<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 8, 1996
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WILMAR INDUSTRIES, INC.
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(Exact name of registrant specified in its charter)
New Jersey 0-27424 22-2232386
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(State or other (Commission (IRS Employee
jurisdiction of File Number) Identification No.)
incorporation)
303 Harper Drive
Moorestown, New Jersey 08057
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(Address of principal executive offices) (Zip Code)
Registrant's telephone, including area code: (609) 439-1222
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(Former name and former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
------------------------------------
On July 8, 1996, Wilmar Industries, Inc. (the "Company") acquired all of
the outstanding capital stock of HMA Enterprises, Inc., a Texas corporation,
d/b/a Gulf Coast Supply and The Supply Depot ("HMA") from the shareholders of
HMA, pursuant to a Stock Purchase Agreement dated as of June 28, 1996 among the
Company, Jerry Mendelson, Brian Mendelson, Ellis Atkinson, the HMA Enterprises,
Inc. Employee Stock Ownership Trust and the Mendelson Charitable Remainder Trust
(the "Stock Purchase Agreement").
HMA, based in Houston, Texas, is a leading supplier of repair and
maintenance products to the apartment housing market in Texas through
distribution centers in Dallas, Houston and San Antonio. The Company intends to
continue such uses for the assets of HMA. To facilitate an orderly transition
to Wilmar's business model, Wilmar intends for HMA to operate independently
during the first year following the acquisition, at which time Wilmar intends to
fully implement its business model at HMA.
Wilmar acquired HMA for a base purchase price of approximately $6.0 million
in cash (including approximately $1.5 million to repay HMA's outstanding bank
debt) and approximately $1.6 million in Wilmar common stock, as well as
additional amounts up to $750,000 if HMA achieves specified revenue and EBIT
targets between July 1, 1996 and June 30, 1997. The purchase price was
determined by direct negotiations between the Company and the shareholders of
HMA, based in part on the audited financial statements of HMA for the year ended
February 29, 1996. The purchase price is subject to post-closing reduction if
HMA's shareholder's equity as of June 30, 1996 is less than that contained in
the audited financial statements for the year ended February 29, 1996. The
Company has placed $500,000 of the purchase price in escrow to secure any
indemnification claims by the Company and any reduction in shareholder's equity
between February 29, 1996 and June 30, 1996.
To finance the acquisition, the Company used $3.5 million of available cash
and borrowed $2.5 million under its line of credit with New Jersey National
Bank.
Item 5. Other Events
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On July 9, 1996, the Company filed a registration statement with the
Securities and Exchange Commission for a public offering of 3,770,000 shares of
Wilmar common stock. Of the shares being offered, 2,000,000 shares will be sold
by the Company and 1,770,000 shares will be sold by selling shareholders. The
net proceeds to the Company from the public offering will be used primarily for
general working capital purposes, including possible acquisitions of companies
engaged in the supply of repair and maintenance products. A portion of the net
proceeds will be applied towards the repayment of the bank debt used to finance
the cash portion of the acquisition of HMA.
Item 7. Financial Statements and Exhibits
---------------------------------
(a) Consolidated Financial Statements of HMA Enterprises, Inc. and its
Subsidiaries.
(1) Independent Auditors Report.*
(2) Consolidated Balance Sheets of HMA and its Subsidiaries as of
February 29, 1996 and February 28, 1995.*
(3) Consolidated Statements of Income of HMA and its Subsidiaries
for the year ended February 29, 1996 and the year ended
February 28, 1995.*
<PAGE>
(4) Consolidated Statements of Stockholders' Equity of HMA and its
Subsidiaries for the year ended February 29, 1996 and the year
ended February 28, 1995.*
(5) Consolidated Statements of Cash Flows of HMA and its
Subsidiaries for the year ended February 29, 1996 and the year
ended February 28, 1995.*
(6) Notes to Consolidated Financial Statements.*
(b) Pro Forma Financial Information (Unaudited).
(1) Unaudited Pro Forma Balance Sheet as of March 29, 1996.*
(2) Unaudited Pro Forma Statements of Income for the year ended
December 29, 1995.*
(3) Unaudited Pro Forma Statements of Income for the three months
ended March 29, 1996.*
(c) Exhibits.
2.1 Stock Purchase Agreement dated as of June 28, 1996 among the
Company, Jerry Mendelson, Brian Mendelson, Ellis Atkinson, the
HMA Enterprises, Inc. Employee Stock Ownership Trust and the
Mendelson Charitable Remainder Trust.
4.1 Registration Rights Agreement dated as of June 30, 1996 among
the Company, Jerry Mendelson, Brian Mendelson, Ellis Atkinson
and the Mendelson Charitable Remainder Trust.
99.1 Press Release.
* To be filed on Form 8 as soon as practicable, but not later than 60 days
after the date this Form 8-K must be filed.
<PAGE>
SIGNATURE
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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 hereunto duly authorized.
WILMAR INDUSTRIES, INC.
(Registrant)
Dated: July 9, 1996 By: /s/ William S. Green
--------------------------------
William S. Green
Chairman, President and
Chief Executive Officer
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Exhibit Index
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<TABLE>
<CAPTION>
Exhibit Description Page
- ------- ----------- ----
<S> <C> <C>
Exhibit 2.1 Stock Purchase Agreement dated as of June 28, 1996
among the Company, Jerry Mendelson, Brian
Mendelson, Ellis Atkinson, the HMA Enterprises, Inc.
Employee Stock Ownership Trust and the Mendelson
Charitable Remainder Trust.
Exhibit 4.1 Registration Rights Agreement dated as of June 30,
1996 among the Company, Jerry Mendelson, Brian
Mendelson, Ellis Atkinson and the Mendelson
Charitable Remainder Trust.
Exhibit 99.1 Press Release.
</TABLE>
<PAGE>
EXHIBIT 4.1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is dated as of June
28, 1996, by and among the persons listed on the signature page hereto as
shareholders (each a "Shareholder" and together, the "Shareholders") and Wilmar
Industries, Inc. a New Jersey Corporation (the "Company").
The Company is acquiring all of the Shareholders' shares of the common
stock, par value $.01 per share of HMA Enterprises, Inc. a Texas Corporation,
d/b/a Gulf Coast Supply and the Supply Depot, pursuant to the terms of that
certain Stock Purchase Agreement dated as of June 28, 1996 among the Company,
the HMA Enterprises, Inc. Stock Ownership Trust (the "ESOP") and the
Shareholders (the "Purchase Agreement"). It is a condition to the obligations
of the Shareholders and the ESOP under Section 3.11 of the Purchase Agreement
that the Shareholders, who are receiving Wilmar Stock (as defined in the
Purchase Agreement) as partial consideration for their obligations under the
Purchase Agreement, enter into this Agreement.
In consideration of the premises, covenants and agreements herein
contained, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. Definitions.
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(a) "Acquisition Shares" means Common Stock issued by the Company
subsequent to the date hereof as consideration for the acquisition of (i)
securities of any person or entity other than securities issued by the Company,
(ii) any indirect or direct equity or ownership interest in any business or
entity or (iii) all or substantially all of the assets of any person or entity.
(b) "Common Stock" means the Company's Common Stock, no par value, and any
stock or other securities into which or for which such stock may hereafter be
changed, converted or exchanged, and any other securities issued to holders of
such stock (or such shares into which or for which such shares are so changed,
converted or exchanged) upon any reclassification, recapitalization, share
combination, share subdivision, share dividend, merger, consolidation or similar
transactions or events.
(c) "Form S-3" means the Form S-3 form for registration of securities under
the Securities Act, or any successor or substitute form.
(d) "Registrable Securities" means the Common Stock delivered to the
Shareholders pursuant to the Purchase Agreement
<PAGE>
and registered in the names of the Shareholders from time to time. As to any
particular Registrable Securities, such securities will cease to be Registrable
Securities when (i) they have been effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering such
Registrable Securities or (ii) they are transferable pursuant to Rule 144.
(e) "Registration Expenses" means all expenses incident to the Company's
performance of or compliance with this Agreement, including without limitation
all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and delivery expenses,
expenses and fees for listing the securities to be registered on exchanges or
electronic quotation systems on which similar securities issued by the Company
are then listed, and fees and disbursements of counsel for the Company and of
all independent certified public accountants, underwriters (other than
Underwriting Commissions) and other persons retained by the Company.
(f) "Rule 144" means Rule 144 promulgated under the Securities Act, as
amended from time to time, or any successor rule to similar effect.
(g) "Securities Act" means the Securities Act of 1933, as amended and the
Rules promulgated by the Commission thereunder.
(h) "Selling Shareholders" means registered holders of Registrable
Securities who request inclusion of all or a portion of their shares of
Registrable Securities in a Piggyback Registration pursuant to Section 2(a).
(i) "Summit" means, both individually and collectively, Summit Ventures
III, L.P., Summit Investors II, L.P. and Summit Subordinated Debt Fund, L.P.
(j) "Summit Agreement" means that certain Registration Rights Agreement
dated as of March 9, 1995, as amended, among the Company, Summit and William S.
Green.
(k) "Summit Securities" means Registrable Securities, as that term is
defined in the Summit Agreement.
(l) "Underwriting Commissions" means all underwriting discounts or
commissions relating to the sale of securities of the Company, but excludes any
expenses reimbursed to underwriters.
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2. Piggyback Registrations.
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(a) Right to Piggyback.
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(i) Whenever (A) the Company proposes to register any of its
securities under the Securities Act, (B) such registration does not relate
solely to Common Stock issuable pursuant to employee benefit plans and (C) the
registration form to be used may be used for the registration of Registrable
Securities (a "Piggyback Registration"), the Company will give prompt written
notice to all holders of Registrable Securities and will include in such
Piggyback Registration, subject to the allocation provisions below, all
Registrable Securities with respect to which the Company has received written
requests for inclusion within five business days after the Company's mailing of
such notice. The Company shall not select a form of registration statement
which imposes, for its use, limitations on the maximum value or number of
securities to be registered if these limitations would preclude registration of
the Registrable Securities that the Company has been requested to include in
such registration.
(ii) The holders of Registrable Securities shall not have the right
to request inclusion in the first Piggyback Registration initiated either by (A)
the holders of Summit Securities or (B) the Company.
(b) Piggyback Expenses. In all Piggyback Registrations, the Company will
------------------
pay the Registration Expenses related to the Registrable Securities of the
Selling Shareholders, but the Selling Shareholders will pay the Underwriting
Commissions related to their Registrable Securities.
(c) Priority on Primary Registrations. If a Piggyback Registration is an
---------------------------------
underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number that
can be sold in such offering at a price reasonably related to fair value without
adversely affecting the price per share obtainable in such offering, the Company
will allocate the securities to be included as follows: (i) the securities the
Company proposes to sell on its own behalf; (ii) Summit Securities requested to
be included in such registration pursuant to the Summit Agreement and (iii)
Registrable Securities requested to be included in such registration by the
Selling Shareholders on a pro rata basis with the holders of Acquisition Shares
who have been granted piggyback registration rights. Such securities to be
included pursuant to
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<PAGE>
clauses (ii) and (iii) above shall be allocated by the Company on the basis of
the respective Acquisition Shares or Registrable Securities, as the case may be,
requested for inclusion by such holders.
(d) Priority on Secondary Registrations. If a Piggyback Registration is
-----------------------------------
initiated as an underwritten secondary registration on behalf of holders of the
Company's securities, and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such registration exceeds the number that can be sold in such offering, at a
price reasonably related to fair value, without adversely affecting the price
per share obtainable in such offering, the Company will allocate the securities
to be included as follows: (i) Summit Securities requested to be included in
such registration pursuant to the Summit Agreement and (ii) Registrable
Securities requested to be included in such registration by the Selling
Shareholders, pro rata with the holders of Acquisition Shares who have been
granted piggyback registration rights. Such securities to be included pursuant
to clauses (i) and (ii) above shall be allocated by the Company on the basis of
the respective Acquisition Shares or Registrable Securities, as the case may be,
requested for inclusion by such holders.
(e) Selection of Underwriters. If any Piggyback Registration is
-------------------------
underwritten, the selection of investment banker(s) and manager(s) and all other
decisions regarding the underwriting arrangements for the offering will be made
by the Company.
3. Holdback Agreements.
-------------------
Neither the Company nor any Shareholder shall effect any sale or
distribution of equity securities of the Company or any securities convertible
into or exchangeable or exercisable for such securities, including any sale
pursuant to Rule 144 and excluding a sale or distribution pursuant to an
employee benefit plan, during the seven days prior to and the later of (i) 90
days after any underwritten Piggyback Registration has become effective or (ii)
such other period customary in underwritten public offerings as the managing
underwriter(s) may determine is appropriate (except as part of such underwritten
registration).
