10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 30, 2004

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number 001-08772

HUGHES SUPPLY, INC.

(Exact name of registrant as specified in its charter)

Florida	59-0559446
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Corporate Office

One Hughes Way

Orlando, Florida 32805

(Address of principal executive offices)

(407) 841-4755

(Registrant’s telephone number, including area code)

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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes  x    No  ¨

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock	Outstanding as of September 3, 2004
$1 Par Value	30,948,389

HUGHES SUPPLY, INC.

FORM 10-Q

INDEX

			Page(s)
PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Consolidated Statements of Income (unaudited) for the Three and Six Months Ended July 30, 2004 and August 1, 2003	3
		Consolidated Balance Sheets as of July 30, 2004 (unaudited) and January 30, 2004	4
		Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended July 30, 2004 and August 1, 2003	5
		Notes to Consolidated Financial Statements (unaudited)	6 – 16
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17 –31
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	32
	Item 4.	Controls and Procedures	32
PART II. OTHER INFORMATION
	Item 2.	Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities	33
	Item 4.	Submission of Matters to a Vote of Security Holders	33
	Item 6.	Exhibits and Reports on Form 8-K	34
SIGNATURES			35

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HUGHES SUPPLY, INC.

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(in millions, except per share data)

	Three Months Ended						Six Months Ended
	July 30, 2004			August 1, 2003			July 30, 2004			August 1, 2003
Net Sales	$	1,143.1		$	815.1		$	2,135.9		$	1,597.9
Cost of Sales		873.0			630.6			1,624.7			1,238.0
Gross Margin		270.1			184.5			511.2			359.9
Operating Expenses:
Selling, general and administrative		192.9			142.9			377.4			287.3
Depreciation and amortization		6.7			5.0			12.7			10.1
Total operating expenses		199.6			147.9			390.1			297.4
Operating Income		70.5			36.6			121.1			62.5
Non-Operating Income (Expenses):
Interest and other income		1.6			1.9			3.3			3.4
Interest expense		(7.5	)		(7.4	)		(13.8	)		(15.1	)
		(5.9	)		(5.5	)		(10.5	)		(11.7	)
Income Before Income Taxes		64.6			31.1			110.6			50.8
Income Taxes		25.2			12.4			41.4			20.3
Net Income	$	39.4		$	18.7		$	69.2		$	30.5
Earnings Per Share:
Basic	$	1.31		$	0.82		$	2.31		$	1.33
Diluted	$	1.27		$	0.80		$	2.24		$	1.31
Weighted-Average Shares Outstanding:
Basic		30.0			22.8			30.0			22.8
Diluted		31.0			23.3			30.9			23.2
Dividends Declared Per Share	$	0.13		$	0.10		$	0.26		$	0.20

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

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HUGHES SUPPLY, INC.

CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share data)

	July 30, 2004			January 30, 2004
	(unaudited)
Assets
Current Assets:
Cash and cash equivalents	$	18.2		$	8.3
Accounts receivable, less allowance for doubtful accounts of $9.4 and $6.5		662.5			493.3
Inventories		570.6			467.0
Deferred income taxes		24.8			19.4
Other current assets		61.4			53.0
Total current assets		1,337.5			1,041.0
Property and Equipment, Net		112.4			161.8
Goodwill		651.0			609.8
Other Assets		103.0			68.7
Total assets	$	2,203.9		$	1,881.3
Liabilities and Shareholders’ Equity
Current Liabilities:
Current portion of long-term debt	$	45.2		$	44.6
Accounts payable		426.3			308.3
Accrued compensation and benefits		38.4			39.3
Other current liabilities		78.4			45.2
Total current liabilities		588.3			437.4
Long-Term Debt		449.6			368.7
Deferred Income Taxes		65.6			55.4
Other Noncurrent Liabilities		18.2			7.8
Total liabilities		1,121.7			869.3
Shareholders’ Equity:
Preferred stock, no par value; 10,000,000 shares authorized; none issued		—			—
Common stock, par value $1 per share; 100,000,000 shares authorized; 30,819,039 and 30,795,577 shares issued		30.8			30.8
Capital in excess of par value		535.7			533.3
Retained earnings		527.5			465.1
Treasury stock, zero and 216,952 shares, at cost		—			(5.5	)
Unearned compensation related to outstanding restricted stock		(11.8	)		(11.7	)
Total shareholders’ equity		1,082.2			1,012.0
Total liabilities and shareholders’ equity	$	2,203.9		$	1,881.3

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

4

HUGHES SUPPLY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in millions)

	Six Months Ended
	July 30,   2004			August 1,   2003
Cash Flows from Operating Activities:
Net income	$	69.2		$	30.5
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization		12.7			10.1
Provision for doubtful accounts		5.5			3.0
Amortization of restricted stock		2.2			1.3
Deferred income taxes		5.9			14.3
Other		2.3			0.4
Changes in assets and liabilities:
Accounts receivable		(124.9	)		(48.9	)
Inventories		(70.3	)		1.6
Other current assets		(3.6	)		(5.5	)
Other assets		(3.6	)		(1.7	)
Accounts payable		91.2			44.2
Accrued compensation and benefits		(6.3	)		(10.2	)
Other current liabilities		21.4			2.6
Other noncurrent liabilities		(2.8	)		0.6
Net cash (used in) provided by operating activities		(1.1	)		42.3
Cash Flows from Investing Activities:
Capital expenditures		(11.3	)		(8.0	)
Proceeds from sale of property and equipment		38.5			0.4
Business acquisitions, net of cash		(98.2	)		—
Net investment in corporate owned life insurance		(11.4	)		—
Net cash used in investing activities		(82.4	)		(7.6	)
Cash Flows from Financing Activities:
Net borrowings (payments) under short-term debt arrangements		113.4			(17.5	)
Principal payments on other debt		(10.6	)		(9.3	)
Change in book overdrafts		(6.0	)		5.3
Dividends paid		(7.0	)		(4.7	)
Purchase of treasury shares		—			(6.0	)
Other		3.6			(0.4	)
Net cash provided by (used in) financing activities		93.4			(32.6	)
Net Increase in Cash and Cash Equivalents		9.9			2.1
Cash and Cash Equivalents, Beginning of Period		8.3			1.7
Cash and Cash Equivalents, End of Period	$	18.2		$	3.8

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

5

HUGHES SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Note 1. Basis of Presentation

In our opinion, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly our results of operations for the three and six months ended July 30, 2004 and August 1, 2003, our financial position as of July 30, 2004, and cash flows for the six months ended July 30, 2004 and August 1, 2003. The results of operations for the three and six months ended July 30, 2004 are not necessarily indicative of the trends or results that may be expected for the full year. Certain information and disclosures normally included in the notes to the annual consolidated financial statements have been omitted from these interim consolidated financial statements. Accordingly, these interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K (the “Annual Report”) for the fiscal year ended January 30, 2004, as filed with the Securities and Exchange Commission.

Business

Founded in 1928, we are one of the largest diversified wholesale distributors of construction, repair and maintenance-related products in the United States. We distribute over 350,000 products to more than 100,000 customers through approximately 500 branches located in 38 states. Our principal customers include electrical, plumbing and mechanical contractors; public utilities; property management companies; municipalities; and industrial companies. Although we have a national presence, we operate principally in the southeastern and southwestern United States.

Fiscal Year

Our fiscal year was previously a 52 or 53-week period ending on the last Friday in January. Beginning in fiscal year 2005 and thereafter, our fiscal year will be a 52-week period ending on January 31. The change in our fiscal year ending date was made to simplify reporting and to allow for better comparability between reporting periods. Fiscal year 2004 was a 52-week period. The three and six months ended July 30, 2004 and August 1, 2003 each contained 13 and 26 weeks, respectively.

Recent Accounting Pronouncements

On March 31, 2004, the Financial Accounting Standards Board (“FASB”) issued an exposure draft, Share-Based Payment, an Amendment of FASB Statements No. 123 and 95. The proposed change in accounting would replace existing requirements under Statement of Financial Accounting Standards (“FAS”) 123, Accounting for Stock-Based Compensation, and Accounting Principles Board (“APB”) Opinion 25, Accounting for Stock Issued to Employees. The exposure draft covers a wide range of equity-based compensation arrangements. Under the FASB’s proposal, all forms of share-based payments to employees, including employee stock options, would be treated the same as other forms of compensation by recognizing the related cost in the income statement. The expense of the award would generally be measured at fair value at the grant date. The comment period for the exposure draft ended on June 30, 2004, and final rules are expected to be issued in late 2004. The standard, if issued in its current form, would be applicable for fiscal years beginning after December 15, 2004. We are currently evaluating the impact of the proposed change in accounting, but will not know the ultimate impact until the final rules are issued.

Note 2. Business Combinations

On May 28, 2004, we acquired Todd Pipe & Supply (“Todd Pipe”), one of the largest independent wholesale plumbing suppliers in Southern California and Las Vegas, Nevada. The acquisition of Todd Pipe allows us to expand our geographic footprint into high-growth markets and to invest in businesses with returns historically higher than the returns generated by our own plumbing business.

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The purchase price consisted of $74.5 million of net cash paid for Todd Pipe’s net assets, including the assumption of accounts payable, accrued and other liabilities, which collectively totaled $42.3 million, subject to finalization of working capital adjustments in accordance with the purchase agreement. The results of Todd Pipe’s operations have been included in our consolidated statements of income since May 28, 2004. The total cost of the acquisition was allocated to the assets acquired and liabilities assumed based on their respective preliminary fair values in accordance with FAS 141, Business Combinations (“FAS 141”). Goodwill, none of which is deductible for tax purposes, and other intangible assets recorded in connection with the transaction totaled $35.1 million and $11.3 million, respectively. The goodwill and intangible assets were assigned entirely to our Plumbing/Heating, Ventilating and Air Conditioning (“HVAC”) segment. The intangible assets are subject to amortization and consist primarily of corporate customer relationships, employment agreements and non-compete agreements that are amortized on a straight-line basis over a weighted-average useful life of 9.1 years. The purchase price allocation for this acquisition has not been finalized because the post closing settlement has not been completed and our initial determination of fair value assigned to intangible assets other than goodwill is ongoing. The purchase price allocation is therefore subject to change based upon continuing review. Pro forma results of operations reflecting this acquisition have not been presented because the results of operations of Todd Pipe are not material to our consolidated results of operations.

On May 3, 2004, we acquired Standard Wholesale Supply Company (“Standard”), a distributor of waterworks, electrical and plumbing products primarily serving residential and infrastructure water and sewer contractors and customers in Las Vegas, Nevada. The acquisition of Standard allows us to accelerate our expansion into the high-growth market of Las Vegas, Nevada, and also allows us to invest in a business that is well-aligned with our culture of providing the highest level of service possible to the customer, along with quality products.

The purchase price consisted of $23.7 million of net cash paid for Standard’s net assets, including the assumption of accounts payable, accrued and other liabilities, which collectively totaled $10.9 million, subject to finalization of working capital adjustments in accordance with the purchase agreement. The results of Standard’s operations have been included in our consolidated statements of income since May 3, 2004. The total cost of the acquisition was allocated to the assets acquired and liabilities assumed based on their respective preliminary fair values in accordance with FAS 141. Goodwill and other intangible assets recorded in connection with the transaction totaled $5.8 million and $5.7 million, respectively, with approximately $4.1 million of the recorded goodwill deductible for tax purposes. The goodwill and intangible assets were assigned entirely to our Water & Sewer segment. The intangible assets are subject to amortization and consist primarily of shareholder relationships, corporate customer relationships, non-compete agreements, and consulting and employment agreements that are amortized on a straight-line basis over a weighted-average useful life of 10 years. The purchase price allocation for this acquisition has not been finalized because the post closing settlement has not been completed and our initial determination of fair value assigned to intangible assets other than goodwill is ongoing. The purchase price allocation is therefore subject to change based upon continuing review. Pro forma results of operations reflecting this acquisition have not been presented because the results of operations of Standard are not material to our consolidated results of operations.

As more fully disclosed in Note 2 to the consolidated financial statements in our fiscal year 2004 Annual Report, on December 19, 2003, we acquired Century Maintenance Supply, Inc. (“Century”), a leading supplier of maintenance, repair and operations products serving the multi-family apartment market throughout the United States. The results of Century’s operations have been included in our consolidated statements of income since December 19, 2003. Unaudited operating results of operations for the three and six months ended July 30, 2004 compared to the pro forma operating results of operations for the three and six months ended August 1, 2003, assuming the acquisition of Century had been completed as of the beginning of fiscal year 2004, are as follows (in millions, except per share data):

	Three Months Ended				Six Months Ended
	July 30,         2004		August 1, 2003		July 30,         2004		August 1, 2003
			(Pro forma)				(Pro forma)
Net sales	$	1,143.1	$	904.5	$	2,135.9	$	1,757.8
Operating income		70.5		47.5		121.1		79.5
Net income		39.4		22.6		69.2		35.4
Earnings per share:
Basic	$	1.31	$	0.99	$	2.31	$	1.55
Diluted	$	1.27	$	0.97	$	2.24	$	1.52

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The pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisition been made at the beginning of the period presented or the results which may occur in the future.

Note 3. Goodwill and Intangible Assets

A summary of the changes in the carrying amount of goodwill by reportable segment for the six months ended July 30, 2004 was as follows (in millions):

	Goodwill as of January 30, 2004		Goodwill       Acquired		Adjustment to Purchase Accounting		Goodwill as of July 30, 2004
Water & Sewer	$	104.7	$	5.8	$	—	$	110.5
Plumbing/ HVAC		50.1		35.1		—		85.2
MRO		272.8		—		0.3		273.1
Utilities		59.3		—		—		59.3
Electrical		9.0		—		—		9.0
Industrial PVF		56.4		—		—		56.4
Other		57.5		—		—		57.5
Total	$	609.8	$	40.9	$	0.3	$	651.0

As of July 30, 2004 and January 30, 2004, our intangible assets were classified as follows (in millions):

	July 30, 2004					January 30, 2004
	Gross    Carrying    Value		Accumulated Amortization			Gross    Carrying    Value		Accumulated Amortization
Amortized intangible assets:
Acquired customer contracts	$	37.1	$	(3.0	)	$	37.1	$	(1.4	)
Corporate customer relationships		11.1		(0.4	)		—		—
Non-compete/employment agreements		4.8		(0.6	)		3.1		(0.3	)
Shareholder relationships		4.2		(0.2	)		—		—
Total		57.2		(4.2	)		40.2		(1.7	)
Unamortized intangible assets:
Private label tradenames		5.9		—			5.9		—
Total	$	63.1	$	(4.2	)	$	46.1	$	(1.7	)

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Amortization expense for the amortized intangible assets reflected above for the three months ended July 30, 2004 and August 1, 2003 totaled $1.5 million and $0.2 million, respectively. Amortization expense for amortized intangible assets for the six months ended July 30, 2004 and August 1, 2003 totaled $2.5 million and $0.3 million, respectively.

Amortization expense for the amortized intangible assets above is expected to be approximately $6.0 million, $5.7 million, $5.1 million, $4.9 million and $4.5 million for the fiscal years ending January 31, 2005, 2006, 2007, 2008 and 2009, respectively.

Note 4. Stock-Based Compensation

We account for our 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, 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 millions, except per share data):

	Three Months Ended						Six Months Ended
	July 30, 2004			August 1, 2003			July 30, 2004			August 1, 2003
Net income as reported	$	39.4		$	18.7		$	69.2		$	30.5
Deduct: Total stock-based compensation expense determined under the fair value based method for all awards, net of related tax effects		(0.9	)		(0.9	)		(2.0	)		(1.6	)
Pro forma net income	$	38.5		$	17.8		$	67.2		$	28.9
Earnings per share:
Basic —as reported	$	1.31		$	0.82		$	2.31		$	1.33
Basic —pro forma	$	1.28		$	0.78		$	2.24		$	1.27
Diluted —as reported	$	1.27		$	0.80		$	2.24		$	1.31
Diluted —pro forma	$	1.24		$	0.76		$	2.17		$	1.24

The estimated fair values of stock options granted during the three and six months ended July 30, 2004 and August 1, 2003, respectively were derived using the Black-Scholes option-pricing model. The following table includes the assumptions used in estimating fair values and the resulting weighted average fair value of the stock options granted in the periods presented:

	Stock Options Granted During the
	Three Months Ended					Six Months Ended
Assumption	July 30, 2004 (1)		August 1, 2003			July 30, 2004			August 1, 2003
Risk-free interest rate		—		3.8	%		3.0	%		3.7	%
Average expected life of stock options (in years)		—		8			5			8
Expected volatility of common stock		—		41.0	%		43.2	%		41.7	%
Expected annual dividend yield on common stock		—		1.4	%		1.0	%		1.4	%
Weighted average fair value of stock options granted	$	—	$	13.67		$	19.30		$	12.03

⁽¹⁾ There were no stock options granted during the three months ended July 30, 2004.

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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 our 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 our opinion, the existing models do not necessarily provide a reliable single measure of the fair value of our stock options.

Note 5. Branch Closures and Consolidation Activities

As more fully disclosed in Note 5 to the consolidated financial statements in our fiscal year 2004 Annual Report, we approved plans to relocate our corporate offices and to close and consolidate certain branches that did not strategically fit into our core businesses and/or did not perform to our expectations. The liability balance, included in other current liabilities, related to these activities as of July 30, 2004 and January 30, 2004 was as follows (in millions):

	July 30,   2004			January 30, 2004
Beginning balance	$	4.1		$	1.2
Provision		—			4.4
Lease payments		(1.6	)		(1.4	)
Other		(0.1	)		(0.1	)
Ending balance	$	2.4		$	4.1
Note 6. Long-Term Debt Long-term debt as of July 30, 2004 and January 30, 2004 consisted of the following (in millions):
	July 30,   2004			January 30, 2004
8.27% senior notes, due 2005	$	11.2		$	11.2
8.42% senior notes, due 2007		82.4			82.4
7.96% senior notes, due 2011		65.3			70.0
7.14% senior notes, due 2012		30.5			32.4
7.19% senior notes, due 2012		40.0			40.0
6.74% senior notes, due 2013		42.9			45.2
Unsecured bank notes under revolving credit agreement, payable June 14, 2009, with an interest rate of 2.2% at July 30, 2004		184.4			100.0
Commercial paper with an interest rate of 1.7% at July 30, 2004		29.0			—
Other notes payable with varying interest rates of 2.1% to 7.6% at July 30, 2004, with due dates from 2004 to 2010		9.1			32.1
Total debt		494.8			413.3
Less current portion		(45.2	)		(44.6	)
Total long-term debt	$	449.6		$	368.7

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On June 14, 2004, we replaced our existing $290.0 million revolving credit agreement, which was scheduled to mature on March 26, 2007, with a new $500.0 million revolving credit agreement (the “new credit agreement”), subject to borrowing limitations, which matures on June 14, 2009. As a result of this transaction, we recognized a pretax charge of $0.8 million in the second quarter of 2005 classified as interest expense for the write-off of unamortized loan origination costs relating to our previous credit agreement. The new credit agreement is unsecured and contains financial and other covenants, including limitations on dividends and treasury stock purchases and maintenance of certain financial ratios. The new credit agreement also includes an accordion feature that allows it to be expanded, in certain circumstances, by up to $150 million. Interest on amounts outstanding under the new credit agreement is payable at market rates plus applicable margins. Commitment fees of 0.20% are currently paid on the new credit agreement.

On March 16, 2004, we entered into a sale-leaseback transaction in which we sold our corporate headquarters building in Orlando, Florida, excluding certain furniture and fixtures and other office equipment relating to the property, to a subsidiary of Wachovia Development Corporation (“WDC”) for $23.0 million and leased the property back for a period of 20 years. The proceeds from the sale approximated the net book value of the property sold and were paid by WDC to SunTrust Bank (“SunTrust”) for application against amounts outstanding under a separate real estate term credit agreement (the “credit agreement”) we had previously executed on June 5, 2002 with SunTrust. We repaid the remaining amounts outstanding under the credit agreement with SunTrust in the first quarter of fiscal year 2005. The total amount of debt extinguished in the first quarter of fiscal year 2005 under the credit agreement with SunTrust totaled approximately $24.4 million. See Note 9 for further information regarding our lease with WDC.

As of July 30, 2004, we were in compliance with all financial and non-financial covenants.

Note 7. 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 our potential common shares, which include certain employee and director stock options and unvested shares of restricted stock. 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 (in millions):

	Three Months Ended		Six Months Ended
	July 30, 2004	August 1, 2003	July 30, 2004	August 1, 2003
Basic weighted-average shares outstanding	30.0	22.8	30.0	22.8
Incremental shares resulting from:
Stock options	0.5	0.2	0.4	0.1
Restricted stock	0.5	0.3	0.5	0.3
Diluted weighted-average shares outstanding	31.0	23.3	30.9	23.2

All stock options and restricted stock outstanding as of July 30, 2004 were dilutive and, therefore, included in the computation of diluted weighted-average shares outstanding for the three and six months ended July 30, 2004. Excluded from the above computations of diluted weighted-average shares outstanding for the three and six months ending August 1, 2003 were 0.2 million and 0.8 million options at an average price of $37.42 and $33.91 per share, respectively, because their effect would have been anti-dilutive. There was no restricted stock that was considered to have an anti-dilutive effect during the three and six months ended August 1, 2003.

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Note 8. Capital Stock

On March 15, 1999, our Board of Directors authorized us to repurchase up to 2.5 million shares of our outstanding common stock to be used for general corporate purposes. Since March 15, 1999, we have repurchased a total of 1.8 million shares at an average price of $22.91 per share. Shares repurchased during the first six months of fiscal year 2004 totaled $6.0 million. There were no shares repurchased during the first six months of fiscal year 2005.

Treasury stock of 0.2 million and 0.1 million shares were issued under stock plans during the first six months of fiscal years 2005 and 2004, respectively.

Note 9. Commitments and Contingencies

Lease Commitments

On April 30, 2004, we completed a sale-leaseback transaction for a portfolio of properties associated with 18 different branches. The properties were sold at a price of $32.7 million and leased back pursuant to 15-year minimum term operating leases. A loss of approximately $1.3 million resulting from the sale was recognized during the first quarter of fiscal year 2005 for the branches that were sold at a price less than their net book value. A gain of approximately $9.1 million resulting from the sale was deferred and will be amortized over the minimum term of the leases for branches that were sold at a price greater than their net book value. We do not have an option to purchase the leased facilities at the end of the minimum lease terms and have not issued any residual guarantees of the value of the leased facilities. The leases are accounted for as operating leases with future minimum annual lease payments totaling $1.9 million occurring during fiscal year 2005, $2.6 million per year occurring during fiscal years 2006 through 2008, $2.7 million occurring during fiscal year 2009 and $28.8 million occurring thereafter.

As discussed in Note 6, on March 16, 2004, we entered into a sale-leaseback transaction in which we sold our corporate headquarters building in Orlando, Florida to a subsidiary of WDC for $23.0 million and leased the property back for a period of 20 years. The lease expires on March 16, 2024, with five 5-year extensions exercisable at fair market value and at our option upon 12 months notice. We do not have an option to purchase the leased facility at the end of the minimum lease term and have not issued any residual value guarantee on the value of the leased facility. The lease is accounted for as an operating lease with future minimum annual lease payments totaling $1.2 million occurring during fiscal year 2005, $1.4 million per year occurring during fiscal years 2006 through 2009 and $25.6 million occurring thereafter.

Legal Matters

We are involved in various legal proceedings arising in the normal course of our business. In our opinion, none of the proceedings that have not been disclosed or recognized in our consolidated financial statements are material in relation to our consolidated operations, cash flows or financial position.

