. Depreciation of property and equipment totaled $16.1 million, $18.1 million and $19.6 million in fiscal 2003, 2002 and 2001, respectively.

Goodwill

Goodwill represents the excess of the purchase price paid over the fair value of the net assets acquired in connection with business acquisitions. Effective January 26, 2002, the Company adopted Statement of Financial Accounting Standards (“FAS”) 142, Goodwill and Other Intangible Assets. FAS 142 requires entities to assess the fair value of the net assets underlying all acquisition-related goodwill on a reporting unit basis effective beginning in fiscal 2003. When the fair value is less than the related goodwill value, entities are required to reduce the amount of goodwill. The approach to evaluating the recoverability of goodwill as outlined in FAS 142 requires the use of valuation techniques utilizing estimates and assumptions about projected future operating results and other variables. Under the new impairment approach, the Company may be subject to earnings volatility if additional goodwill impairment occurs at a future date. FAS 142 also requires entities to discontinue the amortization of goodwill, including amortization of goodwill acquired in past business combinations. Accordingly, the Company no longer amortized goodwill beginning in fiscal 2003 (see note 4).

At January 31, 2003 and January 25, 2002, goodwill, net of accumulated amortization, totaled $320.1 million and $263.8 million, respectively. Accumulated amortization of goodwill totaled $40.3 million at January 31, 2003 and January 25, 2002. Amortization of goodwill totaled $9.2 million and $9.3 million in fiscal 2002 and 2001, respectively.

Other Assets

The Company capitalizes certain software development costs, which are being amortized on a straight-line basis over the estimated useful lives of the software, ranging from 2 to 7 years. At January 31, 2003 and January 25, 2002, capitalized software development costs totaled $9.4 million and $9.8 million, respectively, net of accumulated amortization of $11.7 million and $10.4 million, respectively. Amortization of capitalized software development costs totaled $3.9 million, $3.6 million and $3.6 million in fiscal 2003, 2002 and 2001, respectively.

Intangible assets, which principally consist of customer contracts acquired in business combinations, are recorded at their respective fair values in accordance with FAS 141, Business Combinations, and are amortized using the straight-line method over a weighted-average useful life of 14.6 years. At January 31, 2003, intangible assets totaled $8.3 million, net of accumulated amortization of $0.3 million. The estimated annual amortization expense related to these intangibles for the next five fiscal years is expected to be $0.6 million. There were no intangible assets recorded at January 25, 2002.

Impairment of Long-Lived Assets Other than Goodwill

Self-Insurance

Fair Value of Financial Instruments

The carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued compensation and benefits, and other current liabilities approximate their fair values because of the short-term nature of these instruments. The fair value of the Company’s long-term debt is estimated based on quoted market prices for the same or similar issues or on current rates offered to the Company for debt of the same remaining maturities. The fair value of long-term debt was computed by discounting the remaining cash flows by a rate equal to the estimated constant treasury rate for the remaining life of the debt instrument plus applicable credit spread over the remaining average life of the issue. The fair values of long-term debt approximated $395.9 million and $431.9 million and the related carrying values were $441.9 million and $422.8 million at January 31, 2003 and January 25, 2002, respectively.

Revenue Recognition

The Company ships products to its customers predominantly by its internal fleet and to a lesser extent by third party carriers. The Company recognizes revenues from product sales when title to the products is passed to the customer, which occurs at the point of destination for products shipped by the Company’s internal fleet and at the point of shipping for products shipped by third party carriers. Revenues related to services are recognized in the period the services are performed and totaled $2.4 million, $2.6 million and $1.9 million in fiscal 2003, 2002, and 2001, respectively.

Concentration of Credit Risk

The majority of the Company’s sales are credit sales which are made primarily to customers whose ability to pay is dependent upon the economic strength of the construction industry in the areas where they operate. Concentration of credit risk with respect to trade accounts receivable is limited by the large number of customers comprising the Company’s customer base and the fact that no one customer comprises more than 1% of annual net sales. The Company performs ongoing credit evaluations of its customers and in certain situations obtains collateral sufficient to protect its credit position.

Advertising

Advertising costs are charged to expense as incurred and totaled $5.1 million, $5.3 million and $6.5 million in fiscal 2003, 2002 and 2001, respectively.

Shipping and Handling Fees and Costs

The Company includes shipping and handling fees billed to customers in net sales. Shipping and handling costs associated with inbound freight are capitalized to inventories and relieved through cost of sales as inventories are sold. Shipping and handling costs associated with outbound freight are included in selling, general and administrative expenses and totaled $24.1 million, $23.5 million and $26.4 million in fiscal 2003, 2002 and 2001, respectively.

Income Taxes

Income taxes are recorded for the tax effects of transactions reported in the consolidated financial statements and consist of taxes currently due plus deferred taxes resulting from temporary differences. Such temporary differences result from differences in the carrying value of assets and liabilities for tax and financial reporting purposes. The deferred tax assets and liabilities represent the future tax consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. An assessment is made as to whether or not a valuation allowance is required to offset deferred tax assets.

Stock-Based Compensation

The Company measures compensation expense for employee and director stock options as the aggregate difference between the market and exercise prices of the options on the date that both the number of shares the grantee is entitled to receive and the purchase price are known. Compensation expense associated with restricted stock grants is equal to the market value of the shares on the date of grant and is recorded pro rata over the required holding period. For purposes of pro forma disclosures under FAS 123, Accounting for Stock-Based Compensation, as amended by FAS 148, Accounting for Stock-Based Compensation—Transition and Disclosure, the estimated fair value of the stock options is amortized to compensation expense over the options’ vesting period.

The following table illustrates the effect on net income and earnings per share if the fair value based method had been applied to all outstanding and unvested awards in each period (in thousands except per share data):

	Fiscal Years Ended

	2003			2002			2001

Net income as reported:	$	58,084		$	44,065		$	46,515
Deduct: Total stock-based compensation expense determined under the fair value based method for all awards, net of related tax effects	(1,974		)	(580		)	(3,352		)

Pro forma net income	$	56,110		$	43,485		$	43,163

Earnings per share:
Basic—as reported	$	2.50		$	1.90		$	2.00

Basic—pro forma	$	2.42		$	1.88		$	1.86

Diluted—as reported	$	2.45		$	1.88		$	1.97

Diluted—pro forma	$	2.37		$	1.86		$	1.83

Comprehensive Income

The Company does not have any significant components of comprehensive income.

Reclassifications

Certain prior year amounts in the consolidated financial statements have been reclassified to conform to current year presentation. These reclassifications had no net impact on previously reported results of operations.

Recent Accounting Pronouncements

FAS 143, Accounting for Asset Retirement Obligations, was issued in June 2001. FAS 143, which is effective for the Company beginning in fiscal 2004, addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The Company does not expect the adoption of FAS 143 in fiscal 2004 will have a material impact on its consolidated financial statements.

Financial Accounting Standards Board Interpretation (“FIN”) 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, was issued in November 2002. FIN 45 requires an entity to disclose in its interim and annual financial statements information with respect to its obligations under certain guarantees that it has issued. It also requires an entity to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The disclosure requirements of FIN 45 are effective for interim or annual periods ending after December 15, 2002. These disclosures are presented in note 10. The initial recognition and measurement requirements of FIN 45 are effective prospectively for guarantees issued or modified after December 31, 2002, irrespective of the guarantor’s fiscal year-end. The Company is currently assessing the initial measurement requirements of FIN 45. However, management does not believe that the recognition requirements will have a material impact on the Company’s consolidated financial statements.

NOTE 2 — BUSINESS COMBINATIONS AND DIVESTITURES

Business Combinations

On August 9, 2002, the Company acquired one hundred percent of the capital stock of Utiliserve Holdings, Inc. and its subsidiaries (“Utiliserve”), a wholesale distributor of electrical transmission and distribution products and services to the United States’ electric utility industry. As a result of the acquisition, the Company expects to be a leading provider of electrical transmission and distribution products and services in the United States. It also expects to expand the development of customer contracts as a result of Utiliserve’s value-added services, including vendor-managed inventory, collaborative emergency response, and job-site delivery. Through its supply chain management solutions, Utiliserve is able to assume full responsibility for its customers’ warehouse, work-flow, and inventory management needs.

The purchase price consisted of $33.4 million cash paid (net of cash acquired of $1.9 million) for Utiliserve’s net equity along with the assumption of $54.5 million and $33.2 million of long-term debt and other liabilities, respectively. The results of Utiliserve’s operations have been included in the Company’s consolidated statements of income since August 9, 2002. The total cost of the acquisition was allocated to the tangible and intangible assets acquired and liabilities assumed based on their respective fair values in accordance with FAS 141. Goodwill, all of which is non-deductible for income tax purposes, and other intangible assets recorded in connection with the transaction totaled $56.3 million and $8.6 million, respectively. The goodwill was assigned entirely to the Electrical & Plumbing Group. The fair value assigned to intangible assets and the related weighted-average useful life was based on valuations prepared by an independent third party appraisal firm using estimates and assumptions provided by management. The intangible assets are subject to amortization and consist mainly of customer contracts that are being amortized on a straight-line basis over a weighted-average useful life of 14.6 years. The estimated annual amortization expense related to these contracts for the next five fiscal years is expected to be $0.6 million. Pro forma results of operations reflecting this acquisition have not been presented because the results of Utiliserve’s operations are not material to the Company’s consolidated operating results or assets in fiscal 2003 or 2002.

During fiscal 2002 and 2001, the Company acquired several other wholesale distributors of materials to the construction and industrial markets that were accounted for as purchases. These acquisitions, individually and in the aggregate, did not have a material effect on the consolidated financial statements. Results of operations of these companies from their respective dates of acquisition have been included in the consolidated financial statements.

The assets acquired and liabilities assumed for acquisitions recorded using the purchase method of accounting are summarized below (in thousands):

	Fiscal Years Ended

	2003			2002			2001

Accounts receivable	$	19,934		$	13,498		$	8,828
Inventories	30,447			9,671			10,406
Property and equipment	2,382			961			6,813
Goodwill	56,325			23,713			27,722
Other assets (including intangibles)	13,885			133			4,413

Assets acquired	122,973			47,976			58,182

Accounts payable and accrued liabilities	(33,167		)	(8,040		)	(9,991		)
Long-term debt	(54,536		)	(8,595		)	(2,475		)

Liabilities assumed	(87,703		)	(16,635		)	(12,466		)

Cash purchase price	$	35,270		$	31,341		$	45,716

Consideration in fiscal 2001 for bestroute.com (“bestroute”) included 723,183 stock rights with a fair value of $7.3 million. There was no stock consideration issued in connection with business acquisitions during fiscal 2003 and 2002.

Divestitures

In January 2001, the Company completed the sale of the assets of its pool and spa business for $48.0 million subject to working capital adjustments. The Company received cash proceeds of $23.0 million with the remaining $25.0 million of consideration in the form of a short-term note receivable. The note receivable bore interest at a fixed rate of 7.0% and was fully collected in fiscal 2002. In fiscal 2001, the Company recorded a pre-tax gain of $11.0 million in connection with the sale. The pool and spa business was engaged in the wholesale distribution of swimming pool and spa equipment and supplies. Net sales and income before income taxes for the pool and spa business were $144.0 million and $8.8 million, respectively, in fiscal 2001.

In fiscal 2000, the Company invested $1.8 million in bestroute, an e-commerce company founded in 1999 to provide hard-to-find inventory products to wholesale distributors and end-users via the internet. During fiscal 2001, the Company was required to fund an additional $6.3 million to bestroute as certain operating thresholds were met. In September 2000, the Company acquired the remaining 51.0% interest of bestroute in a transaction where the other members of bestroute received 723,183 stock rights of the Company. Under the terms of the agreement, the stock rights were exercisable by the holders on or after February 1, 2001 and granted the holders the right to convert their bestroute holdings into the Company’s common stock. The agreement also provided a call provision under which the Company had the ability to call the stock rights in exchange for shares of the Company’s common stock. The exercise of a portion of the stock rights issued was contingent upon bestroute meeting its operating plan and demonstrating continued viability as a business. In the fourth quarter of fiscal 2001, bestroute was not able to meet its operating plan and incurred operating losses of $2.1 million. These losses were attributed to bestroute’s inability to gain market acceptance and generate revenues sufficient to cover its operating costs. As a result of these continued losses and viability concerns, the Company discontinued bestroute’s operations and on March 2, 2001, the Company and the holders of the stock rights entered into an agreement to cancel 347,541 of the stock rights and redeem the remaining rights for $7.3 million in cash.

NOTE 3 — PROPERTY AND EQUIPMENT

Property and equipment at January 31, 2003 and January 25, 2002 consist of the following (in thousands):

	2003			2002

Land	$	34,588		$	34,735
Buildings and improvements	117,520			116,595
Transportation equipment	24,149			20,611
Furniture, fixtures and equipment	75,857			71,743
Construction in progress	19,857			10,306

	271,971			253,990
Less accumulated depreciation	(114,199		)	(108,288		)

	$	157,772		$	145,702

NOTE 4 — GOODWILL

	Fiscal Years Ended

	2003		2002		2001

Net income, as reported	$	58,084	$	44,065	$	46,515
Add: goodwill amortization, net of tax	—		5,445		5,359

Adjusted net income	$	58,084	$	49,510	$	51,874

Basic earnings per share, as reported	$	2.50	$	1.90	$	2.00
Add: goodwill amortization, net of tax	—		0.23		0.23

Adjusted basic earnings per share	$	2.50	$	2.13	$	2.23

Diluted earnings per share, as reported	$	2.45	$	1.88	$	1.97
Add: goodwill amortization, net of tax	—		0.23		0.23

Adjusted diluted earnings per share	$	2.45	$	2.11	$	2.20

NOTE 5 — BRANCH CLOSURE AND CONSOLIDATION ACTIVITIES

In the normal course of business, the Company’s management continually evaluates the operations and performance of its individual branches and identifies branches for closure or consolidation. Prior to January 25, 2002, the Company’s management approved a plan to close and consolidate 43 branches, including bestroute as discussed in note 2 above, because these branches did not strategically fit into the Company’s core businesses and/or they did not perform to management’s expectations. During fiscal 2003, the Company announced the closure of an additional seven branches along with its distribution center in Georgia. The following is a summary of the expenses associated with the Company’s closure activities (in thousands):

	Fiscal Years Ended

	2003			2002		2001

Cost of sales	$	391		$	1,647	$	—

Severance expense	$	49		$	519	$	—
Lease expense	—			1,610		—
Professional expense (contractual obligation)	—			650		—
Other	(255		)	885		—

Selling, general and administrative expenses	$	(206	)	$	3,664	$	—

Non-operating expenses	$	26		$	658	$	—

The cost of sales amounts represented an inventory write-down of products that will no longer be saleable following the closure of the branches. Severance expense included charges associated with payments owed to employees who have been or will be involuntarily terminated in connection with the Company’s branch closures. All terminations from branch closures in fiscal 2003 have occurred prior to January 31, 2003. The Company has accrued the estimated lease obligation from the planned closure date through the end of the contractual lease term, net of any estimated sublease income. Other costs accrued for branches identified for closure were based on amounts due under agreements and/or based on estimates to terminate such agreements. Non-operating expenses primarily related to write-downs of assets for which the Company projects the undiscounted cash flows to be less than the carrying amount of the related investment.

During the third quarter of fiscal 2003, the Company reversed accruals totaling $0.5 million related to previous branch closures mainly as a result of favorable settlements of lease obligations for less than originally anticipated.

The liability balance, included in other current liabilities, related to the Company’s closure activities as of January 31, 2003 and January 25, 2002 was as follows (in thousands):

	2003			2002

Beginning balance	$	3,102		$	—
Provision (income)	(185		)	4,322
Cash expenditures:
Lease	(1,131		)	(262		)
Severance	(108		)	(461		)
Other	(351		)	(387		)
Non-cash asset impairments	(176		)	(110		)

Ending balance	$	1,151		$	3,102

NOTE 6 — IMPAIRMENT OF LONG – LIVED ASSETS

In the fourth quarter of fiscal 2002, the Company recorded an impairment loss of $0.7 million related to goodwill of one entity in its Electrical & Plumbing Group.

In fiscal 2001, the Company experienced continued operating losses in its e-commerce ventures and international operations. As a result of these losses and based on an analysis of future profitability and anticipated customer demand for these businesses, the Company recorded an impairment charge totaling $15.6 million relating to the write-down of long-lived assets and goodwill. Of the total $15.6 million impairment charge, $10.9 million represented amounts recorded for bestroute (see note 2) and included the impairment of goodwill ($7.3 million), capitalized development software costs and other intangibles ($3.2 million), other current assets ($0.2 million), and equipment ($0.2 million). Of the remaining $4.7 million of impairment charges, the components are goodwill associated with the Company’s international operations ($2.2 million), the Company’s investment in supplyForce.com ($2.0 million), and certain equipment ($0.5 million).

NOTE 7 — LONG – TERM DEBT

Long-term debt at January 31, 2003 and January 25, 2002 consists of the following (dollars in thousands):

	2003			2002

8.27% senior notes, due 2003	$	19,000		$	19,000
8.27% senior notes, due 2005	16,800			22,400
8.42% senior notes, due 2007	103,000			103,000
7.96% senior notes, due 2011	79,333			88,666
7.14% senior notes, due 2012	36,191			40,000
7.19% senior notes, due 2012	40,000			40,000
6.74% senior notes, due 2013	50,000			50,000
Unsecured bank notes under $275,000 revolving credit agreement, payable January 25, 2004, with varying interest rates between 1.6% to 2.1% at January 31, 2003	72,366			16,142
Commercial paper	—			36,409
Other notes payable with varying interest rates of 2.4% to 18.7% at January 31, 2003 with due dates from 2003 to 2019	25,201			7,229

	441,891			422,846
Less current portion	(63,815		)	(19,175		)

	$	378,076		$	403,671

Unsecured Bank Notes and Line of Credit Agreements

On March 26, 2003, the Company replaced its existing $275.0 million revolving credit agreement, which was scheduled to mature on January 25, 2004, with a new $252.5 million revolving credit agreement (the “new credit agreement”), subject to borrowing limitations, which matures on March 26, 2007. The March 26, 2003 agreement supports the classification of amounts borrowed under the prior revolving credit agreement and maturing within one year as long-term debt at January 31, 2003. The new credit agreement is unsecured and contains financial and other covenants, including limitations on dividends and maintenance of certain financial ratios. Interest is payable at market rates plus applicable margins and commitment fees of 0.25% are paid on the new credit agreement.

The Company has a commercial paper program backed by its revolving credit agreement. There were no commercial borrowings outstanding at January 31, 2003. The weighted-average interest rate on outstanding commercial paper borrowings of $36.4 million at January 25, 2002 was 2.9%. The Company has the ability and intent to refinance short-term borrowings on a long-term basis. Accordingly, all of the commercial paper borrowings at January 25, 2002 have been classified as long-term debt.

On January 15, 2002, the Company’s line of credit agreement was amended to decrease borrowing capacity from $75.0 million to $36.3 million. This line of credit agreement matured on July 31, 2002 and was not renewed by the Company.

The Company had two short-term lines of credit with borrowing capacities of $10.0 million and $15.0 million, respectively. On July 25, 2002, both line of credit agreements were amended to extend the maturity dates to June 30, 2003. Concurrent with this amendment, the funds under the $15.0 million line of credit agreement were allocated to an operating lease agreement. On August 30, 2002, the operating lease agreement was amended to increase borrowing capacity from $15.0 million to $18.7 million. Under the terms of the operating lease agreement, the Company leases certain equipment, including vehicles, forklifts, and trailers from various companies with funds provided by the $18.7 million line of credit. Monthly payments are made to the bank in accordance with the terms of each specific equipment lease. There was no remaining availability under the operating lease agreement at January 31, 2003. There were no amounts outstanding at January 31, 2003 under the $10.0 million line of credit agreement. At January 25, 2002, $0.2 million was outstanding under the $10.0 million line of credit agreement. Concurrent with the execution of the new credit agreement, the $10.0 million line of credit agreement, which was uncommitted, was terminated.

Other Notes Payable

Orlando Property. Under the terms of the loan agreement (“Orlando loan agreement”) between AFG and SunTrust for the Orlando property, AFG was required to fund the lease facility through a nominal equity investment, with the remainder funded through non-recourse borrowings from SunTrust. Concurrent with the execution of the Orlando loan agreement, the Company executed a master lease agreement (“Orlando lease agreement”) with AFG under which the Company would lease the Orlando property for a five-year term, including the construction period and a lease period. The Orlando lease agreement required interest only payments that began at the earlier of the completion of construction or eighteen months following the acquisition of the Orlando property. Payments were interest only at LIBOR rates plus applicable credit spreads. Although AFG has partially funded the lease facility through equity contributions, AFG does not have sufficient residual equity at risk. Accordingly, the Company has included the assets and liabilities related to AFG’s Orlando loan agreement in the consolidated balance sheet at January 25, 2002. The outstanding borrowings and related assets of $1.1 million are recorded in long-term debt and construction in progress at January 25, 2002.

Miami Property. Under the terms of the loan agreement (“Miami loan agreement”) between AFG and SunTrust for the Miami property, AFG was required to fund the Miami property through an equity investment of approximately 20% with the remainder funded through non-recourse borrowings from SunTrust. Concurrent with the execution of the Miami loan agreement, the Company executed a master lease agreement (the “Miami lease agreement”) with AFG. Under the terms of the Miami lease agreement, the Company will lease the Miami property with rent payments beginning in September 2003. Rent payments for the first four years are interest only at a rate based on LIBOR plus applicable credit spreads (estimated to be 125 basis points at January 31, 2003). Beginning in the fifth year, rents are re-amortized and rates for the remainder of the term increase to 12.5% plus applicable consumer price index adjustments. During the first four years of the Miami lease agreement, the Company may elect to purchase the property for the existing lease balance or convert it into the Company’s lease facility agreement referenced above. Although AFG has sufficient equity at risk with respect to the Miami property, the assets and liabilities related to AFG’s Miami loan agreement have been included in the consolidated balance sheets based on the required consolidation of the assets and liabilities related to AFG’s lease facility referenced above. The outstanding borrowings and related assets of $6.7 million and $5.5 million are reflected in long-term debt and construction in progress at January 31, 2003 and January 25, 2002, respectively.

Other

The Company’s debt agreements contain covenants that require the Company, among other things, to maintain certain financial ratios and minimum net worth levels. The covenants also restrict the Company’s activities regarding investments, liens, borrowing and leasing, and payment of dividends other than stock. Under the dividend covenant, approximately $75.3 million was available at January 31, 2003 for payment of dividends. At January 31, 2003, the Company was in compliance with all financial covenants.

Maturities of debt for each of the five years subsequent to January 31, 2003 and in the aggregate are as follows (in thousands):

Fiscal Years Ending
2004	$	63,815
2005	44,628
2006	54,582
2007	45,022
2008	123,419
Thereafter	110,425

	$	441,891

NOTE 8 — INCOME TAXES

The consolidated provision for income taxes consists of the following (in thousands):

	Fiscal Years Ended

	2003		2002			2001

Currently payable:
Federal	$	23,290	$	17,811		$	37,515
State	2,157		2,321			4,315

	25,447		20,132			41,830

Deferred:
Federal	13,219		10,998			(7,007		)
State	1,489		(509		)	(661		)

	14,708		10,489			(7,668		)

	$	40,155	$	30,621		$	34,162

The following is a reconciliation of tax computed at the statutory federal rate to the income tax expense in the consolidated statements of income (dollars in thousands):

	Fiscal Years Ended

	2003					2002					2001

	Amount		%			Amount		%			Amount		%

Tax computed at statutory federal rate	$	34,384		35.0	%	$	26,140		35.0	%	$	28,237		35.0	%
Effect of:
State and local income tax, net of federal income tax benefit	2,369		2.4		%	1,509		2.0		%	2,377		2.9		%
Nondeductible expenses	1,283		1.3		%	2,336		3.1		%	3,548		4.4		%
Other, net	2,119		2.2		%	636		0.9		%	—		—

	$	40,155		40.9	%	$	30,621		41.0	%	$	34,162		42.3	%

The components of deferred tax assets and liabilities at January 31, 2003 and January 25, 2002 are as follows (in thousands):

	2003			2002

Deferred tax assets:
Allowance for doubtful accounts	$	1,874		$	2,016
Inventories	6,195			5,621
Property and equipment	—			700
Accrued vacation	2,522			2,481
Other accrued liabilities	4,458			2,843
Net operating losses	4,736			2,086
Deferred compensation	4,756			3,498

Gross deferred tax assets	24,541			19,245
Valuation allowance	(219		)	(72		)

Total deferred tax assets	24,322			19,173

Deferred tax liabilities:
Capitalized software development costs	2,709			2,793
Goodwill and intangible assets	16,634			7,165
Deferred revenue	9,671			—
Prepaid expenses and other current assets	9,374			7,554
Property and equipment	70			—
Other	118			113

Total deferred tax liabilities	38,576			17,625

Net deferred tax (liabilities) assets	$	(14,254	)	$	1,548

At January 31, 2003, the Company had federal and state net operating loss carryforwards of $4.7 million, which expire between 2012 and 2023. A valuation allowance has been provided on certain of the net operating losses at January 31, 2003 as full realization of these assets is not considered more likely than not.

NOTE 9 — EMPLOYEE BENEFIT PLANS

Profit Sharing Plan

The Company has a 401(k) profit sharing plan, which provides benefits for substantially all employees of the Company who meet minimum age and length of service requirements. The maximum percentage of each eligible employee’s contribution to be matched by the Company was increased from 4% to 5% on February 1, 2000 and from 5% to 6% on February 1, 2001. Additional annual contributions may be made at the discretion of the Board of Directors. Amounts charged to expense for this plan totaled $4.9 million, $5.0 million and $4.3 million in fiscal 2003, 2002 and 2001, respectively.

Bonus Plans

The Company has bonus plans, based on growth, profitability formulas, and return on assets which provide incentive compensation for key officers and employees. Amounts charged to expense for bonuses to executive officers totaled $2.8 million, $1.3 million and $1.4 million in fiscal 2003, 2002 and 2001, respectively.

Deferred Executive Compensation Plan

A non-qualified executive deferred compensation plan established on March 1, 2002 allows eligible employees to defer up to 90.0% of their cash compensation through the plan. The Company does not match employees’ contributions under the current plan.

Supplemental Executive Retirement Plan

The Company has a defined benefit retirement plan, which provides supplemental benefits for certain key executive officers, generally for periods up to 15 years, upon retirement, disability or death. The obligations are not funded separately from the Company’s general assets. At January 31, 2003 and January 25, 2002, the liability under the plan, as determined in accordance with FAS 87, Employers’ Accounting for Pensions, was $5.1 million and $4.6 million, respectively. The liability in each year is recorded in other noncurrent liabilities. Amounts charged to expense under the plan totaled $0.6 million, $0.5 million and $0.7 million in fiscal 2003, 2002 and 2001, respectively.

NOTE 10 — COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company occupies certain facilities and operates certain equipment and vehicles under leases that expire at various dates through the year 2012. In addition to minimum rentals, there are certain executory costs such as real estate taxes, insurance, and common area maintenance on most of the Company’s facility leases. Rent expense under these leases totaled $51.5 million, $51.6 million and $51.1 million in fiscal 2003, 2002 and 2001, respectively. Future minimum annual rental payments, under non-cancelable operating leases as of January 31, 2003 are as follows (in thousands):

Fiscal Years Ending
2004	$	41,158
2005	35,318
2006	24,994
2007	15,844
2008	9,358
Thereafter	9,331

	$	136,003

Certain operating leases for vehicles and equipment expiring in fiscal 2008 contain residual value guarantee provisions and other guarantees which would become due in the event of a default under the operating lease agreement, or at the expiration of the operating lease agreement if the fair value of the leased properties is less than the guaranteed residual value. The maximum amount of the Company’s guarantee obligation at January 31, 2003 is approximately $3.0 million. The Company believes the likelihood of funding the guarantee obligation under any provision of the operating lease agreements is remote.

Legal Matters

NOTE 11 — STOCK OPTION PLANS

Stock Plans

The Company’s two active stock plans include the 1997 Executive Stock Plan (the “1997 Stock Plan”) and the Directors’ Stock Option Plan. These stock plans authorize the granting of both incentive and non-incentive stock options for an aggregate of 2,552,500 shares of common stock, including 2,250,000 shares to key employees and 302,500 shares to non-employee board of director members. Under these plans, options are granted at prices not less than the market value on the date of grant, and the maximum term of an option may not exceed ten years. Prices for incentive stock options granted to employees who own 10% or more of the Company’s stock are at least 110% of market value at date of grant. Options may be granted from time to time until December 31, 2006 with respect to the 1997 Stock Plan or May 24, 2003 with respect to the Directors’ Stock Option Plan. An option becomes exercisable at such times and in such installments as set forth by the compensation committee of the Board of Directors (the “compensation committee”) or by the Directors’ Stock Option Plan. Under the 1997 Stock Plan, the Company can grant up to 1,125,000 shares of the authorized options as restricted stock to certain key employees. These shares are subject to certain transfer restrictions, and vesting may be dependent upon continued employment, the satisfaction of performance objectives, or both.

In May 2002, the shareholders approved an amendment to the 1997 Stock Plan allowing the compensation committee to make grants of performance-based restricted shares to senior executives. Performance-based shares are used as an incentive to increase shareholder returns with actual awards based on various criteria, including increases in the price of the Company’s common shares, earnings per share, shareholder value, and net income. Compensation expense for the anticipated number of shares to be issued, if any, will be recognized over the vesting period. On August 21, 2002, target awards of 125,000 shares have been made to these senior executives. These shares will be issued in five separate tranches if the price of the Company’s common shares achieves certain levels. As of January 31, 2003, none of these price levels have been attained and accordingly, no restricted shares have been issued to the participants.

During fiscal 2002, the Company granted certain senior executives 410,000 restricted shares in accordance with a stock performance award under the 1997 Stock Plan. The shares were awarded in five separate tranches as the price of the Company’s common shares achieved certain levels as determined by the compensation committee. At January 25, 2002, all such stock price achievement levels had been met. The shares vest five years from the award date, and are subject to certain other vesting and forfeiture provisions contained in the 1997 Stock Plan. The market value of the restricted shares was $10.7 million at the date of the grant and was recorded as unearned compensation, a component of shareholders’ equity. This amount is being charged to expense over the respective vesting period and totaled $2.2 million and $0.7 million in fiscal 2003 and 2002, respectively.

During fiscal 2003 and 2002, the Company granted certain employees 20,000 and 11,000 shares of restricted stock, with market values at the date of grant of $0.6 million and $0.3 million, respectively. There were no restricted stock grants made to employees during fiscal 2001. In fiscal 2003, 2002 and 2001, the Company also cancelled 29,888, 84,709 and 6,000, respectively, of the restricted shares granted, with market values at the date of grant of $0.5 million, $1.5 million and $0.1 million, respectively, according to the provisions of the grant. The market value of the restricted stock at the date of grant was recorded as unearned compensation, a component of shareholders’ equity, and is being charged to expense over the respective vesting periods. In fiscal 2003, 2002 and 2001, this expense totaled $0.7 million, $0.8 million and $1.5 million, respectively.

The 1997 Stock Plan also permits the granting of stock appreciation rights (“SARs”) to holders of options. Such rights permit the option holder to surrender an exercisable option, in whole or in part, on any date that the fair market value of the Company’s common stock exceeds the option price for the stock and receive payment in common stock or, if the Board of Directors approves, in cash or any combination of cash and common stock. Such payment would be equal to the excess of the fair market value of the shares under the surrendered option over the option price for such shares. The change in value of SARs would be reflected in income based upon the market value of the stock. No SARs have been granted or issued through January 31, 2003.

Stock Options

Stock option and restricted stock activity and information about the 1997 Stock Plan and the Directors’ Stock Plan are as follows:

Stock Options	Shares Subject to Option			Weighted- Average Option Price

Balance at January 28, 2000 (426,947 shares exercisable)		733,147		$	22.32
Granted	502,000			18.75
Exercised	(83,420		)	8.62
Cancelled	(27,838		)	24.72

Balance at January 26, 2001 (1,098,789 shares exercisable)	1,123,889			21.21
Granted	167,500			20.71
Exercised	(255,425		)	14.63
Cancelled	(80,600		)	26.91

Balance at January 25, 2002 (695,664 shares exercisable)	955,364			22.40
Granted	672,200			33.91
Exercised	(232,387		)	20.97
Cancelled	(30,400		)	31.40

Balance at January 31, 2003 (544,277 shares exercisable)		1,364,777		$	28.11

Restricted Stock	Shares Outstanding			Shares Available for Issuance

Balance at January 28, 2000		362,021			12,979
Additional authorized	—			500,000
Granted	—			—
Cancelled	(6,000		)	6,000
Vested	(13,500		)	—

Balance at January 26, 2001	342,521			518,979
Granted	421,000			(421,000		)
Cancelled	(84,709		)	84,709
Vested	(36,000		)	—

Balance at January 25, 2002	642,812			182,688
Additional authorized	—			250,000
Shares transferred to stock option pool	—			(288,900		)
Shares assigned but not issued	—			(125,000		)
Granted	20,000			(20,000		)
Cancelled	(29,888		)	29,888
Vested	—			—

Balance at January 31, 2003		632,924			28,676

At January 31, 2003, shares available for award under the 1997 Stock Plan and Directors’ Stock Option Plan totaled 61,986, of which 28,676 could be granted in the form of restricted stock. Outstanding options at January 31, 2003 have expiration dates ranging from August 17, 2004 to November 26, 2012.

The following table summarizes information about stock options outstanding at January 31, 2003:

	Options Outstanding						Options Exercisable

Range of Exercise Prices	Number Outstanding		Weighted- Average Remaining Contractual Life (Years)		Weighted- Average Exercise Price		Number Exercisable		Weighted- Average Exercise Price

$12.83–$16.00		85,000		4.8	$	14.48		67,500	$	14.25
16.92– 21.00	307,118		6.7		17.65		182,618		17.80
21.91– 28.75	151,639		7.3		24.04		101,339		24.52
32.50– 40.00	821,020		8.6		33.91		192,820		34.54

$12.83–$40.00		1,364,777		7.8	$	27.94		544,277	$	24.54

Stock-Based Compensation

The Company accounts for its stock option plans using the intrinsic value based method of accounting, under which no compensation expense has been recognized for stock option awards granted at fair market value. For purposes of pro forma disclosures under FAS 123, as amended by FAS 148, the estimated fair value of the stock options is amortized to compensation expense over the options’ vesting period. Pro forma information relating to the fair value of stock-based compensation is presented in note 1 under Stock-Based Compensation.

The fair value of each stock option is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions for grants:

	Fiscal Years Ended

	2003		2002		2001

Risk-free interest rates	4.6	%	4.7	%	6.7	%

Dividend yield	1.1	%	1.5	%	1.3	%

Expected volatility	40.3	%	38.3	%	36.0	%

Expected stock option lives	8		8		8

The weighted-average estimated fair value of employee stock options granted during 2003, 2002 and 2001 was $15.94, $9.16 and $8.77 per share, respectively. The pro forma calculations above do not include the effects of options granted prior to fiscal 1996.

The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Option-pricing models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions could materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

NOTE 12 — CAPITAL STOCK

Treasury Stock

On March 15, 1999, the Company’s Board of Directors authorized the Company to repurchase up to 2,500,000 shares of its outstanding common stock to be used for general corporate purposes. Since March 15, 1999, the Company has repurchased 1,572,800 shares at an average price of $22.83 per share, of which 257,000 shares at an average price of $27.78 per share were repurchased in fiscal 2003 and 394,700 shares at an average price of $19.10 per share were repurchased in fiscal 2002. No shares were repurchased in fiscal 2001. Subsequent to year-end, the Company has repurchased an additional 258,600 shares at an average price per share of $23.39 through March 31, 2003.

Preferred Stock

The Company’s Board of Directors established Series A Junior Participating Preferred Stock (“Series A Stock”) consisting of 75,000 shares. Each share of Series A Stock will be entitled to 1,000 votes on all matters submitted to a vote of shareholders. Series A Stock is not redeemable or convertible into any other security. Each share of Series A Stock shall have a minimum cumulative preferential quarterly dividend rate equal to the greater of $1.00 per share or 1,000 times the aggregate per share amount of the dividend declared on common stock in the related quarter. In the event of liquidation, shares of Series A Stock will be entitled to the greater of $1,000 per share plus any accrued and unpaid dividends or 1,000 times the payment to be made per share of common stock. No shares of Series A Stock are presently outstanding, and no shares are expected to be issued except in connection with the shareholder rights plan referred to below.

The Company has a shareholder rights plan. Under the plan, the Company distributed to shareholders a dividend of one right per share of the Company’s common stock. When exercisable, each right will permit the holder to purchase from the Company one one-thousandth of a share (a “unit”) of Series A Stock at a purchase price of $200 per unit. The rights generally become exercisable if a person or group acquires 15% or more of the Company’s common stock or commences a tender offer that could result in such person or group owning 15% or more of the Company’s common stock. If certain subsequent events occur after the rights first become exercisable, the rights may become exercisable for the purchase of shares of common stock of the Company, or of an acquiring company, having a value equal to two times the exercise price of the right. In general, the rights may be redeemed by the Company at $.01 per right at any time prior to the latter of (a) ten days after 20% or more of the Company’s stock is acquired by a person or group and (b) the first date of a public announcement that a person or group has acquired 15% or more of the Company’s stock. The rights expire on June 2, 2008 unless terminated earlier in accordance with the shareholder rights plan.

NOTE 13 — EARNINGS PER SHARE

Basic earnings per share is calculated by dividing net income by the weighted-average number of shares outstanding. Diluted earnings per share includes the additional dilutive effect of the Company’s potential common shares, which includes certain employee and director stock options, unvested shares of restricted stock and stock rights issued in connection with the bestroute acquisition in fiscal 2001. The following summarizes the incremental shares from these potentially dilutive common shares, calculated using the treasury method, as included in the calculation of diluted weighted-average shares:

	Fiscal Years Ended

	2003	2002	2001

Basic weighted-average number of shares	23,212,392	23,175,025	23,238,025
Incremental shares resulting from:
Stock options	153,011	96,062	56,244
Restricted stock	299,208	84,986	47,363
Stock rights issued in connection with bestroute acquisition	—	67,550	242,386

Diluted weighted-average number of shares	23,664,611	23,423,623	23,584,018

Excluded from the above computations of weighted-average shares for diluted earnings per share were options and unvested shares of restricted stock to purchase 831,020, 362,114 and 1,166,490 shares of common stock at average exercise prices of approximately $33.88, $32.10 and $29.83 for fiscal 2003, 2002 and 2001, respectively, because their effect would have been anti-dilutive.

NOTE 14 — SUPPLEMENTAL CASH FLOWS

Additional supplemental information related to the consolidated statements of cash flows is as follows (in thousands):

	Fiscal Years Ended

	2003		2002		2001

Income taxes paid	$	10,269	$	36,642	$	36,601
Interest paid		29,862		35,814		44,429
Property acquired with debt	17,946		6,946		—
Note receivable from sale of investment in affiliated entity	300		—		—
Note receivable from sale of pool and spa business	—		—		25,000

During fiscal 2003 and 2002, the Company awarded certain key employees 20,000 and 421,000 restricted shares of the Company’s common stock, respectively, in accordance with the 1997 Executive Stock Plan. There were no restricted stock grants made to employees during fiscal 2001.

During fiscal 2002, the Company retired 342,854 shares of its common stock previously held in treasury.

See note 2 for the net assets acquired and liabilities assumed for acquisitions recorded using the purchase method of accounting.

Dividends declared but not paid totaled $2.4 million and $2.0 million at January 31, 2003 and January 25, 2002.

NOTE 15 — RELATED PARTY TRANSACTIONS

The Company leases several buildings and properties from certain related parties, including the Company’s chairman and chief executive officer, two members of the Board of Directors, and an executive officer. The leases generally provide that all expenses related to the properties are to be paid by the Company. Rents paid under these leases totaled $2.1 million, $2.1 million and $1.9 million in fiscal 2003, 2002 and 2001, respectively.

The Company made donations totaling $0.9 million, $0.1 million and $0.025 million to Hughes Supply Foundation, Inc. (“HSF”), a not-for-profit charitable organization, in fiscal 2003, 2002 and 2001, respectively. The board of directors of HSF is comprised of certain executives of the Company, including the chairman and chief executive officer and the president and chief operating officer.

NOTE 16 — SEGMENT INFORMATION

During the first quarter of fiscal 2003, the Company completed the reorganization of its management structure, which started in fiscal 2002 after the new president/chief operating officer had been with the Company for several months and a new strategic direction set. In connection with this reorganization, the Company initiated centralization programs in vendor relations, customer service, and support service areas, which are designed to leverage these functions across the entire Company. The branch operations were then reorganized under the management of three group (“Group”) presidents, as compared to being managed by five Group presidents in the prior fiscal years.

Based on the requirements of FAS 131, Disclosures about Segments of an Enterprise and Related Information, which aligns financial reporting with management structure and responsibility, the Company combined the operating results of its previous Electrical and Plumbing/HVAC Groups, to create a single Electrical & Plumbing segment, which reports to one Group president. The Company also combined the Water & Sewer and Building Material Groups, to create a single Water & Sewer/Building Materials segment, which reports to one Group president. The Industrial Group president was not affected by the changes in management responsibility. These three Groups represent the Company’s reportable segments. This is the basis management uses for making operating decisions and assessing performance, and is on a basis consistent with how business activities are reported internally to management and the board of directors.

The Electrical & Plumbing Group includes the Company’s electrical and electric utility products, plumbing products, heating ventilation and air conditioning products, and its international business. The Industrial Group includes the Company’s industrial pipe, valves, and fittings products. The Water & Sewer/Building Materials Group includes the Company’s water and sewer products, building materials products, maintenance supplies, fire protection products, and concrete products. The “Corporate & Other” category includes corporate level expenses not allocated to the Company’s operating Groups, along with revenues and expenses for bestroute.com in fiscal 2002 and 2001.

Intersegment sales are excluded from net sales presented for each Group. Income before income taxes includes certain corporate expense allocations for employee benefits, corporate capital charges, data processing expenses, and property/casualty insurance. These allocations are based on consumption or at a standard rate determined by management.

In fiscal 2003, in connection with the reorganization of the Company’s operations and re-centralization of certain administrative functions, the Company changed its method of allocating certain costs (e.g. corporate capital charges, certain centralized support service expenses, data processing expenses, interest expense, etc.) to the Groups. As a result of these changes, prior year operating expenses totaling $10.1 million and $6.7 million in fiscal 2002 and 2001, respectively, have been reclassified from Corporate to the operating Groups.

The following table presents net sales and other financial information by Group for fiscal 2003, 2002 and 2001, as reclassified for the changes discussed above (in thousands):

	Electrical & Plumbing(1)		Industrial			Water & Sewer/Building Materials(1)		Corporate & Other			Total

Net sales
2003	$	1,486,424	$	313,942		$	1,265,975	$	—		$	3,066,341
2002	1,467,584		330,375			1,239,666		83			3,037,708
2001	1,632,923		315,315			1,361,896		29			3,310,163

Gross profit
2003	$	329,012	$	86,076		$	295,244	$	—		$	710,332
2002	321,381		84,146			293,633		(1,473		)	697,687
2001	348,378		83,137			314,849		(936		)	745,428

Depreciation and amortization
2003	$	6,138	$	791		$	5,617	$	7,902		$	20,448
2002	9,402		2,752			11,860		7,079			31,093
2001	9,958		2,876			11,733		7,984			32,551

Provision for doubtful accounts
2003	$	3,867	$	372		$	4,862	$	—		$	9,101
2002	6,924		255			3,487		399			11,065
2001	6,269		356			3,633		368			10,626

Impairment of long-lived assets
2003	$	—	$	—		$	—	$	—		$	—
2002	734		—			—		—			734
2001	2,217		—			416		12,924			15,557

Interest and other income (expense)
2003	$	3,712	$	(96	)	$	5,365	$	533		$	9,514
2002	4,151		58			4,623		1,714			10,546
2001	4,700		195			5,426		(2,845		)	7,476

Interest expense
2003	$	40	$	—		$	108	$	30,177		$	30,325
2002	—		—			43		35,902			35,945
2001	—		—			32		43,256			43,288

Gain on sale of pool and spa business
2003	$	—	$	—		$	—	$	—		$	—
2002	—		—			—		—			—
2001	—		—			11,000		—			11,000

Income (loss) before income taxes
2003	$	43,260	$	25,442		$	61,080	$	(31,543	)	$	98,239
2002	24,762		22,498			58,470		(31,044		)	74,686
2001	24,905		23,395			73,910		(41,533		)	80,677

Capital expenditures
2003	$	1,179	$	538		$	3,015	$	10,541		$	15,273
2002	2,590		645			6,661		6,954			16,850
2001	5,745		620			6,098		11,408			23,871

______________

(1) In addition to the reclassifications discussed above, prior year amounts have also been reclassified to reflect the transfer of branches between the Electrical & Plumbing and Water & Sewer/Building Materials Groups, which resulted from the change in management structure discussed above. Results of operations for the pool and spa business, which was sold in January 2001, were included in the Electrical & Plumbing and Water & Sewer/Building Materials Groups in fiscal 2001.

The following table includes the Company’s investment in accounts receivable less allowance for doubtful accounts, inventories, and goodwill for each Group at January 31, 2003 and January 25, 2002 (in thousands):

	2003

	Accounts Receivable		Inventories		Goodwill		Group Assets

Electrical & Plumbing	$	193,164	$	201,258	$	118,464	$	512,886
Industrial	41,160		117,314		56,398		214,872
Water & Sewer/Building Materials	188,804		119,879		145,271		453,954

	$	423,128	$	438,451	$	320,133	1,181,712

Cash and cash equivalents							1,671
Deferred income taxes							19,719
Other current assets							48,565
Property and equipment							157,772
Other assets							26,903

Total Assets							$	1,436,342

	2002

	Accounts Receivable		Inventories		Goodwill		Group Assets

Electrical & Plumbing	$	168,702	$	176,599	$	62,139	$	407,440
Industrial	42,971		103,663		56,398		203,032
Water & Sewer/Building Materials	176,280		116,179		145,271		437,730

	$	387,953	$	396,441	$	263,808	1,048,202

Cash and cash equivalents							6,817
Deferred income taxes							15,420
Other current assets							56,809
Property and equipment							145,702
Other assets							20,312

Total Assets							$	1,293,262

NOTE 17 — QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following is a summary of the unaudited results of operations for each quarter in fiscal 2003 and 2002 (in thousands except per share data):

	First		Second		Third		Fourth		Full Year

Fiscal 2003
Net sales	$	790,004	$	774,651	$	804,061	$	697,625	$	3,066,341
Gross profit	181,218		180,683		188,522		159,909		710,332
Net income	12,394		18,546		19,775		7,369		58,084


Earnings per share:
Basic	$	0.54	$	0.80	$	0.85	$	0.32	$	2.50
Diluted	0.52		0.78		0.84		0.31		2.45


Average shares outstanding:
Basic	23,159		23,283		23,252		23,160		23,212
Diluted	23,632		23,781		23,609		23,511		23,665


Dividends per share	$	0.085	$	0.085	$	0.085	$	0.100	$	0.355


Fiscal 2002
Net sales	$	775,149	$	806,317	$	790,042	$	666,200	$	3,037,708
Gross profit	175,125		180,959		182,994		158,609		697,687
Net income	6,417		14,667		17,742		5,239		44,065


Earnings per share:
Basic	$	0.28	$	0.63	$	0.77	$	0.23	$	1.90
Diluted	0.27		0.63		0.76		0.22		1.88


Average shares outstanding:
Basic	23,297		23,170		23,145		23,089		23,175
Diluted	23,603		23,270		23,356		23,395		23,424


Dividends per share	$	0.085	$	0.085	$	0.085	$	0.085	$	0.340

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Shareholders and Board of Directors of Hughes Supply, Inc.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, shareholders’ equity and cash flows present fairly, in all material respects, the financial position of Hughes Supply, Inc. and its subsidiaries at January 31, 2003 and January 25, 2002, and the results of their operations and their cash flows for each of the three years in the period ended January 31, 2003 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in note 4 to the consolidated financial statements, effective January 26, 2002, the Company changed its method of accounting for goodwill and certain intangible assets as a result of adopting Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets.

PricewaterhouseCoopers LLP
Orlando, Florida
March 26, 2003

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS

The consolidated financial statements and related information included in this Annual Report were prepared in conformity with accounting principles generally accepted in the United States of America. Management is responsible for the integrity of the financial statements and for the related information. Management has included in the Company’s consolidated financial statements amounts that are based on estimates and judgments, which it believes are reasonable under the circumstances. The responsibility of the Company’s independent accountants is to express an opinion on the fairness of the consolidated financial statements. Their opinion is based on an audit conducted in accordance with auditing standards generally accepted in the United States of America as further described in their report.

The Audit Committee of the Board of Directors is composed of three non-management directors. The Committee meets periodically with financial management, internal auditors, and the independent accountants to review internal accounting control, auditing and financial reporting matters.

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

The Company has not had any change in, or disagreement with, its accountants or a reportable event which is required to be reported in response to this item.

PART III

The information required by Items 10, 11, 12, and 13 of Part III is incorporated by reference to the Company’s Definitive Proxy Statement for the 2003 Annual Meeting of Shareholders.

ITEM 14. Controls and Procedures

Within 90 days before the filing date of this Annual Report on Form 10-K, an evaluation was performed under the supervision and with the participation of the Company’s management, including the CEO and CFO, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the CEO and CFO, as appropriate, to allow timely decisions regarding disclosure. There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect such internal controls subsequent to the date that the Company’s management conducted its evaluation.

PART IV

ITEM 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) The following documents are filed as part of this report:

(1) Consolidated Financial Statements

The consolidated financial statements of the Company and its subsidiaries are included in Item 8 on pages 30–57.

(2) Financial Statement Schedules

The financial statement schedules are included on page 62. All other schedules have been omitted as they are either not applicable, not required or the information is given in the financial statements or related notes thereto.

(3) Exhibits Filed

A substantial number of the exhibits listed below in the index to the exhibits on page 59–61 are indicated as having been previously filed as exhibits to other reports under the Securities Exchange Act of 1934, as amended, or as exhibits to registration statements under the Securities Act of 1933, as amended. Such previously filed exhibits are incorporated by reference in this Form 10-K. Exhibits not incorporated by reference herein are filed with this report.

(b) Reports on Form 8-K

There were no reports on Form 8-K filed during the fourth quarter ended January 31, 2003.

INDEX TO EXHIBITS

ITEM 14 (a) 3 — Exhibits Required by Item 601 of Regulation S-K and Additional Exhibits

(3) Articles of incorporation and by-laws.

3.1 Restated Articles of Incorporation, as amended, incorporated by reference to Exhibit 3.1 to Form 10-Q for the quarter ended April 30, 1997 (Commission File No. 001-08772).

3.2 Composite By-Laws, as amended, incorporated by reference to Exhibit 3.2 to Form 10-Q for the quarter ended October 31, 1999 (Commission File No. 001-08772).

3.3 Form of Articles of Amendment to Restated Articles of Incorporation of the Company, incorporated by reference to Exhibit 99.2 to Form 8-A dated May 22, 1998 (Commission File No. 001-08772).

(4) Instruments defining the rights of security holders, including indentures.

4.1 Form of Common Stock Certificate representing shares of the Registrant’s common stock, $1.00 par value, incorporated by reference to Exhibit 4.1 to Form 10-Q for the quarter ended July 31, 1997 (Commission File No. 001-08772).

4.2 Rights Agreement dated as of May 20, 1998 between Hughes Supply, Inc. and American Stock Transfer & Trust Company, incorporated by reference to Exhibit 99.2 to Form 8-A dated May 22, 1998 (Commission File No. 001-08772).