4. Registration Procedures.
-----------------------
Whenever the holders of Registrable Securities have requested that any
Registrable Securities be registered pursuant
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<PAGE>
to Section 2 of this Agreement, the Company will, as expeditiously as possible:
(a) prepare and file with the Securities and Exchange Commission a
registration statement on such form as the Company determines and for which the
Company then qualifies, with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective (provided
that before filing a registration statement or prospectus or any amendments or
supplements or term sheet thereto, the Company will furnish each Selling
Shareholder with copies of all such documents proposed to be filed) as promptly
as practical;
(b) prepare and file with the Securities and Exchange Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective until the earlier of (i) such time as all of the Registrable
Securities included in such Piggyback Registration have been disposed of in
accordance with the intended methods of disposition set forth in such
registration statement or (ii) 120 days after such registration statement
becomes effective;
(c) furnish to each Selling Shareholder such number of copies of such
registration statement, each amendment and supplement thereto and the prospectus
included in such registration statement (including each preliminary prospectus
and any term sheet associated therewith), and such other documents as such
Selling Shareholder may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such Selling Shareholder;
(d) use its best efforts to register or qualify such Registrable Securities
under such other securities or blue sky laws of such jurisdictions as the
managing underwriter(s) may reasonably request;
(e) notify each Selling Shareholder at any time when a prospectus relating
thereto is required to be delivered under the Securities Act within the period
that the Company is required to keep the registration statement effective of the
happening of any event as a result of which the prospectus included in such
registration statement, together with any associated term sheet, contains an
untrue statement of a material fact or omits any fact necessary to make the
statement therein not misleading, and, at the request of any such seller, the
Company will prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
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<PAGE>
prospectus will not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statement therein not misleading;
(f) cause all such Registrable Securities to be listed or included on
securities exchanges on which similar securities issued by the Company are then
listed or included;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into such customary agreements (including an underwriting
agreement in customary form) and take such other customary actions as may be
reasonably necessary to expedite or facilitate the disposition of such
Registrable Securities;
(i) obtain a "comfort" letter addressed to the Company from its independent
public accountants in customary form and covering such matters of the type
customarily covered by "comfort" letters; and
(j) make available for inspection during the Company's normal business
hours by any Selling Shareholder, any underwriter participating in any
disposition and any attorney, accountant or other agent retained by any such
seller or any underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such Selling Shareholder or any such underwriter, attorney, accountant or agent
in connection with such registration statement.
5. Indemnification.
---------------
(a) The Company hereby indemnifies, to the extent permitted by law, each
Shareholder, its officers and directors (if applicable), and each person who
controls such Shareholder (if applicable and within the meaning of the
Securities Act), against all losses, claims, damages, liabilities and expenses
arising out of or resulting from any untrue or alleged untrue statement of
material fact contained in any registration statement, prospectus or preliminary
prospectus or associated term sheet or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading except insofar as the same are caused by or
contained in any information furnished in writing to the Company by such
Shareholder expressly for use therein or by any
-6-
<PAGE>
such Shareholder's failure to deliver a copy of the registration statement or
prospectus or any amendments or supplements thereto after the Company has
furnished such Shareholder with a sufficient number of copies of the same. In
connection with an underwritten offering, the Company will indemnify the
underwriters, their officers and directors, and each person who controls such
underwriters (within the meaning of the Securities Act) to the same extent as
provided above with respect to the indemnification of the Shareholders.
(b) In connection with any registration statement in which a Selling
Shareholder is participating, each such holder will furnish to the Company in
writing such information as is reasonably requested by the Company for use in
any such registration statement or prospectus and will indemnify, to the extent
permitted by law, the Company, its directors and officers and each person who
controls the Company (within the meaning of the Securities Act) against any
losses, claims, damages, liabilities and expenses resulting from any untrue or
alleged untrue statement of material fact or any omission or alleged omission of
a material fact required to be stated in the registration statement or
prospectus or any amendment thereof or supplement thereto or necessary to make
the statements therein not misleading, but only to the extent that such untrue
statement or omission is contained in information so furnished in writing by
such holder specifically for use in preparing the registration statement.
Notwithstanding the foregoing, the liability of a Selling Shareholder under this
Section 5(b) shall be limited to an amount equal to the net proceeds actually
received by the Selling Shareholder from the sale of Registrable Securities
covered by the registration statement.
(c) Any person entitled to indemnification hereunder will (i) give prompt
notice to the indemnifying party of any claim with respect to which it seeks
indemnification and (ii) unless in such indemnified party's reasonable judgment
a conflict of interest between such indemnified and indemnifying parties may
exist with respect to such claim, permit such indemnifying party to assume the
defense of such claim with counsel reasonably satisfactory to the indemnified
party. The failure of the indemnified party to notify the indemnifying party
shall not relieve the indemnifying party from any liability which it may have to
an indemnified party on account of the indemnity agreement contained in
paragraph (a) or (b) of this Section 5, unless the indemnifying party was
materially prejudiced by such failure, and in no event shall relieve the
indemnifying party from any other liability which it may have to such
indemnified party. If such defense is assumed, the indemnifying party will not
be subject to
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<PAGE>
any liability for any settlement made without its consent (but such consent will
not be unreasonably withheld). An indemnifying party who is not entitled, or
elects not, to assume the defense of a claim will not be obligated to pay the
fees and expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
6. Participation in Underwritten Registrations.
-------------------------------------------
No Selling Shareholder may participate in any underwritten registration
hereunder unless such holder (a) agrees to sell such holder's securities on the
basis provided in any underwriting arrangements approved by the persons entitled
hereunder to approve such arrangements under Section 2(e), and (b) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.
7. Limitations on Subsequent Registration Rights.
---------------------------------------------
From and after the date of this Agreement, the Company may enter into an
agreement with any holder or prospective holder of any securities of the Company
that would allow such holder or prospective holder to include such securities in
any registration filed under Section 2 hereof or that would add any such holder
or prospective holder as a party to this Agreement, including, without
limitation, the holders of Acquisition Shares, on either a pro rata or
subordinated basis with the Shareholders.
8. Miscellaneous.
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(a) Termination of Other Agreements. This Agreement sets forth the entire
-------------------------------
understanding of the parties hereto with respect to rights to the registration
of capital stock of the Company and supersedes all prior agreements or
understandings among the parties regarding such matters.
(b) Notices. Any notices required hereunder shall be deemed to be given
-------
upon the earlier of the date when received at, or the seventh day after the date
when sent by certified or registered mail to, the address of the Company's
corporate headquarters in the case of any notice to the Company, and until
changed by notice to the Company, the respective addresses of the Shareholders
on file with the Company in the case of any notice to the Shareholders.
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<PAGE>
(c) Amendments and Waivers; Survival. The provisions of this Agreement may
--------------------------------
be amended or terminated and the Company may take any action herein prohibited,
or omit to perform any act herein required to be performed by it, if approved in
writing by the Shareholders that own beneficially a majority of the Registrable
Securities and or by any agreement permitted by Section 7. The provisions of
Section 5 shall survive the termination of this Agreement.
(d) Binding Effect. This Agreement will bind and inure to the benefit of
--------------
the respective successors (including any successor resulting from a merger or
similar reorganization), assigns, heirs, and personal representatives of the
parties hereto. If applicable, and without limiting the generality of the
foregoing, if a Shareholder liquidates or reorganizes such that its assets are
transferred to its own stockholders or partners or to another entity, such
stockholders, partners or entity shall succeed to all of the rights of the
Shareholder hereunder.
(e) Governing Law. This Agreement and (unless otherwise provided) all
-------------
amendments hereof and waivers and consents hereunder shall be governed by the
internal law of the State of New Jersey, without regard to the conflicts of law
principles thereof.
(f) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be considered an original, but all of which
together shall constitute the same instrument. It shall not be necessary in
making proof of this Agreement to produce or account for any of the other
counterparts.
(g) Interpretation. Unless the context of this Agreement clearly requires
--------------
otherwise, (i) references to the plural include the singular, the singular the
plural, the part the whole, (ii) references to one gender include all genders,
(iii) "or" has the inclusive meaning frequently identified with the phrase
"and/or" and (d) "including" has the inclusive meaning frequently identified
with the phrase "but not limited to."
(h) Captions; Section References. The captions in this Agreement are for
----------------------------
convenience of reference only and shall not be given any effect in the
interpretation of this Agreement. Unless otherwise specified, Section
references in this Agreement refer to the applicable Section or Subsection of
this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
WILMAR INDUSTRIES, INC.
By:/s/ William S. Green
-------------------------------------
Name: William S. Green
Title: President
SHAREHOLDERS
/s/ Jerry Mendelson
- ---------------------------------------
Jerry Mendelson
/s/ Brian Mendelson
- ---------------------------------------
Brian Mendelson
/s/ Ellis Atkinson
- ---------------------------------------
Ellis Atkinson
MENDELSON CHARITABLE REMAINDER UNITRUST
By:/s/ Jerry R. Mendelson
------------------------------------
Jerry R. Mendelson
Trustee
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<PAGE>
Exhibit 2.1
STOCK PURCHASE AGREEMENT
This Agreement is dated as of June 28, 1996, by and among the persons
listed on the signature page hereto as shareholders (each, a "Shareholder" and
together, the "Shareholders") and Wilmar Industries, Inc., a New Jersey
corporation ("Buyer").
The Shareholders own all of the outstanding equity securities of HMA
Enterprises, Inc., a Texas corporation, d/b/a Gulf Coast Supply and the Supply
Depot ("HMA"), consisting of 115,170 shares of common stock, par value $.01 per
share of HMA Enterprises, Inc. (the "Shares"), as more fully set forth on
Exhibit 1 hereto. The parties desire to provide for the Shareholders' sale of
the Shares to the Buyer and the Buyer's purchase of the Shares from the
Shareholders on the terms and conditions of this Agreement. The parties desire
to give economic effect to the transactions contemplated in this Agreement as of
the close of business on June 30, 1996.
In consideration of the premises and of the representations, warranties,
covenants and agreements herein contained, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. The Acquisition.
---------------
1.1 Purchase and Sale. Subject to the terms and conditions of this
-----------------
Agreement, at the Closing to be held as provided in Section 2.1 hereof, each
Shareholder shall sell the Shares owned by such Shareholder to the Buyer, and
the Buyer shall purchase from such Shareholder, free and clear of any security
interest, mortgage, lien, charge, adverse claim or restriction of any kind,
including without limitation, any restriction on the use, voting, transfer,
receipt of income or other exercise of any attributes of ownership, other than a
restriction on transfer attributable solely to Federal or state securities laws
(each, an "Encumbrance and collectively, "Encumbrances").
1.2 The Purchase Price.
------------------
(a) Base Purchase Price. The aggregate purchase price for the Shares
-------------------
(the "Base Purchase Price") shall be $7,610,000, subject to adjustment as
provided in Sections 1.2(b) and 1.3. At the Closing, the Buyer shall pay and
deliver the Base Purchase Price as follows:
<PAGE>
(i) to CoreStates Bank, N.A. as escrow agent (the "Escrow
Agent") $500,000 (the "Escrow Amount") pursuant to an Escrow Agreement with
terms and conditions substantially similar to the form attached hereto as
Exhibit 1.2(a)(i) (the "Escrow Agreement");
(ii) to the Shareholders, $1,672,000 by delivering to each
Shareholder, a number of Shares of the Buyer's Common Stock no par value
(the "Wilmar Stock") calculated on a per share basis equal to $23.79 per
share, which constitutes the average closing price of Wilmar Stock
published in The Wall Street Journal for each of the ten trading days prior
to the business day prior to the date hereof, in such amounts as indicated
in Exhibit 1.2(a)(ii); and
(iii) to the Shareholders, the balance in immediately available
funds, in such amounts and to such Shareholder, as indicated in Exhibit
1.2(a)(iii);
(b) Adjustment to Base Purchase Price at Closing. The amount
--------------------------------------------
payable to the Shareholders at the Closing pursuant to Section 1.2(a)(iii) shall
be reduced by the amount set forth in a payoff letter issued by Bank One, Texas,
N.A. ("Bank One"), to be delivered to the Buyer at the Closing, representing the
total amount due by HMA to Bank One.
(c) Additional Purchase Price. If for the twelve month period (the
-------------------------
"Measurement Period) beginning the first day of the month following the Closing
Date (A) the revenues of HMA from the operations of the Houston and Arlington
Warehouses (the "Annual Revenues"), equal or exceed $26,000,000 and (B) the
earnings before interest expenses and income taxes ("EBIT") equals or exceeds
4.6% of Annual Revenues, the Buyer will pay the Shareholders additional
consideration (the "Additional Purchase Price") as follows:
(i) If EBIT equals or exceeds 5.6% of Annual Revenues, the
Additional Purchase Price shall equal $750,000;
(ii) If EBIT equals or exceeds 4.6% of Annual Revenues, and is
less than 5.6% of Annual Revenues, the Additional Purchase Price shall
equal $500,000.