Note 10. Supplemental Cash Flows Information

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

	Six Months Ended
	July 30,  2004		August 1, 2003
Income taxes paid, net	$	28.1	$	5.3
Interest paid		12.9		14.9
Debt relieved with sale-leaseback proceeds (Note 6)		23.0		—
Assets acquired with debt		1.7		15.1

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During the first six months of fiscal years 2005 and 2004, we awarded an aggregate of 34,000 and 21,000 restricted shares, respectively, of our common stock to certain key employees in accordance with our 1997 Executive Stock Plan. The majority of the shares vest five years from the award date. The market value of the restricted shares awarded during the first six months of fiscal year 2005 totaled $2.0 million at the date of the grant and was recorded as unearned compensation, a component of shareholders’ equity. This amount is being charged ratably to expense over the vesting period.

The income tax benefit of stock options exercised during the first six months of fiscal years 2005 and 2004 totaled $1.8 million and $0.1 million, respectively.

On July 21, 2004, our Board of Directors declared a quarterly cash dividend of $0.13 per share that was payable on August 23, 2004 to shareholders of record on August 9, 2004. Dividends declared but not paid totaled $4.0 million and $2.3 million at July 30, 2004 and August 1, 2003, respectively.

On June 30, 2004, we made an $11.4 million investment in our corporate owned life insurance (“COLI”) policies to partially fund enhancements made in the first quarter of 2005 to our supplemental executive retirement plan (“SERP”), which provides supplemental benefits for certain key executive officers. While the SERP obligation is not funded by our general assets and thus the value of our COLI policies is not restricted to funding the SERP obligation, the interest income generated by our COLI policies will help offset the additional net periodic benefit costs associated with our SERP, as amended in the first quarter of 2005. The net periodic benefit cost associated with our SERP is included in selling, general and administrative expenses, while interest income associated with our COLI policies is recognized within interest and other income in our consolidated statements of income.

The net assets acquired and liabilities assumed for acquisitions recorded using the purchase method of accounting during the first six months of fiscal 2005 are summarized below (in millions). There was no stock consideration issued in connection with these acquisitions.

	July 30, 2004
Accounts receivable	$	49.8
Inventories		33.3
Property and equipment		5.1
Goodwill		40.9
Intangible assets		17.0
Deferred income taxes		1.2
Other assets		4.1
Assets acquired		151.4
Accounts payable and accrued liabilities		(38.1	)
Other liabilities		(15.1	)
Liabilities assumed		(53.2	)
Cash purchase price	$	98.2

There were no acquisitions made during the first six months of fiscal year 2004.

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Note 11. Segment Information

We are organized on a product line basis and report the results of our operations associated with our product lines in six operating segments and an Other category. The six operating segments are Water & Sewer; Plumbing/HVAC; Maintenance, Repair and Operations (“MRO”); Utilities; Electrical; and Industrial Pipe, Valves, and Fittings (“PVF”). We include our Building Materials, Fire Protection and Mechanical Industrial product lines in the Other category.

The Corporate category includes corporate level expenses not allocated to our operating segments. Inter-segment sales are excluded from net sales presented for each segment. Operating income for each segment includes certain corporate expense allocations for employee benefits, corporate overhead expenses, data processing expenses and property/casualty insurance. These allocations are based on consumption or at a standard rate determined by management.

The following tables present net sales and other financial information by segment for the three and six months ended July 30, 2004 and August 1, 2003, respectively (in millions):

	Net Sales				Operating Income				Depreciation and Amortization
	Three Months Ended				Three Months Ended				Three Months Ended
	July 30, 2004		August 1, 2003		July 30,   2004		August 1,  2003		July 30,   2004		August 1,  2003
Water & Sewer	$	323.3	$	232.5	$	18.7	$	13.4	$	1.0	$	0.7
Plumbing/HVAC		280.1		219.5		8.5		6.1		1.4		0.8
MRO		126.3		36.2		12.4		3.0		1.1		0.1
Utilities		108.7		91.5		4.6		4.1		0.3		0.4
Electrical		108.0		90.0		2.7		1.6		0.2		0.2
Industrial PVF		85.6		67.4		12.4		5.3		0.2		0.2
Other		111.1		78.0		11.2		3.1		0.2		0.5
Corporate		—		—		—		—		2.3		2.1
Total	$	1,143.1	$	815.1	$	70.5	$	36.6	$	6.7	$	5.0
	Net Sales				Operating Income				Depreciation and Amortization
	Six Months Ended				Six Months Ended				Six Months Ended
	July 30, 2004		August 1, 2003		July 30, 2004		August 1, 2003		July 30, 2004		August 1, 2003
Water & Sewer	$	594.9	$	451.5	$	29.3	$	22.3	$	1.7	$	1.4
Plumbing/HVAC		501.0		424.7		13.6		7.2		2.1		1.6
MRO		233.2		66.8		19.6		4.2		2.3		0.2
Utilities		208.8		180.4		7.5		7.5		0.6		0.8
Electrical		210.3		180.4		6.3		3.5		0.4		0.5
Industrial PVF		168.3		140.5		23.9		11.9		0.4		0.4
Other		219.4		153.6		20.9		5.9		0.6		1.0
Corporate		—		—		—		—		4.6		4.2
Total	$	2,135.9	$	1,597.9	$	121.1	$	62.5	$	12.7	$	10.1

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The following tables include our investment in assets (accounts receivable less allowance for doubtful accounts, inventories and goodwill) and accounts payable for each segment as of July 30, 2004 and January 30, 2004 (in millions):

	As of July 30, 2004
	Accounts Receivable		Inventories		Goodwill		Segment Assets		Accounts Payable
Water & Sewer	$	228.9	$	122.6	$	110.5	$	462.0	$	108.4
Plumbing/HVAC		156.8		148.1		85.2		390.1		111.7
MRO		62.4		54.1		273.1		389.6		29.8
Utilities		37.6		55.2		59.3		152.1		47.1
Electrical		67.6		29.6		9.0		106.2		36.2
Industrial PVF		38.1		119.6		56.4		214.1		26.6
Other		71.1		41.4		57.5		170.0		30.9
Corporate		—		—		—		—		35.6
Total	$	662.5	$	570.6	$	651.0		1,884.1	$	426.3
Cash and cash equivalents								18.2
Deferred income taxes								24.8
Other current assets								61.4
Property and equipment, net								112.4
Other assets								103.0
Total Assets							$	2,203.9

	As of January 30, 2004
	Accounts Receivable		Inventories		Goodwill		Segment Assets		Accounts Payable
Water & Sewer	$	161.4	$	92.8	$	104.7	$	358.9	$	78.8
Plumbing/HVAC		106.8		114.4		50.1		271.3		79.1
MRO		48.7		52.6		272.8		374.1		16.4
Utilities		30.9		46.8		59.3		137.0		22.2
Electrical		51.6		28.4		9.0		89.0		28.1
Industrial PVF		40.5		103.3		56.4		200.2		27.8
Other		53.4		28.7		57.5		139.6		18.8
Corporate		—		—		—		—		37.1
Total	$	493.3	$	467.0	$	609.8		1,570.1	$	308.3
Cash and cash equivalents								8.3
Deferred income taxes								19.4
Other current assets								53.0
Property and equipment, net								161.8
Other assets								68.7
Total Assets							$	1,881.3

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Note 12. Related Party Transaction

During the first six months of fiscal year 2005, we approved donations totaling $0.5 million to the Hughes Supply Foundation, Inc. (“HSF”), a not-for-profit charitable organization designed to help provide financial assistance for families in need in areas where we operate. The Board of Directors of HSF is comprised of certain of our executives, including the Chairman of the Board, the President and Chief Executive Officer, and the Executive Vice President and Chief Financial Officer.

Note 13. Subsequent Events

On August 24, 2004, we announced that our Board of Directors approved a two-for-one stock split in the form of a stock dividend, payable on September 22, 2004, to shareholders of record as of the close of business on September 15, 2004. As the stock split is not effective as of the filing date of this Form 10-Q, the computations of weighted average shares outstanding and basic and diluted earnings per share contained in this filing have not been adjusted for the effect of the stock split. The following table presents unaudited pro forma weighted average shares outstanding and earnings per share information, assuming that the additional shares resulting from the stock split had been outstanding since the beginning of each period presented (in millions, except per share data):

	Three Months Ended				Six Months Ended
	July 30,  2004		August 1, 2003		July 30,  2004		August 1, 2003
Weighted-average shares outstanding:
Basic		60.0		45.7		60.0		45.7
Diluted		62.0		46.7		61.9		46.5
Earnings per share:
Basic	$	0.66	$	0.41	$	1.15	$	0.67
Diluted	$	0.63	$	0.40	$	1.12	$	0.66

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PART I. FINANCIAL INFORMATION — Continued

HUGHES SUPPLY, INC.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide information to assist the reader in better understanding and evaluating our business and results of operations. This information is a discussion and analysis of certain significant factors that have affected our results of operations for the three and six months ended July 30, 2004 and August 1, 2003, and our financial condition as of July 30, 2004. MD&A should be read in conjunction with our consolidated financial statements and the notes thereto contained herein and in our Annual Report on Form 10-K (the “Annual Report”) for the fiscal year ended January 30, 2004.

Forward-Looking Statements

Certain statements made by us or incorporated by reference 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 we believe that the expectations reflected in such forward-looking statements are reasonable, we 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 under the caption “Item 1. Business—Risk Factors” in our Annual Report on Form 10-K for the year ended January 30, 2004. All forward-looking statements are qualified by and should be read in conjunction with those risk factors. Except as may be required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Business

Founded in 1928, we are one of the largest diversified wholesale distributors of construction, repair and maintenance-related products in the United States. We distribute over 350,000 products to more than 100,000 customers through approximately 500 branches located in 38 states. Our principal customers include electrical, plumbing and mechanical contractors; public utilities; property management companies; municipalities; and industrial companies. Although we have a national presence, we operate principally in the southeastern and southwestern United States.

Fiscal Year

Our fiscal year was previously a 52 or 53-week period ending on the last Friday in January. Beginning in fiscal year 2005 and thereafter, our fiscal year will be a 52-week period ending on January 31. The change in our fiscal year ending date was made to simplify reporting and to allow for better comparability between reporting periods. Fiscal year 2004 was a 52-week period. The three and six months ended July 30, 2004 and August 1, 2003 each contained 13 and 26 weeks, respectively.

Segment Information

We are organized on a product line basis and report the results of our operations associated with our product lines in six operating segments and an Other category. The six operating segments are: Water & Sewer; Plumbing/Heating, Ventilating and Air Conditioning (“HVAC”); Maintenance, Repair and Operations (“MRO”); Utilities; Electrical; and Industrial Pipe, Valves, and Fittings (“PVF”). We include our Building Materials, Fire Protection and Mechanical Industrial product lines in the Other category.

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Inter-segment sales are excluded from the net sales presented for each segment. Operating income for each segment includes certain corporate expense allocations for employee benefits, corporate overhead expenses, data processing expenses and insurance. These allocations are based on consumption or at a standard rate determined by management.

Same-Store Sales Methodology

During the first quarter of fiscal year 2005, we changed our same-store sales methodology to include all branches, including those that are newly opened, closed and acquired during the comparative fiscal periods. For comparative purposes, prior period sales will be reported on a pro forma basis to include pre-acquisition sales activity. Branches of any divested business will continue to be excluded from our calculation. We believe the new methodology more accurately reflects the current sales performance of all our branches, including those newly acquired.

Results of Operations

Overview

Our results of operations for the second quarter of fiscal year 2005 reflect net sales, net income and diluted earnings per share growth driven by higher commodity prices across all of our segments, increased residential and commercial demand, and the impact of recent acquisitions including Marden Susco, LLC (“Marden Susco”), Century Maintenance Supply, Inc. (“Century”), Standard Wholesale Supply Company (“Standard”) and Todd Pipe & Supply (“Todd Pipe”). Net sales increased 40.2% to $1,143.1 million in the second quarter of fiscal year 2005, compared to the $815.1 million reported in the prior year’s second quarter. Same-store sales increased 16.8% with growth reported in all of our segments and the three product lines comprising the Other category. Net income in the second quarter of 2005 totaled $39.4 million, a $20.7 million increase compared to the prior year’s second quarter net income of $18.7 million. The 110.7% increase in net income was primarily attributable to a 100 basis point increase in our gross margin ratio to net sales, from 22.6% during the second quarter of 2004 to 23.6% for the second quarter of 2005, in addition to a 70 basis point improvement in our ratio of operating expenses to net sales, despite higher personnel, insurance, fuel and acquisition integration expenses. Diluted earnings per share in the second quarter of fiscal year 2005 totaled $1.27 on 31.0 million shares outstanding, compared to $0.80 per diluted share reported in the prior year on 23.3 million shares outstanding.

Our results of operations for the first six months of fiscal year 2005 also reflect higher net sales, net income and diluted earnings per share, driven primarily by the factors identified above. Net sales increased 33.7% to $2,135.9 million during the first six months of fiscal year 2005, compared to the $1,597.9 million reported in the prior year. Same-store sales increased 15.8% with growth reported in all of our segments and the three product lines comprising the Other category. Net income during the first six months of fiscal year 2005 totaled $69.2 million, a $38.7 million increase compared to the prior year net income of $30.5 million. The 126.9% increase in net income was primarily attributable to a 140 basis point increase in our gross margin ratio to net sales, from 22.5% during the first six months of 2004 to 23.9% during the first six months of 2005, in addition to a 30 basis point improvement in our ratio of operating expenses to net sales, despite higher personnel, insurance, fuel, and acquisition integration expenses. Diluted earnings per share during the first six months of fiscal year 2005 totaled $2.24 on 30.9 million shares outstanding, compared to $1.31 per diluted share reported in the prior year on 23.2 million shares outstanding.

Net Sales

Net sales are affected by numerous factors, including, but not limited to, commodity pricing, changes in demand, seasonality, weather, competition and construction cycles. The following table presents the major components of our consolidated net sales in the second quarter and first six months of fiscal years 2005 and 2004 (dollars in millions):

	Three Months Ended								Six Months Ended
	July 30, 2004			August 1, 2003			Percentage Variance		July 30, 2004			August 1, 2003			Percentage Variance
Existing sales base	$	954.5		$	799.5		19.4	%	$	1,839.3		$	1,560.3		17.9	%
Branch openings/closures		7.3			15.6					17.6			37.6
Acquisitions		200.1			179.6					380.7			334.5
Same-store sales (1)		1,161.9			994.7		16.8	%		2,237.6			1,932.4		15.8	%
Less: Pre-acquisition pro forma sales		(18.8	)		(179.6	)				(101.7	)		(334.5	)
Reported Net Sales	$	1,143.1		$	815.1		40.2	%	$	2,135.9		$	1,597.9		33.7	%

⁽¹⁾ Same store sales calculation includes all branches, including newly opened, closed and those acquired during the comparative fiscal periods. For comparative purposes, prior period sales are reported on a pro forma basis to include pre-acquisition sales activity.

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Net sales in the second quarter of fiscal year 2005 totaled $1,143.1 million, an increase of $328.0 million or 40.2%, compared to the prior year’s second quarter net sales of $815.1 million. Net sales in the first six months of fiscal 2005 totaled $2,135.9 million, an increase of $538.0 million or 33.7% compared to the prior year’s first six months net sales of $1,597.9 million. These increases were primarily due to the acquisitions of Marden Susco and Century completed during the third and fourth quarters of fiscal year 2004, respectively, the acquisitions of Standard and Todd Pipe completed in May 2004, commodity price increases, continued strength in residential demand and increased demand from a strengthening commercial construction sector.

Same-store sales increased $167.2 million or 16.8% and $305.2 million or 15.8% during the second quarter and first six months of fiscal year 2005, respectively, as compared to the prior year. All of our segments reported positive same-store sales growth, with double-digit growth reported in four of our six segments and two of the three product lines comprising the Other category during the second quarter of 2005. Additionally, five of the six segments and all three product lines comprising the Other category reported double-digit same-store sales growth during the first six months of 2005. The growth in same-store sales was primarily the result of higher commodity prices, continued strength in residential demand and stronger commercial activity.

Gross Margin

Gross margin is affected by numerous factors, including, but not limited to product mix changes, commodity pricing, competition, vendor rebates and direct shipments compared to stock sales. Gross margin and gross margin ratio to net sales in the second quarter and first six months of fiscal years 2005 and 2004 were as follows (dollars in millions):

	Three Months Ended
	July 30,   2004			August 1, 2003			Percentage and Basis Point Variance
Gross margin	$	270.1		$	184.5		46.4	%
Gross margin ratio to net sales		23.6	%		22.6	%	100
	Six Months Ended
	July 30,   2004			August 1, 2003			Percentage and Basis Point Variance
Gross margin	$	511.2		$	359.9		42.0	%
Gross margin ratio to net sales		23.9	%		22.5	%	140

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Gross margin ratio to net sales was 23.6% and 22.6% in the second quarter of fiscal years 2005 and 2004, respectively, and 23.9% and 22.5% in the first six months of fiscal years 2005 and 2004, respectively. The 100 and 140 basis point improvements during the second quarter and first six months of fiscal year 2005, respectively, were mainly attributable to the improved performance of traditionally higher margin businesses, including Industrial PVF and Building Materials, resulting from our ability to pass on higher commodity prices and improved market conditions, in addition to a higher net sales mix of our higher margined MRO business resulting from the acquisition of Century in December 2003. Our MRO business comprised 11.0% and 10.9% of our net sales in the second quarter and first six months of fiscal year 2005, respectively, compared with 4.4% and 4.2% in the comparable prior year periods.

The value of our inventories and related cost of sales are determined by the moving average cost method. Changes in cost of sales therefore generally occur later than price changes reflected in our net sales figures over a given period of time. While commodity prices increased during the first six months of fiscal year 2005, our gross margin ratio to net sales decreased 70 basis points to 23.6% during the second quarter from 24.3% experienced during the first quarter of fiscal year 2005 and our gross margin ratio to net sales is expected to continue to moderate as cost of sales begin to reflect the higher priced inventory.

Operating Expenses

Operating expenses and percentage of net sales for the second quarter and first six months of fiscal years 2005 and 2004 were as follows (dollars in millions):

	Operating Expenses			Percentage of Net Sales
	Three Months Ended			Three Months Ended
	July 30, 2004	August 1, 2003	Percentage Variance	July 30, 2004	August 1, 2003	Basis Point Variance
Personnel expenses	$    130.8	$      94.5	38.4%	11.4%	11.6%	(20)
Other selling, general and administrative expenses	62.1	48.4	28.3%	5.4%	5.9%	(50)
Depreciation and amortization	6.7	5.0	34.0%	0.6%	0.6%	—
Total	$    199.6	$    147.9	35.0%	17.4%	18.1%	(70)
	Operating Expenses			Percentage of Net Sales
	Six Months Ended			Six Months Ended
	July 30, 2004	August 1, 2003	Percentage Variance	July 30, 2004	August 1, 2003	Basis Point Variance
Personnel expenses	$    251.2	$    189.8	32.3%	11.8%	11.9%	(10)
Other selling, general and administrative expenses	126.2	97.5	29.4%	5.9%	6.1%	(20)
Depreciation and amortization	12.7	10.1	25.7%	0.6%	0.6%	—
Total	$    390.1	$    297.4	31.2%	18.3%	18.6%	(30)

As a percentage of net sales, personnel expenses remained relatively consistent at 11.4% and 11.6% for the second quarter of fiscal years 2005 and 2004, respectively, with the $36.3 million increase quarter over quarter primarily relating to the Marden Susco, Century, Standard and Todd Pipe acquisitions, which collectively added $18.5 million of personnel expenses to the second quarter of fiscal year 2005 and which were the primary contributors to a 23.6% increase in our workforce, from an average of approximately 7,200 employees during the second quarter of 2004 to approximately 8,900 during the second quarter of 2005. Personnel expenses during the second quarter of fiscal year 2005, excluding the impact of the acquisitions, increased by $17.8 million primarily due to an increase in salaries and wages, including commissions, bonuses, vacation and payroll taxes, resulting from considerably higher net sales and margin growth, and a significant increase in employee healthcare insurance expenses due to higher enrollment and increasing healthcare costs.

As a percentage of net sales, personnel expenses remained relatively flat at 11.8% and 11.9% during the first six months of fiscal years 2005 and 2004, respectively, with $30.0 million of the $61.4 million increase in costs primarily relating to the Marden Susco, Century, Standard and Todd Pipe acquisitions. Personnel expenses during the first six months of fiscal year 2005, excluding the impact of acquisitions, increased by $31.4 million primarily due to the factors identified in the analysis of the second quarter’s results.

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As a percentage of net sales, other selling, general and administrative expenses decreased 50 basis points to 5.4% for the second quarter of fiscal year 2005, as compared to 5.9% for the second quarter of fiscal year 2004, primarily as a result of the operating leverage obtained from the increase in net sales. The $13.7 million increase in costs was primarily related to the Marden Susco, Century, Standard and Todd Pipe acquisitions, which added an aggregate of $9.4 million of other selling, general and administrative expenses to the second quarter of fiscal year 2005. Excluding the acquisitions, other selling, general and administrative expenses increased $4.3 million in the second quarter of fiscal year 2005 primarily as a result of an increase in the provision for doubtful accounts resulting from a bad debt recovery of approximately $0.9 million during the second quarter of fiscal year 2004 in the Utilities segment relating to a bankruptcy settlement associated with one customer in addition to the growth in net sales; an increase in insurance expenses primarily relating to higher losses associated with our casualty insurance program; an increase in vehicle lease expense due to our initiative to lease vehicles upon replacement of owned vehicles; an increase in fuel expenses; and an increase in building rent and repairs primarily resulting from our first quarter of fiscal year 2005 sale-leaseback transactions.

As a percentage of net sales, other selling, general and administrative expenses remained relatively consistent at 5.9% and 6.1% during the first six months of fiscal 2005 and 2004, respectively, with the $28.7 million increase in costs primarily relating to the Marden Susco, Century, Standard and Todd Pipe acquisitions, which added $16.6 million of other selling, general and administrative expenses to the first half of fiscal year 2005. Excluding the acquisitions, other selling, general and administrative expenses increased by $12.1 million primarily due to additional sales, property and other tax expenses; an increase in vehicle lease expense due to our initiative to lease vehicles upon replacement of owned vehicles; an increase in the provision for doubtful accounts resulting from the bad debt recovery during the second quarter of fiscal year 2004 in the Utilities segment in addition to the growth in net sales; an increase in insurance expenses primarily relating to higher losses associated with our casualty insurance program; an increase in fuel costs; an increase in building rent and repairs resulting from our first quarter of fiscal year 2005 sale-leaseback transactions; and a donation of $0.5 million in the first quarter of fiscal year 2005 to the Hughes Supply Foundation, Inc., a not-for-profit charitable foundation.

As a percentage of net sales, depreciation and amortization expenses remained flat at 0.6% for the second quarter of fiscal years 2005 and 2004 as well as for the first six months of fiscal years 2005 and 2004, respectively. The increase of $1.7 million and $2.6 million during the second quarter and the first six months of fiscal year 2005, respectively, as compared to the prior year periods was primarily the result of the amortization of intangible assets related to the Century and Todd Pipe acquisitions.

Operating Income

Operating income is affected significantly by fluctuations in net sales as well as changes in business and product mix. Operating income for the second quarter and first six months of fiscal years 2005 and 2004 was as follows (dollars in millions):

	Operating Income						Percentage of Net Sales
	Three Months Ended						Three Months Ended
	July 30, 2004		August 1, 2003		Percentage Variance		July 30, 2004		August 1, 2003		Basis Point Variance
Operating income	$	70.5	$	36.6	92.6	%	6.2	%	4.5	%	170
	Operating Income						Percentage of Net Sales
	Six Months Ended						Six Months Ended
	July 30,   2004		August 1,   2003		Percentage Variance		July 30,   2004		August 1,   2003		Basis Point Variance
Operating income	$	121.1	$	62.5	93.8	%	5.7	%	3.9	%	180

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Operating income during the second quarter of fiscal year 2005 totaled $70.5 million, increasing $33.9 million or 92.6%, compared to the prior year’s second quarter operating income of $36.6 million, due in part to the acquisitions of Marden Susco, Century, Standard and Todd Pipe. Operating income as a percentage of net sales increased 170 basis points to 6.2% in the second quarter of fiscal year 2005 compared to 4.5% in fiscal year 2004 primarily due to improved product pricing and mix, higher commodity prices, increased residential and commercial demand, our continued efforts to manage our expenses to leverage increased net sales, and the overall higher return contributions from our recent acquisitions.

