SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ___)*
Wilmar Industries, Inc.
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock
- --------------------------------------------------------------------------------
(Title of Class of Securities)
971426 10 1
- --------------------------------------------------------------------------------
(CUSIP Number)
James M. Dubin, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
December 22, 1999
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e)(3), 13d-1(f) or 13d-1(g), check
the following box [_].
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
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CUSIP No. 971426 10 1 13D 2 of 12
(1) NAME OF REPORTING PERSON
WM Acquisition, Inc.
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(See instructions) (a) [X]
(b) [_]
(3) SEC USE ONLY
(4) SOURCE OF FUNDS
(See instructions)
BK, AF
(5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT [ ]
TO ITEMS 2(d) or 2(e)
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
New Jersey
(7) SOLE VOTING POWER
0 shares
NUMBER OF
SHARES (8) SHARED VOTING POWER
BENEFICIALLY 2,013,536 shares
OWNED BY EACH
REPORTING (9) SOLE DISPOSITIVE POWER
PERSON WITH 0 shares
(10) SHARED DISPOSITIVE POWER
0 shares
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,013,536 shares
(12) CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
(See Instructions)
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15 .3%
(14) TYPE OF REPORTING PERSON
(See Instructions)
CO
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CUSIP No. 971426 10 1 13D 3 of 12
(1) NAME OF REPORTING PERSON
Parthenon Investors, L.P.
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(See instructions) (a) [X]
(b) [_]
(3) SEC USE ONLY
(4) SOURCE OF FUNDS
(See instructions)
OO
(5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT [ ]
TO ITEMS 2(d) or 2(e)
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
(7) SOLE VOTING POWER
0 shares
NUMBER OF
SHARES (8) SHARED VOTING POWER
BENEFICIALLY 2,013,536 shares
OWNED BY EACH
REPORTING (9) SOLE DISPOSITIVE POWER
PERSON WITH 0 shares
(10) SHARED DISPOSITIVE POWER
0 shares
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,013,536 shares
(12) CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
(See Instructions)
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.3 %
(14) TYPE OF REPORTING PERSON
(See Instructions)
PN
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CUSIP No. 971426 10 1 13D 4 of 12
(1) NAME OF REPORTING PERSON
Parthenon Investment Advisors, L.L.C.
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(See instructions) (a) [X]
(b) [_]
(3) SEC USE ONLY
(4) SOURCE OF FUNDS
(See instructions)
OO
(5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT [ ]
TO ITEMS 2(d) or 2(e)
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
(7) SOLE VOTING POWER
0 shares
NUMBER OF
SHARES (8) SHARED VOTING POWER
BENEFICIALLY 2,013,536 shares
OWNED BY EACH
REPORTING (9) SOLE DISPOSITIVE POWER
PERSON WITH 0 shares
(10) SHARED DISPOSITIVE POWER
0 shares
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,013,536 shares
(12) CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
(See Instructions)
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.3 %
(14) TYPE OF REPORTING PERSON
(See Instructions)
00
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CUSIP No. 971426 10 1 13D 5 of 12
(1) NAME OF REPORTING PERSON
Parthenon Investment Partners, L.L.C.
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(See instructions) (a) [X]
(b) [_]
(3) SEC USE ONLY
(4) SOURCE OF FUNDS
(See instructions)
OO
(5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT [ ]
TO ITEMS 2(d) or 2(e)
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
(7) SOLE VOTING POWER
0 shares
NUMBER OF
SHARES (8) SHARED VOTING POWER
BENEFICIALLY 2,013,536 shares
OWNED BY EACH
REPORTING (9) SOLE DISPOSITIVE POWER
PERSON WITH 0 shares
(10) SHARED DISPOSITIVE POWER
0 shares
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,013,536 shares
(12) CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
(See Instructions)
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.3 %
(14) TYPE OF REPORTING PERSON
(See Instructions)
00
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CUSIP No. 971426 10 1 13D 6 of 12
(1) NAME OF REPORTING PERSON
John Rutherford
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(See instructions) (a) [X]
(b) [_]
(3) SEC USE ONLY
(4) SOURCE OF FUNDS
(See instructions)
OO
(5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT [ ]
TO ITEMS 2(d) or 2(e)
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Citizen of New Zealand
(7) SOLE VOTING POWER
0 shares
NUMBER OF
SHARES (8) SHARED VOTING POWER
BENEFICIALLY 2,013,536 shares
OWNED BY EACH
REPORTING (9) SOLE DISPOSITIVE POWER
PERSON WITH 0 shares
(10) SHARED DISPOSITIVE POWER
0 shares
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,013,536 shares
(12) CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
(See Instructions)
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.3 %
(14) TYPE OF REPORTING PERSON
(See Instructions)
IN
<PAGE>
CUSIP No. 971426 10 1 13D 7 of 12
(1) NAME OF REPORTING PERSON
Ernest Jacquet
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(See instructions) (a) [X]
(b) [_]
(3) SEC USE ONLY
(4) SOURCE OF FUNDS
(See instructions)
OO
(5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT [ ]
TO ITEMS 2(d) or 2(e)
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Citizen of the United States
(7) SOLE VOTING POWER
10,000 shares
NUMBER OF
SHARES (8) SHARED VOTING POWER
BENEFICIALLY 2,013,536 shares
OWNED BY EACH
REPORTING (9) SOLE DISPOSITIVE POWER
PERSON WITH 10,000 shares
(10) SHARED DISPOSITIVE POWER
0 shares
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,023,536 shares
(12) CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
(See Instructions)
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.3 %
(14) TYPE OF REPORTING PERSON
(See Instructions)
IN
<PAGE>
CUSIP No. 971426 10 1 13D 8 of 12
Item 1. Security and Issuer
This statement relates to the common stock, no par value (the "Common
Stock"), of Wilmar Industries, Inc., a New Jersey corporation (the "Issuer").
The principal executive offices of the Issuer are located at 303 Harper Drive,
Moorestown, New Jersey 08057.
Item 2. Identity and Background
(a)-(c), (f) This Statement on Schedule 13D is being filed jointly by
WM Acquisition, Inc., a New Jersey corporation ("Merger Sub"); Parthenon
Investors, L.P., a Delaware limited partnership ("Parthenon"); Parthenon
Investment Advisors, L.L.C., a Delaware limited liability company and the
general partner of Parthenon ("Advisors"); Parthenon Investment Partners,
L.L.C., a Delaware limited liability company and the Managing Member of Advisors
("Partners"); and John Rutherford, a citizen of New Zealand, and Ernest Jacquet,
a citizen of the United States, each of whom is a Managing Member of Partners
(collectively, the "Managing Members" and, together with Merger Sub, Parthenon,
Advisors and Partners, the "Reporting Persons").
Parthenon is a private investment vehicle formed for the purpose of
investing in acquisition transactions. Merger Sub was formed by Parthenon to
effect the proposed transactions described in Item 4 below and has not engaged
in any activities other than those incident to its incorporation and such
proposed transactions. The Directors of WM Acquisition, Inc. are Drew Sawyer and
Samantha Trotman. Mr. Sawyer and Ms. Trotman, together with Bruce MacRae, are
the only officers of WM Acquisition, Inc. Mr. MacRae, Mr. Sawyer and Ms. Trotman
are all officers of Parthenon Capital, Inc., an affiliate of Parthenon, Advisors
and Partners. The principal business address of each of the Reporting Persons is
c/o Parthenon Capital, Inc., 200 State Street, Boston, MA 02109.
(d) Neither Parthenon nor any person disclosed in response to Item 2(a)
has been convicted in a criminal proceeding during the last five years.
(e) Neither Parthenon nor any person disclosed in response to Item 2(a)
has been party to any civil proceeding as a result of which it has been subject
to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities
laws, or finding any violation in respect of such laws.
Item 3. Source and Amount of Funds or Other Consideration
As more fully described in Item 4 hereof, Merger Sub and William Green
(the "Stockholder") have entered into the Voting Agreement (as such term is
defined in Item 4) with respect to the Merger (as such term is defined in Item
4).
The Stockholder entered into the Voting Agreement to induce Merger Sub
to enter into the Merger Agreement (as such term is defined in Item 4) and no
funds were expended by any of the Reporting Persons in connection with the
Voting Agreement.
Item 4. Purpose of Transaction
On December 22, 1999, the Issuer and Merger Sub entered into an
Agreement and Plan of Merger and Recapitalization (the "Merger Agreement"),
attached hereto as Exhibit 7(a), providing for the merger of Merger Sub with and
into the Issuer (the "Merger"), whereupon the separate existence of Merger Sub
will cease and the Issuer will continue as the surviving corporation (the
"Surviving Corporation").
The Merger Agreement provides for a recapitalization of the Issuer,
effected through a merger. Subject to shareholder approval, and satisfaction of
the other conditions contained in the Merger Agreement, all shares of Common
Stock issued and outstanding (other than shares of Common Stock held in the
Issuer's treasury or owned by Merger Sub to be canceled without payment or
conversion thereof) would be canceled and converted into the right to receive
$18.25 in cash, without interest. Prior to the consummation of the Merger, the
Stockholder will exchange approximately 165,000 shares of Common Stock for an
equal number of shares of newly issued Class C Preferred Stock, par value $.10
per share (the "Preferred Stock"), which in the Merger will be converted into
shares of Common Stock (representing approximately 8% of the voting stock of the
Surviving Corporation) and shares of preferred stock of the Surviving
Corporation.
On December 22, 1999, the Stockholder, the holder of approximately 15%
of the outstanding shares of Common Stock, entered into a Voting and Exchange
Agreement (the "Voting Agreement"), attached hereto as Exhibit 7(b), which
provides, among
<PAGE>
CUSIP No. 971426 10 1 13D 9 of 12
other things, that such holder will vote in favor of the Merger Agreement.
Completion of the Merger is subject to certain conditions, including
(i) approval of the holders of the Common Stock, (ii) obtaining the requisite
debt financing to complete the Merger pursuant to the commitment letters
described in Item 6, below, and (iii) compliance with applicable regulatory
requirements.
It is anticipated that the Common Stock will be delisted from the NASD
National Market System as a result of the Merger.
The description of the Merger disclosed in this Item 4 is qualified in
its entirety by reference to the Exhibits attached hereto.
Except as disclosed in this Item 4, no Reporting Person nor any other
person disclosed in response to Item 2(a) has any current plans or proposals
which relate to or would result in any of the events described in clauses (a)
through (j) of the instructions to Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer
(a) and (b). As of December 22, 1999, the Reporting Persons owned no
shares of Common Stock, except that Ernest Jacquet, a member of the Board of
Directors of the Issuer, holds: (i) currently exercisable options in respect of
10,000 shares of Common Stock and (ii) options in respect of 20,000 shares of
Common Stock that are not excercisable. However, as of December 22, 1999, the
Reporting Persons may be deemed to have acquired beneficial ownership of the
shares of Common Stock subject to the Voting Agreement, constituting in the
aggregate approximately 15% of the outstanding shares of Common Stock (based on
the number of shares of Common Stock represented by the Issuer in the Merger
Agreement as outstanding as of December 22, 1999) under the definition of
"beneficial ownership" as set forth in Rule 13d-3 under the Securities Exchange
Act of 1934, as amended.
(c) Except as set forth in this Item 5, to the best knowledge of each
Reporting Person, none of the Reporting Persons and no other person described in
Item 2 hereof has engaged in any transaction during the past 60 days in any
shares of Common Stock.
(d) None of the Reporting Persons, to the best knowledge of each
Reporting Person, has the right to receive, or the power to direct the receipt
of, dividends from, or the proceeds from the sale of, the Shares.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer
Pursuant to the Merger Agreement, the Stockholder has entered into the
Voting Agreement pursuant to which the Stockholder has agreed to vote all of the
shares of Common Stock owned by him (the "Shares") (representing approximately
15% of the Common Stock issued and outstanding as of December 22, 1999) in favor
of the Merger. If the Merger Agreement is terminated in accordance with its
terms, the covenants and agreements in the Voting Agreement with respect to the
Shares will also terminate at such time. Subject to the foregoing and to certain
exceptions and conditions, the Stockholder has agreed to vote, and has appointed
Merger Sub, or any nominee of Merger Sub as his irrevocable proxy to vote, the
Shares in favor of the Merger and certain related agreements and actions and
against certain other enumerated actions or agreements. Subject to the terms and
conditions of the Voting Agreement, the Stockholder has also agreed to: (i)
refrain from soliciting or responding to certain inquiries or proposals
regarding the Issuer; (ii) restrictions on transfer of the Shares; (iii) take or
refrain from taking certain other actions and (iv) exchange certain of his
shares of Common Stock for shares of Class C Preferred Stock as described above
in Item 4.
Financing for the Merger is expected to be provided by: (a) purchases
of $130 million of preferred and common stock of Merger Sub (which will be
converted into shares of preferred stock of the Surviving Corporation and Common
Stock) by Parthenon, affiliates of Chase Capital Partners, and The Chase
Manhattan Bank, as Trustee for First Plaza Group Trust, pursuant to commitment
letters attached hereto as Exhibits 7(c), 7(d) and 7(e) respectively; (b) the
continued equity interest of the Stockholder in the Surviving Corporation
pursuant to the exchange transaction described above in Item 4, together with
new investments by existing management; (c) a credit facility of up to $160
million provided by Fleet National Bank, pursuant to a commitment letter
attached hereto as Exhibit 7(f); and (d) purchases of $40 million of senior
subordinated notes and warrants by Fleet Corporate
<PAGE>
CUSIP No. 971426 10 1 13D 10 of 12
Finance, Inc., pursuant to a commitment letter attached hereto as Exhibit 7(g).
Other than the matters disclosed in response to Items 3, 4 and 5 and
this Item 6, neither Parthenon nor any other person disclosed in response to
Item 2(a) is party to any contracts, arrangements, understandings or
relationships with respect to any securities of the Issuer, including but not
limited to the transfer or voting of any of the securities, finder's fees, joint
ventures, loan or option agreements, puts or calls, guarantees of profits,
division of profits or loss, or the giving or withholding of proxies.