The Buyer will pay the Additional Purchase Price by delivering the Additional
Purchase Price to the Shareholders in immediately available funds, in such
amounts and to such Shareholder, as indicated in Exhibit 1.2(a)(i). The Annual
Revenues and the EBIT shall be calculated within ninety days after the end of
the Measurement Period in a manner consistent with the calculation of HMA's
revenues on its income statement for the period ended
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<PAGE>
February 29, 1996 based upon the financial information for HMA included in the
Buyer's financial statements for such period.
(d) Acceleration of Additional Purchase Price. If prior to the end
-----------------------------------------
of the Measurement Period, (i) the Buyer merges with HMA or otherwise causes HMA
to cease to operate as an independent entity, (ii) the Buyer causes Jerry
Mendelson to cease to be an officer, a director and employee of HMA, then the
Additional Purchase Price shall immediately become due and payable in accordance
with Section 1.2(c)(1), (iii) Jerry Mendelson is given additional duties which
do not allow him to devote substantially all (95%) of his business time to the
management of HMA, (iv) the Buyer over the objection of Jerry Mendelson causes a
material change in the operations of HMA or (v) the Buyer fails to provide
financing or access to financing in an amount adequate to meet the needs of HMA
during the Measurement Period. Upon payment of the Additional Purchase Price in
accordance with this Section 1.2(d), the Buyer's obligations in Section 1.2(c)
shall be fully satisfied and discharged.
1.3 Adjustment to Base Purchase Price.
---------------------------------
(a) Within ten business days after the Closing Date, Buyer and the
Shareholders shall jointly conduct a physical count of the inventory, equipment
and other fixed assets. Within thirty days after the Closing Date, the Buyer
shall prepare (with such assistance from the Shareholders as the Buyer
reasonably requires) and deliver to Shareholders a balance sheet of HMA as of
June 30, 1996 (the "Closing Balance Sheet"). The Shareholders shall have ten
business days to review the Closing Balance Sheet. The Closing Balance Sheet
shall be prepared in accordance with generally accepted accounting principles
("GAAP"). The operating net worth (assets less liabilities) set forth on the
Closing Balance Sheet is referred to herein as the Closing Date Net Worth. Any
dispute as to the amount and calculation of the Closing Date Net Worth shall be
resolved pursuant to the procedures set forth in paragraph (b) of this Section
1.3.
(b) If at the end of twenty business days after the delivery of the
Closing Balance Sheet to the Shareholders, the Shareholders and the Buyer shall
have failed to agree upon the Closing Date Net Worth, then any such matters as
to which agreement has not been reached (the "Disputed Matters") shall be
submitted to arbitration, unless the parties agree in writing to extend such
twenty-day period in an attempt to negotiate a settlement of such Disputed
Matters. The arbitrator (the "Arbitrator") shall be experienced with
distribution businesses and a partner in any one of the "big six" accounting
firms, mutually agreed to by the Shareholders and the Buyer. If the
Shareholders and the Buyer fail to agree upon the selection of the Arbitrator or
any such Arbitrator selected by them shall not
-3-
<PAGE>
have agreed to perform the services called for hereunder, the Arbitrator shall
thereupon be selected in accordance with the rules of the American Arbitration
Association, with preference being given to any partner of a national accounting
firm who may be willing to perform such services other than any such firm which
is then employed by the Shareholders, HMA or the Buyer or any affiliate thereof.
The Arbitrator shall consider only the Disputed Matters, and the arbitration
shall be conducted in accordance with the rules of the American Arbitration
Association then in effect. The arbitration proceeding shall be conducted in
Houston, Texas. The Arbitrator shall apply GAAP in making his determination and
shall announce his determination in writing, explaining his conclusions. The
Arbitrator shall act promptly to resolve all Disputed Matters and its decision
with respect to all Disputed Matters shall be final and binding upon the parties
hereto and shall not be appealable to any court. The costs and expenses of the
Arbitrator shall be shared equally by the Shareholders and the Buyer.
(c) If the Closing Date Net Worth as finally determined is less than
the shareholder's equity on the balance sheet contained in the Financial
Statements (as defined in Section 3.12 hereof), the Shareholders shall, within
ten days after such final determination, pay the difference to the Buyer in
cash.
2. The Closing.
-----------
2.1 Place and Time. The closing of the sale and purchase of the Shares
--------------
(the "Closing") shall take place at the offices of HMA, 3333 Holly Hall, Houston
Texas 77021 10:00 a.m. (Central Daylight Time) on July 8, 1996, or as soon as
practicable thereafter (the "Closing Date"), but no later than the close of
business on August 30, 1996, or at such other place, date and time as the
parties may agree in writing, subject to the following:
(a) If any of the conditions set forth in Section 3 hereof has not
been satisfied on the date on which the Closing would otherwise occur, the Buyer
may from time to time, by notice to the Shareholders, defer the Closing to 10:00
a.m. on a business day specified in that notice, but not later than August 30,
1996.
(b) If any of the conditions set forth in Section 4 hereof has not
been satisfied on the date on which the Closing would otherwise occur, the
Shareholders may from time to time, by notice to the Buyer, defer the closing to
10:00 a.m. on a business day specified in that notice, but not later than August
30, 1996.
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<PAGE>
(c) If both of the preceding paragraphs (a) and (b) are applicable,
the Closing shall take place on the later of the dates determined in accordance
with those paragraphs.
(d) The parties agree to give economic effect to the transactions
contemplated in this Agreement as of the close of business on June 30, 1996.
2.2 Deliveries by the Shareholders. At the Closing, the Shareholders
------------------------------
shall deliver the following to the Buyer:
(a) certificates representing the Shares, duly endorsed for transfer
to the Buyer or with separate stock transfer powers attached thereto and signed
in blank;
(b) the documents contemplated by Section 3 hereof; and
(c) all other documents, instruments and writings required by this
Agreement to be delivered by the Shareholders at the Closing and any other
documents or records relating to HMA's business reasonably requested by the
Buyer in connection with this Agreement.
2.3 Deliveries by the Buyer. At the Closing, the Buyer shall deliver the
-----------------------
following to the Shareholders:
(a) wire transfers in immediately available funds to accounts
designated by the Shareholders and the Escrow Agent pursuant to Section
1.2(a)(i) and Section 1.2(a)(iii);
(b) certificates representing the Wilmar Stock to be delivered
pursuant to Section 1.2(a)(ii);
(c) the documents contemplated by Section 4 hereof; and
(d) all other documents, instruments and writings required by this
Agreement to be delivered by the Buyer at the Closing.
3. Conditions to the Buyer's Obligations. The obligations of the Buyer to
-------------------------------------
effect the Closing shall be subject to the satisfaction at or prior to the
Closing of the following conditions, any one or more of which may be waived by
the Buyer:
3.1 No Injunction. There shall not be in effect any injunction, order or
-------------
decree of a court of competent jurisdiction that prevents the consummation of
the transactions contemplated by this Agreement, that restricts the Buyer's
acquisition of the Shares or that will require any divestiture as a result of
the
-5-
<PAGE>
Buyer's acquisition of the Shares or that will require all or any part of the
business of HMA to be held separate and no litigation or proceedings seeking the
issuance of such an injunction, order or decree or seeking to impose substantial
penalties on the Buyer or the Shareholders if this Agreement is consummated
shall be pending.
3.2 Representations, Warranties and Agreements. (a) The representations
------------------------------------------
and warranties of the Shareholders set forth in this Agreement shall be true and
complete in all material respects as of the Closing Date with the same effect as
though made at such time, (b) the Shareholders shall have performed and complied
in all material respects with the agreements contained in this Agreement
required to be performed and complied with by them prior to or at the Closing
and (c) the Buyer shall have received a certificate dated the Closing Date to
the foregoing effects signed by the Shareholders.
3.3 Legal Opinion. The Buyer shall have received an opinion from counsel
-------------
to the Shareholders dated the Closing Date and in substantially the form of
Exhibit 3.3 hereto.
3.4 Regulatory Approvals. All licenses, authorizations, consents,
--------------------
orders and regulatory approvals of any domestic or foreign national, state or
municipal or other local government or multi-national body (including without
limitation, the European Union), any governmental or regulatory authority,
agency, commission, subdivision or other entity (each, a "Governmental Body" and
collectively, "Governmental Bodies") necessary for the consummation of the
Buyer's acquisition of the Shares shall have been obtained and shall be in full
force and effect.
3.5 Consents of Third Parties. All consents and approvals of third
-------------------------
parties identified in Schedule 5.7 to this Agreement shall have been obtained on
terms and conditions reasonably satisfactory to the Buyer.
3.6 Resignations of Directors. All directors of HMA shall have submitted
-------------------------
their resignations or shall have been removed effective as of the Closing Date.
3.7 Sales People. There shall not be any material change in the
------------
salespeople employed by HMA between the date hereof and the Closing Date.
3.8 Non-Solicitation Agreements. The Buyer shall have entered into non-
---------------------------
solicitation agreements, with terms and conditions satisfactory to the Buyer,
with all of the salespeople employed by HMA as of the Closing Date.
3.9 Employment Agreement. The Buyer shall have entered into an employment
--------------------
agreements with Jerry Mendelson,
-6-
<PAGE>
Brian Mendelson and Ellis Atkinson, in substantially the form attached hereto as
Exhibit 3.9.
3.10 Escrow Agreement. The Shareholders and the Escrow Agent shall have
----------------
entered into the Escrow Agreement.
3.11 Registration Rights Agreement. The Shareholders receiving Wilmar
-----------------------------
Stock and the Buyer shall have entered into a Registration Rights Agreement in
substantially the form attached hereto as Exhibit 3.11.
3.12 Financial Statements. The Shareholders shall have delivered to the
--------------------
Buyer consolidated financial statements for HMA, audited by an accounting firm
acceptable to the Buyer, for the year ended February 29, 1996 (the "Financial
Statements").
3.13 Bank One Payoff Letter. HMA shall have delivered to the Buyer a
----------------------
payoff statement setting forth the aggregate amount owed by HMA to Bank One and
a UCC-3 termination statement evidencing the release by Bank One of its lien
against certain HMA assets.
3.14 Due Diligence. The Buyer shall be fully satisfied with the results of
-------------
its review of, and its other due diligence investigations with respect to, the
business, operations, affairs, prospects, properties, assets, existing and
potential, obligations, profits or condition (financial or otherwise) of Gulf
Coast taken as a whole.
3.15 Accrued Taxes. The Shareholders and the Buyer shall have agreed upon
-------------
the amount of the reserve for accrued Taxes pursuant to Section 1.2(b)(ii).
4. Conditions to the Shareholders' Obligations. The obligations of the
-------------------------------------------
Shareholders to effect the Closing shall be subject to the satisfaction at or
prior to the Closing of the following conditions, any one or more of which may
be waived by the Shareholders:
4.1 No Injunction. There shall not be in effect any injunction, order or
-------------
decree of a court of competent jurisdiction that prevents the consummation of
the transactions contemplated by this Agreement or that prohibits the sale of
the Shares to the Buyer and no litigation or proceedings seeking the issuance of
such an injunction, order or decree or seeking to impose substantial penalties
on the Buyer or the Shareholders if this Agreement is consummated shall be
pending.
4.2 Representations, Warranties and Agreements. (a) The representations
------------------------------------------
and warranties of the Buyer set forth in this Agreement shall be true and
complete in all material respects as
-7-
<PAGE>
of the Closing Date with the same effect as though made at such time, (b) the
Buyer shall have performed and complied in all material respects with the
agreements contained in this Agreement required to be performed and complied
with by it prior to or at the Closing and (c) the Shareholders shall have
received a certificate dated the Closing Date to the foregoing effects signed by
an officer of the Buyer.
4.3 Legal Opinion. The Shareholders shall have received an opinion from
-------------
Morgan, Lewis & Bockius LLP, counsel to the Buyer, dated the Closing Date and in
substantially the form of Exhibit 4.3 hereto.
4.4 Regulatory Approvals. All licenses, authorizations, consents, orders
--------------------
and regulatory approvals of Governmental Bodies necessary for the consummation
of the Shareholders' sale of the Shares to the Buyer shall have been obtained
and shall be in full force and effect.
4.5 Life Insurance. HMA shall have assigned its right, title and interest
--------------
in certain life insurance contracts maintained by HMA on the lives of certain
Shareholders to such Shareholders.
4.6 Instructions from Special Fiduciary. Jerry Mendelson, as Trustee of
-----------------------------------
The HMA Enterprises, Inc. Employee Stock Ownership Trust (the "ESOP"), shall
have received a written instruction to consummate the transactions contemplated
herein at the Closing from Consulting Fiduciaries, Inc. as special fiduciary for
the ESOP, or such other entity duly appointed as special fiduciary for the ESOP
prior to the Closing.