Operating income during the first six months of fiscal year 2005 totaled $121.1 million, increasing $58.6 million or 93.8%, compared to the prior year’s first six months operating income total of $62.5 million, due in part to the acquisitions of Marden Susco, Century, Standard and Todd Pipe. As a percentage of net sales, operating income increased 180 basis points during the first six months of fiscal year 2005 to 5.7%, as compared to 3.9% in the prior year, for reasons consistent with those identified in the analysis of the second quarter of fiscal year 2005.

Interest and Other Income

Interest and other income totaled $1.6 million and $1.9 million in the second quarter of fiscal years 2005 and 2004, respectively, and $3.3 million and $3.4 million in the first six months of fiscal years 2005 and 2004, respectively.

Interest Expense

Interest expense totaled $7.5 million and $7.4 million in the second quarter of fiscal years 2005 and 2004, respectively, and totaled $13.8 million and $15.1 million in the first six months of fiscal years 2005 and 2004, respectively. Included in interest expense for the second quarter and the first six months of fiscal year 2005 was a $0.8 million charge associated with the write-off of unamortized loan origination costs relating to our $290.0 million revolving credit agreement which was replaced by a new $500 million revolving credit agreement on June 14, 2004. Excluding the $0.8 million charge, interest expense decreased by $0.7 million and $2.1 million during the second quarter and first half of fiscal year 2005, respectively, as compared to the prior year. The decrease in interest expense was primarily the result of a 102 basis point and 84 basis point decrease in our weighted average interest rate for the second quarter and first six months of fiscal year 2005, respectively, in addition to a change in the mix of our debt balances represented by a lower percentage of higher-cost fixed rate senior notes and a higher percentage of lower-cost variable rate borrowings under our new credit agreement, the collective impact of which was partially offset by an increase in overall debt levels from the prior year. Total debt increased by $64.7 million or 15.0% from $430.1 million as of August 1, 2003 to $494.8 million as of July 30, 2004 as a result of the funding of the Standard and Todd Pipe acquisitions in May 2004 and to help support the increased working capital levels primarily resulting from our net sales growth.

Income Taxes

Our effective tax rate was 39.0% and 39.9% in the second quarter of fiscal years 2005 and 2004, respectively, and 37.4% and 40.0% in the first six months of fiscal years 2005 and 2004, respectively. The decrease in our effective tax rate during the first six months of fiscal year 2005 was primarily attributable to a $1.7 million tax benefit realized in the first quarter of fiscal year 2005 related to federal income tax filing amendments associated with prior fiscal years. Our effective tax rate is expected to be 39.0% for the remainder of fiscal year 2005.

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Segment Results

Consolidated and same-store sales by segment in the second quarter and first six months of fiscal years 2005 and 2004 were as follows (dollars in millions):

	Consolidated Net Sales						Same-Store Sales
	Three Months Ended						Three Months Ended
	July 30, 2004		August 1, 2003		Percentage Variance		July 30, 2004			August 1, 2003			Percentage Variance
Water & Sewer	$	323.3	$	232.5	39.1	%	$	323.3		$	268.3		20.5	%
Plumbing/HVAC		280.1		219.5	27.6	%		298.9			274.0		9.1	%
MRO		126.3		36.2	248.9	%		126.3			125.5		0.6	%
Utilities		108.7		91.5	18.8	%		108.7			91.5		18.8	%
Electrical		108.0		90.0	20.0	%		108.0			90.0		20.0	%
Industrial PVF		85.6		67.4	27.0	%		85.6			67.4		27.0	%
Other		111.1		78.0	42.4	%		111.1			78.0		42.4	%
Total	$	1,143.1	$	815.1	40.2	%	$	1,161.9		$	994.7		16.8	%
	Consolidated Net Sales						Same-Store Sales
	Six Months Ended						Six Months Ended
	July 30, 2004		August 1, 2003		Percentage Variance		July 30, 2004			August 1, 2003			Percentage Variance
Water & Sewer	$	594.9	$	451.5	31.8	%	$	615.0		$	521.2		18.0	%
Plumbing/HVAC		501.0		424.7	18.0	%		582.6			529.8		10.0	%
MRO		233.2		66.8	249.1	%		233.2			226.5		3.0	%
Utilities		208.8		180.4	15.7	%		208.8			180.4		15.7	%
Electrical		210.3		180.4	16.6	%		210.3			180.4		16.6	%
Industrial PVF		168.3		140.5	19.8	%		168.3			140.5		19.8	%
Other		219.4		153.6	42.8	%		219.4			153.6		42.8	%
Total	$	2,135.9	$	1,597.9	33.7	%	$	2,237.6		$	1,932.4		15.8	%
Operating income by segment and as a percentage of net sales for the second quarter and first six months of fiscal years 2005 and 2004 were as follows (dollars in millions):
	Operating Income						Percentage of Net Sales
	Three Months Ended						Three Months Ended
	July 30, 2004		August 1, 2003		Percentage Variance		July 30, 2004			August 1, 2003			Basis Point Variance
Water & Sewer	$	18.7	$	13.4	39.6	%		5.8	%		5.8	%	—
Plumbing/HVAC		8.5		6.1	39.3	%		3.0	%		2.8	%	20
MRO		12.4		3.0	313.3	%		9.8	%		8.3	%	150
Utilities		4.6		4.1	12.2	%		4.2	%		4.5	%	(30	)
Electrical		2.7		1.6	68.8	%		2.5	%		1.8	%	70
Industrial PVF		12.4		5.3	134.0	%		14.5	%		7.9	%	660
Other		11.2		3.1	261.3	%		10.1	%		4.0	%	610
Total	$	70.5	$	36.6	92.6	%		6.2	%		4.5	%	170

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	Operating Income						Percentage of Net Sales
	Six Months Ended						Six Months Ended
	July 30, 2004		August 1, 2003		Percentage Variance		July 30, 2004		August 1, 2003		Basis Point Variance
Water & Sewer	$	29.3	$	22.3	31.4	%	4.9	%	4.9	%	—
Plumbing/HVAC		13.6		7.2	88.9	%	2.7	%	1.7	%	100
MRO		19.6		4.2	366.7	%	8.4	%	6.3	%	210
Utilities		7.5		7.5	0.0	%	3.6	%	4.2	%	(60	)
Electrical		6.3		3.5	80.0	%	3.0	%	1.9	%	110
Industrial PVF		23.9		11.9	100.8	%	14.2	%	8.5	%	570
Other		20.9		5.9	254.2	%	9.5	%	3.8	%	570
Total	$	121.1	$	62.5	93.8	%	5.7	%	3.9	%	180

The following is a discussion of factors impacting net sales and operating income for our operating segments:

Water & Sewer

Net sales: Net sales in the second quarter of fiscal year 2005 totaled $323.3 million, an increase of $90.8 million or 39.1%, compared to the prior year’s second quarter net sales of $232.5 million. This increase included sales of $19.8 million from the Marden Susco acquisition completed in August 2003 and sales of $22.2 million from the Standard acquisition completed in May 2004. Same-store sales increased by $55.0 million or 20.5% compared to the second quarter of fiscal year 2004, which includes pro forma sales of $17.7 million for Marden Susco and $18.1 million for Standard. Growth in same-store sales was experienced across all regions due to a higher volume of private and public infrastructure projects and higher prices for PVC, ductile iron pipe and steel products. The growth in same-store sales was also aided by the fact that the second quarter of fiscal year 2004 net sales results were unfavorably impacted by heavy rainfall in the mid-Atlantic and Southeast states and lower ductile iron prices.

Net sales in the first six months of fiscal year 2005 totaled $594.9 million, an increase of $143.4 million or 31.8% compared to the prior year’s first six months net sales total of $451.5 million. This increase included sales of $40.2 million from the Marden Susco acquisition completed in August 2003 and sales of $22.2 million from the Standard acquisition completed in May 2004. Same store sales increased by $93.8 million or 18.0% compared to the first six months of fiscal year 2004 amount, which includes pro forma sales of $33.3 million for Marden Susco and $36.3 million for Standard. A higher volume of private and public infrastructure projects, particularly in the mid-Atlantic, Southeast and West markets, and higher prices for PVC, ductile iron pipe and steel drove the 18.0% same-store sales increase in the first half of fiscal year 2005.

Operating income: As a percentage of net sales, operating income remained consistent, totaling 5.8% in the second quarter of fiscal years 2005 and 2004, respectively, and 4.9% during the first six months of fiscal years 2005 and 2004, respectively. The flat levels of operating income as a percentage of net sales were primarily the result of decreased gross margins attributable to competitive pricing pressures in certain markets offset by increased rebate income resulting from continued vendor consolidation efforts and improved programs with our suppliers, and lower operating expenses as a percentage of net sales.

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Plumbing/HVAC

Net sales: Net sales in the second quarter of fiscal year 2005 totaled $280.1 million, an increase of $60.6 million or 27.6%, compared to the prior year’s second quarter total of $219.5 million. This increase included sales of $45.0 million from the Todd Pipe acquisition completed on May 28, 2004. Same-store sales increased by $24.9 million or 9.1% compared to the second quarter of fiscal year 2004 amount, which included pro forma sales of $54.5 million for Todd Pipe. The 9.1% growth in same-store sales was primarily the result of stronger demand in the commercial sector and continued strength in residential projects, along with price increases in steel, copper and PVC products.

Net sales in the first six months of fiscal year 2005 totaled $501.0 million, an increase of $76.3 million or 18.0% compared to the prior year’s first six months net sales total of $424.7 million. Same-store sales increased by $52.8 million or 10.0% compared to the first six months of fiscal year 2004, which included pro forma sales of $105.1 million for Todd Pipe. The growth in same-store sales during the first six months of fiscal year 2005 was primarily attributable to the factors identified in the analysis of the second quarter of fiscal year 2005.

Operating income: As a percentage of net sales, operating income increased to 3.0% in the second quarter of fiscal year 2005 from 2.8% in the prior year’s second quarter. The 20 basis point increase was primarily the result of the addition of Todd Pipe in May 2004, which has returns that have historically been above those of our plumbing business, and higher commodity prices.

During the first six months of fiscal year 2005, operating income as a percentage of net sales increased by 100 basis points to 2.7%, as compared to a ratio of 1.7% during the prior year period. The 100 basis point improvement in the ratio was primarily the result of more favorable commodity prices, growth in the commercial market, continued strength in residential projects, and increased rebate income, in addition to the inclusion of Todd Pipe in the segment’s operating results beginning in May 2004.

MRO

Net sales: Net sales in the second quarter of fiscal year 2005 totaled $126.3 million, an increase of $90.1 million or 248.9%, compared to the prior year’s second quarter total of $36.2 million. This increase is primarily the result of the acquisition of Century, which was completed in December 2003. Same-store sales increased $0.8 million or 0.6% compared to the second quarter of fiscal year 2004 amount, which included pro forma sales of $89.3 million for Century. The flat sales growth during the second quarter of fiscal year 2005 as compared to the 5.8% same-store sales growth experienced in the first quarter of fiscal year 2005 was primarily the result of the temporary disruption caused by the sales force rationalization and integration efforts associated with the Century acquisition in addition to continued weakness in the apartment market. The weakness in the apartment market has been driven by low interest rates, which favor first home purchases and which have led to historically low levels of apartment occupancy rates in key markets such as Atlanta, Houston and Dallas, contributing to decreased maintenance spending by property managers.

Net sales in the first six months of fiscal year 2005 totaled $233.2 million, an increase of $166.4 million or 249.1% compared to the prior year’s first six months net sales total of $66.8 million. This increase was primarily the result of the acquisition of Century. Same-store sales increased $6.7 million or 3.0% compared to the second quarter of fiscal year 2004 amount, which included pro forma sales of $159.7 million for Century. The growth in same-store sales during the first six months of fiscal year 2005 was primarily due to improved penetration in certain markets and various sales initiatives, the benefits of which were partially offset by the disruption caused by the sales force rationalization and integration efforts associated with the Century acquisition and continued weakness in the apartment market.

Operating income: As a percentage of net sales, operating income increased to 9.8% in the second quarter of fiscal year 2005 from 8.3% in the prior year’s second quarter. During the first six months of fiscal year 2005, operating income as a percentage of net sales increased to 8.4%, as compared to a ratio of 6.3% during the prior year period. The 150 and 210 basis point improvements during the second quarter and first half of fiscal year 2005, respectively, occurred despite lower sales growth and integration costs and were primarily attributable to the inclusion of Century, which generates higher returns on net sales.

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Utilities

Net sales: Net sales and same-store sales in the second quarter of fiscal year 2005 totaled $108.7 million, an increase of $17.2 million or 18.8%, compared to the prior year’s second quarter total of $91.5 million. During the first six months of fiscal year 2005, net sales and same-store sales totaled $208.8 million, an increase of $28.4 or 15.7% compared to the prior year. The sales growth experienced during the second quarter and first six months of fiscal year 2005 was primarily attributable to higher sales resulting from our continued efforts to expand alliances with large electric utility companies, in addition to improved overall market conditions and higher pricing for steel, aluminum, copper, and PVC products.

Operating income: As a percentage of net sales, operating income decreased to 4.2% in the second quarter of fiscal year 2005 from 4.5% in the prior year’s second quarter. The 30 basis point decrease was primarily the result of the impact of a bad debt recovery totaling approximately $0.9 million in the second quarter of fiscal year 2004 relating to a bankruptcy settlement associated with one customer, partially offset by an improvement in the ratio of operating expenses to net sales (excluding the bad debt recovery) and a slight improvement in gross margins. The improvement in the ratio of operating expenses to net sales was primarily the result of the leverage obtained from the net sales growth. Excluding the impact of the bad debt recovery in the second quarter of fiscal year 2004, operating income as a percentage of sales increased by 70 basis points during the second quarter of fiscal year 2005.

During the first six months of fiscal year 2005, operating income as a percentage of net sales decreased by 60 basis points to 3.6%, as compared to a ratio of 4.2% during the prior year period. The 60 basis point decrease was primarily the result of the bad debt recovery in the second quarter of fiscal year 2004. Excluding the impact of the bad debt recovery, operating income as a percentage of net sales decreased by 10 basis points primarily as a result of a higher percentage of lower margin direct shipment sales. The ratio of operating expenses to net sales (excluding the bad debt recovery) was consistent during the first six months of fiscal years 2005 and 2004, respectively, as the increase in the ratio relating to our efforts to put an infrastructure in place necessary to support additional business from alliance customers was offset by the impact of the leverage obtained from the net sales growth.

Electrical

Net sales: Net sales and same-store sales in the second quarter of fiscal year 2005 totaled $108.0 million, an increase of $18.0 million or 20.0%, compared to the prior year’s second quarter total of $90.0 million. During the first six months of fiscal year 2005, net sales and same-store sales totaled $210.3 million, an increase of $29.9 million or 16.6% compared to the prior year. Sales growth experienced in both the second quarter and first six months of fiscal year 2005 as compared to the prior year periods was primarily the result of higher prices for steel, copper and PVC-based products, in addition to the strengthening economy and increased and larger commercial, residential and municipal projects, primarily in Florida.

Operating income: As a percentage of net sales, operating income increased to 2.5% in the second quarter of fiscal year 2005 from 1.8% in the prior year’s second quarter. During the first six months of fiscal year 2005, operating income as a percentage of net sales increased by 110 basis points to 3.0%, as compared to a ratio of 1.9% during the prior year period. The basis point improvements during the second quarter and first six months of fiscal year 2005 were primarily the result of the leverage obtained from the increase in sales volumes. The 70 basis point improvement in the second quarter of fiscal year 2005 was lower than the 140 basis point improvement experienced during the first quarter of fiscal year 2005 primarily due to the impact of falling copper and aluminum prices during the second quarter that resulted in margin compression, as higher priced moving average cost inventory was sold at the lower market prices.

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Industrial PVF

Net sales: Net sales and same-store sales in the second quarter of fiscal year 2005 totaled $85.6 million, an increase of $18.2 million or 27.0%, compared to the prior year’s second quarter net sales and same-store sales total of $67.4 million. Additionally, net sales and same-store sales in the first six months of fiscal year 2005 totaled $168.3 million, an increase of $27.8 million or 19.8% compared to the prior year’s first six months net sales total of $140.5 million. The increase in net sales during both the second quarter and first six months of fiscal year 2005 as compared to the prior year was primarily attributable to higher nickel and steel prices. The remainder of the increase was primarily the result of higher demand generated from an improvement in the industrial market, particularly in fabrication, the addition of several new accounts, and market share gains.

Operating income: As a percentage of net sales, operating income increased to 14.5% in the second quarter of fiscal year 2005 from 7.9% in the prior year’s second quarter. During the first six months of fiscal year 2005, operating income as a percentage of net sales increased 570 basis points to 14.2%, as compared to a ratio of 8.5% during the prior year period. The 660 and 570 basis point increases during the second quarter and first six months of fiscal year 2005, respectively, were primarily the result of an increase in gross margins attributable to higher selling prices related to nickel and steel products partially offset by a $0.6 million increase in the provision for doubtful accounts primarily relating to one specific customer.

Other

Net sales: Net sales and same-store sales in the second quarter of fiscal year 2005 totaled $111.1 million, an increase of $33.1 million or 42.4%, compared to the prior year’s second quarter net sales of $78.0 million, with all three product lines comprising the Other category experiencing strong sales growth. The Building Materials product line had sales growth of $20.8 million or 46.3% in the second quarter of fiscal year 2005 as compared to the prior year’s second quarter as a result of significant increases in the prices of steel and lumber, along with increased demand from the strengthening commercial construction market, particularly in Florida and North Carolina. The Fire Protection product line had sales growth of $11.7 million or 46.7% during this period as a result of significantly higher steel prices and increased demand. The Mechanical Industrial product line had sales growth in the second quarter of fiscal year 2005 of $0.6 million or 7.5%, as compared to the prior year’s second quarter due primarily to higher steel prices.

Net sales in the first six months of fiscal year 2005 totaled $219.4 million, an increase of $65.8 million or 42.8% compared to the prior year’s first six months net sales of $153.6 million, with all three product lines comprising the Other category experiencing strong sales growth for reasons consistent with those relating to the net sales growth in the second quarter of fiscal year 2005. The Building Materials, Fire Protection and Mechanical Industrial product lines had sales growth of $37.2 million or 42.4%, $25.3 million or 51.4%, and $3.3 million or 19.7% during the six months ended July 30, 2004, respectively, as compared to the first six months of fiscal year 2004.

Operating income: As a percentage of net sales, operating income increased to 10.1% in the second quarter of fiscal year 2005 from 4.0% in the prior year’s second quarter. During the first six months of fiscal year 2005, operating income as a percentage of net sales increased 570 basis points to 9.5%, as compared to a ratio of 3.8% during the prior year period. The 610 and 570 basis point increases for the second quarter and the first six months of fiscal year 2005, respectively, were primarily the result of strong sales and gross margin growth in all three product lines in addition to sound expense management.

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Liquidity and Capital Resources

The following sets forth certain measures of our liquidity (dollars in millions):

	July 30,         2004			January 30, 2004
Working capital	$	749.2		$	603.6
Current ratio		2.3 to 1			2.4 to 1
Debt to total capital		31.4	%		29.0	%
	Six Months Ended
	July 30, 2004			August 1, 2003
Net cash (used in) provided by operating activities	$	(1.1	)	$	42.3
Net cash used in investing activities		(82.4	)		(7.6	)
Net cash provided by (used in) financing activities		93.4			(32.6	)

Working Capital

Compared to January 30, 2004, working capital increased $145.6 million or 24.1%. The increase in working capital was primarily attributable to higher accounts receivable driven by the double-digit same-store sales growth and the acquisitions of Standard and Todd Pipe, and increased cash and cash equivalents. These working capital increases were offset by lower levels of owned inventories (inventories less accounts payable) resulting from improved inventory and payables management and increased other current liabilities primarily attributable to the timing of income and sales tax accrual payments. We continue to focus on asset management initiatives that will improve our working capital efficiency.

Operating Activities

Net cash used in operating activities during the first six months of fiscal year 2005 totaled $1.1 million to support higher same-store sales growth compared to net cash provided by operating activities of $42.3 million for the first six months of fiscal year 2004. The $43.4 million decrease in operating cash flows was primarily driven by fluctuations in accounts receivable, inventories, accounts payable and other current liabilities despite higher results of operations during the first six months of fiscal year 2005.

Accounts receivable balances increased $169.2 million during the first six months of fiscal year 2005, of which $49.8 million related to the acquisitions of Standard and Todd Pipe, which are classified as investing activities for cash flow reporting purposes. The remaining net increase of $119.4 million was due primarily to same-store sales growth. Days sales outstanding remained flat in both periods, while past due balances as a percentage of total accounts receivable decreased during the first six months of fiscal year 2005.

The $103.6 million increase in inventories during the first six months of fiscal year 2005 includes $33.3 million related to the acquisitions of Standard and Todd Pipe, which has been classified as an investing activity for cash flow reporting purposes. The remaining net inventory increase of $70.3 million was the result of purchases made to support net sales growth and higher prices.

Higher prices as well as our efforts to extend vendor payment terms were the primary drivers of the $118.0 million increase in accounts payable during the first six months of fiscal year 2005, of which $32.7 million was associated with the acquisitions of Standard and Todd Pipe and has been classified as an investing activity for cash flow reporting purposes.

Other current liabilities increased $33.2 million during the first six months of fiscal year 2005, of which $10.3 million related to the investing activity associated with the acquisitions of Standard and Todd Pipe. The remaining net increase in other current liabilities during the first six months of fiscal year 2005 was primarily due to the timing of income and sales tax accrual payments.

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Going forward, we expect operating cash flows to be strong as we continue to improve our working capital efficiency, allowing us to generate cash from operations.

Investing Activities

Our expenditures for property and equipment totaled $11.3 million and $8.0 million during the first six months of fiscal years 2005 and 2004, respectively. Of the total $11.3 million of capital expenditures, approximately $8.9 million related to information technology outlays, including amounts for the Hughes Unified operating system and the new Oracle Financial system implementation. While there can be no assurance that current expectations will be realized, capital expenditures are expected to be in the range of approximately $20.0 million to $25.0 million in fiscal year 2005.

Proceeds from the sale of property and equipment totaled $38.5 million and $0.4 million during the first six months of fiscal years 2005 and 2004, respectively. During the first six months of fiscal year 2005, proceeds from the sale of property and equipment consisted primarily of cash received from the first quarter sale-leaseback of a portfolio of properties comprised of 18 different branches. The resulting leases have qualified for operating lease treatment.

Cash payments for business acquisitions totaled $98.2 million during the first six months of fiscal year 2005. There were no business acquisitions during the first six months of fiscal year 2004. On May 28, 2004, we acquired Todd Pipe, one of the largest independent wholesale plumbing suppliers in Southern California and Las Vegas, Nevada. We paid $74.5 million for the net assets of Todd Pipe, including the assumption of $42.3 million of accounts payable, accrued and other liabilities, subject to finalization of working capital adjustments in accordance with the purchase agreement. On May 3, 2004, we completed the acquisition of Standard, a distributor of waterworks, electrical and plumbing products primarily serving residential and infrastructure water and sewer contractors and customers in Las Vegas, Nevada. The purchase price consisted of $23.7 million of net cash paid for Standard’s net assets, including the assumption of $10.9 million of accounts payable, accrued and other liabilities, subject to finalization of working capital adjustments in accordance with the purchase agreement.