Item 7. Materials to Be Filed as Exhibits
Exhibit 7(a) Agreement and Plan of Merger dated as of December 22, 1999, by
and between WM Acquisition, Inc., and Wilmar Industries, Inc.
Exhibit 7(b) Voting and Exchange Agreement dated as of December 22, 1999,
by and between WM Acquisition, Inc. and Mr. William Green.
Exhibit 7(c) Commitment Letter dated December 22, 1999, from Parthenon
Investors, L.P. to WM Acquisition, Inc.
Exhibit 7(d) Commitment Letter dated December 22, 1999, from Chase Capital
Partners to WM Acquisition, Inc.
Exhibit 7(e) Commitment Letter dated December 22, 1999, from The Chase
Manhattan Bank, as Trustee for First Plaza Group Trust to WM
Acquisition, Inc.
Exhibit 7(f) Commitment Letter dated December 22, 1999, from FleetBoston
Robertson Stephens Inc. and Fleet National Bank to Ernest
Jacquet, Samantha Trotman and Parthenon Investors, L.P.
Exhibit 7(g) Commitment Letter dated December 22, 1999, from Fleet
Corporate Finance, Inc. to Parthenon Investors, L.P.
<PAGE>
CUSIP No. 971426 10 1 13D 11 of 12
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
the undersigned certifies as of January 3, 2000, that the information set forth
in this statement is true, complete and correct.
WM ACQUISITION, INC.
By: /s/ Samantha Trotman
------------------------
Name: Samantha Trotman
Title: President
PARTHENON INVESTORS, L.P.
By: PARTHENON INVESTMENT ADVISORS L.L.C.
its general partner
By: PARTHENON INVESTMENT PARTNERS L.L.C.
its Managing Member
By: /s/ Ernest Jacquet
----------------------
Name: Ernest Jacquet
Title: Managing Member
PARTHENON INVESTMENT ADVISORS, L.L.C.
By: PARTHENON INVESTMENT PARTNERS L.L.C.
its Managing Member
By: /s/ Ernest Jacquet
----------------------
Name: Ernest Jacquet
Title: Managing Member
PARTHENON INVESTMENT PARTNERS, L.L.C.
By: /s/ Ernest Jacquet
----------------------
Name: Ernest Jacquet
Title: Managing Member
/s/ John Rutherford
-------------------
John Rutherford
/s/ Ernest Jacquet
------------------
Ernest Jacquet
<PAGE>
CUSIP No. 971426 10 1 13D 12 of 12
EXHIBIT INDEX
Exhibit 7(a) Agreement and Plan of Merger dated as of December 22, 1999, by
and between WM Acquisition, Inc., and Wilmar Industries, Inc.
Exhibit 7(b) Voting and Exchange Agreement dated as of December 22, 1999,
by and between WM Acquisition, Inc. and Mr. William Green.
Exhibit 7(c) Commitment Letter dated December 22, 1999, from Parthenon
Investors, L.P. to WM Acquisition, Inc.
Exhibit 7(d) Commitment Letter dated December 22, 1999, from Chase Capital
Partners to WM Acquisition, Inc.
Exhibit 7(e) Commitment Letter dated December 22, 1999, from The Chase
Manhattan Bank, as Trustee for First Plaza Group Trust to WM
Acquisition, Inc.
Exhibit 7(f) Commitment Letter dated December 22, 1999, from FleetBoston
Robertson Stephens Inc. and Fleet National Bank to Ernest
Jacquet, Samantha Trotman and Parthenon Investors, L.P.
Exhibit 7(g) Commitment Letter dated December 22, 1999, from Fleet
Corporate Finance, Inc. to Parthenon Investors, L.P.
[Conformed Copy]
--------- ----
================================================================================
AGREEMENT AND PLAN OF MERGER
AND RECAPITALIZATION
between
WM ACQUISITION, INC.
and
WILMAR INDUSTRIES, INC.
Dated as of December 22, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
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RECITALS.................................................................................................1
ARTICLE 1
THE MERGER...............................................................................................2
Section 1.1 The Merger....................................................................2
Section 1.2 Closing.......................................................................2
Section 1.3 Effective Time................................................................2
Section 1.4 The Certificate of Incorporation..............................................2
Section 1.5 The By-Laws...................................................................2
Section 1.6 Directors of Surviving Corporation............................................3
Section 1.7 Officers of Surviving Corporation.............................................3
CONVERSION OR CANCELLATION OF SHARES
IN THE MERGER AND THE RECAPITALIZATION EXCHANGE..........................................................3
Section 2.1 Conversion or Cancellation of Shares and the Recapitalization
Exchange...............................................................................3
Section 2.2 Payment for Shares............................................................4
Section 2.3 Transfer of Shares After the Effective Time...................................5
Section 2.4 Stock Options.................................................................5
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................................5
Section 3.1 Organization and Qualification; Subsidiaries..................................5
Section 3.2 Certificate of Incorporation and By-Laws......................................6
Section 3.3 Capitalization................................................................6
Section 3.4 Authority.....................................................................7
Section 3.5 No Conflict...................................................................8
Section 3.6 Required Filings and Consents.................................................9
Section 3.7 Permits; Compliance with Law..................................................9
Section 3.8 SEC Filings; Financial Statements............................................10
Section 3.9 Absence of Certain Changes or Events.........................................11
Section 3.10 Employee Benefit Plans; Labor Matters........................................11
Section 3.11 Contracts; Debt Instruments..................................................14
Section 3.12 Litigation...................................................................14
Section 3.13 Environmental Matters........................................................15
Section 3.14 Intellectual Property........................................................15
Section 3.15 Taxes........................................................................16
Section 3.16 Non-Competition Agreements...................................................17
Section 3.17 Assets.......................................................................17
Section 3.18 Opinion of Financial Advisor.................................................17
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Section 3.19 Brokers......................................................................18
Section 3.20 Certain Statutes.............................................................18
Section 3.21 Information..................................................................18
Section 3.22 Vote Required................................................................18
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF MERGER SUB...........................................................................................18
Section 4.1 Organization.................................................................18
Section 4.2 Binding Obligation...........................................................19
Section 4.3 No Authorization or Consents Required........................................19
Section 4.4 Financing Commitments........................................................19
Section 4.5 No Conflict..................................................................20
Section 4.6 Information..................................................................20
Section 4.7 Brokers......................................................................20
ARTICLE 5
COVENANTS...............................................................................................21
Section 5.1 Conduct of Business of the Company...........................................21
Section 5.2 Other Actions................................................................23
Section 5.3 Notification of Certain Matters..............................................23
Section 5.4 Proxy Statement..............................................................24
Section 5.5 Stockholders' Meeting........................................................25
Section 5.6 Access to Information; Confidentiality.......................................26
Section 5.7 No Solicitation..............................................................26
Section 5.8 Directors' and Officers' Indemnification and Insurance.......................28
Section 5.9 Reasonable Best Efforts......................................................29
Section 5.10 Consents; Filings; Further Action............................................29
Section 5.11 Public Announcements.........................................................30
Section 5.12 Stock Exchange Listings and De-Listings......................................30
Section 5.13 Expenses.....................................................................30
Section 5.14 Takeover Statutes............................................................30
Section 5.15 Employee Benefit Arrangements................................................31
Section 5.16 Issuance of Class C Preferred Stock..........................................31
Section 5.17 Solvency Matters.............................................................31
ARTICLE 6
CONDITIONS..............................................................................................32
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger...................32
(a) Stockholder Approval..................................................................32
(b) Governmental Consents.................................................................32
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ii
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(c) Litigation............................................................................32
Section 6.2 Conditions to Obligations of Merger Sub......................................32
(a) Representations and Warranties........................................................32
(b) Performance of Obligations of the Company.............................................33
(c) Material Adverse Effect...............................................................33
(d) Financing.............................................................................33
(e) Consents Under Agreements.............................................................33
(f) Company Voting Agreement..............................................................33
Section 6.3 Conditions to Obligation of the Company......................................33
(a) Representations and Warranties........................................................33
(b) Performance of Obligations of Merger Sub..............................................34
(c) Material Adverse Effect...............................................................34
(d) Consents Under Agreements.............................................................34
ARTICLE 7
TERMINATION.............................................................................................34
Section 7.1 Termination..................................................................34
Section 7.2 Effect of Termination........................................................36
Section 7.3 Amendment....................................................................36
Section 7.4 Waiver.......................................................................36
Section 7.5 Expenses following Termination...............................................36
ARTICLE 8
MISCELLANEOUS...........................................................................................38
Section 8.1 Certain Definitions..........................................................38
Section 8.2 Non-Survival of Representations, Warranties and Agreements
.....................................................................................38
Section 8.3 Counterparts.................................................................39
Section 8.4 Governing Law and Venue; Waiver of Jury Trial................................39
Section 8.5 Notices......................................................................40
Section 8.6 Entire Agreement.............................................................41
Section 8.7 No Third Party Beneficiaries.................................................41
Section 8.8 Severability.................................................................42
Section 8.9 Interpretation...............................................................42
Section 8.10 Assignment...................................................................42
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iii
<PAGE>
INDEX OF DEFINED TERMS
----------------------
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
Acquisition Agreement.................................................... 5.7(e)(ii)
affiliate................................................................ 8.1(a)
Agreement................................................................ Title
Benefit Plan............................................................. 3.10(a)
business day............................................................. 8.1(b)
Certificate of Merger.................................................... 1.3
Class C Preferred Stock................................................. Recitals
Claims................................................................... 3.12
Closing.................................................................. 1.2
Closing Date............................................................. 1.2
COBRA.................................................................... 3.10(a)
Common Stock............................................................. Recitals
Company.................................................................. Title
Company Benefit Plan .................................................... 3.10(a)
Company Charter Documents................................................ 3.2
Company Disclosure Letter................................................ Article 3 (introduction)
Company Financial Advisor................................................ 3.18
Company Permits.......................................................... 3.7
Company Principal........................................................ Recitals
Company SEC Reports...................................................... 3.8(a)
Company Stockholders Meeting............................................. 5.4
Company Subsidiaries..................................................... 3.1(a)
Company Voting Agreement................................................. Recitals
Confidentiality Agreement................................................ 5.6
control.................................................................. 8.1(a)
controlled by............................................................ 8.1(a)
controlling.............................................................. 8.1(a)
Debt Financing Commitments............................................... 4.4
Effective Time........................................................... 1.3
Employee................................................................ 3.10(a)
Environmental Law........................................................ 3.13
Equity Financing Commitments............................................. 4.4
ERISA.................................................................... 3.10(a)
Exchange Act............................................................. 3.6
Expenses................................................................. 7.5(a)
GAAP..................................................................... 3.8(b)
Governmental Entity...................................................... 3.6
group.................................................................... 8.1(e)
Hazardous Substance...................................................... 3.13
HSR Act.................................................................. 3.6
including................................................................ 8.1(c)
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
Indemnified Parties...................................................... 5.8(a)
Intellectual Property.................................................... 3.14(a)
knowledge................................................................ 8.1(d)
Law...................................................................... 3.5(a)(ii)
Liens.................................................................... 3.3
Material Adverse Effect on the Company................................... 3.1(a)
Material Assets......................................................... 3.17(a)
Merger................................................................... Recitals
Merger Consideration..................................................... 2.1(a)
Merger Sub............................................................... Title
Merger Sub Material Adverse Effect....................................... 4.1
NASD..................................................................... 5.4(a)
NJBC..................................................................... Recitals
Option................................................................... 2.4
Option Plans............................................................. 2.4
Other Filings............................................................ 5.4(a)
Paying Agent............................................................. 2.2
PBGC..................................................................... 3.10(a)
Permitted Liens.......................................................... 3.17
person................................................................... 8.1(e)
Preferred Stock.......................................................... 3.3(a)
Proxy Statement.......................................................... 5.4(a)
Representatives.......................................................... 5.6
Requisite Company Vote................................................... 3.4(a)
Retiree Welfare Plan..................................................... 3.10(a)
SEC...................................................................... 3.8
Securities Act........................................................... 3.8
Senior Preferred Stock................................................... 2.1(b)
Shares................................................................... 2.1(a)
Software................................................................. 3.14(a)
subsidiary............................................................... 8.1(f)
subsidiaries............................................................. 8.1(f)
Superior Proposal........................................................ 5.7(e)(i)
Surviving By-Laws........................................................ 1.5
Surviving Charter........................................................ 1.4
Surviving Corporation.................................................... 1.1
Systems.................................................................. 3.14(c)
Takeover Proposal........................................................ 5.7(a)
Takeover Statute......................................................... 3.20
Taxes.................................................................... 3.15
Technology............................................................... 3.14(a)
Terminating Company Breach............................................... 7.1(f)
Terminating Merger Sub Breach............................................ 7.1(g)
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
Termination Amount....................................................... 7.5(b)
under common control with................................................ 8.1(a)
Welfare Plan............................................................. 3.10(a)
Year 2000 Compliant...................................................... 3.14(c)
</TABLE>
vi
<PAGE>
AGREEMENT AND PLAN OF MERGER AND RECAPITALIZATION
AGREEMENT AND PLAN OF MERGER AND RECAPITALIZATION (the "Agreement"),
dated as of December 22, 1999 by and between WM Acquisition, Inc., a New Jersey
corporation (the "Merger Sub"), and Wilmar Industries, Inc., a New Jersey
corporation (the "Company").
RECITALS:
WHEREAS, the respective boards of directors of each of the Merger Sub
and the Company each have approved this Agreement pursuant to which, among other
things, Merger Sub will be merged with and into the Company (the "Merger") on
the terms and conditions contained herein and in accordance with the New Jersey
Business Corporation Act (the "NJBC").