(10) Material contracts.

10.1 Lease Agreements with Hughes, Inc.

(a) Leases effective March 31, 1988, incorporated by reference to Exhibit 10.1(c) to Form 10-K for the year ended January 27, 1989 (Commission File No. 0-5235).

Sub-Item		Property

(1)		Clearwater
(2)		Daytona Beach
(3)		Fort Pierce
(4)		Lakeland
(7)		Orlando Electrical
(8)		Orlando Plumbing
(9)		Orlando Utility
(11)		Sarasota
(12)		Venice
(13)		Winter Haven

(b) Lease Agreement dated June 1, 1987, between Hughes, Inc. and the Registrant, for additional Sarasota property, incorporated by reference to Exhibit 10.1(j) to Form 10-K for the fiscal year ended January 29, 1988 (Commission File No. 0-5235).

(c) Lease Agreement dated March 11, 1992, incorporated by reference to Exhibit 10.1(e) to Form 10-K for the fiscal year ended January 31, 1992 (Commission File No. 0-5235).

Sub-Item		Property

(2)		Gainesville Electrical

(d) Amendments to leases between Hughes, Inc. and the Registrant, dated April 1, 1998, amending the leases for the thirteen properties listed in Exhibit 10.1(b), (d) and (e), incorporated by reference to Exhibit 10.1 to Form 10-K for the fiscal year ended January 30, 1998 (Commission File No. 001-08772).

(e) Lease Extension Agreement.

10.2 Hughes Supply, Inc. 1988 Stock Option Plan as amended March 12, 1996 incorporated by reference to Exhibit 10.2 to Form 10-K for the fiscal year ended January 26, 1996 (Commission File No. 001-08772).

10.3 Real Estate Term Credit Agreement, dated as of May 31, 2002, by and among Hughes Supply Shared Services, Inc. as borrower, Hughes Supply, Inc. as parent, and SunTrust Bank as lender incorporated by reference to Exhibit 10.3 to Form 10-Q for the quarter ended May 3, 2002.

10.4 Hughes Supply, Inc. Amended and Restated Directors’ Stock Option Plan with amendments approved through May 21, 2002.

10.5 Hughes Supply, Inc. Amended Senior Executives’ Long-Term Incentive Bonus Plan, adopted January 25, 1996, incorporated by reference to Exhibit 10.9 to Form 10-K for the fiscal year ended January 26, 1996 (Commission File No. 001-08772).

10.6 Note Purchase Agreement, dated as of August 28, 1997, by and among the Company and certain purchasers identified in Schedule A of the Note Purchase Agreement, incorporated by reference to Exhibit 10.15 to Form 10-Q for the quarter ended July 31, 1997 (Commission File No. 001-08772).

10.7 Hughes Supply, Inc. 1997 Executive Stock Plan, as amended, incorporated by reference to Exhibit 99.1 to Form S-8 dated September 24, 2002 (Commission File No. 001-08772).

10.8 Note Purchase Agreement, dated as of May 29, 1996, by and among the Company and certain purchasers identified in Schedule A of the Note Purchase Agreement, incorporated by reference to Exhibit 10.13 to Form 10-K for the fiscal year ended January 30, 1998 (Commission File No. 001-08772).

10.9 Note Purchase Agreement, dated as of May 5, 1998, by and among the Company and certain purchasers identified in Schedule A of the Note Purchase Agreement, incorporated by reference to Exhibit 10.11 to Form 10-Q for the quarter ended April 30, 1998 (Commission File No. 001-08772).

10.10 Revolving Credit Agreement dated as of March 26, 2003 among Hughes Supply, Inc. as borrower, and the Lenders from time to time party hereto and SunTrust Bank as administrative agent.

10.11 Loan and Aircraft Security Agreement dated as of November 12, 2002 between Juno Industries, Inc. (d/b/a Hughes Aviation), customer, and SunTrust Leasing Corporation, lender, CESSNA 560 XL M/S No. 560-5119, FAA Registration Mark N357 WC.

10.12 Note Purchase Agreement, dated as of December 21, 2000 and amended January 19, 2001, by and among the Company and certain purchasers identified in Schedule A of the Note Purchase Agreement incorporated by reference to Exhibit 10.12 to Form 10-K for the fiscal year ended January 26, 2001 (Commission File No. 001-08772).

10.13 Separation and Release Agreement, dated as of March 28, 2001, by and between the Company and A. Stewart Hall, Jr. incorporated by reference to Exhibit 10.12 to Form 10-K for the fiscal year ended January 26, 2001 (Commission File No. 001-08772).

10.15 Master Lease Agreement, dated as of June 22, 2001 between Atlantic Financial Group, Ltd, as Lessor and Hughes Supply, Inc. and Certain Subsidiaries of Hughes Supply, Inc., as Lessees—Operating Lease incorporated by reference to Exhibit 10.15 to Form 10-Q for the quarter ended October 31, 2001 (Commission File No. 001-08772).

10.15 (a) Loan Agreement, dated as of June 22, 2001 among Atlantic Financial Group, Ltd, as Lessor and Borrower, the financial institutions party hereto as Lenders and SunTrust Bank, as Agent—Operating Lease incorporated by reference to Exhibit 10.15 (a) to Form 10-Q for the quarter ended October 31, 2001 (Commission File No. 001-08772).

10.15 (b) Construction Agency Agreement, dated as of June 22, 2001 among Atlantic Financial Group, Ltd, and Hughes Supply, Inc. as Construction Agent—Operating Lease incorporated by reference to Exhibit 10.15 to Form 10-Q for the quarter ended October 31, 2001 (Commission File No. 001-08772).

10.15 (c) Guaranty Agreement from Hughes Supply, Inc., dated as of June 22, 2001—Operating Lease incorporated by reference to Exhibit 10.15 (c) to Form 10-Q for the quarter ended October 31, 2001 (Commission File No. 001-08772).

10.15 (d) Appendix A to the Operative Documents, Definitions and Interpretation—Operating Lease incorporated by reference to Exhibit 10.15 (d) to Form 10-Q for the quarter ended October 31, 2001 (Commission File No. 001-08772).

10.15 (e) First Amendment to Master Agreement.

10.16 (a) Amendment to Uncommitted Guidance and Swing Line Demand Promissory Note dated July 26, 2002 by the Company and SunTrust Bank, Inc. incorporated by reference to Exhibit 10.16 (a) to Form 10-Q for the quarter ended August 2, 2002 (Commission File No. 001-08772).

(21) Subsidiaries of the Registrant.

(23) Consent of PricewaterhouseCoopers LLP.

(99) Additional Exhibits.

99.1 Location of Facilities.

99.2 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.3 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

FINANCIAL STATEMENT SCHEDULE

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended January 31, 2003, January 25, 2002 and January 26, 2001
(in thousands)

Description	Balance at Beginning of Period		Additions Charged to Income			Deductions			Other Charges		Balance at End of Period

2003
Allowance for doubtful accounts	$	8,388	$	10,809	(a)	$	(10,664	)(b)	$	—	$	8,533
Inventory reserves	9,849		857		(c)	(4,694		)(d)	—		6,012
Deferred income taxes	72		147			—			—		219

2002
Allowance for doubtful accounts	$	6,106	$	13,391	(a)	$	(11,109	)(b)	$	—	$	8,388
Inventory reserves	10,379		8,044		(c)	(8,574		)(d)	—		9,849
Deferred income taxes	698		—			(626		)	—		72

2001
Allowance for doubtful accounts	$	2,777	$	12,447	(a)	$	(9,118	)(b)	$	—	$	6,106
Inventory reserves	7,253		12,395		(c)	(9,269		)(d)	—		10,379
Deferred income taxes		—		698			—			—		698

______________

(a) Represents gross bad debt expense, excluding recoveries of bad debts, which totaled $1,708, $2,326 and $1,821 in fiscal 2003, 2002 and 2001, respectively.

(b) Represents write-offs of uncollectible receivable amounts.

(c) Represents amounts charged for provision for inventory loss, including book to physical inventory adjustments and estimated dead stock write-offs.

(d) Deductions represent the net difference between the original inventory provisions recorded and actual book to physical adjustments, dead stock write-offs, and reductions in calculated reserve requirements.

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE

To the Shareholders and Board of Directors
of Hughes Supply, Inc.

Our audits of the consolidated financial statements referred to in our report dated March 26, 2003 appearing in the 2003 Annual Report on Form 10-K also included an audit of the financial statement schedule listed in Item 15(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

PricewaterhouseCoopers LLP
Orlando, Florida
March 26, 2003

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

HUGHES SUPPLY, INC.
By:	/s/ DAVID H. HUGHES

	David H. Hughes Chairman of the Board and Chief Executive Officer

	/s/ DAVID BEARMAN

	David Bearman Executive Vice President and Chief Financial Officer

Date: April 18, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.


/s/ DAVID H. HUGHES	(Director)	April 18, 2003

David H. Hughes

/s/ JOHN D. BAKER II	(Director)	April 18, 2003

John D. Baker II

/s/ ROBERT N. BLACKFORD	(Director)	April 18, 2003

Robert N. Blackford

/s/ H. CORBIN DAY	(Director)	April 18, 2003

H. Corbin Day

/s/ VINCENT S. HUGHES	(Director)	April 18, 2003

Vincent S. Hughes

/s/ TONI JENNINGS	(Director)	April 18, 2003

Toni Jennings

/s/ WILLIAM P. KENNEDY	(Director)	April 18, 2003

William P. Kennedy

/s/ AMOS R. McMULLIAN	(Director)	April 18, 2003

Amos R. McMullian

/s/ THOMAS I. MORGAN	(Director)	April 18, 2003

Thomas I. Morgan

CERTIFICATIONS

I, David H. Hughes, certify that:

1. I have reviewed this annual report on Form 10-K of Hughes Supply, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


Date: April 18, 2003			/s/ DAVID H. HUGHES

			David H. Hughes Chairman of the Board and Chief Executive Officer

I, David Bearman, certify that:

1. I have reviewed this annual report on Form 10-Q of Hughes Supply, Inc.;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and


Date: April 18, 2003			/s/ DAVID BEARMAN

			David Bearman Executive Vice President and Chief Financial Officer

INDEX OF EXHIBITS FILED WITH THIS REPORT

10.1	(e) Lease Extension Agreement.

10.4	Hughes Supply, Inc. Amended and Restated Directors’ Stock Option Plan with amendments approved through May 21, 2002.

10.10	Revolving Credit Agreement dated as of March 25, 2003 among Hughes Supply, Inc. as borrower, and the Lenders from time to time party hereto and SunTrust Bank as administrative agent.

10.11	Loan and Aircraft Security Agreement dated as of November 12, 2002 between Juno Industries, Inc. (d/b/a Hughes Aviation), customer, and SunTrust Leasing Corporation, lender, CESSNA 560 XL M/S No. 560-5119, FAA Registration Mark N357 WC.

10.15	(e) First Amendment to Master Agreement.

(21) Subsidiaries of the Registrant.

(23) Consent of PricewaterhouseCoopers LLP.

(99) Additional Exhibits.

99.1 Location of Facilities.

99.2 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.3 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SELECTED FINANCIAL DATA

(in thousands, except per share data and ratios)

	Fiscal Years Ended(1)(2)

	2003			2002			2001			2000

STATEMENTS OF INCOME:
Net sales	$	3,066,341		$	3,037,708		$	3,310,163		$	2,994,877
Cost of sales	2,356,009			2,340,021			2,564,735			2,320,604
Gross margin	23.2		%	23.0		%	22.5		%	22.5		%

Selling, general and administrative expenses	$	561,733		$	554,710		$	581,205		$	508,009
Percentage of net sales	18.3		%	18.3		%	17.6		%	17.0		%
Depreciation and amortization	20,448			31,093			32,551			29,808
Operating income	119,050			100,085			105,489			132,392
Operating margin	3.9		%	3.3		%	3.2		%	4.4		%

Interest and other income	$	9,514		$	10,546		$	18,476	(3)	$	9,015
Interest expense	30,325			35,945			43,288			31,805

Income before income taxes	$	98,239		$	74,686		$	80,677		$	109,602
Percentage of net sales	3.2		%	2.5		%	2.4		%	3.7		%
Income taxes	40,155			30,621			34,162			43,731
Net income	58,084			44,065			46,515			65,871
Percentage of net sales	1.9		%	1.5		%	1.4		%	2.2		%

Earnings per share:
Basic	$	2.50		$	1.90		$	2.00		$	2.82
Diluted	2.45			1.88			1.97			2.80

Average shares outstanding:
Basic	23,212			23,175			23,238			23,398
Diluted	23,665			23,424			23,584			23,547

BALANCE SHEETS:
Working capital (current assets less current liabilities)	$	558,782		$	588,275		$	679,130		$	657,500
Total assets	1,436,342			1,293,262			1,406,695			1,377,036
Long-term debt	378,076			403,671			516,168			535,000
Shareholders’ equity	644,852			594,473			570,035			522,444

Current ratio	2.5 to 1			3.1 to 1			3.2 to 1			3.2 to 1
Long-term debt-to-capital	37		%	40		%	48		%	51		%

OTHER:
Cash dividends per share	$	0.355		$	0.340		$	0.340		$	0.340
Return on average assets	4.3		%	3.3		%	3.3		%	5.3		%
Return on average shareholders’ equity	9.4		%	7.6		%	8.5		%	13.1		%

(1) The Company’s fiscal year is a 52 or 53-week period ending on the last Friday in January. Fiscal years 2003 and 1997 contained 53 weeks while the remaining fiscal years contained 52 weeks.

(2) All data adjusted for poolings of interests and the three-for-two stock split declared in fiscal 1998.

(3) Includes $11,000 gain on sale of pool and spa business in January 2001.

Fiscal Years Ended(1)(2)

1999			1998			1997			1996			1995			1994			1993


$	2,536,265		$	1,945,446		$	1,619,362		$	1,326,978		$	1,065,549		$	880,977		$	724,466
1,977,266			1,519,323			1,276,481			1,052,120			848,698			704,907			583,513
22.0		%	21.9		%	21.2		%	20.7		%	20.4		%	20.0		%	19.5		%

$	416,642		$	318,923		$	261,355		$	218,093		$	172,828		$	145,913		$	119,732
16.4		%	16.4		%	16.1		%	16.4		%	16.2		%	16.6		%	16.5		%
23,269			18,727			15,566			11,859			10,131			8,657			7,382
117,206			87,244			64,937			42,703			32,391			19,052			11,811
4.6		%	4.5		%	4.0		%	3.2		%	3.0		%	2.2		%	1.6		%

$	6,886		$	5,837		$	6,241		$	5,111		$	3,206		$	3,677		$	4,072
25,415			19,257			14,842			10,440			6,813			6,456			6,087

$	98,677		$	73,824		$	56,336		$	37,374		$	28,784		$	16,273		$	9,796
3.9		%	3.8		%	3.5		%	2.8		%	2.7		%	1.8		%	1.4		%
37,234			26,254			19,282			11,728			7,984			4,710			1,734
61,443			47,570			37,054			25,646			20,800			11,563			8,062
2.4		%	2.4		%	2.3		%	1.9		%	2.0		%	1.3		%	1.1		%


$	2.57		$	2.37		$	2.13		$	1.78		$	1.54		$	0.97		$	0.68
2.55			2.33			2.09			1.75			1.50			0.92			0.68


23,889			20,108			17,384			14,418			13,504			11,900			11,899
24,138			20,432			17,719			14,647			13,992			13,675			11,917


$	567,435		$	486,106		$	350,975		$	235,113		$	212,573		$	171,702		$	148,919
1,128,973			965,742			684,056			474,574			418,717			330,526			294,510
402,203			343,197			228,351			139,165			127,166			121,292			103,870
483,956			421,769			299,233			188,926			165,427			116,918			106,597

3.5 to 1			3.5 to 1			3.3 to 1			2.6 to 1			2.7 to 1			2.9 to 1			2.8 to 1
45		%	45		%	43		%	42		%	43		%	51		%	49		%


$	0.330		$	0.310		$	0.250		$	0.200		$	0.150		$	0.110		$	0.080
5.9		%	5.8		%	6.4		%	5.7		%	5.6		%	3.7		%	2.8		%
	13.6	%		13.2	%		15.2	%		14.5	%		14.7	%		10.3	%		7.8	%

GRAPHIC 3 image002.jpg GRAPHIC begin 644 image002.jpg M_]C_X``02D9)1@`!`0$`8`!@``#__@`<4V]F='=A8) M+=:7>,REEA2)[9B`1D@EWSC(]O)'BG[&\2_M1.D;Q^ID:.0#Q\#!_BNZ`HHI:]U&QTV-9+^]M[1&.%:>54!/Q MDF@8#*20""1Y&?%?:SW2VI:?J1OKNVOH)IKVX,_:20%DC"JB9&J-I6E-)$P6>3*QL1D)A2S/CWVHK-CWQCWH+:BE=,CN(M*M([N1I+E($65V MQEG"C<3CC.14E06=I%864%G` M"(K>-8D!.2%48'^A4]`45'--';P23RL$CC4N['V`&2:6OM0%I:Q2QQ]UYY8X MXT)VY+,!G[#)^U`[12EQ?+!?VEGL+276\C!X55&23]RH^]9W5;UM'U'\/;:K MJ-WJ31&=+5HQ*DPW`;"%3T9)_<,`>3QY#6T444!4-W-+;V[20VLETX\11LH8 M_=B!_NIJ*#'37NLS:M<7,UA=6";%M85B@:XF88#N5(';3)=1N8D9C-.6.KWE ME:P6XZ6U*-%D99?U$D*9+$-G<2Y)P2?_`$23\Z6B@H[[4M?[GZ">ZR?H2 MSW$8C4E?^8!SP>,#/UKJTU/7)8$6XT!HK@1'>S7$8C+A?"X9C@GCD<5=44&9 MDU?JO^ULL737^0,8[;O<1"+?CDL`Y(&T9YD8% M[:\X*$\KZE!#%?3GQDYR/;444&5FU3JZ>\=M-T".&R%N!&MY*B2=S/)PK-P` M,`>Y/D"E==T_JC7)[:YAT^UMHX8I`MO/=Y+.2A4OM4C:"G[5/()!."16THH, M-):_U&GE0V][:VL=O&-HGV2-QW$9$<>S!)R%)EW`GA-HW<9Q@["B@R.DV/5NGWLUU/%9W*3111QVYU"0"' M:JJ?^L@Y(+<#.6(YX-23=-:W+I4=I!KC6:1N&6WBS@*"<1]U=K[<<9`!X%:J MB@\[ZETGJ#0M&EN+;JIXG[HEB+]PA-J,QCR\C94@,?4"!YK5RPQ3QF.:-)$)!*NH(XY'!KN@RUWT M;` =PLB$O#&T:.[EV"D@D;F))R57S\"F**`HHHH/_]D_ ` end GRAPHIC 4 image004.jpg GRAPHIC begin 644 image004.jpg M_]C_X``02D9)1@`!`0$`8`!@``#__@`<4V]F='=AT2QG)\M/`LK'C')8$GB M@;T5E)8]/L;.YDTB$Z=<).\-G';?IN9%'([0]I&[Z9'1=I+G:$./:,`Y\LO%`VTV^74],M;^-&C2YB655?R`PR,_L:Z7- MY;6:QMKDM/Q2S M]1&ZH\/?7>K,<`$9R"20*ZW>I6MD;99I0&NY1%"`>78\\?L":"U26\UZ2.Z6 M.RLO4Q+],7&IZ7'OQ;U9>Y'DCM1VL$#2HIP22I9 M54G`9B!X!H'%%9W6^M-(TI(434+22>:1`%[JE40LH+L=3Z;<7M M@]K?/+8QR,\US:H\D3,%PJ%T!!R6SC/^//U#222)%&TDCJB("S,QP`!Y)-4K M+7-+U"?L6E]#++@D1AL,0/)`/D?44J'4L,FKK.JW[V'8*1]JPG;=+N]P8!,C M`"XS@>X_7$[BSU?4]=Q*\$.F0-;W$#=HF4L"Q902JRJ)(S%$%."<;1M]N<\^2>.>!AS109VY MZ-AO#`;G6-5E:UD$MNS3KF)AX(]ON/\`MFK$_3?JK7LSZQJ4C=U)5D+QY5D. M1@;-OGGD>0#P13JB@S5WT19ZB8%U+4]5O8;,GQ\ M,5HZ*#+6_P##GINU6,Q6UP)(B=LPNI!(`=V5W`Y`][>/G4AT%IIEMWEOM2D2 MT18[:/U&P0(I]JJ4`;CYYW'`R3@5IZ*!':=(:181+!:"\@MTSMMX[^<1C/GV M[\?MXJU+T[HL[H\FDV;-'^G\E?\`SG]Z944&/U7H;3K[7;%DTBVCLDW&5X&[ M+#*N&7VX)#$Q^#X#?.GUATYHNF2&6STRVBE/F;M@R'[N? EX-10.1(E) 5 d55250_ex10-1e.txt LEASE EXTENSION AGREEMENT EXHIBIT 10.1(e) LEASE EXTENSION AGREEMENT THIS LEASE EXTENSION AGREEMENT is made and entered effective as of the 31st day of March, 2003, by and between HUGHES, INC., a Florida corporation ("Lessor"), and HUGHES SUPPLY, INC., a Florida corporation ("Lessee"). A. Lessor and Lessee entered into twelve (12) different Lease Agreements, as amended, for the demised premises ("Premises") described therein, each of which having the address as set forth in Exhibit "A" attached hereto and by this reference incorporated herein (collectively, the "Leases"). B. Lessor and Lessee desire to amend the Leases to extend the term(s) as set forth below. NOW THEREFORE, in consideration of the mutual covenants contained in the Lease and herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Lessor and Lessee agree as follows: 1. All terms and conditions set forth in each of the Leases are herein incorporated by this reference as to each individual Lease, and defined terms set forth therein shall have the meanings as set forth in each individual Lease. 2. The "term(s)" of each of the Leases are hereby extended for an additional thirty (30) days so that each of the Leases now have a new termination date of April 30, 2003. 3. The Leases remain in full force and effect as amended above. IN WITNESS WHEREOF, the parties hereto have caused this Lease Extension Agreement to be executed effective the date first written above. WITNESSES: LESSOR: HUGHES, INC., a Florida corporation By:__________________________________ __________________________________ Name:________________________________ Print Name:_______________________ Title:_______________________________ __________________________________ Print Name:_______________________ LESSEE: HUGHES SUPPLY, INC., WITNESSES: a Florida corporation /s/ Jack Prevost By: /s/ Vincent S. Hughes - ----------------------------------- ------------------------------- Print Name: Name: ------------------------ ---------------------------- Title: VP ----------------------------- - ----------------------------------- Print Name: ------------------------ 2 EXHIBIT "A" 1. 951 Pierce St., Clearwater, FL 2. 903 Brentwood Dr., Daytona, FL 3. 401 Angle Rd, Ft. Pierce, FL 4. 576 N.E. 23rd Ave., Gainesville, FL 5. 335 N. Ingraham Ave., Lakeland, FL 6. 1010 W. Grand Ave., Orlando, FL 7. 2018 Lucerne Terrace, Orlando, FL 8. 521 W. Central Blvd., Orlando, FL 9. 2525 12th St., Bldg. 1, Sarasota, FL 10. 2525 12th St., Bldg. 2, Sarasota, FL 11. 341 S. Seaboard Ave., Venice, FL 12. 2501 7th St., S.W., Winter Haven, FL (or 2439 7th St., S.W.) 3 EX-10.4 6 d55250_ex10-4.txt AMENDED AND RESTATED PLAN EXHIBIT 10.4 HUGHES SUPPLY, INC. Amended and Restated Plan Directors' Stock Option Plan (with Amendments Approved Through May 21, 2002) 1. PURPOSE This Directors' Stock Option Plan (the "Plan") is intended as an incentive and to encourage Directors of Hughes Supply, Inc. (the "Corporation") who are not, and for the previous twelve (12) months have not been, employees of the Corporation eligible to participate in the Hughes Supply, Inc. 1988 Stock Option Plan (the "Employee Plan") to increase their stock ownership and proprietary interest in the success of the Corporation, to encourage them to continue as Directors of the Corporation and as an incentive to work to increase the value of the stock of the Corporation. The options to be issued pursuant to this Plan shall not constitute incentive stock options within the meaning of 422A of the 1986 Internal Revenue Code, as amended (the "Code"). 2. ADMINISTRATION The Plan shall be administered by a Directors' Stock Option Plan committee appointed by the Board of Directors of the Corporation (the "Committee"). The Committee shall consist of not less than three (3) members of the Corporation's Board of Directors who are not employees of the Corporation and who are "disinterested persons" as that term is defined in Rule 16b-3(d) under the Securities Exchange Act of 1934 (the "Exchange Act") or any successor statute or regulation regarding the same subject matter. The Board of Directors may from time to time remove members from, or add members to, the Committee. Vacancies on the Committee, howsoever caused, shall be filled by the Board of Directors. The Committee shall elect one of its members as Chairman, and shall hold meetings at such times and places as it may determine. Acts of the Committee taken by a majority of the Committee at a meeting at which a quorum is present, or acts reduced to or approved in writing by a majority of the members of the Committee, shall be the valid acts of the Committee. A nonemployee Director shall receive options under the Plan whether or not such Director also serves as a member of the Committee. Subject to the provisions of the Plan the Committee may from time to time adopt such rules for administration of the Plan as it deems appropriate. The interpretation and construction by the Committee of any provisions of the Plan or of any option granted under it shall be final unless otherwise determined by the Board of Directors. No member of the Board of Directors or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any option granted under it. 3. PARTICIPANTS AND OPTIONS The persons who shall be participants under the Plan (the "Participants") shall be all such Directors of the Corporation as are not on the date of the grant of an option under the Plan, and for a period of at least twelve (12) months prior to the grant of such option have not been, employees of the Corporation. Options are granted and shall be granted to Participants under the Plan as follows: (i) Subject to approval of the Plan by the stockholders in accordance with Section 13 hereof and to the receipt by the Corporation of the letter from the staff of the Securities and Exchange Commission referred to in Section 14 hereof, an initial grant of an aggregate of 18,000 shares divided equally (rounded, if necessary, down to the nearest whole number of shares) among the Participants is made effective as of January 24, 1989 to the Participants on that date. (ii) In addition to the options referred to in subparagraph (i) above, during the term of the Plan until, but not including, the date of the 1994 annual meeting of shareholders a subsequent grant of options for an aggregate of 18,000 shares, or such lesser number of shares as shall then constitute all of the remaining shares which are authorized for options under the Plan, but which are not then subject to options under the Plan within the limitation set forth in Section 4 hereof, divided equally (rounded, if necessary, down to the nearest whole number of shares) among the then Participants under the Plan, will be made at the meeting of the Board of Directors of the Corporation immediately following the 1990 annual meeting of stockholders of the Corporation and at each Board meeting immediately following each annual meeting of stockholders of the Corporation thereafter during the term of the Plan and prior to the 1994 annual meeting of Shareholders. (iii) In addition to the options referred to in subparagraphs (i) and (ii) above, during the term of the Plan beginning with the date of the 1994 annual meeting of shareholders, a subsequent grant of options for an aggregate of 22,500 shares or such lesser number of shares as shall then constitute all of the remaining shares which are authorized for options under the Plan but which are not then subject to options under the Plan, within the limitations set forth in Section 4 hereof, divided equally (rounded, if necessary, down to the nearest whole number of shares) among the Participants under the Plan, will be made at the meeting of the Board of Directors of the Corporation immediately following the 1994 annual meeting of stockholders of the Corporation and at each Board meeting immediately following each annual meeting of stockholders thereafter through the 1998 annual meeting. (iv) In addition to the options referred to in subparagraphs (i), (ii) and (iii) above, during the term of the Plan beginning with the date of the 1999 annual meeting of shareholders, a subsequent grant of options for an aggregate of 20,000 shares or such lesser number of shares as shall then constitute all of the remaining 2 shares which are authorized for options under the Plan but which are not then subject to options under the Plan, within the limitations set forth in Section 4 hereof, divided equally (rounded, if necessary, down to the nearest whole number of shares) among the Participants under the Plan, will be made at the meeting of the Board of Directors of the Corporation immediately following the 1999 annual meeting of shareholders of the Corporation and at each Board meeting immediately following each annual meeting of shareholders thereafter through and including the 2001 annual meeting. (v) In addition to the options referred to in subparagraphs (i), (ii), (iii) and (iv) above, during the term of the Plan beginning with the date of the 2002 annual meeting of shareholders, a subsequent grant of options for 5,000 shares to each Participant (or if the number of shares authorized, as set forth in Section 4 hereof, is insufficient to grant 5,000 shares to each Participant, then a number of shares determined by dividing (a) the number of authorized shares which are not then subject to options under the Plan by (b) the number of Participants at that time, and, if necessary, rounding down to the nearest whole number of shares) will be made at the meeting of the Board of Directors of the Corporation immediately following the 2002 annual meeting of shareholders of the Corporation, and at each Board meeting immediately following each annual meeting of shareholders thereafter. 4. STOCK The stock which may be subject to the options under the Plan shall be 302,500 shares of the Corporation's authorized but unissued or reacquired $1.00 par value common stock hereafter sometimes called capital stock. The aggregate number of shares of capital stock which are subject to outstanding options and which will be subject to options to be granted under the Plan shall be subject to adjustment in accordance with the provisions of subsection (h) of Section 5 hereof. In the event that any outstanding option under the Plan for any reason expires or is terminated, the shares of capital stock allocable to the unexercised portion of such option may again be subjected to an option under the Plan. Of the stock which may be subject to options under the Plan, 112,500 of such shares have been added by an amendment to the Plan approved by the stockholders on May 24, 1994 and such additional shares constitute shares as to which "Amendment Options" within the meaning of Section 6 hereof may be granted, and approval by the stockholders of such amendment extends the term of the Plan in accordance with Section 6 thereof. Furthermore, of the stock which may be subject to options under the Plan, 100,000 of such shares have been added by an amendment to the Plan approved by the stockholders on May 19, 1999 and such additional shares constitute shares as to which "Amendment Options" within the meaning of Section 6 hereof may be 3 granted, and approval by the stockholders of such amendment extends the term of the Plan in accordance with Section 6 hereon. 5. TERMS AND CONDITIONS OF OPTIONS: STOCK OPTION AGREEMENTS Stock options granted pursuant to the Plan shall be evidenced by stock option agreements in such form as the Committee shall from time to time recommend and the Board of Directors shall from time to time approve, which agreements shall comply with and be subject to the following terms and conditions: (a) Optionee's Agreement Each optionee shall agree to remain as a Director of the Corporation but such agreement shall not impose upon the Corporation any obligation to retain the optionee as a Director for any period. (b) Number of Shares Each option shall state the number of shares to which it pertains. (c) Option Price Each option shall state the option price, which shall be not less than one hundred percent (100%) of the fair market value of the shares of capital stock of the Corporation on the date of the granting of the option. During such time as such stock is not listed upon an established stock exchange the fair market value per share shall be the mean between dealer "bid" and "ask" prices of the capital stock in over-the-counter market applicable to transactions effected in Orlando, Florida on the day the option is granted, as reported by the National Association of Securities Dealers, Inc. If the stock is listed upon an established stock exchange or exchanges such fair market value shall be deemed to be the highest closing price of the capital stock on such stock exchange or exchanges on the day the option is granted or if no sale of the Corporation's capital stock shall have been made on any stock exchange on that day, on the next preceding day on which there was a sale of such stock. Subject to the foregoing, the Board of Directors and the Committee in fixing the option price shall have full authority and discretion and be fully protected in doing so. 4 (d) Medium and Time of Payment The option price shall be payable in United States dollars upon the exercise of the option and may be paid in cash, by check or with shares of capital stock of the Corporation valued at their fair market value, as that term is defined in the preceding paragraph. (e) Term and Exercise of Options An option shall be exercisable either in whole or in part at any time after the date on which it is granted and prior to its expiration date which, unless sooner terminated under subsections (f) or (g) of this Section 5 hereof, shall be ten (10) years from the date on which it is granted. The procedure for exercise of an option shall be as set forth in the Plan and in the stock option agreement evidencing the grant of the option. In the event of any conflict between the language of the stock option agreement and the language of the Plan, the language of the Plan shall govern. No option shall be exercisable after its expiration date. Not less than ten (10) shares may be purchased at any one time unless the number purchased is the total number at the time purchasable tinder the option. During the lifetime of the optionee, the option shall be exercisable only by him and shall not be assignable or transferable by him and no other person shall acquire any rights therein. (f) Termination of Service as a Director Except Death In the event that an optionee shall cease to be a Director of the Corporation for any reason other than his death, subject to the condition that no option shall be exercisable after its expiration date, such optionee shall have the right to exercise the option at any time within one (1) year after such termination as a Director to the extent his right to exercise such option has not previously been exercised at the date of such termination. For purposes of this paragraph, in the case of an optionee who becomes disabled within the meaning of 22(3)(e) of the Code, the words "three months" shall be replaced by the words "one year". (g) Death of Optionee and Transfer of Option If the optionee shall die while a Director of the Corporation or within a period of three (3) months after the termination of his service as a Director of the Corporation and shall not have fully exercised the option, an option may be exercised at any time within one (1) year after the optionee's death, subject to the condition that no option shall be exercisable after its expiration date, to the extent that the optionee's right to exercise such option at the time of his death had not been previously exercised, by the executors or administrators of the optionee or by any person or persons who shall have acquired the option directly from the optionee by bequest or inheritance or by reason of the death of the decedent. 5 No option shall be transferable by the optionee otherwise than by Will or the laws of descent and distribution. (h) Recapitalization Subject to any required action by the stockholders, the number of shares of capital stock which are subject to each outstanding option or which will be subject to each option to be granted under the Plan, and the price per share thereof in each such option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of capital stock of the Corporation resulting from a subdivision or consolidation of shares or the payment of a stock dividend (but only on the capital stock) or any other increase or decrease in the number of such shares effected without receipt of consideration by the Corporation. Subject to any required action by the stockholders if the Corporation shall be the surviving corporation in any merger or consolidation, each outstanding option shall pertain to and apply to the securities to which a holder of the number of shares of capital stock subject to the option would have been entitled. A dissolution or liquidation of the Corporation or a merger or consolidation in which the Corporation is not the surviving corporation, shall cause each outstanding option to terminate provided that each optionee shall, in such event, have the right immediately prior to such dissolution or liquidation, or merger or consolidation in which the Corporation is not the surviving corporation, to exercise his option in whole or in part. In the event of a change in the capital stock of the Corporation as presently constituted, which is limited to a change of all of its authorized shares with par value into the same number of shares with a different par value or without par value, the shares resulting from any such change shall be deemed to be the capital stock within the meaning of the Plan. To the extent that the foregoing adjustments relate to stock or securities of the Corporation, such adjustments shall be made by the Committee, whose determination in that respect shall be final, binding and conclusive. Except as hereinbefore expressly provided in this subsection 5(h), the optionee shall have no rights by reason of any subdivision or consolidation of shares of stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class or by reason of any dissolution, liquidation, merger, or consolidation or spin-off of assets or stock of another corporation, and any issue by the Corporation of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no 6 adjustment by reason thereof shall be made with respect to, the number or price of shares of capital stock subject to the option. The grant of an option pursuant to the Plan shall not affect in any way the right or power of the Corporation to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets. (i) Rights as a Stockholder An optionee or a transferee of an option shall have no rights as a stockholder with respect to any shares covered by his option until the date of the issuance of a stock certificate to him for such shares. No adjustments shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to the date such stock certificate is issued, except as provided in subsection 5(h) hereof (j) Modification, Extension and Renewal of Options Subject to the terms and conditions and within the limitations of the Plan, the Board of Directors may modify, extend or renew outstanding options granted under the Plan, or accept the surrender of outstanding options (to the extent not theretofore exercised) and authorize the granting of new options in substitution therefor (to the extent not theretofore exercised). Notwithstanding the foregoing, however, no modification of an option shall, without consent of the optionee, alter or impair any rights of obligations under any option theretofore granted under the Plan. (k) Investment Purpose Each option under the Plan shall be granted on the condition that the purchases of stock thereunder shall be for investment purposes, and not with a view to resale or distribution except that in the event the stock subject to such option is registered under the Securities Act of 1933, as amended (the "Securities Act"), or in the event a resale of such stock without such registration would otherwise be permissible, such condition shall be inoperative if in the opinion of counsel for the Corporation such condition is not required under the Securities Act, or any other applicable law, regulation, or rule of any governmental agency. 7 (l) Other Provisions The option agreements authorized under the Plan shall contain such other provisions, including, without limitation, restrictions upon the exercise of the option, as the Committee and the Board of Directors of the Corporation shall deem advisable. 6. EFFECTIVE DATE AND TERM OF PLAN Subject to approval by the stockholders as required by Section 13 hereof and to the receipt by the Corporation of the letter from the staff of the Securities and Exchange Commission referred to in Section 14 hereof, the Plan shall become effective as of January 24, 1989, the date of its adoption by the Board of Directors of the Corporation and, subject to such stockholder approval and the receipt of such letter, the initial grant of options hereunder as provided in subsection 3(i) shall be effective as of the effective date of the Plan. This Plan shall remain in effect and options shall be granted hereunder from time to time until ten (10) years from the date the Plan is approved by the stockholders or until terminated by the Board of Directors in accordance with Section 8 hereof, whichever is earlier. Notwithstanding the foregoing part of this Section 6, with respect to any amendment to this Plan adopted for the purpose of increasing the number of shares as to which options ("Amendment Options") may be granted hereunder, the Plan shall remain in effect as to Amendment Options and Amendment Options may be granted hereunder from time to time until ten (10) years from the date such amendment is adopted or the date such amendment is approved by the stockholders if such approval is required or until the Plan, as amended, is terminated by the Board of Directors in accordance with Section 8 hereof, whichever is earlier. For purposes of options outstanding under the Plan the Plan shall continue in effect until all outstanding options have been exercised in full or are no longer exercisable. 7. INDEMNIFICATION OF COMMITTEE In addition to such other rights of indemnification as they may have as Directors or as members of the Committee, the members of the Committee shall be indemnified by the Corporation against the reasonable expenses, including attorneys' fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan or any option granted thereunder, and against all amounts paid by them in settlement thereof, not to exceed, in the judgment of the Board of Directors, the estimated expense of litigating the proceeding to conclusion (provided such settlement is approved by independent legal counsel selected by the Corporation) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or 8 proceeding that the member of the Committee is liable. A Committee member shall in writing offer the Corporation the opportunity, at its own expense, to handle and defend the same. 8. AMENDMENT OF THE PLAN The Board of Directors of the Corporation may, insofar as permitted by law, from time to time, with respect to any shares at the time not subject to options, suspend or discontinue the Plan or revise or amend it in any respect whatsoever except that, without approval of the stockholders, no such revision or amendment shall change the number of shares subject to the Plan, extend the term of the Plan or the term of any option which may be granted under the Plan, change the designation of the Participants or the manner in which options are granted under the Plan or materially increase the benefits accruing under the Plan (materially, within the meaning of Rule 16b-3 implementing the Exchange Act), decrease the price at which options may be granted or remove the administration of the Plan from the Committee (except as may be required by the staff of the Commission to provide the letter described in Section 13 hereof). 9. APPLICATION OF FUNDS The proceeds received by the Corporation from the sale of capital stock pursuant to options will be used for general corporate purposes. 10. NO OBLIGATION TO EXERCISE OPTION The granting of an option shall impose no obligation upon the optionee to exercise such option. 11. WITHHOLDING The exercise of any option granted under the Plan shall constitute an optionee's full and complete consent to whatever action the Committee directs to satisfy the federal and state withholding requirements, if any, which the Committee in its discretion deems applicable to such exercise or surrender. 12. CONSTRUCTION The Plan shall be construed under the laws of the State of Florida. 9 13. APPROVAL OF STOCKHOLDERS The Plan shall be submitted for approval by the stock holders of the Corporation within twelve (12) months from the date the Plan is adopted by the Board of Directors. Any amendment to the Plan requiring approval by the stockholders of the Corporation shall be submitted for approval by the stockholders within twelve (12) months from the date the amendment is adopted by the Board of Directors. The initial options granted under the Plan, as set forth in subsection 3(1) hereof are granted as of the date set forth therein; provided, however, that such options shall not be exercisable until after the date on which the Plan shall have approved by a vote of the stockholders. Options may be granted pursuant to any amendment to this Plan adopted for the purpose of increasing the number of shares as to which options may be granted, the types of options which may be granted or the rights applicable to options which may be granted hereunder, commencing with the date of adoption of such amendment by the Board of Directors of the Corporation; provided, however, that options granted in reliance upon any such amendment shall not be exercisable until the date on which such amendment shall have been submitted for approval of the stockholders. 14. LETTER FROM COMMISSION STAFF The Corporation will request a letter from the staff of the Securities and Exchange Commission (the "Commission") concurring with the opinion of legal counsel to the Corporation that the Plan complies with the requirements set forth in Rule 6b-3 promulgated by the Commission to provide exemptive relief from certain aspects of Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). If, as a condition of providing its concurring letter, the staff of the Commission requires modifications to the Plan which are not material and such modifications are approved by the Board of Directors, the Plan shall be so modified and amended under the provisions of Section 8 hereof. In the event the Corporation is unable to obtain the aforementioned concurring letter from the staff of the Commission as required by this Section 14 or the Plan is not approved by the stockholders as required by Section 13 hereof, the Plan shall be deemed null and void ab initio. 10 EX-10.10 7 d55250_ex10-10.txt REVOLVING CREDIT AGREEMENT Exhibit 10.10 EXECUTION COPY REVOLVING CREDIT AGREEMENT dated as of March 26, 2003 among HUGHES SUPPLY, INC. as Borrower THE LENDERS FROM TIME TO TIME PARTY HERETO and SUNTRUST BANK as Administrative Agent ================================================================================ SUNTRUST ROBINSON HUMPHREY CAPITAL MARKETS, a division of SunTrust Capital Markets, Inc., as Lead Arranger and Book Manager TABLE OF CONTENTS

SECTION 4.12. DISCLOSURE....................................................................48 SECTION 4.13. LABOR RELATIONS...............................................................48 SECTION 4.14. SUBSIDIARIES..................................................................48 SECTION 4.15. INSOLVENCY....................................................................48 ARTICLE V AFFIRMATIVE COVENANTS...................................................................48 SECTION 5.1. FINANCIAL STATEMENTS AND OTHER INFORMATION....................................49 SECTION 5.2. NOTICES OF MATERIAL EVENTS....................................................50 SECTION 5.3. EXISTENCE; CONDUCT OF BUSINESS................................................51 SECTION 5.4. COMPLIANCE WITH LAWS, ETC.....................................................51 SECTION 5.5. PAYMENT OF OBLIGATIONS........................................................51 SECTION 5.6. BOOKS AND RECORDS.............................................................51 SECTION 5.7. VISITATION, INSPECTION, ETC...................................................51 SECTION 5.8. MAINTENANCE OF PROPERTIES; INSURANCE..........................................51 SECTION 5.9. USE OF PROCEEDS AND LETTERS OF CREDIT.........................................52 SECTION 5.10. ADDITIONAL SUBSIDIARIES.......................................................52 SECTION 5.11. OWNERSHIP OF ALL SUBSIDIARY LOAN PARTIES......................................53 ARTICLE VI FINANCIAL COVENANTS....................................................................53 SECTION 6.1. LEVERAGE RATIO................................................................53 SECTION 6.2. FIXED CHARGE COVERAGE RATIO...................................................53 SECTION 6.3. CONSOLIDATED NET WORTH........................................................53 ARTICLE VII NEGATIVE COVENANTS....................................................................53 SECTION 7.1. INDEBTEDNESS AND PREFERRED EQUITY.............................................54 SECTION 7.2. NEGATIVE PLEDGE...............................................................55 SECTION 7.3. FUNDAMENTAL CHANGES...........................................................56 SECTION 7.4. INVESTMENTS, LOANS, ETC.......................................................56 SECTION 7.5. RESTRICTED PAYMENTS...........................................................57 SECTION 7.6. SALE OF ASSETS................................................................58 SECTION 7.7. TRANSACTIONS WITH AFFILIATES..................................................58 SECTION 7.8. RESTRICTIVE AGREEMENTS........................................................58 SECTION 7.9. SALE AND LEASEBACK TRANSACTIONS...............................................59 SECTION 7.10. HEDGING TRANSACTIONS..........................................................59 SECTION 7.11. FISCAL YEAR...................................................................59 SECTION 7.12. OPTIONAL PREPAYMENTS..........................................................59 SECTION 7.13. ACTIONS UNDER CERTAIN DOCUMENTS...............................................60 ARTICLE VIII EVENTS OF DEFAULT....................................................................60 SECTION 8.1. EVENTS OF DEFAULT.............................................................60 ARTICLE IX THE ADMINISTRATIVE AGENT...............................................................63 SECTION 9.1. APPOINTMENT OF ADMINISTRATIVE AGENT...........................................63 SECTION 9.2. NATURE OF DUTIES OF ADMINISTRATIVE AGENT......................................63 SECTION 9.3. LACK OF RELIANCE ON THE ADMINISTRATIVE AGENT..................................64 SECTION 9.4. CERTAIN RIGHTS OF THE ADMINISTRATIVE AGENT....................................64 SECTION 9.5. RELIANCE BY ADMINISTRATIVE AGENT..............................................64 SECTION 9.6. THE ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY...........................65 SECTION 9.7. SUCCESSOR ADMINISTRATIVE AGENT................................................65 ARTICLE X MISCELLANEOUS...........................................................................66 SECTION 10.1. NOTICES.......................................................................66 SECTION 10.2. WAIVER; AMENDMENTS............................................................68 SECTION 10.3. EXPENSES; INDEMNIFICATION.....................................................69 SECTION 10.4. SUCCESSORS AND ASSIGNS........................................................70 SECTION 10.5. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS....................72

ii SECTION 10.6. WAIVER OF JURY TRIAL..........................................................73 SECTION 10.7. RIGHT OF SETOFF...............................................................73 SECTION 10.8. COUNTERPARTS; INTEGRATION.....................................................74 SECTION 10.9. SURVIVAL......................................................................74 SECTION 10.10. SEVERABILITY..................................................................74 SECTION 10.11. CONFIDENTIALITY...............................................................74 SECTION 10.12. INTEREST RATE LIMITATION......................................................75 SECTION 10.13. WAIVER OF EFFECT OF CORPORATE SEAL............................................75