On June 30, 2004, we made an $11.4 million investment in our corporate owned life insurance (“COLI”) policies to partially fund enhancements made in the first quarter of 2005 to our supplemental executive retirement plan (“SERP”), which provides supplemental benefits for certain key executive officers. While the SERP obligation is not funded by our general assets and thus the value of our COLI policies is not restricted to funding the SERP obligation, the interest income generated by our COLI policies will help offset the additional net periodic benefit costs associated with our SERP, as amended in the first quarter of 2005.

Financing Activities

During the first six months of fiscal years 2005 and 2004, net cash provided by (used in) financing activities totaled $93.4 million and ($32.6) million, respectively. Financing cash flows increased during the first six months of fiscal year 2005 by $126.0 million primarily reflecting larger amounts borrowed under our revolving credit agreement mainly resulting from our acquisitions of Standard and Todd Pipe in May 2004 as well as increases in working capital. Net borrowings (payments) made under our revolving credit agreement totaled $113.4 million and ($17.5) million during the first six months of fiscal years 2005 and 2004, respectively. Other debt payments, including scheduled payments on our senior and other notes, totaled $10.6 million and $9.3 million during the first six months of fiscal years 2005 and 2004, respectively.

On June 14, 2004, we replaced our existing $290.0 million revolving credit agreement, which was scheduled to mature on March 26, 2007, with a new $500.0 million revolving credit agreement (the “new credit agreement”), subject to borrowing limitations, which matures on June 14, 2009. The new credit agreement is unsecured and contains financial and other covenants, including limitations on dividends and treasury stock purchases and maintenance of certain financial ratios. The new credit agreement also includes an accordion feature that allows it to be expanded, in certain circumstances, by up to $150 million. As of July 30, 2004, we were in compliance with all financial covenants.

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Dividend payments totaled $7.0 million and $4.7 million during the first six months of fiscal years 2005 and 2004, respectively. The higher dividend payments in fiscal year 2005 were primarily attributable to an increase in our common stock outstanding due to the sale of 6.9 million shares in a public offering during the fourth quarter of fiscal year 2004 and a 30% higher dividend rate during the first six months of fiscal year 2005.

On March 15, 1999, our Board of Directors authorized us to repurchase up to 2.5 million shares of our outstanding common stock to be used for general corporate purposes. Since March 15, 1999, we have repurchased a total of 1.8 million shares at an average price of $22.91 per share. Shares repurchased totaled $6.0 million during the first six months of fiscal year 2004. There were no shares repurchased during the first six months of fiscal year 2005.

Our liquidity and capital needs have generally been met by cash flows from operating activities and borrowings under our revolving credit agreement. As of July 30, 2004, we had $18.2 million of cash and $285.3 million of unused borrowing capacity (subject to borrowing limitations under long-term debt covenants) to fund ongoing operating requirements and anticipated capital expenditures. The funds necessary to finance the acquisitions of Standard and Todd Pipe were borrowed under our revolving credit agreement.

On June 14, 2004 we filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission (“SEC”) for the possible future offer and sale, from time-to-time, of up to an aggregate of $700 million of equity and/or debt securities. We believe the shelf registration statement gives us additional flexibility in accessing the capital markets.

After the registration statement becomes effective, and unless otherwise stated at the time of any future offering, we intend to use the net proceeds from any sale of securities pursuant to the registration statement for the acquisition of businesses, the repayment or refinancing of debt, capital expenditures, working capital needs and other general corporate purposes. The registration statement filed with the SEC has not yet become effective, and the securities included therein may not be sold, nor may offers to buy be accepted prior to the time the registration statement becomes effective.

These financing initiatives allow us to further develop our capital structure as the business expands, and together with continued strong financial performance, will provide us with the ability to fund and achieve our strategic growth goals. We believe we have sufficient borrowing capacity and cash on hand to take advantage of growth and business opportunities.

Off-balance Sheet Arrangements

As more fully disclosed in our fiscal year 2004 Annual Report, we have entered into operating leases for certain facilities, vehicles and equipment. Many of our vehicle and equipment leases typically contain set residual values and residual value guarantees. We believe that the likelihood of any material amounts being funded in connection with these commitments is remote.

On April 30, 2004, we completed a sale-leaseback transaction for a portfolio of properties associated with 18 different branches. The properties were sold at a price of $32.7 million and leased back pursuant to 15-year minimum term operating leases. A loss of approximately $1.3 million resulting from the sale was recognized during the first quarter of fiscal year 2005 for the branches that were sold at a price less than their net book value. A gain of approximately $9.1 million resulting from the sale was deferred and will be amortized over the minimum term of the leases for branches that were sold at a price greater than their net book value. We do not have an option to purchase the leased facilities at the end of the minimum lease terms and have not issued any residual guarantees of the value of the leased facilities. The leases are accounted for as operating leases with future minimum annual lease payments totaling $1.9 million occurring during fiscal year 2005, $2.6 million per year occurring during fiscal years 2006 through 2008, $2.7 million occurring during fiscal year 2009, and $28.8 million occurring thereafter.

On March 16, 2004, we entered into a sale-leaseback transaction in which we sold our corporate headquarters building in Orlando, Florida to a subsidiary of Wachovia Development Corporation (“WDC”) for $23.0 million and leased the property back for a period of 20 years. The proceeds from the sale approximated the net book value of the property sold, and were paid by WDC to SunTrust Bank (“SunTrust”) for application against amounts

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outstanding under a separate real estate term credit agreement we had previously executed on June 5, 2002 with SunTrust. The lease expires on March 16, 2024, with five 5-year extensions exercisable at fair market value and at our option upon 12 months notice. We do not have an option to purchase the leased facility at the end of the minimum lease term and have not issued any residual value guarantee on the value of the leased facility. The lease is accounted for as an operating lease with future minimum annual lease payments totaling $1.2 million occurring during fiscal year 2005, $1.4 million per year occurring during fiscal years 2006 through 2009, and $25.6 million occurring thereafter.

Contractual Obligations

Aside from the two aforementioned sale-leaseback transactions, there have been no material changes outside of the ordinary course of business to our contractual obligations set forth in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our fiscal year 2004 Annual Report.

Recent Accounting Pronouncements

On March 31, 2004, the Financial Accounting Standards Board (“FASB”) issued an exposure draft, Share-Based Payment, an Amendment of FASB Statements No. 123 and 95. The proposed change in accounting would replace existing requirements under Statement of Financial Accounting Standards (“FAS”) 123, Accounting for Stock-Based Compensation, and Accounting Principles Board (“APB”) Opinion 25, Accounting for Stock Issued to Employees. The exposure draft covers a wide range of equity-based compensation arrangements. Under the FASB’s proposal, all forms of share-based payments to employees, including employee stock options, would be treated the same as other forms of compensation by recognizing the related cost in the income statement. The expense of the award would generally be measured at fair value at the grant date. The comment period for the exposure draft ended on June 30, 2004, and final rules are expected to be issued in late 2004. The standard, if issued in its current form, would be applicable for fiscal years beginning after December 15, 2004. We are currently evaluating the impact of the proposed change in accounting, but will not know the ultimate impact until the final rules are issued.

Critical Accounting Policies

Our significant accounting policies are more fully described in the notes to our consolidated financial statements included in our fiscal year 2004 Annual Report. Certain of our 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 historical experience, current economic trends in the industry, information provided by customers and vendors, information available from other outside sources and management’s estimates, as appropriate. Our critical accounting policies relating to the allowance for doubtful accounts, inventories, consideration received from vendors, impairment of long-lived assets, and self-insurance reserves are described in the Annual Report. During the six months ended July 30, 2004, there have been no material changes to any of our critical accounting policies.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk from changes in the prices of certain of our products that result from commodity price fluctuations and from changes in interest rates on outstanding variable-rate debt.

Commodity Price Risk

We are 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, our operating performance is affected by price fluctuations in stainless steel, plastic, nickel alloy, copper, aluminum, PVC, lumber, and other commodities. We seek 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.

As discussed above, our results of operations in the first six months of fiscal year 2005 were favorably impacted by increases in the pricing of certain commodity-based products. Such commodity price fluctuations have from time to time created cyclicality in our financial performance and could continue to do so in the future.

Interest Rate Risk

At July 30, 2004, we had $213.4 million of outstanding variable-rate debt. Based upon a hypothetical 10% increase or decrease in interest rates from their July 30, 2004 levels, the market risk with respect to our variable-rate debt would not be material. We manage our interest rate risk by maintaining a balance between fixed and variable rate debt.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act 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 management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and management was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of the end of the period covered by this report, management, under the supervision of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as amended. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of such period, the disclosure controls and procedures were effective at a level of reasonable assurance to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required.

In addition, there have been no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act, during our second fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

HUGHES SUPPLY, INC.

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

The following table sets forth our repurchases of equity securities registered under Section 12 of the Exchange Act that have occurred during the three months ended July 30, 2004 (in millions).

Period	Total number of shares (or units) purchased	Average price paid per share	Total number of shares (or units) purchased as part of publicly announced plans or programs	Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs (1)
May 2004 (May 1 - May 28)	—	—	—	0.7
June 2004 (May 29 - June 25)	—	—	—	0.7
July 2004 (June 26 - July 30)	—	—	—	0.7
Total	—		—

(1) On March 15, 1999, our Board of Directors authorized us to repurchase up to 2.5 million shares of our outstanding common stock to be used for general corporate purposes.

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

The 2004 Annual Meeting of Shareholders (the “annual meeting”) was held on May 20, 2004, pursuant to notice given to shareholders of record on March 26, 2004 at which date holders of 29,314,616 shares of the Company’s common stock were present in person or by proxy. At the annual meeting, John D. Baker II, Dale E. Jones, William P. Kennedy, and Patrick J. Knipe were elected directors of the Company with terms to expire at the 2007 annual meeting and until the election and qualification of their respective successors or until the earlier of their death, resignation, or removal.

The tabulation of the votes present in person or by proxy at the annual meeting with respect to the election of the Company’s directors was as follows:

Matters Voted	For	Against/ Withheld	Abstained
Election of John D. Baker II	28,498,677	815,939	—
Election of Dale E. Jones	28,510,187	804,429	—
Election of William P. Kennedy	28,510,296	804,320	—
Election of Patrick J. Knipe	28,498,475	816,141	—

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Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

10.1	Revolving Credit Agreement dated as of June 14, 2004, among Hughes Supply, Inc., the several banks and other financial institutions from time to time party thereto, and SunTrust Bank as Administrative Agent.
10.2	Form of Incentive Stock Option Award under the 1997 Executive Stock Plan.
10.3	Form of Non-Qualified Stock Option Award under the 1997 Executive Stock Plan.
10.4	Form of Restricted Stock Award under the 1997 Executive Stock Plan.
10.5	Form of Performance-Based Restricted Stock Award under the 1997 Executive Stock Plan.
31.1	Rule 13a-14(a)/15d-14(a) Certification of President and Chief Executive Officer.
31.2	Rule 13a-14(a)/15d-14(a) Certification of Executive Vice President and Chief Financial Officer.
32.1	Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code by the President and Chief Executive Officer.
32.2	Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code by the Executive Vice President and Chief Financial Officer.

(b) Reports on Form 8-K

(1) On May 25, 2004, Hughes Supply, Inc. furnished a Current Report on Form 8-K dated May 25, 2004 regarding a news release announcing its financial results for the first quarter ended April 30, 2004.

(2) On June 14, 2004, Hughes Supply, Inc. filed a Form 8-K dated June 14, 2004, filing as an exhibit its unaudited pro forma condensed consolidated statement of operations for the fiscal year ended January 30, 2004 giving effect to the Century Maintenance Supply, Inc. acquisition and related financing as though those transactions had occurred on January 31, 2003.

(3) On July 30, 2004, Hughes Supply, Inc. filed a Current Report on Form 8-K dated July 7, 2004 regarding a news release announcing its sales and earnings outlook for the second quarter ended July 30, 2004.

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SIGNATURES

Pursuant to the requirements 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.
Date: September 8, 2004	By:	/s/ THOMAS I. MORGAN
		Thomas I. Morgan
		President and Chief Executive Officer
Date: September 8, 2004	By:	/s/ DAVID BEARMAN
		David Bearman
		Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

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EX-10.1

Exhibit 10.1

REVOLVING CREDIT AGREEMENT

dated as of June 14, 2004

among

HUGHES SUPPLY, INC.

as Borrower

THE LENDERS FROM TIME TO TIME PARTY HERETO

SUNTRUST BANK

as Administrative Agent

WELLS FARGO BANK, NATIONAL ASSOCIATION

and WACHOVIA BANK, N.A.,

as Co-Syndication Agents

LEHMAN COMMERCIAL PAPER, INC. and

BANK OF AMERICA, N.A.,

as Co-Documentation Agents

and

CITICORP USA, INC.

as Managing Agent

SUNTRUST CAPITAL MARKETS, INC.,

as Lead Arranger and Sole Book Manager

TABLE OF CONTENTS

			Page
ARTICLE I DEFINITIONS; CONSTRUCTION			1
	SECTION 1.1.	DEFINITIONS	1
	SECTION 1.2.	CLASSIFICATIONS OF LOANS AND BORROWINGS	21
	SECTION 1.3.	ACCOUNTING TERMS AND DETERMINATION	21
	SECTION 1.4.	TERMS GENERALLY	22
ARTICLE II AMOUNT AND TERMS OF THE COMMITMENTS			22
	SECTION 2.1.	GENERAL DESCRIPTION OF FACILITIES	22
	SECTION 2.2.	REVOLVING LOANS	22
	SECTION 2.3.	PROCEDURE FOR REVOLVING BORROWINGS	23
	SECTION 2.4.	INCREASE OF COMMITMENTS; ADDITIONAL LENDERS	23
	SECTION 2.5.	SWINGLINE COMMITMENT	25
	SECTION 2.6.	PROCEDURE FOR SWINGLINE LOAN; ETC	25
	SECTION 2.7.	COMPETITIVE BID BORROWINGS	26
	SECTION 2.8.	FUNDING OF BORROWINGS	28
	SECTION 2.9.	INTEREST ELECTIONS	29
	SECTION 2.10.	OPTIONAL REDUCTION AND TERMINATION OF COMMITMENTS	30
	SECTION 2.11.	REPAYMENT OF LOANS	30
	SECTION 2.12.	EVIDENCE OF INDEBTEDNESS	31
	SECTION 2.13.	OPTIONAL PREPAYMENTS	31
	SECTION 2.14.	INTEREST ON LOANS	32
	SECTION 2.15.	FEES	33
	SECTION 2.16.	COMPUTATION OF INTEREST AND FEES	33
	SECTION 2.17.	INABILITY TO DETERMINE INTEREST RATES	34
	SECTION 2.18.	ILLEGALITY	34
	SECTION 2.19.	INCREASED COSTS	35
	SECTION 2.20.	FUNDING INDEMNITY	36
	SECTION 2.21.	TAXES	36
	SECTION 2.22.	PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING OF SET-OFFS	38
	SECTION 2.23.	LETTERS OF CREDIT	39
	SECTION 2.24.	LIMITATION ON CERTAIN PAYMENT OBLIGATIONS.	43
ARTICLE III CONDITIONS PRECEDENT TO LOANS AND LETTERS OF CREDIT			44
	SECTION 3.1.	CONDITIONS TO EFFECTIVENESS	44
	SECTION 3.2.	EACH CREDIT EVENT	46
	SECTION 3.3.	DELIVERY OF DOCUMENTS	46
ARTICLE IV REPRESENTATIONS AND WARRANTIES			46
	SECTION 4.1.	EXISTENCE; POWER	47
	SECTION 4.2.	ORGANIZATIONAL POWER; AUTHORIZATION	47
	SECTION 4.3.	GOVERNMENTAL APPROVALS; NO CONFLICTS	47
	SECTION 4.4.	FINANCIAL STATEMENTS	47
	SECTION 4.5.	LITIGATION AND ENVIRONMENTAL MATTERS	48
	SECTION 4.6.	COMPLIANCE WITH LAWS AND AGREEMENTS	48
	SECTION 4.7.	INVESTMENT COMPANY ACT, ETC.	48
	SECTION 4.8.	TAXES	48
	SECTION 4.9.	MARGIN REGULATIONS	48
	SECTION 4.10.	ERISA	49
	SECTION 4.11.	OWNERSHIP OF PROPERTY	49

	SECTION 4.12.	DISCLOSURE	49
	SECTION 4.13.	LABOR RELATIONS	50
	SECTION 4.14.	SUBSIDIARIES	50
	SECTION 4.15.	INSOLVENCY	50
	SECTION 4.16.	OFAC	50
	SECTION 4.17.	PATRIOT ACT	50
ARTICLE V AFFIRMATIVE COVENANTS			51
	SECTION 5.1.	FINANCIAL STATEMENTS AND OTHER INFORMATION	51
	SECTION 5.2.	NOTICES OF MATERIAL EVENTS	52
	SECTION 5.3.	EXISTENCE; CONDUCT OF BUSINESS	53
	SECTION 5.4.	COMPLIANCE WITH LAWS, ETC.	53
	SECTION 5.5.	PAYMENT OF OBLIGATIONS	53
	SECTION 5.6.	BOOKS AND RECORDS	53
	SECTION 5.7.	VISITATION, INSPECTION, ETC.	54
	SECTION 5.8.	MAINTENANCE OF PROPERTIES; INSURANCE	54
	SECTION 5.9.	USE OF PROCEEDS AND LETTERS OF CREDIT	54
	SECTION 5.10.	ADDITIONAL SUBSIDIARIES	54
	SECTION 5.11.	OWNERSHIP OF ALL SUBSIDIARY LOAN PARTIES.	55
	SECTION 5.12	POST CLOSING REQUIREMENTS	56
ARTICLE VI FINANCIAL COVENANTS			56
	SECTION 6.1.	LEVERAGE RATIO	56
	SECTION 6.2.	FIXED CHARGE COVERAGE RATIO	56
	SECTION 6.3.	CONSOLIDATED NET WORTH	56
ARTICLE VII NEGATIVE COVENANTS			56
	SECTION 7.1.	INDEBTEDNESS AND PREFERRED EQUITY.	56
	SECTION 7.2.	NEGATIVE PLEDGE	58
	SECTION 7.3.	FUNDAMENTAL CHANGES	58
	SECTION 7.4.	INVESTMENTS, LOANS, ETC.	59
	SECTION 7.5.	RESTRICTED PAYMENTS	60
	SECTION 7.6.	SALE OF ASSETS	61
	SECTION 7.7.	TRANSACTIONS WITH AFFILIATES	61
	SECTION 7.8.	RESTRICTIVE AGREEMENTS	61
	SECTION 7.9.	SALE AND LEASEBACK TRANSACTIONS	62
	SECTION 7.10.	HEDGING TRANSACTIONS	62
	SECTION 7.11.	FISCAL YEAR	62
	SECTION 7.12.	OPTIONAL PREPAYMENTS.	62
	SECTION 7.13.	ACTIONS UNDER CERTAIN DOCUMENTS.	63
	SECTION 7.14.	FINANCIAL LETTERS OF CREDIT.	63
ARTICLE VIII EVENTS OF DEFAULT			63
	SECTION 8.1.	EVENTS OF DEFAULT	63
ARTICLE IX THE ADMINISTRATIVE AGENT			66
	SECTION 9.1.	APPOINTMENT OF ADMINISTRATIVE AGENT	66
	SECTION 9.2.	NATURE OF DUTIES OF ADMINISTRATIVE AGENT	66
	SECTION 9.3.	LACK OF RELIANCE ON THE ADMINISTRATIVE AGENT	67
	SECTION 9.4.	CERTAIN RIGHTS OF THE ADMINISTRATIVE AGENT	67
	SECTION 9.5.	RELIANCE BY ADMINISTRATIVE AGENT	67
	SECTION 9.6.	THE ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY	68
	SECTION 9.7.	SUCCESSOR ADMINISTRATIVE AGENT	68
	SECTION 9.9.	DOCUMENTATION AGENT; SYNDICATION AGENT; MANAGING AGENT.	69

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ARTICLE X MISCELLANEOUS			69
	SECTION 10.1.	NOTICES	69
	SECTION 10.2.	WAIVER; AMENDMENTS	71
	SECTION 10.3.	EXPENSES; INDEMNIFICATION	72
	SECTION 10.4.	SUCCESSORS AND ASSIGNS	73
	SECTION 10.5.	GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS	76
	SECTION 10.6.	WAIVER OF JURY TRIAL	76
	SECTION 10.7.	RIGHT OF SETOFF	77
	SECTION 10.8.	COUNTERPARTS; INTEGRATION	77
	SECTION 10.9.	SURVIVAL	77
	SECTION 10.10.	SEVERABILITY	78
	SECTION 10.11.	CONFIDENTIALITY	78
	SECTION 10.12.	INTEREST RATE LIMITATION	78
	SECTION 10.13	WAIVER OF CORPORATE SEAL	78
	SECTION 10.14	WAIVER OF NOTICE OF TERMINATION	78

Schedules

Schedule I	-	Applicable Margin and Applicable Percentage
Schedule 1.1	-	Existing Letters of Credit
Schedule 4.5	-	Environmental Matters
Schedule 4.14	-	Subsidiaries
Schedule 7.1	-	Outstanding Indebtedness
Schedule 7.2	-	Existing Liens
Schedule 7.4	-	Existing Investments
Schedule 7.9	-	Existing Sales and Leaseback

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)(iv)	-	Form of Secretary’s Certificate
Exhibit 3.1(b)(vii)	-	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 June 14, 2004, 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 $500,000,000 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):

“2011 Notes” shall mean Borrower’s $98,000,000 7.96% Senior Notes due May 30, 2011.

“2012 Notes” shall mean, collectively, Borrower’s (i) $40,000,000 7.14% Series A Senior Notes due May 30, 2012 and (ii) $40,000,000 7.19% Series B Senior Notes due May 30, 2012.

“2013 Notes” shall mean the Borrower’s $50,000,000 6.74% Senior Notes due May 1, 2013.

“8.27% Notes” shall mean, collectively, Borrower’s (i) $28,000,000 8.27% Series B Senior Notes due November 30, 2005 and (ii) $103,000,000 8.42% Series C Senior Notes due 2007.

“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.

“Additional Commitment Amount” shall have the meaning set forth in Section 2.4.

“Additional Lender” shall have the meaning set forth in Section 2.4.

“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 $500,000,000.

“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 (90%) 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 of determination, (a) prior to the Borrower receiving a senior unsecured debt rating from both S&P and Moody’s, with respect to all 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 in Part A of 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

2

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 in Part A of 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; or (b) at any time after the Borrower receives a senior unsecured debt rating from both S&P and Moody’s, with respect to all Borrowings and the letter of credit fee, as the case may be, the percentage per annum determined by reference to the applicable Rating Category from time to time in effect as set forth in Part B of Schedule I; provided, that a change in the Applicable Margin resulting from a change in the Rating Category shall be effective on the day on which either rating agency changes its rating and shall continue until the day prior to the day that a further change becomes effective. Notwithstanding the foregoing, from the date of this Agreement until December 10, 2004 the Applicable Margin shall be at Level II as set forth in Part A of Schedule I or Level III as set forth in Part B of Schedule I, as applicable. Commencing December 11, 2004, the Applicable Margin shall be determined on the basis of the financial statements and Compliance Certificate for the Fiscal Quarter ending October 29, 2004, and thereafter shall be determined on the basis of financial statements and Compliance Certificates submitted for subsequent Fiscal Quarters.