WHEREAS, concurrently with the execution of this Agreement, as a
condition to the willingness of Merger Sub to enter into this Agreement, (i) Mr.
William Green (the "Company Principal") is entering into a Voting and Exchange
Agreement with Merger Sub and the Company (the "Company Voting Agreement"),
providing for, among other things, the agreement of the Company Principal to
vote all shares of the Company's common stock, no par value (the "Common
Stock"), beneficially owned by him on the date hereof in favor of approval and
adoption of this Agreement and the Merger, and to exchange certain shares of
Common Stock owned by him for newly issued shares of Class C Preferred Stock,
par value $.10 per share, of the Company (the "Class C Preferred Stock") prior
to the Merger, and (ii) the Company Principal has delivered to the Merger Sub an
irrevocable proxy to vote such shares as described above.
WHEREAS, certain terms used in this Agreement which are not capitalized
have the meanings specified in Section 8.1.
WHEREAS, the Company and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained in this
Agreement, the parties agree as follows:
<PAGE>
2
ARTICLE 1
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, at the Effective Time (as defined in Section 1.3),
Merger Sub shall be merged with and into the Company and the separate corporate
existence of Merger Sub shall cease. The Company shall be the surviving
corporation in the Merger (sometimes referred to as the "Surviving Corporation")
and shall continue to be governed by the laws of New Jersey, and the separate
corporate existence of the Company with all its rights, privileges, immunities,
powers, purposes and franchises, both public and private, shall continue
unaffected by the Merger. The Merger shall have the effects set forth in Section
14A:10-6 of the NJBC.
Section 1.2 Closing. The closing of the Merger (the "Closing") shall
take place (a) at the offices of Paul, Weiss, Rifkind, Wharton & Garrison, New
York, New York at 10:00 a.m. on the third business day after the last to be
fulfilled or waived of the conditions set forth in Article 6 (other than those
conditions that by their nature are to be satisfied at the Closing, but subject
to the fulfillment or waiver of those conditions) shall be satisfied or waived
in accordance with this Agreement or (b) at such other place and time and/or on
such other date as the Company and the Merger Sub may agree in writing (the
"Closing Date").
Section 1.3 Effective Time. As soon as practicable following the
Closing, the Company and Merger Sub will cause a Certificate of Merger (the
"Certificate of Merger") to be signed, acknowledged and delivered for filing
with the Secretary of the State of New Jersey as provided in Section 14A:10-4.1
of the NJBC. The Merger shall become effective at the time when a Certificate of
Merger has been duly filed with the Secretary of State of the State of New
Jersey or such other time as shall be agreed upon by the parties and set forth
in the Certificate of Merger (the "Effective Time").
Section 1.4 The Certificate of Incorporation. The certificate of
incorporation of the Surviving Corporation shall be amended and restated in the
form of the certificate of incorporation of Merger Sub in effect immediately
prior to the Effective Time (the "Surviving Charter"), until duly amended as
provided in the Surviving Charter or by applicable law, except that, as of the
Effective Time, Article I of such certificate of incorporation shall be amended
to read as follows: "The name of the corporation is Wilmar Industries, Inc."
Section 1.5 The By-Laws. The by-laws of the Surviving Corporation shall
be amended and restated in the form of the by-laws of Merger Sub in effect at
the Effective Time (the "Surviving By-Laws"), until duly amended as provided in
the Surviving By-Laws or by applicable law.
<PAGE>
3
Section 1.6 Directors of Surviving Corporation. The directors of Merger
Sub at the Effective Time shall, from and after the Effective Time, be the
directors of the Surviving Corporation until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Charter and the Surviving By-Laws.
Section 1.7 Officers of Surviving Corporation. The officers of the
Company at the Effective Time shall, from and after the Effective Time, be the
officers of the Surviving Corporation until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Charter and the Surviving By-Laws.
ARTICLE 2
CONVERSION OR CANCELLATION OF SHARES
IN THE MERGER AND THE RECAPITALIZATION EXCHANGE
Section 2.1 Conversion or Cancellation of Shares and the
Recapitalization Exchange. The manner of converting, retaining or canceling
shares of the Company and Merger Sub in the Merger shall be as follows:
(a) At the Effective Time, except as otherwise provided in
Section 2.1(c), each share of Common Stock issued and outstanding immediately
prior to the Effective Time (other than Shares owned by Merger Sub,
collectively, the "Shares"), shall by virtue of the Merger and without any
action on the part of the holder thereof, be converted into the right to
receive, without interest, an amount in cash (the "Merger Consideration") equal
to $18.25. All such Shares, by virtue of the Merger and without any action on
the part of the holders thereof, shall no longer be outstanding and shall be
canceled and retired and shall cease to exist, and each holder of a certificate
representing any such Shares shall thereafter cease to have any rights with
respect to such Shares, except the right to receive the Merger Consideration for
such Shares upon the surrender of such certificate in accordance with Section
2.2.
(b) At the Effective Time, each share of Class C Preferred
Stock issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the holder thereof,
shall be converted into (i) .5486558 shares of Common Stock and (ii) 1.7701344
shares of Cumulative Senior Preferred Stock, par value $0.01 per share of the
Company (the "Senior Preferred Stock").
(c) At the Effective Time, each share of Common Stock issued
and outstanding at the Effective Time and owned by Merger Sub, and each Share
issued and held in the Company's treasury at the Effective Time, shall, by
<PAGE>
4
virtue of the Merger and without any action on the part of the holder thereof,
cease to be outstanding, shall be canceled and retired without payment of any
consideration therefor and shall cease to exist.
(d) At the Effective Time, (i) each share of common stock, no
par value, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of Merger Sub or the holders of such shares, be converted into one share of
Common Stock and (ii) each share of preferred stock, par value $0.01 per share,
of Merger Sub issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of Merger Sub
or the holders of such shares, be converted into one share of Senior Preferred
Stock.
Section 2.2 Payment for Shares. The Surviving Corporation shall make
available or cause to be made available to the paying agent appointed by Merger
Sub with the Company's prior approval (the "Paying Agent") amounts sufficient in
the aggregate to provide all funds necessary for the Paying Agent to make
payments pursuant to Section 2.1(a) hereof to holders of Shares issued and
outstanding immediately prior to the Effective Time. At the Effective Time, the
Surviving Corporation shall instruct the Paying Agent to promptly, and in any
event not later than three business days following the Effective Time, mail to
each person who was, at the Effective Time, a holder of record (other than
Merger Sub) of issued and outstanding Shares a form (mutually agreed to by
Merger Sub and the Company) of letter of transmittal and instructions for use in
effecting the surrender of the certificates which, immediately prior to the
Effective Time, represented any of such Shares in exchange for payment therefor.
Upon surrender to the Paying Agent of such certificates, together with such
letter of transmittal, duly executed and completed in accordance with the
instructions thereto, the Surviving Corporation shall instruct the Paying Agent
to promptly, and in any event not later than three business days following
receipt of properly tendered certificates and letters of transmittal, pay to the
persons entitled thereto a check in the amount to which such persons are
entitled, after giving effect to any required tax withholdings. No interest will
be paid or will accrue on the amount payable upon the surrender of any such
certificate. If payment is to be made to a person other than the registered
holder of the certificate surrendered, it shall be a condition of such payment
that the certificate so surrendered shall be properly endorsed or otherwise in
proper form for transfer and that the person requesting such payment shall pay
any transfer or other taxes required by reason of the payment to a person other
than the registered holder of the certificate surrendered or establish to the
satisfaction of the Surviving Corporation or the Paying Agent that such tax has
been paid or is not applicable. One hundred and eighty days following the
Effective Time, the Surviving Corporation shall be entitled to cause the Paying
Agent to deliver to it any funds (including any interest received with respect
thereto) made available to the Paying Agent which have not been disbursed to
holders of certificates formerly representing Shares outstanding on the
Effective Time, and thereafter such holders shall be entitled to look to the
Surviving Corporation only as
<PAGE>
5
general creditors thereof with respect to the Merger Consideration payable upon
due surrender of their certificates. Notwithstanding the foregoing, neither the
Paying Agent nor any party hereto shall be liable to any holder of certificates
formerly representing Shares for any amount paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.
Section 2.3 Transfer of Shares After the Effective Time. No transfer of
Shares shall be made on the stock transfer books of the Surviving Corporation at
or after the Effective Time.
Section 2.4 Stock Options. Immediately prior to the Effective Time,
each outstanding option to purchase shares of Common Stock (an "Option") granted
under the Company's Amended and Restated 1995 Stock Option Plan and any similar
plan or arrangement providing for the issuance of options (collectively, the
"Option Plans"), whether or not then exercisable or vested, shall become fully
exercisable and vested. At the Effective Time (A) each Option which is then
outstanding shall be canceled and (B) in consideration of such cancellation, and
except to the extent that Merger Sub and the holder of any such Option otherwise
agree, immediately following consummation of the Offer, the Company shall pay to
such holders of Options an amount in respect thereof equal to the product of (x)
the excess of the Merger Consideration over the exercise price thereof, if any,
and (y) the number of shares of Common Stock subject thereto (such payment to be
net of taxes required by law to be withheld with respect thereto). No payment
shall be made with respect to any Option having a per share exercise price, as
in effect at the Effective Time, equal to or greater than the Merger
Consideration.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Merger Sub that, except as set
forth in the corresponding sections of the Disclosure Letter delivered to Merger
Sub by the Company prior to the execution of this Agreement (the "Company
Disclosure Letter"):
Section 3.1 Organization and Qualification; Subsidiaries.
(a) Each of the Company and each subsidiary of the Company
(collectively, the "Company Subsidiaries") is a corporation duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, as the case may be, and has the requisite power
and authority and all necessary governmental approvals to own, lease and operate
its properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing or in good standing or to have
such power,
<PAGE>
6
authority and governmental approvals, individually or in the aggregate, have not
resulted and could not reasonably be expected to result in a Material Adverse
Effect on the Company. Each of the Company and each Company Subsidiary is duly
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that, individually or in the aggregate, have not resulted and could not
reasonably be expected to result in a Material Adverse Effect on the Company.
For purposes of this Agreement, "Material Adverse Effect on the Company" means
any change in or effect on the business, assets, properties, results of
operations or condition (financial or otherwise) of the Company or any Company
Subsidiary that is or could reasonably be expected to be materially adverse to
the Company and the Company Subsidiaries, taken as a whole, or that could
reasonably be expected to materially impair the ability of the Company to
perform its obligations under this Agreement or consummate the Merger and the
other transactions contemplated hereby.
(b) The Company Disclosure Letter sets forth a complete and
correct list of all of the Company Subsidiaries, their respective jurisdictions
of organization and percentage ownership by the Company. Neither the Company nor
any Company Subsidiary holds any interest in any person other than the Company
Subsidiaries so listed.
Section 3.2 Certificate of Incorporation and By-Laws. The copies of the
Company's certificate of incorporation and by-laws, each as amended through the
date of this Agreement (collectively, the "Company Charter Documents") that are
incorporated by reference in, as exhibits to the Company's annual report on Form
10-K for the year ended December 25, 1998 are complete and correct copies of
those documents. The Company Charter Documents and all comparable corporate
organizational documents of the Company Subsidiaries are in full force and
effect. The Company is not in violation of any of the provisions of the Company
Charter Documents.
Section 3.3 Capitalization.
(a) The authorized capital stock of the Company consists of
50,000,000 shares of Common Stock, 5,000,000 shares of Preferred Stock, par
value $0.01 per share, 129,450 shares of Series A Senior Preferred Stock, par
value $0.01 per share and 105,914 shares of Series B Senior Preferred Stock, par
value $0.01 per share (collectively, the "Preferred Stock"). As of the date of
this Agreement, (i) 12,407,826 shares of Common Stock were issued and
outstanding, all of which were validly issued and are fully paid, nonassessable
and not subject to preemptive rights, (ii) 1,000,000 shares of Company Common
Stock were held in the treasury of the Company and (iii) 1,502,166 shares of
Common Stock were reserved for issuance
<PAGE>
7
upon exercise of Options that are outstanding or available for grant. As of the
date of this Agreement, no shares of Preferred Stock are issued and outstanding.
(b) As of the date of this Agreement, an aggregate of
1,135,376 Options granted by the Company under the Option Plans are issued and
outstanding. Except for the Options, there are no options, warrants, conversion
rights, stock appreciation rights, redemption rights, repurchase rights or other
rights, agreements, arrangements or commitments of any character to which the
Company is a party or by which the Company is bound relating to the issued or
unissued capital stock of the Company or any Company Subsidiary or obligating
the Company or any Company Subsidiary to issue or sell any shares of capital
stock of, or other equity interests in, the Company or any Company Subsidiary.
The Company Disclosure Letter sets forth, as of the date of this Agreement, (x)
the persons to whom Options have been granted and (y) the exercise price for the
Options held by each such person. No consent of the holder of any Options is
required in connection with the cancellation thereof pursuant to Section 2.4.
(c) All shares of Common Stock subject to issuance, upon
issuance prior to the Effective Time on the terms and conditions specified in
the instruments under which they are issuable, will be duly authorized, validly
issued, fully paid, nonassessable and will not be subject to preemptive rights.
There are no outstanding contractual obligations of the Company or any Company
Subsidiary to repurchase, redeem or otherwise acquire any shares of Common Stock
or any capital stock of any Company Subsidiary. Each outstanding share of
capital stock of each Company Subsidiary is duly authorized, validly issued,
fully paid, nonassessable and not subject to preemptive rights and each such
share owned by the Company or a Company Subsidiary is free and clear of all
security interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on the Company's or such other Company Subsidiary's
voting rights, charges and other encumbrances or any nature whatsoever
(collectively, "Liens"). There are no outstanding contractual obligations of the
Company or any Company Subsidiary to provide funds to, or make any investment
(in the form of a loan, capital contribution or otherwise) in, any Company
Subsidiary that is not wholly owned by the Company or in any other person.