5. Representations, Warranties and Agreements of the Shareholders. Except
--------------------------------------------------------------
where the context otherwise requires, all references to HMA in this Section 5
include the Subsidiaries (as defined in Section 5.5 hereof). The Shareholders
represent and warrant to the Buyer that:
5.1 Organization of ESOP and Trust; Authorization. The ESOP and the
---------------------------------------------
Mendelson Charitable Remainder Unitrust (the "Trust") are duly organized. The
Shareholders have all requisite power and authority to execute, deliver and
perform their obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement have been duly and validly authorized by all necessary action by
the Shareholders and this Agreement constitutes a valid and binding obligation
of the Shareholders, enforceable against them in accordance with its terms.
5.2 No Conflict as to HMA. Neither the execution and delivery of this
---------------------
Agreement nor the consummation of the sale of the Shares to the Buyer will (a)
violate any provision of the
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<PAGE>
articles of incorporation or by-laws (or other governing instrument) of HMA or
(b) subject to receipt of the consents listed in Schedule 5.7 to this Agreement,
violate, be in conflict with, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or excuse
performance by any natural person, corporation, partnership, proprietorship,
association, trust or other legal entity (each, a "Person") of any of its
obligations under, or cause the acceleration of the maturity of any debt or
obligation pursuant to, or resulting in the creation or imposition of any
Encumbrance upon any property or assets of HMA or the Shareholders under, any
agreement or Commitment (as defined in Section 5.17 hereof) to which HMA is a
party or by which any of its property or assets are bound, or to which any of
the property or assets of HMA are subject, except for the Shareholders Agreement
dated June 30, 1994 among certain shareholders of HMA (the "HMA Shareholders
Agreement"), which shall be terminated as of the Closing Date or (c) violate any
statute or law or any judgment, decree, order, regulation or rule of any court
or other Governmental Body applicable to HMA or the Shareholders.
5.3 Ownership of Shares. The authorized equity securities of HMA
-------------------
Enterprises, Inc. consist of 1,000,000 shares of common stock, par value $.01
per share, of which 115,170 shares are outstanding and constitute the Shares.
Except as provided in Schedule 5.3, the Shareholders own the Shares, of record
and beneficially, free and clear of all Encumbrances. The delivery of
certificates to the Buyer provided in Section 2.2 hereof and the payment to the
Shareholders provided in Section 2.3 hereof will result in the Buyer's immediate
acquisition of record and beneficial ownership of the Shares, free and clear of
all Encumbrances. There are no outstanding options, rights, conversion rights,
agreements or commitments of any kind relating to the issuance, sale or transfer
of any equity securities or other securities of HMA, except as set forth in the
HMA Shareholders Agreement.
5.4 Organization of HMA. HMA Enterprises, Inc. is a corporation duly
-------------------
organized, validly existing and in good standing under the laws of the State of
Texas with full corporate power and authority to own its properties and to
engage in its business as presently conducted and is not required to qualify as
a foreign corporation in any other jurisdiction except where the failure to be
so qualified would not have a material adverse effect on the business, financial
condition, operating results, business prospects or assets and liabilities of
HMA, taken as a whole.
5.5 Subsidiaries. Except for the subsidiaries disclosed in Schedule 5.5
------------
to this Agreement (the "Subsidiaries"), HMA does not
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<PAGE>
own, and has no option, right, agreement or commitment of any kind to acquire,
any securities or other securities of any other Person or any direct or indirect
equity or ownership interest in any other business. The Subsidiaries have no
assets or liabilities which have not been assumed by or assigned to HMA and are
reflected on the Financial Statements.
5.6 Consents and Approvals of Governmental Bodies. No consent, approval
---------------------------------------------
or authorization of, or declaration, filing or registration with, any
Governmental Body is required to be made or obtained by HMA in connection with
the execution, delivery and performance of this Agreement by the Shareholders or
the consummation of the sale of the Shares to the Buyer.
5.7 Other Consents. Except as listed in Schedule 5.7 to this Agreement,
--------------
no consent of any Person is required to be obtained by the Shareholders or by
HMA to the execution, delivery and performance of this Agreement or the
consummation of the sale of the Shares to the Buyer, including, without
limitation, consents from parties to leases or other agreements or Commitments.
5.8 Financial Statements. The Shareholders have delivered to the Buyer
--------------------
the Financial Statements and audited Consolidated Financial Statements for the
fiscal years ended February 28, 1995 and February 28, 1994. Such financial
statements and notes are in accordance with the books and records of HMA and
fairly present the consolidated financial condition and results of operations of
HMA at the respective dates thereof and for the periods therein referred to, all
in accordance with GAAP, except as set forth in the notes thereto.
5.9 Undisclosed Liabilities. HMA has no direct or indirect liability,
-----------------------
indebtedness, obligation, expense, claim, deficiency, guaranty of any obligation
of any Person or endorsement by any Person (other than endorsements of notes,
bills and checks presented to banks for collection or deposit in the ordinary
course of business) of any type, whether accrued, absolute, contingent, matured,
unmatured or other ("Liabilities"), except:
(a) those Liabilities adequately and specifically set forth or
reserved for on the Financial Statements and not heretofore paid or discharged;
(b) those Liabilities arising in the ordinary course of business
consistent with past practice under any Commitment specifically disclosed in
Schedule 5.17 to this Agreement or not required to be disclosed therein because
of the term or amount involved; and
(c) those Liabilities incurred, consistent with past business
practice, in the ordinary course of business since the
-10-
<PAGE>
date of the Financial Statements and not heretofore paid or discharged.
5.10 Title to Properties. Schedule 5.10 to this Agreement describes all
-------------------
interests in real property owned or leased by HMA. HMA owns good and marketable
title to all the properties and assets that it purports to own (real, personal
and mixed, tangible and intangible), including, without limitation, all the
properties and assets reflected in the Financial Statements (except for property
sold since the date of the Financial Statements in the ordinary course of
business, leased under capitalized leases or distributed to Shareholders as
disclosed in the Schedules to this Agreement) and all the properties and assets
purchased or otherwise acquired by HMA since the date of the Financial
Statements. All properties and assets reflected in the Financial Statements are
free and clear of all Encumbrances except, with respect to all such properties
and assets, (a) mortgages or security interests shown on the Financial
Statements as securing specified liabilities or obligations, all of which are
listed in the Schedules to this Agreement, (b) mortgages or security interests
incurred in connection with the purchase of property or assets after the date of
the Financial Statements (such mortgages and security interests being limited to
the property or assets so acquired), (c) liens for current taxes not yet due.
There are no existing agreements, options, commitments or rights with, of or to
any Person to acquire any of the assets of HMA or any interest therein, except
for contracts for the sale of inventory entered into in the ordinary course of
business consistent with past practice. No Person other than HMA owns any
tangible assets situated on the properties used by HMA or necessary for the
operation of its businesses, except for leased items listed in the Schedules to
this Agreement and for items of immaterial value.
5.11 Condition of Buildings, Plants and Equipment. Except as set forth in
--------------------------------------------
Schedule 5.11, all buildings, plants, structures, equipment and other personal
property owned or leased by HMA are in good operating condition and repair
(ordinary wear and tear excepted) and are usable in the ordinary course of
business of HMA. HMA is not, and has not received notification that it is, in
violation of any applicable building, zoning, anti-pollution, health, safety or
other law, ordinance or regulation in respect of its buildings, plants or
structures or their operations. Each real property lease is, and on the Closing
Date shall be, in full force and effect and has not been assigned, modified,
supplemented or amended and neither landlord nor tenant under any such lease is
in default under any such lease, and no circumstances or state of facts
presently exists which, with the giving of notice or passage of time, or both,
would permit the landlord or tenant to terminate any such lease.
-11-
<PAGE>
5.12 No Condemnation or Expropriation. Neither the whole nor any portion
--------------------------------
of the property or leaseholds owned or held by HMA is subject to any
governmental decree or order to be sold or is being condemned, expropriated or
otherwise taken by any Governmental Body or other Person with or without payment
of compensation therefor. There are no assessments with respect to any of the
properties owned or leased by HMA which remain unpaid.
5.13 Litigation. Except as listed in Schedule 5.13 to this Agreement,
----------
there is no action, suit, inquiry, proceeding or investigation by or before any
court or Governmental Body pending or, to the Shareholders' knowledge,
threatened, against HMA or the Shareholders or their respective assets or which
seeks to enjoin or obtain damages in respect of the consummation of this
Agreement. Neither HMA nor any Shareholder is subject to any judgment, order,
decree, writ, injunction or award of any court, Governmental Body or any
arbitrator.
5.14 Absence of Certain Changes. Except as set forth in Schedule 5.14,
--------------------------
since the date of the Financial Statements, HMA has not:
(a) suffered the damage or destruction of any of its material
properties or assets (whether or not covered by insurance), or made any material
disposition of any of its properties or assets other than in the ordinary course
of business;
(b) made any change or amendment in its articles of incorporation or
by-laws, or other governing instruments;
(c) issued or sold any equity securities or other securities,
acquired, directly or indirectly, by redemption or otherwise, any such equity
securities, reclassified, split-up or otherwise changed any such equity
security, or granted or entered into any options, warrants, calls or commitments
of any kind with respect thereto;
(d) organized any subsidiary or acquired any equity securities of any
Person or any equity or ownership interest in any business;
(e) borrowed any funds or incurred, or assumed or otherwise become
subject to, whether directly or by way of guarantee or otherwise, any obligation
or liability with respect to any such indebtedness for borrowed money;
(f) subjected any properties or assets to an Encumbrance;
(g) increased in any manner the compensation of any employee except in
the ordinary course of business;
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<PAGE>
(h) created or materially modified any bonus, deferred compensation,
pension, profit sharing, retirement, insurance, stock purchase, stock option, or
other fringe benefit plan, arrangement or practice or any other employee benefit
plan (as defined in section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended, and the rules and regulations promulgated thereunder
("ERISA") except for provisions to terminate the ESOP as of the Closing Date
that meet the requirements of applicable law, including, without limitation,
ERISA;
(i) made any capital expenditure or acquired any property or assets,
other than inventory, for a cost in excess of $20,000;
(j) entered into any agreement that materially restricts HMA from
carrying on its business as it was conducted as of the Financial Statements
Date;
(k) paid, discharged or satisfied any material claim, liability or
obligation, absolute, accrued, contingent or otherwise, other than the payment,
discharge or satisfaction in the ordinary course of business of liabilities or
obligations reflected in the Financial Statements or incurred in the ordinary
course of business and consistent with past practice since the date of the
Financial Statements, except as contemplated by this Agreement;
(l) waived any material claims or rights;
(m) otherwise taken any actions that are not in the ordinary course of
business; or
(n) changed any of the accounting principles followed by HMA or the
method of applying such principles.
5.15 No Material Adverse Change. Since the date of the Financial
--------------------------
Statements, there has not been any material adverse change in the business,
operations, affairs, prospects, properties, assets, existing and potential
liabilities, obligations, profits or condition (financial or otherwise) of HMA
taken as a whole, other than changes resulting from economic conditions
generally prevailing in the United States.
5.16 Names and Trademarks. Schedule 5.16 to this Agreement contains a
--------------------
true, complete and correct list of all of the names and trademarks, whether or
not registered, which are used in or related to the business of HMA (each a
"Name" or "Trademark" and collectively the "Names and Trademarks"), HMA owns all
such Names and Trademarks and has good title thereto, free and clear of all
liens, security interests, pledges, claims, charges and encumbrances. Schedule
5.16 to this Agreement contains a true,
-13-
<PAGE>
complete and correct list of each jurisdiction where HMA has filed a certificate
of assumed name with respect to its business. As to each of the Names and
Trademarks that is registered, or as to which any application for registration
by HMA is pending, Schedule 5.16 to this Agreement lists each jurisdiction in
which such Name or Trademark is registered and the expiration date for such
registration, and each jurisdiction in which an application to register such
Name or Trademark is pending and the date such application was made. There are
no judicial or administrative actions pending, or threatened against, HMA or its
business with respect to any of the Names or Trademarks, and no right to use any
Name or Trademark which is currently outstanding has been granted by HMA or any
past or present subsidiary or affiliate of HMA to any person or third party.
Except as set forth in Schedule 5.16 to this Agreement, to the best of the
Shareholders' knowledge, no person or third party has any right, title or
interest in any Name or Trademark in the United States, for any use in any class
or field which is the same or similar to any aspect of HMA's business. HMA has
neither infringed on, nor is HMA alleged to be infringing on, any trademark,
service mark, copyright, trade dress, trade name, corporate name, graphic work
of art, slogan or logo of any person or third party in connection with its
business and, to the Shareholders' knowledge, no person or third party is
infringing any of the Names or Trademarks listed. No employee or officer of HMA
has any interest in any of the Names or Trademarks.