Schedules Schedule I - Applicable Margin and Applicable Percentage Schedule 4.5 - Environmental Matters Schedule 4.14 - Subsidiaries Schedule 7.1 - Outstanding Indebtedness Schedule 7.2 - Existing Liens Schedule 7.4 - Existing Investments Exhibits Exhibit A - Form of Revolving Credit Note Exhibit B - Form of Competitive Bid Note Exhibit C - Form of Swingline Note Exhibit D - Form of Assignment and Acceptance Exhibit E - Form of Subsidiary Guarantee Agreement Exhibit F - Form of Indemnity, Subrogation and Contribution Agreement Exhibit 2.3 - Form of Notice of Revolving Borrowing Exhibit 2.6 - Form of Notice of Swingline Loan Exhibit 2.7-A - Form of Competitive Bid Request Exhibit 2.7-B - Form of Notice to Lenders of Competitive Bid Request Exhibit 2.7-C - Form of Competitive Bid Exhibit 2.9 - Form of Continuation/Conversion Exhibit 3.1(b)(v) - Form of Secretary's Certificate Exhibit 3.1(b)(viii) - Form of Officer's Certificate Exhibit 5.1(c) - Form of Compliance Certificate iii REVOLVING CREDIT AGREEMENT THIS REVOLVING CREDIT AGREEMENT (this "Agreement") is made and entered into as of March 26, 2003, by and among HUGHES SUPPLY, INC. a Florida corporation (the "Borrower"), the several banks and other financial institutions from time to time party hereto (the "Lenders"), and SUNTRUST BANK, in its capacity as administrative agent for the Lenders (the "Administrative Agent"), as issuing bank (the "Issuing Bank") and as swingline lender (the "Swingline Lender"). W I T N E S S E T H: WHEREAS, the Borrower has requested that the Lenders establish a $252,500,000 revolving credit facility in favor of the Borrower; WHEREAS, subject to the terms and conditions of this Agreement, the Lenders, the Issuing Bank and the Swingline Lender to the extent of their respective Commitments as defined herein, are willing severally to establish the requested revolving credit facility, letter of credit subfacility and the swingline subfacility in favor of the Borrower. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Borrower, the Lenders, the Administrative Agent, the Issuing Bank and the Swingline Lender agree as follows: ARTICLE I DEFINITIONS; CONSTRUCTION Section 1.1. Definitions. In addition to the other terms defined herein, the following terms used herein shall have the meanings herein specified (to be equally applicable to both the singular and plural forms of the terms defined): "Adjusted LIBO Rate" shall mean, with respect to each Interest Period for a Eurodollar Borrowing, the rate per annum obtained by dividing (i) LIBOR for such Interest Period by (ii) a percentage equal to 1.00 minus the Eurodollar Reserve Percentage. "Administrative Agent" shall have the meaning set forth in the introductory paragraph hereof. "Administrative Questionnaire" shall mean, with respect to each Lender, an administrative questionnaire in the form prepared by the Administrative Agent and submitted to the Administrative Agent duly completed by such Lender. "Affiliate" shall mean, as to any Person, any other Person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such Person. For the purposes of this definition, "Control" shall mean the power, directly or indirectly, either to (i) vote 5% or more of the securities having ordinary voting power for the election of directors (or persons performing similar functions) of a Person or (ii) direct or cause the direction of the management and policies of a Person, whether through the ability to exercise voting power, by control or otherwise. The terms "Controlling", "Controlled by", and "under common Control with" have the meanings correlative thereto. "Aggregate Revolving Commitment Amount" shall mean the aggregate principal amount of the Aggregate Revolving Commitments from time to time. On the Closing Date, the Aggregate Revolving Commitment Amount equals $252,500,000. "Aggregate Revolving Commitments" shall mean, collectively, all Revolving Commitments of all Lenders at any time outstanding. "Aggregate Subsidiary Threshold" shall mean an amount equal to ninety percent (95%) of the total consolidated revenue or assets of the Borrower and its Subsidiaries (excluding any Securitization Subsidiaries) for the most recent Fiscal Quarter as shown on the financial statements most recently delivered or required to be delivered pursuant to Section 5.1(a) or (b), as the case may be. "Applicable Lending Office" shall mean, for each Lender and for each Type of Loan, the "Lending Office" of such Lender (or an Affiliate of such Lender) designated for such Type of Loan in the Administrative Questionnaire submitted by such Lender or such other office of such Lender (or an Affiliate of such Lender) as such Lender may from time to time specify to the Administrative Agent and the Borrower as the office by which its Loans of such Type are to be made and maintained. "Applicable Margin" shall mean, as of any date, with respect to all LIBOR Borrowings and the letter of credit fee, as the case may be, a percentage per annum determined by reference to the applicable Leverage Ratio in effect on such date as set forth on Schedule I; provided, that a change in the Applicable Margin resulting from a change in the Leverage Ratio shall be effective on the first day of the first Fiscal Quarter after which the Borrower delivers the financial statements required by Section 5.1(a) or (b) and the Compliance Certificate required by Section 5.1 (c); provided further, that if at any time the Borrower shall have failed to deliver such financial statements and such Compliance Certificate when so required, the Applicable Margin shall be at Level V as set forth on Schedule I until such time as such financial statements and certificate are delivered, at which time the Applicable Margin shall be determined as provided above. Notwithstanding the foregoing, the Applicable Margin from the Closing Date until the financial statements and Compliance Certificate for the Fiscal Quarter ending May 2, 2003 are required to be delivered shall be at Level III as set forth on Schedule I. "Applicable Percentage" shall mean, as of any date, with respect to the commitment fee as of any date, the percentage per annum determined by reference to the applicable Leverage Ratio in effect on such date as set forth on Schedule I; provided, that a change in the Applicable Percentage resulting from a change in the Leverage Ratio shall be effective on the first day of the first Fiscal Quarter after which the Borrower delivers the financial statements required by Section 5.1(a) or (b) and the Compliance Certificate required by Section 5.1 (c); provided, further, that if at any time the Borrower shall have failed to deliver such financial statements and such Compliance Certificate, the Applicable Percentage shall be at Level V as set forth on Schedule I until such time as such financial statements and certificate are delivered, at which time the Applicable Percentage shall be determined as provided above. 2 Notwithstanding the foregoing, the Applicable Percentage for the commitment fee from the Closing Date until the financial statements and Compliance Certificate for the Fiscal Quarter ending May 2, 2003 are required to be delivered shall be at Level III as set forth on Schedule I. "Approved Fund" shall mean any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (i) a Lender, (ii) an Affiliate of a Lender or (iii) an entity or an Affiliate of an entity that administers or manages a Lender. "Asset Coverage Ratio" shall mean, as of any date, the ratio of (i) the net book value of total current assets of the Borrower and its Subsidiaries, excluding all assets of Securitization Subsidiaries, to (ii) all Indebtedness of the Borrower and its Subsidiaries, excluding all Indebtedness attributable to Securitization Transactions, in each case measured as of such date on a consolidated basis in accordance with GAAP. "Asset Value" shall mean, with respect to any property or asset of the Borrower or any Subsidiary as of any particular date, an amount equal to the greater of (i) the net book value of such property or asset as of such date as established in accordance with GAAP, and (ii) the fair market value of such property or asset as of such date as determined in good faith by the board of directors of the Borrower or such Subsidiary. "Assignment and Acceptance" shall mean an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 10.4(b)) and accepted by the Administrative Agent, in the form of Exhibit D attached hereto or any other form approved by the Administrative Agent. "Availability Period" shall mean the period from the Closing Date to the Revolving Commitment Termination Date. "Base Rate" shall mean the higher of (i) the per annum rate which the Administrative Agent publicly announces from time to time to be its prime lending rate, as in effect from time to time, and (ii) the Federal Funds Rate, as in effect from time to time, plus one-half of one percent (0.50%). The Administrative Agent's prime lending rate is a reference rate and does not necessarily represent the lowest or best rate charged to customers. The Administrative Agent may make commercial loans or other loans at rates of interest at, above or below the Administrative Agent's prime lending rate. Each change in the Administrative Agent's prime lending rate shall be effective from and including the date such change is publicly announced as being effective. "Borrower" shall have the meaning set forth in the introductory paragraph hereof. "Borrowing" shall mean a borrowing consisting of (i) Loans of the same Class and Type, made, converted or continued on the same date and in the case of Eurodollar Loans, as to which a single Interest Period is in effect, or (ii) a Swingline Loan. "Business Day" shall mean (i) any day other than a Saturday, Sunday or other day on which commercial banks in Atlanta, Georgia are authorized or required by law to close and 3 (ii) if such day relates to a Borrowing of, a payment or prepayment of principal or interest on, a conversion of or into, or an Interest Period for, a Eurodollar Loan or a notice with respect to any of the foregoing, any day on which dealings in Dollars are carried on in the London interbank market. "Capital Lease Obligations" of any Person shall mean all obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "Capital Stock" shall mean any non-redeemable capital stock (or in the case of a partnership or limited liability company, the partners' or members' equivalent equity interest) of the Borrower or any of its Subsidiaries (to the extent issued to a Person other than the Borrower), whether common or preferred. "Change in Control" shall mean the occurrence of one or more of the following events: (i) any "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934), other than the Hughes Family shall become the "beneficial owner(s)" (as defined in said Rule 13(d)(3)) of more than 25% or more of the shares of the outstanding common stock of the Borrower entitled to vote for members of the Borrower's board of directors, (ii) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were neither (a) nominated by the current board of directors nor (b) appointed by directors so nominated or (iii) any event or condition shall occur or exist which, pursuant to the terms of any Change in Control Provision, requires or permits the holder(s) of Indebtedness of the Borrower or any of its Subsidiaries to require that such Indebtedness be redeemed, repurchased, defeased, prepaid or repaid, in whole or in part, or the maturity of such Indebtedness to be accelerated in any respect. "Change in Control Provision" shall mean any term or provision contained in any indenture, debenture, note, or other agreement or document evidencing or governing Indebtedness of Borrower evidencing debt or a commitment to extend loans in excess of $5,000,000 which requires, or permits the holder(s) of such Indebtedness of Borrower to require that such Indebtedness of Borrower be redeemed, repurchased, defeased, prepaid or repaid, either in whole or in part, or the maturity of such Indebtedness of Borrower to be accelerated in any respect, as a result of a change in ownership of the capital stock of Borrower or voting rights with respect thereto. "Change in Law" shall mean (i) the adoption of any applicable law, rule or regulation after the date of this Agreement, (ii) any change in any applicable law, rule or regulation, or any change in the interpretation or application thereof, by any Governmental Authority after the date of this Agreement, or (iii) compliance by any Lender (or its Applicable Lending Office) or the Issuing Bank (or for purposes of Section 2.19(b), by such Lender's or the Issuing Bank's holding company, if applicable) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. 4 "Class", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans, Competitive Bid Loans or Swingline Loans and when used in reference to any Commitment, refers to whether such Commitment is a Revolving Commitment or a Swingline Commitment. "Closing Date" shall mean the date on which the conditions precedent set forth in Section 3.1 and Section 3.2 have been satisfied or waived in accordance with Section 10.2. "Code" shall mean the Internal Revenue Code of 1986, as amended and in effect from time to time. "Commitment" shall mean a Revolving Commitment or a Swingline Commitment or any combination thereof (as the context shall permit or require). "Competitive Bid" shall mean an offer by a Lender to make a Competitive Bid Loan substantially in the form of Exhibit 2.7-C, to be delivered by a Lender to the Administrative Agent in response to a Competitive Bid Request. "Competitive Bid Loan" shall mean a Loan made pursuant to Section 2.7. "Competitive Bid Loan Limit" shall mean $50,000,000. "Competitive Bid Note" shall mean a promissory note of the Borrower payable to the order of any requesting Lender in the principal amount of the Aggregate Revolving Commitments, in substantially the form of Exhibit B. "Competitive Bid Rate" shall mean, with respect to any Competitive Bid, the rate of interest applicable to such Competitive Bid Loan, as specified by the Lender making such Competitive Bid. "Competitive Bid Request" shall mean a request for a proposed Competitive Bid Rate at which a Competitive Bid Loan may be made, substantially in the form of Exhibit 2.7-A submitted by the Borrower to the Administrative Agent in accordance with Section 2.7. "Compliance Certificate" shall mean a certificate from the principal executive officer and the principal financial officer of the Borrower in the form of, and containing the certifications set forth in, the certificate attached hereto as Exhibit 5.1(c). "Consolidated EBITDAR" shall mean, for the Borrower and its Subsidiaries for any period, an amount equal to the sum of (i) Consolidated EBITR for such period plus (ii) to the extent deducted in determining Consolidated EBITR, depreciation and amortization determined on a consolidated basis in accordance with GAAP for such period. "Consolidated EBITR" shall mean, for the Borrower and its Subsidiaries for any period, an amount equal to (i) Consolidated Net Income for such period plus (ii) to the extent deducted in determining Consolidated Net Income for such period, (A) Consolidated Interest Expense, (B) income tax expense determined on a consolidated basis in accordance with GAAP and (C) Consolidated Rental Expense. 5 "Consolidated Fixed Charges" shall mean, for the Borrower and its Subsidiaries for any period, the sum (without duplication) of (i) Consolidated Interest Expense for such period, plus (ii) Consolidated Rental Expense for such period. "Consolidated Interest Expense" shall mean, for any period of the Borrower, total interest expense of the Borrower and its Subsidiaries determined on a consolidated basis in accordance with GAAP, and including without limitation or duplication, interest expense attributable to Capital Lease Obligations, any program costs incurred by the Borrower in connection with a Securitization Transactions and any interest expense attributable to Hedging Transactions. "Consolidated Net Income" shall mean, for the Borrower and its Subsidiaries for any period, the net income (or loss) of the Borrower and its Subsidiaries for such period (taken as a single accounting period) determined on a consolidated basis in accordance with GAAP, but excluding therefrom (to the extent otherwise included therein) (i) any items of gain or loss which were included in determining such Consolidated Net Income and were not realized in the ordinary course of business or the result of a sale of assets other than in the ordinary course of business and (ii) any income (or loss) of any Person accrued prior to the date such Person becomes a Subsidiary, or is merged into or consolidated with Borrower or any Subsidiary, on the date that such Person's assets are acquired by the Borrower or any Subsidiary. "Consolidated Net Worth" shall mean, as of any date, the Borrower's total shareholder's equity of such date as determined in accordance with GAAP. "Consolidated Rental Expense" shall mean, for the Borrower and its Subsidiaries for any period, the total operating lease expense for such period, determined on a consolidated basis in accordance with GAAP. "Consolidated Total Capital" shall mean, as of any date, the sum of (i) Consolidated Total Funded Debt as of such date and (ii) Consolidated Net Worth as of such date. "Consolidated Total Funded Debt" shall mean, as of any date, all Indebtedness of the Borrower and its Subsidiaries other than Indebtedness of the type described in subsections (vi) and (vii) of the definition thereto, but including, without limitation, all Loans and Letters of Credit. "Contractual Obligation" of any Person shall mean any provision of any security issued by such Person or of any agreement, instrument or undertaking under which such Person is obligated or by which it or any of the property in which it has an interest is bound. "Default" shall mean any condition or event that, with the giving of notice or the lapse of time or both, would constitute an Event of Default. "Default Interest" shall have the meaning set forth in Section 2.14(d). "Dollar(s)" and the sign "$" shall mean lawful money of the United States of America. 6 "Eligible Assignee" shall mean (i) a Lender; (ii) an Affiliate of a Lender; (iii) an Approved Fund; and (iv) any other Person (other than a natural Person) approved by the Administrative Agent, the Issuing Bank, and unless (x) such Person is taking delivery of an assignment in connection with physical settlement of a credit derivatives transaction or (y) an Event of Default has occurred and is continuing, the Borrower (each such approval not to be unreasonably withheld or delayed). If the consent of the Borrower to an assignment or to an Eligible Assignee is required hereunder (including a consent to an assignment which does not meet the minimum assignment thresholds specified in paragraph (b)(i) of Section 10.4), the Borrower shall be deemed to have given its consent five (5) Business Days after the date notice thereof has actually been delivered by the assigning Lender (through the Administrative Agent) to the Borrower, unless such consent is expressly refused by the Borrower prior to such fifth Business Day. "Environmental Laws" shall mean all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by or with any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, Release or threatened Release of any Hazardous Material or to health and safety matters. "Environmental Liability" shall mean any liability, contingent or otherwise (including any liability for damages, costs of environmental investigation and remediation, costs of administrative oversight, fines, natural resource damages, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (i) any actual or alleged violation of any Environmental Law, (ii) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (iii) any actual or alleged exposure to any Hazardous Materials, (iv) the Release or threatened Release of any Hazardous Materials or (v) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute. "ERISA Affiliate" shall mean any trade or business (whether or not incorporated), which, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for the purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA Event" shall mean (i) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (ii) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (iii) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (iv) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (v) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator appointed by the PBGC of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee 7 to administer any Plan; (vi) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (vii) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA. "Eurodollar" when used in reference to any Loan or Borrowing (including any Competitive Bid Loan or Borrowing), refers to whether such Loan, or the Loans comprising such Borrowing, bears interest at a rate determined by reference to the Adjusted LIBO Rate. "Eurodollar Reserve Percentage" shall mean the aggregate of the maximum reserve percentages (including, without limitation, any emergency, supplemental, special or other marginal reserves) expressed as a decimal (rounded upwards to the next 1/100th of 1%) in effect on any day to which the Administrative Agent is subject with respect to the Adjusted LIBO Rate pursuant to regulations issued by the Board of Governors of the Federal Reserve System (or any Governmental Authority succeeding to any of its principal functions) with respect to eurocurrency funding (currently referred to as "eurocurrency liabilities" under Regulation D). Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under Regulation D. The Eurodollar Reserve Percentage shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "Event of Default" shall have the meaning set forth in Section 8.1. "Excluded Taxes" shall mean with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (i) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (ii) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which any Lender is located and (iii) in the case of a Foreign Lender, any withholding tax that (x) is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement, (y) is imposed on amounts payable to such Foreign Lender at any time that such Foreign Lender designates a new lending office, other than taxes that have accrued prior to the designation of such lending office that are otherwise not Excluded Taxes, and (z) is attributable to such Foreign Lender's failure to comply with Section 2.21(e). "Existing Credit Agreement" shall mean that certain Revolving Credit Agreement, dated as of January 26, 1999, by and among the Borrower, the banks from time to time party thereto and SunTrust Bank as administrative agent, as amended or modified prior to the date hereof. "Federal Funds Rate" shall mean, for any day, the rate per annum (rounded upwards, if necessary, to the next 1/100th of 1%) equal to the weighted average of the rates on 8 overnight Federal funds transactions with member banks of the Federal Reserve System arranged by Federal funds brokers, as published by the Federal Reserve Bank of New York on the next succeeding Business Day or if such rate is not so published for any Business Day, the Federal Funds Rate for such day shall be the average rounded upwards, if necessary, to the next 1/100th of 1% of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by the Administrative Agent. "Fee Letter" shall mean that certain fee letter, dated as of February 7, 2003, executed by SunTrust Capital Markets, Inc. and SunTrust Bank and accepted by Borrower. "Financial Letters of Credit" shall mean, collectively, (i) all standby letters of credit issued for the account of the Borrower or any of its Subsidiaries, other than standby letters of credit supporting obligations incurred in the ordinary course of business of the types referred to in clauses (iii) and (iv) of the definition of Permitted Encumbrances, as well as liability insurance, and (ii) all direct pay letters of credit issued for the account of the Borrower or any of its Subsidiaries supporting financing arrangements, including industrial development revenue bonds; provided, however, that the term Financial Letters of Credit shall exclude all trade letters of credit issued for the account of the Borrower or any of its Subsidiaries. "Fiscal Quarter" shall mean any fiscal quarter of the Borrower. "Fiscal Year" shall mean any fiscal year of the Borrower. "Fixed Charge Coverage Ratio" shall mean, as of any date, the ratio of (a) Consolidated EBITDAR to (b) Consolidated Fixed Charges, in each case measured for the four consecutive Fiscal Quarters ending on or immediately prior to such date. "Foreign Lender" shall mean any Lender that is not a United States person under Section 7701(a)(3) of the Code. "Foreign Subsidiary" shall mean any Subsidiary that is organized under the laws of a jurisdiction other than one of the fifty states of the United States or the District of Columbia. "GAAP" shall mean generally accepted accounting principles in the United States applied on a consistent basis and subject to the terms of Section 1.3. "Governmental Authority" shall mean the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Guarantee" of or by any Person (the "guarantor") shall mean any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly and including any obligation, direct or indirect, of the guarantor (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the 9 purchase of) any security for the payment thereof, (ii) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (iv) as an account party in respect of any letter of credit or letter of guaranty issued in support of such Indebtedness or obligation; provided, that the term "Guarantee" shall not include endorsements for collection or deposits in the ordinary course of business. The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which Guarantee is made or, if not so stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. The term "Guarantee" used as a verb has a corresponding meaning. "Hazardous Materials" shall mean all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. "Hedging Obligations" of any Person shall mean any and all obligations of such Person, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired under (i) any and all Hedging Transactions, (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any Hedging Transactions and (iii) any and all renewals, extensions and modifications of any Hedging Transactions and any and all substitutions for any Hedging Transactions, including without limitation any promissory notes issued to pay the Net Mark-to-Market Exposure of any Hedging Transaction that is terminated. "Hedging Transaction" of any Person shall mean any transaction (including an agreement with respect thereto) now existing or hereafter entered into by such Person that is a derivative instrument as defined under FAS 133 as applied under GAAP. "Hughes Family" shall mean (i) David H. Hughes, Vincent S. Hughes and Russell V. Hughes, (ii) any of their direct family members (including, without limitation, lineal ancestors and descendants, siblings, and lineal descendants of siblings), (iii) any trusts and profit-sharing plans and stock option plans established for the sole benefit of the foregoing and (iv) the heirs and personal representatives of the foregoing. "Indebtedness" of any Person shall mean, without duplication (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person in respect of the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of business; provided, that for purposes of Section 8.1(f), trade payables overdue by more than 120 days shall be included in this definition except to the extent that any of such trade payables are being disputed in good faith and by appropriate measures), (iv) all obligations of such Person under any conditional sale or other title retention agreement(s) relating to property acquired by such Person, (v) all Capital Lease Obligations of such Person, (vi) all obligations, contingent or otherwise, of such Person in respect of Financial Letters of Credit, 10 acceptances or similar extensions of credit, (vii) all Guarantees of such Person of the type of Indebtedness described in clauses (i) through (vi) above, (viii) all Indebtedness of a third party secured by any Lien on property owned by such Person, whether or not such Indebtedness has been assumed by such Person, (ix) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any common stock of such Person and (x) Off-Balance Sheet Debt. The Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer, except to the extent that the terms of such Indebtedness provide that such Person is not liable therefor. "Indemnified Taxes" shall mean Taxes other than Excluded Taxes. "Indemnity and Contribution Agreement" shall mean the Indemnity, Subrogation and Contribution Agreement, dated as of the date hereof and substantially in the form of Exhibit F, among the Borrower, the Subsidiary Loan Parties and the Administrative Agent. "Indemnity and Contribution Agreement Supplement" shall mean each supplement substantially in the form of Annex I to the Indemnity and Contribution Agreement executed and delivered by a Subsidiary of the Borrower pursuant to Section 5.10. "Information Memorandum" shall mean the Confidential Information Memorandum dated February 2003 relating to the Borrower and the transactions contemplated by this Agreement and the other Loan Documents. "Interest Period" shall mean (a) with respect to any Eurodollar Borrowing, a period of one, two, three or six months; provided, that: (i) the initial Interest Period for such Borrowing shall commence on the date of such Borrowing (including the date of any conversion from a Borrowing of another Type), and each Interest Period occurring thereafter in respect of such Borrowing shall commence on the day on which the next preceding Interest Period expires; (ii) if any Interest Period would otherwise end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day, unless such Business Day falls in another calendar month, in which case such Interest Period would end on the next preceding Business Day; (iii) any Interest Period which begins on the last Business Day of a calendar month or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period shall end on the last Business Day of such calendar month; and (iv) no Interest Period may extend beyond the Revolving Commitment Termination Date; (b) with respect to any Competitive Bid Loan, such period as the Borrower shall request and the applicable Lender shall accept; provided, however, that (i) no Interest Period for Competitive Bid Loans shall exceed 180 days, (ii) no such Interest Period shall extend beyond the Revolving 11 Commitment Termination Date and (iii) if any Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day and (c) with respect to any Swingline Loan, such period as the Borrower and the Swingline Lender shall agree. "Issuing Bank" shall mean SunTrust Bank or any other Lender, each in its capacity as an issuer of Letters of Credit pursuant to Section 2.23. "LC Commitment" shall mean that portion of the Aggregate Revolving Commitment Amount that may be used by the Borrower for the issuance of Letters of Credit in an aggregate face amount not to exceed $5,000,000. "LC Disbursement" shall mean a payment made by the Issuing Bank pursuant to a Letter of Credit. "LC Documents" shall mean the Letters of Credit and all applications, agreements and instruments relating to the Letters of Credit. "LC Exposure" shall mean, at any time, the sum of (i) the aggregate undrawn amount of all outstanding Letters of Credit at such time, plus (ii) the aggregate amount of all LC Disbursements that have not been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Lender shall be its Pro Rata Share of the total LC Exposure at such time. "Lenders" shall have the meaning set forth in the introductory paragraph hereof and shall include, where appropriate, the Swingline Lender and each Additional Lender that joins this Agreement pursuant to Section 2.4 and Section 10.4. "Letter of Credit" shall mean any stand-by letter of credit issued pursuant to Section 2.23 by the Issuing Bank for the account of the Borrower pursuant to the LC Commitment. "Leverage Ratio" shall mean, as of any date, the ratio of (i) Consolidated Total Funded Debt as of such date to (ii) Consolidated Total Capital as of such date. "LIBOR" shall mean, for any applicable Interest Period with respect to any Eurodollar Loan, the British Bankers' Association Interest Settlement Rate per annum for deposits in Dollars for a period equal to such Interest Period appearing on the display designated as Page 3750 on the Dow Jones Markets Service (or such other page on that service or such other service designated by the British Bankers' Association for the display of such Association's Interest Settlement Rates for Dollar deposits) as of 11:00 a.m. (London, England time) on the day that is two Business Days prior to the first day of the Interest Period or if such Page 3750 is unavailable for any reason at such time, the rate which appears on the Reuters Screen ISDA Page as of such date and such time; provided, that if the Administrative Agent determines that the relevant foregoing sources are unavailable for the relevant Interest Period, LIBOR shall mean the rate of interest determined by the Administrative Agent to be the average (rounded upward, if necessary, to the nearest 1/100th of 1%) of the rates per annum at which deposits in Dollars are offered to the Administrative Agent two (2) Business Days preceding the first day of such Interest Period by leading banks in the London interbank market as of 10:00 a.m. for delivery on 12 the first day of such Interest Period, for the number of days comprised therein and in an amount comparable to the amount of the Eurodollar Loan of the Administrative Agent. "Lien" shall mean any mortgage, pledge, security interest, lien (statutory or otherwise), charge, encumbrance, hypothecation, assignment, deposit arrangement, or other arrangement having the practical effect of the foregoing or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any capital lease having the same economic effect as any of the foregoing). "Loan Documents" shall mean, collectively, this Agreement, the Notes (if any), the LC Documents, the Subsidiary Guaranty Agreement, the Indemnity and Contribution Agreement, all Notices of Borrowing, all Notices of Conversion/Continuation and any and all other instruments, agreements, documents and writings executed in connection with any of the foregoing. "Loan Parties" shall mean the Borrower and the Subsidiary Loan Parties. "Loans" shall mean all Revolving Loans, Swingline Loans and Competitive Bid Loans in the aggregate or any of them, as the context shall require. "Material Adverse Effect" shall mean, with respect to any event, act, condition or occurrence of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singularly or in conjunction with any other event or events, act or acts, condition or conditions, occurrence or occurrences whether or not related, a material adverse change in, or a material adverse effect on, (i) the business, results of operations, financial condition, assets, liabilities or prospects of the Borrower or of the Borrower and its Subsidiaries taken as a whole, (ii) the ability of the Loan Parties to perform any of their respective obligations under the Loan Documents, (iii) the rights and remedies of the Administrative Agent, the Issuing Bank, Swingline Lender, and the Lenders under any of the Loan Documents or (iv) the legality, validity or enforceability of any of the Loan Documents. "Material Indebtedness" shall mean Indebtedness (other than the Loans and Letters of Credit) and Hedging Obligations, of any one or all of the Loan Parties and their Subsidiaries, individually or in an aggregate principal amount exceeding $5,000,000. For purposes of determining the amount of attributed Indebtedness from Hedging Obligations, the "principal amount" of any Hedging Obligations at any time shall be the Net Mark-to-Market Exposure of such Hedging Obligations. "Material Subsidiary" shall mean at any time any direct or indirect Subsidiary of the Borrower (i) having or acquiring total assets in excess of $1,000,000 or (ii) that accounted for or produced more than 5% of the Consolidated EBITR of the Borrower and its Subsidiaries determined on a consolidated basis during any of the three most recently completed Fiscal Years; provided, however, that the term "Material Subsidiary" shall be deemed to exclude any Securitization Subsidiary. "Moody's" shall mean Moody's Investors Service, Inc. 13 "Multiemployer Plan" shall have the meaning set forth in Section 4001(a)(3) of ERISA. "Net Mark-to-Market Exposure" of any Person shall mean, as of any date of determination with respect to any Hedging Obligation, the excess (if any) of all unrealized losses over all unrealized profits of such Person arising from such Hedging Obligation. "Unrealized losses" shall mean the fair market value of the cost to such Person of replacing the Hedging Transaction giving rise to such Hedging Obligation as of the date of determination (assuming the Hedging Transaction were to be terminated as of that date), and "unrealized profits" means the fair market value of the gain to such Person of replacing such Hedging Transaction as of the date of determination (assuming such Hedging Transaction were to be terminated as of that date). "Notes" shall mean, collectively, the Revolving Credit Notes, the Competitive Bid Notes and the Swingline Note. "Notice of Conversion/Continuation" shall have the meaning set forth in Section 2.9(b). "Notice of Revolving Borrowing" shall have the meaning set forth in Section 2.3. "Notice of Swingline Loan" shall have the meaning set forth in Section 2.5. "Notices of Borrowing" shall mean, collectively, the Notices of Revolving Borrowing, the Competitive Bid Requests, and the Notices of Swingline Loan. "Obligations" shall mean all amounts owing by the Borrower to the Administrative Agent, the Issuing Bank or any Lender (including the Swingline Lender) pursuant to or in connection with this Agreement or any other Loan Document, including without limitation, all principal, interest (including any interest accruing after the filing of any petition in bankruptcy or the commencement of any insolvency, reorganization or like proceeding relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), all reimbursement obligations, fees, expenses, indemnification and reimbursement payments, costs and expenses (including all fees and expenses of counsel to the Administrative Agent, the Issuing Bank and any Lender (including the Swingline Lender) incurred pursuant to this Agreement or any other Loan Document), whether direct or indirect, absolute or contingent, liquidated or unliquidated, now existing or hereafter arising hereunder or thereunder, and all Hedging Obligations owed to the Administrative Agent, any Lender or any of their Affiliates relating to Revolving Loans made hereunder, and all obligations and liabilities incurred in connection with collecting and enforcing the foregoing, together with all renewals, extensions, modifications or refinancings thereof. "Off-Balance Sheet Debt" of any Person shall mean (i) any repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person, including without limitation with respect to a Securitization Transaction, (ii) any Synthetic Lease Obligation or (iii) any obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the balance sheet of such Person under GAAP, provided, however, that any liability of such Person with respect to sale and leaseback transactions shall be excluded from this definition. 14 "OSHA" shall mean the Occupational Safety and Health Act of 1970, as amended from time to time, and any successor statute. "Other Taxes" shall mean any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document. "Participant" shall have the meaning set forth in Section 10.4(c). "Payment Office" shall mean the office of the Administrative Agent located at 303 Peachtree Street, N.E., Atlanta, Georgia 30308, or such other location as to which the Administrative Agent shall have given written notice to the Borrower and the other Lenders. "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA, and any successor entity performing similar functions. "Permitted Encumbrances" shall mean: (i) Liens imposed by law for taxes not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained in accordance with GAAP; (ii) statutory Liens of landlords, carriers, warehousemen, mechanics, materialmen and similar Liens arising by operation of law in the ordinary course of business for amounts not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained in accordance with GAAP; (iii) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations; (iv) deposits to secure the performance of bids, trade contracts, insurance contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; (v) judgment and attachment liens not giving rise to an Event of Default or Liens created by or existing from any litigation or legal proceeding that are currently being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained in accordance with GAAP; and (vi) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or materially interfere with the ordinary conduct of business of the Borrower and its Subsidiaries taken as a whole; 15 provided, that the term "Permitted Encumbrances" shall not include any Lien securing Indebtedness. "Permitted Investments" shall mean: (i) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States), in each case maturing within one year from the date of acquisition thereof; (ii) commercial paper having a rating of at least A-1/P-2, at the time of acquisition thereof, of S&P or Moody's and in either case maturing within six months from the date of acquisition thereof; (iii) certificates of deposit, bankers' acceptances and time deposits maturing within 180 days of the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States or any state thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000; (iv) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (i) above and entered into with a financial institution satisfying the criteria described in clause (iii) above; and (v) mutual funds investing solely in any one or more of the Permitted Investments described in clauses (i) through (iv) above. "Permitted Subordinated Debt" shall mean any Indebtedness of the Borrower or any Subsidiary (i) that is expressly subordinated to the Obligations and all guarantees thereof on terms and conditions satisfactory to the Administrative Agent and the Required Lenders in all respects, including without limitation with respect to interest rates, payment terms, maturities, amortization schedules, covenants, defaults, remedies and subordination provisions, as evidenced by the written approval by the Administrative Agent and the Required Lenders. "Person" shall mean any individual, partnership, firm, corporation, association, joint venture, limited liability company, trust or other entity, or any Governmental Authority. "Plan" shall mean any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Pro Rata Share" shall mean with respect to any Revolving Commitment, Loans, other Revolving Credit Exposure, or any payments or prepayments related to the foregoing, of any Lender at any time, a percentage, the numerator of which shall be such Lender's Commitment (or if such Commitments have been terminated or expired or the Loans have been declared to be due and payable, such Lender's Revolving Credit Exposure), and the denominator 16 of which shall be the sum of such Commitments of all Lenders (or if such Commitments have been terminated or expired or the Loans have been declared to be due and payable, the Revolving Credit Exposure of all Lenders). "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System, as the same may be in effect from time to time, and any successor regulations. "Regulation U" shall mean Regulation U of the Board of Governors of the Federal Reserve System, as the same may be in effect from time to time, and any successor regulations. "Related Parties" shall mean, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. "Release" shall mean any release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into the environment (including ambient air, surface water, groundwater, land surface or subsurface strata) or within any building, structure, facility or fixture. "Required Lenders" shall mean, at any time, Lenders holding more than 50% of the aggregate outstanding Revolving Commitments at such time or if the Lenders have no Revolving Commitments outstanding, then Lenders holding more than 50% of the aggregate Revolving Credit Exposure and Competitive Bid Loans of all Lenders. "Requirement of Law" for any Person shall mean the articles or certificate of incorporation, bylaws, partnership certificate and agreement, or limited liability company certificate of organization and agreement, as the case may be, and other organizational and governing documents of such Person, and any law, treaty, rule or regulation, or determination of a Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Responsible Officer" shall mean any of the president, the chief executive officer, the chief operating officer, the chief financial officer, the treasurer or a vice president of the Borrower or such other representative of the Borrower as may be designated in writing by any one of the foregoing with the consent of the Administrative Agent; and, with respect to the compliance certificate, the chief executive officer and the chief financial officer of the Borrower. "Restricted Payment" shall have the meaning set forth in Section 7.5. "Revolving Commitment" shall mean, with respect to each Lender, the obligation of such Lender to make Revolving Loans to the Borrower and to participate in Letters of Credit and Swingline Loans in an aggregate principal amount not exceeding the amount set forth with respect to such Lender on Annex I, as such annex may be amended pursuant to Section 2.4 or through an assignment of an existing Revolving Commitment, the amount of the assigned "Revolving Commitment" as provided in the Assignment and Acceptance executed by such Person as an assignee, as the same may be increased or deceased pursuant to terms hereof. 17 "Revolving Commitment Termination Date" shall mean the earliest of (i) March 26, 2007, (ii) the date on which the Revolving Commitments are terminated pursuant to Section 2.10 and (iii) the date on which all amounts outstanding under this Agreement have been declared or have automatically become due and payable (whether by acceleration or otherwise). "Revolving Credit Availability Period" shall mean the period from the Closing Date to the Revolving Commitment Termination Date. "Revolving Credit Exposure" shall mean, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender's Revolving Loans, LC Exposure and Swingline Exposure. "Revolving Credit Note" shall mean a promissory note of the Borrower payable to the order of a requesting Lender in the principal amount of such Lender's Revolving Commitment, in substantially the form of Exhibit A. "Revolving Loan" shall mean a loan made by a Lender (other than the Swingline Lender) to the Borrower under its Revolving Commitment, which may either be a Base Rate Loan or a Eurodollar Loan. "S&P" shall mean Standard & Poor's, a division of the McGraw-Hill Companies. "Securitization Subsidiary" shall mean any Subsidiary of the Borrower that is a special purpose entity formed for the purpose of acquiring accounts receivable and related rights from the Borrower or one or more of its other Subsidiaries. "Securitization Transaction" shall mean any limited recourse or non-recourse sale, assignment or contribution of accounts receivable and related rights of the Borrower or one or more of its Subsidiaries to any Securitization Subsidiary in connection with the issuance of Indebtedness by such Securitization Subsidiary secured by such assets, the proceeds of which are to be made available, directly or indirectly, to the Borrower or such Subsidiaries. The "amount" or "principal amount" of any Securitization Transaction shall be deemed at any time to be the aggregate principal or stated amount of the Indebtedness owing by such Securitization Subsidiary to any Person other than the Borrower or another Subsidiary. "Subordinated Debt Documents" shall mean any indenture, agreement or similar instrument governing any Permitted Subordinated Debt. "Subsidiary" shall mean, with respect to any Person (the "parent"), any corporation, partnership, joint venture, limited liability company, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, partnership, joint venture, limited liability company, association or other entity (i) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power, or in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (ii) that is, as of such date, otherwise controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. 18 Unless otherwise indicated, all references to "Subsidiary" hereunder shall mean a Subsidiary of the Borrower. "Subsidiary Guaranty Agreement" shall mean the Subsidiary Guaranty Agreement, dated as of the date hereof and substantially in the form of Exhibit E, made by the Subsidiary Loan Parties in favor of the Administrative Agent for the benefit of the Lenders. "Subsidiary Guaranty Supplement" shall mean each supplement substantially in the form of Annex I to the Subsidiary Guaranty Agreement executed and delivered by a Subsidiary of the Borrower pursuant to Section 5.10. "Subsidiary Loan Party" shall mean any Material Subsidiary and any other Subsidiary that guarantees the Obligations. "Swingline Commitment" shall mean the commitment of the Swingline Lender to make Swingline Loans in an aggregate principal amount at any time outstanding not to exceed $10,000,000. "Swingline Exposure" shall mean, with respect to each Lender, the principal amount of the Swingline Loans in which such Lender is legally obligated either to make a Base Rate Loan or to purchase a participation in accordance with Section 2.6, which shall equal such Lender's Pro Rata Share of all outstanding Swingline Loans. "Swingline Lender" shall mean SunTrust Bank "Swingline Loan" shall mean a loan made to the Borrower by the Swingline Lender under the Swingline Commitment. "Swingline Note" shall mean the promissory note of the Borrower payable to the order of the Swingline Lender in the principal amount of the Swingline Commitment, substantially the form of Exhibit C. "Swingline Rate" shall mean, for any Interest Period agreed to by the Swingline Lender and the Borrower, the rate as offered by the Swingline Lender and accepted by the Borrower. The Borrower is under no obligation to accept this rate. "Synthetic Lease" shall mean a lease transaction under which the parties intend that (i) the lease will be treated as an "operating lease" by the lessee pursuant to Statement of Financial Accounting Standards No. 13, as amended and (ii) the lessee will be entitled to various tax and other benefits ordinarily available to owners (as opposed to lessees) of like property. "Synthetic Lease Obligations" shall mean, with respect to any Person, the sum of (i) all remaining rental obligations of such Person as lessee under Synthetic Leases which are attributable to principal and, without duplication, and (ii) all rental and purchase price payment obligations of such Person under such Synthetic Leases assuming such Person exercises the option to purchase the lease property at the end of the lease term. 19 "Taxes" shall mean any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority. "Type", when used in reference to a Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Base Rate. "Withdrawal Liability" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. Section 1.2. Classifications of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g. a "Revolving Loan" or "Competitive Bid Loan") or by Type (e.g. a "Eurodollar Loan" or "Base Rate Loan") or by Class and Type (e.g. "Revolving Eurodollar Loan"). Borrowings also may be classified and referred to by Class (e.g. "Revolving Borrowing") or by Type (e.g. "Eurodollar Borrowing") or by Class and Type (e.g. " Revolving Eurodollar Borrowing"). Section 1.3. Accounting Terms and Determination. Unless otherwise defined or specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with GAAP as in effect from time to time, applied on a basis consistent with the most recent audited consolidated financial statement of the Borrower delivered pursuant to Section 5.1(a); provided, that if the Borrower notifies the Administrative Agent that the Borrower wishes to amend any covenant in Article VI to eliminate the effect of any change in GAAP on the operation of such covenant (or if the Administrative Agent notifies the Borrower that the Required Lenders wish to amend Article VI for such purpose), then the Borrower's compliance with such covenant shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Lenders. Section 1.4. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the word "to" means "to but excluding". Unless the context requires otherwise (i) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as it was originally executed or as it may from time to time be amended, restated, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (ii) any reference herein to any Person shall be construed to include such Person's successors and permitted assigns, (iii) the words "hereof", "herein" and "hereunder" and words of similar import shall be construed to refer to this Agreement as a whole and not to any particular provision hereof, (iv) all references to Articles, 20 Sections, Exhibits and Schedules shall be construed to refer to Articles, Sections, Exhibits and Schedules to this Agreement and (v) all references to a specific time shall be construed to refer to the time in the city and state of the Administrative Agent's principal office, unless otherwise indicated. ARTICLE II AMOUNT AND TERMS OF THE COMMITMENTS Section 2.1. General Description of Facilities. Subject to and upon the terms and conditions herein set forth, (i) the Lenders hereby establish in favor of the Borrower a revolving credit facility pursuant to which each Lender severally agrees (to the extent of such Lender's Revolving Commitment) to make Revolving Loans to the Borrower in accordance with Section 2.2 and to offer in its sole discretion to make Competitive Bid Loans in accordance with Section 2.7, (ii) the Issuing Bank agrees to issue Letters of Credit in accordance with Section 2.23, (iii) the Swingline Lender agrees to make Swingline Loans in accordance with Section 2.5 and (iv) each Lender agrees to purchase a participation interest in the Letters of Credit and the Swingline Loans pursuant to the terms and conditions hereof; provided, that in no event shall the aggregate principal amount of all outstanding Revolving Loans, Competitive Bid Loans, Swingline Loans and outstanding LC Exposure exceed at any time the Aggregate Revolving Commitment Amount from time to time in effect. Section 2.2. Revolving Loans. Subject to the terms and conditions set forth herein, each Lender severally agrees to make Revolving Loans, ratably in proportion to its Pro Rata Share, to the Borrower, from time to time during the Availability Period, in an aggregate principal amount outstanding at any time that will not result in (a) such Lender's Revolving Credit Exposure exceeding such Lender's Revolving Commitment or (b) the sum of the aggregate Revolving Credit Exposures of all Lenders plus the aggregate principal amount of all Competitive Bid Loans exceeding the Aggregate Revolving Commitment Amount. During the Availability Period, the Borrower shall be entitled to borrow, prepay and reborrow Revolving Loans in accordance with the terms and conditions of this Agreement; provided, that the Borrower may not borrow or reborrow should there exist a Default or Event of Default. Section 2.3. Procedure for Revolving Borrowings. The Borrower shall give the Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of each Revolving Borrowing substantially in the form of Exhibit 2.3 attached hereto (a "Notice of Revolving Borrowing") (x) prior to 11:00 a.m. (Atlanta, Georgia time) one (1) Business Day prior to the requested date of each Base Rate Borrowing and (y) prior to 11:00 a.m. (Atlanta, Georgia time) three (3) Business Days prior to the requested date of each Eurodollar Borrowing. Each Notice of Revolving Borrowing shall be irrevocable and shall specify: (i) the aggregate principal amount of such Borrowing, (ii) the date of such Borrowing (which shall be a Business Day), (iii) the Type of such Revolving Loan comprising such Borrowing and (iv) in the case of a Eurodollar Borrowing, the duration of the initial Interest Period applicable thereto (subject to the provisions of the definition of Interest Period). Each 21 Revolving Borrowing shall consist entirely of Base Rate Loans or Eurodollar Loans, as the Borrower may request. The aggregate principal amount of each Eurodollar Borrowing shall be not less than $5,000,000 or a larger multiple of $1,000,000, and the aggregate principal amount of each Base Rate Borrowing shall not be less than $1,000,000 or a larger multiple of $100,000; provided, that Base Rate Loans made pursuant to Section 2.5 or Section 2.23(c) may be made in lesser amounts as provided therein. At no time shall the total number of Eurodollar Borrowings and Competitive Bid Loans outstanding at any time exceed ten. Promptly following the receipt of a Notice of Revolving Borrowing in accordance herewith, the Administrative Agent shall advise each Lender of the details thereof and the amount of such Lender's Revolving Loan to be made as part of the requested Revolving Borrowing. Section 2.4. Increase of Commitments; Additional Lenders. (a) So long as no Event of Default has occurred and is continuing, from time to time after the Closing Date, Borrower may, upon at least 30 days' written notice to the Administrative Agent, who shall promptly notify the Lenders, propose to increase the Aggregate Revolving Commitment Amount up to an amount not to exceed $300,000,000 (the amount of any such increase, the "Additional Commitment Amount"). Each Lender shall have the right for a period of 15 days following receipt of such notice, to elect by written notice to the Borrower and the Administrative Agent to increase its Revolving Commitment by a principal amount equal to its Pro Rata Share of the Additional Commitment Amount. In the event that the aggregate amount to which the Lenders are willing to increase the Revolving Commitments is less than the Additional Commitment Amount based on the written notices delivered by the Lenders to the Administrative Agent, the Administrative Agent shall offer to the Lenders who have agreed to increase their Revolving Commitments the opportunity to further increase their Revolving Commitments up to an amount equal to the Additional Commitment Amount. Each such Lender shall promptly respond in writing to the Administrative Agent of whether it will agree to further increase its Revolving Commitment and by what amount it will agree to further increase its Revolving Commitment. Within five (5) Business Days after receipt of all responses from such Lenders, the Administrative Agent shall inform the Borrower and all Lenders in writing of the amount by which each Lender will increase its Revolving Commitment. No Lender (or any successor thereto) shall have any obligation to increase its Revolving Commitment or its other obligations under this Agreement and the other Loan Documents, and any decision by a Lender to increase its Revolving Commitment shall be made in its sole discretion independently from any other Lender. Decisions to increase a Revolving Loan Commitment must be affirmatively communicated in writing and shall not be presumed based upon a failure to respond to Borrower's request. (b) If the existing Lenders do not elect to increase the Aggregate Revolving Commitment Amount by the Additional Commitment Amount pursuant to subsection (a) of this Section, the Borrower shall have the right, within sixty days (60) after receipt of such notice from the Administrative Agent, to obtain additional Revolving Commitments from one or more other banks or financial institutions (each, an "Additional Lender") to the extent necessary to increase the Aggregate Revolving Commitment Amount by the Additional Commitment Amount; provided, however, that each Additional Lender must (i) be acceptable to the Administrative Agent and (ii) become a party to this Agreement pursuant to a joinder agreement in form and substance satisfactory to the Administrative Agent. The sum of the increases in the 22 Revolving Commitments of the existing Lenders pursuant to subsection (a) plus the Revolving Commitments of the Additional Lenders shall not in the aggregate exceed the Additional Commitment Amount. (c) An increase in the aggregate amount of the Revolving Commitments pursuant to this Section 2.4 shall become effective upon the receipt by the Administrative Agent of an agreement in form and substance satisfactory to the Administrative Agent signed by the Borrower, by each Additional Lender and by each other Lender whose Revolving Commitment is to be increased, setting forth the new Revolving Commitments of such Lenders and setting forth the agreement of each Additional Lender to become a party to this Agreement and to be bound by all the terms and provisions hereof, together with such evidence of appropriate corporate authorization on the part of the Borrower with respect to the increase in the Revolving Commitments and such opinions of counsel for the Borrower with respect to the increase in the Revolving Commitments as the Administrative Agent may reasonably request. . Upon the acceptance of any such agreement by the Administrative Agent, the Aggregate Revolving Commitment Amount shall automatically be increased by the amount of the Revolving Commitments added through such agreement and Annex I shall automatically be deemed amended to reflect the Revolving Commitments of all Lenders after giving effect to the addition of such Revolving Commitments. (d) Upon any increase in the aggregate amount of the Revolving Commitments pursuant to this Section 2.4 that is not pro rata among all Lenders, (x) within five Business Days, in the case of any Base Rate Loans then outstanding, and at the end of the then current Interest Period with respect thereto, in the case of any Eurodollar Loans then outstanding, the Borrower shall prepay such Loans in their entirety and, to the extent the Borrower elects to do so and subject to the conditions specified in Article III, the Borrower shall reborrow Loans from the Lenders in proportion to their respective Revolving Commitments after giving effect to such increase, until such time as all outstanding Loans are held by the Lenders in such proportion and (y) effective upon such increase, the amount of the participations held by each Lender in each Letter of Credit then outstanding shall be deemed adjusted such that, after giving effect to such adjustments, the Lenders shall hold participations in each such Letter of Credit in the proportion its respective Revolving Commitment bears to the aggregate Revolving Commitments after giving effect to such increase. Section 2.5. Swingline Commitment. Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make Swingline Loans to the Borrower, from time to time during the Availability Period, in an aggregate principal amount outstanding at any time not to exceed the lesser of (i) the Swingline Commitment then in effect and (ii) the difference between the Aggregate Revolving Commitment Amount and the sum of (x) the aggregate Revolving Credit Exposures of all Lenders and (y) the outstanding Competitive Bid Loans; provided, that the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Loan. The Borrower shall be entitled to borrow, repay and reborrow Swingline Loans in accordance with the terms and conditions of this Agreement. Section 2.6. Procedure for Swingline Loan; Etc. (a) The Borrower shall give the Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of each Swingline Loan substantially in the form of Exhibit 2.6 attached hereto ("Notice of 23 Swingline Loan") prior to 2:00 p.m. (Atlanta, Georgia time) on the requested date of each Swingline Loan. Each Notice of Swingline Loan shall be irrevocable and shall specify: (i) the principal amount of such Swingline Loan, (ii) the date of such Swingline Loan (which shall be a Business Day) and (iii) the account of the Borrower to which the proceeds of such Swingline Loan should be credited. The Administrative Agent will promptly advise the Swingline Lender of each Notice of Swingline Loan. Each Swingline Loan shall accrue interest at the Base Rate or any other interest rate as agreed between the Borrower and the Swingline Lender and shall have an interest period as agreed between the Borrower and the Swingline Lender. The aggregate principal amount of each Swingline Loan shall be not less than $100,000 or a larger multiple of $50,000, or such other minimum amounts agreed to by the Swingline Lender and the Borrower. The Swingline Lender will make the proceeds of each Swingline Loan available to the Borrower in Dollars in immediately available funds at the account specified by the Borrower in the applicable Notice of Swingline Loan not later than 4:00 p.m. (Atlanta, Georgia time) on the requested date of such Swingline Loan. (b) The Swingline Lender, at any time and from time to time in its sole discretion, may, on behalf of the Borrower (which hereby irrevocably authorizes and directs the Swingline Lender to act on its behalf), give a Notice of Revolving Borrowing to the Administrative Agent (with a copy to the Borrower) requesting the Lenders (including the Swingline Lender) to make Base Rate Loans in an amount equal to the unpaid principal amount of any Swingline Loan. Each Lender will make the proceeds of its Base Rate Loan included in such Borrowing available to the Administrative Agent for the account of the Swingline Lender in accordance with Section 2.8, which will be used solely for the repayment of such Swingline Loan. (c) If for any reason a Base Rate Borrowing may not be (as determined in the sole discretion of the Administrative Agent), or is not, made in accordance with the foregoing provisions, then each Lender (other than the Swingline Lender) shall purchase an undivided participating interest in such Swingline Loan in an amount equal to its Pro Rata Share thereof on the date that such Base Rate Borrowing should have occurred. On the date of such required purchase, each Lender shall promptly transfer, in immediately available funds, the amount of its participating interest to the Administrative Agent for the account of the Swingline Lender. If such Swingline Loan bears interest at a rate other than the Base Rate, such Swingline Loan shall automatically become a Base Rate Loan on the effective date of any such participation and interest shall become payable on demand. (d) Each Lender's obligation to make a Base Rate Loan pursuant to Section 2.6(b) or to purchase the participating interests pursuant to Section 2.6(c) shall be absolute and unconditional and shall not be affected by any circumstance, including without limitation (i) any setoff, counterclaim, recoupment, defense or other right that such Lender or any other Person may have or claim against the Swingline Lender, the Borrower or any other Person for any reason whatsoever, (ii) the existence of a Default or an Event of Default or the termination of any Lender's Revolving Commitment, (iii) the existence (or alleged existence) of any event or condition which has had or could reasonably be expected to have a Material Adverse Effect, (iv) any breach of this Agreement or any other Loan Document by the Borrower, the Administrative Agent or any Lender or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. If such amount is not in fact made available to the Swingline 24 Lender by any Lender, the Swingline Lender shall be entitled to recover such amount on demand from such Lender, together with accrued interest thereon for each day from the date of demand thereof (i) at the Federal Funds Rate until the second Business Day after such demand and (ii) at the Base Rate at all times thereafter. Until such time as such Lender makes its required payment, the Swingline Lender shall be deemed to continue to have outstanding Swingline Loans in the amount of the unpaid participation for all purposes of the Loan Documents. In addition, such Lender shall be deemed to have assigned any and all payments made of principal and interest on its Loans and any other amounts due to it hereunder, to the Swingline Lender to fund the amount of such Lender's participation interest in such Swingline Loans that such Lender failed to fund pursuant to this Section, until such amount has been purchased in full. Section 2.7. Competitive Bid Borrowings. (a) Competitive Bid Option. Subject to the terms and conditions set forth herein, from time to time during the Availability Period, the Borrower may request the Lenders to submit Competitive Bids. Each Lender may, but shall have no obligation to, make such Competitive Bids, and the Borrower may, but shall have no obligation to, accept any such Competitive Bids. At no time shall the number of Competitive Bid Borrowings outstanding under this Section 2.7, together with all LIBOR Borrowings exceed ten in any case. At no time shall (i) the sum of the aggregate principal amount of outstanding Competitive Bid Loans plus the aggregate Revolving Credit Exposures of all Lenders exceed the Aggregate Revolving Commitment Amount and (ii) the aggregate principal amount of outstanding Competitive Bid Loans exceed the Competitive Bid Loan Limit. A Lender's Competitive Bid Loans shall not be deemed to constitute usage of such Lender's Revolving Commitment, and such Lender shall remain obligated to fund its Pro Rata Share of Revolving Loans and to purchase participations in the LC Exposure and Swingline Exposure. (b) Competitive Bid Requests. The Borrower may request Competitive Bids by delivering a duly completed Competitive Bid Request to the Administrative Agent in writing (or by telephone, immediately confirmed in writing). Each Competitive Bid Request shall specify (i) the proposed date of such Borrowing (which shall be a Business Day), (ii) the aggregate amount of such Borrowing, and (iii) the duration of the Interest Period or Interest Periods applicable thereto, and shall otherwise comply with notice requirements of each respective Lender, which shall be communicated by Lenders to the Administrative Agent and the Borrower from time to time. A Competitive Bid Request which does not conform substantially to the form of Exhibit 2.7-A may be rejected by the Administrative Agent in its sole discretion, and the Administrative Agent shall promptly notify the Borrower of such rejection by telecopy. Promptly after its receipt of a Competitive Bid Request which is not rejected, the Administrative Agent shall promptly notify each Lender the details thereof by telecopy, inviting the Lenders to submit Competitive Bids, in a notice substantially similar to the form of Exhibit 2.7-B. (c) Competitive Bids. (i) Each Lender may, but shall have no obligation to, submit one or more Competitive Bids, each containing an irrevocable offer to make a Competitive Bid Loan in response to a Competitive Bid Request; provided, that if the Borrower's Competitive Bid Request specified more than one Interest Period, such Lender may make a single submission 25 containing a separate offer for each Interest Period and each such separate offer shall be deemed to be a separate Competitive Bid. Each Competitive Bid by a Lender must be received by the Borrower directly by telecopy not later than 11:30 a.m. (Atlanta, Georgia time) on the proposed date of Borrowing. (ii) Each Competitive Bid shall specify (A) the principal amount of each Competitive Bid Loan, the Interest Period applicable thereto and the aggregate principal amount of all Competitive Bid Loans for all Interest Periods (which principal amount may be greater than the Revolving Commitment of such Lender but which may not exceed the aggregate principal amount of Competitive Bid Loans for each Interest Period for which Competitive Bid Requests were requested) and (B) the Competitive Bid Rate or Rates at which such Lender is prepared to make such Loan or Loans (expressed as a percentage rate per annum in the form of a decimal to no more than four decimal places). Competitive Bids that do not conform substantially to Exhibit 2.7-C may be rejected by the Borrower, and the Borrower shall notify the applicable Lender as promptly as possible. (iii) No Competitive Bid shall contain qualifying, conditional or similar language or propose terms other than or in addition to those set forth in the applicable Competitive Bid Request, and in particular, no Competitive Bid may be conditioned upon the acceptance by the Borrower of all (or some specified minimum) of the principal amount of the Competitive Bid Loan for which the Competitive Bid was made. (d) Acceptance by Borrower. The Borrower may accept or reject any Competitive Bid; provided, that (i) the aggregate amount of the Competitive Bids accepted by the Borrower shall not exceed the aggregate amount of the requested Competitive Bid Borrowing specified in the related Competitive Bid Request, and (ii) the aggregate amount of all Competitive Bid Loans, after giving effect to the loans to be made after such Competitive Bids are accepted, (A) would not exceed the Competitive Bid Loan Limit, and (B) together with all Revolving Credit Exposure outstanding at such time would not exceed the Aggregate Revolving Commitment Amount. (e) The Borrower shall promptly notify by telecopy each Lender that made a Competitive Bid (with a copy to the Agent) whether its Competitive Bid was accepted (and if so, the amount and the duration of the Interest Period or Periods so accepted), and shall promptly notify the Administrative Agent of the amounts of the Competitive Bids accepted, not later than 1:30 p.m. (Atlanta, Georgia time) on the date of the proposed Competitive Bid Borrowing (f) Upon receipt of notice from the Borrower described in clause (e) above, each successful bidding Lender will thereupon become bound, subject to the terms and conditions hereof, to make the Competitive Bid Loan in respect of which its Competitive Bid was accepted. Each such Lender shall, not later than 2:30 p.m. (Atlanta, Georgia time) on the date specified for the making of such Competitive Bid Loan, make the amount of such Loan available to the Borrower in immediately available funds in U.S. Dollars at the account specified by the Borrower. Section 2.8. Funding of Borrowings. 26 (a) Each Lender will make available each Loan to be made by it hereunder on the proposed date thereof by wire transfer in immediately available funds in U.S. Dollars by 11:00 a.m. (Atlanta, Georgia time) to the Administrative Agent at the Payment Office; provided, that the Swingline Loans will be made as set forth in Section 2.6. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts that it receives, in like funds by the close of business on such proposed date, to an account maintained by the Borrower with the Administrative Agent or at the Borrower's option, by effecting a wire transfer of such amounts to an account designated by the Borrower to the Administrative Agent. (b) Unless the Administrative Agent shall have been notified by any Lender prior to 5:00 p.m. (Atlanta, Georgia time) one (1) Business Day prior to the date of a Borrowing in which such Lender is to participate that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on such date, and the Administrative Agent, in reliance on such assumption, may make available to the Borrower on such date a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent by such Lender on the date of such Borrowing, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest at the Federal Funds Rate until the second Business Day after such demand and thereafter at the Base Rate. If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent shall promptly notify the Borrower, and the Borrower shall immediately pay such corresponding amount to the Administrative Agent together with interest at the rate specified for such Borrowing. Nothing in this subsection shall be deemed to relieve any Lender from its obligation to fund its Pro Rata Share of any Borrowing hereunder or to prejudice any rights which the Borrower may have against any Lender as a result of any default by such Lender hereunder. (c) All Revolving Borrowings shall be made by the Lenders on the basis of their respective Pro Rata Shares. All Competitive Bid Borrowings shall be made severally by the Lenders whose Competitive Bids were accepted by the Borrower. No Lender shall be responsible for any default by any other Lender in its obligations hereunder, and each Lender shall be obligated to make its Revolving Loans provided to be made by it hereunder, regardless of the failure of any other Lender to make its Loans hereunder. Section 2.9. Interest Elections. (a) Each Borrowing initially shall be of the Type specified in the applicable Notice of Borrowing, and in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Notice of Borrowing. Thereafter, the Borrower may elect to convert such Borrowing into a different Type or to continue such Borrowing, and in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall NOT apply to Competitive Bid Borrowings or Swingline Loans, which may not be converted or continued. 27 (b) To make an election pursuant to this Section, the Borrower shall give the Administrative Agent prior written notice (or telephonic notice promptly confirmed in writing) of each Borrowing substantially in the form of Exhibit 2.9 attached hereto (a "Notice of Conversion/Continuation") that is to be converted or continued, as the case may be, (x) prior to 11:00 a.m. (Atlanta, Georgia time) one (1) Business Day prior to the requested date of a conversion into a Base Rate Borrowing and (y) prior to 11:00 a.m. (Atlanta, Georgia time) three (3) Business Days prior to a continuation of or conversion into a Eurodollar Borrowing. Each such Notice of Conversion/Continuation shall be irrevocable and shall specify (i) the Borrowing to which such Notice of Continuation/Conversion applies and if different options are being elected with respect to different portions thereof, the portions thereof that are to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Notice of Continuation/Conversion, which shall be a Business Day, (iii) whether the resulting Borrowing is to be a Base Rate Borrowing or a Eurodollar Borrowing; and (iv) if the resulting Borrowing is to be a Eurodollar Borrowing, the Interest Period applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of "Interest Period". If any such Notice of Continuation/Conversion requests a Eurodollar Borrowing but does not specify an Interest Period, the Borrower shall be deemed to have selected an Interest Period of one month. The principal amount of any resulting Borrowing shall satisfy the minimum borrowing amount for Eurodollar Borrowings and Base Rate Borrowings set forth in Section 2.3. (c) If, on the expiration of any Interest Period in respect of any Eurodollar Borrowing, the Borrower shall have failed to deliver a Notice of Conversion/ Continuation, then, unless such Borrowing is repaid as provided herein, the Borrower shall be deemed to have elected to convert such Borrowing to a Base Rate Borrowing. No Borrowing may be converted into, or continued as, a Eurodollar Borrowing if a Default or an Event of Default exists, unless the Administrative Agent and each of the Lenders shall have otherwise consented in writing. No conversion of any Eurodollar Loans shall be permitted except on the last day of the Interest Period in respect thereof. (d) Upon receipt of any Notice of Conversion/Continuation, the Administrative Agent shall promptly notify each Lender of the details thereof and of such Lender's portion of each resulting Borrowing. Section 2.10. Optional Reduction and Termination of Commitments. (a) Unless previously terminated, all Revolving Commitments (including the LC Commitment and the Swingline Commitment) shall terminate on the Revolving Commitment Termination Date. (b) Upon at least three (3) Business Days' prior written notice (or telephonic notice promptly confirmed in writing) to the Administrative Agent (which notice shall be irrevocable), the Borrower may reduce the Aggregate Revolving Commitments in part or terminate the Aggregate Revolving Commitments in whole; provided, that (i) any partial reduction shall apply to reduce proportionately and permanently the Revolving Commitment of each Lender, (ii) any partial reduction pursuant to this Section 2.10 shall be in an amount of at 28 least $5,000,000 and any larger multiple of $1,000,000, and (iii) no such reduction shall be permitted which would reduce the Aggregate Revolving Commitment Amount to an amount less than the outstanding Revolving Credit Exposures of all Lenders plus the outstanding principal amount of all Competitive Bid Loans. Any such reduction in the Aggregate Revolving Commitment Amount below the aggregate principal amount of the Swingline Commitment and the LC Commitment shall result in a reduction (rounded to the next lowest integral multiple of $100,000) in the Swingline Commitment and the LC Commitment, proportionate to the unused portion of each such Commitment. Section 2.11. Repayment of Loans. (a) The outstanding principal amount of all Revolving Loans shall be due and payable (together with accrued and unpaid interest thereon) on the Revolving Commitment Termination Date. (b) The principal amount of each Competitive Bid Borrowing shall be due and payable (together with accrued and unpaid interest thereon) on the earlier of (i) the last day of the Interest Period applicable to such Borrowing and (ii) the Revolving Commitment Termination Date. (c) The principal amount of each Swingline Loan shall be due and payable (together with accrued interest thereon) on the earlier of (i) the last day of the interest period applicable to such Borrowing and (ii) the Revolving Commitment Termination Date. Section 2.12. Evidence of Indebtedness. (a) Each Lender shall maintain in accordance with its usual practice appropriate records evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable thereon and paid to such Lender from time to time under this Agreement. The Administrative Agent shall maintain appropriate records in which shall be recorded (i) the Revolving Commitment of each Lender, (ii) the amount of each Loan made hereunder by each Lender, the Class and Type thereof and the Interest Period applicable thereto, (iii) the date of each continuation thereof pursuant to Section 2.9, (iv) the date of each conversion of all or a portion thereof to another Type pursuant to Section 2.9, (v) the date and amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder in respect of such Loans and (vi) both the date and amount of any sum received by the Administrative Agent hereunder from the Borrower in respect of the Loans and each Lender's Pro Rata Share thereof. The entries made in such records shall be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, that the failure or delay of any Lender or the Administrative Agent in maintaining or making entries into any such record or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans (both principal and unpaid accrued interest) of such Lender in accordance with the terms of this Agreement. (b) At the request of any Lender (including the Swingline Lender) at any time, the Borrower agrees that it will execute and deliver to such Lender a Revolving Credit Note, and/or a Competitive Bid Note and, in the case of the Swingline Lender only, a Swingline Note, payable to the order of such Lender. 29 Section 2.13. Optional Prepayments. (a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing, in whole or in part, without premium or penalty, by giving irrevocable written notice (or telephonic notice promptly confirmed in writing) to the Administrative Agent no later than (i) in the case of prepayment of any Eurodollar Borrowing, 11:00 a.m. (Atlanta, Georgia time) not less than three (3) Business Days prior to any such prepayment, (ii) in the case of any prepayment of any Base Rate Borrowing, not less than one Business Day prior to the date of such prepayment, and (iii) in the case of Swingline Loans, prior to 11:00 a. m. on the date of such prepayment. Each such notice shall be irrevocable and shall specify the proposed date of such prepayment and the principal amount of each Borrowing or portion thereof to be prepaid. Upon receipt of any such notice, the Administrative Agent shall promptly notify each affected Lender of the contents thereof and of such Lender's Pro Rata Share of any such prepayment. If such notice is given, the aggregate amount specified in such notice shall be due and payable on the date designated in such notice, together with accrued interest to such date on the amount so prepaid in accordance with Section 2.14(e); provided, that if a Eurodollar Borrowing is prepaid on a date other than the last day of an Interest Period applicable thereto, the Borrower shall also pay all amounts required pursuant to Section 2.20. Each partial prepayment of any Loan (other than a Swingline Loan) shall be in an amount that would be permitted in the case of an advance of a Revolving Borrowing of the same Type pursuant to Section 2.3 or in the case of a Swingline Loan pursuant to Section 2.6. Each prepayment of a Borrowing shall be applied ratably to the Loans comprising such Borrowing. (b) The Borrower may not prepay any Competitive Bid Loan except with the prior written consent of the affected Lender. Section 2.14. Interest on Loans. (a) The Borrower shall pay interest on each Base Rate Loan at the Base Rate in effect from time to time and on each Eurodollar Loan at the Adjusted LIBO Rate for the applicable Interest Period in effect for such Loan, plus, in the case of a Eurodollar Loan, the Applicable Margin in effect from time to time. (b) The Borrower shall pay interest on each Competitive Bid Eurodollar Loan at the Competitive Bid Rate quoted by the Lender making such Loan pursuant to Section 2.7(c) and accepted by the Borrower pursuant to Section 2.7(d). (c) The Borrower shall pay interest on each Swingline Loan at the Swingline Rate in effect from time to time. (d) Notwithstanding clause (a) and (b) above, while an Event of Default exists or after acceleration, at the option of the Required Lenders, the Borrower shall pay interest ("Default Interest") with respect to all Eurodollar Loans and Competitive Bid Loans at the rate otherwise applicable for the then-current Interest Period plus an additional 2% per annum until the last day of such Interest Period, and thereafter, and with respect to all Base Rate Loans (including all Swingline Loans) and all other Obligations hereunder (other than Loans and LC Exposure), at an all-in rate in effect for Base Rate Loans, plus an additional 2% per annum. 30 (e) Interest on the principal amount of all Loans shall accrue from and including the date such Loans are made to but excluding the date of any repayment thereof. Interest on all outstanding Base Rate Loans shall be payable quarterly in arrears on the last day of each Fiscal Quarter and on the Revolving Commitment Termination Date, as the case may be. Interest on all outstanding Eurodollar Loans shall be payable on the last day of each Interest Period applicable thereto, and, in the case of any Eurodollar Loans having an Interest Period in excess of three months or 90 days, respectively, on each day which occurs every three months or 90 days, as the case may be, after the initial date of such Interest Period, and on the Revolving Commitment Termination Date. Interest on each Swingline Loan shall be payable on the maturity date of such Loan, which shall be the last day of the Interest Period applicable thereto, and on the Revolving Commitment Termination Date. Interest on any Loan which is converted into a Loan of another Type or which is repaid or prepaid shall be payable on the date of such conversion or on the date of any such repayment or prepayment (on the amount repaid or prepaid) thereof. All Default Interest shall be payable on demand. (f) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder and shall promptly notify the Borrower and the Lenders of such rate in writing (or by telephone, promptly confirmed in writing). Any such determination shall be conclusive and binding for all purposes, absent manifest error. Section 2.15. Fees. (a) The Borrower shall pay to the Administrative Agent for its own account fees in the amounts and at the times previously agreed upon in writing by the Borrower and the Administrative Agent. (b) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee, which shall accrue at the Applicable Percentage per annum (determined daily in accordance with Schedule I) on the daily amount of the unused Revolving Commitment of such Lender during the Availability Period. For purposes of computing commitment fees with respect to the Revolving Commitments, the Revolving Commitment of each Lender shall be deemed used to the extent of the outstanding Revolving Loans and LC Exposure, but not Swingline Exposure or Competitive Bid Loans, of such Lender. (c) The Borrower agrees to pay (i) to the Administrative Agent, for the account of each Lender, a letter of credit fee with respect to its participation in each Letter of Credit, which shall accrue at a rate per annum equal to the Applicable Margin for Eurodollar Loans then in effect on the average daily amount of such Lender's LC Exposure attributable to each Letter of Credit during the period from and including the date of issuance of such Letter of Credit to but excluding the date on which such Letter of Credit expires or is drawn in full (including without limitation any LC Exposure that remains outstanding after the Revolving Commitment Termination Date) and (ii) to the Issuing Bank for its own account a fronting fee, which shall accrue at the rate of 0.125% per annum on the average daily amount of the LC Exposure during the Availability Period (or until the date that such Letter of Credit is irrevocably cancelled, whichever is later), as well as the Issuing Bank's standard fees with respect to issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Notwithstanding the foregoing, if the Required Lenders elect to increase interest on 31 the Loans to the Default Interest pursuant to Section 2.14(d), the letter of credit fees payable pursuant to clause (i) above shall automatically be increased by an additional 2% per annum. (d) The Borrower shall pay to the Administrative Agent, for the ratable benefit of each Lender, the upfront fee previously agreed upon by the Borrower and the Administrative Agent, which shall be due and payable on the Closing Date. (e) Accrued fees (other than the upfront fee referenced in paragraph (d)) shall be payable quarterly in arrears on the last day of each Fiscal Quarter, commencing on May 2, 2003 and on the Revolving Commitment Termination Date (and if later, the date the Loans and LC Exposure shall be repaid in their entirety; provided further, that any such fees accruing after the Revolving Commitment Termination Date shall be payable on demand. Section 2.16. Computation of Interest and Fees. All computations of interest and fees hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable (to the extent computed on the basis of days elapsed). Each determination by the Administrative Agent of an interest amount or fee hereunder shall be made in good faith and, except for manifest error, shall be final, conclusive and binding for all purposes. Section 2.17. Inability to Determine Interest Rates. If prior to the commencement of any Interest Period for any Eurodollar Borrowing, (i) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant interbank market, adequate means do not exist for ascertaining LIBOR for such Interest Period, or (ii) the Administrative Agent shall have received notice from the Required Lenders that the Adjusted LIBO Rate does not adequately and fairly reflect the cost to such Lenders (or Lender, as the case may be) of making, funding or maintaining their (or its, as the case may be) Eurodollar Loans for such Interest Period, the Administrative Agent shall give written notice (or telephonic notice, promptly confirmed in writing) to the Borrower and to the Lenders as soon as practicable thereafter. Until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) the obligations of the Lenders to make Eurodollar Revolving Loans or to continue or convert outstanding Loans as or into Eurodollar Loans shall be suspended and (ii) all such affected Loans shall be converted into Base Rate Loans on the last day of the then current Interest Period applicable thereto unless the Borrower prepays such Loans in accordance with this Agreement. Unless the Borrower notifies the Administrative Agent at least one Business Day before the date of any Eurodollar Revolving Borrowing for which a Notice of Revolving Borrowing has previously been given that it elects not to borrow on such date, then such Revolving Borrowing shall be made as a Base Rate Borrowing. 32 Section 2.18. Illegality. If any Change in Law shall make it unlawful or impossible for any Lender to make, maintain or fund any Eurodollar Loan and such Lender shall so notify the Administrative Agent, the Administrative Agent shall promptly give notice thereof to the Borrower and the other Lenders, whereupon until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such suspension no longer exist, the obligation of such Lender to make Eurodollar Revolving Loans, or to continue or convert outstanding Loans as or into Eurodollar Loans, shall be suspended. In the case of the making of a Eurodollar Revolving Borrowing, such Lender's Revolving Loan shall be made as a Base Rate Loan as part of the same Revolving Borrowing for the same Interest Period and if the affected Eurodollar Loan is then outstanding, such Loan shall be converted to a Base Rate Loan either (i) on the last day of the then current Interest Period applicable to such Eurodollar Loan if such Lender may lawfully continue to maintain such Loan to such date or (ii) immediately if such Lender shall determine that it may not lawfully continue to maintain such Eurodollar Loan to such date. Notwithstanding the foregoing, the affected Lender shall, prior to giving such notice to the Administrative Agent, designate a different Applicable Lending Office if such designation would avoid the need for giving such notice and if such designation would not otherwise be disadvantageous to such Lender in the good faith exercise of its discretion. Section 2.19. Increased Costs. (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement that is not otherwise included in the determination of the Adjusted LIBO Rate hereunder against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or the Issuing Bank; or (ii) impose on any Lender or on the Issuing Bank or the eurodollar interbank market any other condition affecting this Agreement or any Eurodollar Loans made by such Lender or any Letter of Credit or any participation therein; and the result of either of the foregoing is to increase the cost to such Lender of making, converting into, continuing or maintaining a Eurodollar Loan or to increase the cost to such Lender or the Issuing Bank of participating in or issuing any Letter of Credit or to reduce the amount received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or any other amount), then the Borrower shall promptly pay, upon written notice from and demand by such Lender on the Borrower (with a copy of such notice and demand to the Administrative Agent), to the Administrative Agent for the account of such Lender, within five Business Days after the date of such notice and demand, additional amount or amounts sufficient to compensate such Lender or the Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered. (b) If any Lender or the Issuing Bank shall have determined that on or after the date of this Agreement any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's or the Issuing Bank's capital (or on the capital of such Lender's or the Issuing Bank's parent corporation) as a consequence of its obligations hereunder or under or in respect of any Letter of Credit to a level below that which 33 such Lender or the Issuing Bank or such Lender's or the Issuing Bank's parent corporation could have achieved but for such Change in Law (taking into consideration such Lender's or the Issuing Bank's policies or the policies of such Lender's or the Issuing Bank's parent corporation with respect to capital adequacy) then, from time to time, within five (5) Business Days after receipt by the Borrower of written demand by such Lender (with a copy thereof to the Administrative Agent), the Borrower shall pay to such Lender such additional amounts as will compensate such Lender or the Issuing Bank or such Lender's or the Issuing Bank's parent corporation for any such reduction suffered. (c) A certificate of a Lender or the Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or the Issuing Bank or such Lender's or the Issuing Bank's parent corporation, as the case may be, specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower (with a copy to the Administrative Agent) and shall be conclusive, absent manifest error. The Borrower shall pay any such Lender or the Issuing Bank, as the case may be, such amount or amounts within 10 days after receipt thereof. (d) Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's or the Issuing Bank's right to demand such compensation. Section 2.20. Funding Indemnity. In the event of (a) the payment of any principal of a Eurodollar Loan or a Competitive Bid Loan other than on the last day of the Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion or continuation of a Eurodollar Loan other than on the last day of the Interest Period applicable thereto, or (c) the failure by the Borrower to borrow, prepay, convert or continue any Eurodollar Loan on the date specified in any applicable notice (regardless of whether such notice is withdrawn or revoked), unless such failure is a result of a Lender failing to make a Eurodollar Borrowing to Borrower, then, in any such event, the Borrower shall compensate each Lender, within five (5) Business Days after written demand from such Lender, for any loss, cost or expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense shall be deemed to include an amount determined by such Lender to be the excess, if any, of (A) the amount of interest that would have accrued on the principal amount of such Eurodollar Loan if such event had not occurred at the Adjusted LIBO Rate applicable to such Eurodollar Loan for the period from the date of such event to the last day of the then current Interest Period therefor (or in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Eurodollar Loan) over (B) the amount of interest that would accrue on the principal amount of such Eurodollar Loan for the same period if the Adjusted LIBO Rate were set on the date such Eurodollar Loan was prepaid or converted or the date on which the Borrower failed to borrow, convert or continue such Eurodollar Loan. In the case of a Competitive Bid Loan, such compensation shall include the amount of such losses, costs or expenses as the Lender that made such Competitive Bid Loan may reasonably incur by reason of such prepayment or failure to borrower, including any such losses, costs or expenses incurred in obtaining, liquidating or employing deposits from third parties. A certificate as to any additional amount payable under this Section 2.20 submitted to the Borrower by any Lender (with a copy to the Administrative Agent) shall be conclusive, absent manifest error. 34 Section 2.21. Taxes. (a) Any and all payments by or on account of any obligation of the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided, that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, any Lender or the Issuing Bank (as the case may be) shall receive an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) The Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Bank, within five (5) Business Days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or the Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Bank, shall be conclusive absent manifest error. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the Code or any treaty to which the United States is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate. Without limiting the generality of the foregoing, each Foreign Lender agrees that it will deliver to the Administrative Agent and the Borrower (or in the case of a Participant, to the Lender from which the related participation shall have been purchased), as appropriate, two (2) duly completed copies of (i) Internal Revenue Service Form W-8 ECI, or any successor form thereto, certifying that the payments received from the Borrower hereunder are effectively connected with such Foreign Lender's conduct of a trade or business in the United States; or (ii) Internal Revenue Service Form W-8 BEN, or any successor form thereto, certifying that such Foreign Lender is entitled to benefits under an income tax treaty to which the United States is a party 35 which reduces the rate of withholding tax on payments of interest; or (iii) Internal Revenue Service Form W-8 BEN, or any successor form prescribed by the Internal Revenue Service, together with a certificate (A) establishing that the payment to the Foreign Lender qualifies as "portfolio interest" exempt from U.S. withholding tax under Code section 871(h) or 881(c), and (B) stating that (1) the Foreign Lender is not a bank for purposes of Code section 881(c)(3)(A), or the obligation of the Borrower hereunder is not, with respect to such Foreign Lender, a loan agreement entered into in the ordinary course of its trade or business, within the meaning of that section; (2) the Foreign Lender is not a 10% shareholder of the Borrower within the meaning of Code section 871(h)(3) or 881(c)(3)(B); and (3) the Foreign Lender is not a controlled foreign corporation that is related to the Borrower within the meaning of Code section 881(c)(3)(C); or (iv) such other Internal Revenue Service forms as may be applicable to the Foreign Lender, including Forms W-8 IMY or W-8 EXP. Each such Foreign Lender shall deliver to the Borrower and the Administrative Agent such forms on or before the date that it becomes a party to this Agreement (or in the case of a Participant, on or before the date such Participant purchases the related participation). In addition, each such Foreign Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Foreign Lender. Each such Foreign Lender shall promptly notify the Borrower and the Administrative Agent at any time that it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted by the Internal Revenue Service for such purpose). Section 2.22. Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a) The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 2.19, 2.20 or 2.21, or otherwise) prior to 2:00 p.m. (Atlanta, Georgia time), on the date when due, in immediately available funds, free and clear of any defenses, rights of set-off, counterclaim, or withholding or deduction of taxes. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at the Payment Office, except payments to be made directly to the Issuing Bank or Swingline Lender as expressly provided herein and except that payments pursuant to Sections 2.19, 2.20 and 2.21 and 10.3 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be made payable for the period of such extension. All payments hereunder shall be made in Dollars. (b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties 36 entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties. (c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans or participations in LC Disbursements or Swingline Loans that would result in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans and participations in LC Disbursements and Swingline Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion (each a "Purchasing Lender") shall purchase (for cash at face value) participations in the Revolving Loans and participations in LC Disbursements and Swingline Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans and participations in LC Disbursements and Swingline Loans; provided, that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered or the Purchasing Lender is otherwise required to return or restore any such payment, such participations shall be rescinded and each other Lender shall, promptly after request from the Administrative Agent or the Purchasing Lender, return to the Purchasing Lender the purchase price for such participation to the extent of such recovery or the amount otherwise returned or restored by the Purchasing Lender, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements or Swingline Loans to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation. (d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Bank hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Bank, as the case may be, the amount or amounts due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. (e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.6(b), 2.23(c) or (d), 2.8(b) or 10.3(d), then the Administrative Agent may, 37 in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid. Section 2.23. Letters of Credit. (a) During the Availability Period, the Issuing Bank, in reliance upon the agreements of the other Lenders pursuant to Section 2.23(d), agrees to issue, at the request of the Borrower, Letters of Credit for the account of the Borrower on the terms and conditions hereinafter set forth; provided, that (i) each Letter of Credit shall expire on the earlier of (A) the date one year after the date of issuance of such Letter of Credit (or in the case of any renewal or extension thereof, one year after such renewal or extension) and (B) the date that is five (5) Business Days prior to the Revolving Commitment Termination Date, (ii) each Letter of Credit shall be in a stated amount of at least $100,000; and (iii) the Borrower may not request any Letter of Credit, if, after giving effect to such issuance (A) the aggregate LC Exposure would exceed the LC Commitment or (B) the aggregate Revolving Credit Exposure of all Lenders would exceed the Aggregate Revolving Commitment Amount. Upon the issuance of each Letter of Credit each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Issuing Bank without recourse a participation in such Letter of Credit equal to such Lender's Pro Rata Share of the aggregate amount available to be drawn under such Letter of Credit. Each issuance of a Letter of Credit shall be deemed to utilize the Revolving Commitment of each Lender by an amount equal to the amount of such participation. (b) To request the issuance of a Letter of Credit (or any amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall give the Issuing Bank and the Administrative Agent irrevocable written notice at least three (3) Business Days prior to the requested date of such issuance specifying the date (which shall be a Business Day) such Letter of Credit is to be issued (or amended, extended or renewed, as the case may be), the expiration date of such Letter of Credit, the amount of such Letter of Credit , the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. In addition to the satisfaction of the conditions in Article III, the issuance of such Letter of Credit (or any amendment which increases the amount of such Letter of Credit) will be subject to the further conditions that such Letter of Credit shall be in such form and contain such terms as the Issuing Bank shall approve and that the Borrower shall have executed and delivered any additional applications, agreements and instruments relating to such Letter of Credit as the Issuing Bank shall reasonably require; provided, that in the event of any conflict between such applications, agreements or instruments and this Agreement, the terms of this Agreement shall control. (c) At least two Business Days prior to the issuance of any Letter of Credit, the Issuing Bank will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received such notice and if not, the Issuing Bank will provide the Administrative Agent with a copy thereof. Unless the Issuing Bank has received notice from the Administrative Agent on or before the Business Day immediately preceding the date the Issuing Bank is to issue the requested Letter of Credit (1) directing the Issuing Bank not to issue the Letter of Credit because such issuance is not then permitted hereunder because of the limitations set forth in Section 2.23(a) or that one or more conditions specified in Article III are not then 38 satisfied, then, subject to the terms and conditions hereof, the Issuing Bank shall, on the requested date, issue such Letter of Credit in accordance with the Issuing Bank's usual and customary business practices. (d) The Issuing Bank shall examine all documents purporting to represent a demand for payment under a Letter of Credit promptly following its receipt thereof. The Issuing Bank shall notify the Borrower and the Administrative Agent of such demand for payment and whether the Issuing Bank has made or will make a LC Disbursement thereunder; provided, that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the Lenders with respect to such LC Disbursement. The Borrower shall be irrevocably and unconditionally obligated to reimburse the Issuing Bank for any LC Disbursements paid by the Issuing Bank in respect of such drawing, without presentment, demand or other formalities of any kind. Unless the Borrower shall have notified the Issuing Bank and the Administrative Agent prior to 11:00 a.m. (Atlanta, Georgia time) on the Business Day immediately prior to the date on which such drawing is honored that the Borrower intends to reimburse the Issuing Bank for the amount of such drawing in funds other than from the proceeds of Revolving Loans, the Borrower shall be deemed to have timely given a Notice of Revolving Borrowing to the Administrative Agent requesting the Lenders to make a Base Rate Borrowing on the date on which such drawing is honored in an exact amount due to the Issuing Bank; provided, that for purposes solely of such Borrowing, the conditions precedents set forth in Section 3.2 hereof shall not be applicable. The Administrative Agent shall notify the Lenders of such Borrowing in accordance with Section 2.3, and each Lender shall make the proceeds of its Base Rate Loan included in such Borrowing available to the Administrative Agent for the account of the Issuing Bank in accordance with Section 2.8. The proceeds of such Borrowing shall be applied directly by the Administrative Agent to reimburse the Issuing Bank for such LC Disbursement. (e) If for any reason a Base Rate Borrowing may not be (as determined in the sole discretion of the Administrative Agent), or is not, made in accordance with the foregoing provisions, then each Lender (other than the Issuing Bank) shall be obligated to fund the participation that such Lender purchased pursuant to subsection (a) in an amount equal to its Pro Rata Share of such LC Disbursement on and as of the date which such Base Rate Borrowing should have occurred. Each Lender's obligation to fund its participation shall be absolute and unconditional and shall not be affected by any circumstance, including without limitation (i) any setoff, counterclaim, recoupment, defense or other right that such Lender or any other Person may have against the Issuing Bank or any other Person for any reason whatsoever, (ii) the existence of a Default or an Event of Default or the termination of the Aggregate Revolving Commitments, (iii) any adverse change in the condition (financial or otherwise) of the Borrower or any of its Subsidiaries, (iv) any breach of this Agreement by the Borrower or any other Lender, (v) any amendment, renewal or extension of any Letter of Credit or (vi) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. On the date that such participation is required to be funded, each Lender shall promptly transfer, in immediately available funds, the amount of its participation to the Administrative Agent for the account of the Issuing Bank. Whenever, at any time after the Issuing Bank has received from any such Lender the funds for its participation in a LC Disbursement, the Issuing Bank (or the Administrative Agent on its behalf) receives any payment on account thereof, the Administrative Agent or the Issuing Bank, as the case may be, will distribute to such Lender its Pro Rata Share 39 of such payment; provided, that if such payment is required to be returned for any reason to the Borrower or to a trustee, receiver, liquidator, custodian or similar official in any bankruptcy proceeding, such Lender will return to the Administrative Agent or the Issuing Bank any portion thereof previously distributed by the Administrative Agent or the Issuing Bank to it. (f) To the extent that any Lender shall fail to pay any amount required to be paid pursuant to paragraph (d) of this Section 2.24 on the due date therefor, such Lender shall pay interest to the Issuing Bank (through the Administrative Agent) on such amount from such due date to the date such payment is made at a rate per annum equal to the Federal Funds Rate; provided, that if such Lender shall fail to make such payment to the Issuing Bank within three (3) Business Days of such due date, then, retroactively to the due date, such Lender shall be obligated to pay interest on such amount at the Default Rate. (g) If any Event of Default shall occur and be continuing, on the Business Day that the Borrower receives notice from the Administrative Agent or the Required Lenders demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Issuing Bank and the Lenders, an amount in cash equal to the LC Exposure as of such date plus any accrued and unpaid fees thereon; provided, that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described in clause (g) or (h) of Section 8.1. Such deposit shall be held by the Administrative Agent as collateral for the payment and performance of the obligations of the Borrower under this Agreement. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Borrower agrees to execute any documents and/or certificates to effectuate the intent of this paragraph. Such deposits shall not bear interest. Interest and profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to reimburse the Issuing Bank for LC Disbursements for which it had not been reimbursed and to the extent so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated, with the consent of the Required Lenders, be applied to satisfy other obligations of the Borrower under this Agreement and the other Loan Documents. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not so applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have been cured or waived. (h) Promptly following the end of each Fiscal Quarter, the Issuing Bank shall deliver (through the Administrative Agent) to each Lender and the Borrower a report describing the aggregate Letters of Credit outstanding at the end of such Fiscal Quarter. Upon the request of any Lender from time to time, the Issuing Bank shall deliver to such Lender any other information reasonably requested by such Lender with respect to each Letter of Credit then outstanding. (i) The Borrower's obligation to reimburse LC Disbursements hereunder shall be absolute, unconditional and irrevocable and shall be performed strictly in accordance 40 with the terms of this Agreement under all circumstances whatsoever and irrespective of any of the following circumstances: (i) Any lack of validity or enforceability of any Letter of Credit or this Agreement; (ii) The existence of any claim, set-off, defense or other right which the Borrower or any Subsidiary or Affiliate of the Borrower may have at any time against a beneficiary or any transferee of any Letter of Credit (or any Persons or entities for whom any such beneficiary or transferee may be acting), any Lender (including the Issuing Bank) or any other Person, whether in connection with this Agreement or the Letter of Credit or any document related hereto or thereto or any unrelated transaction; (iii) Any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect; (iv) Payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document to the Issuing Bank that does not comply with the terms of such Letter of Credit; (v) Any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower's obligations hereunder; or (vi) The existence of a Default or an Event of Default. Neither the Administrative Agent, the Issuing Bank, the Lenders nor any Related Party of any of the foregoing shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to above), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided, that the foregoing shall not be construed to excuse the Issuing Bank from liability to the Borrower to the extent of any actual direct damages (as opposed to special, indirect (including claims for lost profits or other consequential damages), or punitive damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Issuing Bank's failure to exercise care when determining whether drafts or other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree, that in the absence of gross negligence or willful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented that appear on their face to be in substantial compliance with the terms of a Letter of 41 Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit. (j) Each Letter of Credit shall be subject to the Uniform Customs and Practices for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, as the same may be amended from time to time, and, to the extent not inconsistent therewith, the governing law of this Agreement set forth in Section 10.5. Section 2.24. Limitation on Certain Payment Obligations. (a) Each Lender or Administrative Agent shall make written demand on Borrower for indemnification or compensation pursuant to Section 2.21 no later than 90 days after the earlier of (i) the date on which such Lender or the Administrative Agent makes payment of such Taxes, and (ii) the date on which the relevant taxing authority or other governmental authority makes written demand upon such Lender or the Administrative Agent for payment of such Taxes. (b) Each Lender or the Administrative Agent shall make written demand on Borrower for indemnification or compensation pursuant to Section 2.20 no later than 90 days after the event giving rise to the claim for indemnification or compensation occurs. (c) Each Lender or the Administrative Agent shall make written demand on Borrower for indemnification or compensation pursuant to Section 2.19 no later than 90 days after such Lender or the Administrative Agent receives actual notice or obtains actual knowledge of the promulgation of a law, role, order or interpretation or occurrence of another event giving rise to a claim pursuant to such sections. (d) In the event that the Lenders or the Administrative Agent fail to give Borrower notice within the time limitations prescribed in (a) or (b) above, Borrower shall not have any obligation to pay such claim for compensation or indemnification. In the event that the Lender or the Administrative Agent fail to give Borrower notice within the time limitation prescribed in (c) above, Borrower shall not have any obligation to pay any amount with respect to claims accruing prior to the ninetieth day preceding such written demand. ARTICLE III CONDITIONS PRECEDENT TO LOANS AND LETTERS OF CREDIT Section 3.1. Conditions To Effectiveness. The obligations of the Lenders (including the Swingline Lender) to make Loans and the obligation of the Issuing Bank to issue any Letter of Credit hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 10.2). 42 (a) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Closing Date, including reimbursement or payment of all out-of-pocket expenses (including reasonable fees, charges and disbursements of counsel to the Administrative Agent) required to be reimbursed or paid by the Borrower hereunder, under any other Loan Document and under any agreement with the Administrative Agent or SunTrust Capital Markets, Inc., as Arranger. (b) The Administrative Agent (or its counsel) shall have received the following: (i) a counterpart of this Agreement signed by or on behalf of each party hereto or written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement; (ii) if requested by any Lender, duly executed Revolving Credit and/or Competitive Bid Notes payable to such Lender and the Swingline Note payable to the Swingline Lender; (iii) the duly executed Subsidiary Guaranty Agreement and Indemnity and Contribution Agreement, executed by each Domestic Subsidiary and acknowledged by the Borrower; (iv) a certificate of the Secretary or Assistant Secretary of each Loan Party, attaching and certifying copies of its bylaws and of the resolutions of its boards of directors, or partnership agreement or limited liability company operating agreement, or comparable organizational documents and authorizations, authorizing the execution, delivery and performance of the Loan Documents to which it is a party and certifying the name, title and true signature of each officer of such Loan Party executing the Loan Documents to which it is a party; (v) certified copies of the articles or certificate of incorporation, certificate of organization or limited partnership, or other registered organizational documents of each Loan Party, together with certificates of good standing or existence, as may be available from the Secretary of State of the jurisdiction of organization of such Loan Party and each other jurisdiction where such Loan Party is required to be qualified to do business as a foreign corporation and a failure to be so qualified would have a Material Adverse Effect; (vi) a favorable written opinion of counsel to the Loan Parties, addressed to the Administrative Agent and each of the Lenders, and covering such matters relating to the Loan Parties, the Loan Documents and the transactions contemplated therein as the Administrative Agent or the Required Lenders shall reasonably request; (vii) a certificate, dated the Closing Date and signed by a Responsible Officer, confirming compliance with the conditions set forth in paragraphs (a), (b) and (c) of Section 3.2; 43 (viii) a duly executed Notice of Revolving Borrowing; (ix) a duly executed funds disbursement agreement; (x) certified copies of all consents, approvals, authorizations, registrations and filings and orders required or advisable to be made or obtained under any Requirement of Law, or by any Contractual Obligation of each Loan Party, in connection with the execution, delivery, performance, validity and enforceability of the Loan Documents or any of the transactions contemplated thereby, and such consents, approvals, authorizations, registrations, filings and orders shall be in full force and effect and all applicable waiting periods shall have expired; (xi) copies of (A) the internally prepared quarterly financial statements of Borrower and its Subsidiaries on a consolidated basis for the Fiscal Quarter ending on November 1, 2002, and (B) the audited consolidated financial statements for Borrower and its Subsidiaries for the Fiscal Years ended 2000, 2001 and 2002; and (xii) certificates of insurance issued on behalf of insurers of the Borrower and all guarantors, describing in reasonable detail the types and amounts of insurance (property and liability) maintained by the Borrower and all guarantors Section 3.2. Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any Borrowing and of the Issuing Bank to issue, amend, renew or extend any Letter of Credit is subject to the satisfaction of the following conditions: (a) at the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default or Event of Default shall exist; and (b) all representations and warranties of each Loan Party set forth in the Loan Documents shall be true and correct in all material respects on and as of the date of such Borrowing or the date of issuance, amendment, extension or renewal of such Letter of Credit, in each case before and after giving effect thereto; and (c) since the date of the financial statements of the Borrower described in Section 4.4, there shall have been no change which has had or could reasonably be expected to have a Material Adverse Effect; and (d) the Borrower shall have delivered the required Notice of Borrowing; and (e) the Administrative Agent shall have received such other documents, certificates, information or legal opinions as the Administrative Agent or the Required Lenders may reasonably request, all in form and substance reasonably satisfactory to the Administrative Agent or the Required Lenders. Each Borrowing and each issuance, amendment, extension or renewal of any Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in paragraphs (a), (b) and (c) of this Section 3.2. 44 Section 3.3. Delivery of Documents. All of the Loan Documents, certificates, legal opinions and other documents and papers referred to in this Article III, unless otherwise specified, shall be delivered to the Administrative Agent for the account of each of the Lenders and, except for the Notes, in sufficient counterparts or copies for each of the Lenders and shall be in form and substance satisfactory in all respects to the Administrative Agent. ARTICLE IV REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Administrative Agent and each Lender as follows: Section 4.1. Existence; Power. The Borrower and each of its Subsidiaries (i) is duly organized, validly existing and in good standing as a corporation, partnership or limited liability company under the laws of the jurisdiction of its organization, (ii) has all requisite power and authority to carry on its business as now conducted, and (iii) is duly qualified to do business, and is in good standing, in each jurisdiction where such qualification is required, except where a failure to be so qualified could not reasonably be expected to result in a Material Adverse Effect. Section 4.2. Organizational Power; Authorization. The execution, delivery and performance by each Loan Party of the Loan Documents to which it is a party are within such Loan Party's organizational powers and have been duly authorized by all necessary organizational, and if required, stockholder, partner or member, action. This Agreement has been duly executed and delivered by the Borrower, and constitutes, and each other Loan Document to which any Loan Party is a party, when executed and delivered by such Loan Party, will constitute, valid and binding obligations of the Borrower or such Loan Party (as the case may be), enforceable against it in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity. Section 4.3. Governmental Approvals; No Conflicts. The execution, delivery and performance by the Borrower of this Agreement, and by each Loan Party of the other Loan Documents to which it is a party (a) do not require any consent or approval of, registration or filing with, or any action by, any Governmental Authority, except those as have been obtained or made and are in full force and effect, (b) will not violate any Requirements of Law applicable to the Borrower or any of its Subsidiaries or any judgment, order or ruling of any Governmental Authority, (c) will not violate or result in a default under any indenture, material agreement or other material instrument binding on the Borrower or any of its Subsidiaries or any of its assets or give rise to a right thereunder to require any payment to be made by the Borrower or any of its Subsidiaries and (d) will not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries, except Liens (if any) created under the Loan Documents. Section 4.4. Financial Statements. The Borrower has furnished to each Lender (i) the audited consolidated balance sheet of the Borrower and its Subsidiaries as of January 25, 2002, and the related consolidated statements of income, shareholders' equity and cash flows for the Fiscal Year then ended prepared by PriceWaterhouseCoopers LLP and (ii) the 45 unaudited consolidated balance sheet of the Borrower and its Subsidiaries as of November 1, 2002, and the related unaudited consolidated statements of income and cash flows for the Fiscal Quarter and year-to-date period then ending, certified by a Responsible Officer. Such financial statements fairly present the consolidated financial condition of the Borrower and its Subsidiaries as of such dates and the consolidated results of operations for such periods in conformity with GAAP consistently applied, subject to year end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii). Since January 25, 2002, there have been no changes with respect to the Borrower and its Subsidiaries which have had or could reasonably be expected to have, singly or in the aggregate, a Material Adverse Effect. Section 4.5. Litigation and Environmental Matters. (a) No litigation, investigation or proceeding of or before any arbitrators or Governmental Authorities is pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of its Subsidiaries (i) as to which there is a reasonable possibility of an adverse determination that could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect or (ii) which in any manner draws into question the validity or enforceability of this Agreement or any other Loan Document. (b) Except for the matters set forth on Schedule 4.5, neither the Borrower nor any of its Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability, in each case where the effect of the foregoing could reasonably be expected to result in a Material Adverse Effect. Section 4.6. Compliance with Laws and Agreements. The Borrower and each Subsidiary is in compliance with (a) all Requirements of Law and all judgments, decrees and orders of any Governmental Authority and (b) all indentures, agreements or other instruments binding upon it or its properties, except where non-compliance, either singly or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. Section 4.7. Investment Company Act, Etc. Neither the Borrower nor any of its Subsidiaries is (a) an "investment company" or is "controlled" by an "investment company", as such terms are defined in, or subject to regulation under, the Investment Company Act of 1940, as amended, (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935, as amended or (c) otherwise subject to any other regulatory scheme limiting its ability to incur debt or requiring any approval or consent from or registration or filing with, any Governmental Authority in connection therewith. Section 4.8. Taxes. The Borrower and its Subsidiaries have timely filed or caused to be filed all Federal income tax returns and all other material tax returns that, to the best knowledge of the executive officers of Borrower and its Subsidiaries, are required to be filed by them, and have paid all taxes shown to be due and payable on such returns or on any assessments made against it or its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority, except (i) to the extent the failure to do so would 46 not have a Material Adverse Effect or (ii) where the same are currently being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary, as the case may be, has set aside on its books adequate reserves in accordance with GAAP. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of such taxes are adequate, and no tax liabilities that could be materially in excess of the amount so provided are anticipated. Section 4.9. Margin Regulations. None of the proceeds of any of the Loans or Letters of Credit will be used, directly or indirectly, for "purchasing" or "carrying" any "margin stock" with the respective meanings of each of such terms under Regulation U or for any purpose that violates the provisions of Regulation U. Neither the Borrower nor its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying "margin stock." Section 4.10. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of all such underfunded Plans. Section 4.11. Ownership of Property. (a) Each of the Borrower and its Subsidiaries has good title to, or valid leasehold interests in, all of its real and personal property material to the operation of its business, including all such properties reflected in the most recent audited consolidated balance sheet of the Borrower referred to in Section 4.4 or purported to have been acquired by the Borrower or any Subsidiary after said date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens, other than Liens permitted under Section 7.2. All leases that individually or in the aggregate are material to the business or operations of the Borrower and its Subsidiaries are valid and subsisting and are in full force. (b) Each of the Borrower and its Subsidiaries owns, or is licensed, or otherwise has the right, to use, all patents, trademarks, service marks, trade names, copyrights, franchises, licenses and other intellectual property material to its business, and the use thereof by the Borrower and its Subsidiaries does not infringe in any material respect on the rights of any other Person. (c) The properties of the Borrower and its Subsidiaries are insured within terms reasonably acceptable to the Lenders, with financially sound and reputable insurance companies which are not Affiliates of the Borrower (unless otherwise reasonably acceptable to the Lenders), in such amounts with such deductibles and covering such risks deemed adequate as 47 are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Borrower or any applicable Subsidiary operates. Section 4.12. Disclosure. The Borrower has disclosed to the Lenders all agreements, instruments, and corporate or other restrictions to which the Borrower or any of its Subsidiaries is subject, and all other matters known to any of them, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. Neither the Information Memorandum nor any of the reports (including without limitation all reports that the Borrower is required to file with the Securities and Exchange Commission), financial statements, certificates or other information furnished by or on behalf of the Borrower to the Administrative Agent or any Lender in connection with the negotiation or syndication of this Agreement or any other Loan Document or delivered hereunder or thereunder (as modified or supplemented by any other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, taken as a whole, in light of the circumstances under which they were made, not misleading. Section 4.13. Labor Relations. There are no strikes, lockouts or other material labor disputes or grievances against the Borrower or any of its Subsidiaries, or, to the Borrower's knowledge, threatened against or affecting the Borrower or any of its Subsidiaries, and no significant unfair labor practice, charges or grievances are pending against the Borrower or any of its Subsidiaries, or to the Borrower's knowledge, threatened against any of them before any Governmental Authority. All payments due from the Borrower or any of its Subsidiaries pursuant to the provisions of any collective bargaining agreement have been paid or accrued as a liability on the books of the Borrower or any such Subsidiary, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. Section 4.14. Subsidiaries. Schedule 4.14 sets forth the name of, the ownership interest of the Borrower in, the jurisdiction of incorporation or organization of, and the type of, each Subsidiary and identifies each Subsidiary that is a Subsidiary Loan Party and that is a Material Subsidiary, in each case as of the Closing Date. Section 4.15. Insolvency. After giving effect to the execution and delivery of the Loan Documents, the making of the Loans under this Agreement, neither the Borrower nor its Subsidiaries will be "insolvent," within the meaning of such term as defined in ss. 101 of Title 11 of the United States Code, as amended from time to time, or be unable to pay its debts generally as such debts become due, or have an unreasonably small capital to engage in any business or transaction, whether current or contemplated. ARTICLE V AFFIRMATIVE COVENANTS The Borrower covenants and agrees that so long as any Lender has a Commitment hereunder, any Letter of Credit remains outstanding or any Obligation remains unpaid or outstanding: 48 Section 5.1. Financial Statements and Other Information. The Borrower will deliver to the Administrative Agent and each Lender: (a) as soon as available and in any event within 90 days after the end of each Fiscal Year of Borrower, a copy of the annual audited report for such Fiscal Year for the Borrower and its Subsidiaries, containing a consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such Fiscal Year and the related consolidated statements of income, stockholders' equity and cash flows (together with all footnotes thereto) of the Borrower and its Subsidiaries for such Fiscal Year, setting forth in each case in comparative form the figures for the previous Fiscal Year, all in reasonable detail and reported on by PriceWaterhouseCoopers LLP or other independent public accountants of nationally recognized standing (without a "going concern" or like qualification, exception or explanation and without any qualification or exception as to scope of such audit) to the effect that such financial statements present fairly in all material respects the financial condition and the results of operations of the Borrower and its Subsidiaries for such Fiscal Year on a consolidated basis in accordance with GAAP and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards; (b) as soon as available and in any event within 60 days after the end of each Fiscal Quarter of the Borrower, an unaudited consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such Fiscal Quarter and the related unaudited consolidated statements of income and cash flows of the Borrower and its Subsidiaries for such Fiscal Quarter and the then elapsed portion of such Fiscal Year, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of Borrower's previous Fiscal Year, all certified by the chief financial officer or treasurer of the Borrower as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP, subject to normal year end audit adjustments and the absence of footnotes; (c) concurrently with the delivery of the financial statements referred to in clauses (a) and (b) above, (i) a Compliance Certificate signed by the chief executive officer or the chief financial officer of the Borrower and (ii) a written list of all Material Subsidiaries formed, acquired or created from a transfer of assets or through any other event since the Closing Date with respect to the first delivery of financial statements after the Closing Date and thereafter since the date of the most recently delivered Compliance Certificate, such list to include the name of each new Material Subsidiaries, its state of incorporation, list of its officers and directors and any other information that the Administrative Agent shall reasonably request; (d) promptly upon receipt thereof, copies of all reports on the financial statements of the Borrower and its Subsidiaries, submitted by independent public accountants to Borrower in connection with each annual, interim or special audit of Borrower's consolidated financial statements; (e) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all functions of said 49 Commission, or with any national securities exchange, or distributed by the Borrower to its shareholders generally, as the case may be; and (f) promptly following any request therefor, such other information regarding the results of operations, business affairs and financial condition of the Borrower or any Subsidiary as the Administrative Agent or any Lender may reasonably request. So long as the Borrower maintains a site on Intralinks(R) and each Lender has a valid identification number and password with which to access information regarding the Borrower on Intralinks(R), Borrower may satisfy its obligation to deliver the financial statements and other reports and materials referred to in clauses (a), (b) and (e) above by posting such financial statements and other reports and materials and having each Lender notified thereof. Section 5.2. Notices of Material Events. The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of the following: (a) the occurrence of any Default or Event of Default; (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or, to the knowledge of the Borrower, affecting the Borrower or any Subsidiary which, if adversely determined, could reasonably be expected to result in a Material Adverse Effect; (c) the occurrence of any event or any other development by which the Borrower or any of its Subsidiaries (i) fails to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) becomes subject to any Environmental Liability, (iii) receives notice of any claim with respect to any Environmental Liability, or (iv) becomes aware of any basis for any Environmental Liability and in each of the preceding clauses, which individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect; (d) the occurrence of any ERISA Event that alone, or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding $1,000,000; (e) the occurrence of any default or event of default, or the receipt by Borrower or any of its Subsidiaries of any written notice of an alleged default or event of default, in respect of any Material Indebtedness of the Borrower or any of its Subsidiaries; (f) simultaneously with the delivery of each Compliance Certificate, a written list of all Material Subsidiaries formed, acquired, or created from a transfer of assets or through any other event, during the period commencing on the Closing Date and ending on the date on which the first Compliance Certificate is delivered, and thereafter since the date of the most recently delivered Compliance Certificate; such written list shall include the name of each new Material Subsidiary, its state of incorporation, list of its officers and any other information that the Administrative Agent shall reasonably request. 50 (g) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect. Each notice delivered under this Section shall be accompanied by a written statement of a Responsible Officer setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto. Section 5.3. Existence; Conduct of Business. The Borrower will, and will cause each of its Subsidiaries to, do or cause to be done all things necessary to preserve, renew and maintain in full force and effect its legal existence and its respective rights, licenses, permits, privileges, franchises, patents, copyrights, trademarks and trade names material to the conduct of its business; provided, that nothing in this Section shall prohibit any merger, consolidation, liquidation or dissolution permitted under Section 7.3. Section 5.4. Compliance with Laws, Etc. The Borrower will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and requirements of any Governmental Authority applicable to its business and properties, including without limitation, all Environmental Laws, ERISA and OSHA, except where the failure to do so, either individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. Section 5.5. Payment of Obligations. The Borrower will, and will cause each of its Subsidiaries to, pay and discharge at or before maturity, (i) all taxes, assessments and governmental charges imposed upon it or upon its property, and (ii) all claims (including, without limitation, claims for labor, materials, supplies or services) which might, if unpaid, become a Lien upon its property, unless, in each case, the validity or amount thereof is being contested in good faith by appropriate proceedings and adequate reserves are maintained with respect thereto. Section 5.6. Books and Records. The Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities to the extent necessary to prepare the consolidated financial statements of Borrower in conformity with GAAP. Section 5.7. Visitation, Inspection, Etc. The Borrower will, and will cause each of its Subsidiaries to, permit any representative of the Administrative Agent or any Lender, to visit and inspect its properties, to examine its books and records and to make copies and take extracts therefrom, and to discuss its affairs, finances and accounts with any of its officers and with its independent certified public accountants, all at such reasonable times and as often as the Administrative Agent or any Lender may reasonably request after reasonable prior notice to the Borrower; provided, however, if an Event of Default has occurred and is continuing, no prior notice shall be required. Section 5.8. Maintenance of Properties; Insurance. The Borrower will, and will cause each of its Subsidiaries to, (a) keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted, except 51 where the failure to do so, either individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, (b) maintain with financially sound and reputable insurance companies, insurance with respect to its properties and business, and the properties and business of its Subsidiaries, against loss or damage of the kinds customarily insured against by companies in the same or similar businesses operating in the same or similar locations, and (c) at all times shall name Administrative Agent as additional insured on all liability policies of the Borrower and its Subsidiaries. Section 5.9. Use of Proceeds and Letters of Credit. The Borrower will use the proceeds of all Loans to refinance Indebtedness outstanding under the Existing Credit Agreement, to finance working capital needs and acquisitions permitted under Section 7.4, to support the issuance of commercial paper and for other general corporate purposes of the Borrower and its Subsidiaries. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that would violate any rule or regulation of the Board of Governors of the Federal Reserve System, including Regulations T, U or X. All Letters of Credit will be used for general corporate purposes. Section 5.10. Additional Subsidiaries. (a) If any Subsidiary becomes a Material Subsidiary after the Closing Date, or any Material Subsidiary is acquired or formed after the Closing Date, the Borrower will, simultaneously with delivery of the written list of new Material Subsidiaries required pursuant to Section 5.1(c) above, cause such Material Subsidiary to become a Subsidiary Loan Party by satisfying the requirements of clause (e) below. (b) If, at any time, the aggregate revenue or assets (on a non-consolidated basis) of the Borrower and those Subsidiaries that are then Subsidiary Loan Parties are less than the Aggregate Subsidiary Threshold, then the Borrower shall cause one or more other Subsidiaries to become additional Subsidiary Loan Parties, as provided in this Section 5.10, within ten (10) Business Days after such revenues or assets become less than the Aggregate Subsidiary Threshold so that after including the revenue or assets of any such additional Subsidiary Loan Parties, the aggregate revenue or assets (on a non-consolidated basis) of the Borrower and all such Subsidiary Loan Parties would equal or exceed the Aggregate Subsidiary Threshold. (c) The Borrower may elect at any time to have any Subsidiary become an additional Subsidiary Loan Party as provided in this Section 5.10. (d) Upon the occurrence and during the continuation of any Event of Default, if the Required Lenders so direct, the Borrower shall (i) cause all of its Subsidiaries (other than Securitization Subsidiaries) to become additional Subsidiary Loan Parties, as provided in this Section 5.10, within ten (10) Business Days after the Borrower's receipt of written confirmation of such direction from the Administrative Agent. (e) A Subsidiary shall become an additional Subsidiary Loan Party after the Closing Date by executing and delivering to the Administrative Agent a Subsidiary Guaranty Supplement and an Indemnity and Contribution Agreement Supplement, accompanied by (i) all 52 other Loan Documents related thereto, (ii) certified copies of certificates or articles of incorporation or organization, by-laws, membership operating agreements, and other organizational documents, appropriate authorizing resolutions of the board of directors of such Subsidiaries, and opinions of counsel comparable to those delivered pursuant to Section 3.1(vii), and (iii) such other documents as the Administrative Agent may reasonably request. Section 5.11. Ownership of all Subsidiary Loan Parties. Borrower shall maintain its percentage of ownership existing as of the date hereof of all Subsidiary Loan Parties, and shall not decrease its ownership percentage in each Person which becomes a Subsidiary Loan Party after the date hereof, as such ownership exists at the time such Person becomes a Subsidiary Loan Party. ARTICLE VI FINANCIAL COVENANTS The Borrower covenants and agrees that so long as any Lender has a Commitment hereunder, any Letter of Credit remains outstanding or any Obligation remains unpaid or outstanding: Section 6.1. Leverage Ratio. The Borrower will maintain at all times a Leverage Ratio of not greater than 0.55:1.00. Section 6.2. Fixed Charge Coverage Ratio. The Borrower will maintain, as of the end of each Fiscal Quarter, a Fixed Charge Coverage Ratio of not less than 1.50:1.00. Section 6.3. Consolidated Net Worth. The Borrower will maintain at all times a Consolidated Net Worth of not less than the sum of (a) $560,000,000 plus (b) 50% of Consolidated Net Income on a cumulative basis for all preceding Fiscal Quarters, commencing with the Fiscal Quarter ending January 31, 2003; provided, that if Consolidated Net Income is negative in any Fiscal Quarter the amount added for such Fiscal Quarter shall be zero and such negative Consolidated Net Income shall not reduce the amount of Consolidated Net Income added from any previous Fiscal Quarter, plus (c) 100% of the amount by which the Borrower's "total stockholders' equity" is increased as a result of any public or private offering of Capital Stock of the Borrower after the Closing Date. Promptly upon the consummation of any such offering of Capital Stock, the Borrower shall notify the Administrative Agent in writing of the amount of such increase in "total stockholders' equity". Section 6.4. Asset Coverage Ratio. The Borrower will maintain at all times an Asset Coverage Ratio of not less than 1.2:1.0. ARTICLE VII NEGATIVE COVENANTS The Borrower covenants and agrees that so long as any Lender has a Commitment hereunder, any Letter of Credit remains outstanding or any Obligation remains outstanding: 53 Section 7.1. Indebtedness and Preferred Equity. The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness created pursuant to the Loan Documents; (b) Indebtedness outstanding on the date hereof or incurred under lines of credit outstanding on the date hereof, in each case as set forth on Schedule 7.1 and extensions, renewals and replacements of any such Indebtedness and such lines of credit that do not increase the outstanding principal amount thereof (immediately prior to giving effect to such extension, renewal or replacement) or shorten the maturity or the weighted average life thereof; (c) Indebtedness incurred to finance the acquisition, construction or improvement of any fixed or capital assets, including Capital Lease Obligations, and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof; provided, that such Indebtedness is incurred prior to or within 90 days after such acquisition or the completion of such construction or improvements or extensions, renewals, and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof (immediately prior to giving effect to such extension, renewal or replacement) or shorten the maturity or the weighted average life thereof; provided further, that the aggregate principal amount of such Indebtedness does not exceed $20,000,000 at any time outstanding; (d) Indebtedness of the Borrower owing to any Subsidiary and of any Subsidiary owing to the Borrower or any other Subsidiary; provided, that any such Indebtedness that is owed by a Subsidiary that is not a Subsidiary Loan Party shall be subject to Section 7.4; (e) Guarantees by the Borrower of Indebtedness of any Subsidiary and by any Subsidiary of Indebtedness of the Borrower or any other Subsidiary; provided, that Guarantees by any Loan Party of Indebtedness of any Subsidiary that is not a Subsidiary Loan Party shall be subject to Section 7.4; provided, further, that neither the Borrower nor any of its Subsidiaries shall be permitted to Guarantee any Indebtedness owed by any Securitization Subsidiary; (f) Indebtedness of any Person which becomes a Subsidiary after the date of this Agreement; provided, that such Indebtedness exists at the time that such Person becomes a Subsidiary and is not created in contemplation of or in connection with such Person becoming a Subsidiary; (g) Permitted Subordinated Debt; (h) Indebtedness owed to a Person other than the Borrower or any Subsidiaries in respect of any Securitization Transaction permitted by Section 7.6(c) in an aggregate amount not to exceed $100,000,000; (i) Indebtedness in respect of Hedging Obligations permitted by Section 7.10; and 54 (j) other unsecured Indebtedness in an aggregate principal amount not to exceed $75,000,000 at any time outstanding. Borrower will not, and will not permit any Subsidiary to, issue any preferred stock or other preferred equity interests that (i) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (ii) is or may become redeemable or repurchaseable at the option of the holder thereof, in whole or in part or (iii) is convertible or exchangeable at the option of the holder thereof for Indebtedness or preferred stock or any other preferred equity interests described in this paragraph, on or prior to, in the case of clause (i), (ii) or (iii), the first anniversary of the Revolving Commitment Termination Date. Section 7.2. Negative Pledge. The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien on any of its assets or property now owned or hereafter acquired, except: (a) Permitted Encumbrances; (b) any Liens on any property or asset of the Borrower or any Subsidiary existing on the Closing Date set forth on Schedule 7.2; provided, that such Lien shall not apply to any other property or asset of the Borrower or any Subsidiary; (c) purchase money Liens upon or in any fixed or capital assets to secure the purchase price or the cost of construction or improvement of such fixed or capital assets or to secure Indebtedness incurred solely for the purpose of financing the acquisition, construction or improvement of such fixed or capital assets (including Liens securing any Capital Lease Obligations); provided, that (i) such Lien secures Indebtedness permitted by Section 7.1(c), (ii) such Lien attaches to such asset concurrently or within 90 days after the acquisition, improvement or completion of the construction thereof; (iii) such Lien does not extend to any other asset; and (iv) the Indebtedness secured thereby does not exceed the cost of acquiring, constructing or improving such fixed or capital assets; (d) any Lien (i) existing on any asset of any Person at the time such Person becomes a Subsidiary of the Borrower, (ii) existing on any asset of any Person at the time such Person is merged with or into the Borrower or any Subsidiary of the Borrower or (iii) existing on any asset prior to the acquisition thereof by the Borrower or any Subsidiary of the Borrower; provided, that any such Lien was not created in the contemplation of any of the foregoing and any such Lien secures only those obligations which it secures on the date that such Person becomes a Subsidiary or the date of such merger or the date of such acquisition; (e) any Lien arising out of any Securitization Transaction permitted by Section 7.6(c); (f) Liens (other than those permitted by paragraphs (a) through (e) above) encumbering assets having an Asset Value not greater than $20,000,000 in the aggregate at any one time; and (g) extensions, renewals, or replacements of any Lien referred to in paragraphs (a) through (f) of this Section; provided, that the principal amount of the 55 Indebtedness secured thereby is not increased and that any such extension, renewal or replacement is limited to the assets originally encumbered thereby. Section 7.3. Fundamental Changes. (a) The Borrower will not, and will not permit any Subsidiary to, merge into or consolidate into any other Person, or permit any other Person to merge into or consolidate with it, or sell, or lease, transfer or otherwise dispose of (in a single transaction or a series of transactions) all or substantially all of its assets (in each case, whether now owned or hereafter acquired) or all or substantially all of the stock of any of its Subsidiaries (in each case, whether now owned or hereafter acquired) or liquidate or dissolve; provided, that if at the time thereof and immediately after giving effect thereto, no Default or Event of Default shall have occurred and be continuing (i) the Borrower or any Subsidiary may merge with a Person if the Borrower (or such Subsidiary if the Borrower is not a party to such merger) is the surviving Person, (ii) any Subsidiary may merge into another Subsidiary; provided, that if any party to such merger is a Subsidiary Loan Party, the Subsidiary Loan Party shall be the surviving Person, (iii) any Subsidiary may sell, transfer, lease or otherwise dispose of all or substantially all of its assets to the Borrower or to a Subsidiary Loan Party, (iv) the Borrower and any Subsidiary may sell, transfer, lease or otherwise dispose of all or substantially all of its assets to the extent permitted in Section 7.6, and (v) any Subsidiary (other than a Subsidiary Loan Party) may liquidate or dissolve if the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower and is not materially disadvantageous to the Lenders; provided, that any such merger involving a Person that is not a wholly-owned Subsidiary immediately prior to such merger shall not be permitted unless also permitted by Section 7.4. (b) The Borrower will not, and will not permit any of its Subsidiaries to, engage in any business other than businesses of the type conducted by the Borrower and its Subsidiaries taken as whole on the date hereof and businesses reasonably related thereto, except where the Investment made, and other funds expended or committed with respect to such business, do not exceed $5,000,000 in each new business. Section 7.4. Investments, Loans, Etc. The Borrower will not, and will not permit any of its Subsidiaries to, purchase, hold or acquire (including pursuant to any merger with any Person that was not a wholly-owned Subsidiary prior to such merger), any Capital Stock, evidence of indebtedness or other securities (including any option, warrant, or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist any investment or any other interest in, any other Person (all of the foregoing being collectively called "Investments"), or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person that constitute a business unit, or create or form any Subsidiary, except: (a) Investments (other than Permitted Investments) existing on the date hereof and set forth on Schedule 7.4 (including Investments in Subsidiaries); (b) Permitted Investments; 56 (c) Guarantees constituting Indebtedness permitted by Section 7.1; provided, that the aggregate principal amount of Indebtedness of Subsidiaries that are not Subsidiary Loan Parties that is Guaranteed by any Loan Party shall be subject to the limitation set forth in clause (d) hereof; (d) Investments made by the Borrower in or to any Subsidiary and by any Subsidiary to the Borrower or in or to another Subsidiary; provided, that the aggregate amount of Investments by Loan Parties in or to, and Guarantees by Loan Parties of Indebtedness of, any Subsidiary that is not a Subsidiary Loan Party (including all such Investments and Guarantees existing on the Closing Date) shall not exceed $30,000,000 at any time outstanding; provided, further, that neither the Borrower nor any of its Subsidiaries shall be permitted to Guarantee any Indebtedness owed by any Securitization Subsidiary; (e) Investments made by the Borrower in or to any Subsidiary and by any Subsidiary to any Person that is not a Subsidiary; provided, that the aggregate amount of all such Investments in or to, and Guarantees of Indebtedness of, any such Persons (including all such Investments and Guarantees existing on the Closing Date) shall not exceed $25,000,000 at any time outstanding; (f) loans or advances to employees, officers or directors of the Borrower or any Subsidiary in the ordinary course of business for travel, relocation and related expenses; provided, however, that the aggregate amount of all such loans and advances does not exceed $1,000,000 at any time; (g) Hedging Obligations permitted by Section 7.10; and (h) other Investments which in the aggregate do not exceed $5,000,000 in any Fiscal Year. Without limitation of the foregoing, the Borrower will not, and will not permit any of its Subsidiaries to, purchase or acquire (in one transaction or in a series of related transactions, including pursuant to any merger with any Person that was not a wholly-owned Subsidiary prior to such merger), any Capital Stock, evidence of indebtedness, other securities (including any option, warrant, or other right to acquire any of the foregoing) or any assets of any other Person if the aggregate purchase price in any such transaction or series of related transactions would exceed $100,000,000. Section 7.5. Restricted Payments. The Borrower will not, and will not permit its Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any dividend on any class of its stock, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, retirement, defeasance or other acquisition of, any shares of Capital Stock or Indebtedness subordinated to the Obligations of the Borrower or any Guarantee thereof or any options, warrants, or other rights to purchase such Capital Stock or such Indebtedness, whether now or hereafter outstanding (each, a "Restricted Payment"), except for (i) dividends payable by the Borrower solely in shares of any class of its common stock, (ii) Restricted Payments made by any Subsidiary to the Borrower or to another Subsidiary Loan Party, (iii) so long as no Default or Event of Default has occurred and is continuing or 57 would result therefrom, any payments made for the repurchase of outstanding capital stock of the Borrower made since January 31, 2003 in an aggregate amount at any time not to exceed $60,000,000; and (iv) so long as no Default or Event of Default has occurred and is continuing or would result therefrom, cash dividends and distributions paid on, and cash redemptions of, the common stock of the Borrower; provided, that the aggregate amount of all such Restricted Payments made by the Borrower in any Fiscal Year does not exceed (A) 50% of Consolidated Net Income (or, in an event of a loss, minus 100% of Net Income) earned during the Borrower's Fiscal Year commencing on January 30, 1999 and each Fiscal Year thereafter (such period to be treated as one accounting period). Section 7.6. Sale of Assets. The Borrower will not, and will not permit any of its Subsidiaries to, convey, sell, lease, assign, transfer or otherwise dispose of, any of its assets, business or property, whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any Person other than the Borrower or a Subsidiary Loan Party (or to qualify directors if required by applicable law), except: (a) the sale of equipment or other personal property being replaced by other equipment or other personal property purchased as a capital expenditure item, (b) the sale of inventory and Permitted Investments in the ordinary course of business; (c) the sale of accounts receivable and all related rights pursuant to a Securitization Transaction that results in Indebtedness that is permitted under Section 7.1; (d) the sale of assets in connection with a sale-leaseback transaction permitted under Section 7.9; and (e) other asset sales (including the stock of Subsidiaries) where, on the date of execution of a binding obligation to make such asset sale (provided that if the asset sale is not consummated within six (6) months of such execution, then on the date of consummation of such asset sale rather than on the date of execution of such binding obligation), the aggregate Asset Value of all asset sales occurring after the Closing Date, taking into account the Asset Value of the proposed asset sale, would not exceed ten percent (10%) of the greater of (i) Borrower's Consolidated Net Worth as of November 1, 2002 and (ii) Borrower's Consolidated Net Worth as of the date of the most recent financial statements delivered pursuant to this Agreement. Section 7.7. Transactions with Affiliates. The Borrower will not, and will not permit any of its Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) in the ordinary course of business at prices and on terms and conditions not less favorable to the Borrower or such Subsidiary than could be obtained on an arm's-length basis from unrelated third parties, (b) transactions between or among the Borrower and any Subsidiary Loan Party not involving any other Affiliates and (c) any Restricted Payment permitted by Section 7.5. Section 7.8. Restrictive Agreements. The Borrower will not, and will not permit any Subsidiary to, directly or indirectly, enter into, incur or permit to exist any agreement 58 that prohibits, restricts or imposes any condition upon (a) the ability of the Borrower or any Subsidiary to create, incur or permit any Lien upon any of its assets or properties, whether now owned or hereafter acquired, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to its common stock, to make or repay loans or advances to the Borrower or any other Subsidiary, to Guarantee Indebtedness of the Borrower or any other Subsidiary or to transfer any of its property or assets to the Borrower or any Subsidiary of the Borrower; provided, that (i) the foregoing shall not apply to restrictions or conditions imposed by law or by this Agreement or any other Loan Document, (ii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is sold and such sale is permitted hereunder, (iii) clause (a) shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions and conditions apply only to the property or assets securing such Indebtedness, (iv) clause (a) shall not apply to customary provisions in leases and other contracts restricting the assignment thereof and (v) the foregoing restrictions shall not apply to restrictions on any Securitization Subsidiaries contained in the documents governing any Securitization Transaction. Section 7.9. Sale and Leaseback Transactions. The Borrower will not, and will not permit any of the Subsidiaries to, enter into any arrangement, directly or indirectly, whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereinafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property sold or transferred, except (i) to the extent that the aggregate value of all such property sold and leased back does not exceed $40,000,000 at any one time and (ii) with respect to the Orlando, Florida and Miami, Florida properties that, as of the Closing Date, are subject to Liens noted on Schedule 7.2. Section 7.10. Hedging Transactions. The Borrower will not, and will not permit any of the Subsidiaries to, enter into any Hedging Transaction, other than Hedging Transactions entered into in the ordinary course of business to hedge or mitigate risks to which the Borrower or any Subsidiary is exposed in the conduct of its business or the management of its assets and liabilities. Solely for the avoidance of doubt, the Borrower acknowledges that a Hedging Transaction entered into for speculative purposes or of a speculative nature (which shall be deemed to mean the creation of risk exposure where one does not exist in relation to any of its business operations and shall include without limitation any Hedging Transaction under which the Borrower or any of the Subsidiaries is or may become obliged to make any payment (i) in connection with the purchase by any third party of any common stock or any Indebtedness or (ii) as a result of changes in the market value of any common stock or any Indebtedness, is not a Hedging Transaction entered into in the ordinary course of business to hedge or mitigate risks. Section 7.11. Fiscal Year. The Borrower will not, and will not permit any Subsidiary to, change the fiscal year of the Borrower or of any Subsidiary, except to change the fiscal year of a Subsidiary to conform its fiscal year to that of the Borrower. Section 7.12. Optional Prepayments. The Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, prepay, purchase, redeem, retire, defease 59 or otherwise acquire, or make any optional payment on account of any principal of, interest on, or premium payable in connection with the optional prepayment, redemption or retirement of, any of its Indebtedness, or give a notice of redemption with respect to any such Indebtedness, or make any payment in violation of the subordination provisions of any Permitted Subordinated Debt, except with respect to (i) the Obligations under this Agreement and the Notes, (ii) prepayments of Indebtedness outstanding pursuant to revolving credit, overdraft and line of credit facilities permitted pursuant to Section 7.1, and (iii) so long as no Default or Event of Default has occurred and is continuing, intercompany loans made or outstanding pursuant to Section 7.1. Section 7.13. Actions Under Certain Documents. The Borrower will not, and will not permit any of its Subsidiaries to, without the prior written consent of the Administrative Agent, (a) modify, amend, cancel or rescind (i) the certificate or articles of incorporation, bylaws or other organizational documents or (ii) any agreements or documents evidencing or governing Permitted Subordinated Debt, or (b) make demand of payment or accept payment on any Permitted Subordinated Debt or on any intercompany Indebtedness permitted by Section 7.1, except that with respect to such intercompany Indebtedness, (i) current interest accrued thereon as of the date of this Agreement and all interest subsequently accruing thereon (whether or not paid currently) may be paid unless a Default or Event of Default has occurred and is continuing and (ii) the Borrower and its Subsidiaries may demand and accept payment on any intercompany Indebtedness owed by a Securitization Subsidiary to the Borrower or such Subsidiary. ARTICLE VIII EVENTS OF DEFAULT Section 8.1. Events of Default. If any of the following events (each an "Event of Default") shall occur: (a) the Borrower shall fail to pay any principal of any Loan or of any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment or otherwise; or (b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount payable under clause (a) of this Section 8.1) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of five (5) Business Days; or (c) any representation or warranty made or deemed made by or on behalf of the Borrower or any Subsidiary in or in connection with this Agreement or any other Loan Document (including the Schedules attached thereto) and any amendments or modifications hereof or waivers hereunder, or in any certificate, report, financial statement or other document submitted to the Administrative Agent or the Lenders by any Loan Party or any representative of any Loan Party pursuant to or in connection with this Agreement or any other Loan Document shall prove to be incorrect in any material respect when made or deemed made or submitted; or 60 (d) the Borrower shall fail to observe or perform any covenant or agreement contained in Sections 5.2, 5.3 (with respect to the Borrower's existence) or Articles VI or VII; or (e) any Loan Party shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those referred to in clauses (a), (b) and (d) above) or any other Loan Document, and such failure shall remain unremedied for 30 days after the earlier of (i) any officer of the Borrower becomes aware of such failure, or (ii) notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender; or (f) the Borrower or any Subsidiary (whether as primary obligor or as guarantor or other surety) shall fail to pay any principal of, or premium or interest on, any Material Indebtedness that is outstanding, when and as the same shall become due and payable (whether at scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument evidencing or governing such Indebtedness; or any other event shall occur or condition shall exist under any agreement or instrument relating to such Indebtedness and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or permit the acceleration of, the maturity of such Indebtedness; or any such Indebtedness shall be declared to be due and payable, or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or any offer to prepay, redeem, purchase or defease such Indebtedness shall be required to be made, in each case prior to the stated maturity thereof; (g) the Borrower or any Subsidiary shall (i) commence a voluntary case or other proceeding or file any petition seeking liquidation, reorganization or other relief under any federal, state or foreign bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a custodian, trustee, receiver, liquidator or other similar official of it or any substantial part of its property, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (i) of this Section, (iii) apply for or consent to the appointment of a custodian, trustee, receiver, liquidator or other similar official for the Borrower or any such Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, or (vi) take any action for the purpose of effecting any of the foregoing; or (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any Subsidiary or its debts, or any substantial part of its assets, under any federal, state or foreign bankruptcy, insolvency or other similar law now or hereafter in effect or (ii) the appointment of a custodian, trustee, receiver, liquidator or other similar official for the Borrower or any Subsidiary or for a substantial part of its assets, and in any such case, such proceeding or petition shall remain undismissed for a period of 60 days or an order or decree approving or ordering any of the foregoing shall be entered; or (i) the Borrower or any Subsidiary shall become unable to pay, shall admit in writing its inability to pay, or shall fail to pay, its debts as they become due; or 61 (j) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with other ERISA Events that have occurred, could reasonably be expected to result in liability to the Borrower and the Subsidiaries in an aggregate amount exceeding $5,000,000; or (k) any judgment or order for the payment of money in excess of $5,000,000 in the aggregate shall be rendered against the Borrower or any Subsidiary, and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be a period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (l) any non-monetary judgment or order shall be rendered against the Borrower or any Subsidiary that could reasonably be expected to have a Material Adverse Effect, and there shall be a period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (m) a Change in Control shall occur or exist; or (n) any provision of any Subsidiary Guaranty Agreement shall for any reason cease to be valid and binding on, or enforceable against, any Subsidiary Loan Party, or any Subsidiary Loan Party shall so state in writing, or any Subsidiary Loan Party shall seek to terminate its Subsidiary Guaranty Agreement; or (o) there shall exist or occur any "Event of Default" as provided under the terms of any other Loan Document, or any Loan Document ceases to be in full force and effect or the validity or enforceability thereof is disaffirmed by or on behalf of Borrower or any other Loan Party, or at any time it is or becomes unlawful for Borrower or any other Loan Party to perform or comply with its obligations under any Loan Document, or the obligations of Borrower or any other Loan Party under any Loan Document are not or cease to be legal, valid and binding on Borrower or any such Loan Party; (p) an attachment or similar action shall be made on or taken against any of the assets of the Borrower or any Subsidiary with an Asset Value exceeding $5,000,000 in aggregate and is not removed, suspended or enjoined within 60 days of the same being made or any suspension or injunction being lifted; then, and in every such event (other than an event with respect to the Borrower described in clause (g) or (h) of this Section) and at any time thereafter during the continuance of such event, the Administrative Agent may, and upon the written request of the Required Lenders shall, by notice to the Borrower, take any or all of the following actions, at the same or different times: (i) terminate the Commitments, whereupon the Commitment of each Lender shall terminate immediately, (ii) declare the principal of and any accrued interest on the Loans, and all other Obligations owing hereunder, to be, whereupon the same shall become, due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower, (iii) exercise all remedies contained in any other Loan Document, and (iv) exercise any other remedies available at law or in equity; and that, if an Event of Default specified in either clause (g) or (h) with respect to the Borrower shall occur, the 62 Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon, and all fees, and all other Obligations shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. ARTICLE IX THE ADMINISTRATIVE AGENT Section 9.1. Appointment of Administrative Agent. (a) Each Lender irrevocably appoints SunTrust Bank as the Administrative Agent and authorizes it to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent under this Agreement and the other Loan Documents, together with all such actions and powers that are reasonably incidental thereto. The Administrative Agent may perform any of its duties hereunder or under the other Loan Documents by or through any one or more sub-agents or attorneys-in-fact appointed by the Administrative Agent. The Administrative Agent and any such sub-agent or attorney-in-fact may perform any and all of its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions set forth in this Article shall apply to any such sub-agent or attorney-in-fact and the Related Parties of the Administrative Agent, any such sub-agent and any such attorney-in-fact and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. (b) The Issuing Bank shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith until such time and except for so long as the Administrative Agent may agree at the request of the Required Lenders to act for the Issuing Bank with respect thereto; provided, that the Issuing Bank shall have all the benefits and immunities (i) provided to the Administrative Agent in this Article IX with respect to any acts taken or omissions suffered by the Issuing Bank in connection with Letters of Credit issued by it or proposed to be issued by it and the application and agreements for letters of credit pertaining to the Letters of Credit as fully as if the term "Administrative Agent" as used in this Article IX included the Issuing Bank with respect to such acts or omissions and (ii) as additionally provided in this Agreement with respect to the Issuing Bank. Section 9.2. Nature of Duties of Administrative Agent. The Administrative Agent shall not have any duties or obligations except those expressly set forth in this Agreement and the other Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default or an Event of Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except those discretionary rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.2), and (c) except as expressly set forth in the Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable 63 for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it, its sub-agents or attorneys-in-fact with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.2) or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall not be responsible for the negligence or misconduct of any sub-agents or attorneys-in-fact selected by it with reasonable care. The Administrative Agent shall not be deemed to have knowledge of any Default or Event of Default unless and until written notice thereof (which notice shall include an express reference to such event being a "Default" or "Event of Default" hereunder) is given to the Administrative Agent by the Borrower or any Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements, or other terms and conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article III or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. The Administrative Agent may consult with legal counsel (including counsel for the Borrower) concerning all matters pertaining to such duties. Section 9.3. Lack of Reliance on the Administrative Agent. Each of the Lenders, the Swingline Lender and the Issuing Bank acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each of the Lenders, the Swingline Lender and the Issuing Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, continue to make its own decisions in taking or not taking of any action under or based on this Agreement, any related agreement or any document furnished hereunder or thereunder. Section 9.4. Certain Rights of the Administrative Agent. If the Administrative Agent shall request instructions from the Required Lenders with respect to any action or actions (including the failure to act) in connection with this Agreement, the Administrative Agent shall be entitled to refrain from such act or taking such act, unless and until it shall have received instructions from such Lenders; and the Administrative Agent shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Lender shall have any right of action whatsoever against the Administrative Agent as a result of the Administrative Agent acting or refraining from acting hereunder in accordance with the instructions of the Required Lenders where required by the terms of this Agreement. Section 9.5. Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed, sent or made by the proper Person. The Administrative Agent 64 may also rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (including counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or not taken by it in accordance with the advice of such counsel, accountants or experts. Section 9.6. The Administrative Agent in its Individual Capacity. The bank serving as the Administrative Agent shall have the same rights and powers under this Agreement and any other Loan Document in its capacity as a Lender as any other Lender and may exercise or refrain from exercising the same as though it were not the Administrative Agent; and the terms "Lenders", "Required Lenders", "holders of Notes", or any similar terms shall, unless the context clearly otherwise indicates, include the Administrative Agent in its individual capacity. The bank acting as the Administrative Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or Affiliate of the Borrower as if it were not the Administrative Agent hereunder. Section 9.7. Successor Administrative Agent. (a) The Administrative Agent may resign at any time by giving notice thereof to the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Administrative Agent, subject to the approval by the Borrower provided that no Default or Event of Default shall exist at such time. If no successor Administrative Agent shall have been so appointed, and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent, which shall be a commercial bank organized under the laws of the United States of America or any state thereof or a bank which maintains an office in the United States, having a combined capital and surplus of at least $500,000,000. (b) Upon the acceptance of its appointment as the Administrative Agent hereunder by a successor, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. If within 45 days after written notice is given of the retiring Administrative Agent's resignation under this Section 9.7 no successor Administrative Agent shall have been appointed and shall have accepted such appointment, then on such 45th day (i) the retiring Administrative Agent's resignation shall become effective, (ii) the retiring Administrative Agent shall thereupon be discharged from its duties and obligations under the Loan Documents and (iii) the Required Lenders shall thereafter perform all duties of the retiring Administrative Agent under the Loan Documents until such time as the Required Lenders appoint a successor Administrative Agent as provided above. After any retiring Administrative Agent's resignation hereunder, the provisions of this Article IX shall continue in effect for the benefit of such retiring Administrative Agent and its representatives and agents in respect of any actions taken or not taken by any of them while it was serving as the Administrative Agent. 65 Section 9.8. Authorization to Execute other Loan Documents. Each Lender hereby authorizes the Administrative Agent to execute on behalf of all Lenders all Loan Documents other than this Agreement. ARTICLE X MISCELLANEOUS Section 10.1. Notices. (a) Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications to any party herein to be effective shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by email or telecopy, as follows: To the Borrower: Hughes Supply, Inc. 20 N. Orange Avenue, Suite 200 Orlando, Florida 32801 Attention: David Bearman, Chief Financial Officer Telecopy Number: 407-649-1670 Email: David.Bearman@hughessupply.com with a copy to: Hughes Supply, Inc. 20 N. Orange Avenue, Suite 200 Orlando, Florida 32801 Attention: Jeff Leonard, Chief Financial Officer Telecopy Number: 407-540-4914 Email: jeff.leonard@hughessupply.com To the Administrative Agent or Swingline Lender: SunTrust Bank 200 S. Orange Avenue, MC 2064 Orlando, Florida 32801 Attn: Mr. William C. Barr Telecopy No. (407) 237-4076 Email: william.barr@suntrust.com 66 With a copy to: SunTrust Bank Agency Services 303 Peachtree Street, N. E./ 25th Floor Atlanta, Georgia 30308 Attention: Ms. Hope Williams Telecopy Number: (404) 658-4906 and King & Spalding 191 Peachtree Street, N.E. Atlanta, Georgia 30303 Attention: Carolyn Z. Alford Telecopy Number: (404) 572-5100 Email: czalford@kslaw.com To the Issuing Bank: SunTrust Bank 25 Park Place, N. E./Mail Code 3706 Atlanta, Georgia 30303 Attention: Michael E. Sullivan Telecopy Number: (404) 588-8129 To any other Lender: the address set forth in the Administrative Questionnaire Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All such notices and other communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the mail or if delivered, upon delivery, or if emailed, upon receipt of confirmation that such email has been read or deleted; provided, that notices delivered to the Administrative Agent, the Issuing Bank or the Swingline Bank shall not be effective until actually received by such Person at its address specified in this Section 10.1. (b) Any agreement of the Administrative Agent and the Lenders herein to receive certain notices by telephone or facsimile is solely for the convenience and at the request of the Borrower. The Administrative Agent and the Lenders shall be entitled to rely on the authority of any Person purporting to be a Person authorized by the Borrower to give such notice and the Administrative Agent and Lenders shall not have any liability to the Borrower or other Person on account of any action taken or not taken by the Administrative Agent or the Lenders in reliance upon such telephonic or facsimile notice. The obligation of the Borrower to repay the Loans and all other Obligations hereunder shall not be affected in any way or to any extent by any failure of the Administrative Agent and the Lenders to receive written confirmation of any telephonic or facsimile notice or the receipt by the Administrative Agent and the Lenders of a confirmation which is at variance with the terms understood by the Administrative Agent and the Lenders to be contained in any such telephonic or facsimile notice. 67 Section 10.2. Waiver; Amendments. (a) No failure or delay by the Administrative Agent, the Issuing Bank or any Lender in exercising any right or power hereunder or any other Loan Document, and no course of dealing between the Borrower and the Administrative Agent or any Lender, shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power or any abandonment or discontinuance of steps to enforce such right or power, preclude any other or further exercise thereof or the exercise of any other right or power hereunder or thereunder. The rights and remedies of the Administrative Agent, the Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies provided by law. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or the issuance of a Letter of Credit shall not be construed as a waiver of any Default or Event of Default, regardless of whether the Administrative Agent, any Lender or the Issuing Bank may have had notice or knowledge of such Default or Event of Default at the time. (b) No amendment or waiver of any provision of this Agreement or the other Loan Documents, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Borrower and the Required Lenders or the Borrower and the Administrative Agent with the consent of the Required Lenders and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, that no amendment or waiver shall: (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the date fixed for any payment of any principal of, or interest on, any Loan or LC Disbursement or interest thereon or any fees hereunder or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date for the termination or reduction of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.22 (b) or (c) in a manner that would alter the pro rata sharing of payments required thereby , without the written consent of each Lender, (v) change any of the provisions of this Section or the definition of "Required Lenders" or any other provision hereof specifying the number or percentage of Lenders which are required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the consent of each Lender; (vi) release any guarantor or limit the liability of any such guarantor under any guaranty agreement, without the written consent of each Lender; (vii) release all or substantially all collateral (if any) securing any of the Obligations or agree to subordinate any Lien in such collateral to any other creditor of the Borrower or any Subsidiary, without the written consent of each Lender; provided further, that no such agreement shall amend, modify or otherwise affect the rights, duties or obligations of the Administrative Agent, the Swingline Bank or the Issuing Bank without the prior written consent of such Person. 68 Section 10.3. Expenses; Indemnification. (a) The Borrower shall pay (i) all reasonable, out-of-pocket costs and expenses of the Administrative Agent and its Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent and its Affiliates, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of the Loan Documents and any amendments, modifications or waivers thereof (whether or not the transactions contemplated in this Agreement or any other Loan Document shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all reasonable out-of-pocket costs and expenses (including, without limitation, the reasonable fees, charges and disbursements of outside counsel) incurred by the Administrative Agent, the Issuing Bank or any Lender in connection with the enforcement or protection of its rights in connection with this Agreement, including its rights under this Section, or in connection with the Loans made or any Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit. (b) The Borrower shall indemnify the Administrative Agent, the Issuing Bank and each Lender, and each Related Party of any of the foregoing (each, an "Indemnitee") against, and hold each of them harmless from, any and all costs, losses, liabilities, claims, damages and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, which may be incurred by or asserted against any Indemnitee arising out of, in connection with or as a result of (i) the execution or delivery of this Agreement or any other agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of any of the transactions contemplated hereby, (ii) any Loan or Letter of Credit or any actual or proposed use of the proceeds therefrom (including any refusal by the Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned by the Borrower or any Subsidiary or any Environmental Liability related in any way to the Borrower or any Subsidiary or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided, that the Borrower shall not be obligated to indemnify any Indemnitee for any of the foregoing arising out of such Indemnitee's gross negligence or willful misconduct as determined by a court of competent jurisdiction in a final and nonappealable judgment. No Indemnitee shall be liable for any damages arising from the use by others of information or others obtained through internet, Intralinks(R), or other similar transmission services in connection with this Agreement. (c) The Borrower shall pay, and hold the Administrative Agent and each of the Lenders harmless from and against, any and all present and future stamp, documentary, and other similar taxes with respect to this Agreement and any other Loan Documents, any collateral described therein, or any payments due thereunder, and save the Administrative Agent and each Lender harmless from and against any and all liabilities with respect to or resulting from any delay or omission to pay such taxes. 69 (d) To the extent that the Borrower fails to pay any amount required to be paid to the Administrative Agent, the Issuing Bank or the Swingline Lender under clauses (a), (b) or (c) hereof, each Lender severally agrees to pay to the Administrative Agent, the Issuing Bank or the Swingline Lender, as the case may be, such Lender's Pro Rata Share (determined as of the time that the unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided, that the unreimbursed expense or indemnified payment, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent, the Issuing Bank or the Swingline Lender in its capacity as such. (e) To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to actual or direct damages) arising out of, in connection with or as a result of, this Agreement or any agreement or instrument contemplated hereby, the transactions contemplated therein, any Loan or any Letter of Credit or the use of proceeds thereof. (f) All amounts due under this Section shall be payable promptly after written demand therefor. Section 10.4. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Any Lender may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that (i) except in the case of an assignment of the entire remaining amount of the assigning Lender's Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $1,000,000, unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed), (ii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement with respect to the Loan or the Commitment assigned and (iii) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $1,000, and the Eligible Assignee, if it shall not be a Lender, shall deliver to 70 the Administrative Agent an Administrative Questionnaire. Upon (i) the execution and delivery of the Assignment and Acceptance by the assigning Lender and assignee Lender, (ii) acceptance and recording thereof by the Administrative Agent pursuant to paragraph (c) of this Section, (iii) acceptance thereof from the Borrower to the extent required pursuant to this clause (b) and (iv) if such assignee Lender is a Foreign Lender, compliance by such Person with Section 2.21(e), from and after the effective date specified in each Assignment and Acceptance, the Eligible Assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.19, 2.20, 2.21 and 10.3. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (d) of this Section. (c) The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at one of its offices in Atlanta, Georgia a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive absent manifest error, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. (d) Any Lender may, without the consent of, or notice to, the Borrower, the Administrative Agent, the Swingline Bank or the Issuing Bank sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent, the Swingline Bank, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver with respect to the following to the extent affecting such Participant: (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the date fixed for any payment of any principal of, or interest on, any Loan or LC Disbursement or interest thereon or any fees hereunder or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date for the termination or reduction of any Commitment, without the written consent of each Lender 71 affected thereby, (iv) change Section 2.22(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby , without the written consent of each Lender, (v) change any of the provisions of this Section or the definition of "Required Lenders" or any other provision hereof specifying the number or percentage of Lenders which are required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the consent of each Lender; (vi) release any guarantor or limit the liability of any such guarantor under any guaranty agreement without the written consent of each Lender except to the extent such release is expressly provided under the terms of the Guaranty Agreement; or (vii) release all or substantially all collateral (if any) securing any of the Obligations. Subject to paragraph (e) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.19, 2.20, and 2.21 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.7 as though it were a Lender, provided such Participant agrees to be subject to Section 10.7 as though it were a Lender. (e) A Participant shall not be entitled to receive any greater payment under Section 2.19 and Section 2.21 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.21 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.21(e) as though it were a Lender. (f) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including without limitation any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. Section 10.5. Governing Law; Jurisdiction; Consent to Service of Process. (a) This Agreement and the other Loan Documents shall be construed in accordance with and be governed by the law (without giving effect to the conflict of law principles thereof) of the State of Georgia. (b) The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the non-exclusive jurisdiction of the United States District Court of the Northern District of Georgia, and of any state court of the State of Georgia located in Fulton County and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document or the transactions contemplated hereby or thereby, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Georgia state court or, to the extent permitted by applicable law, such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by 72 suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against the Borrower or its properties in the courts of any jurisdiction. (c) The Borrower irrevocably and unconditionally waives any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding described in paragraph (b) of this Section and brought in any court referred to in paragraph (b) of this Section. Each of the parties hereto irrevocably waives, to the fullest extent permitted by applicable law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (d) Each party to this Agreement irrevocably consents to the service of process in the manner provided for notices in Section 10.1. Nothing in this Agreement or in any other Loan Document will affect the right of any party hereto to serve process in any other manner permitted by law. Section 10.6. WAIVER OF JURY TRIAL. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. Section 10.7. Right of Setoff. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, each Lender and the Issuing Bank shall have the right, at any time or from time to time upon the occurrence and during the continuance of an Event of Default, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, to set off and apply against all deposits (general or special, time or demand, provisional or final) of the Borrower at any time held or other obligations at any time owing by such Lender and the Issuing Bank to or for the credit or the account of the Borrower against any and all Obligations held by such Lender or the Issuing Bank, as the case may be, irrespective of whether such Lender or the Issuing Bank shall have made demand hereunder and although such Obligations may be unmatured. Each Lender and the Issuing Bank agree promptly to notify the Administrative Agent and the Borrower after any such set-off and any application made by such Lender and the Issuing Bank, as the case may be; provided, that the failure to give such notice shall not affect the validity of such set-off and application. Each Lender and the Issuing Bank agrees to apply all amounts collected from any such set-off to the Obligations before applying such amounts to any 73 other Indebtedness or other obligations owed by the Borrower and any of its Subsidiary to such Lender or Issuing Bank. Section 10.8. Counterparts; Integration. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. This Agreement, the Fee Letter, the other Loan Documents, and any separate letter agreement(s) relating to any fees payable to the Administrative Agent constitute the entire agreement among the parties hereto and thereto regarding the subject matters hereof and thereof and supersede all prior agreements and understandings, oral or written, regarding such subject matters. Section 10.9. Survival. All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Sections 2.19, 2.20, 2.21, and 10.3 and Article IX shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof. All representations and warranties made herein, in the certificates, reports, notices, and other documents delivered pursuant to this Agreement shall survive the execution and delivery of this Agreement and the other Loan Documents, and the making of the Loans and the issuance of the Letters of Credit. Section 10.10. Severability. Any provision of this Agreement or any other Loan Document held to be illegal, invalid or unenforceable in any jurisdiction, shall, as to such jurisdiction, be ineffective to the extent of such illegality, invalidity or unenforceability without affecting the legality, validity or enforceability of the remaining provisions hereof or thereof; and the illegality, invalidity or unenforceability of a particular provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 10.11. Confidentiality. Each of the Administrative Agent, the Issuing Bank and each Lender agrees to take normal and reasonable precautions to maintain the confidentiality of any information designated in writing as confidential and provided to it by the Borrower or any Subsidiary, except that such information may be disclosed (i) to any Related Party of the Administrative Agent, the Issuing Bank or any such Lender, including without limitation accountants, legal counsel and other advisors, (ii) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (iii) to the extent requested by any regulatory agency or authority, (iv) to the extent that such information becomes publicly available other than as a result of a breach of this Section, or which becomes available to the 74 Administrative Agent, the Issuing Bank, any Lender or any Related Party of any of the foregoing on a non-confidential basis from a source other than the Borrower, (v) in connection with the exercise of any remedy hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, and (ix) subject to provisions substantially similar to this Section 10.11, to any actual or prospective assignee or Participant, or (vi) with the consent of the Borrower. Any Person required to maintain the confidentiality of any information as provided for in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such information as such Person would accord its own confidential information. Section 10.12. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which may be treated as interest on such Loan under applicable law (collectively, the "Charges"), shall exceed the maximum lawful rate of interest (the "Maximum Rate") which may be contracted for, charged, taken, received or reserved by a Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Rate to the date of repayment, shall have been received by such Lender. Section 10.13. Waiver of Effect of Corporate Seal. The Borrower represents and warrants that neither it nor any other Loan Party is required to affix its corporate seal to this Agreement or any other Loan Document pursuant to any requirement of law or regulation, agrees that this Agreement shall be deemed delivered by Borrower under seal and waives any shortening of the statute of limitations that may result from not affixing the corporate seal to this Agreement or such other Loan Documents. (remainder of page left intentionally blank) 75 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed under seal in the case of the Borrower by their respective authorized officers as of the day and year first above written. HUGHES SUPPLY, INC. By:_________________________________________L.S. Name: Jeffrey Leonard Title: Treasurer SUNTRUST BANK, as Administrative Agent, as Issuing Bank, as Swingline Lender and as a Lender By:______________________________________________ Name: William C. Barr, III Title: Director [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT] WACHOVIA BANK, N.A., as Syndication Agent and as a Lender By__________________________________ Name: Title: [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT] SOUTHTRUST BANK, as Documentation Agent and as a Lender By__________________________________ Name: Title: [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT] BANK OF AMERICA, N.A., as a Lender By__________________________________ Name: Title: [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT] PNC BANK, NATIONAL ASSOCIATION, as a Lender By__________________________________ Name: Title: [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT] THE FIFTH THIRD BANK, as a Lender By__________________________________ Name: Title: [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT] WELLS FARGO BANK, NATIONAL ASSOCIATION, as a Lender By__________________________________ Name: Title: [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT] US BANK, NATIONAL ASSOCIATION, as a Lender By__________________________________ Name: Title: [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT] ISRAEL DISCOUNT BANK OF NEW YORK, as a Lender By__________________________________ Name: Title: [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT] ANNEX I Revolving Commitments - ------------------------------------------------------------------------------- Institution Title Commitment - ------------------------------------------------------------------------------- SunTrust Bank Administrative Agent $ 60,000,000 - ------------------------------------------------------------------------------- Wachovia Syndication Agent 50,000,000 - ------------------------------------------------------------------------------- SouthTrust Documentation Agent 30,000,000 - ------------------------------------------------------------------------------- Bank of America 30,000,000 - ------------------------------------------------------------------------------- PNC 25,000,000 - ------------------------------------------------------------------------------- Fifth Third 17,500,000 - ------------------------------------------------------------------------------- U.S. Bank 15,000,000 - ------------------------------------------------------------------------------- Wells Fargo 15,000,000 - ------------------------------------------------------------------------------- Israel Discount Bank 10,000,000 - ------------------------------------------------------------------------------- Total $252,500,000 - ------------------------------------------------------------------------------- Schedule I APPLICABLE MARGIN AND APPLICABLE PERCENTAGE - -------------------------------------------------------------------------------- Applicable Percentage for Pricing Leverage Applicable Commitment Level Ratio Margin Fee - -------------------------------------------------------------------------------- I Less than 0.75% per 0.15% per 0.35:1.00 annum annum - -------------------------------------------------------------------------------- II Greater than or equal to 0.875% per 0.20% per 0.35:1.00 but annum annum less than 0.40:1.00 - -------------------------------------------------------------------------------- III Greater than or equal to 1.00% per 0.25% per 0.40:1.00 but annum annum less than 0.45:1.00 - -------------------------------------------------------------------------------- IV Greater than or equal to 1.125% per 0.25% per 0.45:1.00 but annum annum less than 0.50:1.00 - -------------------------------------------------------------------------------- V Greater than or equal to 1.375% per 0.30% per 0.50:1.00 annum annum - -------------------------------------------------------------------------------- EXHIBIT A FORM OF REVOLVING CREDIT NOTE $__________ Atlanta, Georgia March 26, 2003 FOR VALUE RECEIVED, the undersigned, HUGHES SUPPLY, INC. a Florida corporation (the "Borrower"), hereby promises to pay to [Name of Lender] (the "Lender") or its registered assigns, at the office of SunTrust Bank ("SunTrust") at 303 Peachtree St., N.E., Atlanta, Georgia 30308, on the Revolving Commitment Termination Date (as defined in the Revolving Credit Agreement dated as of March 26, 2003, (as the same may be amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the Lenders from time to time party thereto and SunTrust as the Administrative Agent for the Lenders), the lesser of the principal sum of [Amount of such Lender's Revolving Commitment] and the aggregate unpaid principal amount of all Revolving Loans made by the Lender to the Borrower pursuant to the Credit Agreement, in lawful money of the United States of America in immediately available funds, and to pay interest from the date hereof on the principal amount thereof from time to time outstanding, in like funds, at said office, at the rate or rates per annum and payable on such dates as provided in the Credit Agreement. In addition, should legal action or an attorney-at-law be utilized to collect any amount due hereunder, the Borrower further promises to pay all costs of collection, including the reasonable attorneys' fees of the Lender actually incurred. Upon the occurrence of an Event of Default, the Borrower promises to pay interest, on demand, at a rate or rates provided in the Credit Agreement. All borrowings evidenced by this Revolving Credit Note and all payments and prepayments of the principal hereof and the date thereof shall be endorsed by the holder hereof on the schedule attached hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof, or otherwise recorded by such holder in its internal records; provided, that the failure of the holder hereof to make such a notation or any error in such notation shall not affect the obligations of the Borrower to make the payments of principal and interest in accordance with the terms of this Revolving Credit Note and the Credit Agreement. This Revolving Credit Note is issued in connection with, and is entitled to the benefits of, the Credit Agreement which, among other things, contains provisions for the acceleration of the maturity hereof upon the happening of certain events, for prepayment of the principal hereof prior to the maturity hereof and for the amendment or waiver of certain provisions of the Credit Agreement, all upon the terms and conditions therein specified. THIS REVOLVING CREDIT NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF GEORGIA AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. A-2 HUGHES SUPPLY, INC. a Florida corporation By:______________________________________ Name: Title: A-3 LOANS AND PAYMENTS - -------------------------------------------------------------------------------- Unpaid Principal Name of Person Amount and Payments of Balance of Making Date Type of Loan Principal Note Notation ---- ------------ --------- ---- -------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- A-4 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- A-5 EXHIBIT B COMPETITIVE BID NOTE $50,000,000 Atlanta, Georgia March 26, 2003 FOR VALUE RECEIVED, the undersigned, HUGHES SUPPLY, INC. a Florida corporation (the "Borrower"), hereby promises to pay to [Name of Lender] (the "Lender") or its registered assigns, at the office of SunTrust Bank ("SunTrust") at 303 Peachtree Street, N.E., Atlanta, Georgia 30308, or at such other place as the holder hereof may designate in writing to the Borrower, on the Revolving Commitment Termination Date (as defined in the Revolving Credit Agreement dated as of March 26, 2003 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the Lenders from time to time party thereto and SunTrust, as Administrative Agent for the Lenders), the lesser of the principal sum of FIFTY MILLION AND 00/100 DOLLARS ($50,000,000) and the aggregate unpaid principal amount of all Competitive Bid Loans made by the Lender to the Borrower pursuant to the Credit Agreement, in lawful money of the United States of America in immediately available funds, and to pay interest from the date hereof on the principal amount thereof from time to time outstanding, in like funds, at said office, at the rate or rates per annum and payable on such dates as provided in the Credit Agreement. In addition, should legal action or an attorney-at-law be utilized to collect any amount due hereunder, the Borrower further promises to pay all costs of collection, including the reasonable attorneys' fees of the Lender actually incurred. Upon the occurrence of an Event of Default, the Borrower promises to pay interest, on demand, at the Default Rate (as defined in the Credit Agreement) on the terms and conditions set forth in the Credit Agreement. All borrowings evidenced by this Competitive Bid Note and all payments and prepayments of the principal hereof and the date thereof shall be endorsed by the holder hereof on the schedule attached hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof, or otherwise recorded by such holder in its internal records; provided, that the failure of the holder hereof to make such a notation or any error in such notation shall not affect the obligations of the Borrower to make the payments of principal and interest in accordance with the terms of this Competitive Bid Note and the Credit Agreement. This Competitive Bid Note is issued in connection with, and is entitled to the benefits of, the Credit Agreement which, among other things, contains provisions for the acceleration of the maturity hereof upon the happening of certain events, for prepayment of the principal hereof prior to the maturity hereof and for the amendment or waiver of certain provisions of the Credit Agreement, all upon the terms and conditions therein specified. B-1 THIS COMPETITIVE BID NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF GEORGIA AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. HUGHES SUPPLY, INC. a Florida corporation By:______________________________________ Name: Title: B-2 LOANS AND PAYMENTS - -------------------------------------------------------------------------------- Unpaid Principal Name of Person Amount and Payments of Balance of Making Date Type of Loan Principal Note Notation ---- ------------ --------- ---- -------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- B-3 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- B-4 EXHIBIT C FORM OF SWINGLINE NOTE $10,000,000 Atlanta, Georgia March 26, 2003 FOR VALUE RECEIVED, the undersigned, HUGHES SUPPLY, INC. a Florida corporation (the "Borrower"), hereby promises to pay to SunTrust Bank (the "Swingline Lender") or its registered assigns, at the office of the Swingline Lender at 303 Peachtree St., N.E., Atlanta, Georgia 30308, on the Revolving Commitment Termination Date (as defined in the Revolving Credit Agreement dated as of March 26, 2003 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the Lenders from time to time party thereto and SunTrust, as Administrative Agent for the Lenders), the lesser of the principal sum of TEN MILLION AND 00/100 DOLLARS ($10,000,000) or the aggregate unpaid principal amount of all Swingline Loans made by the Swingline Lender to the Borrower pursuant to the Credit Agreement, in lawful money of the United States of America in immediately available funds, and to pay interest from the date hereof on the principal amount thereof from time to time outstanding, in like funds, at said office, at the rate or rates per annum and payable on such dates as provided in the Credit Agreement. In addition, should legal action or an attorney-at-law be utilized to collect any amount due hereunder, the Borrower further promises to pay all costs of collection, including the reasonable attorneys' fees of the Swingline Lender actually incurred. Upon the occurrence of an Event of Default, the Borrower promises to pay interest, on demand, at the Default Rate (as defined in the Credit Agreement) on the terms and conditions set forth in the Credit Agreement. All borrowings evidenced by this Swingline Note and all payments and prepayments of the principal hereof and the date thereof shall be endorsed by the holder hereof on the schedule attached hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof, or otherwise recorded by such holder in its internal records; provided, that the failure of the holder hereof to make such a notation or any error in such notation shall not affect the obligations of the Borrower to make the payments of principal and interest in accordance with the terms of this Swingline Note and the Credit Agreement. C-1 This Swingline Note is issued in connection with, and is entitled to the benefits of, the Credit Agreement which, among other things, contains provisions for the acceleration of the maturity hereof upon the happening of certain events, for optional and mandatory prepayment of the principal hereof prior to the maturity hereof and for the amendment or waiver of certain C-2 provisions of the Credit Agreement, all upon the terms and conditions therein specified. THIS SWINGLINE NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF GEORGIA AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. HUGHES SUPPLY, INC. a Florida corporation By:______________________________________ Name: Title: C-3 LOANS AND PAYMENTS - -------------------------------------------------------------------------------- Unpaid Principal Name of Person Amount and Payments of Balance of Making Date Type of Loan Principal Note Notation ---- ------------ --------- ---- -------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- C-4 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- C-5 EXHIBIT D FORM OF ASSIGNMENT AND ACCEPTANCE [Date to be supplied] Reference is made to the Revolving Credit Agreement dated as of March 26, 2003 (as amended and in effect on the date hereof, the "Credit Agreement"), among HUGHES SUPPLY, INC. a Florida corporation, the Lenders from time to time party thereto and SunTrust Bank, as Administrative Agent for the Lenders. Terms defined in the Credit Agreement are used herein with the same meanings. The Assignor hereby sells and assigns, without recourse, to the Assignee designated below, and the Assignee hereby purchases and assumes, without recourse, from the Assignor, effective as of the Assignment Date set forth below, the interests set forth below (the "Assigned Interest") in the Assignor's rights and obligations under the Credit Agreement, including, without limitation, the interests set forth below in the Revolving Commitment of the Assignor on the Assignment Date and Revolving Loans owing to the Assignor which are outstanding on the Assignment Date, together with the participations in the LC Exposure and the Swingline Exposure of the Assignor on the Assignment Date, but excluding accrued interest and fees to and excluding the Assignment Date. The Assignee hereby acknowledges receipt of a copy of the Credit Agreement. From and after the Assignment Date, (i) the Assignee shall be a party to and be bound by the provisions of the Credit Agreement and, to the extent of the Assigned Interest, have the rights and obligations of a Lender thereunder, and (ii) the Assignor shall, to the extent of the Assigned Interest, relinquish its rights and be released from its obligations under the Credit Agreement. This Assignment and Acceptance is being delivered to the Administrative Agent together with (i) if the Assignee is a Foreign Lender, any documentation required to be delivered by the Assignee pursuant to Section 2.21(e) of the Credit Agreement, duly completed and executed by the Assignee, and (ii) if the Assignee is not already a Lender under the Credit Agreement, an Administrative Questionnaire in the form supplied by the Administrative Agent, duly completed by the Assignee. The Assignee shall pay the processing and recordation fee payable to the Administrative Agent pursuant to Section 10.4(b) of the Credit Agreement. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of Georgia. D-1 Date of Assignment: Legal Name of Assignor: Legal Name of Assignee: Assignee's Address for Notices: Effective Date of Assignment: ("Assignment Date"):
Percentage Assigned of Revolving Commitment (set forth, to at least 8 decimals, as a percentage of the Principal Amount aggregate Revolving Commitments of all Facility Assigned Lenders thereunder) -------- -------- ------------------- ~~Revolving Commitment: $ %~~
D-2 The terms set forth above are hereby agreed to: [Name of Assignor], as Assignor By:_____________________________ Name: Title: [Name of Assignee], as Assignee By:_____________________________ Name: Title: The undersigned hereby consents to the within assignment:(1) HUGHES SUPPLY, INC. SUNTRUST BANK, as a Florida corporation Administrative Agent: By:_______________________________ By:________________________________ Name: Name: Title: Title: D-3 SUNTRUST BANK, as Issuing Bank: By:________________________________ Name: Title: - ---------- (1) Consents to be included to the extent required by Section 10.4(b) of the Credit Agreement. D-4 EXHIBIT E FORM OF SUBSIDIARY GUARANTY AGREEMENT THIS SUBSIDIARY GUARANTY AGREEMENT dated as of March 26, 2003, executed by each of the Subsidiaries of Hughes Supply, Inc., a Florida corporation (the "Borrower") listed on Schedule I attached hereto (each such subsidiary individually, a "Guarantor" and collectively, the "Guarantors"), in favor of SunTrust Bank, a Georgia banking corporation, as administrative agent (the "Administrative Agent") for the Lenders (as defined in the Credit Agreement referred to below). Reference is made to the Revolving Credit Agreement dated as of March 26, 2003 (as amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the Lenders from time to time party thereto and SunTrust Bank, as administrative agent for the Lenders (in such capacity, the "Administrative Agent"), Swingline Lender and Issuing Bank (in such capacity, the "Issuing Bank"). Capitalized terms used herein and not defined herein shall have 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, pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement. Each of the Guarantors is a direct or indirect wholly-owned Subsidiary of the Borrower and acknowledges that it will derive substantial benefit from the making of the Loans by the Lenders and the issuance of the Letters of Credit by the Issuing Bank. 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 Guarantors of a Subsidiary Guaranty Agreement in the form hereof. As consideration therefor and in order to induce the Lenders to make Loans and the Issuing Bank to issue Letters of Credit, the Guarantors are willing to execute this Subsidiary Guaranty Agreement. Accordingly, the parties hereto agree as follows: Section 1. Guaranty. Each Guarantor unconditionally guarantees, jointly with the other Guarantors and severally, as a primary obligor and not merely as a surety, (a) the due and punctual payment of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement or disbursements, interest thereon and obligations to provide cash collateral, and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Loan Parties to the Administrative Agent and the Lenders under the Credit Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Loan Parties under or pursuant to the Credit Agreement and the other Loan Documents; and (c) the due and punctual payment and performance of all obligations of the E-1 Borrower, monetary or otherwise, under each Hedging Transaction entered into with a counterparty that was a Lender or an Affiliate of a Lender at the time such Hedging Transaction was entered into (all the monetary and other obligations referred to in the preceding clauses (a) through (c) being collectively called the "Obligations"). Each Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound by this Guaranty notwithstanding any extension or renewal of any Obligation. Section 2. Obligations Not Waived. To the fullest extent permitted by applicable law, each Guarantor waives presentment to, demand of payment from and protest to the Borrower of any of the Obligations, and also waives notice of acceptance of its Guaranty and notice of protest for nonpayment. To the fullest extent permitted by applicable law, the obligations of each Guarantor hereunder shall not be affected by (a) the failure of the Administrative Agent or any Lender to assert any claim or demand or to enforce or exercise any right or remedy against the Borrower or any other Guarantor under the provisions of the Credit Agreement, any other Loan Document or otherwise, (b) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, this Agreement, any other Loan Document, any Guaranty or any other agreement, including with respect to any other Guarantor under this Agreement, or (c) the failure to perfect any security interest in, or the release of, any of the security held by or on behalf of the Administrative Agent or any Lender. Section 3. Guaranty of Payment. Each Guarantor further agrees that its Guaranty constitutes a Guaranty of payment when due and not of collection, and waives any right to require that any resort be had by the Administrative Agent or any Lender to any of the security held for payment of the Obligations or to any balance of any deposit account or credit on the books of the Administrative Agent or any Lender in favor of the Borrower or any other person. Section 4. No Discharge or Diminishment of Guaranty. The obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible payment in full in cash of the Obligations), including any claim of waiver, release, surrender, alteration or compromise of any of the Obligations, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by the failure of the Administrative Agent or any Lender to assert any claim or demand or to enforce any remedy under the Credit Agreement, any other Loan Document or any other agreement, by any waiver or modification of any provision of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or omission that may or might in any manner or to any extent vary the risk of any Guarantor or that would otherwise operate as a discharge of each Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of all the Obligations). Section 5. Defenses of Borrower Waived. To the fullest extent permitted by applicable law, each Guarantor waives any defense based on or arising out of any defense of the Borrower or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower, other than the final and indefeasible payment in full in cash of the Obligations. The Administrative Agent and the Lenders may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with the Borrower or any other guarantor, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Obligations have been fully, finally and indefeasibly paid in cash. Pursuant to applicable law, each Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against the Borrower or any other Guarantor or guarantor, as the case may be, or any security. Section 6. Agreement to Pay; Subordination. In furtherance of the foregoing and not in limitation of any other right that the Administrative Agent or any Lender has at law or in equity against any Guarantor by virtue E-2 hereof, upon the failure of the Borrower or any other Loan Party to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, each Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Administrative Agent for the benefit of the Lenders in cash the amount of such unpaid Obligations. Upon payment by any Guarantor of any sums to the Administrative Agent, all rights of such Guarantor against the Borrower arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior indefeasible payment in full in cash of all the Obligations. In addition, any indebtedness of the Borrower now or hereafter held by any Guarantor is hereby subordinated in right of payment to the prior payment in full in cash of the Obligations. If any amount shall erroneously be paid to any Guarantor on account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii) any such indebtedness of the Borrower, such amount shall be held in trust for the benefit of the Administrative Agent and the Lenders and shall forthwith be paid to the Administrative Agent to be credited against the payment of the Obligations, whether matured or unmatured, in accordance with the terms of the Loan Documents. Section 7. Information. Each Guarantor assumes all responsibility for being and keeping itself informed of the Borrower's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder, and agrees that none of the Administrative Agent or the Lenders will have any duty to advise any of the Guarantors of information known to it or any of them regarding such circumstances or risks. Section 8. Representations and Warranties. Each Guarantor represents and warrants as to itself that all representations and warranties relating to it (as a Subsidiary of the Borrower) contained in the Credit Agreement are true and correct. Section 9. Termination. The guarantees made hereunder (a) shall terminate when all the Obligations have been paid in full in cash and the Lenders have no further commitment to lend under the Credit Agreement, the LC Exposure has been reduced to zero and the Issuing Bank has no further obligation to issue Letters of Credit under the Credit Agreement and (b) 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 Lender or any Guarantor upon the bankruptcy or reorganization of the Borrower, any Guarantor or otherwise. In connection with the foregoing, the Administrative Agent shall execute and deliver to such Guarantor or Guarantor's designee, at such Guarantor's expense, any documents or instruments which such Guarantor shall reasonably request from time to time to evidence such termination and release. Section 10. Binding Effect; Several 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 Guarantors that are contained in this Agreement shall bind and inure to the benefit of each party hereto and their respective successors and assigns. This Agreement shall become effective as to any Guarantor when a counterpart hereof executed on behalf of such Guarantor shall have been delivered to the Administrative Agent, and a counterpart hereof shall have been executed on behalf of the Administrative Agent, and thereafter shall be binding upon such Guarantor and the Administrative Agent and their respective successors and assigns, and shall inure to the benefit of such Guarantor, the Administrative Agent and the Lenders, and their respective successors and assigns, except that no Guarantor shall have the right to assign its rights or obligations hereunder or any interest herein (and any such attempted assignment shall be void). If all of the capital stock of a Guarantor is sold, transferred or otherwise disposed of pursuant to a transaction permitted by the Credit Agreement, such Guarantor shall be released from its obligations under this Agreement without further action. This Agreement shall be construed as a separate agreement with respect to each Guarantor and may be amended, modified, supplemented, waived or released with respect to any Guarantor without the approval of any other Guarantor and without affecting the obligations of any other Guarantor hereunder. Section 11. Waivers; Amendment. (a) No failure or delay of the Administrative Agent in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right E-3 or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights of the Administrative Agent hereunder and of the Lenders under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Guarantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver and consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any Guarantor in any case shall entitle such Guarantor to any other or further notice in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Guarantors with respect to which such waiver, amendment or modification relates and the Administrative Agent, with the prior written consent of the Required Lenders (except as otherwise provided in the Credit Agreement). Section 12. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA. Section 13. Notices. All communications and notices hereunder shall be in writing and given as provided in Section 10.1 of the Credit Agreement. All communications and notices hereunder to each Guarantor shall be given to it at its address set forth on Schedule I attached hereto. Section 14. Survival of Agreement; Severability. (a) All covenants, agreements representations and warranties made by the Guarantors herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or the other Loan Documents shall be considered to have been relied upon by the Administrative Agent and the Lenders and shall survive the making by the Lenders of the Loans and the issuance of the Letters of Credit by the Issuing Bank regardless of any investigation made by any of them or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any other fee or amount payable under this Agreement or any other Loan Document are outstanding and unpaid or the LC Exposure does not equal zero and as long as the Commitments have not been terminated. (b) In the event one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). 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 15. Counterparts. This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract (subject to Section 10), and shall become effective as provided in Section 10. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually executed counterpart of this Agreement. Section 16. Terms. The definition of terms specified in Section 1.4 of the Credit Agreement shall be applicable to this Agreement. Section 17. Jurisdiction; Consent to Service of Process. (a) Each Guarantor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any Georgia State court or Federal court of the United States of America sitting in Fulton County and any appellate court from any thereof, in E-4 any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Georgia State court or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any Guarantor or its properties in the courts of any jurisdiction. (b) Each Guarantor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any Georgia State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 13. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. Section 18. Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 18. Section 19. Additional Subsidiaries. Pursuant to Section 5.10 of the Credit Agreement, each Subsidiary Loan Party that was not in existence on the date of the Credit Agreement is required to enter into this Agreement as a Guarantor upon becoming a Subsidiary Loan Party. Upon execution and delivery after the date hereof by the Administrative Agent and such Subsidiary of an instrument in the form of Annex 1, such Subsidiary shall become a Guarantor hereunder with the same force and effect as if originally named as a Guarantor herein. The execution and delivery of any instrument adding an additional Guarantor as a party to this Agreement shall not require the consent of any other Guarantor hereunder. The rights and obligations of each Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor as a party to this Agreement. Section 20. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and the Issuing Bank are hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other Indebtedness at any time owing by such Lender or the Issuing Bank to or for the credit or the account of any Guarantor against any or all the obligations of such Guarantor now or hereafter existing under this Agreement and the other Loan Documents held by such Lender or the Issuing Bank, irrespective of whether or not such Person shall have made any demand under this Agreement or any other Loan Documents and although such obligations may be unmatured. The rights of each Lender and the Issuing Bank under this Section 20 are in addition to other rights and remedies (including other rights of setoff) which such Lender or the Issuing Bank, as the case may be, may have. E-5 Section 21. Savings Clause. (a) It is the intent of each Guarantor and the Administrative Agent that each Guarantor's maximum obligations hereunder shall be, but not in excess of: (i) in a case or proceeding commenced by or against any Guarantor under the provisions of Title 11 of the United States Code, 11 U.S.C. ss.ss.101 et seq. (the "Bankruptcy Code") on or within one year from the date on which any of the Obligations are incurred, the maximum amount which would not otherwise cause the Obligations (or any other obligations of such Guarantor owed to the Administrative Agent or the Lenders) to be avoidable or unenforceable against such Guarantor under (i) Section 548 of the Bankruptcy Code or (ii) any state fraudulent transfer or fraudulent conveyance act or statute applied in such case or proceeding by virtue of Section 544 of the Bankruptcy Code; or ARTICLE XI (ii) in a case or proceeding commenced by or against any Guarantor under the Bankruptcy Code subsequent to one year from the date on which any of the Obligations are incurred, the maximum amount which would not otherwise cause the Obligations (or any other obligations of such Guarantor to the Administrative Agent or the Lenders) to be avoidable or unenforceable against such Guarantor under any state fraudulent transfer or fraudulent conveyance act or statute applied in any such case or proceeding by virtue of Section 544 of the Bankruptcy Code; or ARTICLE XII (iii) in a case or proceeding commenced by or against any Guarantor under any law, statute or regulation other than the Bankruptcy Code (including, without limitation, any other bankruptcy, reorganization, arrangement, moratorium, readjustment of debt, dissolution, liquidation or similar debtor relief laws), the maximum amount which would not otherwise cause the Obligations (or any other obligations of such Guarantor to the Administrative Agent or the Lenders) to be avoidable or unenforceable against such Guarantor under such law, statute or regulation including, without limitation, any state fraudulent transfer or fraudulent conveyance act or statute applied in any such case or proceeding. ARTICLE XIII (b) The substantive laws under which the possible avoidance or unenforceability of the Obligations (or any other obligations of such Subsidiary Guarantor to the Guaranteed Parties) shall be determined in any case or proceeding shall hereinafter be referred to as the "Avoidance Provisions." To the extent set forth in Section 21(a) (i), (ii), and (iii), but only to the extent that the Obligations would otherwise be subject to avoidance or found unenforceable under the Avoidance Provisions, if any Guarantor is not deemed to have received valuable consideration, fair value or reasonably equivalent value for the Obligations, or if the Obligations would render such Guarantor insolvent, or leave such Guarantor with an unreasonably small capital to conduct its business, or cause such Guarantor to have incurred debts (or to have intended to have incurred debts) beyond its ability to pay such debts as they mature, in each case as of the time any of the Obligations are deemed to have been incurred under the Avoidance Provisions and after giving effect to the contribution by such Guarantor, the maximum Obligations for which such Guarantor shall be liable hereunder shall be reduced to that amount which, after giving effect thereto, would not cause the Obligations (or any other obligations of such Guarantor to the Administrative Agent or the Lenders), as so reduced, to be subject to avoidance or unenforceability under the Avoidance Provisions. ARTICLE XIV (c) This Section 21 is intended solely to preserve the rights of the Administrative Agent and the Lenders hereunder to the maximum extent that would not cause the Obligations of such Guarantor to be subject to avoidance or unenforceability under the Avoidance Provisions, and neither the Guarantors nor any other Person shall have any right or claim under this Section 21 as against the Administrative Agent or Lenders that would not otherwise be available to such Person under the Avoidance Provisions. E-6 [Signature pages follow] E-7 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. GUARANTORS: Address: CAROLINA PUMP & SUPPLY CORP CHAD SUPPLY, INC. 20 North Orange Avenue DOUGLAS LEONHARDT & ASSOCIATES, INC. Suite 200 ELECTRIC LABORATORIES AND SALES CORPORATION Orlando, FL 32801 GILLELAND CONCRETE PRODUCTS, INC. Attn: Treasurer HSI ACQUISITION CORPORATION HSI FUSION SERVICES, INC. (i) HSI INDIANA, LLC HSI NORTH CAROLINA, LLC HUGHES AVIATION, INC. HUGHES SUPPLY SHARED SERVICES, INC. HUGHES SUPPLY (VA), INC. 1) HUGHES WATER & SEWER COMPANY JUNO INDUSTRIES, INC. KAMEN SUPPLY COMPANY, INC. KINGSTON PIPE INDUSTRIES, INC. METALS INCORPORATED METALS, INC. - GULF COAST DIVISION MILLS & LUPTON SUPPLY COMPANY E-8 MOORE ELECTRIC SUPPLY, INC. MOUNTAIN COUNTRY SUPPLY, INC. OLANDER & BROPHY, INCORPORATED ONE-STOP SUPPLY, INC. PAINE SUPPLY OF JACKSON, INC. PANHANDLE PIPE AND SUPPLY CO., INC. Section 14.2. REACTION SUPPLY CORPORATION a) SCOTT-PARISH ELECTRICAL SUPPLY COMPANY SHRADER HOLDING COMPANY, INC. STAINLESS TUBULAR PRODUCTS, INC. USCO INCORPORATED U.S. FUSION SERVICES, INC. UTILISERVE, INC. (b) WATERWORKS SALES COMPANY Section 14.3. WCC MERGER CORPORATION Section 14.4. By: ___________________________________ Name: Title: Address: L & T OF DELAWARE, INC. SWS ACQUISITION, LLC 1403 Foulk Road, Suite 102 SWS FUNDING, LLC Wilmington, DE 19803 Z & L ACQUISITION CORP. E-9 By: ___________________________________ Name: Title: Address: HSI FUNDING, LLC HSI HOLDINGS, INC. HSI IP, INC. By: ___________________________________ Name: Title: Address: SOUTHWEST STAINLESS, L.P. 1403 Foulk Road, Suite 102 Wilmington, DE 19803 By: Z&L ACQUISITION CORP., its General Partner By: ___________________________________ Name: Title: E-10 SCHEDULE I CAROLINA PUMP & SUPPLY CORP CHAD SUPPLY, INC. DOUGLAS LEONHARDT & ASSOCIATES, INC. ELECTRIC LABORATORIES AND SALES CORPORATION GILLELAND CONCRETE PRODUCTS, INC. HSI ACQUISITION CORPORATION HSI FUSION SERVICES, INC. HSI INDIANA, LLC HSI NORTH CAROLINA, LLC HUGHES AVIATION, INC. HUGHES SUPPLY SHARED SERVICES, INC. HUGHES SUPPLY (VA), INC. HUGHES WATER & SEWER COMPANY JUNO INDUSTRIES, INC. KAMEN SUPPLY COMPANY, INC. KINGSTON PIPE INDUSTRIES, INC. METALS INCORPORATED METALS, INC. - GULF COAST DIVISION MILLS & LUPTON SUPPLY COMPANY MOORE ELECTRIC SUPPLY, INC. MOUNTAIN COUNTRY SUPPLY, INC. OLANDER & BROPHY, INCORPORATED ONE-STOP SUPPLY, INC. E-1 PAINE SUPPLY OF JACKSON, INC. PANHANDLE PIPE AND SUPPLY CO., INC. REACTION SUPPLY CORPORATION SCOTT-PARISH ELECTRICAL SUPPLY COMPANY SHRADER HOLDING COMPANY, INC. STAINLESS TUBULAR PRODUCTS, INC. USCO INCORPORATED U.S. FUSION SERVICES, INC. UTILISERVE, INC. WATERWORKS SALES COMPANY WCC MERGER CORPORATION E-2 ANNEX 1 TO THE SUBSIDIARY GUARANTY AGREEMENT SUPPLEMENT NO. [ ] dated as of [ ], to the Subsidiary Guaranty Agreement (the "Guaranty Agreement") dated as of March 26, 2003 executed by each of the subsidiaries of Hughes Supply, Inc., a Florida corporation, (the "Borrower") listed on Schedule I thereto (each such Subsidiary individually, a "Guarantor" and collectively, the "Guarantors"), in favor of SUNTRUST BANK, a Georgia banking corporation, as Administrative Agent (the "Administrative Agent") for the Lenders (as defined in the Credit Agreement referred to below) and for the benefit of the Lenders. A. Reference is made to the Revolving Credit Agreement dated as of March 26, 2003 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the Lenders from time to time party thereto (the "Lenders") and SunTrust Bank, as Administrative Agent, Swingline Lender and Issuing Bank (in such capacity, the "Issuing Bank"). B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Guaranty Agreement and the Credit Agreement. C. The Guarantors have entered into the Guaranty Agreement in order to induce the Lenders to make Loans and the Issuing Bank to issue Letters of Credit. Pursuant to Section 5.10 of the Credit Agreement, each Subsidiary Loan Party that was not in existence or not a Subsidiary Loan Party on the date of the Credit Agreement is required to enter into the Guaranty Agreement as a Guarantor upon becoming a Subsidiary Loan Party. Section 19 of the Guaranty Agreement provides that additional Subsidiaries of the Borrower may become Guarantors under the Guaranty Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary of the Borrower (the "New Guarantor") is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Guarantor under the Guaranty 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 Administrative Agent and the New Guarantor agree as follows: ARTICLE XV Section 1. In accordance with Section 19 of the Guaranty Agreement, the New Guarantor by its signature below becomes a Guarantor under the Guaranty Agreement with the same force and effect as if originally named therein as a Guarantor and the New Guarantor hereby (a) agrees to all the terms and provisions of the Guaranty Agreement applicable to it as Guarantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Guarantor thereunder are true and correct on and as of the date hereof. Each reference to a Guarantor in the Guaranty Agreement shall be deemed to include the New Guarantor. The Guaranty Agreement is hereby incorporated herein by reference. ARTICLE XVI Section 2. The New Guarantor represents and warrants to the Administrative Agent and the Lenders 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. ARTICLE XVII Section 3. This Supplement may be executed in 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 Administrative Agent shall have received counterparts of this Supplement that, E-3 when taken together, bear the signatures of the New Guarantor and the Administrative 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. ARTICLE XVIII Section 4. Except as expressly supplemented hereby, the Guaranty Agreement shall remain in full force and effect. ARTICLE XIX Section 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA. ARTICLE XX 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, the validity, legality and enforceability of the remaining provisions contained herein and in the Guaranty Agreement shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision hereof in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). 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. ARTICLE XXI Section 7. All communications and notices hereunder shall be in writing and given as provided in Section 13 of the Guaranty Agreement. All communications and notices hereunder to the New Guarantor shall be given to it at the address set forth under its signature below, with a copy to the Borrower. ARTICLE XXII Section 8. The New Guarantor agrees to reimburse the Administrative Agent for its out-of-pocket expenses in connection with this Supplement, including the fees, disbursements and other charges of counsel for the Administrative Agent. E-4 IN WITNESS WHEREOF, the New Guarantor and the Administrative Agent have duly executed this Supplement to the Guaranty Agreement as of the day and year first above written. [Name of New Guarantor] By:____________________________________ Name: Title: Address: SUNTRUST BANK, as Administrative Agent By:____________________________________ Name: Title: E-5 EXHIBIT F FORM OF INDEMNITY, SUBROGATION AND CONTRIBUTION AGREEMENT THIS INDEMNITY, SUBROGATION and CONTRIBUTION AGREEMENT dated as of March 26, 2003, by and among Hughes Supply, Inc., a Florida corporation (the "Borrower"), each Subsidiary listed on Schedule I hereto (the "Guarantors"), and SUNTRUST BANK, a Georgia banking corporation, as administrative agent (in such capacity, the "Administrative Agent") for the Lenders (as defined in the Credit Agreement referred to below). Reference is made to (a) the Revolving Credit Agreement dated as of March 26, 2003 (as amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the lenders from time to time party thereto and SunTrust Bank, as Administrative Agent, Swingline Lender and Issuing Bank (in such capacity, the "Issuing Bank"), and (b) the Subsidiary Guaranty Agreement dated as March 26, 2003, by the Guarantors in favor of the Administrative Agent (as amended, restated, supplemented or otherwise modified from time to time, the "Guaranty Agreement"). Capitalized terms used herein and not defined herein shall have 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, pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement. The Guarantors have guaranteed such Loans and the other Obligations (as defined in the Guaranty Agreement) of the Borrower under the Credit Agreement pursuant to the Guaranty Agreement. 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 Borrower and the Guarantors of an agreement in the form hereof. Accordingly, the Borrower, each Guarantor and the Administrative Agent agree as follows: Section 1. Indemnity and Subrogation. In addition to all such rights of indemnity and subrogation as the Guarantors may have under applicable law (but subject to Section 3), the Borrower agrees that, in the event a payment shall be made by any Guarantor under the Guaranty Agreement, the Borrower shall indemnify such Guarantor for the full amount of such payment and such Guarantor shall be subrogated to the rights of the person to whom such payment shall have been made to the extent of such payment. Section 2. Contribution and Subrogation. Each Guarantor (a "Contributing Guarantor") agrees (subject to Section 3) that, in the event a payment shall be made by any other Guarantor under the Guaranty Agreement, such other Guarantor (the "Claiming Guarantor") shall not have been fully indemnified by the Borrower as provided in Section 1, the Contributing Guarantor shall indemnify the Claiming Guarantor in an amount equal to the amount of such payment multiplied by a fraction of which the numerator shall be the net worth of the Contributing Guarantor on the date hereof and the denominator shall be the aggregate net worth of all the Guarantors on the date hereof (or, in the case of any Guarantor becoming a party hereto pursuant to Section 12, the E-1 date of the Supplement hereto executed and delivered by such 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 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 the Borrower or any Guarantor to make the payments required under applicable law or otherwise shall in any respect limit the obligations and liabilities of any Guarantor with respect to its obligations hereunder, and each Guarantor shall remain liable for the full amount of the obligations of such Guarantor hereunder. Section 4. Termination. This Agreement shall survive and be in full force and effect so long as any Obligation is outstanding and has not been indefeasibly paid in full in cash, and so long as the LC Exposure has not been reduced to zero or any of the Commitments under the Credit Agreement have 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 Lender or any Guarantor upon the bankruptcy or reorganization of the Borrower, any Guarantor or otherwise. Section 5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA. Section 6. No Waiver; Amendment. (a) No failure on the part of the Administrative Agent or any 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 Administrative Agent or any 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 Administrative Agent and the 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 Guarantors and the Administrative Agent, with the prior written consent of the Required Lenders (except as otherwise provided in the Credit Agreement). Section 7. Notices. All communications and notices hereunder shall be in writing and given as provided in the Guaranty Agreement and addressed as specified therein. 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 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 Guarantor is released from its obligations under the Guaranty Agreement in accordance with such Guaranty Agreement and the Credit Agreement, such 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 Guarantor herein and in the certificates or other instruments prepared or delivered in connection E-2 with this Agreement or the other Loan Documents shall be considered to have been relied upon by the Administrative Agent, the Lenders and each Guarantor and 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 or this Agreement or under any of the other Loan Documents is outstanding and unpaid or the LC Exposure does not equal zero and as long as the Commitments have not been terminated. (b) In case 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 Guarantor when a counterpart bearing the signature of such Guarantor shall have been delivered to the Administrative 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. Terms. The definition of terms specified in Section 1.4 of the Credit Agreement shall be applicable to this Agreement. Section 12. Additional Guarantors. Pursuant to Section 5.10 of the Credit Agreement, each Subsidiary Loan Party of the Borrower that was not in existence or not such a Subsidiary Loan Party on the date of the Credit Agreement is required to enter into the Guaranty Agreement as Guarantor upon becoming such a Subsidiary Loan Party. Upon the execution and delivery, after the date hereof, by the Administrative Agent and such Subsidiary of an instrument in the form of Annex I hereto, such Subsidiary shall become a Guarantor hereunder with the same force and effect as if originally named as a Guarantor hereunder. The execution and delivery of any instrument adding an additional Guarantor as a party to this Agreement shall not require the consent of any Guarantor hereunder. The rights and obligations of each Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor as a party to this Agreement. (signatures on following pages) E-3 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. Address: CAROLINA PUMP & SUPPLY CORP CHAD SUPPLY, INC. 20 North Orange Avenue Suite 200 DOUGLAS LEONHARDT & ASSOCIATES, INC. Orlando, FL 32801 ELECTRIC LABORATORIES AND SALES CORPORATION Attn: Treasurer GILLELAND CONCRETE PRODUCTS, INC. HSI ACQUISITION CORPORATION HSI FUSION SERVICES, INC. (i) HSI INDIANA, LLC HSI NORTH CAROLINA, LLC HUGHES AVIATION, INC. HUGHES SUPPLY SHARED SERVICES, INC. HUGHES SUPPLY (VA), INC. 1) HUGHES WATER & SEWER COMPANY JUNO INDUSTRIES, INC. KAMEN SUPPLY COMPANY, INC. KINGSTON PIPE INDUSTRIES, INC. METALS INCORPORATED METALS, INC. - GULF COAST DIVISION MILLS & LUPTON SUPPLY COMPANY MOORE ELECTRIC SUPPLY, INC. MOUNTAIN COUNTRY SUPPLY, INC. OLANDER & BROPHY, INCORPORATED ONE-STOP SUPPLY, INC. E-4 PAINE SUPPLY OF JACKSON, INC. PANHANDLE PIPE AND SUPPLY CO., INC. Section 22.2. REACTION SUPPLY CORPORATION a) SCOTT-PARISH ELECTRICAL SUPPLY COMPANY SHRADER HOLDING COMPANY, INC. STAINLESS TUBULAR PRODUCTS, INC. USCO INCORPORATED U.S. FUSION SERVICES, INC. UTILISERVE, INC. (b) WATERWORKS SALES COMPANY Section 22.3. WCC MERGER CORPORATION Section 22.4. By: _____________________________________ Name: Title: Address: L & T OF DELAWARE, INC. 1403 Foulk Road, Suite 102 SWS ACQUISITION, LLC Wilmington, DE 19803 SWS FUNDING, LLC Z & L ACQUISITION CORP. By: _____________________________________ Name: Title: E-5 Address: HSI FUNDING, LLC HSI HOLDINGS, INC. HSI IP, INC. By: _____________________________________ Name: Title: Address: SOUTHWEST STAINLESS, L.P. 1403 Foulk Road, Suite 102 Wilmington, DE 19803 By: Z&L ACQUISITION CORP., its General Partner By: _____________________________________ Name: Title: E-6 SCHEDULE I CAROLINA PUMP & SUPPLY CORP CHAD SUPPLY, INC. DOUGLAS LEONHARDT & ASSOCIATES, INC. ELECTRIC LABORATORIES AND SALES CORPORATION GILLELAND CONCRETE PRODUCTS, INC. HSI ACQUISITION CORPORATION HSI FUSION SERVICES, INC. HSI INDIANA, LLC HSI NORTH CAROLINA, LLC HUGHES AVIATION, INC. HUGHES SUPPLY SHARED SERVICES, INC. HUGHES SUPPLY (VA), INC. HUGHES WATER & SEWER COMPANY JUNO INDUSTRIES, INC. KAMEN SUPPLY COMPANY, INC. KINGSTON PIPE INDUSTRIES, INC. METALS INCORPORATED METALS, INC. - GULF COAST DIVISION MILLS & LUPTON SUPPLY COMPANY MOORE ELECTRIC SUPPLY, INC. MOUNTAIN COUNTRY SUPPLY, INC. OLANDER & BROPHY, INCORPORATED ONE-STOP SUPPLY, INC. PAINE SUPPLY OF JACKSON, INC. F-1 PANHANDLE PIPE AND SUPPLY CO., INC. REACTION SUPPLY CORPORATION SCOTT-PARISH ELECTRICAL SUPPLY COMPANY SHRADER HOLDING COMPANY, INC. STAINLESS TUBULAR PRODUCTS, INC. USCO INCORPORATED U.S. FUSION SERVICES, INC. UTILISERVE, INC. WATERWORKS SALES COMPANY WCC MERGER CORPORATION F-2 ANNEX I TO THE INDEMNITY, SUBROGATION AND CONTRIBUTION AGREEMENT SUPPLEMENT NO. [ ] dated as of [ ], to the Indemnity, Subrogation and Contribution Agreement dated as of March 26, 2003 (as the same may be amended, restated supplemented or otherwise modified from time to time, the "Indemnity, Subrogation and Contribution Agreement") executed by Hughes Supply, Inc., a Florida corporation (the "Borrower"), and each Subsidiary listed on Schedule I thereto (the "Guarantors") in favor of SUNTRUST BANK, a Georgia banking corporation, as administrative agent (the "Administrative Agent") for the Lenders (as defined in the Credit Agreement referred to below). A. Reference is made to (a) the Revolving Credit Agreement dated as of March 26, 2003 (as amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the lenders from time to time party thereto (the "Lenders") and SunTrust Bank, as the Administrative Agent, Swingline Lender and Issuing Bank (in such capacity, the "Issuing Bank "), and (b) the Subsidiary Guaranty Agreement dated as of March 26, 2003, by the Guarantors in favor of Administrative Agent (as amended, supplemented or otherwise modified from time to time, the "Guaranty 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 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. Pursuant to Section 5.10 of the Credit Agreement, each Subsidiary Loan Party that was not in existence or not such a Subsidiary Loan Party on the date of the Credit Agreement is required to enter into the Guaranty Agreement as a Guarantor upon becoming a Subsidiary Loan Party. Section 12 of the Indemnity, Subrogation and Contribution Agreement provides that additional Subsidiaries may become 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 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 Administrative 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 Guarantor under the indemnity, Subrogation and Contribution Agreement with the same force and effect as if originally named therein as a Guarantor and the New Guarantor hereby agrees to all the terms and provisions of the Indemnity, Subrogation and Contribution Agreement applicable to it as Guarantor thereunder. Each reference to a Guarantor in the Indemnity, Subrogation and Contribution F-3 Agreement shall be deemed to include the New Guarantor. The Indemnity, Subrogation and Contribution Agreement is hereby incorporated herein by reference. Section 2. The New Guarantor represents and warrants to the Administrative Agent and the Lenders 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 Administrative Agent shall have received counterparts of this Supplement that, when taken together, bear the signature of the New Guarantor and the Administrative 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 GEORGIA. 