Section 3.4 Authority.
(a) The Company has all necessary corporate power and
authority to execute and deliver this Agreement, to perform its obligations
under this Agreement and to consummate the Merger and the other transactions
contemplated by this Agreement to be consummated by the Company. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of such transactions have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate such
transactions, other than, with respect
<PAGE>
8
to the Merger, the adoption of this Agreement by the holders of a majority of
the outstanding shares of Common Stock (the "Requisite Company Vote"). This
Agreement has been duly authorized and validly executed and delivered by the
Company and, assuming that this Agreement constitutes a valid and binding
obligation of the other party, constitutes a legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
except as may be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws affecting creditors' rights generally
and by equitable principles of general applicability.
(b) The Special Committee of the Board of Directors of the
Company and the full Board of Directors of the Company (i) has unanimously
adopted the plan of merger set forth in Articles I and II of this Agreement and
approved this Agreement and the other transactions contemplated by this
Agreement and (ii) has unanimously agreed to recommend to the stockholders the
approval of this Agreement, the Merger, and the other transactions contemplated
hereby.
Section 3.5 No Conflict.
(a) The execution and delivery of this Agreement by the
Company do not, and the performance of this Agreement by the Company will not:
(i) conflict with or violate any provision of any
Company Charter Document or any equivalent organizational documents of
any Company Subsidiary;
(ii) assuming that all consents, approvals,
authorizations and other actions described in Section 3.6 have been
obtained and all filings and obligations described in Section 3.6 have
been made, conflict with or violate any foreign or domestic law,
statute, ordinance, rule, regulation, order, judgment or decree ("Law")
applicable to the Company or any Company Subsidiary or by which any
property or asset of the Company or any Company Subsidiary is or may be
bound or affected, except for any such conflicts or violations that,
individually or in the aggregate, have not resulted and could not
reasonably be expected to result in a Material Adverse Effect on the
Company; or
(iii) result in any breach of or constitute a default
(or an event which with or without notice or lapse of time or both
would become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or result in
the creation of a Lien on any property or asset of the Company or any
Company Subsidiary under any note, bond, mortgage, indenture, contract,
agreement, commitment, lease, license, permit, franchise or other
instrument or obligation (collectively, "Contracts") to which the
Company or any Company Subsidiary is a party or by which any
<PAGE>
9
of them or their assets or properties is or may be bound or affected,
except for any such breaches, defaults, rights or Liens that,
individually or in the aggregate, have not resulted and could not
reasonably be expected to result in a Material Adverse Effect on the
Company.
(b) The Company Disclosure Letter sets forth a correct and
complete list of all material Contracts to which the Company or any Company
Subsidiaries are a party or by which they or their assets or properties is or
may be bound or affected under which consents or waivers are or may be required
prior to consummation of the transactions contemplated by this Agreement.
Section 3.6 Required Filings and Consents. The execution and delivery
of this Agreement by the Company do not, and the performance of this Agreement
by the Company will not, require any consent, approval, authorization or permit
of, or filing with or notification to, any domestic or foreign national,
federal, state, provincial or local governmental, regulatory or administrative
authority, agency, commission, court, tribunal or arbitral body or
self-regulated entity (each, a "Governmental Entity"), other than (i) compliance
with applicable requirements of the Securities Exchange Act of 1934, as amended
(together with the rules and regulations promulgated thereunder, the "Exchange
Act"), (ii) compliance with the pre-merger notification requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder (the "HSR Act"), (iii) the filing of a
Certificate of Designation relating to the Series C Preferred Stock; (iv) the
filing of the Certificate of Merger in accordance with the NJBC; and (v) where
the failure to obtain such consent, approval, authorization or permit, or to
provide such notice or make such filing, individually or in the aggregate, has
not and could not reasonably be expected to result in a Material Adverse Effect.
Section 3.7 Permits; Compliance with Law. Each of the Company and the
Company Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity necessary for the Company or any
Company Subsidiary to own, lease and operate its properties or to carry on its
business as it is now being conducted (collectively, the "Company Permits"),
except where the failure to have, or the suspension or cancellation of, any of
the Company Permits, individually or in the aggregate, has not resulted and
could not reasonably be expected to result in a Material Adverse Effect on the
Company, and, as of the date of this Agreement, no suspension or cancellation of
any of the Company Permits is pending or, to the knowledge of the Company,
threatened, except where the failure to have, or the suspension or cancellation
of, any of the Company Permits, individually or in the aggregate, has not
resulted and could not reasonably be expected to result in a Material Adverse
Effect on the Company. Neither the Company nor any Company Subsidiary is in
conflict with, or in default or violation of, (i) any Law applicable to the
Company or any Company Subsidiary or
<PAGE>
10
by which any property or asset of the Company or any Company Subsidiary is or
may be bound or affected or (ii) any Company Permits, except for any such
conflicts, defaults or violations that, individually or in the aggregate, have
not resulted and could not reasonably be expected to result in a Material
Adverse Effect on the Company.
Section 3.8 SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports, statements and
other documents (including all exhibits, annexes, supplements and amendments to
such documents) required to be filed by it under the Exchange Act and the
Securities Act since January 1, 1998 (collectively, including any such documents
filed subsequent to the date of this Agreement, the "Company SEC Reports") and
the Company has made available to the Merger Sub each Company SEC Report filed
with the Securities and Exchange Commission (the "SEC"). The Company SEC
Reports, including any financial statements or schedules included or
incorporated by reference, (i) comply in all material respects with the
requirements of the Exchange Act or the Securities Act of 1933, as amended (the
"Securities Act") or both, as the case may be, applicable to those Company SEC
Reports and (ii) did not at the time they were filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated or necessary in order to make the statements made in those Company SEC
Reports, in the light of the circumstances under which they were made, not
misleading. No Company Subsidiary is subject to the periodic reporting
requirements of the Exchange Act or is otherwise required to file any documents
with the SEC or any national securities exchange or quotation service or
comparable Governmental Entity.
(b) Each of the consolidated balance sheets included in or
incorporated by reference into the Company SEC Reports (including the related
notes and schedules) fairly presented or will fairly present, in all material
respects, the consolidated financial position of the Company or a Company
Subsidiary as the case may be, as of the dates set forth in those consolidated
balance sheets. Each of the consolidated statements of income and of cash flows
included in or incorporated by reference into the Company SEC Reports (including
any related notes and schedules), fairly presented or will fairly present, in
all material respects, the consolidated results of operations and cash flows, as
the case may be, of the Company and the consolidated Company Subsidiaries (or of
any Company Subsidiary, as the case may be) for the periods set forth in those
consolidated statements of income and of cash flows (subject, in the case of
unaudited quarterly statements, to notes and normal year-end audit adjustments
that will not be material in amount or effect), in each case in conformity with
United States generally accepted accounting principles ("GAAP") (except, in the
case of unaudited quarterly statements, as permitted by Form 10-Q of the SEC)
consistently applied throughout the periods indicated.
<PAGE>
11
(c) Except as and to the extent set forth on the consolidated
balance sheet of the Company and the consolidated Company Subsidiaries as of
December 25, 1998, including the related notes, neither the Company nor any
Company Subsidiary has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that would be required to be
reflected on a balance sheet or in the related notes prepared in accordance with
GAAP, except for liabilities or obligations incurred in the ordinary course of
business since December 25, 1998, that, individually or in the aggregate, have
not resulted and could not reasonably be expected to result in a Material
Adverse Effect on the Company.
Section 3.9 Absence of Certain Changes or Events. Since December 25,
1998, the Company and the Company Subsidiaries have conducted their businesses
only in the ordinary course and in a manner consistent with past practice and,
since such date, there has not been:
(a) any Material Adverse Effect on the Company;
(b) any damage, destruction or other casualty loss with
respect to any asset or property owned, leased or otherwise used by it or any
Company Subsidiaries, whether or not covered by insurance, which damage,
destruction or loss, individually or in the aggregate, has resulted or could
reasonably be expected to result in a Material Adverse Effect on the Company;
(c) any material change by the Company in its or any Company
Subsidiary's accounting methods, principles or practices;
(d) any declaration, setting aside or payment of any dividend
or distribution in respect of Company Shares or any redemption, purchase or
other acquisition of any of the Company's securities;
(e) any event, occurrence or action described in Section
5.1(a)-(l).
Section 3.10 Employee Benefit Plans; Labor Matters.
(a) For purposes of this Agreement:
(i) "Benefit Plan" means any employee benefit plan,
arrangement, policy or commitment, including, without limitation, any
employment, consulting or deferred compensation agreement, executive
compensation, bonus, incentive, pension, profit-sharing, savings,
retirement, stock option, stock purchase or severance pay plan, any
life, health, disability or accidental death and dismemberment
insurance plan, any holiday or vacation practice or any other employee
benefit plan within the meaning of
<PAGE>
12
section 3(3) of ERISA, as to which the Company has any direct or
indirect, actual or contingent liability;
(ii) "Company Benefit Plan" means any Benefit Plan
that provides benefits with respect to current or former Employees;
(iii) "Welfare Plan" means and Benefit Plan that is a
welfare plan within the meaning of and subject to ERISA section 3(1);
(iv) "Retiree Welfare Plan" means any Welfare Plan
that provides benefits to current or former employees beyond their
retirement or other termination of service (other than coverage
mandated by COBRA, the cost of which is fully paid by the current or
former employee or his dependents);
(v) "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended;
(vi) "COBRA" means the provisions of Code section
4980B and Part 6 of Title I of ERISA;
(vii) "Employee" means any individual employed by the
Company or any of its subsidiaries; and
(viii) "PBGC" means the Pension Benefit Guaranty
Corporation.
(b) The Company Disclosure Letter sets forth all Company
Benefit Plans. With respect to each such plan, the Company has delivered to the
Merger Sub correct and complete copies of: (i) all plan texts and agreements and
related trust agreements or annuity contracts; (ii) all summary plan
descriptions and material Employee communications; (iii) the most recent annual
report (including all schedules thereto); (iv) the most recent annual audited
financial statement and opinion applicable to a plan intended to qualify under
Code section 401(a) or 403(a); (v) if the plan is intended to qualify under Code
section 401(a) or 403(a), the most recent determination letter, if any, received
from the IRS; and (vi) all material communications with any governmental entity
or agency (including, without limitation, the PBGC and the IRS).
(c) The Company has no direct or indirect, actual or
contingent liability with respect to any Benefit Plan other than to make
payments pursuant to Company Benefit Plans in accordance with the terms of such
plans.
(d) Each of the Company and its subsidiaries has made all
material payments due from it to date with respect to each Benefit Plan.
<PAGE>
13 (e) All material amounts properly accrued as liabilities
to, or expenses of, any Benefit Plan that have not been paid have been properly
reflected on the Financial Statements.
(f) There are no Benefit Plans that are subject to any of Code
section 412, ERISA section 302 or Title IV or ERISA.
(g) Each Benefit Plan conforms in all material respects to,
and its administration is in all material respects in compliance with, all
applicable laws and regulations.
(h) There are no actions, liens, suits or claims pending or
threatened (other than routine claims for benefits) with respect to any Benefit
Plan.
(i) Each Benefit Plan which is intended to qualify under Code
section 401(a) or 403(a) so qualifies.
(j) Each Benefit Plan which is a "group health plan" (as
defined in ERISA section 607(1)) has been operated in all material respects in
compliance with the provisions of COBRA and any applicable, similar state law.
(k) There is no contract or arrangement in existence with
respect to any Employee that would result in the payment of any amount that by
operation of Code section 280G would not be deductible to the Company or any of
its subsidiaries.
(l) No assets of the Company are allocated to or held in a
"rabbi trust" or similar funding vehicle.
(m) Except as disclosed on Schedule 3.10, there are no: (i)
unfunded benefit obligations with respect to any Employee that are not fairly
reflected by reserves shown on the Financial Statements, (ii) reserves, assets,
surpluses or prepaid premiums with respect to any Welfare Plan or (iii) Retiree
Welfare Plans.
(n) The consummation of the transactions contemplated by this
Agreement will not: (i) entitle any current or former Employee to severance pay,
unemployment compensation or any similar payment; (ii) accelerate the time of
payment or vesting, or increase the amount of any compensation due to, any
current or former Employee; or (iii) constitute or involve a prohibited
transaction (as defined in ERISA section 406 or Code section 4975), constitute
or involve a breach of fiduciary responsibility within the meaning of ERISA
section 502(1) or otherwise violate Part 4 of Title I of ERISA.
<PAGE>
14
(o) No Benefit Plan is a "multiple employer plan" or a
"multiemployer plan" within the meaning of the Code or ERISA.
(p) The Company does not and has not maintained a plan that is
or was subject to Title IV of ERISA, and has no liability in respect of any such
plan; no filing of a notice of intent to terminate such a Benefit Plan has been
made; and the PBGC has not initiated any proceeding to terminate any such
Benefit Plan. No event has occurred, and no condition or circumstance exists,
that presents a material risk that any Benefit Plan has or is likely to
experience a "partial termination" (within the meaning of Code section
411(d)(3)).
(q) As of the Effective Time, the Company, its subsidiaries
and any entity under common control with the Company within the meaning of Code
section 414(b), (c), (m) or (o) has not incurred any liability or obligation
under the Worker Adjustment and Retraining Notification Act, as it may be
amended from time to time, and within six-month period immediately following the
Effective Time, will not incur any such liability or obligation if, during such
six-month period, only terminations of employment in the normal course of
operations occur.