“Applicable Percentage” shall mean, as of any date of determination, (a) prior to the Borrower receiving a senior unsecured debt rating from both S&P and Moody’s, 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 in Part A of 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; or (b) at any time after the Borrower receives a senior unsecured debt rating from both S&P and Moody’s, with respect to the commitment fee as of any date, the percentage per annum determined by reference to the applicable Rating Category as set forth in Part B of Schedule I; provided, that a change in the Applicable Percentage resulting from a change in the Rating Category shall be effective on the day on which either rating agency changes its rating and shall continue until the day prior to the day that a further change becomes effective. Notwithstanding the foregoing, from the date of this Agreement until December 10, 2004 the Applicable Percentage shall be at Level II as set forth in Part A of Schedule I or Level III as set forth in Part B of Schedule I, as applicable. Commencing December 11, 2004, the Applicable Percentage shall be determined on the basis of the financial statements and Compliance Certificate for the Fiscal Quarter ending October 29, 2004, and thereafter shall be determined on the basis of financial statements and Compliance Certificates submitted for subsequent Fiscal Quarters.

“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.

3

“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 (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 (or other arrangement conveying the right to use) of 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.

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“Captive Insurance Company” shall mean Hughes Insurance Company Ltd., a wholly-owned Subsidiary of the Borrower that is an authorized insurer under the laws of Bermuda.

“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) 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.

“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.

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“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 and the Borrower (or another Person designated by the Borrower in the Competitive Bid Request) 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 $75,000,000.

“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 Competitive Bid Loan Limit, 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.

“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 Securitization Transactions and any interest expense attributable to Hedging Transactions.

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“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 and without duplication.

“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.

“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

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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 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.

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“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 1/100^th 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 March 26, 2003, 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.

“Existing Letters of Credit” shall mean those letters of credit set forth on Schedule 1.1 attached hereto.

“Federal Funds Rate” shall mean, for any day, the rate per annum (rounded upwards, if necessary, to the next 1/100^th of 1%) equal to the weighted average of the rates on 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.

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“Fee Letter” shall mean that certain fee letter, dated as of May 10, 2004, executed by 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 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

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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.

“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, acceptances or similar extensions of credit, (vii) Hedging Obligations (viii) all Guarantees of such Person of the type of Indebtedness described in clauses (i) through (vii) above, (ix) 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, (x) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any common stock of such Person and (xi) 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. 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.

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“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; provided, however, that at any time the Captive Insurance Company shall be required to become a party to the Indemnity and Contribution Agreement pursuant to Section 5.10, the Indemnity and Contribution Agreement shall provide that as to the Captive Insurance Company in no event or circumstance shall the Administrative Agent, any Lender or any other Guarantor be entitled to recover from the Captive Insurance Company any amount that would cause the statutory assets of the Captive Insurance Company to fail to exceed its statutory liabilities by the greatest of (a) $120,000, (b) 20% of net premiums written up to $6,000,000 plus 10% of net premiums written over $6,000,000 and (c) 10% of loss and other insurance reserves; provided, further, such limitations may be amended from time to time with the consent of the Administrative Agent, such consent not to be unreasonably withheld, as required to comply with the insurance laws and regulations of Bermuda.

“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 May 2004 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;

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(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 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 $15,000,000.

“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 and any Existing Letters of Credit.

“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

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necessary, to the nearest 1/100^th 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 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 the Private Placement Notes and any other 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 $10,000,000 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.

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“Moody’s” shall mean Moody’s Investors Service, Inc.

“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 2.6.

“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 any Person who, at the time it entered into such agreement in respect of such Hedging Obligations was, 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.

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“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.

“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

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(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;

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 primarily 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 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

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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.

“Private Placement Notes” shall mean, collectively, the 8.27% Notes, the 2011 Notes, the 2012 Notes and the 2013 Notes.

“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 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.

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“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.

“Revolving Commitment Termination Date” shall mean the earliest of (i) June 14, 2009, (ii) the date on which the Revolving Commitments are terminated pursuant to Section 2.10 or (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.

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“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. 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; provided, however, that at any time the Captive Insurance Company shall be required to become a party to the Subsidiary Guaranty Agreement pursuant to Section 5.10, the Subsidiary Guaranty Agreement shall provide as to the Captive Insurance Company in no event or circumstance shall the Administrative Agent, any Lender or any other Guarantor be entitled to recover from the Captive Insurance Company any amount that would cause the statutory assets of the Captive Insurance Company to fail to exceed its statutory liabilities by the greatest of (a) $120,000, (b) 20% of net premiums written up to $6,000,000 plus 10% of net premiums written over $6,000,000 and (c) 10% of loss and other insurance reserves; provided, further, such limitations may be amended from time to time with the consent of the Administrative Agent, such consent not to be unreasonably withheld, as required to comply with the insurance laws and regulations of Bermuda.

“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 $15,000,000.

“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.

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“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.

“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

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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, 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

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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 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 $650,000,000 (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

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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 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

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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 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.

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(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 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 Eurodollar 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.

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(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 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

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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.

(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.

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(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.

(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 Conversion/Continuation 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 Conversion/Continuation, 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 Conversion/Continuation 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. At no time shall the total number of Eurodollar Borrowings outstanding together with the total number of Competitive Bid Borrowings outstanding, at any time exceed ten.

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(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 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.

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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.

(a) 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.

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.

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(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 each case, 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.

(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.

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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 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 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. Fees for the Fiscal Quarter ending July 30, 2004 shall apply only for the period from the date hereof through the end of such Fiscal Quarter.

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.

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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.

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.

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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 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.

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(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 borrow, 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.

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

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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 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

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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 Sections 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 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

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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, 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,

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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 (2) that one or more conditions specified in Article III are not then 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

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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 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

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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 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;

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(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 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.

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(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).

(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;

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(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 Material Subsidiary and acknowledged by the Borrower; provided, however, that for any Subsidiary that becomes a Material Subsidiary after the Closing Date, this obligation shall be only as provided in Section 5.10;

(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;

(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 ended on April 30, 2004, and (B) the audited consolidated financial statements for Borrower and its Subsidiaries for the Fiscal Years ended 2002, 2003 and 2004; and

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(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;

(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;

(c) since the date of the financial statements of the Borrower described in Section 4.4(i), there shall have been no change which has had or could reasonably be expected to have a Material Adverse Effect;

(d) the Borrower shall have delivered the required Notice of Revolving 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.

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.

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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 30, 2004, 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 unaudited consolidated balance sheet of the Borrower and its Subsidiaries as of April 30, 2004, 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 30, 2004, 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.

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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 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

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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 (other than the Captive Insurance Company) (unless otherwise reasonably acceptable to the Lenders), in such amounts with such deductibles and covering such risks deemed adequate as 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

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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 § 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.

Section 4.16. OFAC. Neither the Borrower nor any of its Subsidiaries (i) is a person whose property or interest in property is blocked or subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (ii) engages in any dealings or transactions prohibited by Section 2 of such executive order, or is otherwise associated with any such person in any manner violative of Section 2 of such executive order, or (iii) is a person on the list of Specially Designated Nationals and Blocked Persons or subject to the limitations or prohibitions under any other U.S. Department of Treasury’s Office of Foreign Assets Control regulation or executive order, except where non-compliance, either singly or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

Section 4.17. Patriot Act. The Borrower and each of its Subsidiaries is in compliance, in all material respects, with the (i) the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto, and (ii) the Uniting And Strengthening America By Providing Appropriate Tools Required To Intercept And Obstruct Terrorism (USA Patriot Act of 2001). No part of the proceeds of the Loans will be used, directly or indirectly, for any payments to any governmental

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official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

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:

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, the treasurer or the controller 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

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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 Subsidiary, 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 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.

Originals of such financial statements and other reports and materials referred to in this Section 5.1 need be delivered only to the Administrative Agent; all other Lenders may receive copies.

So long as the Borrower maintains a site on Intralinks^®, Borrower may satisfy its obligation to deliver the financial statements and other reports and materials referred to in this Section 5.1 by delivering such financial statements and other reports and materials to the Administrative Agent and to Intralinks^® for posting and requesting that each Lender be 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;

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(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; and

(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.

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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 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 or the Captive Insurance Company, 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.

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(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 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. Notwithstanding the foregoing, if the Subsidiary becoming an additional Subsidiary Loan Party shall be a captive insurance company (other than the Captive Insurance Company) organized under the laws of Bermuda or another jurisdiction in which captive insurance companies frequently are formed by major U.S. corporations, the Subsidiary Guaranty Supplement and the Indemnity and Contribution Agreement Supplement for such additional Subsidiary Loan Party shall provide that in no event or circumstance shall the Administrative Agent, any Lender or any other Guarantor be entitled to recover from such new Subsidiary Loan Party any amount that would cause such captive insurance company’s statutory assets to fail to exceed its statutory liabilities by the margin required by the applicable insurance laws of the jurisdiction in which it is organized; provided that such limitations shall be no greater than the limitations contained in the Subsidiary Guaranty Agreement and the Indemnity and Contribution Agreement with respect to the Captive Insurance Company without the prior written consent of the Administrative Agent, such consent not to be unreasonably withheld.

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.

Section 5.12. Post Closing Requirements. The Borrower will, and will cause each of its Subsidiaries to:

(a) No later than ten (10) days after the Closing Date, deliver to the Administrative Agent certified copies of the articles of incorporation or other charter documents of Kamen Supply Company, Inc. together with certificates of good standing or existence from the Secretary of the State of Kansas.

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(b) No later than ten (10) days after the Closing Date, deliver to the Administrative Agent certified copies of the articles of incorporation or other charter documents of Century Maintenance Supply, Inc. together with certificates of good standing or existence from the Delaware Secretary of State.

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 shall maintain at the end of each Fiscal Quarter 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 the end of each Fiscal Quarter a Consolidated Net Worth of not less than the sum of (a) $900,000,000 plus (b) 50% of Consolidated Net Income on a cumulative basis for all preceding Fiscal Quarters, commencing with the Fiscal Quarter ending April 30, 2004; 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”.

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:

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;

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(b) Indebtedness outstanding on the date hereof or incurred under financing agreements outstanding on the date hereof, in each case as set forth on Schedule 7.1 and 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;

(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 $50,000,000 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

(j) other unsecured Indebtedness so long as at the time such Indebtedness is incurred, and after giving pro forma effect to the incurrence and application of the proceeds thereof, the Borrower’s Leverage Ratio is not greater than 0.55:1.00.

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

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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) or Section 7.9, (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 $50,000,000 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 Indebtedness secured thereby is not increased and that any such extension, renewal or replacement is limited to the assets originally encumbered thereby.

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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;

(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;

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(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;

(h) 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 does not exceed $250,000,000; and

(i) other Investments that in the aggregate do not exceed $5,000,000 in any Fiscal Year.

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 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 under clauses (iii) and (iv) in this Section 7.5 does not exceed

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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 April 30, 2004 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 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

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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) the sale and leaseback transactions listed on Schedule 7.9 and (ii) other property to the extent that the aggregate fair market value of all such other property sold and leased back pursuant to this clause (ii) does not exceed $100,000,000 at any one time.

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. Without the prior written consent of the Administrative Agent, 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 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

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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 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.

Section 7.14. Financial Letters of Credit. The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist Indebtedness under Financial Letters of Credit (other than Letters of Credit) in an aggregate amount in excess of $50,000,000 at any one time outstanding.

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

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(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 Responsible 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

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(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; or

(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

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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

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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

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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 45^th 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.

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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.

Section 9.9. Documentation Agent; Syndication Agent; Managing Agent. Each Lender and each of the Borrower and its Subsidiaries hereby designates Lehman Brothers Bank, FSB and Bank of America, N.A. as Co-Documentation Agents and agrees that the Co-Documentation Agents shall have no duties or obligations in such capacity under any Loan Documents to any Lender or the Borrower and its Subsidiaries. Each Lender and each of the Borrower and its Subsidiaries hereby designates Wells Fargo Bank, National Association and Wachovia Bank, N.A. as Co-Syndication Agents and agrees that the Co-Syndication Agents shall have no duties or obligations in such capacity under any Loan Documents to any Lender or the Borrower and its Subsidiaries. Each Lender and each of the Borrower and its Subsidiaries hereby designates Citibank, N.A. as Managing Agent and agrees that the Managing Agent shall have no duties or obligations in such capacity under any Loan Documents to any Lender or the Borrower and its Subsidiaries.

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.
	One Hughes Way
	Orlando, Florida 32805
	Attention: Jay Clark, Treasurer
	Telecopy Number: (407) 648-9898
	Email: jay.clark@hughessupply.com
with a copy to:	Hughes Supply, Inc.
	One Hughes Way
	Orlando, Florida 32805
	Attention: John Z. Pare, General Counsel
	Telecopy Number: (407) 649-3018
	Email: john.pare@hughessupply.com
To the Administrative Agent
or Swingline Lender:	SunTrust Bank
	200 S. Orange Avenue, MC 2064

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	Orlando, Florida 32801
	Attn: Mr. William C. Barr
	Telecopy No. (407) 237-4076
	Email: william.barr@suntrust.com
With a copy to:	SunTrust Bank
	Agency Services
	303 Peachtree Street, N. E./ 25th Floor
	Atlanta, Georgia 30308
	Attention: Ms. Doris Folsum
	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: John Conley
	Telecopy Number: (404) 588-8129
To any other Lender:	the address set forth in the Administrative Questionnaire or the Assignment and Acceptance Agreement executed by such Lender

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 Lender 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

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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.

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

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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 Lender or the Issuing Bank without the prior written consent of such Person. Notwithstanding the foregoing, any provision of this Agreement may be amended by an agreement in writing entered into by the Borrower, the Required Lenders and the Administrative Agent (and, if their rights, duties or obligations are affected thereby, the Issuing Bank and the Swingline Lender) if (i) by the terms of such agreement the Commitment of each Lender not consenting to the amendment provided for therein shall terminate (but such Lender shall continue to be entitled to the benefits of Sections 2.19, 2.20, and 2.21 and 10.3) upon the effectiveness of such amendment, (ii) at the time such amendment becomes effective, each Lender not consenting thereto receives payment in full of principal of and interest accrued on each Loan made by it and all other amounts owing to it or accrued for its account under this Agreement and is released from its obligations hereunder and (iii) the aggregate amount of the Commitments in effect immediately prior to such amendment shall not be decreased.

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

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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, whether brought by a third party or by the Borrower or any other Loan Party, 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 (i) breach of the Loan Documents or (ii) 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^®, or other similar transmission services in connection with this Agreement.

(c) Reserved.

(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

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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 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 Lender 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 Lender, the Issuing Bank and the other Lenders shall continue to deal solely and directly with

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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 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.

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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 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.

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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, the Issuing Bank, or any Affiliate of such Lender or 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 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.

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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 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, (vi) subject to provisions substantially similar to this Section 10.11, to any actual or prospective assignee or Participant, or (vii) 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.

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Section 10.14. Waiver of Notice of Termination Each of the Lenders party to the Existing Credit Agreement hereby waives (i) the requirement under Section 2.10(b) of the Existing Credit Agreement that the Borrower deliver notice of termination of the Existing Credit Agreement and the Revolving Commitments under the Existing Credit Agreement to the Administrative Agent three (3) Business Days prior to such termination and (ii) the requirement that the Borrower pay any LIBOR breakage costs that may be due pursuant to Section 2.20 of the Existing Credit Agreement in connection with such early termination.

(remainder of page left intentionally blank)

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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:	/s/ Jay Clark	L.S.
Name:	Jay Clark
Title:	Treasurer

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SUNTRUST BANK, as Administrative Agent, as
Issuing Bank, as Swingline Lender and as a Lender
By:	/s/ William C. Barr, III
Name:	William C. Barr, III
Title:	Director

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WACHOVIA BANK, N.A.,
as Co-Syndication Agent and as a Lender
By	/s/ David L. Driggers
Name:	David L. Driggers
Title:	Managing Director

82

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Co-Syndication Agent and as a Lender
By	/s/ Alex Idichandy
Name:	Alex Idichandy
Title:	Vice President
By	/s/ Jennifer D. Barrett
Name:	Jennifer D. Barrett
Title:	Vice President

83

LEHMAN COMMERCIAL PAPER, INC., as Co-Documentation Agent and as a Lender
By	/s/ Janine M. Shugan
Name:	Janine M. Shugan
Title:	Authorized Signatory

84

BANK OF AMERICA, N.A. as Co-Documentation Agent and as a Lender
By	/s/ Timothy H. Spanos
Name:	Timothy H. Spanos
Title:	Managing Director

85

CITICORP USA, INC., as Managing Agent and
as a Lender
By	/s/ Kirk P. Lakeman
Name:	Kirk P. Lakeman
Title:	Managing Director

86

PNC BANK, NATIONAL ASSOCIATION, as a Lender
By	/s/ Enrico A. Della Corna
Name:	Enrico A. Della Corna
Title:	Managing Director

87

THE FIFTH THIRD BANK, as a Lender
By	/s/ Andrew Buschue
Name:	Andrew Buschue
Title:	Vice President

88

COMMERCEBANK, NATIONAL ASSOCIATION, as a Lender
By	/s/ Alan L. Hills
Name:	Alan L. Hills
Title:	Vice President

89

SOUTHTRUST BANK, as a Lender
By	/s/ Todd H. Banes
Name:	Todd H. Banes
Title:	Group Vice President

90

US BANK, NATIONAL ASSOCIATION,
as a Lender
By	/s/ Richard J. Popp
Name:	Richard J. Popp
Title:	Vice President

91

ISRAEL DISCOUNT BANK OF NEW YORK,
as a Lender
By	/s/ David Keinan
Name:	David Keinan
Title:	Senior Vice President Regional Manager for Florida
By	/s/ Roberto R. Munoz
Name:	Roberto R. Munoz
Title:	Senior Vice President
	Chief Lending Officer for Florida

92

BNP PARIBAS, as a Lender
By	/s/ Craig Pierce
Name:	Craig Pierce
Title:	Vice President
By	/s/ Aurora Abella
Name:	Aurora Abella
Title:	Vice President

93

ANNEX I

Revolving Commitments

Institution	Title	Commitment
SunTrust Bank	Administrative Agent,	$	60,000,000
Lehman Commercial Paper, Inc.	Co-Documentation Agent	$	50,000,000
Wachovia Bank, N.A.	Co-Syndication Agent	$	50,000,000
Wells Fargo Bank, National Association	Co-Syndication Agent	$	50,000,000
Bank of America, N.A.	Co-Documentation Agent	$	45,000,000
Citicorp USA	Managing Agent	$	45,000,000
BNP Paribas		$	40,000,000
PNC National Association		$	40,000,000
SouthTrust Bank		$	40,000,000
US Bank, National Assoication		$	30,000,000
The Fifth Third Bank		$	25,000,000
CommerceBank, National Association		$	15,000,000
Israel Discount Bank of New York		$	10,000,000
Total		$	500,000,000

94

Schedule I

APPLICABLE MARGIN AND APPLICABLE PERCENTAGE

PART A – LEVERAGE RATIO

Pricing Level	Leverage Ratio	Applicable Margin for LIBOR	Applicable Margin for Base Rate	Applicable Percentage for Commitment Fee
I	Less than 0.35:1.00	0.75% per annum	0.00% per annum	0.15% per annum
II	Greater than or equal to 0.35:1.00 but less than 0.40:1.00	0.875% per annum	0.00% per annum	0.20% per annum
III	Greater than or equal to 0.40:1.00 but less than 0.45:1.00	1.00% per annum	0.00% per annum	0.25% per annum
IV	Greater than or equal to 0.45:1.00 but less than 0.50:1.00	1.125% per annum	0.00% per annum	0.25% per annum
V	Greater than or equal to 0.50:1.00	1.375% per annum	0.00% per annum	0.30% per annum

PART B – SENIOR UNSECURED DEBT RATING

Pricing Level	Rating Category	Applicable Margin for LIBOR	Applicable Margin for Base Rate	Applicable Percentage for Commitment Fee
I	³BBB+/Baa1	0.625% per annum	0.00% per annum	0.150% per annum
II	BBB/Baa2	0.750% per annum	0.00% per annum	0.150% per annum
III	BBB-/Baa3	0.875% per annum	0.00% per annum	0.175% per annum
IV	BB+/Ba1	1.250% per annum	0.00% per annum	0.250% per annum
V	£BB/Ba2	1.750% per annum	0.25% per annum	0.375% per annum

The credit ratings to be utilized for purposes of Part B of this Schedule I are those assigned to the senior, unsecured long-term debt securities of the Borrower without third-party credit enhancement, whether or not any such debt securities are actually outstanding, and any rating assigned to any other debt security of the Borrower shall be disregarded. The rating in effect on any date is that in effect at the close of business on such date. If the Borrower is split-rated and (1) the ratings differential is one category, the higher of the two ratings will apply (e.g.,

BBB/Baa2 results in Level I status) or (2) the ratings differential is more than one category, the rate shall be determined by reference to the category next above that of the lower of the two ratings (e.g., BBB/Baa3, then the rate would be based on Level II status). If the Borrower is not rated by either Moody’s or S&P, then the rate shall be established by reference to the Leverage Ratio of the Borrower as set forth in Part A of this Schedule 1.

If the rating system of Moody’s or S&P shall change, or if either rating agency shall cease to be in the business of rating corporate debt obligations, the Borrower, the Lenders and the Administrative Agent shall negotiate in good faith to amend this Schedule to reflect such changed rating system or the unavailability of ratings from such rating agency and, pending the effectiveness of any such amendment, the Applicable Margin and the Applicable Percentage shall be determined by reference to the rating most recently in effect prior to any such change or cessation. If after a reasonable time the parties cannot agree to a mutually acceptable amendment, the Applicable Margin and the Applicable Percentage shall be determined by reference to the Leverage Ratio of the Borrower as set forth in Part A of this Schedule 1.

2

EX-10.2

Exhibit 10.2

Note: This is the general form used for an incentive stock option award under the 1997 Executive Stock Plan.

INCENTIVE STOCK OPTION AWARD

PURSUANT TO HUGHES SUPPLY, INC.

1997 EXECUTIVE STOCK PLAN

THIS AWARD is made as of the Grant Date by HUGHES SUPPLY, INC. (the “Company”) to «PARTICIPANT» (the “Optionee”).

Upon and subject to the Terms and Conditions attached hereto and incorporated herein by reference, the Company hereby awards as of the Grant Date to Optionee an incentive stock option (the “Option”) pursuant to the Plan, as described below, to purchase the Option Shares. All capitalized terms used but not defined herein shall have the meanings ascribed to them in the Plan.

A. Grant Date: [DATE].

B. Type of Option: Incentive Stock Option.

C. Plan: Hughes Supply, Inc. 1997 Executive Stock Plan.

D. Option Shares: All or any part of [NUMBER] shares of the Company’s common stock, $1.00 par value per share (“Common Stock”).

E. Exercise Price: $[PRICE] per share of Common Stock. The Exercise Price is the Fair Market Value, determined pursuant to the Plan, of a share of Common Stock on the Grant Date.

F. Option Period: The Option may be exercised as to all or any portion of the vested Option Shares during the Option Period, which commences on the Grant Date and ends generally on the earliest of (a) the tenth (10th) anniversary of the Grant Date; (b) expiration of three (3) months after the date the Optionee experiences a termination of employment for any reason other than due to death or Disability; or (c) one (1) year following the date of the Optionee’s death or Disability. Note that other limitations to exercising the Option, as described in the attached Terms and Conditions, may apply.

G. Vesting Schedule: [SCHEDULE]

IN WITNESS WHEREOF, the Company has executed and sealed this Award as of the Grant Date set forth above.

HUGHES SUPPLY, INC.
By:
	Thomas Morgan, President

TERMS AND CONDITIONS

TO THE

INCENTIVE STOCK OPTION AWARD

HUGHES SUPPLY, INC.