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 Administrative 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 Administrative Agent. (signatures on following page) F-4 IN WITNESS WHEREOF, the New Guarantor and the Administrative 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: SUNTRUST BANK, as Administrative Agent By:________________________________ Name: Title: F-5 EXHIBIT 2.3 FORM OF NOTICE OF REVOLVING BORROWING [Date] SunTrust Bank, as Administrative Agent for the Lenders referred to below 303 Peachtree Street, N.E. Atlanta, GA 30308 Attention: Agency Services Dear Sirs: Reference is made to the Revolving Credit Agreement dated as of March 26, 2003 (as amended and in effect on the date hereof, the "Credit Agreement"), among the undersigned, as Borrower, the Lenders named therein, and SunTrust Bank, as Administrative Agent. Terms defined in the Credit Agreement are used herein with the same meanings. This notice constitutes a Notice of Revolving Borrowing. The Borrower hereby requests a Revolving Borrowing under the Credit Agreement, and in that connection the Borrower specifies the following information with respect to the Revolving Borrowing requested hereby: (A) Aggregate principal amount of Revolving Borrowing (1):______________ Exhibit 2.3-1 (B) Date of Revolving Borrowing (which is a Business Day):______________ (C) Interest Rate basis (2):_______________________ (D) Interest Period (3):___________________________ (E) Location and number of Borrower's account to which proceeds of Revolving Borrowing are to be disbursed:________________ Exhibit 2.3-2 The Borrower hereby represents and warrants that the conditions specified in paragraphs (a), (b), (c), (d) and (e) of Section 3.2 of the Credit Agreement are satisfied. Very truly yours, HUGHES SUPPLY, INC. By:___________________________ Name: Title: - ---------- (1) Not less than $5,000,000 and an integral multiple of $1,000,000. (2) Eurodollar Borrowing or Base Rate Borrowing. (3) Which must comply with the definition of "Interest Period" and end not later than the Revolving Commitment Termination Date. Exhibit 2.3-3 EXHIBIT 2.6 FORM OF NOTICE OF SWINGLINE BORROWING [Date] SunTrust Bank, as Swingline Lender 303 Peachtree Street, N.E. Atlanta, GA 30308 Attention: Agency Services Dear Sirs: Reference is made to the Revolving Credit Agreement dated as of March 26, 2003 (as amended and in effect on the date hereof, the "Credit Agreement"), among the undersigned, as Borrower, the Lenders named therein, and SunTrust Bank, as Administrative Agent. Terms defined in the Credit Agreement are used herein with the same meanings. This notice constitutes a Notice of Swingline Borrowing. The Borrower hereby requests a Swingline Borrowing under the Credit Agreement, and in that connection the Borrower specifies the following information with respect to the Swingline Borrowing requested hereby: (A) Principal amount of Swingline Loan:__________________________ (B) Date of Swingline Loan (which is a Business Day):____________ (C) Location and number of Borrower's account to which proceeds of Swingline Loan are to be disbursed:__________________ Exhibit 2.6 The Borrower hereby represents and warrants that the conditions specified in paragraphs (a), (b), (c), (d) and (e) of Section 3.2 of the Credit Agreement are satisfied. Very truly yours, HUGHES SUPPLY, INC. By:_____________________________ Name: Title: Exhibit 2.6-2 EXHIBIT 2.7-A FORM OF COMPETITIVE BID REQUEST [Date] SunTrust Bank, as Administrative Agent 303 Peachtree Street, N.E. Atlanta, GA 30308 Attention: Ladies and Gentlemen: Reference is made to the Revolving Credit Agreement dated as of March 26, 2003 (as amended and in effect on the date hereof, the "Credit Agreement"), among the undersigned, the lenders from time to time party thereto, and SunTrust Bank, as Administrative Agent. Terms defined in the Credit Agreement are used herein with the same meanings. The undersigned hereby gives notice pursuant to Section 2.7 of the Credit Agreement that we request Competitive Bids for the following proposed Competitive Bid Borrowing(s): (1) Proposed date of Borrowing (which is a Business Day):_______________ (2) Principal Amount(1):__________________________ (3) Interest Period(s) and the last day thereof (2) ___________ (4) Location and number of Borrower's account to which funds are to be deposited:)__________________________ Exhibit 2.7-A - 1 The Borrower hereby represents and warrants that the conditions specified in paragraphs (a), (b), (c), (d) and (e) of Section 3.2 of the Credit Agreement are satisfied. Very truly yours, HUGHES SUPPLY, INC. By:_____________________________ Name: Title: - ---------- (1) At no time shall (i) the sum of the aggregate principal amount of outstanding Competitive Bid Loans plus the aggregate Revolving Credit Exposures of all Lenders exceed the Aggregate Revolving Commitment Amount and (ii) the aggregate principal amount of outstanding Competitive Bid Loans exceed the Competitive Bid Loan Limit. (2) Which must comply with the definition of "Interest Period" and end not later than the Revolving Commitment Termination Date. Exhibit 2.7-A - 2 EXHIBIT 2.7-B FORM OF NOTICE TO LENDERS OF COMPETITIVE BID REQUEST [Name of Lender] [Address of Lender] Attention: Ladies and Gentlemen: Reference is made to the Revolving Credit Agreement dated as of March 26, 2003 (as amended and in effect on the date hereof, the "Credit Agreement"), among the undersigned, the lenders from time to time party thereto, and SunTrust Bank, as Administrative Agent. Terms defined in the Credit Agreement are used herein with the same meanings. The Borrower delivered a Competitive Bid Request requesting a Competitive Bid on ______________, _____, pursuant to Section 2.7(b) of the Credit Agreement, and in that connection you are invited to submit a Competitive Bid by [Date]/[Time].(1) Your Competitive Bid must comply with Section 2.7(c) of the Credit Agreement and the terms set forth below on which the Competitive Bid Request was made: (A) Date of Competitive Bid Borrowing:__________________________________ (B) Principal amount of Competitive Bid Borrowing:______________________ (C) Interest Period(s) and the last day thereof: _______________________ Exhibit 2.7-B Very truly yours, SUNTRUST BANK, as Administrative Agent By:________________________________ Name: Title: - ---------- (1) The Competitive Bid must be received by the Borrower not later than 11:30 a.m., on the proposed date of Borrowing. Exhibit 2.7-B - 2 EXHIBIT 2.7-C FORM OF COMPETITIVE BID [Date] Hughes Supply, Inc. 20 N. Orange Avenue, Suite 200 Orlando, Florida 32801 Attention: Chief Financial Officer Telecopy Number: 407-540-4914 Attention: Ladies and Gentlemen: The undersigned [Name of Lender], refers to the Revolving Credit Agreement dated as of March 26, 2003 (as amended and in effect on the date hereof, the "Credit Agreement"), among the undersigned, the lenders from time to time party thereto, and SunTrust Bank, as Administrative Agent. Terms defined in the Credit Agreement are used herein with the same meanings. The undersigned Lender hereby makes a Competitive Bid pursuant to Section 2.7(c) of the Credit Agreement, in response to the Competitive Bid Request made by the Borrower on _____________, ____, and in that connection sets forth below the terms on which such Competitive Bid is made: Principal Amount(1):___________________ Interest Period and the last day thereof(2): __________________ Exhibit 2.7 - C Competitive Bid Rate(3):_____________ The undersigned hereby confirms that it is prepared to make Competitive Bid Loans to the Borrower upon acceptance by the Borrower of this bid in accordance with Section 2.7(d) of the Credit Agreement. Very truly yours, [NAME OF BANK] By:_____________________________ Name: Title: - ---------- (1) Multiple bids will be accepted by the Borrower. (2) The Interest Period(s) must be the Interest Period(s) specified in the Competitive Bid Request. (3) e.g., Adjusted LIBO Rate + or - _____% per annum, in the case of Eurodollar Loans (expressed in the form of a decimal to no more than four decimal places). Exhibit 2.7 -C-2 EXHIBIT 2.9 FORM OF NOTICE OF CONVERSION/CONTINUATION [DATE] Reference is made to the Revolving Credit Agreement dated as of March 26, 2003 (as amended and in effect on the date hereof, the "Credit Agreement"), among the undersigned, as Borrower, the Lenders named therein, and SunTrust Bank, as Administrative Agent. Terms defined in the Credit Agreement are used herein with the same meanings. Borrower hereby gives irrevocable notice, pursuant to Section 2.9 of the Credit Agreement, of its request to: (1) on [DATE] convert [$___________] of the aggregate outstanding principal amount of the Base Rate Loan(s) into a Eurodollar Loan having an Interest Period of [_____] month(s); (2) on [DATE] continue [$___________] of the aggregate outstanding principal amount of the Eurodollar Loan(s), bearing interest at the Adjusted LIBO Rate, as a Eurodollar Loan having an Interest Period of [_____] month(s). Borrower hereby represents and warrants that all of the conditions contained in Section 3.2 of the Loan Agreement have been satisfied on and as of the date hereof, and will continue to be satisfied on and as of the date of the conversion/continuation requested hereby, before and after giving effect thereto. Exhibit 2.9 IN WITNESS WHEREOF, Borrower has caused this Notice of Conversion/Continuation to be executed and delivered by its duly authorized officer as of the date first set forth above. HUGHES SUPPLY, INC. By:______________________________ Name: Title: Exhibit 2.9 - 2 EXHIBIT 3.1(b)(iv) FORM OF SECRETARY'S CERTIFICATE OF [BORROWER][SUBSIDIARY LOAN PARTY] Reference is made to the Revolving Credit Agreement dated as of March 26, 2003 (the "Credit Agreement"), among Hughes Supply, Inc. (the "Borrower"), the Lenders named therein, and SunTrust Bank, as Administrative Agent. Terms defined in the Credit Agreement are used herein with the same meanings. This certificate is being delivered pursuant to Section 3.1 of the Credit Agreement. I, [ ], Secretary of the [Borrower/Subsidiary Loan Party], DO HEREBY CERTIFY that: (a) there have been no amendments or supplements to, or restatements of, the articles of incorporation of the [Borrower/Subsidiary Loan Party] delivered pursuant to Section 3.1 of the Credit Agreement; (b) no proceedings have been instituted or are pending or contemplated with respect to the dissolution, liquidation or sale of all or substantially all the assets of the [Borrower/Subsidiary Loan Party] or threatening its existence or the forfeiture of any of its corporate rights; (c) annexed hereto as Exhibit A is a true and correct copy of the Bylaws of the [Borrower/Subsidiary Loan Party] as in effect on the date hereof; (d) annexed hereto as Exhibit B is a true and correct copy of certain resolutions duly adopted by the Board of Directors of the [Borrower/Subsidiary Loan Party] on [Date], authorizing the execution, delivery and performance of the Loan Documents, which resolutions are the only resolutions adopted by the Board of Directors of the [Borrower/Subsidiary Loan Party] or any committee thereof relating to the Credit Agreement and the other Loan Documents to which the [Borrower/Subsidiary Loan Party] is a party and the transactions contemplated therein and have not been revoked, amended, supplemented or modified and are in full force and effect on the date hereof; and (e) each of the persons named below is a duly elected and qualified officer of the [Borrower/Subsidiary Loan Party] holding the respective office set forth opposite his or her name and the signature set forth opposite of each such person is his or her genuine signature: Exhibit 3.1(b)(iv)-1 Name Title Specimen Signature ---- ----- ------------------ ------------------------ ------------------ ------------------ ------------------------ ------------------ ------------------ ------------------------ ------------------ ------------------ ------------------------ ------------------ ------------------ IN WITNESS WHEREOF, I have hereunto signed my name this ___ day of __________, 2003. ----------------------------- Name: Secretary: I, [ ], [ ] of the [Borrower/Subsidiary Loan Party], do hereby certify that [ ] has been duly elected, is duly qualified and is the [Assistant] Secretary of the [Borrower/Subsidiary Loan Party], that the signature set forth above is [his/her] genuine signature. ----------------------------- Name: Title: Exhibit 3.1(b)(iv)-2 EXHIBIT 3.1(b)(vii) FORM OF OFFICER'S CERTIFICATE Reference is made to the Revolving Credit Agreement dated as of March 26, 2003 (the "Credit Agreement"), among Hughes Supply, Inc. (the "Borrower"), the Lenders from time to time party thereto, and SunTrust Bank, as Administrative Agent. Terms defined in the Credit Agreement are used herein with the same meanings. This certificate is being delivered pursuant to Section 3.1(b)(xi) of the Credit Agreement. I, [ ], [ ] of the Borrower, DO HEREBY CERTIFY that: (a) the representations and warranties of each Loan Party set forth in the Credit Agreement and the Loan Documents are true and correct in all material respects on and as of the date hereof; and (b) no Default or Event of Default has occurred and is continuing at the date hereof; and (c) since the date on which the most recent financial statements described in Section 4.4 of the Credit Agreement, there has been no change which has had or could reasonably be expected to have a Material Adverse Effect. IN WITNESS WHEREOF, I have hereunto signed my name this __ day of ________, 2003. ___________________________________ Name: Title: Exhibit 3.1(b)(vii) Exhibit 3(j) Juno Industries, Inc. and Florida Pipe & Supply Company were merged on June 2, 1999. Juno Industries, Inc. was the surviving corporation. 21 EXHIBIT 5.1 FORM OF COMPLIANCE CERTIFICATE Reference is made to the Revolving Credit Agreement dated as of March 26, 2003 (the "Credit Agreement"), among Hughes Supply, Inc. (the "Borrower"), the Lenders from time to time party thereto, and SunTrust Bank, as Administrative Agent. Terms defined in the Credit Agreement are used herein with the same meanings. This certificate is being delivered pursuant to Section 5.1(c) of the Credit Agreement. We, [NAME] and [NAME], being the principal executive officer and the principal financial officer, respectively, of the Borrower, DO HEREBY CERTIFY that: (a) We have reviewed the financial statements (the "Financial Statement") of the Borrower and its Subsidiaries attached as Exhibit A; (b) Based on our knowledge, the Financial Statements fairly represent, in all material respects, the financial condition, results of operations, shareholders' equity and cash flows of Borrower and its Subsidiaries in accordance with GAAP as at such date and for such period, subject only to normal year-end audit adjustments and the absence of footnotes in the case unaudited Financial Statements. (c) The Financial Statements have been filed with the Securities and Exchange Commission, and we have made the certifications to the Securities and Exchange Commission required under Sections 302(a) and 906(a) of the Sarbanes-Oxley Act of 2002, as amended. (d) Attached hereto as Exhibit B are calculations, in reasonable detail, demonstrating compliance with Article VI of the Credit Agreement; and (e) As of the date hereof, there exists no Default or Event of Default [except those listed on Exhibit C attached hereto, which Exhibit specifies the details of the Default or Event of Default as well as action which the Borrower has taken or proposes to take with respect thereto]; (f) Since the date of previous Financial Statements delivered pursuant to Section 4.4 or Section 5.1 of the Credit Agreement, there has been no change in GAAP or the application thereof [except for such changes set forth in Exhibit D attached hereto, which Exhibit specifies the effect of such change or changes on the Financial Statements delivered herewith.] Exhibit 5.1 IN WITNESS WHEREOF, we have hereunto signed our name this __ day of [MONTH], 200_. ________________________________ Name: Title: [Chief Executive Officer] [Chief Financial Officer] of Hughes Supply, Inc. Exhibit 5.1 EXHIBIT A Financial Statements Exhibit 5.1 EXHIBIT B Compliance Calculations Exhibit 5.1 EXHIBIT C Events of Default Exhibit 5.1 EXHIBIT D Changes in GAAP SUBSIDIARY GUARANTY AGREEMENT THIS SUBSIDIARY GUARANTY AGREEMENT dated as of March 26, 2003, executed by each of the Subsidiaries of Hughes Supply, Inc., a Florida corporation (the "Borrower") listed on Schedule I attached hereto (each such subsidiary individually, a "Guarantor" and collectively, the "Guarantors"), in favor of SunTrust Bank, a Georgia banking corporation, as administrative agent (the "Administrative Agent") for the Lenders (as defined in the Credit Agreement referred to below). Reference is made to the Revolving Credit Agreement dated as of March 26, 2003 (as amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the Lenders from time to time party thereto and SunTrust Bank, as administrative agent for the Lenders (in such capacity, the "Administrative Agent"), Swingline Lender and Issuing Bank (in such capacity, the "Issuing Bank"). Capitalized terms used herein and not defined herein shall have 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, pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement. Each of the Guarantors is a direct or indirect wholly-owned Subsidiary of the Borrower and acknowledges that it will derive substantial benefit from the making of the Loans by the Lenders and the issuance of the Letters of Credit by the Issuing Bank. 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 Guarantors of a Subsidiary Guaranty Agreement in the form hereof. As consideration therefor and in order to induce the Lenders to make Loans and the Issuing Bank to issue Letters of Credit, the Guarantors are willing to execute this Subsidiary Guaranty Agreement. Accordingly, the parties hereto agree as follows: Section 1. Guaranty. Each Guarantor unconditionally guarantees, jointly with the other Guarantors and severally, as a primary obligor and not merely as a surety, (a) the due and punctual payment of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement or disbursements, interest thereon and obligations to provide cash collateral, and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Loan Parties to the Administrative Agent and the Lenders under the Credit Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Loan Parties under or pursuant to the Credit Agreement and the other Loan Documents; and (c) the due and punctual payment and performance of all obligations of the Borrower, monetary or otherwise, under each Hedging Transaction entered into with a counterparty that was a Lender or an Affiliate of a Lender at the time such Hedging Transaction was entered into (all the monetary and other obligations referred to in the preceding clauses (a) through (c) being collectively called the "Obligations"). Each Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound by this Guaranty notwithstanding any extension or renewal of any Obligation. Section 2. Obligations Not Waived. To the fullest extent permitted by applicable law, each Guarantor waives presentment to, demand of payment from and protest to the Borrower of any of the Obligations, and also waives notice of acceptance of its Guaranty and notice of protest for nonpayment. To the fullest extent permitted by applicable law, the obligations of each Guarantor hereunder shall not be affected by (a) the failure of the Administrative Agent or any Lender to assert any claim or demand or to enforce or exercise any right or remedy against the Borrower or any other Guarantor under the provisions of the Credit Agreement, any other Loan Document or otherwise, (b) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, this Agreement, any other Loan Document, any Guaranty or any other agreement, including with respect to any other Guarantor under this Agreement, or (c) the failure to perfect any security interest in, or the release of, any of the security held by or on behalf of the Administrative Agent or any Lender. Section 3. Guaranty of Payment. Each Guarantor further agrees that its Guaranty constitutes a Guaranty of payment when due and not of collection, and waives any right to require that any resort be had by the Administrative Agent or any Lender to any of the security held for payment of the Obligations or to any balance of any deposit account or credit on the books of the Administrative Agent or any Lender in favor of the Borrower or any other person. Section 4. No Discharge or Diminishment of Guaranty. The obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible payment in full in cash of the Obligations), including any claim of waiver, release, surrender, alteration or compromise of any of the Obligations, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by the failure of the Administrative Agent or any Lender to assert any claim or demand or to enforce any remedy under the Credit Agreement, any other Loan Document or any other agreement, by any waiver or modification of any provision of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or omission that may or might in any manner or to any extent vary the risk of any Guarantor or that would otherwise operate as a discharge of each Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of all the Obligations). Section 5. Defenses of Borrower Waived. To the fullest extent permitted by applicable law, each Guarantor waives any defense based on or arising out of any defense of the Borrower or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower, other than the final and indefeasible payment in full in cash of the Obligations. The Administrative Agent and the Lenders may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with the Borrower or any other guarantor, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Obligations have been fully, finally and indefeasibly paid in cash. Pursuant to applicable law, each Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against the Borrower or any other Guarantor or guarantor, as the case may be, or any security. Section 6. Agreement to Pay; Subordination. In furtherance of the foregoing and not in limitation of any other right that the Administrative Agent or any Lender has at law or in equity against any Guarantor by virtue hereof, upon the failure of the Borrower or any other Loan Party to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, each Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Administrative Agent for the benefit of the Lenders in cash the amount of such unpaid Obligations. Upon payment by any Guarantor of any sums to the Administrative Agent, all rights of such Guarantor against the Borrower arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior indefeasible payment in full in cash of all the Obligations. In addition, any indebtedness of the Borrower now or hereafter held by any Guarantor is hereby subordinated in right of payment to the prior payment in full in cash of the Obligations. If any amount shall erroneously be paid to any Guarantor on account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii) any such indebtedness of the Borrower, such amount shall be held in trust for the benefit of the Administrative Agent and the Lenders and shall forthwith be paid to the Administrative Agent to be credited against the payment of the Obligations, whether matured or unmatured, in accordance with the terms of the Loan Documents. Section 7. Information. Each Guarantor assumes all responsibility for being and keeping itself informed of the Borrower's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder, and agrees that none of the Administrative Agent or the Lenders will have any duty to advise any of the Guarantors of information known to it or any of them regarding such circumstances or risks. Section 8. Representations and Warranties. Each Guarantor represents and warrants as to itself that all representations and warranties relating to it (as a Subsidiary of the Borrower) contained in the Credit Agreement are true and correct. Section 9. Termination. The guarantees made hereunder (a) shall terminate when all the Obligations have been paid in full in cash and the Lenders have no further commitment to lend under the Credit Agreement, the LC Exposure has been reduced to zero and the Issuing Bank has no further obligation to issue Letters of Credit under the Credit Agreement and (b) 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 Lender or any Guarantor upon the bankruptcy or reorganization of the Borrower, any Guarantor or otherwise. In connection with the foregoing, the Administrative Agent shall execute and deliver to such Guarantor or Guarantor's designee, at such Guarantor's expense, any documents or instruments which such Guarantor shall reasonably request from time to time to evidence such termination and release. Section 10. Binding Effect; Several 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 Guarantors that are contained in this Agreement shall bind and inure to the benefit of each party hereto and their respective successors and assigns. This Agreement shall become effective as to any Guarantor when a counterpart hereof executed on behalf of such Guarantor shall have been delivered to the Administrative Agent, and a counterpart hereof shall have been executed on behalf of the Administrative Agent, and thereafter shall be binding upon such Guarantor and the Administrative Agent and their respective successors and assigns, and shall inure to the benefit of such Guarantor, the Administrative Agent and the Lenders, and their respective successors and assigns, except that no Guarantor shall have the right to assign its rights or obligations hereunder or any interest herein (and any such attempted assignment shall be void). If all of the capital stock of a Guarantor is sold, transferred or otherwise disposed of pursuant to a transaction permitted by the Credit Agreement, such Guarantor shall be released from its obligations under this Agreement without further action. This Agreement shall be construed as a separate agreement with respect to each Guarantor and may be amended, modified, supplemented, waived or released with respect to any Guarantor without the approval of any other Guarantor and without affecting the obligations of any other Guarantor hereunder. Section 11. Waivers; Amendment. (a) No failure or delay of the Administrative Agent in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights of the Administrative Agent hereunder and of the Lenders under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Guarantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver and consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any Guarantor in any case shall entitle such Guarantor to any other or further notice in similar or other circumstances. (c) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Guarantors with respect to which such waiver, amendment or modification relates and the Administrative Agent, with the prior written consent of the Required Lenders (except as otherwise provided in the Credit Agreement). Section 12. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA. Section 13. Notices. All communications and notices hereunder shall be in writing and given as provided in Section 10.1 of the Credit Agreement. All communications and notices hereunder to each Guarantor shall be given to it at its address set forth on Schedule I attached hereto. Section 14. Survival of Agreement; Severability. (a) All covenants, agreements representations and warranties made by the Guarantors herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or the other Loan Documents shall be considered to have been relied upon by the Administrative Agent and the Lenders and shall survive the making by the Lenders of the Loans and the issuance of the Letters of Credit by the Issuing Bank regardless of any investigation made by any of them or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any other fee or amount payable under this Agreement or any other Loan Document are outstanding and unpaid or the LC Exposure does not equal zero and as long as the Commitments have not been terminated. (c) In the event one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). 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 15. Counterparts. This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract (subject to Section 10), and shall become effective as provided in Section 10. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually executed counterpart of this Agreement. Section 16. Terms. The definition of terms specified in Section 1.4 of the Credit Agreement shall be applicable to this Agreement. Section 17. Jurisdiction; Consent to Service of Process. (a) Each Guarantor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any Georgia State court or Federal court of the United States of America sitting in Fulton County and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Georgia State court or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any Guarantor or its properties in the courts of any jurisdiction. (b) Each Guarantor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any Georgia State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 13. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. Section 18. Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 18. Section 19. Additional Subsidiaries. Pursuant to Section 5.10 of the Credit Agreement, each Subsidiary Loan Party that was not in existence on the date of the Credit Agreement is required to enter into this Agreement as a Guarantor upon becoming a Subsidiary Loan Party. Upon execution and delivery after the date hereof by the Administrative Agent and such Subsidiary of an instrument in the form of Annex 1, such Subsidiary shall become a Guarantor hereunder with the same force and effect as if originally named as a Guarantor herein. The execution and delivery of any instrument adding an additional Guarantor as a party to this Agreement shall not require the consent of any other Guarantor hereunder. The rights and obligations of each Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor as a party to this Agreement. Section 20. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and the Issuing Bank are hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other Indebtedness at any time owing by such Lender or the Issuing Bank to or for the credit or the account of any Guarantor against any or all the obligations of such Guarantor now or hereafter existing under this Agreement and the other Loan Documents held by such Lender or the Issuing Bank, irrespective of whether or not such Person shall have made any demand under this Agreement or any other Loan Documents and although such obligations may be unmatured. The rights of each Lender and the Issuing Bank under this Section 20 are in addition to other rights and remedies (including other rights of setoff) which such Lender or the Issuing Bank, as the case may be, may have. Section 21. Savings Clause. (a) It is the intent of each Guarantor and the Administrative Agent that each Guarantor's maximum obligations hereunder shall be, but not in excess of: (i) in a case or proceeding commenced by or against any Guarantor under the provisions of Title 11 of the United States Code, 11 U.S.C. ss.ss.101 et seq. (the "Bankruptcy Code") on or within one year from the date on which any of the Obligations are incurred, the maximum amount which would not otherwise cause the Obligations (or any other obligations of such Guarantor owed to the Administrative Agent or the Lenders) to be avoidable or unenforceable against such Guarantor under (i) Section 548 of the Bankruptcy Code or (ii) any state fraudulent transfer or fraudulent conveyance act or statute applied in such case or proceeding by virtue of Section 544 of the Bankruptcy Code; or ARTICLE XXIII (ii) in a case or proceeding commenced by or against any Guarantor under the Bankruptcy Code subsequent to one year from the date on which any of the Obligations are incurred, the maximum amount which would not otherwise cause the Obligations (or any other obligations of such Guarantor to the Administrative Agent or the Lenders) to be avoidable or unenforceable against such Guarantor under any state fraudulent transfer or fraudulent conveyance act or statute applied in any such case or proceeding by virtue of Section 544 of the Bankruptcy Code; or ARTICLE XXIV (iii) in a case or proceeding commenced by or against any Guarantor under any law, statute or regulation other than the Bankruptcy Code (including, without limitation, any other bankruptcy, reorganization, arrangement, moratorium, readjustment of debt, dissolution, liquidation or similar debtor relief laws), the maximum amount which would not otherwise cause the Obligations (or any other obligations of such Guarantor to the Administrative Agent or the Lenders) to be avoidable or unenforceable against such Guarantor under such law, statute or regulation including, without limitation, any state fraudulent transfer or fraudulent conveyance act or statute applied in any such case or proceeding. ARTICLE XXV (b) The substantive laws under which the possible avoidance or unenforceability of the Obligations (or any other obligations of such Subsidiary Guarantor to the Guaranteed Parties) shall be determined in any case or proceeding shall hereinafter be referred to as the "Avoidance Provisions." To the extent set forth in Section 21(a) (i), (ii), and (iii), but only to the extent that the Obligations would otherwise be subject to avoidance or found unenforceable under the Avoidance Provisions, if any Guarantor is not deemed to have received valuable consideration, fair value or reasonably equivalent value for the Obligations, or if the Obligations would render such Guarantor insolvent, or leave such Guarantor with an unreasonably small capital to conduct its business, or cause such Guarantor to have incurred debts (or to have intended to have incurred debts) beyond its ability to pay such debts as they mature, in each case as of the time any of the Obligations are deemed to have been incurred under the Avoidance Provisions and after giving effect to the contribution by such Guarantor, the maximum Obligations for which such Guarantor shall be liable hereunder shall be reduced to that amount which, after giving effect thereto, would not cause the Obligations (or any other obligations of such Guarantor to the Administrative Agent or the Lenders), as so reduced, to be subject to avoidance or unenforceability under the Avoidance Provisions. ARTICLE XXVI (c) This Section 21 is intended solely to preserve the rights of the Administrative Agent and the Lenders hereunder to the maximum extent that would not cause the Obligations of such Guarantor to be subject to avoidance or unenforceability under the Avoidance Provisions, and neither the Guarantors nor any other Person shall have any right or claim under this Section 21 as against the Administrative Agent or Lenders that would not otherwise be available to such Person under the Avoidance Provisions. [Signature pages follow] IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. GUARANTORS: Address: CAROLINA PUMP & SUPPLY CORP 20 North Orange Avenue CHAD SUPPLY, INC. Suite 200 DOUGLAS LEONHARDT & ASSOCIATES, INC. Orlando, FL 32801 ELECTRIC LABORATORIES AND SALES Attn: Secretary CORPORATION GILLELAND CONCRETE PRODUCTS, INC. HSI ACQUISITION CORPORATION HSI FUSION SERVICES, INC. HSI INDIANA, LLC HSI NORTH CAROLINA, LLC HUGHES AVIATION, INC. HUGHES SUPPLY SHARED SERVICES, INC. HUGHES SUPPLY (VA), INC. HUGHES WATER & SEWER COMPANY JUNO INDUSTRIES, INC. KAMEN SUPPLY COMPANY, INC. KINGSTON PIPE INDUSTRIES, INC. METALS INCORPORATED METALS, INC. - GULF COAST DIVISION MILLS & LUPTON SUPPLY COMPANY MOORE ELECTRIC SUPPLY, INC. MOUNTAIN COUNTRY SUPPLY, INC. OLANDER & BROPHY, INCORPORATED ONE-STOP SUPPLY, INC. PAINE SUPPLY OF JACKSON, INC. PANHANDLE PIPE AND SUPPLY CO., INC. REACTION SUPPLY CORPORATION SCOTT-PARISH ELECTRICAL SUPPLY COMPANY SHRADER HOLDING COMPANY, INC. STAINLESS TUBULAR PRODUCTS, INC. USCO INCORPORATED U.S. FUSION SERVICES, INC. UTILISERVE, INC. WATERWORKS SALES COMPANY WCC MERGER CORPORATION By: ____________________________ Benjamin P. Butterfield Secretary Address: L & T OF DELAWARE, INC. 1403 Foulk Road, Suite 102 SWS ACQUISITION, LLC Wilmington, DE 19803 SWS FUNDING, LLC Z & L ACQUISITION CORP. By: ____________________________ Gordon Stewart President Address: HSI FUNDING, LLC HSI HOLDINGS, INC. HSI IP, INC. By: ____________________________ Gordon Stewart President Address: SOUTHWEST STAINLESS, L.P. 1403 Foulk Road, Suite 102 Wilmington, DE 19803 By: Z&L ACQUISITION CORP., its General Partner By: ____________________________ President SCHEDULE I CAROLINA PUMP & SUPPLY CORP CHAD SUPPLY, INC. DOUGLAS LEONHARDT & ASSOCIATES, INC. ELECTRIC LABORATORIES AND SALES CORPORATION GILLELAND CONCRETE PRODUCTS, INC. HSI ACQUISITION CORPORATION HSI FUSION SERVICES, INC. HSI INDIANA, LLC HSI NORTH CAROLINA, LLC HUGHES AVIATION, INC. HUGHES SUPPLY SHARED SERVICES, INC. HUGHES SUPPLY (VA), INC. HUGHES WATER & SEWER COMPANY JUNO INDUSTRIES, INC. KAMEN SUPPLY COMPANY, INC. KINGSTON PIPE INDUSTRIES, INC. METALS INCORPORATED METALS, INC. - GULF COAST DIVISION MILLS & LUPTON SUPPLY COMPANY MOORE ELECTRIC SUPPLY, INC. MOUNTAIN COUNTRY SUPPLY, INC. OLANDER & BROPHY, INCORPORATED ONE-STOP SUPPLY, INC. PAINE SUPPLY OF JACKSON, INC. PANHANDLE PIPE AND SUPPLY CO., INC. REACTION SUPPLY CORPORATION SCOTT-PARISH ELECTRICAL SUPPLY COMPANY SHRADER HOLDING COMPANY, INC. STAINLESS TUBULAR PRODUCTS, INC. USCO INCORPORATED U.S. FUSION SERVICES, INC. UTILISERVE, INC. WATERWORKS SALES COMPANY WCC MERGER CORPORATION ANNEX 1 TO THE SUBSIDIARY GUARANTY AGREEMENT SUPPLEMENT NO. [ ] dated as of [ ], to the Subsidiary Guaranty Agreement (the "Guaranty Agreement") dated as of March 26, 2003 executed by each of the subsidiaries of Hughes Supply, Inc., a Florida corporation, (the "Borrower") listed on Schedule I thereto (each such Subsidiary individually, a "Guarantor" and collectively, the "Guarantors"), in favor of SUNTRUST BANK, a Georgia banking corporation, as Administrative Agent (the "Administrative Agent") for the Lenders (as defined in the Credit Agreement referred to below) and for the benefit of the Lenders. A. Reference is made to the Revolving Credit Agreement dated as of March 26, 2003 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the Lenders from time to time party thereto (the "Lenders") and SunTrust Bank, as Administrative Agent, Swingline Lender and Issuing Bank (in such capacity, the "Issuing Bank"). B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Guaranty Agreement and the Credit Agreement. C. The Guarantors have entered into the Guaranty Agreement in order to induce the Lenders to make Loans and the Issuing Bank to issue Letters of Credit. Pursuant to Section 5.10 of the Credit Agreement, each Subsidiary Loan Party that was not in existence or not a Subsidiary Loan Party on the date of the Credit Agreement is required to enter into the Guaranty Agreement as a Guarantor upon becoming a Subsidiary Loan Party. Section 19 of the Guaranty Agreement provides that additional Subsidiaries of the Borrower may become Guarantors under the Guaranty Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary of the Borrower (the "New Guarantor") is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Guarantor under the Guaranty 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 Administrative Agent and the New Guarantor agree as follows: ARTICLE XXVII Section 1. In accordance with Section 19 of the Guaranty Agreement, the New Guarantor by its signature below becomes a Guarantor under the Guaranty Agreement with the same force and effect as if originally named therein as a Guarantor and the New Guarantor hereby (a) agrees to all the terms and provisions of the Guaranty Agreement applicable to it as Guarantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Guarantor thereunder are true and correct on and as of the date hereof. Each reference to a Guarantor in the Guaranty Agreement shall be deemed to include the New Guarantor. The Guaranty Agreement is hereby incorporated herein by reference. ARTICLE XXVIII Section 2. The New Guarantor represents and warrants to the Administrative Agent and the Lenders 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. ARTICLE XXIX Section 3. This Supplement may be executed in 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 Administrative Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Guarantor and the Administrative 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. ARTICLE XXX Section 4. Except as expressly supplemented hereby, the Guaranty Agreement shall remain in full force and effect. ARTICLE XXXI Section 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA. ARTICLE XXXII 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, the validity, legality and enforceability of the remaining provisions contained herein and in the Guaranty Agreement shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision hereof in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). 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. ARTICLE XXXIII Section 7. All communications and notices hereunder shall be in writing and given as provided in Section 13 of the Guaranty Agreement. All communications and notices hereunder to the New Guarantor shall be given to it at the address set forth under its signature below, with a copy to the Borrower. ARTICLE XXXIV Section 8. The New Guarantor agrees to reimburse the Administrative Agent for its out-of-pocket expenses in connection with this Supplement, including the fees, disbursements and other charges of counsel for the Administrative Agent. IN WITNESS WHEREOF, the New Guarantor and the Administrative Agent have duly executed this Supplement to the Guaranty Agreement as of the day and year first above written. [NAME OF NEW GUARANTOR] By:_____________________________ Name: Title: Address: SUNTRUST BANK, as Administrative Agent By:_____________________________ Name: Title: INDEMNITY, SUBROGATION AND CONTRIBUTION AGREEMENT THIS INDEMNITY, SUBROGATION and CONTRIBUTION AGREEMENT dated as of March 26, 2003, by and among Hughes Supply, Inc., a Florida corporation (the "Borrower"), each Subsidiary listed on Schedule I hereto (the "Guarantors"), and SUNTRUST BANK, a Georgia banking corporation, as administrative agent (in such capacity, the "Administrative Agent") for the Lenders (as defined in the Credit Agreement referred to below). Reference is made to (a) the Revolving Credit Agreement dated as of March 26, 2003 (as amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the lenders from time to time party thereto and SunTrust Bank, as Administrative Agent, Swingline Lender and Issuing Bank (in such capacity, the "Issuing Bank"), and (b) the Subsidiary Guaranty Agreement dated as March 26, 2003, by the Guarantors in favor of the Administrative Agent (as amended, restated, supplemented or otherwise modified from time to time, the "Guaranty Agreement"). Capitalized terms used herein and not defined herein shall have 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, pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement. The Guarantors have guaranteed such Loans and the other Obligations (as defined in the Guaranty Agreement) of the Borrower under the Credit Agreement pursuant to the Guaranty Agreement. 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 Borrower and the Guarantors of an agreement in the form hereof. Accordingly, the Borrower, each Guarantor and the Administrative Agent agree as follows: Section 1. Indemnity and Subrogation. In addition to all such rights of indemnity and subrogation as the Guarantors may have under applicable law (but subject to Section 3), the Borrower agrees that, in the event a payment shall be made by any Guarantor under the Guaranty Agreement, the Borrower shall indemnify such Guarantor for the full amount of such payment and such Guarantor shall be subrogated to the rights of the person to whom such payment shall have been made to the extent of such payment. Section 2. Contribution and Subrogation. Each Guarantor (a "Contributing Guarantor") agrees (subject to Section 3) that, in the event a payment shall be made by any other Guarantor under the Guaranty Agreement, such other Guarantor (the "Claiming Guarantor") shall not have been fully indemnified by the Borrower as provided in Section 1, the Contributing Guarantor shall indemnify the Claiming Guarantor in an amount equal to the amount of such payment multiplied by a fraction of which the numerator shall be the net worth of the Contributing Guarantor on the date hereof and the denominator shall be the aggregate net worth of all the Guarantors on the date hereof (or, in the case of any Guarantor becoming a party hereto pursuant to Section 12, the date of the Supplement hereto executed and delivered by such 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 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 the Borrower or any Guarantor to make the payments required under applicable law or otherwise shall in any respect limit the obligations and liabilities of any Guarantor with respect to its obligations hereunder, and each Guarantor shall remain liable for the full amount of the obligations of such Guarantor hereunder. Section 4. Termination. This Agreement shall survive and be in full force and effect so long as any Obligation is outstanding and has not been indefeasibly paid in full in cash, and so long as the LC Exposure has not been reduced to zero or any of the Commitments under the Credit Agreement have 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 Lender or any Guarantor upon the bankruptcy or reorganization of the Borrower, any Guarantor or otherwise. Section 5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA. Section 6. No Waiver; Amendment. (a) No failure on the part of the Administrative Agent or any 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 Administrative Agent or any 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 Administrative Agent and the 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 Guarantors and the Administrative Agent, with the prior written consent of the Required Lenders (except as otherwise provided in the Credit Agreement). Section 7. Notices. All communications and notices hereunder shall be in writing and given as provided in the Guaranty Agreement and addressed as specified therein. 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 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 Guarantor is released from its obligations under the Guaranty Agreement in accordance with such Guaranty Agreement and the Credit Agreement, such 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 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 Administrative Agent, the Lenders and each Guarantor and 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 or this Agreement or under any of the other Loan Documents is outstanding and unpaid or the LC Exposure does not equal zero and as long as the Commitments have not been terminated. (b) In case 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 Guarantor when a counterpart bearing the signature of such Guarantor shall have been delivered to the Administrative 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. Terms. The definition of terms specified in Section 1.4 of the Credit Agreement shall be applicable to this Agreement. Section 12. Additional Guarantors. Pursuant to Section 5.10 of the Credit Agreement, each Subsidiary Loan Party of the Borrower that was not in existence or not such a Subsidiary Loan Party on the date of the Credit Agreement is required to enter into the Guaranty Agreement as Guarantor upon becoming such a Subsidiary Loan Party. Upon the execution and delivery, after the date hereof, by the Administrative Agent and such Subsidiary of an instrument in the form of Annex I hereto, such Subsidiary shall become a Guarantor hereunder with the same force and effect as if originally named as a Guarantor hereunder. The execution and delivery of any instrument adding an additional Guarantor as a party to this Agreement shall not require the consent of any Guarantor hereunder. The rights and obligations of each Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor as a party to this Agreement. (signatures on following pages) 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. Address: CAROLINA PUMP & SUPPLY CORP 20 North Orange Avenue CHAD SUPPLY, INC. Suite 200 DOUGLAS LEONHARDT & ASSOCIATES, INC. Orlando, FL 32801 ELECTRIC LABORATORIES AND SALES Attn: J. Stephen Zepf CORPORATION GILLELAND CONCRETE PRODUCTS, INC. HSI ACQUISITION CORPORATION HSI FUSION SERVICES, INC. HSI INDIANA, LLC HSI NORTH CAROLINA, LLC HUGHES AVIATION, INC. HUGHES SUPPLY SHARED SERVICES, INC. HUGHES SUPPLY (VA), INC. HUGHES WATER & SEWER COMPANY JUNO INDUSTRIES, INC. KAMEN SUPPLY COMPANY, INC. KINGSTON PIPE INDUSTRIES, INC. METALS INCORPORATED METALS, INC. - GULF COAST DIVISION MILLS & LUPTON SUPPLY COMPANY MOORE ELECTRIC SUPPLY, INC. MOUNTAIN COUNTRY SUPPLY, INC. OLANDER & BROPHY, INCORPORATED ONE-STOP SUPPLY, INC. PAINE SUPPLY OF JACKSON, INC. PANHANDLE PIPE AND SUPPLY CO., INC. REACTION SUPPLY CORPORATION SCOTT-PARISH ELECTRICAL SUPPLY COMPANY SHRADER HOLDING COMPANY, INC. STAINLESS TUBULAR PRODUCTS, INC. USCO INCORPORATED U.S. FUSION SERVICES, INC. UTILISERVE, INC. WATERWORKS SALES COMPANY WCC MERGER CORPORATION By: ____________________________ Benjamin P. Butterfield Secretary Address: L & T OF DELAWARE, INC. 1403 Foulk Road, Suite 102 SWS ACQUISITION, LLC Wilmington, DE 19803 SWS FUNDING, LLC Z & L ACQUISITION CORP. By: ____________________________ Gordon Stewart President Address: HSI FUNDING, LLC HSI HOLDINGS, INC. HSI IP, INC. By: ____________________________ Gordon Stewart President Address: SOUTHWEST STAINLESS, L.P. 1403 Foulk Road, Suite 102 Wilmington, DE 19803 By: Z&L ACQUISITION CORP., its General Partner By: ____________________________ President SCHEDULE I CAROLINA PUMP & SUPPLY CORP CHAD SUPPLY, INC. DOUGLAS LEONHARDT & ASSOCIATES, INC. ELECTRIC LABORATORIES AND SALES CORPORATION GILLELAND CONCRETE PRODUCTS, INC. HSI ACQUISITION CORPORATION HSI FUSION SERVICES, INC. HSI INDIANA, LLC HSI NORTH CAROLINA, LLC HUGHES AVIATION, INC. HUGHES SUPPLY SHARED SERVICES, INC. HUGHES SUPPLY (VA), INC. HUGHES WATER & SEWER COMPANY JUNO INDUSTRIES, INC. KAMEN SUPPLY COMPANY, INC. KINGSTON PIPE INDUSTRIES, INC. METALS INCORPORATED METALS, INC. - GULF COAST DIVISION MILLS & LUPTON SUPPLY COMPANY MOORE ELECTRIC SUPPLY, INC. MOUNTAIN COUNTRY SUPPLY, INC. OLANDER & BROPHY, INCORPORATED ONE-STOP SUPPLY, INC. PAINE SUPPLY OF JACKSON, INC. PANHANDLE PIPE AND SUPPLY CO., INC. REACTION SUPPLY CORPORATION SCOTT-PARISH ELECTRICAL SUPPLY COMPANY SHRADER HOLDING COMPANY, INC. STAINLESS TUBULAR PRODUCTS, INC. USCO INCORPORATED U.S. FUSION SERVICES, INC. UTILISERVE, INC. WATERWORKS SALES COMPANY WCC MERGER CORPORATION ANNEX I TO THE INDEMNITY, SUBROGATION AND CONTRIBUTION AGREEMENT SUPPLEMENT NO. [ ] dated as of [ ], to the Indemnity, Subrogation and Contribution Agreement dated as of March 26, 2003 (as the same may be amended, restated supplemented or otherwise modified from time to time, the "Indemnity, Subrogation and Contribution Agreement") executed by Hughes Supply, Inc., a Florida corporation (the "Borrower"), and each Subsidiary listed on Schedule I thereto (the "Guarantors") in favor of SUNTRUST BANK, a Georgia banking corporation, as administrative agent (the "Administrative Agent") for the Lenders (as defined in the Credit Agreement referred to below). A. Reference is made to (a) the Revolving Credit Agreement dated as of March 26, 2003 (as amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the lenders from time to time party thereto (the "Lenders") and SunTrust Bank, as the Administrative Agent, Swingline Lender and Issuing Bank (in such capacity, the "Issuing Bank "), and (b) the Subsidiary Guaranty Agreement dated as of March 26, 2003, by the Guarantors in favor of Administrative Agent (as amended, supplemented or otherwise modified from time to time, the "Guaranty 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 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. Pursuant to Section 5.10 of the Credit Agreement, each Subsidiary Loan Party that was not in existence or not such a Subsidiary Loan Party on the date of the Credit Agreement is required to enter into the Guaranty Agreement as a Guarantor upon becoming a Subsidiary Loan Party. Section 12 of the Indemnity, Subrogation and Contribution Agreement provides that additional Subsidiaries may become 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 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 Administrative 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 Guarantor under the indemnity, Subrogation and Contribution Agreement with the same force and effect as if originally named therein as a Guarantor and the New Guarantor hereby agrees to all the terms and provisions of the Indemnity, Subrogation and Contribution Agreement applicable to it as Guarantor thereunder. Each reference to a Guarantor in the Indemnity, Subrogation and Contribution Agreement shall be deemed to include the New Guarantor. The Indemnity, Subrogation and Contribution Agreement is hereby incorporated herein by reference. Section 2. The New Guarantor represents and warrants to the Administrative Agent and the Lenders 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 Administrative Agent shall have received counterparts of this Supplement that, when taken together, bear the signature of the New Guarantor and the Administrative 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 GEORGIA. 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 Administrative 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 Administrative Agent. (signatures on following page) IN WITNESS WHEREOF, the New Guarantor and the Administrative 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: SUNTRUST BANK, as Administrative Agent By:_____________________________ Name: Title: EX-10.11 8 d55250_ex10-11.txt LOAN AND AIRCRAFT SECURITY AGREEMENT EXHIBIT 10.11 - -------------------------------------------------------------------------------- LOAN AND AIRCRAFT SECURITY AGREEMENT Dated as of November 12, 2002 between JUNO INDUSTRIES, INC. (d/b/a HUGHES AVIATION), Customer, and SUNTRUST LEASING CORPORATION, Lender, CESSNA 560XL M/S No. 560-5119, FAA Registration Mark N357WC - -------------------------------------------------------------------------------- TABLE OF CONTENTS Section 1. Amount and Terms of Loan...........................................1 1.1 Commitment.............................................................1 1.2 The Note...............................................................1 1.3 Prepayment.............................................................1 1.4 Use of Proceeds........................................................1 1.5 Guaranty...............................................................1 Section 2. Conditions of Borrowing............................................1 Section 3. Representations and Warranties.....................................2 Section 4. Covenants..........................................................4 4.1 Notices; Financial Information; and Further Assurances.................4 4.2 Laws: Obligations: Operations..........................................4 4.3 No Disposition of Collateral or Liens; Title and Security Interest.....5 4.4 Use of Aircraft; Maintenance; Identification...........................6 4.5 Insurance..............................................................6 4.6 Reports, etc...........................................................7 4.7 Event of Loss..........................................................7 Section 5. Security Interest..................................................8 5.1 Grant of Security Interest.............................................8 5.2 Lender Appointed as Attorney-in-Fact...................................8 Section 6. Events of Default..................................................8 Section 7. Remedies..........................................................10 7.1 Termination of Commitment.............................................10 7.2 Additional Remedies...................................................10 Section 8. Miscellaneous.....................................................11 8.1 No Waiver: Cumulative Remedies........................................11 8.2 Notices...............................................................11 8.3 Payment of Expenses and Taxes: Performance by Lender of Customer's Obligations................................................12 8.4 Disclaimer............................................................12 8.5 Construction of this Agreement and Related Matters....................13 8.6 Jurisdiction..........................................................13 8.7 Jury Waiver...........................................................13 Exhibit A Annex A Annex B Exhibit 3(j) i LOAN AND AIRCRAFT SECURITY AGREEMENT THIS LOAN AND AIRCRAFT SECURITY AGREEMENT (this "Agreement") is dated as of the 12th day of November, 2002, by and between JUNO INDUSTRIES, INC. (d/b/a HUGHES AVIATION), a Florida corporation ("Customer"), and SUNTRUST LEASING CORPORATION, a Virginia corporation ("Lender"). In consideration of the mutual agreements contained herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in Exhibit A attached hereto and made a part hereof. Section 1. Amount and Terms of Loan. 1.1 Commitment. Subject to the terms and conditions of this Agreement, Lender agrees to make a loan to Customer in the principal amount of $7,700,000.00 (the "Loan"). 1.2 The Note. The Loan shall be evidenced by a Promissory Note dated as of the date hereof, payable by Customer to the order of Lender in the original principal amount of the Loan (the "Note"). The Loan, together with interest thereon at the rate set forth in the Note, shall be repaid at the times and in the manner set forth in the Note. 1.3 Prepayment. The Note may be prepaid only in the manner and subject to terms and conditions of the Note and, if applicable, Section 4.7 hereof. 1.4 Use of Proceeds. Customer shall use the proceeds of the Loan to finance or refinance the costs of the acquisition of the Aircraft and for no other purpose. 1.5 Guaranty. The obligations of Customer under this Agreement, the Note and the other Loan Documents shall be guaranteed by Hughes Supply, Inc. ("Guarantor") pursuant to a Guaranty dated as of the date hereof by Guarantor in favor of Lender (the "Guaranty"). Section 2. Conditions of Borrowing. Lender's obligation to make the Loan shall be both subject to and conditioned upon all of the following conditions being satisfied: (a) Lender shall have received all of the following in form and substance satisfactory to Lender: (i) this Agreement, the Note, and the other Loan Documents duly executed by Customer; (ii) the Guaranty duly executed by Guarantor; (iii) a copy of the warranty bill of sale conveying the Aircraft to Customer; (iv) certificates executed by the secretary or other authorized representative of Customer and Guarantor certifying: (A) that the execution, delivery and performance of this Agreement and the other Loan Documents and the entrance by Customer and Guarantor into the transactions contemplated hereby and thereby have been authorized and (B) the names of the Persons authorized to execute and deliver such documents on behalf of Customer and Guarantor together with specimen signatures of such Persons; (v) the written opinion of counsel to Customer and Guarantor addressed to Lender, as to such matters incident to the transactions contemplated by this Agreement as Lender may reasonably request; (vi) a certified copy of the Standard Airworthiness Certificate (AC Form 8100-2) issued by the FAA for the Aircraft; (vii) an insurance certificate evidencing that the Aircraft is insured in accordance with the provisions of this Agreement; (viii) certificate(s) of good standing for Customer and Guarantor from the states of their incorporation and the state where the Aircraft is primarily hangared and where the chief executive offices and principal places of business of Customer and Guarantor are located; (ix) aircraft purchase agreement dated November 12, 2002, between Customer and Transcontinental Gas Pipe Line Corporation; and (x) all such other documents, agreements or instruments reasonably requested by Lender; (b) receipt by Lender of lien searches in the jurisdiction of Customer's organization, and each jurisdiction in which the Aircraft or other Collateral and/or Customer's chief executive office is located; and UCC financing statements, fixture filings, real property waivers, and all other filings and recordings, in each case, as required by Lender (all of which Customer hereby authorizes Lender to file); (c) evidence that FAA Counsel has received in escrow: (i) the executed FAA Aircraft Bill of Sale (AC Form 8050-2) in the name of Customer; (ii) the executed FAA Aircraft Registration Application (AC Form 8050-1) in the name of Customer (except for the pink copy, which shall be available to be placed on the Aircraft upon acceptance thereof); (iii) executed releases in form and substance satisfactory to FAA Counsel of any Liens on the Aircraft; (iv) such other documents as are necessary, in the opinion of Lender's counsel and/or FAA Counsel to vest good title to the Aircraft in the name of Customer; and (v) executed duplicates of this Agreement, all the foregoing being in proper form for filing with the FAA; (d) Lender shall have received an opinion of FAA Counsel, in form and substance satisfactory to Lender, that on the records of the aircraft registry of the FAA (i) the Airframe is registered in the name of Customer, (ii) the Aircraft (including, without limitation, the Airframe and Engines) is free and clear of all Liens of record with the FAA, except as created by this Agreement, and (iii) this Agreement creates a duly perfected security interest in the Aircraft in favor of Lender; (e) the Aircraft shall have been duly delivered to and accepted by Customer, and Lender shall be satisfied that the cost of the Aircraft (as specified on the invoices issued with respect to the Aircraft) has been, or concurrently with the making of the Loan will be, fully paid; (f) No material adverse change in the financial condition of either Customer or Guarantor has occurred since July 31, 2002; and (g) the representations and warranties contained in this Agreement shall be true and correct in all respects on and as of the date of the making of the Loan with the same effect as if made on and as of such date. Section 3. Representations and Warranties. In order to induce Lender to enter into this Agreement and to make the Loan herein provided for, Customer represents and warrants to Lender that: (a) Customer (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida, Customer's organizational identification number is P96000072506, and Customer's exact legal name is as set forth in the preamble of this Agreement, (ii) has the necessary authority and power to own and operate the Aircraft and its other assets and to transact the business in which it is engaged; (iii) is duly qualified to do business in each jurisdiction in which the conduct of its business or the ownership or operation of its assets requires such qualification; (iv) is a "citizen of the United States" within the meaning of the Federal Aviation Act; and (v) has full power, authority and legal right to execute and deliver this Agreement, the Note and the other Loan Documents, to perform its obligations hereunder and thereunder, to borrow hereunder and to grant the assignment and security interest created by this Agreement; (b) no consent of any other party (including any stockholders, trustees or holders of indebtedness), and no consent, license, approval or authorization of, exemption by, or registration or declaration with, any governmental body, authority, bureau or agency is required in connection with the execution, delivery or performance by Customer of this Agreement, the Note and the other Loan Documents, or the validity or enforceability of this Agreement, the Note and the other Loan Documents, 2 except recordation of this Agreement with the FAA and the filing of UCC financing statements in the appropriate recording offices, which shall have been duly effected as of the date hereof; (c) the execution, delivery and performance by Customer of this Agreement, the Note and the other Loan Documents do not and shall not violate any provision of any applicable law or regulation or of any judgment, award, order, writ or decree of any court or governmental instrumentality, will not violate any provision of the charter or by-laws of Customer and will not violate any provision of or cause a default under any mortgage, indenture, contract, agreement or other undertaking to which Customer is a party or which purports to be binding upon Customer or upon any of its assets, and will not result in the creation or imposition of any Lien on any of the assets of Customer other than the security interests intended to be created hereby; (d) this Agreement, the Note and the other Loan Documents have been duly authorized, executed and delivered by Customer and constitute the legal, valid and binding obligations of Customer enforceable in accordance with their respective terms (including, without limitation, the grant of security interest in this Agreement); (e) there is no action, suit, investigation or proceeding pending or to its knowledge threatened against or affecting Customer or any of its assets and there is no dispute known to it between Customer and any governmental regulatory body or other Person which (i) involves the Aircraft or any of the transactions contemplated by this Agreement and the other Loan Documents; or (ii) if adversely determined, could have an adverse effect upon the transactions contemplated by this Agreement and the other Loan Documents or a material adverse effect on the business, operations or financial condition of Customer (collectively, a "Proceeding"); (f) Customer has good and marketable title, and all necessary rights in and to the Aircraft subject to no Liens except the security interest created hereby in favor of Lender, Lender has a legal, valid and continuing purchase money or other first priority security interest in the Collateral, free and clear of all other Liens, and all filings, recordings or other actions necessary or desirable in order to establish, protect and perfect such security interest (including, the filing of this Agreement with the FAA) have been duly effected, and all taxes, fees and other charges in connection therewith have been duly paid; (g) Customer is not in default, and no event or condition exists which after the giving of notice or lapse of time or both would constitute an event of default, under any mortgage, indenture, contract, agreement, judgment or other undertaking to which Customer is a party or which purports to be binding upon Customer or upon any of its assets; (h) all financial statements of Guarantor, copies of which have been heretofore delivered to Lender, are complete and correct, have been prepared in accordance with GAAP, and present fairly the financial position of Guarantor as at the date thereof and the results of its operations for the period ended on said date and there has been no material adverse change in the financial condition, business or operations of Guarantor since the date thereof; (i) Customer has filed all Federal, state and local income tax returns that are required to be filed, and has paid all taxes as shown on said returns and all assessments received by it to the extent that such taxes and assessments have become due (other than those the amount or validity of which is being contested in good faith by appropriate proceedings and with respect to which appropriate reserves in conformity with GAAP have been provided on its books), and Customer does not have any knowledge of any actual or proposed deficiency or additional assessment in connection therewith; (j) within the previous six (6) years Customer has not changed its name, done business under any other names, changed its chief place of business from its present location or merged or been the surviving entity of any merger, except as disclosed on Annex 3(j) attached hereto (if any); and (k) each of the Engines has 750 or more rated take-off horsepower or the equivalent of such horsepower. 