Section 3.11 Contracts; Debt Instruments. Neither the Company nor any
Company Subsidiary is in violation of or in default under (nor does there exist
any condition which with the passage of time or the giving of notice would cause
such a violation of or default under) any Contract to which it is a party or by
which it or any of its properties or assets is or may be bound or affected,
except for violations or defaults that, individually or in the aggregate, have
not resulted and could not reasonably be expected to result in a Material
Adverse Effect on the Company. Set forth in the Company Disclosure Letter is a
description of any material changes to the amount and terms of the indebtedness
of the Company and the consolidated Company Subsidiaries as described in the
notes to the financial statements set forth as incorporated by reference in the
Company's quarterly report on Form 10-Q for the period ended September 24, 1999.
Section 3.12 Litigation. There is no suit, claim, action, proceeding or
investigation (collectively, "Claims") pending or, to the knowledge of the
Company, threatened against the Company or any Company Subsidiary before any
Governmental Entity that, if adversely determined, individually or in the
aggregate, has resulted or could reasonably be expected to result in a Material
Adverse Effect on the Company. Neither the Company nor any Company Subsidiary is
subject to any outstanding order, writ, injunction or decree which, individually
or in the aggregate, has resulted or could reasonably be expected to result in a
Material Adverse Effect on the Company.
<PAGE>
15
Section 3.13 Environmental Matters. Except as set forth in Section 3.13
of the Disclosure Schedule, (i) no real property currently or, to the Company's
knowledge, formerly owned or operated by the Company or any Subsidiary is
contaminated with any Hazardous Substances (as defined herein) to an extent or
in a manner or condition now requiring remediation under any Environmental Law
(as defined herein), (ii) no judicial or administrative proceeding is pending
or, to the knowledge of the Company, threatened relating to liability for any
off-site disposal or contamination and (iii) the Company and its Subsidiaries
have not received in writing any claims or notices alleging liability under any
Environmental Law. Neither the Company nor any Subsidiary is in violation of any
applicable Environmental Law and no condition or event has occurred with respect
to the Company or any Subsidiary that would constitute a violation of such
Environmental Law, excluding in any event, such violations, conditions and
events that would not have a Material Adverse Effect. "Environmental Law" means
any applicable federal, state or local law, regulation, order, decree or
judicial opinion or other agency requirement having the force and effect of law
and relating to Hazardous Substances or the protection of the environment.
"Hazardous Substance" means any toxic or hazardous substance that is regulated
by or under authority of any Environmental Law.
Section 3.14 Intellectual Property.
(a) Definitions. For purposes of this Agreement, "Intellectual
Property" means all of the following as they exist in all jurisdictions
throughout the world, in each case, to the extent owned by, licensed to, or
otherwise used by the Company or the Merger Sub: (A) patents, patent
applications, and other patent rights (including any divisions, continuations,
continuations-in-part, substitutions, or reissues thereof, whether or not
patents are issued on any such applications and whether or not any such
applications are modified, withdrawn, or resubmitted); (B) registered and
material unregistered trademarks, service marks, trade dress, trade names, brand
names, Internet domain names, designs, logos, or corporate names, whether
registered or unregistered, and all registrations and applications for
registration thereof; (C) copyrights, including all renewals and extensions,
copyright registrations and applications for registration, and material
non-registered copyrights; (D) trade secrets, concepts, ideas, designs,
research, processes, procedures, techniques, methods, know-how, data, mask
works, discoveries, inventions, modifications, extensions, improvements, and
other proprietary rights (whether or not patentable or subject to copyright,
mask work, or trade secret protection) (collectively, "Technology"); and (E)
computer software programs, including all source code, object code, and
documentation related thereto (the "Software").
(b) Ownership and Claims. The Company owns, free and clear of
all Liens, and has the unrestricted right to use, sell, or license, all
Intellectual Property, except for failures that, individually or in the
aggregate, have not resulted
<PAGE>
16
and could not reasonably be expected to result in a Material Adverse Effect on
the Company. The Company has not been, during the three years preceding the date
of this Agreement, a party to any Claim, nor, to the knowledge of the Company,
is any Claim threatened, that challenges the validity, enforceability,
ownership, or right to use, sell, or license any Intellectual Property, except
for Claims that, individually or in the aggregate, have not resulted and could
not reasonably be expected to result in a Material Adverse Effect on the
Company. To the knowledge of the Company, no third party is infringing upon any
Intellectual Property, except for infringements that, individually or in the
aggregate, have not resulted and could not reasonably be expected to result in a
Material Adverse Effect on the Company.
(c) Year 2000 Compliance. All Software, hardware, databases,
and embedded control systems (collectively, the "Systems") used by the Company
are Year 2000 Compliant, except for failures to be Year 2000 Compliant that,
individually or in the aggregate, have not resulted and could not reasonably be
expected to result in a Material Adverse Effect on the Company. For purposes of
this Agreement, "Year 2000 Compliant" means that the Systems (i) accurately
process date and time data (including calculating, comparing, and sequencing)
from, into, and between the twentieth and twenty-first centuries, the years 1999
and 2000, and leap year calculations and (ii) operate accurately with other
software and hardware that use standard date format for representation of the
year.
(d) Effect of Transaction. The Company is not, nor, as a
result of the execution and delivery of this Agreement or the performance of its
obligations under this Agreement, will be, in violation of any agreement
relating to any Intellectual Property, except for violations that, individually
or in the aggregate, have not resulted and could not reasonably be expected to
result in a Material Adverse Effect on the Company. After the completion of the
transactions contemplated by this Agreement, the Merger Sub will own all right,
title, and interest in and to or have a license to use all Intellectual Property
on identical terms and conditions as the Company enjoyed immediately prior to
such transactions, except for failures to own or have available for use that,
individually or in the aggregate, have not resulted and could not reasonably be
expected to result in a Material Adverse Effect on the Company.
Section 3.15 Taxes. Except to the extent that failure to do so,
individually or in the aggregate, has not resulted and could not reasonably be
expected to result in a Material Adverse Effect on the Company, the Company and
the Company Subsidiaries have filed all Tax returns and reports to be filed by
them and have paid, or established adequate reserves for, all Taxes required to
be paid by them. Except as, individually or in the aggregate, has not resulted
and could not reasonably be expected to result in a Material Adverse Effect on
the Company, no deficiencies for any Taxes have been proposed, asserted or
assessed against the Company or any Company Subsidiaries, and no requests for
waivers of the time to assess any such Taxes are pending. As used in this
Agreement, "Taxes" shall mean
<PAGE>
17
all federal, state, local and foreign income, property, sales, excise and other
taxes, tariffs or governmental charges of any nature whatsoever.
Section 3.16 Non-Competition Agreements. Neither the Company nor any
Company Subsidiary is a party to any agreement which purports to restrict or
prohibit in any material respect the Company and the Company Subsidiaries
collectively from, directly or indirectly, engaging in any business currently
engaged in by the Company, any Company Subsidiary. None of the Company's
officers, directors or key employees is a party to any agreement which, by
virtue of such person's relationship with the Company, restricts in any material
respect the Company or any Company Subsidiary from, directly or indirectly,
engaging in any of such businesses.
Section 3.17 Assets.
(a) The Company and its Subsidiaries own, or otherwise have
sufficient and legally enforceable rights to use, all of the properties and
assets (real, personal or mixed, tangible or intangible), reasonably necessary
for the conduct of, or otherwise material to, their business and operations (the
"Material Assets"). The Company and its Subsidiaries have good, valid and
marketable title to, or in the case of leased property have good and valid
leasehold interests in, all Material Assets, including but not limited to all
such Material Assets reflected in the balance sheet dated as of September 24,
1999, constituting a portion of the Company's Quarterly Report on Form 10-Q for
the period ended September 24, 1999 or acquired since the date thereof (except
as may have been disposed of in the ordinary course of business consistent with
past practices prior to the date hereof or in accordance herewith), in each case
free and clear of any Lien (as defined below), except Permitted Liens.
"Permitted Liens" means (a) Liens reserved against in the September 24, 1999
Balance Sheet, to the extent so reserved, (b) Liens for Taxes not yet due and
payable or that are being contested in good faith by appropriate proceedings and
for which adequate reserves have been provided in accordance with GAAP or that
are statutory Liens for Taxes not yet delinquent, (c) those Liens that are set
forth in Schedule 3.17 of the Company Disclosure Letter and (d) those Liens
that, in the aggregate with all other Permitted Liens, do not and will not
materially detract from the value of the properties and assets of any of the
Company and its Subsidiaries or materially interfere with the present use
thereof.
Section 3.18 Opinion of Financial Advisor. William Blair & Company
L.L.C. (the "Company Financial Advisor") has delivered to the Board of Directors
of the Company its opinion to the effect that, as of the date of this Agreement,
the Merger Consideration is fair to the Company's stockholders from a financial
point of view (other than the Company Principal), accompanied by an
authorization to include a copy of such opinion in the Proxy Materials.
<PAGE>
18
Section 3.19 Brokers. No broker, finder or investment banker other than
the Company Financial Advisor is entitled to any brokerage, finder's or other
fee or commission in connection with the Merger or the other transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company. Prior to the date of this Agreement, the Company has made available
to the Merger Sub a complete and correct copy of all agreements between the
Company and the Company Financial Advisor under which the Company Financial
Advisor would be entitled to any payment relating to the Merger or any other
transactions.
Section 3.20 Certain Statutes. No "interested shareholder," "fair
price," "moratorium," "control share acquisition" or other similar state or
federal anti- takeover statute or regulation (each a "Takeover Statute") is, as
of the date of this Agreement, applicable to the Merger or any other
transactions contemplated by this Agreement. No holder of shares of Common Stock
is entitled to exercise dissenters' or appraisal rights pursuant to ss. 14A:11-1
of the NJBC or otherwise.
Section 3.21 Information. None of the information to be supplied by the
Company for inclusion or incorporation by reference in the Proxy Statement (as
defined in Section 5.4) will, at the time of the mailing of the Proxy Statement
and any amendments or supplements of the Proxy Statement and at the time of the
Company Stockholders Meeting (as defined in Section 5.4), contain any untrue
statement of a material fact or omit to state any material fact required to be
stated in that Proxy Statement or necessary in order to make the statements in
that Proxy Statement, in light of the circumstances under which they are made,
not misleading. The Proxy Statement (except for those portions of the Proxy
Statement that relate only to Merger Sub or subsidiaries or affiliates of the
Merger Sub) will comply as to form in all material respects with the provisions
of the Exchange Act.
Section 3.22 Vote Required. The Requisite Company Vote is the only vote
of the holders of any class or series of the Company's capital stock necessary
(under the Company Charter Documents, the NJBC, other applicable Law or
otherwise) to approve this Agreement, the Merger or the other transactions
contemplated by this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF MERGER SUB
Merger Sub represents and warrants to the Company as follows:
Section 4.1 Organization. Merger Sub is a corporation duly
incorporated, validly existing and in good standing under the laws of New
Jersey. Since the date of its incorporation, Merger Sub has not engaged in any
activities other
<PAGE>
19
than in connection with arranging any financing required to consummate the
transaction contemplated hereby. For purposes of this Agreement, "Merger Sub
Material Adverse Effect" means any change in or effect on the business, assets,
properties, results of operations or condition (financial or otherwise) of
Merger Sub that is or could reasonably be expected to be materially adverse to
Merger Sub, taken as a whole, or that could reasonably be expected to materially
impair the ability of Merger Sub to perform their respective obligations under
this Agreement or consummate the Merger and the other transactions contemplated
hereby.
Section 4.2 Binding Obligation. Merger Sub has all necessary corporate
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the Merger and the other transactions
contemplated by this Agreement to be consummated by it. This Agreement has been
duly authorized, executed and delivered by Merger Sub and, assuming this
Agreement constitutes a valid and binding obligation of the other party hereto,
constitutes the legal, valid and binding obligation of Merger Sub, enforceable
against Merger Sub in accordance with its terms, except as may be limited by
bankruptcy, insolvency, fraudulent, fraudulent conveyance, reorganization,
moratorium or similar laws from time to time in effect affecting generally the
enforcement of creditors' rights and remedies and by equitable principles of
general applicability.
Section 4.3 No Authorization or Consents Required. No authorization or
approval or other action by, and no notice to or filing with, any Governmental
Entity will be required to be obtained or made by Merger Sub in connection with
the due execution and delivery by Merger Sub of this Agreement and the
consummation by Merger Sub of the Merger as contemplated hereby other than (i)
compliance with applicable requirements of the Exchange Act, (ii) compliance
with the HSR Act, (iii) filings with the Secretary of State of New Jersey to
effect a recapitalization of Merger Sub prior to the Effective Time, (iv) the
filing of the Certificate of Merger in accordance with the NJBC, and (v) where
the failure to obtain such authorization, approval or action, or to provide such
notice or make such filing, individually or in the aggregate, has not resulted
and could not reasonably be expected to result in a Merger Sub Material Adverse
Effect.
Section 4.4 Financing Commitments. Merger Sub has delivered to the
Company true and complete copies of written commitments of (a) Parthenon
Investors, L.P., Chase Capital Partners and The Chase Manhattan Bank, as Trustee
for First Plaza Group Trust to provide equity financing in connection with the
transactions contemplated hereby (the "Equity Financing Commitments") and (b)
Fleet Boston Robertson Stephens Inc. and Fleet National Bank to provide debt
financing in connection with the transactions contemplated hereby (the "Debt
Financing Commitments"), each in amounts sufficient to consummate the
transactions contemplated hereby. The commitment fees set forth in such
financing documents which are due and payable as of the date hereof have been
paid.