1997 EXECUTIVE STOCK PLAN

1. Exercise of Option. Subject to the provisions provided herein or in the Award made pursuant to the Plan:

(a) The Option may be exercised with respect to all or any portion of the Option Shares at any time during the Option Period by the delivery to the Company, at its principal place of business, of (i) a written notice of exercise in substantially the form attached hereto as Exhibit 1, which shall be actually delivered to the Company no earlier than thirty (30) days prior to the date upon which Optionee desires to exercise all or any portion of the Option; and (ii) payment to the Company of the Exercise Price multiplied by the number of Option Shares being purchased (the “Purchase Price”) in the manner provided in Subsection (b); and, if applicable, (iii) payment, in accordance with Section 5, of the withholding liability arising from the exercise. Upon acceptance of such notice and receipt of payment in full of the Purchase Price and any applicable withholding liability, the Company shall cause to be issued a certificate representing the Option Shares purchased.

(b) The Purchase Price shall be paid in full upon the exercise of an Option and no Option Shares shall be issued or delivered until full payment therefor has been made. Payment of the Purchase Price for all Option Shares purchased pursuant to the exercise of an Option shall be made in one of the following manners:

(i) by cash or certified check;

(ii) by delivery to the Company of a number of shares of Common Stock which have been owned by the holder for at least six (6) months prior to the date of exercise having an aggregate Fair Market Value of not less than the product of the Exercise Price multiplied by the number of shares the Optionee intends to purchase upon the exercise of the Option on the date of delivery;

(iii) by receipt of the purchase price in cash from a proper broker, dealer or other creditor following delivery of instructions by the Participant to the Board of Directors regarding delivery to such broker, dealer or other creditor of that number of Option Shares with respect to which the Option is exercised; or

(iv) any combination thereof.

2. Rights as Shareholder. Until the stock certificates reflecting the Option Shares accruing to the Optionee upon exercise of the Option are issued to the Optionee, the Optionee shall have no rights as a shareholder with respect to such Option Shares. The Company shall make no adjustment for any dividends or distributions or other rights on or with respect to Option Shares for which the record date is prior to the issuance of that stock certificate, except as the Plan or the attached Award otherwise provides.

3. Restriction on Transfer of Option and of Option Shares. Except to the extent the Committee deems permissible under Section 422(b) of the Internal Revenue Code of 1986, as amended and Rule 16b–3 promulgated under the Securities Exchange Act of 1934 (the “1934 Act”) and consistent with the best interests of the Company, the Option evidenced hereby is nontransferable other than by will or the

Page 1 of 4

laws of descent and distribution and shall be exercisable during the lifetime of the Optionee only by the Optionee (or in the event of his disability, by his personal representative) and after his death, only by his legatee or the executor of his estate.

4. Incentive Stock Option Status. In the event the aggregate Fair Market Value (determined as of the applicable option grant date) of shares of Common Stock subject to options (under all plans of the Company and its Subsidiaries) that first become exercisable in favor of the Optionee during any calendar year by an amount that exceeds $100,000, then such options in excess of the limitation shall not be incentive stock options. To the extent such options include this Option, that portion of the Option that does not constitute an incentive stock option shall be treated as a nonqualified stock option and shall be subject to the remaining provisions of this Award and its related Terms and Conditions and any applicable provisions contained within the Plan.

5. Withholding. In the event the Option or any portion thereof shall be treated as a non-qualified stock option, the Optionee must satisfy his federal, state and local, if any, withholding taxes imposed by reason of the exercise of the Option either by paying to the Company the full amount of the withholding obligation (i) in cash, (ii) by electing, irrevocably and in writing in substantially the form attached hereto as Exhibit 2 (a “Withholding Election”), to have the actual number of shares of Common Stock issuable upon exercise reduced by the smallest number of whole shares of Common Stock which, when multiplied by the fair market value of the Common Stock as of the date the Option is exercised, is sufficient to satisfy the amount of withholding tax; or (iii) by any combination of the above. Optionee may make a Withholding Election only if the following conditions are met:

(a) the Withholding Election is made by executing and delivering to the Company a properly completed Notice of Withholding Election in substantially the form of Exhibit 2 attached hereto;

(b) the Withholding Election is delivered to the Company sufficiently in advance of the date on which the amount of tax required to be withhold is determined (the “Tax Date”) as the Committee under the Plan (the “Committee”) determines is necessary or appropriate to satisfy the conditions of the exemptions provided under Rule 16b-3 promulgated under the 1934 Act;

(c) any Withholding Election is irrevocably given in a manner that satisfies the requirements of the exemption provided under Rule 16b-3 promulgated under the 1934 Act; and

(d) if the Optionee is considered by the Committee not to be subject to Section 16 of the 1934 Act, the Withholding Election is made no later than the Tax Date.

Notwithstanding anything to the contrary herein, the Committee may in its sole discretion disapprove and give no effect to any Withholding Election.

6. Changes in Capitalization.

(a) The number of shares of Common Stock reserved for issuance upon the exercise of the Option and the Exercise Price of the Option shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a subdivision or a combination of shares or the payment of an ordinary stock dividend in shares of such Common Stock to holders of outstanding shares of Common Stock or any other increase or decrease in the number of shares of such Common Stock outstanding effected without receipt of consideration by the Company to the extent that Optionee’s proportionate interest shall be maintained as before the occurrence of the event.

Page 2 of 4

(b) In the event of a merger, consolidation, extraordinary dividend, reorganization or other change in the capital structure of the Company or tender offer for shares of Common Stock, the Committee may make such adjustments with respect to the Option and take such other actions as it deems necessary or appropriate to reflect such merger, consolidation, reorganization or tender offer; provided, however that if the Company shall not be the surviving entity as a result of any such event and the parties to that transaction do not provide for the substitution of the Option with option rights in the surviving entity, then the Committee may cash-out the Option based upon the Fair Market Value of the Common Stock determined as of any date within thirty (30) days immediately prior to the transaction.

(c) The existence of the Plan and the Option granted pursuant to the Plan shall not affect in any way the right or power of the Company to make or authorize any adjustment, reclassification, reorganization or other change in its capital or business structure, any merger or consolidation of the Company, any issue of debt or equity securities having preferences or priorities as to the Common Stock or the rights thereof, the dissolution or liquidation of the Company, any sale or transfer of all or any part of its business or assets, or any other corporate act or proceeding. Any adjustment pursuant to this Section 6 may provide, in the Committee’s discretion, for the elimination without payment therefor of any fractional shares that might otherwise be subject to the Option.

7. Special Limitation on Exercise. No purported exercise of the Option shall be effective without the approval of the Committee, which may be withheld to the extent that the exercise, either individually or in the aggregate together with the exercise of other previously exercised stock options and/or offers and sales pursuant to any prior or contemplated offering of securities, would, in the sole and absolute judgment of the Committee, require the filing of a registration statement with the United States Securities and Exchange Commission or with the securities commission of any state. If a registration statement is not in effect under the Securities Act of 1933 or any applicable state securities law with respect to shares of Common Stock purchasable or otherwise deliverable under the Option, the Optionee (a) shall deliver to the Company, prior to the exercise of the Option or as a condition to the delivery of Common Stock pursuant to the exercise of an Option exercise, such information, representations and warranties as the Company may reasonably request in order for the Company to be able to satisfy itself that the Option Shares are being acquired in accordance with the terms of an applicable exemption from the securities registration requirements of applicable federal and state securities laws and (b) shall agree that the shares of Common Stock so acquired will not be disposed of except pursuant to an effective registration statement, unless the Company shall have received an opinion of counsel that such disposition is exempt from such requirement under the Securities Act of 1933 and any applicable state securities law.

8. Legend on Stock Certificates. Certificates evidencing the Option Shares, to the extent appropriate at the time, shall have noted conspicuously on the certificates a legend intended to give all persons full notice of the existence of the conditions, restrictions, rights and obligations set forth herein and in the Plan.

9. Governing Laws. This Award and the Terms and Conditions shall be construed, administered and enforced according to the laws of the State of Florida.

10. Successors. This Award and the Terms and Conditions shall be binding upon and inure to the benefit of the heirs, legal representatives, successors and permitted assigns of the Optionee and the Company.

Page 3 of 4

11. Notice. Except as otherwise specified herein, all notices and other communications under this Award shall be in writing and shall be deemed to have been given if personally delivered or if sent by registered or certified United States mail, return receipt requested, postage prepaid, addressed to the proposed recipient at the last known address of the recipient. Any party may designate any other address to which notices shall be sent by giving notice of the address to the other parties in the same manner as provided herein.

12. Severability. In the event that any one or more of the provisions or portion thereof contained in the Award and these Terms and Conditions shall for any reason be held to be invalid, illegal or unenforceable in any respect, the same shall not invalidate or otherwise affect any other provisions of the Award and these Terms and Conditions, and the Award and these Terms and Conditions shall be construed as if the invalid, illegal or unenforceable provision or portion thereof had never been contained herein.

13. Entire Agreement. Subject to the terms and conditions of the Plan which is incorporated herein by reference, the Award and the Terms and Conditions express the entire understanding of the parties with respect to the Option.

14. Violation. Any transfer, pledge, sale, assignment, or hypothecation of the Option or any portion thereof shall be a violation of the terms of the Award or these Terms and Conditions and shall be void and without effect.

15. Headings and Capitalized Terms. Section headings used herein are for convenience of reference only and shall not be considered in construing the Award or these Terms and Conditions. Capitalized terms used, but not defined, in either the Award or the Terms and Conditions shall be given the meaning ascribed to them in the Plan.

16. Specific Performance. In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of the Award and these Terms and Conditions, the party or parties who are thereby aggrieved shall have the right to specific performance and injunction in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative.

17. Arbitration. Any controversy or claim arising out of or relating to this Option shall be settled by arbitration in accordance with the commercial Arbitration rules of the American Arbitration Association. The arbitration shall take place in Orlando, Florida. Each party to this Award may select on neutral arbitrator. The selected arbitrators shall in turn appoint a third neutral arbitrator, and the three so chosen shall comprise the arbitration panel. The decision of the arbitration panel shall be final and binding on the parties, and judgment upon the award rendered by the arbitration panel may be entered by any court having jurisdiction thereof.

18. No Right to Continued Retention. Neither the establishment of the Plan nor the award of Option Shares hereunder shall be construed as giving the Optionee the right to continued employment with the Company or any affiliate.

Page 4 of 4

EXHIBIT 1

NOTICE OF EXERCISE OF

INCENTIVE STOCK OPTION TO PURCHASE

COMMON STOCK OF

HUGHES SUPPLY, INC.

Name

Address

Date

Hughes Supply, Inc.

20 North Orange Avenue

Suite 200

Orlando, Florida 32801

Attention:       General Counsel

Re:     Exercise of Incentive Stock Option

Gentlemen:

Subject to acceptance hereof by Hughes Supply, Inc. (the “Company”) pursuant to the provisions of the Hughes Supply, Inc. 1997 Executive Stock Plan (the “Plan”), I hereby give notice of my election to exercise options granted to me to purchase «SHARES» shares of common stock of the Company (“Common Stock”) under the Incentive Stock Option Award (the “Award”) dated as of [DATE]. The purchase shall take place as of                     ,      (the “Exercise Date”).

On or before the Exercise Date, I will pay the applicable purchase price as follows:

¨ by delivery of cash or a certified check for $                     for the full purchase price payable to the order of Hughes Supply, Inc.

¨ by delivery of cash or a certified check for $                     representing a portion of the purchase price with the balance to consist of shares of Common Stock that I have owned for at least six months and that are represented by a stock certificate I will surrender to the Company with my endorsement. If the number of shares of Common Stock represented by such stock certificate exceed the number to be applied against the purchase price, I understand that a new stock certificate will be issued to me reflecting the excess number of shares.

¨ by delivery of a stock certificate representing shares of Common Stock that I have owned for at least six months which I will surrender to the Company with my endorsement as payment of the purchase price. If the number of shares of Common Stock represented by such certificate exceed the number to be applied against the purchase price, I understand that a new certificate will be issued to me reflecting the excess number of shares.

Exhibit 1 - Page 1 of 4

¨ by delivery of the purchase price by                                                  , a broker, dealer or other “creditor” as defined by Regulation T issued by the Board of Governors of the Federal Reserve System. I hereby authorize the Company to issue a stock certificate for the number of shares indicated above in the name of said broker, dealer or other creditor or its nominee pursuant to instructions received by the Company and to deliver said stock certificate directly to that broker, dealer or other creditor (or to such other party specified in the instructions received by the Company from the broker, dealer or other creditor) upon receipt of the purchase price.

To the extent applicable, the required federal, state and local income tax withholding obligations or the exercise of the Award shall also be paid in cash or by certified check on or before the Exercise Date, or will be satisfied in the manner provided in the Withholding Election previously tendered or (if I am no longer a Section 16(b) reporting person) to be tendered to the Company no later than the indicated date of purchase.

I understand that I must have obtained the consent of the Committee before I may select any payment option other than the first choice provided above.

As soon as the stock certificate is registered in my name, please deliver it to me at the above address.

If the Common Stock being acquired is not registered for issuance to and resale by the Optionee pursuant to an effective registration statement on Form S-8 (or successor form) filed under the Securities Act of 1933, as amended (the “1933 Act”), I hereby represent, warrant, covenant, and agree with the Company as follows:

The shares of the Common Stock being acquired by me will be acquired for my own account without the participation of any other person, with the intent of holding the Common Stock for investment and without the intent of participating, directly or indirectly, in a distribution of the Common Stock and not with a view to, or for resale in connection with, any distribution of the Common Stock, nor am I aware of the existence of any distribution of the Common Stock;

I am not acquiring the Common Stock based upon any representation, oral or written, by any person with respect to the future value of, or income from, the Common Stock but rather upon an independent examination and judgment as to the prospects of the Company;

The Common Stock was not offered to me by means of publicly disseminated advertisements or sales literature, nor am I aware of any offers made to other persons by such means;

I am able to bear the economic risks of the investment in the Common Stock, including the risk of a complete loss of my investment therein;

I understand and agree that the Common Stock will be issued and sold to me without registration under any state law relating to the registration of securities for sale, and will be issued and sold in reliance on the exemptions from registration under the 1933 Act, provided by Sections 3(b) and/or 4(2) thereof and the rules and regulations promulgated thereunder;

The Common Stock cannot be offered for sale, sold or transferred by me other than pursuant to: (A) an effective registration under the 1933 Act or in a transaction otherwise in compliance with the 1933 Act; and (B) evidence satisfactory to the Company of compliance with

Exhibit 1 - Page 2 of 4

the applicable securities laws of other jurisdictions. The Company shall be entitled to rely upon an opinion of counsel satisfactory to it with respect to compliance with the above laws;

The Company will be under no obligation to register the Common Stock or to comply with any exemption available for sale of the Common Stock without registration or filing, and the information or conditions necessary to permit routine sales of securities of the Company under Rule 144 under the 1933 Act are not now available and no assurance has been given that it or they will become available. The Company is under no obligation to act in any manner so as to make Rule 144 available with respect to the Common Stock;

I have and have had complete access to and the opportunity to review and make copies of all material documents related to the business of the Company, including, but not limited to, contracts, financial statements, tax returns, leases, deeds and other books and records. I have examined such of these documents as I wished and am familiar with the business and affairs of the Company. I realize that the purchase of the Common Stock is a speculative investment and that any possible profit therefrom is uncertain;

I have had the opportunity to ask questions of and receive answers from the Company and any person acting on its behalf and to obtain all material information reasonably available with respect to the Company and its affairs. I have received all information and data with respect to the Company which I have requested and which I have deemed relevant in connection with the evaluation of the merits and risks of my investment in the Company;

I have such knowledge and experience in financial and business matters that I am capable of evaluating the merits and risks of the purchase of the Common Stock hereunder and I am able to bear the economic risk of such purchase; and

The agreements, representations, warranties and covenants made by me herein extend to and apply to all of the Common Stock of the Company issued to me pursuant to this Award. Acceptance by me of the certificate representing such Common Stock shall constitute a confirmation by me that all such agreements, representations, warranties and covenants made herein shall be true and correct at that time.

Exhibit 1 - Page 3 of 4

I understand that the certificates representing the shares being purchased by me in accordance with this notice shall bear a legend referring to the foregoing covenants, representations and warranties and restrictions on transfer, and I agree that a legend to that effect may be placed on any certificate which may be issued to me as a substitute for the certificates being acquired by me in accordance with this notice. I further understand that capitalized terms used in this Notice of Exercise without definition shall have the meanings given to them in the Plan.

	Very truly yours,
AGREED TO AND ACCEPTED:
HUGHES SUPPLY, INC.
By:
Title:

Number of Shares

Exercised:

Number of Shares Remaining: Date:                                

Exhibit 1 - Page 4 of 4

EXHIBIT 2

NOTICE OF WITHHOLDING ELECTION

HUGHES SUPPLY, INC.

1997 EXECUTIVE STOCK PLAN

TO:	Hughes Supply, Inc. Attn: Chief Financial Officer
FROM:	«PARTICIPANT»
RE:	Withholding Election

This election relates to the Option identified in Paragraph 3 below. I hereby certify that:

(1) My correct name and social security number and my current address are set forth at the end of this document.

(2) I am (check one, whichever is applicable):

¨ the original recipient of the Option.

¨ the legal representative of the estate of the original recipient of the Option.

¨ a legatee of the original recipient of the Option.

¨ the legal guardian of the original recipient of the Option.

(3) The Option pursuant to which this election relates was issued under the Hughes Supply 1997 Executive Stock Plan (the “Plan”) in the name of «PARTICIPANT» for the purchase of a total of «SHARES» shares of Common Stock. This election relates to                      shares of Common Stock issuable upon exercise of the Option (the “Common Stock”), provided that the numbers set forth above shall be deemed changed as appropriate to reflect the applicable Plan provisions.

(4) In connection with any exercise of the Option with respect to the Common Stock, I hereby elect to have certain of the shares issuable pursuant to the exercise withheld by the Company for the purpose of having the value of the shares applied to pay federal, state and local, if any, taxes arising from the exercise.

The shares to be withheld shall have, as of the Tax Date applicable to the exercise, a fair market value equal to the minimum statutory tax withholding requirement under federal, state and local law in connection with the exercise.

(5) This Withholding Election is made no later than the Tax Date and is otherwise timely made pursuant to the Plan.

Exhibit 2 - Page 1 of 2

(6) I understand that this Withholding Election may not be revised, amended or revoked by me (except in a manner that satisfies the requirements of the exemption provided under Rule 16b-3 promulgated under the Securities Exchange Act of 1934).

(7) I further understand that the Company shall withhold from the Common Stock a whole number of shares of Common Stock having the value specified in Paragraph 4 above.

(8) The plan has been made available to me by the Company, I have read and understand the Plan and I have no reason to believe that any of the conditions therein to the making of this Withholding Election have not been met. Capitalized terms used in this Notice of Withholding Election without definition shall have the meanings given to them in the Plan.

Dated:
	Signature
	Name (Printed)
	Street Address
	City, State, Zip Code

Exhibit 2 - Page 2 of 2

EX-10.3

Exhibit 10.3

Note: This is the general form used for a non-qualified stock option award under the 1997 Executive Stock Plan.

NON-QUALIFIED STOCK OPTION AGREEMENT

PURSUANT TO HUGHES SUPPLY, INC.

1997 EXECUTIVE STOCK PLAN

THIS AGREEMENT is made as of the Grant Date by and between HUGHES SUPPLY, INC. (the “Company”) and [NAME] the “Grantee”).

Upon and subject to the Terms and Conditions attached hereto and incorporated herein by reference, the Company hereby awards as of the Grant Date to Grantee a non-qualified stock option (the “Option”) pursuant to the Plan, as described below, to purchase the Option Shares. All capitalized terms used but not defined herein shall have the meanings ascribed to them in the Plan.

A. Grant Date: [DATE].

B. Type of Option: Non-Qualified Stock Option.

C. Plan: Hughes Supply, Inc. 1997 Executive Stock Plan.

D. Option Shares: All or any part of [NUMBER] shares of the Company’s common stock, $1.00 par value per share (“Common Stock”).

E. Exercise Price: $[PRICE] per share of Common Stock. The Exercise Price is the Fair Market Value, determined pursuant to the Plan, of a share of Common Stock on the Grant Date.

F. Option Period: The Option may be exercised as to all or any portion of the vested Option Shares during the Option Period, which commences on the Grant Date and ends generally on the earliest of (select all that apply):

¨ the tenth (10th) anniversary of the Grant Date;

¨ expiration of three (3) months after the date the Grantee experiences a termination of employment or service for any reason other than death or Disability;

¨ expiration of                      after the date the Grantee experiences a termination of employment or service for any reason other than death or Disability;

¨ one (1) year following the date of the Grantee’s death or Disability;

¨                          following the date of the Grantee’s death or Disability.

Note that other limitations to exercising the Option, as described in the attached Terms and Conditions, may apply.

G. Vesting Schedule: [SCHEDULE].

By their signatures below, the Grantee and the Company agree that the Option is granted under and governed by the terms and conditions of the Plan and this Agreement. Grantee has received and reviewed in their entirety the Plan, the prospectus that summarizes the terms of the Plan and this Agreement, has had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all provisions of the Plan and Agreement. Grantee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan and Agreement.

IN WITNESS WHEREOF, the Company and the Grantee have executed and sealed this Agreement as of the Grant Date set forth above.

HUGHES SUPPLY, INC.
By:
	Thomas I. Morgan, President and CEO
[NAME OF GRANTEE]

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TERMS AND CONDITIONS

TO THE

NON-QUALIFIED STOCK OPTION AGREEMENT

HUGHES SUPPLY, INC.

1997 EXECUTIVE STOCK PLAN

1. Exercise of Option. Subject to the provisions provided herein or in the Agreement made pursuant to the Plan:

(a) The Option may be exercised with respect to all or any portion of the Option Shares at any time during the Option Period by the delivery to the Company, at its principal place of business, of (i) a written notice of exercise in substantially the form attached hereto as Exhibit 1, which shall be actually delivered to the Company no earlier than thirty (30) days prior to the date upon which Grantee desires to exercise all or any portion of the Option; and (ii) payment to the Company of the Exercise Price multiplied by the number of Option Shares being purchased (the “Purchase Price”) in the manner provided in Subsection (b); and, if applicable, (iii) payment, in accordance with Section 5, of the withholding liability arising from the exercise. Upon acceptance of such notice and receipt of payment in full of the Purchase Price and any applicable withholding liability, the Company shall cause to be issued a certificate representing the Option Shares purchased.

(b) The Purchase Price shall be paid in full upon the exercise of an Option and no Option Shares shall be issued or delivered until full payment therefor has been made. Payment of the Purchase Price for all Option Shares purchased pursuant to the exercise of an Option shall be made in one of the following manners:

(i) by cash or certified check;

(ii) by delivery to the Company of a number of shares of Common Stock which have been owned by the holder for at least six (6) months prior to the date of exercise having an aggregate Fair Market Value of not less than the product of the Exercise Price multiplied by the number of shares the Grantee intends to purchase upon the exercise of the Option on the date of delivery;

(iii) by receipt of the purchase price in cash from a proper broker, dealer or other creditor following delivery of instructions by the Grantee to the Secretary of the Company regarding delivery to such broker, dealer or other creditor of that number of Option Shares with respect to which the Option is exercised; or

(iv) any combination thereof.

2. Rights as Shareholder. Until the stock certificates reflecting the Option Shares accruing to the Grantee upon exercise of the Option are issued to the Grantee, the Grantee shall have no rights as a shareholder with respect to such Option Shares. The Company shall make no adjustment for any dividends or distributions or other rights on or with respect to Option Shares for which the record date is prior to the issuance of that stock certificate, except as the Plan or the attached Agreement otherwise provides.

3. Restriction on Transfer of Option and of Option Shares. Except to the extent the Committee deems permissible under Section 422(b) of the Internal Revenue Code of 1986, as amended, and consistent with the best interests of the Company, the Option evidenced hereby is nontransferable other than by will or the laws of descent and distribution and shall be exercisable during the lifetime of the Grantee

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only by the Grantee (or in the event of his disability, by his personal representative) and after his death, only by his legatee or the executor of his estate.