5.17 Commitments. Schedule 5.17 to this Agreement contains a list, as of
-----------
the date hereof, of each contract, agreement, understanding or other commitment,
whether written or oral (including any and all amendments thereto), to which HMA
is a party or by which it is bound relating to the business of HMA
(collectively, the "Commitments"), described below:
(a) contract with any employee or consultant;
(b) contract for the future purchase of, or payment for, supplies or
products or services in any single instance exceeding $25,000, or in the
aggregate $50,000, or of a duration of more than twelve months;
(c) contract to sell or supply products to any Governmental Body;
(d) representative or sales agency contract;
(e) contract limiting or restraining it from engaging or competing
in any lines of business with any Person;
(f) contract with any customer providing for a volume refund,
rebate, retrospective price adjustment or price guarantee;
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<PAGE>
(g) commitment to guarantee the obligations of others or commitment
by others to guarantee the obligations of HMA;
(h) equipment lease;
(i) mortgage, indenture, note debenture, bond, letter of credit
agreement, surety agreement, loan agreement or other commitment for the
borrowing or lending of money relating to HMA or agreement for a line of credit;
(j) license, franchise, distributorship or other agreement,
including those which relate in whole or in part to any software, technical
assistance or other know-how of or used in the prior twenty-four months;
(k) commitment or agreement for any capital expenditure or leasehold
improvement in excess of $10,000; or
(l) material contract, agreement or commitment not otherwise
disclosed herein.
True and complete copies of such Commitments have been delivered or made
available to the Buyer prior to the date hereof. Each Commitment is a valid and
binding obligation, which, to the Shareholders' knowledge, is in full force and
effect. Except as disclosed, HMA is not in default under any of the
Commitments, and, to the Shareholders' knowledge, no third party is in default
under any of the Commitments. Schedule 5.17 to this Agreement identifies each
Commitment that requires action on behalf of a third party to give HMA all
rights under such Commitment following the consummation of the transactions
contemplated by this Agreement.
5.18 Employee Matters.
----------------
(a) HMA does not have a collective bargaining agreement with any labor
union or other representative of employees and, to the Shareholders' knowledge,
there has been no demand or attempt by employees to organize a union or labor
organization. There are no unfair labor practice charges or complaints against
HMA threatened or pending before the National Labor Relations Board or any other
federal, state, local or foreign court or agency. There has been no other labor
trouble or other occurrence, event or condition of a similar character, which is
occurring or threatened or has occurred or been threatened.
(b) The Shareholders have previously delivered to the Buyer the name
and current salary of each employee of HMA. Except for the plans set forth on
Schedule 5.18 to this Agreement (the "Employee Benefit Plans"), HMA does not
sponsor, maintain or contribute to, or has not sponsored, maintained or
contributed
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<PAGE>
to, any plan, fund, program, policy, arrangement, contract or commitment,
whether or not qualified for federal income tax purposes, whether or not funded,
whether formal or informal, and whether for the benefit of a single individual
or more than one individual, which is in the nature of (i) an employee pension
benefit plan (as defined in section 3(2) of ERISA), (ii) an employee welfare
benefit plan (as defined in section 3(1) of ERISA), (iii) an incentive current
or deferred compensation, or other benefit or compensation arrangement for
employees, former employees, their dependents and/or their beneficiaries or (iv)
an arrangement that could be characterized as providing for additional
compensation, compensation associated with a change of control, severance
benefits, perquisites, or fringe benefits.
(c) HMA does not sponsor or maintain, and is not a contributing
employer or otherwise a party to, or has any obligation or liability under or
with respect to, and has never maintained or participated in, or been obligated
to contribute to any defined benefit plan (as defined in section 3(35) of ERISA)
or multiemployer plan (as defined in section 3(37) of ERISA). There are no
circumstances pursuant to which HMA may be liable to the Pension Benefit
Guaranty Corporation ("PBGC"), to any such defined benefit plan (or to any
participant, beneficiary, trustee or fiduciary thereof), presently or heretofore
sponsored or maintained by HMA or any entity other than HMA, including within
the concept of "entity other than HMA" any predecessor of HMA or any "controlled
company." A "controlled company" is any enterprise which, with HMA, forms or
formed at any time since September 2, 1974 a controlled group of corporations
within the meaning of Section 414(b) of the Internal Revenue Code of 1986, as
amended (the "Code"), a group of trades or businesses under common control
within the meaning of Section 414(c) of the Code, or any affiliated service
group within the meaning of Section 414(m) of the Code.
(d) Each Employee Benefit Plan intended to be qualified under Section
401(a), 4975(e)(7), 401(k) and 501(a) of the Code has been determined to be so
qualified by the Internal Revenue Service ("IRS") and any trust created pursuant
to any such Employee Benefit Plan has been determined by the IRS to be exempt
from federal income tax under Section 501(a) of the Code. Nothing has occurred
since the date of the last such determination which resulted or could result in
the revocation of such determination. As of the Closing Date, all amendments
and actions required to bring each Employee Benefit Plan into conformity in all
respects with all applicable laws have been made or taken to the extent that
such amendments or actions are required by law to be made or taken in order to
obtain a favorable determination letter upon termination of the Employee Benefit
Plan, if applicable. HMA has properly and timely submitted all Employee Benefit
Plans in a good faith effort to meet the applicable requirements of ERISA and
the Code to the IRS
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for its determination of their continuing tax-qualified status within the time
prescribed therefor under applicable law. HMA is not presently or potentially
liable for failure to make contributions to any such Employee Benefit Plan or
for their fiduciary conduct in connection with such Employee Benefit Plan.
There has been no violation of Section 404, 406 or 607 of ERISA and Section 4975
of the Code, no violation of the reporting and disclosure provisions of the Code
and ERISA, and no termination or partial termination with respect to any
Employee Benefit Plans.
(e) Full payment has been made of all amounts which HMA is required,
under applicable law or under any Employee Benefit Plan or any agreement related
to any Employee Benefit Plan to which HMA or any of its subsidiaries are a
party, to have paid as contributions thereto as of the last day of the most
recent fiscal year of each Employee Benefit Plan ended prior to the date hereof.
HMA has made adequate provision for reserves to meet contributions that have not
been made because they are not yet due under the terms of any Employee Benefit
Plan or related agreements. Benefits under all Employee Benefit Plans are as
represented and have not been increased subsequent to the date of such
documents.
(f) No Employee Benefit Plan provides any health, life or other
welfare benefit coverage to employees of HMA or any of its subsidiaries beyond
termination of their employment with HMA or any of its subsidiaries by reason of
retirement or otherwise, other than coverage as may be required under Section
4980B of the Code or Part 6 of ERISA, or under the continuation of coverage
provisions of the laws of any state or locality.
(g) The consummation of the transactions contemplated by this
Agreement will not (other than any payment made pursuant to Code Section
401(k)(10) under any 401(k) Plan) accelerate the time of payment or vesting,
increase any compensation due to any current employee or former employee of HMA
or entitle any employee to severance pay, unemployment compensation or any other
payment, except in connection with the termination of the ESOP.
(h) Neither HMA nor any Shareholder has taken any action which would
commit the Buyer to establish or continue any plan, fund or program providing
any employee benefits of any kind whatsoever for any present or former employee
of HMA, nor has HMA or any Shareholder taken any action prior to the Closing
which would prevent the Buyer from changing the benefits provided by any
Employee Benefit Plan. Except as expressly provided in this Agreement, nothing
in this Agreement or in the consummation of this transaction will require the
Buyer to assume any obligation of HMA or the Shareholders under any Employee
Benefit Plan.
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(i) No proceedings, suits or material claims (other than routine
claims for benefits) exist or are threatened against HMA with respect to any
Employee Benefit Plan.
(j) The Buyer has no obligation to continue any Employee Benefit Plan
as of the Closing and may, in its sole and absolute discretion, terminate,
modify or discontinue any such Employee Benefit Plan, in whole or in part,
without penalty and without prior notice to HMA, the Shareholders, any
participant, beneficiary or present or former employee of HMA.
5.19 Tax and Other Returns and Reports.
---------------------------------
(a) All federal, state, local and foreign tax returns, reports,
statements and other similar filings required to be filed by HMA, including any
amendments thereto (the "Tax Returns") with respect to any federal, state, local
or foreign taxes, assessments, interest, penalties, deficiencies, fees and other
governmental charges or impositions, (including without limitation, all income
tax, unemployment compensation, social security, payroll, sales and use, excise,
privilege, property, ad valorem, franchise, license, school and any other tax or
similar governmental charge or imposition under laws of the United States or any
state or municipal or political subdivision thereof or any foreign country or
political subdivision thereof) (the "Taxes") have been timely filed with the
appropriate governmental agencies in all jurisdictions in which such Tax Returns
are required to be filed, and all such Tax Returns properly reflect the
liabilities of HMA for Taxes for the periods, property or events covered
thereby. All Taxes, including without limitation, those that are called for by
the Tax Returns, or heretofore or hereafter claimed to be due by any taxing
authority from HMA have been properly accrued or paid. The accruals for Taxes
contained in the Financial Statements are adequate provision for all deferred
taxes, and nothing has occurred subsequent to that date to make any of such
accruals inadequate. HMA has not received any notice of assessment or proposed
assessment in connection with any Tax Returns and there are not pending tax
examinations of or tax claims asserted against HMA or any of its assets or
properties. HMA has not extended, or waived the application of, any statute of
limitations of any jurisdiction regarding the assessment or collection of any
Taxes. There are no tax liens (other than any lien for current taxes not yet
due and payable) on any of the assets or properties of HMA. The Shareholders
have no knowledge of any basis for any additional assessment of any Taxes. HMA
has made all deposits required by law to be made with respect to employees'
withholding and other employment taxes, including without limitation, the
portion of such deposits relating to Taxes imposed upon HMA.
(b) HMA has not filed a consent under Section 341(f) of the Internal
Revenue Code (the "Code") concerning collapsible
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corporations. HMA has not made any payments, is not obligated to make any
payments, or is not a party to any agreement that under certain circumstances
could obligate it to make any payments that will not be deductible under Section
280G of the Code. HMA has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code. HMA has
disclosed on its federal income Tax Returns all positions taken therein that
could give rise to a substantial understatement of federal income Tax within the
meaning of Section 6662 of the Code. HMA is not a party to any Tax allocation
or sharing agreement. HMA has not been a member of an Affiliated Group filing a
consolidated federal income Tax Return (except a consolidated return including
only HMA and the Subsidiaries).
(c) The books and records of HMA delivered to the Buyer at the Closing
set forth the following information with respect to HMA as of the most recent
practicable date: (i) the basis of HMA in its assets and (ii) the amount of any
net operating loss, net capital loss, unused investment or other credit, unused
foreign tax, or excess charitable contribution allocable to HMA.
5.20 Compliance with Law. The operations of HMA have been conducted in
-------------------
accordance with all applicable laws and regulations of all Governmental Bodies
having jurisdiction over HMA. Without limiting the generality of the foregoing,
neither HMA, nor to the Shareholders' knowledge, any person with apparent or
actual authority to act on behalf of HMA, has unlawfully offered, paid or agreed
to pay, directly or indirectly, any money or anything of value to or for the
benefit of any individual who is or was an official or employee or candidate for
office of the government of any country or political subdivision, agency or
instrumentality thereof or any employee or agent of any customer or supplier of
HMA. Except for previously resolved matters in connection with sales tax
audits, since January 1, 1990, HMA has not received any notification of any
asserted present or past failure by it to comply with any applicable laws or
regulations. HMA has all licenses, permits, orders or approvals from the
Governmental Bodies required for the conduct of its businesses, and is not in
material violation of any such licenses, permits, orders and approvals. All
such licenses, permits, orders and approvals are in full force and effect, and
no suspension or cancellation of any thereof has been threatened.
5.21 Environmental Matters.
---------------------
(a) Except as may be disclosed on Schedule 5.21, HMA has conducted its
business in compliance with all Environmental Laws (as hereinafter defined).
For purposes of this Agreement, the term "Environmental Laws" means any and all
federal, state,
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provincial, local laws, regulations and ordinances and foreign laws and
requirements relating to health and safety and pollution or protection of the
environment, including laws, regulations and requirements relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or Hazardous Substances (as hereinafter defined)
into the environment (including without limitation ambient air, surface water,
groundwater or land), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes. For purposes of this Agreement, the term "Hazardous
Substance" means (i) any petroleum products, explosives, alcohols, chemical
solvents, polychlorinated biphenyls ("PCBs") or related or similar materials,
(ii) any substance, waste, material or good defined as hazardous, radioactive,
extremely hazardous, toxic or dangerous, or as a pollutant or contaminant, under
any Environmental Law, or by any federal, state or municipal government or
governmental agency, and (iii) any asbestos, asbestos-containing substances or
urea formaldehyde insulation.
(b) No action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand or notice has been filed or commenced against HMA
alleging any violation or failure to comply with any Environmental Law. HMA is
not a party to any agreement, consent order or adjudication of any type with any
person, including any government agency, that is authorized under or make
reference to any Environmental Law,
(c) HMA has obtained and has at all times possessed all permits,
licenses, registrations and other authorizations (the "Environmental Permits")
necessary to conduct its business under the Environmental Laws and has filed
timely and complete applications for renewal of any such Environmental Permits
that are required prior to the Closing. The Environmental Permits necessary for
HMA to conduct its business are currently in effect and are listed on Schedule
5.21 and HMA is in compliance with all terms and conditions of such
Environmental Permits and has not materially violated any of same. HMA has not
received any notice of any proposal to amend, revoke, reissue or replace any
Environmental Permit, nor have any events occurred that could form a reasonable
basis for any such action.