<PAGE>
20
Section 4.5 No Conflict. The execution and delivery of this Agreement
by Merger Sub do not, and the performance of this Agreement by each of Merger
Sub will not:
(a) conflict with or violate any provision of any Merger Sub
Charter Document;
(b) assuming that all consents, approvals, authorizations and
other actions described in Section 4.3 have been obtained and all filings and
obligations described in Section 4.3 have been made, conflict with or violate
any foreign or domestic Law applicable to Merger Sub or by which any property or
asset of Merger Sub is or may be bound or affected, except for any such
conflicts or violations which, individually or in the aggregate, have not
resulted and could not reasonably be expected to result in a Merger Sub Material
Adverse Effect; or
(c) result in any breach of or constitute a default (or an
event which with or without notice or lapse of time or both would become a
default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of Merger Sub under, any Contract to which
Merger Sub is a party or by which it or its assets or Properties is or may be
bound or affected, except for any such breaches, defaults or other occurrences
which, individually or in the aggregate, have not resulted and could not
reasonably be expected to result in a Merger Sub Material Adverse Effect;
Section 4.6 Information. None of the information to be supplied by
Merger Sub for inclusion or incorporation by reference in the Proxy Statement
(as defined in Section 5.4) will, at the time of the mailing of the Proxy
Statement and any amendments or supplements of the Proxy Statement and at the
time of the Company Stockholders Meeting (as defined in Section 5.4), contain
any untrue statement of a material fact or omit to state any material fact
required to be stated in that Proxy Statement or necessary in order to make the
statements in that Proxy Statement, in light of the circumstances under which
they are made, not misleading.
Section 4.7 Brokers. No broker, finder or investment banker other than
PaineWebber is entitled to any brokerage, finder's or other fee or commission in
connection with the Merger or the other transactions contemplated hereby based
upon arrangements made by or on behalf of Merger Sub.
<PAGE>
21
ARTICLE 5
COVENANTS
Section 5.1 Conduct of Business of the Company. Except as contemplated
by this Agreement or with the prior written consent of Merger Sub, during the
period from the date of this Agreement to the Effective Time, the Company will,
and will cause each of the Company Subsidiaries to, conduct its operations only
in the ordinary course of business consistent with past practice and will use
its commercially reasonable efforts to, and to cause each Company Subsidiary to,
preserve intact the business organization of the Company and each of the Company
Subsidiaries, to keep available the services of the present officers and key
employees of the Company and the Company Subsidiaries, and to preserve the good
will of customers, suppliers and all other persons having business relationships
with the Company and the Company Subsidiaries. Without limiting the generality
of the foregoing, and except as otherwise contemplated by this Agreement or
disclosed in the Company Disclosure Letter, prior to the Effective Time, the
Company will not, and will not permit any Company Subsidiary to, without the
prior written consent of Merger Sub:
(a) adopt any amendment to the Company Charter Documents or
the comparable organizational documents of any Company Subsidiary;
(b) except for issuances of capital stock of Company
Subsidiaries to the Company or a wholly owned Company Subsidiary, issue, reissue
or sell, or authorize the issuance, reissuance or sale of (i) additional shares
of capital stock of any class, or securities convertible into capital stock of
any class, or any rights, warrants or options to acquire any convertible
securities or capital stock, other than the issue of Company Shares, in
accordance with the terms of the instruments governing such issuance on the date
hereof, pursuant to the exercise of Company Stock Options outstanding on the
date hereof, or (ii) any other securities in respect of, in lieu of, or in
substitution for, Company Shares outstanding on the date hereof;
(c) declare, set aside or pay any dividend or other
distribution (whether in cash, securities or property or any combination
thereof) in respect of any class or series of its capital stock other than
between the Company and any wholly owned Company Subsidiary;
(d) split, combine, subdivide, reclassify or redeem, purchase
or otherwise acquire, or propose to redeem or purchase or otherwise acquire, any
shares of its capital stock, or any of its other securities;
(e) except for (i) increases in salary, wages and benefits of
officers or employees of the Company or the Company Subsidiaries in accordance
with past practice, (ii) increases in salary, wages and benefits granted to
officers and
<PAGE>
22
employees of the Company or the Company Subsidiaries in conjunction with new
hires, promotions or other changes in job status or increases in salary, wages
and benefits to employees of the Company or the Company Subsidiaries pursuant to
collective bargaining agreements entered into in the ordinary course of
business, increase the compensation or fringe benefits payable or to become
payable to its directors, officers or employees (whether from the Company or any
Company Subsidiaries) except for year-end bonuses in accordance with past
practice, or pay any benefit not required by any existing plan or arrangement
(including the granting of stock options, stock appreciation rights, shares of
restricted stock or performance units) or grant any severance or termination pay
to (except pursuant to existing agreements, plans or policies), or enter into
any employment or severance agreement with, any director, officer or other
employee of the Company or any Company Subsidiaries or establish, adopt, enter
into, or materially amend any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
savings, welfare, deferred compensation, employment, termination, severance or
other employee benefit plan, agreement, trust, fund, policy or arrangement for
the benefit or welfare of any directors, officers or current or former
employees, except in each case to the extent required by applicable Law;
provided, however, that nothing in this Agreement will be deemed to prohibit the
payment of benefits as they become payable;
(f) acquire, sell, lease, license, transfer, pledge, encumber,
grant or dispose of (whether by merger, consolidation, purchase, sale or
otherwise) any material assets, including capital stock of Company Subsidiaries
(other than the acquisition and sale of inventory or the disposition of used or
excess equipment and the purchase of supplies and equipment, in either case in
the ordinary course of business consistent with past practice), or enter into
any material commitment or transaction outside the ordinary course of business,
other than transactions between a wholly owned Company Subsidiary and the
Company or another wholly owned Company Subsidiary;
(g) (i) incur, assume or prepay any long-term indebtedness or
incur or assume any short-term indebtedness (including, in either case, by
issuance of debt securities), except that the Company and the Company
Subsidiaries may incur, assume or prepay indebtedness in the ordinary course of
business consistent with past practice under existing lines of credit and
pursuant to the Credit Agreement, dated as of December 6, 1999, between the
Company and certain other parties thereto, (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person except in the ordinary course
of business, or (iii) make any loans, advances or capital contributions to, or
investments in, any other person; or
(h) terminate, cancel or request any material change in, or
agree to any material change in any Contract which is material to the Company
and the Company Subsidiaries taken as a whole, or enter into any Contract which
would
<PAGE>
23
be material to the Company and the Company Subsidiaries taken as a whole, in
either case other than in the ordinary course of business consistent with past
practice; or make or authorize any capital expenditure or acquisition, other
than capital expenditures that are provided for in the Company's budget for the
Company and the Company Subsidiaries taken as a whole for such fiscal year (a
copy of which budget has been provided to Merger Sub);
(i) take any action with respect to accounting policies or
procedures, other than actions in the ordinary course of business and consistent
with past practice or as required pursuant to applicable Law or GAAP;
(j) waive, release, assign, settle or compromise any material
rights, claims or litigation;
(k) make any Tax election or settle or compromise any material
federal, state, local or foreign income Tax liability; or
(l) authorize or enter into any formal or informal written or
other agreement or otherwise make any commitment to do any of the foregoing.
Section 5.2 Other Actions. During the period from the date hereof to
the Effective Time, the Company and Merger Sub shall not, and shall not permit
any of their respective subsidiaries to, take any action that would, or that
could reasonably be expected to, result in any of the conditions to the Merger
set forth in Article 6 hereof not being satisfied.
Section 5.3 Notification of Certain Matters. Merger Sub and the Company
shall promptly notify each other of (a) the occurrence or non-occurrence of any
fact or event which could reasonably be expected (i) to cause any representation
or warranty contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date hereof to the Effective Time, (ii) to
cause any material covenant, condition or agreement hereunder not to be complied
with or satisfied in all material respects or (iii) to result in, in the case of
Merger Sub, a Merger Sub Material Adverse Effect; and, in the case of the
Company, a Material Adverse Effect on the Company, (b) any failure of the
Company or Merger Sub, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder in any material respect; provided, however, that no such notification
shall affect the representations or warranties of any party or the conditions to
the obligations of any party hereunder, (c) any notice or other material
communications from any Governmental Entity in connection with the transactions
contemplated by this Agreement and (d) the commencement of any suit, action or
proceeding that seeks to prevent or seek damages in respect of, or otherwise
relates to, the consummation of the transactions contemplated by this Agreement.
<PAGE>
24
Section 5.4 Proxy Statement.
(a) As promptly as practicable after the execution of this
Agreement, Merger Sub and the Company shall jointly prepare and the Company
shall file with the SEC the proxy statement of the Company (the "Proxy
Statement") relating to the special meeting of the Company's stockholders (the
"Company Stockholders Meeting") to be held to consider approval and adoption of
this Agreement and the Merger. Substantially contemporaneously with the filing
of the Proxy Statement with the SEC, copies of the Proxy Statement shall be
provided to the National Association of Securities Dealers, Inc. ("NASD").
Merger Sub or the Company, as the case may be, shall furnish all information
concerning Merger Sub or the Company as the other party may reasonably request
in connection with such actions and the preparation of the Proxy Statement and
any other filings required to be made in connection within this Agreement and
the transactions contemplated hereby, including, without limitation, a
Transaction Statement on Schedule 13E-3 (collectively, the"Other Filings"). As
promptly as practicable the Proxy Statement will be mailed to the stockholders
of the Company. The Company shall cause the Proxy Statement and the Other
Filings to be filed by it to comply as to form and substance in all material
respects with the applicable requirements of (i) the Exchange Act, including
Sections 14(a) and 14(d) thereof and the respective regulations promulgated
thereunder, (ii) the Securities Act, (iii) the rules and regulations of the NASD
and (iv) the NJBC.
(b) The Proxy Statement shall include the recommendation of
the Board of Directors of the Company to the stockholders of the Company that
they vote in favor of the adoption of this Agreement and the Merger; provided,
however, that subject to Section 7.5(b), the Board of Directors of the Company
may, at any time prior to the Effective Time, withdraw, modify or change any
such recommendation if the Board of Directors of the Company determines in good
faith that failure to so withdraw, modify or change its recommendation would
cause the Board of Directors of the Company to breach its fiduciary duties to
the Company's stockholders under applicable Laws after receipt of advice to such
effect from independent legal counsel (who may be the Company's regularly
engaged independent legal counsel). In addition, the Proxy Statement and the
Proxy Materials will include a copy of the written opinion of the Company
Financial Advisor referred to in Section 3.18.
(c) No amendment or supplement to the Proxy Statement will be
made without the approval of each of Merger Sub and the Company, which approval
shall not be unreasonably withheld or delayed, unless such amendment or
supplement to the Proxy Statement is required to be made by the Company under
applicable Laws. Each of Merger Sub and the Company will advise the other,
promptly after it receives notice thereof, or of any request by the SEC or the
NASD for amendment of the Proxy Statement and the Other Filings or comments
thereon and responses thereto or requests by the SEC for additional information.
<PAGE>
25
(d) The information supplied by the Company for inclusion in
the Proxy Statement shall not, at (i) the time the Proxy Materials (or any
amendment thereof or supplement thereto) is first mailed to the stockholders of
the Company, (ii) the time of the Company Stockholders' Meeting, and (iii) the
Effective Time, contain any untrue statement of a material fact or fails to
state any material fact required to be stated in the Proxy Statement or
necessary in order to make the statements in the Proxy Statement not misleading.
If at any time prior to the Effective Time any event or circumstance relating to
the Company or any Company Subsidiary, or their respective officers or
directors, should be discovered by the Company that should be set forth in an
amendment or a supplement to the Proxy Statement, the Company shall promptly
inform Merger Sub. All documents that the Company is responsible for filing with
the SEC in connection with the transactions contemplated hereby will comply as
to form and substance in all material respects with the applicable requirements
of the NJBC, the Securities Act and the Exchange Act.
(e) The information supplied by Merger Sub for inclusion in
the Proxy Statement shall not, at (i) the time the Proxy Materials (or any
amendment of or supplement to the Proxy Materials) are first mailed to the
stockholders the Company, (ii) the time of the Company Stockholders Meeting, and
(iii) the Effective Time, contain any untrue statement of a material fact or
fail to state any material fact required to be stated in the Proxy Statement or
necessary in order to make the statements in the Proxy Statement not misleading.
If, at any time prior to the Effective Time, any event or circumstance relating
to Merger Sub or any Merger Sub Subsidiary, or their respective officers or
directors, should be discovered by Merger Sub that should be set forth in an
amendment or a supplement to the Proxy Statement, Merger Sub shall promptly
inform the Company. All documents that Merger Sub is responsible for filing in
connection with the transactions contemplated by this Agreement will comply as
to form and substance in all material aspects with the applicable requirements
of NJBC, the Securities Act and the Exchange Act.
(f) The information supplied by any party for inclusion in
another party's Other Filing will be true and correct in all material respects.
Section 5.5 Stockholders' Meeting. The Company shall call and hold the
Company Stockholders Meeting as promptly as practicable for the purpose of
voting upon the adoption of this Agreement and Merger Sub and the Company will
cooperate with each other to cause the Company Stockholders Meeting to be held
as soon as practicable following the mailing of the Proxy Materials to the
stockholders of the Company. The Company shall use its best efforts (through its
agents or otherwise) to solicit from its stockholders proxies in favor of the
adoption of this Agreement, and shall take all other action necessary or
advisable to secure Requisite Company Vote, except, subject to 7.5(b), to the
extent that the Board of Directors of the Company determines in good faith that
doing so would cause the Board of Directors of the Company to breach its
fiduciary duties to the Company's
<PAGE>
26
stockholders under applicable Law after receipt of advice to such effect from
independent legal counsel (who may be the Company's regularly engaged
independent legal counsel).
Section 5.6 Access to Information; Confidentiality. From the date of
this Agreement to the Effective Time, the Company shall (and shall cause
subsidiaries to): (i) provide to Merger Sub and Merger Sub (and its respective
officers, directors, employees, accountants, consultants, legal counsel,
financial advisors, invest ment bankers, financing sources and their respective
advisors, agents and other representatives (collectively, "Representatives"))
access at reasonable times upon prior notice to the officers, employees, agents,
properties, offices and other facilities of the Company and its subsidiaries and
to the books and records thereof; and (ii) furnish promptly such information
concerning the business, properties, Contracts, assets, liabilities, personnel
and other aspects of the Company and its subsidiaries as Merger Sub or its
Representatives may reasonably request. No investigation conducted under this
Section 5.6 shall affect or be deemed to modify any representation or warranty
made in this Agreement. Merger Sub agrees that any information furnished
pursuant to this Section 5.6 will be subject to the letter agreement, dated July
29, 1999, between the Company and Parthenon Capital (the "Confidentiality
Agreement").