4. Withholding. The Grantee must satisfy his federal, state and local, if any, withholding taxes imposed by reason of the exercise of the Option either by paying to the Company the full amount of the withholding obligation (i) in cash, (ii) by electing, in writing in substantially the form attached hereto as Exhibit 2 (a “Withholding Election”), to have the actual number of shares of Common Stock issuable upon exercise reduced by the smallest number of whole shares of Common Stock which, when multiplied by the fair market value of the Common Stock as of the date the Option is exercised, is sufficient to satisfy the amount of withholding tax; or (iii) by any combination of the above. Grantee may make a Withholding Election only if the following conditions are met:

(a) the Withholding Election is made by executing and delivering to the Company a properly completed Notice of Withholding Election in substantially the form of Exhibit 2 attached hereto; and

(b) the Withholding Election is made no later than the date on which the amount of tax required to be withhold is determined (the “Tax Date”).

Notwithstanding anything to the contrary herein, the Committee may in its sole discretion disapprove and give no effect to any Withholding Election.

5. Changes in Capitalization.

(a) The number of shares of Common Stock reserved for issuance upon the exercise of the Option and the Exercise Price of the Option shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a subdivision or a combination of shares or the payment of an ordinary stock dividend in shares of such Common Stock to holders of outstanding shares of Common Stock or any other increase or decrease in the number of shares of such Common Stock outstanding effected without receipt of consideration by the Company to the extent that Grantee’s proportionate interest shall be maintained as before the occurrence of the event.

(b) In the event of a merger, consolidation, extraordinary dividend, reorganization or other change in the capital structure of the Company or tender offer for shares of Common Stock, the Committee may make such adjustments with respect to the Option and take such other actions as it deems necessary or appropriate to reflect such merger, consolidation, reorganization or tender offer; provided, however that if the Company shall not be the surviving entity as a result of any such event and the parties to that transaction do not provide for the substitution of the Option with option rights in the surviving entity, then the Committee may cash-out the Option based upon the Fair Market Value of the Common Stock determined as of any date within thirty (30) days immediately prior to the transaction.

(c) The existence of the Plan and the Option granted pursuant to the Plan shall not affect in any way the right or power of the Company to make or authorize any adjustment, reclassification, reorganization or other change in its capital or business structure, any merger or consolidation of the Company, any issue of debt or equity securities having preferences or priorities as to the Common Stock or the rights thereof, the dissolution or liquidation of the Company, any sale or transfer of all or any part of its business or assets, or any other corporate act or proceeding. Any adjustment pursuant to this Section 6 may provide, in the Committee’s discretion, for the

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elimination without payment therefor of any fractional shares that might otherwise be subject to the Option.

6. Special Limitation on Exercise. No purported exercise of the Option shall be effective without the approval of the Committee, which may be withheld to the extent that the exercise, either individually or in the aggregate together with the exercise of other previously exercised stock options and/or offers and sales pursuant to any prior or contemplated offering of securities, would, in the sole and absolute judgment of the Committee, require the filing of a registration statement with the United States Securities and Exchange Commission or with the securities commission of any state. If a registration statement is not in effect under the Securities Act of 1933 or any applicable state securities law with respect to shares of Common Stock purchasable or otherwise deliverable under the Option, the Grantee (a) shall deliver to the Company, prior to the exercise of the Option or as a condition to the delivery of Common Stock pursuant to the exercise of an Option exercise, such information, representations and warranties as the Company may reasonably request in order for the Company to be able to satisfy itself that the Option Shares are being acquired in accordance with the terms of an applicable exemption from the securities registration requirements of applicable federal and state securities laws and (b) shall agree that the shares of Common Stock so acquired will not be disposed of except pursuant to an effective registration statement, unless the Company shall have received an opinion of counsel that such disposition is exempt from such requirement under the Securities Act of 1933 and any applicable state securities law.

7. Legend on Stock Certificates. Certificates evidencing the Option Shares, to the extent appropriate at the time, shall have noted conspicuously on the certificates a legend intended to give all persons full notice of the existence of the conditions, restrictions, rights and obligations set forth herein and in the Plan.

8. Governing Laws. This Agreement and the Terms and Conditions shall be construed, administered and enforced according to the laws of the State of Florida.

9. Successors. This Agreement and the Terms and Conditions shall be binding upon and inure to the benefit of the heirs, legal representatives, successors and permitted assigns of the Grantee and the Company.

10. Notice. Except as otherwise specified herein, all notices and other communications under this Agreement shall be in writing and shall be deemed to have been given if personally delivered or if sent by registered or certified United States mail, return receipt requested, postage prepaid, addressed to the proposed recipient at the last known address of the recipient. Any party may designate any other address to which notices shall be sent by giving notice of the address to the other parties in the same manner as provided herein.

11. Severability. In the event that any one or more of the provisions or portion thereof contained in the Agreement and these Terms and Conditions shall for any reason be held to be invalid, illegal or unenforceable in any respect, the same shall not invalidate or otherwise affect any other provisions of the Agreement and these Terms and Conditions, and the Agreement and these Terms and Conditions shall be construed as if the invalid, illegal or unenforceable provision or portion thereof had never been contained herein.

12. Entire Agreement. Subject to the terms and conditions of the Plan which is incorporated herein by reference, the Agreement and the Terms and Conditions express the entire understanding of the parties with respect to the Option.

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13. Violation. Any transfer, pledge, sale, assignment, or hypothecation of the Option or any portion thereof shall be a violation of the terms of the Agreement or these Terms and Conditions and shall be void and without effect.

14. Headings and Capitalized Terms. Section headings used herein are for convenience of reference only and shall not be considered in construing the Agreement or these Terms and Conditions. Capitalized terms used, but not defined, in either the Agreement or the Terms and Conditions shall be given the meaning ascribed to them in the Plan.

15. Specific Performance. In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of the Agreement and these Terms and Conditions, the party or parties who are thereby aggrieved shall have the right to specific performance and injunction in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative.

16. Arbitration. Any controversy or claim arising out of or relating to this Option shall be settled by arbitration in accordance with the commercial Arbitration rules of the American Arbitration Association. The arbitration shall take place in Orlando, Florida. Each party to this Agreement may select a neutral arbitrator. The selected arbitrators shall in turn appoint a third neutral arbitrator, and the three so chosen shall comprise the arbitration panel. The decision of the arbitration panel shall be final and binding on the parties, and judgment upon the award rendered by the arbitration panel may be entered by any court having jurisdiction thereof.

17. No Right to Continued Retention. Neither the establishment of the Plan nor the award of Option Shares hereunder shall be construed as giving the Grantee the right to continued employment with the Company or any affiliate.

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EXHIBIT 1

NOTICE OF EXERCISE OF

NON-QUALIFIED STOCK OPTION TO PURCHASE

COMMON STOCK OF

HUGHES SUPPLY, INC.

Hughes Supply, Inc.

20 North Orange Avenue

Suite 200

Orlando, Florida 32801

Attention:	Secretary
Re:	Exercise of Non-Qualified Stock Option

Gentlemen:

Subject to acceptance hereof by Hughes Supply, Inc. (the “Company”) pursuant to the provisions of the Hughes Supply, Inc. 1997 Executive Stock Plan (the “Plan”), I hereby give notice of my election to exercise the option granted to me to purchase [NUMBER] shares of common stock of the Company (“Common Stock”) under the Non-Qualified Stock Option Agreement (the “Agreement”) dated as of [DATE] (the “Option”). The purchase shall take place as of                     ,          (the “Exercise Date”).

On or before the Exercise Date, I will pay the applicable purchase price as follows:

¨ by delivery of cash or a certified check for $                     for the full purchase price payable to the order of Hughes Supply, Inc.

¨ by delivery of cash or a certified check for $                     representing a portion of the purchase price with the balance to consist of shares of Common Stock that I have owned for at least six months and that are represented by a stock certificate I will surrender to the Company with my endorsement. If the number of shares of Common Stock represented by such stock certificate exceed the number to be applied against the purchase price, I understand that a new stock certificate will be issued to me reflecting the excess number of shares.

¨ by delivery of a stock certificate representing shares of Common Stock that I have owned for at least six months which I will surrender to the Company with my endorsement as payment of the purchase price. If the number of shares of Common Stock represented by such certificate exceed the number to be applied against the purchase price, I understand that a new certificate will be issued to me reflecting the excess number of shares.

¨ by delivery of the purchase price by                                              , a broker, dealer or other “creditor” as defined by Regulation T issued by the Board of Governors of the Federal Reserve System. I hereby authorize the Company to issue a stock certificate for the number of shares indicated above in the name of said broker, dealer or other creditor or its nominee pursuant to instructions received by the Company and to deliver said stock

Exhibit 1 - Page 1 of 4

certificate directly to that broker, dealer or other creditor (or to such other party specified in the instructions received by the Company from the broker, dealer or other creditor) upon receipt of the purchase price.

To the extent applicable, the required federal, state and local income tax withholding obligations or the exercise of the Option shall also be paid in cash or by certified check on or before the Exercise Date, or will be satisfied in the manner provided in the Withholding Election previously tendered or to be tendered to the Company no later than the Tax Date.

As soon as the stock certificate is registered in my name, please deliver it to me at the below address.

If the Common Stock being acquired is not registered for issuance to and resale by the Grantee pursuant to an effective registration statement on Form S-8 (or successor form) filed under the Securities Act of 1933, as amended (the “1933 Act”), I hereby represent, warrant, covenant, and agree with the Company as follows:

The shares of the Common Stock being acquired by me will be acquired for my own account without the participation of any other person, with the intent of holding the Common Stock for investment and without the intent of participating, directly or indirectly, in a distribution of the Common Stock and not with a view to, or for resale in connection with, any distribution of the Common Stock, nor am I aware of the existence of any distribution of the Common Stock;

I am not acquiring the Common Stock based upon any representation, oral or written, by any person with respect to the future value of, or income from, the Common Stock but rather upon an independent examination and judgment as to the prospects of the Company;

The Common Stock was not offered to me by means of publicly disseminated advertisements or sales literature, nor am I aware of any offers made to other persons by such means;

I am able to bear the economic risks of the investment in the Common Stock, including the risk of a complete loss of my investment therein;

Exhibit 1 - Page 2 of 4

I understand and agree that the Common Stock will be issued and sold to me without registration under any state law relating to the registration of securities for sale, and will be issued and sold in reliance on the exemptions from registration under the 1933 Act, provided by Sections 3(b) and/or 4(2) thereof and the rules and regulations promulgated thereunder;

The Common Stock cannot be offered for sale, sold or transferred by me other than pursuant to: (A) an effective registration under the 1933 Act or in a transaction otherwise in compliance with the 1933 Act; and (B) evidence satisfactory to the Company of compliance with the applicable securities laws of other jurisdictions. The Company shall be entitled to rely upon an opinion of counsel satisfactory to it with respect to compliance with the above laws;

The Company will be under no obligation to register the Common Stock or to comply with any exemption available for sale of the Common Stock without registration or filing, and the information or conditions necessary to permit routine sales of securities of the Company under Rule 144 under the 1933 Act are not now available and no assurance has been given that it or they will become available. The Company is under no obligation to act in any manner so as to make Rule 144 available with respect to the Common Stock;

I have and have had complete access to and the opportunity to review and make copies of all material documents related to the business of the Company, including, but not limited to, contracts, financial statements, tax returns, leases, deeds and other books and records. I have examined such of these documents as I wished and am familiar with the business and affairs of the Company. I realize that the purchase of the Common Stock is a speculative investment and that any possible profit therefrom is uncertain;

I have had the opportunity to ask questions of and receive answers from the Company and any person acting on its behalf and to obtain all material information reasonably available with respect to the Company and its affairs. I have received all information and data with respect to the Company which I have requested and which I have deemed relevant in connection with the evaluation of the merits and risks of my investment in the Company;

I have such knowledge and experience in financial and business matters that I am capable of evaluating the merits and risks of the purchase of the Common Stock hereunder and I am able to bear the economic risk of such purchase; and

The agreements, representations, warranties and covenants made by me herein extend to and apply to all of the Common Stock of the Company issued to me pursuant to this Agreement. Acceptance by me of the certificate representing such Common Stock shall constitute a confirmation by me that all such agreements, representations, warranties and covenants made herein shall be true and correct at that time.

Exhibit 1 - Page 3 of 4

I understand that the certificates representing the shares being purchased by me in accordance with this notice shall bear a legend referring to the foregoing covenants, representations and warranties and restrictions on transfer, and I agree that a legend to that effect may be placed on any certificate which may be issued to me as a substitute for the certificates being acquired by me in accordance with this notice. I further understand that capitalized terms used in this Notice of Exercise without definition shall have the meanings given to them in the Plan.

Very truly yours,

Signature

Name

Address

Social Security Number

Date

AGREED TO AND ACCEPTED:

HUGHES SUPPLY, INC.

By:

Title:

Number of Shares Exercised:

Number of Shares Remaining:         Date:

Exhibit 1 - Page 4 of 4

EXHIBIT 2

NOTICE OF WITHHOLDING ELECTION

HUGHES SUPPLY, INC.

1997 EXECUTIVE STOCK PLAN

TO:	Hughes Supply, Inc.
	Attn: Secretary
FROM:	[NAME]
RE:	Withholding Election

This election relates to the Option identified in Paragraph 3 below. I hereby certify that:

(1) My correct name and social security number and my current address are set forth at the end of this document.

(2) I am (check one, whichever is applicable):

¨ the original recipient of the Option.

¨ the legal representative of the estate of the original recipient of the Option.

¨ a legatee of the original recipient of the Option.

¨ the legal guardian of the original recipient of the Option.

(3) The Option pursuant to which this election relates was issued under the Hughes Supply 1997 Executive Stock Plan (the “Plan”) in the name of [NAME] for the purchase of a total of [NUMBER] shares of Common Stock. This election relates to                  shares of Common Stock issuable upon exercise of the Option (the “Common Stock”), provided that the numbers set forth above shall be deemed changed as appropriate to reflect the applicable Plan provisions.

(4) In connection with any exercise of the Option with respect to the Common Stock, I hereby elect to have certain of the shares issuable pursuant to the exercise withheld by the Company for the purpose of having the value of the shares applied to pay federal, state and local, if any, taxes arising from the exercise.

The shares to be withheld shall have, as of the Tax Date applicable to the exercise, a Fair Market Value equal to the minimum statutory tax withholding requirement under federal, state and local law in connection with the exercise.

(5) This Notice of Withholding Election is made no later than the Tax Date and is otherwise timely made pursuant to the Plan.

Exhibit 2 - Page 1 of 2

(6) I understand that the Company shall withhold from the Common Stock a whole number of shares of Common Stock having the value specified in Paragraph 4 above.

(7) The Plan has been made available to me by the Company, I have read and understand the Plan and I have no reason to believe that any of the conditions therein to the making of this Withholding Election have not been met. Capitalized terms used in this Notice of Withholding Election without definition shall have the meanings given to them in the Plan.

Dated:
	Signature
	Name (Printed)
	Street Address
	City, State, Zip Code
	Social Security Number

Exhibit 2 - Page 2 of 2

EX-10.4

Exhibit 10.4

Note: This is the general form used for a restricted stock award under the 1997 Executive Stock Plan.

HUGHES SUPPLY, INC.

RESTRICTED STOCK AWARD AGREEMENT

This RESTRICTED STOCK AWARD AGREEMENT (the “Agreement”) is made as of              (the “Grant Date”) between HUGHES SUPPLY, INC. a Florida corporation (the “Company”) and                 , a key employee of the Company (the “Employee”).

Background Information

A. The Board of Directors (the “Board”) and shareholders of the Company previously adopted the Hughes Supply, Inc. 1997 Executive Stock Plan, as amended and restated as of April 9, 2003 (the “Plan”).

B. Section 8 of the Plan provides that the Compensation Committee of the Board (the “Committee”) shall have the discretion and right to grant Restricted Stock (as defined below) to key employees of the Company, subject to the terms and conditions of the Plan and any additional terms provided by the Committee. The Committee has made a grant of Restricted Stock to the Employee as of the Grant Date pursuant to the terms of the Plan and this Agreement.

C. The Employee desires to accept the grant of Restricted Stock and agrees to be bound by the terms and conditions of the Plan and this Agreement.

Agreement

1. Restricted Stock. Subject to the terms and conditions provided in this Agreement and the Plan, the Company hereby grants the Employee                 (            ) shares of restricted, common stock of the Company (the “Restricted Stock”) as of the Grant Date.

2. Vesting. The Employee’s rights and interest in the Restricted Stock shall become fully vested and non-forfeitable (and the stock shall cease being restricted) upon the occurrence of the first of the following events, provided the Employee is a full-time employee of the Company or its Affiliates (as hereinafter defined) at that time.

(a) Continued Employment for Five (5) Years Following Grant Date. The Employee shall become 100% vested if the Employee remains employed by the Company or its Affiliates for a period of five (5) years following the Grant Date.

(b) Age 65. The Employee shall become 100% vested upon the attainment of age 65.

(c) Death. The Employee shall become 100% vested (and the Restricted Stock shall pass to his/her beneficiaries) upon the Employee’s death.

(d) Disability. The Employee shall become 100% vested if his termination of employment with the Company and its Affiliates is due to the Employee’s “disability”. For purposes of this Agreement, “disability” shall have the same meaning as is provided under the Company’s group, long-term disability plan or policy then maintained by the Company or the Affiliate for whom the Employee is employed. If no such plan or policy then exists, “disability” shall have the same meaning as in Internal Revenue Code §22(e)(3), as amended or replaced from time to time. In the event of a dispute under this provision, the determination of “disability” shall be made by the Committee, in its discretion, upon the advice of one or more physicians employed by the Committee to assist in its determination.

(e) Change of Control. The Employee shall become 100% vested upon a “change of control” of the Company. For purposes of this Agreement, a “change of control” shall mean:

(i) any person (as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and as used in Section 13(d) thereof), excluding the Company, and any subsidiary and employee benefit plan sponsored or maintained by the Company or any subsidiary (including any trustee of such plan acting as trustee) (the Company, all subsidiaries, and such employee benefit plans and trustees acting as trustees being hereinafter referred to as the “Company Group”), but including a “group” under Section 13(d)(3) of the Exchange Act (such person or group being hereinafter referred to as a “Person”), becomes the beneficial owner of shares of the Company having at least fifty percent (50%) of the total number of votes that may be cast for the election of directors of the Company (the “Voting Shares”), provided that no change of control will occur as a result of an acquisition of stock by the Company Group which increases, proportionately, the stock representing the voting power of the Company, and provided further that if such Person acquires beneficial ownership of stock representing more than fifty percent (50%) of the voting power of the Company by reason of share purchases by the Company Group, and after such share purchases by the Company Group, the Person acquires any additional shares representing voting power of the Company, then a change of control shall occur;

(ii) the shareholders of the Company shall approve any merger or other business combination of the Company, sale of the Company’s assets or combination of the foregoing transactions (a “Transaction”) other than a Transaction involving only the Company and one or more of its subsidiaries, or a Transaction immediately following which the shareholders of the Company immediately prior to the Transaction continue to have a majority of the voting power in the resulting entity excluding for this purpose any shareholder owning directly or indirectly more than ten percent (10%) of the shares of the other company involved in the merger; or

(iii) within any 24-month period, the persons who are directors of the Company immediately before the beginning of such period (the “Incumbent Directors”) shall cease (for any reason other than death) to constitute at least a majority of the Board of Directors of any successor to the Company, provided that any director who was not a director as of the Grant Date shall be deemed to be an Incumbent Director if such director was elected to the Board by, or on the recommendation of or with the approval of, at least two-thirds (2/3rds) of the directors who were then qualified as Incumbent Directors either actually or by prior operation of this Subsection (iii); and provided further that any director elected to the Board to avoid or settle a threatened or actual proxy contest shall in no event be deemed to be an Incumbent Director.

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3. Restrictions on Transfer. Until such time as any share of Restricted Stock becomes vested pursuant to Section 2 above, the Employee shall not have the right to make or permit to occur any transfer, pledge or hypothecation of all or any portion of the Restricted Stock, whether outright or as security, with or without consideration, voluntary or involuntary. Any transfer, pledge or hypothecation not made in accordance with this Agreement shall be deemed null and void. See also Section 6 below.

The Employee shall forfeit all of his rights and interest in the Restricted Stock if he fails to remain as a full-time employee of the Company or its Affiliates until he becomes “vested” in his Restricted Stock. To the extent Restricted Stock is forfeited by the Employee, it shall be returned to the Company as treasury stock that is subject to the terms of the Plan.

For purposes of this Agreement, an “Affiliate” means (i) an entity that directly or through another Affiliate is more than fifty percent (50%) owned by the Company, or (ii) an entity in which the Company has a “significant equity interest” as determined by the Committee.

4. Shares Held by Custodian. The Employee hereby authorizes and directs the Company to deliver any share certificate issued by the Company to evidence the award of Restricted Stock to the Secretary of the Company or such other officer of the Company as may be designated by the Committee (the “Share Custodian”) to be held by the Share Custodian until the Restricted Stock becomes vested in accordance with Section 2 above. When all or any portion of the Restricted Stock becomes vested, the Share Custodian shall deliver to the Employee (or his beneficiary in the event of death) a certificate representing the vested Restricted Stock (which then will be unrestricted). The Employee hereby irrevocably appoints the Share Custodian, and any successor thereto, as the true and lawful attorney-in-fact of the Employee with full power and authority to execute any stock transfer power or other instrument necessary to transfer the Restricted Stock to the Company, or to transfer a portion of the Restricted Stock to the Employee on an unrestricted basis upon vesting, pursuant to this Agreement, in the name, place, and stead of the Employee. The term of such appointment shall commence on the Grant Date and shall continue until all the Restricted Stock becomes vested or is forfeited. During the period that the Share Custodian holds the shares of Restricted Stock subject to this Section, the Employee shall be entitled to all rights applicable to shares of common stock of the Company not so held, including the right to vote and receive dividends, but provided, however, in the event the number of shares of Restricted Stock is increased or reduced by changing par value, split-up, stock split, reverse stock split, reclassification, merger, reorganization, consolidation, or otherwise, and in the event of any distribution of common stock or other securities of the Company in respect of such shares of common stock, the Employee agrees that any certificate representing shares of such additional common stock or other securities of the Company issued as a result of any of the foregoing shall be delivered to the Share Custodian and shall be subject to all of the provisions of this Agreement as if initially received hereunder.

5. Tax Payment Upon Vesting.

(a) At such time as the Employee becomes vested pursuant to Section 2 above in all or any portion of the Restricted Stock, the Employee (or his/her personal representative) shall deliver to the Company, within ten (10) days after the occurrence of the vesting event specified in Section 2 above (or in the event of death, within ten (10) days of the appointment of the personal representative) (a “Vesting Date”), either a certified check payable to the Company in the amount of all withholding tax obligations (whether federal, state or local), imposed on the Employee and the Company by reason of the vesting of the Restricted Stock, or a Withholding Election Form to be provided by the Company upon request by the Employee (or personal representative). Failure to tender either the required certified check or Withholding Election Form will result in a delay of the delivery of the Restricted Stock. Upon receipt of payment in full of all withholding tax obligations, the Company shall cause a certificate representing the vested Restricted Stock (which then will be unrestricted) to be issued and delivered to the Employee.

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(b) In the event the Employee (or his/her personal representative) elect to satisfy the withholding obligation by executing the Withholding Election Form, the Employee’s actual number of vested shares of Restricted Stock shall be reduced by the smallest number of whole shares of common stock of the Company which, when multiplied by the fair market value of the common stock on the Vesting Date, is sufficient to satisfy the amount of the withholding tax obligations imposed on the Company by reason of the vesting of the Restricted Stock.