(d) There has not been any spill, release or unauthorized discharge of
any Hazardous Substance in connection with the business of HMA or, to the
Shareholders' knowledge, at any of the properties or facilities used by HMA,
where such spill, release or discharge was required to be reported under the
Environmental Law or would require abatement or correction under any
Environmental Law. Sellers have not permitted any Hazardous
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<PAGE>
Substances to be disposed of, treated or stored on the Facility or any other
property used by HMA.
(e) To the Shareholders' knowledge, there has not been and is not any
Environmental Condition (as hereinafter defined) in connection with the business
of HMA at or relating to the properties or facilities used by HMA or any
predecessor, or at or relating to any property owned, leased or operated at any
time by HMA or any such predecessor, or at or relating to any property at which
wastes have been deposited or disposed by or at the behest or direction of HMA
or any such predecessor, nor has HMA received written notice of any such
Environmental Condition. For purposes of this Agreement the term "Environmental
Condition" means any condition or circumstance, that (i) requires abatement or
correction under any Environmental Law, (ii) could give rise to any civil or
criminal liability under any Environmental, Law, or (iii) could create a public
or private nuisance, including the presence of Hazardous Substances.
5.22 Brokers or Finders. Neither HMA nor the Shareholders have employed
------------------
any broker or finder or incurred any liability for any brokerage or finder's
fees or commissions or similar payments in connection with the sale of the
Shares to the Buyer.
5.23 Borrowing and Guarantees. Except as set forth in the Schedules to
------------------------
this Agreement, HMA (a) does not have any indebtedness for borrowed money, (b)
is not lending or committed to lend any money (except for advances to employees
in the ordinary course of business), and (c) is not a guarantor or surety with
respect to the obligations of any Person.
5.24 Inventory. All inventory of HMA reflected on the Financial
---------
Statements or acquired since the date thereof through the Closing Date (a) was
acquired and has been maintained in the ordinary course of business, (b) is of
good and merchantable quality, (c) consists of a quality, quantity and condition
usable or salable in the ordinary course of business after giving effect to
inventory obsolescence reserves in the Financial Statements, (d) was acquired
less than one year prior to the date of the Financial Statements and (e) is
valued at the lower of cost or market value in accordance with GAAP.
5.25 Accounts Receivable. The accounts receivable of HMA as reflected on
-------------------
the Financial Statements or arising since the date thereof through the Closing
Date (a) are valid and genuine, (b) have arisen solely out of bona fide sales
and deliveries of goods, performance of services or other business transactions
in the ordinary course of business, (c) are not subject to defenses, set-offs or
counterclaims other than normal returns and allowances, and (d) are collectible
within sixty days after the applicable due date at the full recorded amount
thereof less the
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<PAGE>
amount reserved for doubtful accounts in the Financial Statements.
5.26 Accounts Payable. All accounts payable as set forth on the Financial
----------------
Statements or arising since the date thereof have been incurred in the ordinary
course of business consistent with past practice.
5.27 Relations with Customers and Suppliers. Except as disclosed in
--------------------------------------
Schedule 5.27 to this Agreement, since January 1, 1996, no customer or supplier
of HMA has notified HMA, either orally or in writing, that it intends to cease
or materially change its relationship with HMA either before, after or because
of the consummation of the transactions contemplated hereby.
5.28 Transactions with Affiliates. Except as disclosed in Schedule 5.28
----------------------------
to this Agreement, neither HMA, nor any affiliate of HMA, nor any director or
officer of HMA or any member of his or her immediate family, owns or has a
controlling ownership interest in any corporation or other entity that is a
party to any Commitment or material business arrangement or relationship with
respect to the business of HMA. All disclosed transactions between HMA or an
affiliate of HMA have been on substantially the same terms and conditions as
similar transactions between non-affiliated parties and are properly recorded on
the books and records of HMA.
5.29 Books of Account. The books, records and accounts of HMA accurately
----------------
and fairly reflect in reasonable detail the transactions and the assets and
liabilities of HMA. HMA has not engaged in any transaction, maintained any bank
account or used any funds except for transactions, bank accounts and funds which
have been and are reflected in the normally maintained books and records of the
business.
5.30 Full Disclosure. There are and will be no materially misleading
---------------
misstatements in any of the representations and warranties made by the
Shareholders in this Agreement, the Schedules and Exhibits to this Agreement or
in any of the documents, certificates and instruments delivered or to be
delivered by the Shareholders or their affiliates pursuant to this Agreement and
the Shareholders have not omitted to state any fact necessary to make statements
made herein or therein not materially misleading.
5.31 Investment Intent; Restrictions on Transfer.
-------------------------------------------
(a) The Shareholders represent and warrant that they have not relied
on any purchaser representative in connection with the acquisition of shares of
Wilmar Stock hereunder. The Shareholders (i) have such knowledge,
sophistication and experience in business and financial matters that they are
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capable of evaluating the merits and risks of an investment in the shares of
Wilmar Stock, (ii) fully understand the nature, scope and duration of the
limitations on transfer contained in this Agreement and (iii) can bear the
economic risk of an investment in the shares of Wilmar Stock and can afford a
complete loss of such investment. The Shareholders have had an adequate
opportunity to ask questions and receive answers from the officers of the Buyer
concerning any and all matters relating to the transactions described herein,
including without limitation, the background and experience of the officers and
directors of the Buyer, the plans for the operations of the business of the
Buyer, the business, operations and financial condition of the Buyer, and any
plans for additional acquisitions and the like. The Shareholders have asked any
and all questions in the nature described in the preceding sentence and all
questions have been answered to their satisfaction.
(b) The Shareholders further represent, warrant, acknowledge and
agree that (i) they are acquiring the shares of Wilmar Stock under this
Agreement for their own account, as principal and not on behalf of other
persons, and for investment and not with a view to the resale or distribution of
all or any part of such shares and (ii) they will not sell or otherwise transfer
such shares unless, in the opinion of counsel who is satisfactory to the Buyer,
the transfer can be made without violating the registration provisions of the
Securities Act of 1933, as amended, and the rules and regulations thereunder
(the "Securities Act").
(c) The certificate evidencing the Wilmar Stock to be received by the
Shareholders will bear a legend substantially in the form set forth below and
containing such other information as the Buyer may deem necessary or
appropriate:
THE SHARES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATES AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND EXEMPTIONS FROM
REGISTRATION UNDER THE SECURITIES LAWS OF THE DISTRICT OF COLUMBIA AND A
NUMBER OF STATES. THE SHARES MAY NOT BE SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF IN WHOLE OR
IN PART EXCEPT PURSUANT TO REGISTRATION, EXEMPTION THEREFROM OR OPERATION
OF LAW. THE SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER
REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON
OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
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6. Representations and Warranties of the Buyer. The Buyer represents and
-------------------------------------------
warrants to the Shareholders as follows:
6.1 Organization of the Buyer; Authorization. The Buyer is a corporation
----------------------------------------
duly organized, validly existing and in good standing under the laws of New
Jersey, with full corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution, delivery and
performance of this Agreement have been duly authorized by all necessary
corporate action of the Buyer and this Agreement constitutes a valid and binding
obligation of the Buyer, enforceable against it in accordance with its terms.
6.2 Conflict as to the Buyer. Neither the execution and delivery of this
------------------------
Agreement nor the consummation of the acquisition of the Shares by the Buyer
will (a) violate any provision of the certificate of incorporation or by-laws of
the Buyer, (b) violate, be in conflict with, or constitute a default (or an
event which, with notice of lapse of time or both, would constitute a default)
under any agreement or commitment to which the Buyer is party or (c) violate any
statute or law or any judgment, decree, order, regulation or rule of any court
or other Governmental Body applicable to the Buyer.
6.3 Consents and Approvals of Governmental Bodies. No consent, approval
---------------------------------------------
or authorization of, or declaration, filing or registration with, any
Governmental Body is required to be made or obtained by the Buyer in connection
with the execution, delivery and performance of this Agreement by the Buyer or
the consummation of the purchase of the Shares by the Buyer.
6.4 Other Consents. No consent of any Person is required to be obtained
--------------
by the Buyer to the execution, delivery and performance of this Agreement by
the Buyer or the consummation of the purchase of the Shares by the Buyer.
6.5 Brokers or Finders. The Buyer has not employed any broker or finder
------------------
or incurred any liability for any brokerage or finder's fees or commissions or
similar payments in connection with any of the transactions contemplated hereby.
6.6 Investment Intent. The Buyer is purchasing the Shares solely for its
-----------------
own account for the purpose of investment and not with a view to, or for sale in
connection with, any distribution of any portion thereof in violation of any
applicable securities law. The Buyer has had an adequate opportunity to ask
questions and receive answers from the Shareholders to the transactions
described herein, including without limitation the background and experience of
the officers and the directors of the Sellers, the plans for the operations of
the business of the Seller and the business, operations and financial condition
of the Seller, and any plans for additional acquisitions and the like.
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<PAGE>
6.7 Disclosure. No representation or warranty by the Buyer contained in
----------
this Agreement, and no representation, warranty or statement contained either in
any document filed by the Buyer with the Securities and Exchange Commission (the
"Commission") or any list, certificate, Schedule or other instrument, document,
agreement or writing furnished or to be furnished to the Shareholders pursuant
to this Agreement or in connection with the negotiation, execution or
performance hereof, contains or will contain any untrue statement of a material
fact or omits or will omit to state any material fact necessary to make any
statement herein or therein not misleading.
7. Certain Agreements.
------------------
7.1 Access. Between the date of this Agreement and the Closing Date, the
------
Shareholders shall, and shall cause HMA to, (a) give the Buyer and its
authorized representatives reasonable access to all plants, offices, warehouse
and other facilities and properties of HMA, to the customers, suppliers and
accountants of HMA and to the books and records of HMA, (b) permit the Buyer to
make inspections thereof and (c) cause its officers and its advisors to furnish
the Buyer with such financial and operating data and other information with
respect to the business and properties of HMA and to discuss with the Buyer and
its authorized representatives the affairs of HMA, all as the Buyer may from
time to time reasonably request.
7.2 Other Regulatory Matters. The Shareholders and the Buyer shall, and
------------------------
the Shareholders shall cause HMA to, (a) file with applicable regulatory
authorities any applications and related documents required to be filed by them
in order to consummate the contemplated transaction and (b) cooperate with each
other as they may reasonably request in connection with the foregoing.
7.3 Exclusivity.
-----------
(a) From the date hereof until the earlier of the Closing or the
termination of this Agreement, the Shareholders shall not, and shall cause the
agents, officers, directors or representatives of HMA not to, directly or
indirectly (i) solicit or initiate the submission of proposals or offers from
any person for, (ii) participate in any discussions or negotiate any terms
pertaining to or (iii) provide any nonpublic information to any other Person,
with respect to or in furtherance of any proposal for a merger or business
combination involving, or acquisition of any interest in, or (except in the
ordinary course of business) sale of assets by, HMA, except for the acquisition
of the Shares by the Buyer.
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<PAGE>
(b) From the date hereof until the earlier of the Closing or the
termination of this Agreement, the Shareholders shall not and shall cause the
agents, officers, directors or representatives of HMA not to disclose
Confidential Information (as defined in Section 7.5(c) hereof) relating to the
business of HMA to any Person.
7.4 Update Schedules. Between the date hereof and the Closing Date, the
----------------
Shareholders will promptly disclose to the Buyer in writing any information set
forth in the Schedules to this Agreement that is no longer applicable and any
information of the nature of that set forth in the Schedules to this Agreement
that arises after the date hereof and which would have been required to be
included in the Schedules if such information had been obtained on the date of
delivery thereof.
7.5 Restrictive Covenants.
---------------------
(a) Jerry Mendelson covenants that for the five year period
beginning on the Closing Date, he will not, directly or indirectly, own, manage,
operate, join, control, finance or participate in the ownership, management,
operation, control or financing of, or be connected as a partner, principal,
agent, representative, consultant, employee or otherwise with any business or
enterprise engaged directly or indirectly within any portion of the United
States in the business of apartment maintenance and supply (the "Business").
(b) Each individual Shareholder other than Jerry Mendelson covenants
that for the four year period beginning on the Closing Date, he will not,
directly or indirectly, own, manage, operate, join, control, finance or
participate in the ownership, management, operation, control or financing of, or
be connected as a partner, principal, agent, representative, consultant,
employee or otherwise with any business or enterprise engaged directly or
indirectly within any portion of the United States in the Business.
(c) It is recognized by the Buyer and by each of the Shareholders that
the Business is and is expected to continue to be conducted throughout the
United States and that more narrow geographical limitations of any nature on
this non-competition covenant (and the non-solicitation covenant set forth in
Section 7.5(b) hereof) are therefore not appropriate.