Section 5.7 No Solicitation.
(a) The Company agrees that, prior to the Effective Time, it
shall not, and shall not authorize or permit any Company Subsidiaries or any of
its or the Company Subsidiaries' directors, officers, employees, investment
bankers, attorneys or other agents or representatives, directly or indirectly,
to solicit, initiate or encourage any inquiries or the making of any proposal or
provide any information about the Company or the Company Subsidiaries with
respect to any merger, consolidation or other business combination involving the
Company or the Company Subsidiaries or their respective assets or capital stock
(a "Takeover Proposal") or negotiate, explore or otherwise engage in discussions
with any person (other than Merger Sub or its directors, officers, employees,
agents and representatives) with respect to any Takeover Proposal or enter into
any agreement, arrangement or understanding requiring it to abandon, terminate
or fail to consummate the Merger or any other transactions contemplated by this
Agreement; provided, however, that if the Board of Directors of the Company
determines in good faith, after consultation with outside counsel, that it is
necessary to do so in order to act in a manner consistent with its fiduciary
duties to the Company's stockholders under applicable law, the Company may, in
response to any Superior Proposal (as defined below), which proposal was not
solicited by it and which did not otherwise result from a breach of this Section
5.7, and subject to providing prior written notice of its decision to take such
action to Merger Sub and compliance with the other requirements of this Section
5.7, (i) furnish information with respect to the Company and the Company
Subsidiaries to any person making a Superior Proposal pursuant to a customary
<PAGE>
27
confidentiality agreement no less favorable to the Company than the
confidentiality agreement previously entered into by the Company and Merger Sub
(as determined in good faith by the Company based on the advice of its outside
counsel) and (ii) participate in discussions or negotiations regarding such
Superior Proposal.
(b) Except as expressly permitted by this Agreement, neither
the Board of Directors of the Company nor any committee thereof shall (i)
withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to Merger Sub, the approval or recommendation by the Board of Directors
of the Company or such committee of the Merger or this Agreement, (ii) approve
or recommend, or propose publicly to approve or recommend, any Takeover
Proposal, or (iii) cause the Company to enter into any Acquisition Agreement.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 5.7, the Company shall promptly advise
Merger Sub orally and in writing of any request for information or any Takeover
Proposal, the material terms and conditions of such request or Takeover Proposal
(and any amendments or proposed amendments thereto) and the identity of the
person making such request or Takeover Proposal.
(d) Nothing contained in this Section 5.7 shall prohibit the
Company from taking and disclosing to its stockholders a position contemplated
by Rule 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to the Company's stockholders if, in the good faith judgment of the
Board of Directors of the Company, after consultation with outside counsel and
based as to legal matters on the written advice of the Company's independent
legal counsel, failure so to disclose would be inconsistent with its obligations
under applicable law; provided, however, that, except as contemplated by clause
(b) of this Section 5.7, neither the Company nor the Board of Directors of the
Company nor any committee thereof shall withdraw or modify, or propose publicly
to withdraw or modify, its position with respect to this Agreement or the Merger
or approve or recommend, or propose publicly to approve or recommend, a Takeover
Proposal.
(e) For purposes of this Agreement:
(i) "Superior Proposal" means any proposal made by a
third party to acquire, directly or indirectly, including pursuant to a
tender offer, exchange offer, merger, consolidation, business
combination, recapitalization, reorganization, liquidation, dissolution
or similar transaction, for consideration to the Company's stockholders
consisting of cash and/or securities, all of the shares of the
Company's capital stock then outstanding or all or substantially all
the assets of the Company, on terms which the Board of Directors of the
Company determines in its good faith judgment to be more favorable to
the Company's stockholders than the Merger and for which financing, to
the extent required, is then committed or which, in the good faith
<PAGE>
28
judgment of the Board of Directors of the Company, is reasonably
capable of being obtained by such third party.
(ii) "Acquisition Agreement" means any letter of
intent, agreement in principle, acquisition agreement or other similar
agreement, contract or commitment related to any Takeover Proposal.
Section 5.8 Directors' and Officers' Indemnification and Insurance.
(a) Merger Sub agrees that all rights to indemnification now
existing in favor of any employee, agent, director or officer of the Company and
the Company Subsidiaries (the "Indemnified Parties") as provided in their
respective charters or by-laws, in an agreement between an Indemnified Party and
the Company or one of the Company Subsidiaries, or otherwise in effect on the
date hereof shall survive the Merger and shall continue in full force and effect
for a period of not less than six years from the Effective Time; provided that
in the event any claim or claims are asserted or made within such six-year
period, all rights to indemnification in respect of any such claim or claims
shall continue until final disposition of any and all such claims. Merger Sub
also agrees that the Surviving Corporation shall indemnify all Indemnified
Parties to the fullest extent permitted by applicable law with respect to all
acts and omissions arising out of such individuals' services as officers,
directors, employees or agents of the Company or any of the Company Subsidiaries
or as trustees or fiduciaries of any plan for the benefit of employees, or
otherwise on behalf of, the Company or any of the Company Subsidiaries,
occurring prior to the Effective Time including the transactions contemplated by
this Agreement. Without limiting of the foregoing, in the event any such
Indemnified Party is or becomes involved in any capacity in any action,
proceeding or investigation in connection with any matter, including the
transactions contemplated by this Agreement, occurring prior to, and including,
the Effective Time, the Surviving Corporation will pay as incurred such
Indemnified Party's legal and other expenses (including the cost of any
investigation and preparation) incurred in connection therewith.
(b) Merger Sub agrees that from and after the Effective Time,
the Surviving Corporation shall cause to be maintained in effect for not less
than six years from the Effective Time the current policies of the directors'
and officers' liability insurance maintained by the Company; provided that the
Surviving Corporation may substitute therefor policies of at least the same
coverage containing terms and conditions which are no less advantageous and
provided that such substitution shall not result in any gaps or lapses in
coverage with respect to matters occurring prior to the Effective Time; and
provided, further, that the Surviving Corporation shall not be required to pay
an annual premium in excess of 150% of the last annual premium paid by the
Company prior to the date hereof and if the Surviving Corporation is unable to
obtain the insurance required by this Section 5.8(b)
<PAGE>
29
it shall obtain as much comparable insurance as possible for an annual premium
equal to such maximum amount.
Section 5.9 Reasonable Best Efforts. Subject to the terms and
conditions provided in this Agreement and to applicable legal requirements, each
of the parties hereto agrees to use its reasonable best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, in the case of
the Company, consistent with the fiduciary duties of the Company's Board of
Directors, and to assist and cooperate with the other parties hereto in doing,
as promptly as practicable, (i) all things necessary, proper or advisable under
applicable laws and regulations to ensure that the conditions set forth in
Article 6 are satisfied; (ii) to consummate and make effective the transactions
contemplated by this Agreement; and (iv) cause the Effective Time to take place
promptly following shareholder approval of the Merger and in no instance later
than the date referred to in Section 7.1(b). If at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, including the execution of additional instruments, the proper
officers and directors of each party to this Agreement shall take all such
necessary action.
Section 5.10 Consents; Filings; Further Action.
(a) Upon the terms and subject to the conditions hereof, each
of the parties hereto shall use its reasonable best efforts to (i) take, or
cause to be taken, all appropriate action, and do, or cause to be done, all
things necessary, proper or advisable under applicable Law or otherwise to
consummate and make effective the Merger and the other transactions contemplated
hereby, (ii) obtain from Governmental Entities any consents, licenses, permits,
waivers, approvals, authorizations or orders required to be obtained or made by
Merger Sub or the Company or any of their subsidiaries in connection with the
authorization, execution and delivery of this Agreement and the consummation of
the Merger and the other transactions contemplated hereby, (iii) make all
necessary filings, and thereafter make any other submissions either required or
deemed appropriate by each of the parties, with respect to this Agreement and
the Merger and the other transactions contemplated hereby required under (A) the
Securities Act, the Exchange Act and any other applicable federal or Blue Sky
Laws, (B) the HSR Act, (C) the NJBC, (D) any other applicable Law and (E) the
rules and regulations of NASD. The parties hereto shall cooperate and consult
with each other in connection with the making of all such filings, including by
providing copies of all such documents to the nonfiling party and its advisors
prior to filing, and none of the parties will file any such document if any of
the other parties shall have reasonably objected to the filing of such document.
No party to this Agreement shall consent to any voluntary extension of any
statutory deadline or waiting party or to any voluntary delay of the
consummation of the Merger and the other transactions contemplated hereby at the
behest of any Governmental Entity without the consent and agreement of the other
parties to this Agreement, which consent shall not be unreasonably withheld or
delayed.
<PAGE>
30
(b) Notwithstanding the foregoing, nothing in this Section
5.10 shall require, or be construed to require, Merger Sub or the Company, in
connection with the receipt of any regulatory approval, to proffer to, or agree
to (A) sell or hold separate and agree to sell, divest or to discontinue to or
limit, before or after the Effective Time, any assets, businesses, or interest
in any assets or businesses of Merger Sub, the Company or any of their
respective affiliates (or to the consent to any sale, or agreement to sell, or
discontinuance or limitation by Merger Sub or the Company, as the case may be,
of any of its assets or businesses) or (B) agree to any conditions relating to,
or changes or restriction in, the operations of any such asset or businesses
which, in either case, could reasonably be expected to result in a Merger Sub
Material Adverse Effect or a Material Adverse Effect on the Company or to
materially and adversely impact the economic or business benefits to such party
of the transactions contemplated by this Agreement.
Section 5.11 Public Announcements. The initial press release concerning
the Merger shall be a joint press release and, thereafter, Merger Sub and the
Company shall consult with each other before issuing any press release or
otherwise making any public statements with respect to this Agreement or any of
the transactions contemplated hereby and shall not issue any such press release
or make any such public statement prior to such consultation, except to the
extent required by applicable Law or the requirements of NASD, in which case the
issuing party shall use its reasonable best efforts to consult with the other
parties before issuing any such release or making any such public statement.
Section 5.12 Stock Exchange Listings and De-Listings. The parties shall
use their reasonable best efforts to cause the Surviving Corporation to cause
the Company Common Stock to be de-listed from NASD and de-registered under the
Exchange Act as soon as practicable following the Effective Time.
Section 5.13 Expenses. Except as otherwise provided in Section 7.5(b)
and (d), whether or not the Merger is consummated, all Expenses incurred in
connection with this Agreement and the Merger and the other transactions
contemplated hereby shall be paid by the party incurring those Expenses.
Section 5.14 Takeover Statutes. If any Takeover Statute is or may
become applicable to the Merger or the other transactions contemplated hereby,
each of Merger Sub and the Company and its board of directors shall grant such
approvals and take such actions as are necessary so that such transactions may
be consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise act to eliminate or minimize the effects of such statute
or regulation on such transactions.
<PAGE>
31
Section 5.15 Employee Benefit Arrangements.
(a) Merger Sub agrees that the Company and the Company
Subsidiaries will honor, and, from and after the Effective Time, the Surviving
Corporation will honor, in accordance with their respective terms as in effect
on the date hereof, the employment, severance and bonus agreements and
arrangements to which the Company and the Company Subsidiaries, as applicable,
are a party and which are set forth on Schedule 3.10.
(b) Merger Sub agrees that for a period of one year following
the Effective Time, the Surviving Corporation shall continue the (i)
compensation (including bonus and incentive awards) programs and plans and (ii)
employee benefit and welfare plans, programs, contracts, agreements and policies
(including insurance and pension plans but not including stock option or any
other equity-based plan or program), fringe benefits and vacation policies which
are currently provided by the Company; provided that notwithstanding anything in
this Agreement to the contrary the Surviving Corporation shall not be required
to maintain any individual plan or program so long as the benefit plan and
agreements maintained by the Surviving Corporation are, in the aggregate, not
materially less favorable than those provided by the Company immediately prior
to the date of this Agreement; and, provided, further, that nothing in this
sentence shall be deemed to limit or otherwise affect the right of the Surviving
Corporation to terminate employment or change the place of work,
responsibilities, status or designation of any employee or group of employees as
the Surviving Corporation may determine in the exercise of its business judgment
and in compliance with applicable laws.
Section 5.16 Issuance of Class C Preferred Stock. The Company shall
promptly adopt and file with the Secretary of State of New Jersey a resolution
establishing and designating 200,000 shares of the Class C Preferred Stock
having the relative rights, preferences and limitations set forth in Exhibit A
hereto. As part of the Company's plan of recapitalization, upon the surrender of
shares of Common Stock by the Principal Stockholder, the Company shall promptly
issue an equal number of shares of Class C Preferred Stock, without any
additional consideration therefor, such shares of Class C Preferred Stock to be
validly issued, fully paid and non-assessable. The shares of Common Stock so
exchanged shall be treasury shares.
Section 5.17 Solvency Matters. The Company shall provide to its Board
of Directors and Merger Sub any reports or opinions relating to the solvency of
the Surviving Corporation that are prepared in connection with the financing
pursuant to the Debt Financing Commitments and shall cause such reports and
opinions to be addressed to the Board of Directors of the Company.
<PAGE>
32
ARTICLE 6
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger and consummate the
other transactions contemplated hereby to be consummated on the Closing Date is
subject to the satisfaction or waiver at or prior to the Effective Time of each
of the following conditions:
(a) Stockholder Approval. This Agreement and consummation of
the Merger shall have been duly approved and adopted by the holders of
outstanding Common Stock by the Requisite Company Vote.
(b) Governmental Consents. The waiting period applicable to
the consummation of the Merger under the HSR Act shall have expired or been
terminated.