(c) In the event the Employee (or his/her personal representative) fail to timely decide between the use of a certified check or the execution of a Withholding Election Form, the Employee (or his/her personal representative) shall be deemed to have elected and executed the Withholding Election Form, and the Company shall thereafter deliver to the Employee (or his/her beneficiary) the net amount of vested shares of Restricted Stock (which then will be unrestricted).

6. Investment Representations. The Employee hereby represents, warrants, covenants, and agrees with the Company as follows:

(a) The Restricted Stock being acquired by the Employee will be acquired for the Employee’s own account without the participation of any other person, with the intent of holding the Restricted Stock for investment and without the intent of participating, directly or indirectly, in a distribution of the Restricted Stock and not with a view to, or for resale in connection with, any distribution of the Restricted Stock, nor is the Employee aware of the existence of any distribution of the Restricted Stock;

(b) The Employee is not acquiring the Restricted Stock based upon any representation, oral or written, by any person with respect to the future value of, or income from, the Restricted Stock but rather upon an independent examination and judgment as to the prospects of the Company;

(c) The Restricted Stock was not offered to the Employee by means of publicly disseminated advertisements or sales literature, nor is the Employee aware of any offers made to other persons by such means;

(d) The Employee is able to bear the economic risks of the investment in the Restricted Stock, including the risk of a complete loss of his/her investment therein;

(e) The Restricted Stock cannot be offered for sale, sold or transferred by the Employee other than pursuant to: (A) an effective registration under the Securities Act of 1933 (the “1933 Act”) or in a transaction otherwise in compliance with the 1933 Act; and (B) evidence satisfactory to the Company of compliance with the applicable securities laws of other jurisdictions. The Company shall be entitled to rely upon an opinion of counsel satisfactory to it with respect to compliance with the above laws;

(f) The Employee has, and has had, complete access to and the opportunity to review and make copies of all material documents related to the business of the Company, including, but not limited to, contracts, financial statements, tax returns, leases, deeds, and other books and records. Employee has examined such of these documents as the Employee has wished and is familiar with the business and affairs of the Company. The Employee realizes that the acquisition of the Restricted Stock is a speculative investment and that any possible profit therefrom is uncertain;

(g) The Employee has had the opportunity to ask questions of and receive answers from the Company and any person acting on its behalf and to obtain all material information reasonably available

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with respect to the Company and its affairs. The Employee has received all information and data with respect to the Company which the Employee has requested and which the Employee has deemed relevant in connection with the evaluation of the merits and risks of the Employee’s investment in the Company;

(h) The Employee has such knowledge and experience in financial and business matters that the Employee is capable of evaluating the merits and risks of the acquisition of the Restricted Stock hereunder and the Employee is able to bear the economic risk of such acquisition; and

(i) The agreements, representations, warranties, and covenants made by the Employee herein extend to and apply to all of the Restricted Stock of the Company issued to the Employee pursuant to this award. Acceptance by the Employee of the certificate representing such Restricted Stock shall constitute a confirmation by the Employee that all such agreements, representations, warranties, and covenants made herein shall be true and correct at that time.

7. No Effect on Employment. Nothing in the Plan or this Agreement shall confer upon the Employee the right to continue in the employment of the Company or effect any right which the Company may have to terminate the employment of the Employee regardless of the effect of such termination of employment on the rights of the Employee under the Plan or this Agreement.

8. Governing Laws. This Agreement shall be construed and enforced in accordance with the local laws of the State of Florida applicable to agreements to be executed and performed wholly within said state, and shall inure to the benefit of, and be binding upon, the parties hereto and their heirs, personal representatives, successors and assigns. The parties further agree that in any dispute between them relating to this Agreement, exclusive jurisdiction shall be in the trial courts located within Orange County, Florida, any objections as to jurisdiction or venue in such court being expressly waived.

9. Successors. This Agreement shall inure to the benefit of the heirs, legal representatives, successors and permitted assigns of the Company and Employee.

10. Notice. Any notice which either party hereto may be required or permitted to give to the other shall be in writing, and may be delivered personally or by mail, postage prepaid, addressed as follows: to the Chief Financial Officer of the Company, or to the Company (attention of the Chief Financial Officer), at Hughes Supply, Inc., One Hughes Way, Orlando, Florida 32805, or at any other address as the Company, by notice to the Employee, may designate in writing from time to time; to the Employee, at the Employee’s address as shown on the records of the Company, or at any other address as the Employee, by notice to the Company, may designate in writing from time to time.

11. Severability. In the event that any one or more of the provisions or portion thereof contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, the same shall not invalidate or otherwise affect any other provisions of this Agreement, and this Agreement shall be construed as if the invalid, illegal or unenforceable provision or portion thereof had never been contained herein.

12. Entire Agreement; Modifications to Agreement. Subject to the terms and conditions of the Plan, which are incorporated herein by reference, this Agreement expresses the entire understanding and agreement of the parties hereto with respect to such terms, restrictions and limitations. The Committee may amend or terminate any (or all) of the provisions of this Agreement at any time prior to the date on which any of the shares of Restricted Stock shall have vested with the Employee pursuant to the terms hereof.

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13. Headings. Section headings used herein are for convenience of reference only and shall not be considered in construing this Agreement.

14. Specific Performance. In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the party or parties who are thereby aggrieved shall have the right to specific performance and injunction in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative.

15. Resolution of Disputes. Any determination or interpretation by the Committee shall be final, binding and conclusive on all persons affected thereby.

IN WITNESS WHEREOF, the Company has executed this Agreement as of the Grant Date set forth above.

HUGHES SUPPLY, INC.

By:

EMPLOYEE:

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EX-10.5

Exhibit 10.5

Note: This is the general form used for a performance-based restricted stock award under the 1997 Executive Stock Plan.

HUGHES SUPPLY, INC.

PERFORMANCE-BASED RESTRICTED STOCK AWARD AGREEMENT

This PERFORMANCE-BASED RESTRICTED STOCK AWARD AGREEMENT (the “Agreement”) is made as of                              (the “Grant Date”) between HUGHES SUPPLY, INC. a Florida corporation (the “Company”) and                                         , a key employee of the Company (the “Employee”).

Background Information

A. The Board of Directors (the “Board”) and shareholders of the Company previously adopted the Hughes Supply, Inc. 1997 Executive Stock Plan, as amended and restated as of April 9, 2003 (the “Plan”).

B. Section 8 of the Plan provides that the Compensation Committee of the Board (the “Committee”) shall have the discretion and right to grant Performance-Based Restricted Stock (as defined below) to key employees of the Company, subject to the terms and conditions of the Plan and any additional terms provided by the Committee. The Committee has made a grant of Performance-Based Restricted Stock to the Employee as of the Grant Date pursuant to the terms of the Plan and this Agreement.

C. The Employee desires to accept the grant of Performance-Based Restricted Stock and agrees to be bound by the terms and conditions of the Plan and this Agreement.

Agreement

1. Performance-Based Restricted Stock. Subject to the terms and conditions provided in this Agreement and the Plan, the Company hereby grants the Employee                                 (             ) shares of restricted, common stock of the Company (the “Performance-Based Restricted Stock”) as of the Grant Date. Subject to the provisions of Sections 2 and 3, the Performance-Based Restricted Stock will be awarded on an Award Date (as hereinafter defined) to the Employee upon certification by the Compensation Committee that the Performance-Based Restricted Stock has achieved the “stock price” (as hereinafter defined).

2. Award Date (stock price); Continued Employment. The Employee shall be awarded twenty percent (20%) of his/her Performance-Based Restricted Stock granted hereunder when the Compensation Committee certifies that the average of the “stock price” (as defined below) of the Company’s common stock during any period of twenty (20) consecutive trading days equals or exceeds the following stock prices for the first time within a period of five (5) years following the Grant Date (each such date being referred to as an “Award Date”). Thereafter, the extent to which the Performance-Based Restricted Stock awarded to the Employee on the Award Date becomes vested and non-forfeitable will be determined in accordance with Section 3.

Average Stock Price	Percent Awarded		Cumulative Award
$	20	%	20	%
$	20	%	40	%
$	20	%	60	%
$	20	%	80	%
$	20	%	100	%

For example, in the event that the Compensation Committee certifies that the average stock price of $                 is achieved during any 20 day period that occurs within a period of five (5) years following the Grant Date, the Employee shall be awarded 20% of the Performance-Based Restricted Stock on the Award Date.

In the event of a stock split or other recapitalization of the Company, these average stock prices shall be adjusted proportionately by the Committee. For purposes of this Section 2, the term “stock price” shall mean, with respect to a trading date, the closing price at which sales of common stock of the Company shall have been sold on the trading date, as reported by any national securities exchange or any NASDAQ quotation or market system selected by the Committee on which shares of the Company’s common stock are then traded.

3. Vesting. Provided the Performance-Based Restricted Stock has been awarded to the Employee upon the satisfaction of the conditions set forth in Section 2 of this Agreement, the Employee’s rights and interest in the Performance-Based Restricted Stock shall become fully vested and non-forfeitable (and the stock shall cease being restricted) upon the occurrence of the first of the following events, provided the Employee is a full-time employee of the Company or its Affiliates (as hereinafter defined) at that time.

(a) Continued Employment for Five (5) Years Following Award Date. The Employee shall become 100% vested if the Employee remains employed by the Company or its Affiliates for a period of five (5) years following the Award Date.

(b) Age 65. The Employee shall become 100% vested upon the attainment of age 65.

(c) Death. The Employee shall become 100% vested (and the Performance-Based Restricted Stock shall pass to his/her beneficiaries) upon the Employee’s death.

(d) Disability. The Employee shall become 100% vested if his termination of employment with the Company and its Affiliates is due to the Employee’s “disability”. For purposes of this Agreement, “disability” shall have the same meaning as is provided under the Company’s group, long-term disability plan or policy then maintained by the Company or the Affiliate for whom the Employee is employed. If no such plan or policy then exists, “disability” shall have the same meaning as in Internal Revenue Code §22(e)(3), as amended or replaced from time to time. In the event of a dispute under this provision, the determination of “disability” shall be made by the Committee, in its discretion, upon the advice of one or more physicians employed by the Committee to assist in its determination.

(e) Change of Control. The Employee shall become 100% vested upon a “change of control” of the Company. For purposes of this Agreement, a “change of control” shall mean:

(i) any person (as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and as used in Section 13(d) thereof), excluding the

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Company, and any subsidiary and employee benefit plan sponsored or maintained by the Company or any subsidiary (including any trustee of such plan acting as trustee) (the Company, all subsidiaries, and such employee benefit plans and trustees acting as trustees being hereinafter referred to as the “Company Group”), but including a “group” under Section 13(d)(3) of the Exchange Act (such person or group being hereinafter referred to as a “Person”), becomes the beneficial owner of shares of the Company having at least fifty percent (50%) of the total number of votes that may be cast for the election of directors of the Company (the “Voting Shares”), provided that no change of control will occur as a result of an acquisition of stock by the Company Group which increases, proportionately, the stock representing the voting power of the Company, and provided further that if such Person acquires beneficial ownership of stock representing more than fifty percent (50%) of the voting power of the Company by reason of share purchases by the Company Group, and after such share purchases by the Company Group, the Person acquires any additional shares representing voting power of the Company, then a change of control shall occur;

(ii) the shareholders of the Company shall approve any merger or other business combination of the Company, sale of the Company’s assets or combination of the foregoing transactions (a “Transaction”) other than a Transaction involving only the Company and one or more of its subsidiaries, or a Transaction immediately following which the shareholders of the Company immediately prior to the Transaction continue to have a majority of the voting power in the resulting entity excluding for this purpose any shareholder owning directly or indirectly more than ten percent (10%) of the shares of the other company involved in the merger; or

(iii) within any 24-month period, the persons who are directors of the Company immediately before the beginning of such period (the “Incumbent Directors”) shall cease (for any reason other than death) to constitute at least a majority of the Board of Directors of any successor to the Company, provided that any director who was not a director as of the Grant Date shall be deemed to be an Incumbent Director if such director was elected to the Board by, or on the recommendation of or with the approval of, at least two-thirds (2/3rds) of the directors who were then qualified as Incumbent Directors either actually or by prior operation of this Subsection (iii); and provided further that any director elected to the Board to avoid or settle a threatened or actual proxy contest shall in no event be deemed to be an Incumbent Director.

4. Restrictions on Transfer. Until such time as any share of Performance-Based Restricted Stock becomes vested pursuant to Section 3 above, the Employee shall not have the right to make or permit to occur any transfer, pledge or hypothecation of all or any portion of the Performance-Based Restricted Stock, whether outright or as security, with or without consideration, voluntary or involuntary. Any transfer, pledge or hypothecation not made in accordance with this Agreement shall be deemed null and void. See also Section 7 below.

The Employee shall forfeit all of his rights and interest in the Performance-Based Restricted Stock if he fails to remain as a full-time employee of the Company or its Affiliates until he becomes “vested” in his Performance-Based Restricted Stock. In addition, the Employee shall forfeit any and all rights to the Performance-Based Restricted Stock if it has not been awarded within five (5) years from Grant Date. To the extent Performance-Based Restricted Stock is forfeited by the Employee, it shall be returned to the Company as treasury stock that is subject to the terms of the Plan.

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For purposes of this Agreement, an “Affiliate” means (i) an entity that directly or through another Affiliate is more than fifty percent (50%) owned by the Company, or (ii) an entity in which the Company has a “significant equity interest” as determined by the Committee.

5. Shares Held by Custodian. The Employee hereby authorizes and directs the Company to deliver any share certificate issued by the Company to evidence the award of Performance-Based Restricted Stock to the Secretary of the Company or such other officer of the Company as may be designated by the Committee (the “Share Custodian”) to be held by the Share Custodian until the Performance-Based Restricted Stock becomes vested in accordance with Section 3 above. When all or any portion of the Performance-Based Restricted Stock becomes vested, the Share Custodian shall deliver to the Employee (or his beneficiary in the event of death) a certificate representing the vested Performance-Based Restricted Stock (which then will be unrestricted). The Employee hereby irrevocably appoints the Share Custodian, and any successor thereto, as the true and lawful attorney-in-fact of the Employee with full power and authority to execute any stock transfer power or other instrument necessary to transfer the Performance-Based Restricted Stock to the Company, or to transfer a portion of the Performance-Based Restricted Stock to the Employee on an unrestricted basis upon vesting, pursuant to this Agreement, in the name, place, and stead of the Employee. The term of such appointment shall commence on each Award Date and shall continue until all the Performance-Based Restricted Stock becomes vested or is forfeited. During the period that the Share Custodian holds the shares of Performance-Based Restricted Stock subject to this Section, the Employee shall be entitled to all rights applicable to shares of common stock of the Company not so held, including the right to vote and receive dividends, but provided, however, in the event the number of shares of Performance-Based Restricted Stock is increased or reduced by changing par value, split-up, stock split, reverse stock split, reclassification, merger, reorganization, consolidation, or otherwise, and in the event of any distribution of common stock or other securities of the Company in respect of such shares of common stock, the Employee agrees that any certificate representing shares of such additional common stock or other securities of the Company issued as a result of any of the foregoing shall be delivered to the Share Custodian and shall be subject to all of the provisions of this Agreement as if initially received hereunder.

6. Tax Payment Upon Vesting.

(a) At such time as the Employee becomes vested pursuant to Section 3 above in all or any portion of the Performance-Based Restricted Stock, the Employee (or his/her personal representative) shall deliver to the Company, within ten (10) days after the occurrence of the vesting event specified in Section 3 above (or in the event of death, within ten (10) days of the appointment of the personal representative) (a “Vesting Date”), either a certified check payable to the Company in the amount of all withholding tax obligations (whether federal, state or local), imposed on the Employee and the Company by reason of the vesting of the Performance-Based Restricted Stock, or a Withholding Election Form to be provided by the Company upon request by the Employee (or personal representative). Failure to tender either the required certified check or Withholding Election Form will result in a delay of the delivery of the Performance-Based Restricted Stock. Upon receipt of payment in full of all withholding tax obligations, the Company shall cause a certificate representing the vested Performance-Based Restricted Stock (which then will be unrestricted) to be issued and delivered to the Employee.

(b) In the event the Employee (or his/her personal representative) elect to satisfy the withholding obligation by executing the Withholding Election Form, the Employee’s actual number of vested shares of Performance-Based Restricted Stock shall be reduced by the smallest number of whole shares of common stock of the Company which, when multiplied by the fair market value of the common stock on the Vesting Date, is sufficient to satisfy the amount of the withholding tax obligations imposed on the Company by reason of the vesting of the Performance-Based Restricted Stock.

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(c) In the event the Employee (or his/her personal representative) fail to timely decide between the use of a certified check or the execution of a Withholding Election Form, the Employee (or his/her personal representative) shall be deemed to have elected and executed the Withholding Election Form, and the Company shall thereafter deliver to the Employee (or his/her beneficiary) the net amount of vested shares of Performance-Based Restricted Stock (which then will be unrestricted).

7. Investment Representations. The Employee hereby represents, warrants, covenants, and agrees with the Company as follows:

(a) The Performance-Based Restricted Stock being acquired by the Employee will be acquired for the Employee’s own account without the participation of any other person, with the intent of holding the Performance-Based Restricted Stock for investment and without the intent of participating, directly or indirectly, in a distribution of the Performance-Based Restricted Stock and not with a view to, or for resale in connection with, any distribution of the Performance-Based Restricted Stock, nor is the Employee aware of the existence of any distribution of the Performance-Based Restricted Stock;

(b) The Employee is not acquiring the Performance-Based Restricted Stock based upon any representation, oral or written, by any person with respect to the future value of, or income from, the Performance-Based Restricted Stock but rather upon an independent examination and judgment as to the prospects of the Company;

(c) The Performance-Based Restricted Stock was not offered to the Employee by means of publicly disseminated advertisements or sales literature, nor is the Employee aware of any offers made to other persons by such means;

(d) The Employee is able to bear the economic risks of the investment in the Performance-Based Restricted Stock, including the risk of a complete loss of his/her investment therein;

(e) The Performance-Based Restricted Stock cannot be offered for sale, sold or transferred by the Employee other than pursuant to: (A) an effective registration under the Securities Act of 1933 (the “1933 Act”) or in a transaction otherwise in compliance with the 1933 Act; and (B) evidence satisfactory to the Company of compliance with the applicable securities laws of other jurisdictions. The Company shall be entitled to rely upon an opinion of counsel satisfactory to it with respect to compliance with the above laws;

(f) The Employee has, and has had, complete access to and the opportunity to review and make copies of all material documents related to the business of the Company, including, but not limited to, contracts, financial statements, tax returns, leases, deeds, and other books and records. Employee has examined such of these documents as the Employee has wished and is familiar with the business and affairs of the Company. The Employee realizes that the acquisition of the Performance-Based Restricted Stock is a speculative investment and that any possible profit therefrom is uncertain;

(g) The Employee has had the opportunity to ask questions of and receive answers from the Company and any person acting on its behalf and to obtain all material information reasonably available with respect to the Company and its affairs. The Employee has received all information and data with respect to the Company which the Employee has requested and which the Employee has deemed relevant in connection with the evaluation of the merits and risks of the Employee’s investment in the Company;

(h) The Employee has such knowledge and experience in financial and business matters that the Employee is capable of evaluating the merits and risks of the acquisition of the Performance-Based Restricted Stock hereunder and the Employee is able to bear the economic risk of such acquisition; and

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(i) The agreements, representations, warranties, and covenants made by the Employee herein extend to and apply to all of the Performance-Based Restricted Stock of the Company issued to the Employee pursuant to this award. Acceptance by the Employee of the certificate representing such Performance-Based Restricted Stock shall constitute a confirmation by the Employee that all such agreements, representations, warranties, and covenants made herein shall be true and correct at that time.

8. No Effect on Employment. Nothing in the Plan or this Agreement shall confer upon the Employee the right to continue in the employment of the Company or effect any right which the Company may have to terminate the employment of the Employee regardless of the effect of such termination of employment on the rights of the Employee under the Plan or this Agreement.

9. Governing Laws. This Agreement shall be construed and enforced in accordance with the local laws of the State of Florida applicable to agreements to be executed and performed wholly within said state, and shall inure to the benefit of, and be binding upon, the parties hereto and their heirs, personal representatives, successors and assigns. The parties further agree that in any dispute between them relating to this Agreement, exclusive jurisdiction shall be in the trial courts located within Orange County, Florida, any objections as to jurisdiction or venue in such court being expressly waived.

10. Successors. This Agreement shall inure to the benefit of the heirs, legal representatives, successors and permitted assigns of the Company and Employee.

11. Notice. Any notice which either party hereto may be required or permitted to give to the other shall be in writing, and may be delivered personally or by mail, postage prepaid, addressed as follows: to the Chief Financial Officer of the Company, or to the Company (attention of the Chief Financial Officer), at Hughes Supply, Inc., 20 North Orange Avenue, Suite 200, Orlando, Florida 32801, or at any other address as the Company, by notice to the Employee, may designate in writing from time to time; to the Employee, at the Employee’s address as shown on the records of the Company, or at any other address as the Employee, by notice to the Company, may designate in writing from time to time.

12. Severability. In the event that any one or more of the provisions or portion thereof contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, the same shall not invalidate or otherwise affect any other provisions of this Agreement, and this Agreement shall be construed as if the invalid, illegal or unenforceable provision or portion thereof had never been contained herein.

13. Entire Agreement; Modifications to Agreement. Subject to the terms and conditions of the Plan, which are incorporated herein by reference, this Agreement expresses the entire understanding and agreement of the parties hereto with respect to such terms, restrictions and limitations. The Committee may amend or terminate any (or all) of the provisions of this Agreement at any time prior to the date on which any of the shares of Performance-Based Restricted Stock shall have vested with the Employee pursuant to the terms hereof.

14. Headings. Section headings used herein are for convenience of reference only and shall not be considered in construing this Agreement.

15. Specific Performance. In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the party or parties who are thereby aggrieved shall have the right to specific performance and injunction in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative.

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16. Resolution of Disputes. Any determination or interpretation by the Committee shall be final, binding and conclusive on all persons affected thereby.

IN WITNESS WHEREOF, the Company has executed this Agreement as of the Date of Grant set forth above.

HUGHES SUPPLY, INC.

By:

EMPLOYEE:

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EX-31.1

Exhibit 31.1

RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, Thomas I. Morgan, the president and chief executive officer of Hughes Supply, Inc., certify that:

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

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

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

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 8, 2004	By:	/s/ THOMAS I. MORGAN
		Thomas I. Morgan
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, David Bearman, the executive vice president and chief financial officer of Hughes Supply, Inc., certify that:

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

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

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

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 8, 2004	By:	/s/ DAVID BEARMAN
		David Bearman
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

EX-32.1

Exhibit 32.1

Form of Certification Pursuant to Section 1350 of Chapter 63

of Title 18 of the United States Code

I, Thomas I. Morgan, the president and chief executive officer of Hughes Supply, Inc., certify that, to the best of my knowledge, (i) the Form 10-Q for the period ended July 30, 2004 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Hughes Supply, Inc.

Date: September 8, 2004	By:	/s/ THOMAS I. MORGAN
		Thomas I. Morgan
		President and Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to Hughes Supply, Inc. and will be retained by Hughes Supply, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

Form of Certification Pursuant to Section 1350 of Chapter 63

of Title 18 of the United States Code

I, David Bearman, the executive vice president and chief financial officer of Hughes Supply, Inc., certify that, to the best of my knowledge, (i) the Form 10-Q for the period ended July 30, 2004 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Hughes Supply, Inc.

Date: September 8, 2004	By:	/s/ DAVID BEARMAN
		David Bearman
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

A signed original of this written statement required by Section 906 has been provided to Hughes Supply, Inc. and will be retained by Hughes Supply, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.