(d) The foregoing restrictions shall not be construed to prohibit the
ownership by any Shareholder, as a passive investment, of not more than five
percent (5%) of any class of securities of any corporation which is engaged in
any of the foregoing businesses having a class of securities registered pursuant
to the Securities Exchange Act of 1934, as amended (the "Exchange Act").
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<PAGE>
(e) Each Shareholder further covenants that for a three year period
beginning the Closing Date, he will not, either directly or indirectly, (i) call
on or solicit any Person who or which within the past two years has been a
customer with respect to the Business with respect to the activities prohibited
by Section 7.5(a) hereof or (ii) solicit the employment of any person who is
currently employed by HMA on a full or part-time basis, unless such person prior
to being solicited by such Shareholder was involuntarily discharged by HMA.
(f) Each Shareholder recognizes and acknowledges that by reason of
the Shareholders' ownership of HMA he has had access to confidential information
relating to the Business including without limitation, information and knowledge
pertaining to products and services offered, innovations, designs, ideas, plans,
trade secrets, proprietary information, advertising, distribution and sales
methods and systems, sales and profit figures, customer and client lists, and
relationships with dealers, distributors, wholesalers, customers, clients,
suppliers and others who have business dealings with the Business ("Confidential
Information"). Each Shareholder acknowledges that such Confidential Information
is a valuable and unique asset and covenants that he will not disclose any such
Confidential Information after the Closing Date to any Person for any reason
whatsoever, unless such information (a) is in the public domain through no
wrongful act of any Shareholder, (b) has been rightfully received from a third
party without restriction and without breach of this Agreement or (c) except as
may be required by law.
(g) Each Shareholder acknowledges that the restrictions contained in
this Section 7.5 are reasonable and necessary to protect the legitimate
interests of the Buyer, and that any violation will result in irreparable injury
to the Shareholders, the Buyer and HMA.
Each Shareholder agrees that the Buyer and HMA shall be entitled to
preliminary and permanent injunctive relief, without the necessity of proving
actual damages, as well as an equitable accounting of all earnings, profits and
other benefits arising from any violation of this Section 7.5, which rights
shall be cumulative and in addition to any other rights or remedies to which the
Buyer may be entitled. In the event that any of the provisions of this Section
7.5 should ever be adjudicated to exceed the time, geographic, product or
service, or other limitations permitted by applicable law in any jurisdiction,
then such provisions shall be deemed reformed in such jurisdiction to the
maximum time, geographic, product or service, or other limitations permitted by
applicable law.
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<PAGE>
7.6 Maintenance of Salespeople. The Shareholders agree to use their best
--------------------------
efforts to, and to cause HMA to, maintain employment of all salespeople employed
by HMA as of the date hereof. In the event a salesperson leaves the employ of
HMA for any reason, the Shareholders shall notify the Buyer within one business
day of such salesperson's separation of employment from HMA or within one
business day of HMA or any Shareholder receiving notice of such salesperson's
intent to leave the employ of HMA.
7.7 Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission which may permit the sale of
restricted securities (as that term is used in Rule 144 under the Act) to the
public without registration, the Company agrees to:
(a) make and keep public information available as those terms are
understood and defined in Rule 144 under the Act, at all times;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the Act and
the Exchange Act for such time as it remains subject to such reporting
requirements; and
(c) so long as a Shareholder owns any restricted Wilmar Stock, furnish
to such Shareholder promptly upon such Shareholder's request a written statement
by the Company as to its compliance with the reporting requirements of Rule 144
and of the Act and Exchange Act (during such time period as it remains subject
to such reporting requirements), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents so filed as such
Shareholder may reasonably request in availing itself of any rule or regulation
of the Commission allowing a Shareholder to sell any such securities without
registration.
8. Conduct of HMA's Business Prior to the Closing.
----------------------------------------------
8.1 Operation in Ordinary Course. Between the date of this Agreement and
----------------------------
the Closing Date, the Shareholders shall cause HMA to conduct its businesses in
all material respects in the ordinary course and to use commercially reasonable
efforts to maintain all current business relationships.
8.2 Business Organization. Between the date of this Agreement and the
---------------------
Closing Date, the Shareholders shall use commercially reasonable efforts, and
shall cause HMA to use commercially reasonable efforts, to (a) preserve
substantially intact the business organization of HMA and keep available the
services of the present officers and employees of HMA, and (b)
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preserve in all material respects the present business relationships and good
will of HMA.
8.3 Corporate Organization. Between the date of this Agreement and the
----------------------
Closing Date, the Shareholders shall not cause or permit any amendment of the
articles of incorporation or by-laws (or other governing instrument) of HMA, and
shall cause HMA not to:
(a) issue, sell or otherwise dispose of any of its equity securities
or other securities, or create, sell or otherwise dispose of any options,
rights, conversion rights or other agreements or commitments of any kind
relating to the issuance, sale or disposition of any of its equity securities;
(b) sell or otherwise dispose of any equity securities of HMA or any
of its subsidiaries, or create or suffer to be created any Encumbrance thereon,
or create, sell or otherwise dispose of any options, rights, conversion rights
or other agreements or commitments of any kind relating to the sale or
disposition of any equity securities of HMA or any of its subsidiaries;
(c) reclassify, split up or otherwise change any of its equity
securities;
(d) declare or pay any dividend on, or make any other distribution or
payment with respect to any share or shares of its capital stock;
(e) grant any general increase in the rates of pay of any of its
hourly-paid employees, grant any increase in the salary or other compensation of
any of its officers or other salaried employees or grant any bonuses of any kind
to any of its employees;
(f) be party to any merger, consolidation or other business
combination;
(g) sell, lease, license or otherwise dispose of any of its properties
or assets (including without limitation, rights with respect to patents and
registered trademarks and copyrights or other proprietary rights), except in the
ordinary course of business; or
(h) organize any new subsidiary or acquire any equity securities of
any Person or any equity or ownership interest in any business.
8.4 Other Restrictions. Without the consent of the Buyer, between the
------------------
date of this Agreement and the Closing Date, the Shareholders shall cause HMA
not to:
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(a) borrow any funds or otherwise become subject to, whether directly
or by way of guarantee or otherwise, any indebtedness for borrowed money;
(b) create any material Encumbrance on any of its material properties
or assets;
(c) except in the ordinary course of business, increase in any manner
the compensation of any director or officer or increase in any manner the
compensation of any class of employees;
(d) create or materially modify, except as noted in the Schedules to
this Agreement, any bonus, deferred compensation, pension, profit sharing,
retirement, insurance, stock purchase, stock option, or other fringe benefit
plan, arrangement or practice or any other employee benefit plan (as defined in
section 3(3) of ERISA);
(e) terminate the employment of any salesperson of HMA for any reason
or permit a salesperson to resign as a salesperson from HMA without giving
notice to the Buyer within one business day after receiving notice of (i) such
termination or resignation or (ii) such salesperson's intention to terminate
employment or resign;
(f) make any capital expenditure or acquire any property or assets
(other than raw materials and supplies) for a cost in excess of $10,000 in any
one case or $25,000 in the aggregate;
(g) enter into any agreement that materially restricts HMA or any of
its subsidiaries from carrying on its business;
(h) pay, discharge or satisfy any material claim, liability or
obligation, absolute, accrued, contingent or otherwise, other than the payment,
discharge or satisfaction in the ordinary course of business of liabilities or
obligations reflected in the Financial Statements or incurred in the ordinary
course of business and consistent with past practice since the date of the
Financial Statements;
(i) cancel any material debts or waive any material claims or rights;
or
(j) act or omit from taking any action which would cause any of the
representations and warranties in Section 5 hereof to be inaccurate.
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<PAGE>
9. Survival of Representations and Warranties; Indemnification.
-----------------------------------------------------------
9.1 Survival. The representations and warranties contained in this
--------
Agreement and in any certificate or document delivered pursuant hereto shall
survive the Closing for a period of two years, except for those contained in
Sections 5.1, 5.2, 5.3, 5.4, 5.19, 5.20, 5.21 and 5.22, 6.1 and 6.2 hereof which
shall survive until the termination of the applicable statute of limitations.
9.2 Indemnification by the Shareholders. The Shareholders, other than the
-----------------------------------
ESOP, shall jointly and severally indemnify and hold harmless the Buyer, and
shall reimburse the Buyer for, any loss, liability, damage or expense (including
reasonable attorneys fees) (collectively, "Damages") arising from or in
connection with (a) any inaccuracy in any of the representations and warranties
of the Shareholders in this Agreement, (b) any failure by the Shareholders to
perform or comply with any agreement in this Agreement prior to Closing with any
failure by any Shareholder to perform or comply with any agreement in this
Agreement after the Closing several but not joint, (c) any obligation or
liability known to the Shareholders prior to the Closing, except to the extent
such obligations are fully accrued on the Closing Balance Sheet, (d) any
obligation or liability arising out of the failure of the ESOP to be qualified
or the inability of HMA to receive a determination letter from the Internal
Revenue Service that the ESOP, as terminated, is qualified and (e) any sexual
harassment claim against HMA or Buyer by Rebecca Jo Martin. The ESOP and its
beneficiaries shall not be required to contribute to the Shareholders
indemnification obligations under this Section 9.2.
9.3 Indemnification by the Buyer. The Buyer shall indemnify and hold
----------------------------
harmless the Shareholders, and shall reimburse the Shareholders for, any Damages
arising from or in connection with (a) any inaccuracy in any of the
representations and warranties of the Buyer in this Agreement, (b) any failure
by the Buyer to perform or comply with any agreement in this Agreement and (c)
any claims arising from the conduct of the business of HMA after the Closing
unless caused by an act or omission by HMA or the Shareholders prior to the
Closing.
9.4 Procedure for Indemnification. Promptly after receipt by an
-----------------------------
indemnified party under Section 9.2 or 9.3 hereof of notice of the commencement
of any action which gives rise to Damages, such indemnified party shall, if a
claim in respect thereof is to be made against an indemnifying party, give
notice to the indemnifying party of the commencement thereof. Failure so to
notify the indemnifying party shall relieve it of any liability that it may have
to any indemnified party, but only to the extent that the defense of such action
is materially prejudiced thereby, providing the indemnifying party did not
receive or otherwise have actual notice thereof. If any such action shall be
brought
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<PAGE>
against an indemnified party and it shall give notice to the indemnifying party
of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, to assume the defense
and cost thereof with counsel satisfactory to such indemnified party and, after
notice from the indemnifying party to such indemnified party of its election to
assume the defense thereof, the indemnifying party shall not be liable to such
indemnified party under Section 9.2 or 9.3 hereof, for any fees of other counsel
or any other expenses of conducting the defense (unless such fees or expenses
are incurred at the request of the indemnifying party), in each case
subsequently incurred by such indemnified party in connection with the defense
thereof, other than reasonable costs of investigation, provided, however, that
the Buyer and the Shareholders shall be entitled, at their sole election to
retain control of any action or demand related to any intellectual property
right matters or as to which the remedy would have a materially adverse on-going
effect on HMA or its subsidiaries. If the indemnifying party receives notice of
any action or demand, it shall notify the indemnified party within twenty days
after the indemnified party's notice is given as to whether it intends to
control the defense thereof. If an indemnifying party defends an action, the
indemnified party may participate in, but not control, any such defense (except
as provided above), at its sole cost and expense. If an indemnifying party
defends an action (a) no compromise or settlement thereof may be effected by the
indemnifying party without the indemnified party's consent (which shall not be
unreasonably withheld) unless (i) there is no finding or admission of any
violation of law and no effect on any other claims that may be made against the
indemnified party and (ii) the sole relief provided is monetary damages that are
paid in full by the indemnifying party and (b) the indemnifying party shall have
no liability with respect to any compromise or settlement thereof effected
without its consent. If notice is given to an indemnifying party of the
commencement of any action and it does not, within twenty days after the
indemnified party's notice is given, give notice to the indemnified party of its
election to assume the defense thereof, the indemnifying party shall be bound by
any compromise or settlement thereof effected by the indemnified party. In the
event the indemnified party should have a claim against the indemnifying party
that does not involve a claim or demand by a third party, the indemnified party
shall notify the indemnifying party with respect to such claim. If the
indemnifying party does not notify the indemnified party within twenty days
after the indemnified party's notice is given that it disputes such claim, the
amount of such claim shall be conclusively deemed as liability of the
indemnifying party hereunder. Nothing hereunder shall be deemed to prevent a
party from making a claim hereunder for potential or contingent damages,
provided the notice to the indemnifying party sets forth the specific basis for
any such potential or contingent claim or
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<PAGE>
demand to the extent then feasible and such party has reasonable grounds to
believe that such a claim or demand may be made.