3 Customer hereby acknowledges, agrees and certifies that (a) the Aircraft as set forth and described in Annex A hereto is in Customer's possession, has been inspected by Customer to its complete satisfaction, has been found to be in good working order, repair and condition and fully equipped to operate as required under applicable law for its purpose, is of a size, design, capacity and manufacture selected by Customer and suitable for Customer's purposes, and is, as of the date hereof, unconditionally, irrevocably and fully accepted by Customer; and (b) all of the avionics set forth on Schedule A to Annex A hereto are on board the Aircraft and are in proper working condition. Section 4. Covenants. Customer covenants and agrees that from and after the date hereof and so long as the Note is outstanding: 4.1 Notices; Financial Information; and Further Assurances. Customer will: (a) promptly give written notice to Lender of (i) the occurrence of any Event of Default or any event that with notice, with lapse of time and/or with any further condition, event or act would constitute an Event of Default (a "Default"); (ii) the occurrence of any Event of Loss; and (iii) the commencement or threat of any Proceeding; and (iv) any contemplated change in the name, address, or jurisdiction of organization of Customer; (b) furnish to Lender (i) as soon as available, but in any event not later than 120 days after the end of each fiscal year of Guarantor, a balance sheet of Guarantor as at the end of such fiscal year, and statements of income and changes in financial position of Guarantor for such fiscal year, all in reasonable detail, prepared in accordance with GAAP and certified by independent certified public accountants of recognized standing selected by Guarantor (which shall be a firm acceptable to Lender), and (ii) promptly, such additional financial and other information as Lender may from time to time reasonably request; and (c) promptly, at its sole expense, execute and deliver to Lender such further instruments, UCC and FAA filings and other documents, and take such further action, as Lender may from time to time reasonably request in order to further carry out the intent and purpose of this Agreement and to establish and protect the rights, interests and remedies created, or intended to be created, in favor of Lender hereby. Customer hereby authorizes Lender, in such jurisdictions where such action is authorized by law, to effect any such recordation or filing without the signature of Customer thereto. Customer will pay, or reimburse Lender for, any and all fees, taxes, insurance premiums, costs and expenses of whatever kind or nature incurred in connection with the creation, preservation and protection of the Collateral and Lender's first priority and only security interest therein. 4.2 Laws: Obligations: Operations. Customer will: (a) duly observe and conform to all requirements of any governmental authorities relating to the conduct of its business, the Aircraft, and to its properties or assets; (b) maintain its existence as a legal entity and obtain and keep in full force and effect all rights, franchises, licenses and permits that are necessary to the proper conduct of its business; (c) remain a "citizen of the United States" within the meaning of the Federal Aviation Act; (d) obtain or cause to be obtained as promptly as possible any governmental, administrative or agency approval and make any filing or registration therewith required with respect to the performance of its obligations under this Agreement and the operation of the Aircraft and its business; 4 (e) cause the Aircraft to remain duly registered, in its name, under the Federal Aviation Act; (f) maintain all Records to be maintained with respect to the Aircraft; (g) not (i) enter into any transaction of merger or consolidation, (ii) liquidate or dissolve, (iii) sell or otherwise dispose of all or any substantial portion of its assets, (iv) change its name or the form of organization of its business, and (v) without thirty (30) days' prior written notice to Lender, change its chief place of business; (h) permit Lender or its authorized representative at any reasonable time or times to inspect the Aircraft, the Records maintained with respect thereto; and (i) attach to the Aircraft a notice satisfactory to Lender disclosing Lender's security interest in the Aircraft. 4.3 No Disposition of Collateral or Liens; Title and Security Interest. Customer will not (a) sell, convey, transfer, exchange, lease or otherwise relinquish possession or dispose of any Collateral or attempt or offer to do any of the foregoing, or (b) create, assume or suffer to exist any Lien upon the Collateral, except for the security interest created hereby. Customer will warrant and defend its good and marketable title to the Aircraft and Lender's first and only perfected security interest in the Collateral, against all claims and demands whatsoever. Notwithstanding the foregoing, provided that no Event of Default has occurred and is continuing, Customer may lease the Aircraft pursuant to the following terms and conditions: (a) Any lease shall provide that it shall terminate, or be canceled, at the option of Lender, upon the occurrence of an Event of Default. (b) Any lease shall be a true lease and not a grant of a "security interest" as such term is used in Section 1-201 (37) of the UCC. (c) Customer shall deliver to Lender a fully executed copy of any lease, which is, and will be, the only copy of such lease marked "Secured Party's Original." All copies of such lease shall bear the following legend: "To the extent, if any, this instrument constitutes chattel paper under the UCC, no security interest herein may be created through the transfer and/or possession of any counterpart other than the counterpart marked 'Secured Party's Original.'" All copies of such lease, other than the "Secured Party's Original" shall bear the following legend: "'Copy.' No interest herein may be created in the aircraft subject hereto through the transfer and/or possession hereof." (d) Any lease shall be expressly, and at all times remain, subject and subordinate to this Agreement and the rights of Lender hereunder and under the other Loan Documents and in and to the Aircraft. (e) Customer shall cause a copy of any lease to be placed on board the Aircraft to the extent required by applicable law. (f) In no event shall any lease (i) permit any subleasing, management, chartering or other disposition of the Aircraft, (ii) contain provisions that are inconsistent with the provisions of this Agreement or cause Customer to breach any of its representations, warranties or agreements under this Agreement or the other Loan Documents, or (iii) permit any de-registration of the Aircraft from the FAA registry or registration of the Aircraft in the registry of the aviation authority or other governmental authority of any other nation. (g) With respect to any lease, Customer shall deliver to Lender a Consent to Lease and Assignment, in form and substance satisfactory to Lender, duly executed and delivered by Customer 5 and the lessee of such lease. Customer shall also deliver to Lender any other consents and/or acknowledgments duly executed and in form and substance satisfactory to Lender, along with such other instruments (including, without limitation, FAA recording documents and UCC financing statements) as Lender may reasonably require and shall take such other actions as are deemed reasonably necessary or desirable by Lender to effect the terms and conditions of this Section and maintain the perfection and priority of Lender's Lien on the Aircraft. No such leasing by Customer, will reduce any of the obligations of Customer hereunder or the rights of Lender hereunder or under any of the other Loan Documents, and all of the obligations of Customer hereunder shall be and remain primary and shall continue in full force and effect as the obligations of a principal and not of a guarantor or surety. 4.4 Use of Aircraft; Maintenance; Identification. Except as expressly permitted by the following sentence, Customer will not permit the Aircraft to be used, operated or located outside the continental United States nor change its principal base from Orlando Executive Airport, 467 N. Herndon Avenue, Orlando, Florida 32803. Notwithstanding the foregoing, Lender agrees that the Aircraft may be flown temporarily to any country in the world in connection with the conduct of Customer's business; provided, however, that in no event may the Aircraft temporarily fly, be operated, used or located in, to or over any such country or area (1) that is excluded from coverage by any insurance policy in effect with respect to the Aircraft or by any insurance policy required by the terms hereof or any country or area not specifically and fully covered by such insurance; or (2) in a recognized or threatened area of hostility unless fully covered to Lender's satisfaction by hull, political, expropriation, hijacking and war risk insurance. Customer further agrees that it shall not operate the Aircraft, or permit the Aircraft to be operated, in any manner unless the insurance coverages set forth herein are in full force and effect. Customer will operate or cause the Aircraft to be operated in a careful and proper manner, will comply with and conform to all governmental laws, rules and regulations relating thereto, and will cause the Aircraft to be operated in compliance with the requirements of the insurance policies required herein and in accordance with the manufacturer's or supplier's instructions or manuals and only by competent, duly qualified and certified personnel. Customer will, at its own expense, maintain, service, repair, overhaul and test the Aircraft and furnish all parts, replacements, mechanisms, devices and servicing required therefor so that the value, condition and operating efficiency thereof will at all times be maintained and preserved at a level that is the higher of (i) its value, condition and operating efficiency when delivered to Customer, reasonable wear and tear excepted, or (ii) the level required by any governmental authority having jurisdiction with respect thereto, and, in any case, the level necessary to enable the airworthiness certification of the Aircraft to be maintained in good standing at all times under the Federal Aviation Act, or as shall be required by any and all applicable FAA Airworthiness Directives and Service Bulletins. All such repairs, parts, mechanisms, devices and replacements shall immediately, without further act, become part of the Aircraft and subject to the security interest created by this Agreement. Customer will not make or authorize any improvement, change, addition or alteration to the Aircraft if it will impair the originally intended function or use of the Aircraft, impair the value of the Aircraft as it existed immediately prior thereto, or violate any applicable industry standard or governmental law, rule, regulation or standard; and any Part, mechanism, device or replacement added to the Aircraft in connection therewith shall immediately, without further act, become part of the Aircraft and subject to the security interest created by this Agreement. 4.5 Insurance. (a) Customer agrees to maintain at all times, at its own cost and expense, with insurers of recognized responsibility reasonably satisfactory to Lender (but in no event having an A.M. Best or comparable agency rating of less than "A-"): (i) (A) comprehensive aircraft and general liability insurance against bodily injury or property damage claims including, without limitation, contractual liability, premises damage, public 6 liability, death and property damage liability, public and passenger legal liability coverage, and sudden accident pollution coverage, in an amount not less than $50,000,000.00 for each single occurrence, (B) personal injury liability in an amount not less than $25,000,000.00, and (C) such other property damage insurance (exclusive of manufacturer's product liability insurance) with respect to the Aircraft as is of the type and in the amounts usually carried by companies engaged in the same or a similar business as Customer, similarly situated with Customer, and owning or operating similar aircraft and engines, and that covers risks of the kind customarily insured against by such companies, (ii) "all-risk" ground, taxiing, and flight hull insurance on an agreed-value basis, covering the Aircraft, provided that such insurance shall at all times be in an amount not less than 105% of the unpaid principal amount of the Note, including all accrued interest, late charges and any prepayment penalty (each such amount re-determined as of each anniversary of the date hereof for the next succeeding year throughout the term of this Agreement). (iii) war risk and allied perils (including confiscation, appropriation, expropriation, terrorism and hijacking insurance) in the amounts required in paragraphs (a) and (b), as applicable. (b) Any policies of insurance carried in accordance with this Section and any policies taken out in substitution or replacement or any such policies (i) shall be amended to name Lender as the additional insured under any liability policies, (ii) with respect to insurance carried in accordance with Section 4.5(a)(ii) above, shall provide that any amount(s) payable thereunder shall be paid directly to Lender as sole loss payee, except (so long as (A) no Event of Loss has occurred and (B) no Event of Default has occurred and is continuing) for amounts less than $500,000 which shall be paid to Customer, (iii) shall provide that any cancellation, lapse or substantial change in scope or amount or other terms of any of the coverage required hereunder shall not be effective as to Lender until the thirtieth (30th) day following receipt by Lender of written notice by such insurer of such cancellation, lapse or change, (iv) shall provide that the insurance shall not be invalidated as to Lender by any action or inaction of Customer or any other Person (other than Lender) and regardless of any breach or violation of any warranties, declarations or conditions contained in such policies by or binding upon Customer or any other Person (other than Lender), (v) shall be primary insurance, not subject to any co-insurance clause and without right of contribution from any other insurance, (vi) shall provide that all of the provisions thereof, except the limits of liability, shall operate in the same manner as if there were a separate policy covering each insured or loss payee, and (vii) shall waive (A) any right of such insurer to any setoff, counterclaim or other deduction, by attachment or otherwise in respect of Lender or Customer and (B) any rights of subrogation against Secured Party. All of the coverages required herein shall be in full force and effect worldwide throughout any geographical areas to, in or over which the Aircraft is operated. 4.6 Reports, etc. Annually on the anniversary of the date hereof, Customer shall furnish to Lender an insurance certificate evidencing that Customer has obtained the insurance coverages required hereby for the twelve (12) month period commencing from and after such anniversary date, and if Lender shall so request, a copy of each applicable policy. Customer will also advise Lender in writing at least thirty (30) days prior to the expiration or termination date of any insurance carried and maintained on or with respect to the Aircraft pursuant to this Section. In the event Customer shall fail to maintain insurance as herein provided, Lender may, at its option, provide such insurance, and Customer shall, upon demand, reimburse Lender for the cost thereof, together with interest at the Default Rate (as defined in the Note) from the date of payment through the date of reimbursement. 4.7 Event of Loss. In the event that the Aircraft shall suffer an Event of Loss, Customer shall pay, on the earlier of (i) the date Customer receives all insurance proceeds in respect of such Event of Loss, and (ii) sixty (60) days after the date on which such Event of Loss shall be deemed to have occurred, an amount (the "Prepayment Amount") equal to the sum of the following: (a) the unpaid principal amount of the Note; (b) interest accrued thereon to the date of prepayment; (c) 3.0% of such unpaid principal amount, if the Prepayment Amount is payable prior to the first anniversary of the Note; and (d) any and all other amounts then due. The amounts payable in connection with an Event of Loss pursuant to clauses (a), (b) and (c) of the preceding sentence (assuming timely payment of all amounts 7 due from time to time under the Note) are specified in Annex B attached hereto. Upon payment in full of the Prepayment Amount and so long as no Event of Default has occurred and is continuing, the Aircraft shall be released from the security interest of this Agreement. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if an Event of Loss occurs with respect to the Airframe. An Event of Loss with respect to any Engine shall not, without loss of the Airframe, be deemed an Event of Loss with respect to the Aircraft. Upon the occurrence of an Event of Loss with respect to an Engine under circumstances in which there has not occurred an Event of Loss with respect to the Airframe, Customer shall give Lender prompt written notice thereof and shall, within sixty (60) days after the occurrence of such Event of Loss, (i) replace the Engine with respect to which such Event of Loss occurred with a similar or better engine of the same make and model number as the Engine suffering the Event of Loss; and (ii) execute such documents and make such filings as Lender may deem desirable or necessary to subject such engine to the lien of this Agreement. Such engine shall be free and clear of all Liens, have a value, utility, and useful life, without regards to hours and cycles, at least equal to, and be in as good an operating condition as, the Engine suffering the Event of Loss, assuming such Engine was of the value and utility and in the condition and repair required by the terms hereof immediately prior to the occurrence of such Event of Loss. Section 5. Security Interest. 5.1 Grant of Security Interest. As collateral security for the prompt and complete payment and performance when due of all of the Obligations and in order to induce Lender to enter into this Agreement and make the Loan to Customer in accordance with the terms hereof, Customer hereby assigns, conveys, mortgages, pledges and transfers to Lender, and hereby grants to Lender a first priority security interest in, all Customer's right, title and interest in, to and under the following collateral (collectively, the "Collateral"): (i) the Aircraft, (ii) the Airframe, (iii) each of the Engines, (iv) the Parts, (v) the Records; (vi) any charters, leases or management agreements relating to the Aircraft, and (vii) all Proceeds of the foregoing. Notwithstanding anything to the contrary contained herewith or otherwise, Lender does not by virtue of this Agreement or otherwise assume any obligations, liabilities and/or duties of any kind whatsoever of Customer (and/or of any other Person) under, or with respect to, the Collateral, and Lender shall not be responsible in any way whatsoever for the performance by Customer (and/or by any other Person) of any obligations, liabilities and/or duties of any kind whatsoever in connection with, relating to, or arising under, the Collateral. 5.2 Lender Appointed as Attorney-in-Fact. Customer hereby appoints Lender and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full power and authority in the place and stead of Customer and in the name of Customer or in its own name, from time to time in Lender's discretion, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments that may be necessary or desirable to accomplish the purposes of this Agreement. Customer hereby ratifies all that said attorney shall lawfully do or cause to be done by virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable. Without limiting the generality of the foregoing, pursuant to such appointment, Lender shall have authority, after the occurrence of an Event of Default, to endorse Customer's name on any checks, notes, drafts or any other payments or instrument relating to the Collateral that come into Lender's possession or control. The powers conferred on Lender hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Lender shall be accountable only for amounts that it actually receives as a result of the exercise of such powers and neither it nor any of its officers, directors, employees or agents shall be responsible to Customer for any act or failure to act. Section 6. Events of Default. The term "Event of Default", wherever used herein, shall mean any of the following events or circumstances (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary, or come about or be effected by operation of law, or be pursuant to or in compliance with any 8 judgment, decree or order of any court or any order, rule or regulation or any administrative or governmental body): (a) Customer shall fail to pay any Obligation within ten (10) days after the same shall become due and payable (whether at the stated maturity, by acceleration or otherwise); (b) Customer shall fail to keep in full force and effect any of the insurance required under this Agreement, or shall operate the Aircraft at a time when, or at a place in which, such insurance shall not be in effect; (c) Customer shall fail to maintain the Aircraft in accordance and in compliance with this Agreement; (d) [INTENTIONALLY LEFT BLANK]; (e) Customer shall or shall attempt to (except as expressly permitted by the provisions of this Agreement) remove, sell, transfer, charter, convey, pledge, mortgage, encumber, part with possession of, assign or sublet the Aircraft or any part thereof, use the Aircraft for an illegal purpose, or permit the same to occur; (f) Customer shall fail to perform or observe any covenant, condition or agreement (other than those specifically referred to in this Section 6) required to be performed or observed by it under this Agreement or in any of the other Loan Documents, and such failure shall continue uncured for thirty (30) days after written notice thereof from Lender to Customer, and for an additional thirty (30) days (except that such additional cure period shall only be available to Customer if and so long as (A) such failure is not curable by practical means within the first thirty day period after notice, but is curable by practical means within such additional thirty (30) day period, and (B) Customer is using due diligence to cure the same within the applicable cure period); (g) any representation or warranty made by Customer or Guarantor in this Agreement or any agreement, document or certificate delivered by Customer in connection herewith or pursuant hereto shall prove to have been incorrect, misleading, or inaccurate in any material respect when such representation or warranty was made or given (or, if a continuing representation or warranty, at any time); (h) Customer or Guarantor shall (i) generally fail to pay its debts as they became due, admit its inability to pay its debts or obligations generally as they fall due, or shall file a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization in a proceeding under any bankruptcy laws or other insolvency laws, as now or hereafter in effect, or an answer admitting the material allegations of such a petition filed against Customer or Guarantor in any such proceeding; or (ii) by voluntary petition, answer or consent, seek relief under the provisions of any other bankruptcy or other insolvency or similar law providing for the reorganization or liquidation of corporations, or providing for an assignment for the benefit of creditors, or providing for an agreement, composition, extension or adjustment with its creditors; (i) a petition against Customer or Guarantor in a proceeding under applicable bankruptcy laws or other insolvency laws, as now or hereafter in effect, shall be filed and shall not be withdrawn or dismissed within sixty (60) days thereafter, or if, under the provisions of any law providing for reorganization or liquidation that may apply to Customer or Guarantor, any court of competent jurisdiction shall assume jurisdiction, custody or control of Customer or Guarantor or of any substantial part of its property and such jurisdiction, custody or control shall remain in force unrelinquished, unstayed or unterminated for a period of sixty (60) days; (j) Guarantor shall fail to be in compliance with any of its Financial Covenants (as defined in the Guaranty); 9 (k) any judgment, attachment or garnishment against Customer or Guarantor with respect to aggregate claims in excess of $250,000 shall remain unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a period of thirty (30) days; (l) Customer or Guarantor liquidates or dissolves or sells, transfers, or disposes of all or substantially all of its stock, assets or property, or merges or consolidates with or into any other entity or engages in any form of corporate reorganization, or becomes the subject of, or engages in, a leveraged buy-out, or Customer terminates its existence by merger, consolidation, or sale of substantially all of its assets or otherwise; (m) the Person or group of Persons that currently controls fifty percent (50%) or more of the issued and outstanding common stock of Customer as of the date hereof shall no longer continue to control fifty percent (50%) or more of such stock at all times unless such change in control in the ownership of such stock occurs in conjunction with a public offering of such equity securities pursuant to the Securities Act of 1933, as amended, or the Securities and Exchange Act of 1934, as amended; (n) any repudiation of the Guaranty by Guarantor or any allegation or determination that the Guaranty is unenforceable in any material respect; or (o) any event or condition set forth in subsections (d) or (f) through (l) and/or (m) of this Section 6 shall occur with respect to Guarantor or other Person responsible, in whole or in part, for payment or performance of the Obligations. Section 7. Remedies. 7.1 Termination of Commitment. If an Event of Default specified in Sections 6 (h) or (i) above shall occur, then, and in any such event, the Obligations (including, without limitation, the unpaid principal amount of the Note, together with all accrued but unpaid interest thereon and all other amounts due and payable under or with respect to the Loan Documents) shall become immediately due and payable without any notice or other action by Lender. If any other Event of Default shall occur and be continuing, then, and in any such event, Lender may declare the Obligations to be forthwith due and payable, whereupon the Obligations (including, without limitation, the unpaid principal amount of the Note, together with all accrued but unpaid interest thereon and all other amounts due and payable under or with respect to the Loan Documents), shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the other Loan Documents to the contrary notwithstanding. During the continuance of any Event of Default hereunder, Lender shall have the right to pursue and enforce any of its rights and remedies under this Section 7. 7.2 Additional Remedies. If an Event of Default shall occur and be continuing, in addition to all other rights and remedies granted to it in this Agreement and in the other Loan Documents, Lender may exercise all rights and remedies of a secured party under the UCC or under any other applicable law. Without limiting the generality of the foregoing, Customer agrees that upon the occurrence of an Event of Default, Lender, without demand or notice of any kind (except the notice specified below of time and place of public or private sale) to or upon Customer or any other Person (all and each of which demands and/or notices are hereby expressly waived), may collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may sell, lease, assign, give options to purchase or otherwise dispose of the Collateral, or any part thereof, in one or more parcels at public or private sale or sales, at such prices as it may deem best. Lender shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale, or sales to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in Customer, which right or equity of redemption is hereby expressly released. Customer further agrees, at Lender's request, to assemble the Collateral, make it available to Lender at such places as Lender shall reasonably select, whether at Customer's premises or elsewhere. Lender shall apply the net proceeds of any such realization (after deducting all reasonable costs and expenses of every kind incurred in connection therewith) to the payment in whole or in part of the Obligations, in such order and manner as Lender may elect. 10 To the extent permitted by applicable law, Customer waives all claims, damages, and demands against Lender arising out of the repossession, retention or sale of the Collateral. Customer agrees that Lender need not give more than ten (10) days' notice of the time and place of any public sale or of the time after which a private sale may take place and that such notice is reasonable notification of such matters. Customer shall be liable for any deficiency if the proceeds of any sale or disposition of the Collateral are insufficient to pay all amounts to which Lender is entitled hereunder. Any such notification shall be deemed given either (i) five (5) days after being mailed as certified mail, postage prepaid, addressed to Customer at its address set forth in Section 8.2 hereof, or (ii) when delivered, if by hand delivery or delivery by an overnight delivery service, or (iii) when sent by telecopy, with customary confirmation of receipt of such telecopy, on the business day when sent or upon the next business day if sent on other than a business day. Customer also agrees to pay all costs of Lender, including attorneys' fees, incurred with respect to the collection of any of the Obligations and the enforcement of any of its rights hereunder. Section 8. Miscellaneous. 8.1 No Waiver: Cumulative Remedies. No failure or delay on the part of Lender in exercising any right hereunder or under the Note or any of the other Loan Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. No right or remedy in this Agreement or in any of the other Loan Documents is intended to be exclusive but each shall be cumulative and in addition any other remedy referred to herein or otherwise available to Lender at law or in equity. The exercise by Lender of any one or more of such remedies shall not preclude the simultaneous or later exercise by Lender of any or all such other remedies. No express or implied waiver by Lender of an Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Event of Default. After the occurrence of any Event of Default, the acceptance by Lender of any installment of principal and/or interest or of any other sum owing hereunder or under the other Loan Documents shall not constitute a waiver of such Event of Default, regardless of Lender's knowledge or lack of knowledge thereof at the time of acceptance of any such payment, and shall not constitute a reinstatement of this Agreement if Lender has sent Customer a notice of default, unless Lender shall have agreed in writing to reinstate this Agreement and waive the Event of Default. To the extent permitted by law, Customer waives any rights now or hereafter conferred by statute or otherwise that limit or modify any of Lender's rights or remedies under this Agreement. 8.2 Notices. All notices, requests and demands to or upon any party hereto shall be deemed to have been duly given or made when delivered or when deposited in the United States mail, return receipt requested, first class postage prepaid, addressed to such party as follows, or to such other address as may be hereafter designated in writing by such party to the other party hereto: Customer: Juno Industries, Inc. (d/b/a Hughes Aviation) 20 North Orange P.O. Box 2273 Orlando, Florida 32802 Attention: Jeff Leonard Telephone: (407) 254-2057 Facsimile: (407) 426-8284 Lender: SunTrust Leasing Corporation 29 W. Susquehanna Avenue 4th Floor Towson, Maryland 21204 Attention: Mike Powers Telephone: (410) 307-6600 Facsimile: (410) 307-6702 11 8.3 Payment of Expenses and Taxes: Performance by Lender of Customer's Obligations. (a) Customer agrees, whether or not the transactions contemplated by this Agreement shall be consummated, to pay (i) all costs and expenses of Lender in connection with the negotiation, preparation, execution and delivery of this Agreement and the other Loan Documents, including, without limitation, the reasonable fees and disbursements of counsel to Lender; (ii) all fees and taxes in connection with the recording of this Agreement or any other document or instrument required hereby; and (iii) all costs and expenses of Lender in connection with the enforcement of this Agreement and the other Loan Documents, including all legal fees and disbursements arising in connection therewith. Customer also agrees to pay, and to indemnify and save Lender harmless from any delay in paying, all taxes, including, without limitation, sales, use, stamp and personal property taxes (other than any corporate income, capital, franchise or similar taxes payable by Lender with respect to the payments made to Lender hereunder or thereunder) and all license, filing, and registration fees and assessments and other charges, if any, that may be payable or determined to be payable in connection with the execution, delivery and performance of this Agreement or the other Loan Documents or any modification thereof. (b) Customer hereby further agrees, whether or not the transactions contemplated by this Agreement shall be consummated, to pay, indemnify, defend and hold harmless Lender, its agents, employees, officers, directors, shareholders, Affiliates, successors and assigns (collectively, "SunTrust Parties"), on a net after-tax basis, from and against any and all liabilities, obligations, losses, damages, penalties, claims (including, without limitation, claims involving or alleging product liability or strict or absolute liability in tort), actions, judgments, suits, demands, costs, expenses and disbursements (including, without limitation, reasonable legal fees and expenses) of any kind and nature whatsoever (collectively, "Claims") that may be imposed on, incurred by or asserted against any of the SunTrust Parties, whether or not such SunTrust Party shall also be indemnified as to any such Claim by any other Person, in any way relating to or arising out of the execution, delivery, enforcement, performance or administration of this Agreement or any of the other Loan Documents, or in any way relating to or arising out of the assertion or enforcement of any manufacturer's, vendor's or dealer's warranties on the Aircraft or any part thereof, the manufacture, inspection, construction, purchase, acceptance, rejection, ownership, management, chartering, titling or re-titling, delivery, lease, sublease, possession, use, operation, maintenance, condition, registration or re-registration, sale, return, removal, repossession, storage or other disposition of the Aircraft or any part thereof or any accident in connection therewith (including, without limitation, latent and other defects, whether or not discoverable, and any Claim for patent, trademark or copyright infringement). Notwithstanding the foregoing, Customer shall not be required to indemnify a SunTrust Party for any Claim to the extent caused by the gross negligence or willful misconduct of such SunTrust Party. The liability of Customer to make indemnification payments pursuant hereto shall, notwithstanding any expiration or other termination (whether voluntary, as the result of any default by Customer of its obligations or duties to SunTrust Parties, or otherwise) of this Agreement, shall continue to exist until such indemnity payments are irrevocably made by Customer in full and received by the SunTrust Parties. If any Claim is made against Customer or any of the SunTrust Parties, the party receiving notice of such Claim shall promptly notify the other, but the failure of the party receiving notice to so notify the other shall not relieve Customer of any obligation hereunder. (c) If Customer fails to perform or comply with any of its agreements contained herein and Lender shall itself perform or comply, or otherwise cause performance or compliance, with such agreement, the expenses of Lender incurred in connection with such performance of compliance, together with interest thereon at the Default Rate from the date incurred until reimbursed, shall be payable by Customer to Lender on demand and until such payment shall constitute part of the Obligations secured hereby except to the extent Customer is prejudiced by such failure. 8.4 Disclaimer. WITHOUT LIMITING THE GENERALITY OF THE TERMS OF THIS AGREEMENT, CUSTOMER AGREES THAT LENDER SHALL NOT BE LIABLE TO CUSTOMER FOR ANY CLAIM CAUSED DIRECTLY OR INDIRECTLY BY THE INADEQUACY OF THE AIRCRAFT OR ANY PART THEREOF FOR ANY PURPOSE OR ANY DEFICIENCY OR DEFECT THEREIN OR THE USE OF MAINTENANCE THEREOF OR ANY REPAIRS, SERVICING OR ADJUSTMENTS THERETO 12 OR ANY DELAY IN PROVIDING OR FAILURE TO PROVIDE ANY OF THE SAME OR ANY INTERRUPTION OR LOSS OF SERVICE OR USE THEREOF OR ANY LOSS OF BUSINESS, OR PROFITS ALL OF WHICH SHALL BE THE SOLE RISK AND RESPONSIBILITY OF CUSTOMER. 8.5 Construction of this Agreement and Related Matters. This Agreement and the other Loan Documents constitute the entire understanding and agreement of the parties hereto with respect to the matters contained herein. All representations and warranties made in this Agreement and in the other Loan Documents shall survive the execution and delivery of this Agreement and the making of the Loan hereunder. The agreements contained in Section 8.3 hereof shall survive payment of the Obligations. Neither this Agreement, nor any terms hereof, may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of a change, waiver, discharge or termination is sought. This Agreement may be executed by the parties hereto on any number of separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. The headings of the Sections hereof are for convenience only, are not part of this Agreement and shall not be deemed to effect the meaning or construction of any of the provisions hereof. This Agreement shall be binding upon and inure to the benefit of Customer and Lender and their respective successors and assigns, except that Customer may not assign or transfer its rights hereunder or any interest herein. This Agreement shall be governed by, and construed and interpreted in accordance with the substantive laws, but not the choice of law rules, of the State of Maryland. This Agreement shall be delivered for closing purposes in Lender's office at 29 W. Susquehanna Avenue, 4th Floor, Towson, Maryland 21204. 8.6 Jurisdiction. Customer hereby irrevocably consents and agrees that any legal action, suit, or proceeding arising out of or in any way in connection with this Agreement or any of the other Loan Documents may be instituted or brought in the courts of the State of Maryland or the United States Courts for the District of Maryland, as Lender may elect or in any other state or Federal Court as Lender shall deem appropriate, and by execution and delivery of this Agreement, Customer hereby irrevocably accepts and submits to, for itself and in respect of its property, generally and unconditionally, the non-exclusive jurisdiction of any such court, and to all proceedings in such courts. Customer irrevocably consents to service of any summons and/or legal process by first class, certified United States air mail, postage prepaid, to Customer at the address set forth in Section 8.2 hereof, such method of service to constitute, in every respect, sufficient and effective service of process in any such legal action or proceeding. Nothing in this Agreement or in any of the other Loan Documents shall affect the right to service of process in any other manner permitted by law or limit the right of Lender to bring actions, suits or proceedings in the courts of any other jurisdiction. Customer further agrees that final judgment against it in any such legal action, suit or proceeding shall be conclusive and may be enforced in any other jurisdiction, within or outside the United States of America, by suit on the judgment, a certified or exemplified copy of which shall be conclusive evidence of the fact and the amount of the liability. 8.7 Jury Waiver. CUSTOMER HEREBY KNOWINGLY AND FREELY WAIVES ITS RIGHTS TO A JURY TRIAL IN ANY ACTION, SUIT OR PROCEEDING RELATING TO, ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE NOTE OR ANY OF THE OTHER LOAN DOCUMENTS. (SIGNATURES ON NEXT PAGE) 13 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written. SUNTRUST LEASING CORPORATION JUNO INDUSTRIES, INC. (d/b/a HUGHES AVIATION) By:_____________________________ By:_________________________________ Name: Name: Title: Title: 14 EXHIBIT A DEFINITIONS The following terms shall have the following meanings for all purposes of this Agreement: Affiliate shall mean, with respect to either Lender or Customer, as applicable, any affiliated Person controlling, controlled by or under common control with such party, and for this purpose, 'control' means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of any such Person, whether through the legal or beneficial ownership of voting securities, by contract or otherwise. Aircraft shall mean (i) the Airframe, (ii) the Engines, and (iii) to the extent applicable, the Records. Airframe shall mean (i) the Aircraft described in Annex A and shall not include the Engines and (ii) any and all Parts from time to time incorporated in, installed on or attached to the Aircraft and any and all Parts removed therefrom so long as Lender shall retain an interest therein in accordance with the applicable terms of this Agreement after removal from the Aircraft. Collateral shall have the meaning set forth in Section 5.1 hereof. Engine shall mean (i) each of the engines and the auxiliary power unit described and listed by manufacturer's serial numbers in Annex A hereto and currently installed on the Airframe, whether or not thereafter installed on the Airframe or any other airframe from time to time; (ii) any engine and/or auxiliary power unit that may from time to time be substituted, pursuant to the applicable terms of this Agreement, for an Engine; and (iii) in each case set forth in clauses (i) and (ii) hereof, with any and all Parts incorporated in or installed on or attached to such Engine, and/or engine and/or auxiliary power unit or any and all Parts removed therefrom so long as Lender shall retain an interest therein in accordance with the applicable terms of this Agreement after removal from such Engine. Event of Default shall have the meaning set forth in Section 6 hereof. Event of Loss with respect to the Aircraft, the Airframe or any Engine shall mean any of the following events with respect to such property (i) loss of such property or the use thereof due to theft, disappearance, destruction, damage beyond repair or rendition of such property permanently unfit for normal use for any reason whatsoever; (ii) any damage to such property that results in an insurance settlement with respect to such property on the basis of a total loss or constructive total loss; (iii) the condemnation, confiscation or seizure of, or requisition of title to or use of, such property by the act of any government (foreign or domestic) or of any state or local authority or any instrumentality or agency of the foregoing ("Requisition of Use"); (iv) as a result of any rule, regulation, order or other action by any government (foreign or domestic) or governmental body (including, without limitation, the FAA or any similar foreign governmental body) having jurisdiction, the use of such property shall have been prohibited, or such property shall have been declared unfit for use, for a period of six (6) consecutive months, unless Customer, prior to the expiration of six-month period, shall have undertaken and, in the opinion of Lender, shall be diligently carrying forward all steps that are necessary or desirable to permit the normal use of such property by Customer or, in any event, if use shall have been prohibited, or such property shall have been declared unfit for use, for a period of twelve (12) consecutive months; (v) with respect to an Engine, the removal thereof from the Airframe for a period of six (6) consecutive months or longer, whether or not such Engine is operational; or (vi) an Engine is returned to the manufacturer thereof, other than for modification in the event of patent infringement or for repair or replacement (any such return being herein referred to as a "Return to Manufacturer"). The date of such Event of Loss shall be the date of such theft, disappearance, destruction, damage, Requisition of Use, prohibition, unfitness for use for the stated period, removal for the stated period or Return to Manufacturer. FAA shall mean the United States Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration and the Department of Transportation, or any Person, governmental department, bureau, authority, commission or agency succeeding the functions of any of the foregoing. 15 FAA Counsel shall mean Daugherty, Fowler, Peregrin & Haught, 204 North Robinson, Suite 900, Oklahoma City, Oklahoma 73102, or such other counsel as Lender may designate. Federal Aviation Act shall mean Subtitle VII of Title 49 of the United States Code, as amended and recodified. GAAP shall mean generally accepted accounting principles in the United States as consistently applied. Liens shall mean all liens, charges, security interests, and encumbrances of every nature and description whatever, including, without limitation, rights of third parties under management, pooling, interchange, overhaul, repair or other similar agreements or arrangements. Loan Documents shall mean this Agreement, the Note, the Guaranty, the UCC financing statements naming Customer, as debtor, and Lender, as secured party, with respect to the Aircraft and the other Collateral and the other documents securing, evidencing or relating to the Obligations. Obligations shall mean: (i) the unpaid principal amount of, and accrued interest on, the Note; and (ii) all other indebtedness, obligations or liabilities under or in respect of this Agreement, the Note or any of the other Loan Documents. Parts shall mean all appliances, avionics, parts, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than additions or complete Engines) that may from time to time be incorporated or installed in or attached to the Airframe or any Engine or any and all such appliances, avionics, parts, instruments, appurtenances, accessories, furnishings and other equipment removed therefrom so long as Lender shall retain an interest therein in accordance with the applicable terms of this Agreement after removal. Person shall mean any individual, partnership, corporation, limited liability company, trust, association, joint venture, joint stock company, or non-incorporated organization or government or any department or agency thereof, or any other entity of any kind whatsoever. Proceeds shall have the meaning assigned to it in the UCC, and in any event, shall include, but not be limited to, any and all rents, payments and other amounts of any kind whatsoever due or payable under or in connection with the Aircraft, including, without limitation, (A) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to Customer from time to time with respect to the Aircraft, (B) any and all payments (in any form whatsoever) made or due and payable to Customer from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of the Aircraft by any governmental body, authority, bureau or agency or any other Person (whether or not acting under color of governmental authority), and (C) any and all other rents or profits or other amounts from time to time paid or payable under or in connection with the Aircraft. Records shall mean any and all logs, manuals, certificates and data and inspection, modification, maintenance, engineering, technical and overhaul records (including all computerized data, records and materials of any kind whatsoever) with respect to the Aircraft, including, without limitation, all records required to be maintained by the FAA or any other governmental agency or authority having jurisdiction with respect to the Aircraft or any manufacturer or supplier of the Aircraft (or any part thereof) with respect to the enforcement of warranties or otherwise. UCC shall mean the applicable Uniform Commercial Code as then in effect. 16 ANNEX A AIRCRAFT DESCRIPTION CESSNA 560XL aircraft that consists of the following components: (a) Airframe bearing FAA Registration Mark N357WC and manufacturer's serial number 560-5119. (b) Two (2) Pratt & Whitney engines Model PW545A bearing manufacturer's serial numbers PCE-DB0244 and PCE-DB0246 (each of which has 750 or more rated takeoff horsepower or the equivalent of such horsepower). (c) Standard accessories and optional equipment and such other items fitted or installed on the Aircraft and as may be more particularly described on Schedule A attached hereto and made a part hereof. (d) One (1) Honeywell RE-100XL auxiliary power unit bearing manufacturer's serial number 344. 17 SCHEDULE A TO ANNEX A AVIONICS Honeywell Primus 1000 Integrated Avionics System 3 Tube EFIS Primus 880 Color Radar Dual AZ-850Air Data Computer Single Honeywell Primus 1000 FMS Dual AHRS Honeywell AFIS Meggitt Standby Altitude/Altimeter/Airspeed Loral/Fairchild A200S CVR Honeywell EGPWS Dual Honeywell TR-850 Comms Dual Honeywell NV-850 Nav Systems Dual Honeywell DM-850 DME Dual Honeywell XS-852 Transponders Dual Color RMU Honeywell DF-850 ADF Collins ALT-55 Radar Altimeter Honeywell TCAS II Artex 110-4 ELT Universal TT-3000 Aero-M Satcom Pro Parts Power Adv. ADDITIONAL EQUIPMENT RVSM Certified 8.33 Spacing FM Immunity Pulse Light System Concorde Lead-Acid Battery RH Landing Gear Control Data Loader Long Range Oxygen CESCOM INTERIOR Eight pax leather cabin seating includes forward two place couch. Forward left hand galley with heated coffee and water. Large forward right hand closet. Light gray with navy blue carpet. Externally serviced lavatory. EXTERIOR Nordic Gray with Baltic Blue and Empress Blue Stripes 18 ANNEX B Annex B - Casualty Schedule Percent Period Date Amount of Cost - ------ ---- ------ ------- 1 12/31/2002 7,958,899.73 103.36 2 1/31/2003 7,934,123.70 103.04 3 2/28/2003 7,909,260.51 102.72 4 3/31/2003 7,884,309.86 102.39 5 4/30/2003 7,859,271.44 102.07 6 5/31/2003 7,834,144.93 101.74 7 6/30/2003 7,808,930.04 101.41 8 7/31/2003 7,783,626.44 101.09 9 8/31/2003 7,758,233.83 100.76 10 9/30/2003 7,732,751.90 100.43 11 10/31/2003 7,707,180.32 100.09 12 11/30/2003 7,681,518.79 99.76 13 12/31/2003 7,432,783.48 96.53 14 1/31/2004 7,407,693.78 96.20 15 2/29/2004 7,382,515.81 95.88 16 3/31/2004 7,357,249.28 95.55 17 4/30/2004 7,331,893.86 95.22 18 5/31/2004 7,306,449.25 94.89 19 6/30/2004 7,280,915.12 94.56 20 7/31/2004 7,255,291.18 94.22 21 8/31/2004 7,229,577.09 93.89 22 9/30/2004 7,203,772.55 93.56 23 10/31/2004 7,177,877.23 93.22 24 11/30/2004 7,151,890.81 92.88 25 12/31/2004 7,125,812.98 92.54 26 1/31/2005 7,099,643.42 92.20 27 2/28/2005 7,073,381.79 91.86 28 3/31/2005 7,047,027.78 91.52 29 4/30/2005 7,020,581.06 91.18 30 5/31/2005 6,994,041.31 90.83 31 6/30/2005 6,967,408.20 90.49 32 7/31/2005 6,940,681.40 90.14 33 8/31/2005 6,913,860.57 89.79 34 9/30/2005 6,886,945.40 89.44 35 10/31/2005 6,859,935.54 89.09 36 11/30/2005 6,832,830.67 88.74 37 12/31/2005 6,805,630.45 88.38 38 1/31/2006 6,778,334.54 88.03 39 2/28/2006 6,750,942.61 87.67 40 3/31/2006 6,723,454.32 87.32 41 4/30/2006 6,695,869.34 86.96 19 ANNEX B Annex B - Casualty Schedule Percent Period Date Amount of Cost - ------ ---- ------ ------- 42 5/31/2006 6,668,187.31 86.60 43 6/30/2006 6,640,407.90 86.24 44 7/31/2006 6,612,530.78 85.88 45 8/31/2006 6,584,555.58 85.51 46 9/30/2006 6,556,481.98 85.15 47 10/31/2006 6,528,309.61 84.78 48 11/30/2006 6,500,038.14 84.42 49 12/31/2006 6,471,667.22 84.05 50 1/31/2007 6,443,196.50 83.68 51 2/28/2007 6,414,625.62 83.31 52 3/31/2007 6,385,954.23 82.93 53 4/30/2007 6,357,181.98 82.56 54 5/31/2007 6,328,308.52 82.19 55 6/30/2007 6,299,333.49 81.81 56 7/31/2007 6,270,256.52 81.43 57 8/31/2007 6,241,077.27 81.05 58 9/30/2007 6,211,795.38 80.67 59 10/31/2007 6,182,410.47 80.29 60 11/30/2007 6,152,922.20 79.91 20 EX-10.15 9 d55250_ex10-15.txt FIRST AMENDMENT TO MASTER AGREEMENT Exhibit 10.15 FIRST AMENDMENT TO MASTER AGREEMENT This First Amendment to Master Agreement, dated and effective as of December 18, 2002 (this "Amendment"), is among HUGHES SUPPLY, INC., a Florida corporation ("Hughes" or "Guarantor"), ATLANTIC FINANCIAL GROUP, LTD., a Texas limited partnership (the "Lessor"), certain financial institutions parties hereto as a lender (individually, a "Lender" and collectively, the "Lenders") and SUNTRUST BANK, a Georgia banking corporation, as agent for the Lenders (in such capacity, the "Agent"). BACKGROUND 1. Hughes and certain subsidiaries of Hughes that may become parties thereto, the Lessor, the Lenders and the Agent are parties to that certain Master Agreement, dated as of June 22, 2001 (the "Master Agreement"). 2. The parties hereto desire to amend the Master Agreement to extend the Funding Termination Date. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. Definitions. Capitalized terms used in this Amendment and not otherwise defined herein shall have the meanings assigned thereto in the Master Agreement. SECTION 2. Definitions. The definition of "Funding Termination Date" set forth in Appendix A to the Master Agreement is hereby amended by deleting the date "December 22, 2002" that appears in clause (i) thereof and substituting therefor the date "August 29, 2003". Notwithstanding the definition of Scheduled Construction Termination Date set forth in Appendix A to the Master Agreement, the parties hereby agree that with respect to the Leased Property located in the Beacon Station Addition of Miami, Florida, the Scheduled Construction Termination Date shall be August 29, 2003. SECTION 3. Representations and Warranties. Hughes hereby represents and warrants that, after giving effect to this Amendment, (i) each representation and warranty of Hughes contained in the Master Agreement or in any other Operative Document is true and correct in all material respects as though made on and as of the date of this Amendment, except to the extent such representations or warranties relate solely to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date, and (ii) no Event of Default or Potential Event of Default has occurred and is continuing. SECTION 4. Reaffirmation of Guaranty. Hughes hereby affirms that the Guaranty Agreement remains in full force and effect, after giving effect to this Amendment. SECTION 5. Miscellaneous. This Amendment shall be governed by, and construed in accordance with, the laws of the State of Florida. This Amendment may be executed by the parties hereto in separate counterparts (including by facsimile) each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same agreement. The Master Agreement, as amended hereby, remains in full force and effect. Any reference to the Master Agreement from and after the date hereof shall be deemed to refer to the Master Agreement as amended hereby, unless otherwise expressly stated. Hughes shall promptly pay, or shall reimburse the Agent for, all out-of-pocket costs and expenses incurred by the Agent in connection with this Amendment, including, without limitation, reasonable legal fees and expenses. 2 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective duly authorized officers as of the year first above written. HUGHES SUPPLY, INC., as Guarantor and as a Lessee By:_______________________________________ Name Printed:_____________________________ Title:____________________________________ S-1 FIRST AMENDMENT TO MASTER AGREEMENT SUNTRUST BANK, as a Lender and as Agent By:_______________________________________ Name Printed:_____________________________ Title:____________________________________ S-2 FIRST AMENDMENT TO MASTER AGREEMENT ATLANTIC FINANCIAL GROUP, LTD., as Lessor By: Atlantic Financial Managers, Inc., its General Partner By:_______________________________________ Name Printed:_____________________________ Title:____________________________________ S-3 FIRST AMENDMENT TO MASTER AGREEMENT EX-21 10 d55250_ex-21.txt SUBSIDIARIES OF REGISTRANT EXHIBIT 21 Subsidiaries of the Registrant Set forth below is a listing, by name and jurisdiction of incorporation, of each corporation that is, as of the date of this report, a subsidiary of the Registrant. Unless otherwise indicated, each such corporation is a 100% owned subsidiary of the Registrant. 1) Allstate Pool Business, L.P., a Delaware limited partnership. 2) Carolina Pump & Supply Corporation, a Rhode Island corporation. 3) Cayesteel, Inc., a Georgia corporation, a 100% owned subsidiary of WCC Merger Corporation. 4) CF Fluid Controls, Inc., a Texas corporation. 5) Chad Supply, Inc., a Florida corporation. 6) Dominion Pipe & Supply Corporation, a Virginia corporation. 7) Douglas Leonhardt & Associates, Inc., a North Carolina corporation. 8) Electric Laboratories and Sales Corporation, a Delaware corporation. 9) Gilleland Concrete Products, Inc., a Georgia corporation. 10) HHH, LLC., a Delaware limited liability company. 11) HSI Acquisition Corporation, an Ohio corporation. 12) HSI Corp., a Delaware corporation. 13) HSI Funding, LLC, a Delaware limited liability company. 14) HSI Fusion Services, Inc., a Florida corporation. 15) HSI Holdings, Inc., a Delaware corporation. 16) HSI Indiana, LLC., a Indiana limited liability company. 17) HSI IP, Inc., a Delaware corporation. 18) HSI North Carolina LLC., a North Carolina limited liability company. 19) Hughes Aviation, Inc., a Florida corporation. 20) Hughes Supply IP, Inc., a Delaware corporation. 21) Hughes Supply Foundation, Inc., a Florida not-for-profit corporation. 22) Hughes Supply Management Services, Inc., a Delaware corporation. 23) Hughes Supply Shared Services, Inc., - a Delaware corporation. 24) Hughes Supply (VA), Inc. (fka Virginia Water & Waste Supply Company, Inc.), - a Virginia corporation. 25) Hughes Water & Sewer Company, a West Virginia corporation. 26) Juno Industries, Inc., a Florida corporation. 27) Kamen Supply Company, Inc., a Kansas corporation. 28) Kingston Pipe Industries, Inc., a Rhode Island corporation. 29) L & T of Delaware, Inc., a Delaware corporation. 30) Merex Corporation, a Texas corporation. 31) Merex De Mexico, Sociedad Anonima De Capital Variable, a Mexico corporation, 75% owned. 32) Merex Diesel Power, Sociedad Anonima De Capital Variable, a Mexico corporation, 75% owned. 33) Metals Inc., an Oklahoma corporation. 34) Metals, Inc. - Gulf Coast Division, an Oklahoma corporation. 35) Mills & Lupton Supply Company, a Tennessee corporation. 36) Moore Electric Supply, Inc., a North Carolina corporation. 37) Mountain Country Supply, Inc., an Arizona corporation. 38) National Powerx, Inc., a Pennsylvania corporation. 39) Olander & Brophy, Inc., a Pennsylvania corporation. 40) One Stop Supply, Inc., a Tennessee corporation. 41) Paine Supply of Jackson, Inc., a Mississippi corporation. 42) Palm Pool Products, Inc., a Michigan corporation. 43) Panhandle Pipe & Supply Company, Inc., a West Virginia corporation. 44) Reaction Supply Corporation, a California corporation. 45) Scott-Parish Electrical Supply Company, a North Carolina corporation. 46) Shrader Holding Company, Inc., an Arkansas corporation. 47) Southwest Stainless, L.P., a Delaware limited partnership. 48) Stainless Tubular Products, Inc., an Oklahoma corporation. 49) SWS Acquisition LLC, a Delaware limited liability company. 50) SWS Funding LLC, a Delaware limited liability company. 51) U.S. Fusion Services, Inc., a Louisiana corporation. 52) USCO Inc., a North Carolina corporation. 53) Utiliserve, Inc. (fka Temple Electric, Inc.), a Delaware corporation. 54) Utiliserve Holdings, Inc. (fka Utiliserve, Inc.), a Delaware corporation. 55) Waterworks Sales Company, a Colorado corporation. 56) Waterworks Holding Co., a Colorado corporation. 57) Warner Waterworks Sales Company of Wyoming, a Wyoming corporation. 58) WCC Merger Corporation, a Georgia corporation. 59) World-Wide Travel Network, Inc., a Florida corporation. 60) Z&L Acquisition Corporation, a Delaware corporation. EX-23 11 d55250_ex-23.txt CONSENT OF INDEPENDENT CPA'S Exhibit 23 Consent of Independent Certified Public Accountants We hereby consent to the incorporation by reference in the Registration Statements on Forms S-8 (Nos. 2-78323, 33-9082, 33-26468, 33-33701, 333-19007, 333-27935, 333-35059, 333-57977, 333-57979, 333-40666, 333-40664, 333-40658, 333-100055) and S-3 (Nos. 333-65825 and 333-80249) of Hughes Supply, Inc. of our reports dated March 26, 2003, relating to the financial statements and financial statement schedule, which appear in this Form 10K. /s/ PricewaterhouseCoopers LLP - ------------------------------ PricewaterhouseCoopers LLP Orlando, Florida April 17, 2003 EX-99.1 12 d55250_ex99-1.txt PROPERTIES EXHIBIT 99.1 As of March 31, 2003, the Company operated 451 branches in 34 states. In addition, the Company operates six central distribution centers. The following table presents the number of the Company's branches and distribution centers by Group: Electrical Water & Sewer/ State & Plumbing Industrial Building Materials Total - -------------------------------------------------------------------------------- Alaska -- -- 1 1 Alabama 10 1 6 17 Arkansas -- -- 2 2 Arizona 12 -- 7 19 California -- 1 5 6 Colorado 5 -- 4 9 Delaware 1 -- 1 2 Florida 61 -- 40 101 Georgia 30 3 14 47 Illinois 4 1 -- 5 Indiana 1 -- 4 5 Kansas 4 -- -- 4 Kentucky 3 -- 2 5 Louisiana 1 4 1 6 Maryland 4 -- 5 9 Michigan 1 -- -- 1 Missouri 2 1 -- 3 Mississippi 9 -- 1 10 Montana -- -- 2 2 North Carolina 23 1 14 38 New Jersey -- 1 -- 1 New Mexico -- -- 2 2 Nevada -- -- 1 1 Ohio 10 -- 10 20 Oklahoma 2 2 -- 4 Pennsylvania 5 -- -- 5 Rhode Island -- -- 1 1 South Carolina 16 -- 9 25 Tennessee 7 1 8 16 Texas 34 16 15 65 Utah -- 1 -- 1 Virginia 6 1 7 14 Washington -- 1 5 6 West Virginia -- -- 4 4 - -------------------------------------------------------------------------------- Total 245 35 171 457 ================================================================================ EX-99.2 13 d55250_ex99-2.txt CERTIFICATION OF CEO Exhibit 99.2 WRITTEN STATEMENT OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Hughes Supply, Inc. (the "Company") on Form 10-K for the year ended January 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, David H. Hughes, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: January 31, 2003 /s/ DAVID H. HUGHES ---------------------------------- David H. Hughes Chairman of the Board and Chief Executive Officer EX-99.3 14 d55250_ex99-3.txt CERTIFICATION OF CFO Exhibit 99.3 WRITTEN STATEMENT OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Hughes Supply, Inc. (the "Company") on Form 10-K for the year ended January 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, David Bearman, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: April 18, 2003 /s/ David Bearman ----------------------------------- David Bearman Executive Vice President and Chief Financial Officer ~~-----END PRIVACY-ENHANCED MESSAGE-----~~