9.5 Limitations on Indemnification; Exceptions to Limitations.
---------------------------------------------------------
(a) Notwithstanding anything in this Agreement to the contrary, an
indemnifying party shall not have any liability to an indemnified party in
respect of any claim for indemnification for the breach of any representation or
warranty contained herein (i) unless a claim with respect thereto is delivered
to the indemnifying party specifying the factual basis of the claim in
reasonable detail to the extent then known by the indemnifying party prior to
the termination of the survival period for such representation and warranty set
forth in Section 9.1 hereof and (ii) until the damages to the indemnified party,
exceed a cumulative aggregate total of $65,000, but only to the extent of such
Damages in excess of $65,000.
(b) The indemnification provided sin this Section 9 shall be the sole
remedy for money damages as a result of any misrepresentation or breach of
warranty set forth in this Agreement; provided, however, that nothing herein
shall be deemed to limit or restrict in any manner any rights or remedies which
the Buyer has, or might have, at law, in equity or otherwise, against the
Shareholders for any breach of any covenant or agreement set forth in this
Agreement or any willful misrepresentation or willful breach of warranty set
forth in this Agreement.
9.6 Effect of Investigation. Any claim for indemnification shall not be
-----------------------
invalid as a result of any investigation by or opportunity to investigate
afforded to the Buyer.
9.7 Escrow Agreement.
----------------
(a) The Escrow Amount shall secure the Shareholders obligations to the
Buyer under Section 1.3(a) hereof and the satisfaction by the Shareholders of
any payment obligations pursuant thereto. Promptly following, but no later than
five business days after the final determination of the calculation of the
Closing Date Net Worth as described in Section 1.3(a) hereof, the Buyer and the
Shareholders together shall notify the Escrow Agent to release fifty percent
(50%) of the Escrow Amount, together with any interest thereon (the "First
Release") to the Shareholders. Such notice shall set forth the Closing Date Net
Worth and the calculation of the amounts to be released. The Escrow Agent shall
make the First Release as provided in such notice immediately following receipt
of such notice.
(b) The Escrow Amount shall also secure the Shareholders' obligations
to the Buyer under Section 9.2 hereof.
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<PAGE>
In the event the Buyer shall claim a right to payment pursuant to Section 9.2
hereof, within the applicable time periods specified in Section 9.4 hereof, the
Buyer shall send a written claim to the Shareholders and the Escrow Agent. The
Buyer and the Shareholders shall establish the accuracy of such claim (by mutual
agreement, arbitration, litigation or otherwise) in accordance with the
procedures set forth in this Agreement, and the Buyer and the Agent will notify
the Escrow Agent by written notice signed by the President or any Vice President
of the Buyer and the Agent of the dollar amount, if any (the "Claim Amount")
determined to be payable by the Shareholders to the Buyer. Upon receipt of such
notice, the Escrow Agent shall promptly release to the Buyer the lesser of (i)
the Claim Amount or (ii) the balance of the Escrow Amount. If no claims are
outstanding as of June 30, 1998, the Escrow Amount shall be released in
accordance with the provisions of the Escrow Agreement.
10. Termination.
-----------
10.1 Termination. This Agreement may be terminated before the Closing
-----------
occurs only as follows:
(a) By written agreement of the Shareholders and the Buyer at any
time.
(b) By the Shareholders, by notice to the Buyer at any time, if one or
more of the conditions specified in Section 4 hereof is not satisfied at the
time at which the Closing (as it may be deferred pursuant to Section 2.1 hereof)
would otherwise occur or if satisfaction of such a condition is or becomes
impossible.
(c) By the Buyer, by notice to the Shareholders at any time, if one or
more of the conditions specified in Section 3 hereof is not satisfied at the
time at which the Closing (as it may be deferred pursuant to Section 2.1
hereof), would otherwise occur of if satisfaction of such a condition is or
becomes impossible.
(d) By the Buyer or the Shareholders, by notice to the other at any
time after August 30, 1996.
11. Shareholder Agent. Each Shareholder has made, constituted and appointed,
-----------------
and by the execution of this Agreement irrevocably makes, constitutes and
appoints Jerry Mendelson as such Shareholder's true and lawful attorney-in-fact
and agent (the "Agent"), to act for such Shareholder in such Shareholder's name,
(i) to participate in the Closing and take all other such actions in connection
with the transactions contemplated hereby and to receive, respond to and settle
all claim notices and to receive,
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<PAGE>
respond to and settle all other notices, communications and matters directed to
such Shareholder under this Agreement (or to the Agent on behalf of such
Shareholder) and to take any action (or to determine to take no action) with
respect thereto at or following the Closing as the Agent may deem appropriate as
effectively as such Shareholder could act for himself including, without
limitation, delivery of HMA share certificates and acceptance of payments due at
the Closing, execution and delivery of documents and certificates and the
settlement and compromise of any issue, dispute or controversy relating to the
transactions contemplated hereby, and (ii) to execute and deliver all
instruments and documents of every kind incident to the foregoing for all
intents and purposes and with the same effect as such Shareholder could do
personally, and each such Shareholder hereby ratifies and confirms as such
Shareholder's own act all that the Agent shall do or cause to be done pursuant
to the provisions hereof.
12. Notices. All notices, consents, assignments and other communications under
-------
this Agreement shall be in writing and shall be deemed to have been duly given
when (a) delivered by hand, (b) sent by telex or telecopier (with receipt
confirmed), provided that a copy is mailed registered mail, return receipt
requested, or (c) received by overnight delivery service, in each case to the
appropriate addresses, telex numbers and telecopier numbers set forth below (or
to such other addresses, telex numbers and telecopier numbers as a party may
designate as to itself by notice to the other parties).
(a) If to the Buyer:
Wilmar Industries, Inc.
303 Harper Drive
Moorestown, NJ 08057
Attention: Fred B. Gross
Telecopy: (609) 439-1333
With a copy to:
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103
Attention: Stephen M. Goodman, Esq.
Steven M. Cohen, Esq.
Telecopy: (215) 963-5299
(b) If to the Shareholders:
Jerry Mendelson
c/o HMA Enterprises, Inc.
d/b/a/ HMA Supply
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<PAGE>
3333 Holly Hall
Houston, TX 77021
Telecopy:
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<PAGE>
With a copy to:
James A. McLain, Esq.
3050 Post Oak Boulevard
Suite 1090
Houston, Texas 77056
Telecopy: (713) 629-8487
13. Miscellaneous.
-------------
13.1 Expenses. Each party shall bear its own expenses incident to the
--------
preparation, negotiation, execution and delivery of this Agreement and the
performance of its obligations hereunder. HMA shall bear certain expenses in
connection with this transaction which shall be reflected on the Closing Date
Balance Sheet.
13.2 Captions; Section References. The captions in this Agreement are for
----------------------------
convenience of reference only and shall not be given any effect in the
interpretation of this Agreement. Unless otherwise specified, Section
references in this Agreement refer to the applicable Section or Subsection of
this Agreement.
13.3 Modification and Waiver. No amendment, modification or alteration
-----------------------
of the terms or provisions of this Agreement shall be binding unless the same
shall be in writing and duly executed by the parties hereto, except that any of
the terms or provisions of this Agreement may be waived in writing at any time
by the party which is entitled to the benefits of such waived terms or
provisions of this Agreement and the same shall not be deemed to or constitute a
waiver of any other provision hereof (whether or not similar). No delay on the
part of any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof.
13.4 Exclusive Agreement; Amendment. This Agreement supersedes all prior
------------------------------
agreements among the parties with respect to its subject matter, and is intended
(with the documents referred to herein) as a complete and exclusive statement of
the terms of the agreement among the parties with respect thereto and cannot be
changed or terminated orally. The HMA Shareholders Agreement shall be
terminated, null and void and of no further force and effect as of the Closing
Date and the Shareholders shall be deemed to have satisfied or waived any
restrictions on transfer contained therein in connection with this transaction.
13.5 Governing Law. This Agreement and (unless otherwise provided) all
-------------
amendments hereof and waivers and consents hereunder shall be governed by the
internal law of the State of New Jersey, without regard to the conflicts of law
principles thereof, except to the extent that local law and public policy may be
applicable.
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<PAGE>
13.6 Binding Effect. This Agreement shall inure to the benefit of and be
--------------
binding upon the parties hereto and their respective successors and assigns,
provided that neither party may assign its rights hereunder without the consent
of the other party.
13.7 Public Announcements. Neither the Shareholders nor HMA shall make
--------------------
any public statements, including without limitation, any press releases, with
respect to this Agreement and the transactions contemplated hereby without the
prior written consent of the Buyer except as may be required by law.
13.8 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be considered an original, but all of which
together shall constitute the same instrument. It shall not be necessary in
making proof of this Agreement or any counterpart hereof to produce or account
for any of the other counterparts.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
WILMAR INDUSTRIES, INC.
By:/s/ William S. Green
------------------------------------
Name: William S. Green
Title: President
SHAREHOLDERS
/s/ Jerry Mendelson
- ---------------------------------------
Jerry Mendelson
/s/ Brian Mendelson
- ---------------------------------------
Brian Mendelson
/s/ Ellis Atkinson
- ---------------------------------------
Ellis Atkinson
HMA ENTERPRISES, INC. EMPLOYEE STOCK OWNERSHIP TRUST
By:/s/ Jerry R. Mendelson
------------------------------------
Jerry R. Mendelson
Trustee
MENDELSON CHARITABLE REMAINDER UNITRUST
By:/s/ William C. McCain, Jr.
------------------------------------
Houston Trust Company
Special Trustee
William C. McCain, Jr., Vice President
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<PAGE>
List of Exhibits and Schedules
------------------------------
Exhibit 1 Shareholders and Holdings
Exhibit 1.2(a)(i) Escrow Agreement
Exhibit 1.2(a)(ii) Wilmar Stock Allocation
Exhibit 1.2(a)(iii) Base Purchase Price Allocation
Exhibit 3.3 Opinion of Shareholders' Counsel
Exhibit 3.9 Form of Employment Agreement
Exhibit 3.11 Form of Registration Rights Agreement
Exhibit 4.3 Opinion of Morgan, Lewis & Bockius LLP
Schedule 5.3 Beneficial Ownership of Shares
Schedule 5.5 Subsidiaries
Schedule 5.7 Third Party Consents
Schedule 5.10 Title to Properties
Schedule 5.11 Condition of Buildings, Plants and Equipment
Schedule 5.13 Litigation
Schedule 5.14 Certain Changes
Schedule 5.16 Names and Trademarks
Schedule 5.17 Commitments
Schedule 5.18 Employee Benefit Plans
Schedule 5.21 Environmental Matters
Schedule 5.27 Relations with Customer and Suppliers
Schedule 5.28 Transactions with Affiliates
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<PAGE>
Exhibit 99.1
------------
FOR IMMEDIATE RELEASE July 9, 1996
- ---------------------
FOR FURTHER INFORMATION CONTACT:
- -------------------------------
Fred B. Gross
Vice President -- Corporate Development
Wilmar Industries, Inc.
303 Harper Drive
Moorestown, NJ 08057
(609) 439-1222
WILMAR INDUSTRIES, INC.
FILES REGISTRATION STATEMENT FOR PUBLIC OFFERING
Moorestown, NJ, July 9, 1996. Today, Wilmar Industries, Inc. (NASDAQ:
----------------------------
WLMR) filed a registration statement with the Securities and Exchange Commission
for a public offering of 3,770,000 shares of Common Stock. Of the shares being
offered, 2,000,000 shares will be sold by the Company and 1,770,000 shares will
be sold by selling shareholders. The offering will be managed by Alex. Brown &
Sons Incorporated, William Blair & Company, L.L.C., Robertson Stephens & Company
L.L.C. and PaineWebber Incorporated.
The net proceeds to the Company will be used primarily for general working
capital purposes, including possible acquisitions of companies engaged in the
supply of repair and maintenance products. A portion of the net proceeds will
be applied towards the repayment of bank debt used to finance the cash portion
of the acquisition of HMA Enterprises, Inc., which was completed on July 8,
1996. HMA is a leading supplier of repair and maintenance products to the
apartment housing market in Texas and has distribution centers in Dallas,
Houston and San Antonio. HMA had net sales of approximately $24.8 million for
the 12 months ended February 29, 1996.
Copies of the preliminary prospectus relating to the offering may be
obtained from Alex. Brown & Sons Incorporated, 135 E. Baltimore Street,
Baltimore, MD 21202, William Blair & Company, 222 West Adams Street, Chicago,
IL 60606, Robertson, Stephens & Company, 555 California Street, Suite 2600, San
Francisco, CA 94104, or PaineWebber Incorporated, 1285 Avenue of the Americas,
13th Floor, New York, NY 10019.
Wilmar is a rapidly growing national marketer and direct distributor of
repair and maintenance products, principally to the apartment housing market,
and operates 15 distribution centers throughout the United States, including the
three centers added through the acquisition of HMA.
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. THE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME
THE REGISTRATION BECOMES EFFECTIVE. THIS PRESS RELEASE SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE
OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