(c) Litigation. No court or Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
Law, order injunction or decree (whether temporary, preliminary or permanent)
that is in effect and restrains, enjoins or otherwise prohibits consummation of
the Merger or the other transactions contemplated hereby or that, individually
or in the aggregate with all other such Laws, orders injunctions or decrees,
could reasonably be expected to result in a Merger Sub Material Adverse Effect
or a Material Adverse Effect on the Company, and no Governmental Entity shall
have instituted any proceeding or threatened to institute any proceeding seeking
any such Law, order injunction or decree.
Section 6.2 Conditions to Obligations of Merger Sub. The obligation of
Merger Sub to effect the Merger and consummate the other transactions
contemplated hereby to be consummated on the Closing Date are also subject to
the satisfaction or waiver by Merger Sub at or prior to the Effective Time of
the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement that are qualified as to
materiality shall be true and correct in all respects, and the representations
and warranties of the Company set forth in this Agreement that are not so
qualified shall be true and correct in all material respects, in each case as of
the date of this Agreement and as of the Closing Date, as though made on and as
of the Closing Date, except to the extent the representation or warranty is
expressly limited by its terms to another date, and Merger Sub shall have
received a certificate (which certificate may be qualified by knowledge to the
same extent as the representations
<PAGE>
33
and warranties of the Company contained in this Agreement are so qualified)
signed on behalf of the Company by an executive officer of the Company to such
effect.
(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and the
Merger Sub shall have received a certificate signed on behalf of the Company by
an executive officer of the Company to such effect.
(c) Material Adverse Effect. Since the date of this Agreement,
there shall have been no Material Adverse Effect on the Company and Merger Sub
shall have received a certificate of an executive officer of the Company to such
effect.
(d) Financing. The Surviving Corporation shall have obtained
the debt financing necessary to consummate the Merger, to pay all fees and
expenses in connection therewith, refinance existing indebtedness of the Company
and to provide working capital for the Surviving Corporation pursuant to the
Debt Financing Commitments or other substantially equivalent financing.
(e) Consents Under Agreements. The Company shall have obtained
the consent, approval or waiver of each person whose consent, approval or waiver
shall be required in order to consummate the transactions contemplated by this
Agreement, except those for which the failure to obtain such consent, approval
or waiver, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect on the Company.
(f) Company Voting Agreement. The Company Principal shall have
performed in all material respects all obligations required to be performed by
him under the Company Voting Agreement prior to the Closing Date.
Section 6.3 Conditions to Obligation of the Company. The obligation of
the Company to effect the Merger and consummate the other transactions
contemplated hereby to be consummated on the Closing Date is also subject to the
satisfaction or waiver by the Company at or prior to the Effective Time of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of Merger Sub set forth in this Agreement that are qualified as to
materiality shall be true and correct in all respects, and the representations
and warranties of Merger Sub set forth in this Agreement that are not so
qualified shall be true and correct in all material respects, in each case as of
the date of this Agreement and as of the Closing Date, as though made on and as
of the Closing Date, except to the extent the representation or warranty is
expressly limited by its terms to another date, and the Company shall have
received a certificate (which certificate may be
<PAGE>
34
qualified by knowledge to the same extent as the representations and warranties
of Merger Sub contained in this Agreement are so qualified) signed on behalf of
Merger Sub by an executive officer of Merger Sub to such effect.
(b) Performance of Obligations of Merger Sub. Merger Sub shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and the Company
shall have received a certificate signed on behalf of Merger Sub by an executive
officer of Merger Sub to such effect.
(c) Material Adverse Effect. Since the date of this Agreement,
there shall have been no Merger Sub Material Adverse Effect and the Company
shall have received a certificate of an executive officer of Merger Sub to such
effect.
(d) Consents Under Agreements. Merger Sub shall have obtained
the consent, approval or waiver of each person whose consent, approval or waiver
shall be required in order to consummate the transactions contemplated by this
Agreement, except those for which failure to obtain such consents, approval or
waiver, individually or in the aggregate, could not reasonably be expected to
result in a Merger Sub Material Adverse Effect.
ARTICLE 7
TERMINATION
Section 7.1 Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, notwithstanding
any requisite approval and adoption of this Agreement, as follows:
(a) by mutual written consent of Merger Sub and the Company
duly authorized by their respective boards of directors;
(b) by either Merger Sub or the Company, if the Effective Time
shall not have occurred on or before June 30, 2000; provided, however, that the
right to terminate this Agreement under this Section 7.1(b) shall not be
available to the party whose failure to fulfill any obligation under this
Agreement shall have been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date;
(c) by either Merger Sub or the Company, if any order
injunction or decree preventing the consummation of the Merger shall have been
entered by any court of competent jurisdiction or Governmental Entity and shall
have become final and nonappealable;
<PAGE>
35
(d) by Merger Sub, if (i) the Board of Directors of the
Company withdraws, modifies or changes its approval or recommendation of this
Agreement in a manner adverse to Merger Sub or shall have resolved to do so,
(ii) the Board of Directors of the Company shall have recommended to the
stockholders of the Company a Takeover Proposal or shall have resolved to do so,
or (iii) a tender offer or exchange offer for any outstanding shares of capital
stock of the Company is commenced and the Board of Directors of the Company
fails to recommend against acceptance of such tender offer or exchange offer by
its stockholders (including by taking no position with respect to the acceptance
of such tender offer or exchange offer by its stockholders); or (iv) the Company
fails to promptly mail the Proxy to the stockholders after receiving SEC
approval;
(e) by Merger Sub or the Company, if this Agreement shall fail
to receive the Requisite Vote for adoption at the Company Stockholders Meeting
or any adjournment or postponement thereof;
(f) by Merger Sub, upon a breach of any material
representation, warranty, covenant or agreement on the part of the Company set
forth in this Agreement, or if any representation or warranty of the Company
shall have become untrue, in either case such that the conditions set forth in
either of Section 6.2(a) or 6.2(b) would not be satisfied (a "Terminating
Company Breach"); provided, however, that, if such Terminating Company Breach is
curable by the Company through the exercise of its reasonable best efforts and
for so long as the Company continues to exercise such reasonable best efforts,
the Merger Sub may not terminate this Agreement under this Section 7.1(f);
(g) by the Company, upon breach of any material
representation, warranty, covenant or agreement on the part of Merger Sub set
forth in this Agreement, or if any representation or warranty of Merger Sub
shall have become untrue, in either case such that the conditions set forth in
either of Section 6.3(a) or 6.3(b) would not be satisfied (a "Terminating Merger
Sub Breach"); provided, however, that, if such Terminating Merger Sub Breach is
curable by Merger Sub through its reasonable best efforts and for so long as
Merger Sub continues to exercise such reasonable best efforts, the Company may
not terminate this Agreement under this Section 7.1(g);
(h) by the Company, if the Board of Directors of the Company
shall, following receipt of advice of independent legal counsel (who may be the
Company's regularly engaged independent legal counsel) that failure to so
terminate would cause the Board of Directors of the Company to breach its
fiduciary duties under applicable Laws and, on or prior to such date, any person
or group (other than Merger Sub) shall have made a public announcement or
otherwise communicated to the Company and its stockholders with respect to a
Superior Proposal; provided, however, that the Company may not terminate this
Agreement pursuant to this Section 7.1(h) until five business days have elapsed
following delivery
<PAGE>
36
to Merger Sub of written notice of such determination of the Company (which
written notice will inform Merger Sub of the material terms and conditions of
the Superior Proposal); provided, further, however, that such termination under
this Section 7.1(h) shall not be effective until the Company has made payment to
Merger Sub of the amounts required to be paid pursuant to Section 7.5(b).
Section 7.2 Effect of Termination. Except as provided in Section 8.2,
in the event of termination of this Agreement pursuant to Section 7.1, this
Agreement shall forthwith become void, there shall be no liability under this
Agreement on the part of Merger Sub or the Company or any of their respective
Representatives, and all rights and obligations of each party hereto shall
cease, subject to the remedies of the parties set forth in Sections 7.5(b) and
(c); provided, however, that nothing in this Agreement shall relieve any party
from liability for the breach of any of its representations and warranties or
any of its covenants or agreements set forth in this Agreement.
Section 7.3 Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; provided that, after the approval of
this Agreement by the stockholders of the Company, no amendment may be made that
would reduce the amount or change the type of consideration into which each
Company Share shall be converted upon consummation of the Merger. This Agreement
may not be amended except by an instrument in writing signed by the parties
hereto.
Section 7.4 Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any obligation or other
act of any other party hereto, (b) waive any inaccuracy in the representations
and warranties contained in this Agreement or in any document delivered pursuant
hereto, and (c) waive compliance with any agreement or condition contained in
this Agreement. Any waiver of a condition set forth in Section 6.1, or any
determination that such a condition has been satisfied, will be effective only
if made in writing by each of the Company and Merger Sub and, unless otherwise
specified in such writing, shall thereafter operate as a waiver (or
satisfaction) of such conditions for any and all purposes of this Agreement. Any
such extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
Section 7.5 Expenses following Termination.
(a) Except as set forth in this Section 7.5, all Expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid in accordance with the provisions of Section 5.13. For
purposes of this Agreement, "Expenses" consist of all out-of-pocket expenses
(including all fees, commitment fees and expenses of counsel, accountants,
commercial and investment bankers, lenders, experts and consultants to a party
hereto and its affiliates) incurred
<PAGE>
37
by a party or on its behalf to the extent directly related to the authorization,
preparation, negotiation, execution and performance of this Agreement, the
preparation, printing, filing and mailing of the Proxy Statement, the
solicitation of stockholder approvals and all other matters related to the
closing of the transactions contemplated hereby up to a maximum of $1,000,000.
(b) The Company agrees that, if (i) the Company shall
terminate this Agreement pursuant to Section 7.1(h), (ii) Merger Sub shall
terminate this Agreement pursuant to Section 7.1(d), or (iii) (A) Merger Sub
shall terminate this Agreement pursuant to Section 7.1(e) due to the failure to
obtain the approval of the Company's stockholders at the Company Stockholders'
Meeting and (B) at the time of such failure, any person shall have made a public
announcement or otherwise communicated to the Company and its stockholders with
respect to a Takeover Proposal with respect to the Company, then in accordance
with Section 7.5(c), after such termination, or in the case of clause (iii)
after the consummation of such Takeover Proposal, the Company shall pay to
Merger Sub an amount equal to Merger Sub's documented Expenses in connection
with this Agreement and the transactions contemplated hereby and a termination
fee in the amount of $7,000,000 (collectively, such Expenses and such fee, the
"Termination Amount"), which Termination Amount shall be exclusive of any
Expenses paid pursuant to Section 5.13.
(c) Any payment required to be made pursuant to Section 7.5(b)
shall be made to Merger Sub by the Company not later than two business days
after delivery to the Company by Merger Sub of notice of demand for payment and
shall be made by wire transfer of immediately available funds to an account
designated by Merger Sub.
(d) The Company agrees that it shall pay to Merger Sub an
amount equal to Merger Sub's documented Expenses directly related to this
Agreement and the transactions contemplated hereby if this Agreement is
terminated pursuant to 7.1(e) or 7.1(f), and Merger Sub agrees that it shall pay
to the Company an amount equal to the Company's documented Expenses directly
related to this Agreement and the transactions contemplated hereby if this
Agreement is terminated pursuant to Section 7.1(g).
(e) The Company acknowledges that the agreements contained in
this Section 7.5 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Merger Sub would not enter into
this Agreement; accordingly, if the Company fails to pay promptly the
Termination Amount, and, in order to obtain such payment, Merger Sub commences a
suit which results in a judgment against the Company for the Termination Amount,
the Company shall pay to Merger Sub's Expenses in connection with such suit,
together with interest on the amount of the Termination Amount at the prime rate
of Fleet National Bank in effect on the date such payment was required to be
made.
<PAGE>
38
ARTICLE 8
MISCELLANEOUS
Section 8.1 Certain Definitions. For purposes of this Agreement:
(a) The term "affiliate," as applied to any person, means any
other person directly or indirectly controlling, controlled by, or under common
control with, that person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that person, whether through the
ownership of voting securities, by contract or otherwise.
(b) The term "business day" means any day, other than
Saturday, Sunday or a federal holiday, and shall consist of the time period from
12:01 a.m. through 12:00 midnight Eastern time. In computing any time period
under this Agreement, the date of the event which begins the running of such
time period shall be included except that if such event occurs on other than a
business day such period shall begin to run on and shall include the first
business day thereafter.
(c) The term "including" means, unless the context clearly
requires otherwise, including but not limited to the things or matters named or
listed after that term.
(d) The term "knowledge," as applied to the Company or the
Merger Sub, means the knowledge of the executive officers of the Company or the
Merger Sub, as the case may be.
(e) The term "person" shall include individuals, corporations,
limited and general partnerships, trusts, limited liability companies,
associations, joint ventures, Governmental Entities and other entities and
groups (which term shall include a "group" as such term is defined in Section
13(d)(3) of the Exchange Act).
(f) The term "subsidiary" or "subsidiaries" means, with
respect to the Merger Sub, the Company or any other person, any entity of which
the Merger Sub, the Company or such other person, as the case may be (either
alone or through or together with any other subsidiary), owns, directly or
indirectly, stock or other equity interests constituting more than 50% of the
voting or economic interest in such entity.
Section 8.2 Non-Survival of Representations, Warranties and Agreements.
The representations, warranties and agreements in this Agreement and
<PAGE>
39
in any certificate delivered under this Agreement shall terminate at the
Effective Time or upon the termination of this Agreement under Section 7.1, as
the case may be, except that the agreements set forth in Articles 1 and 2 and
Sections 5.8 and 5.13 shall survive the Effective Time, those set forth in
Sections 5.6, 7.2 and 7.5 and this Article 8 shall survive termination of this
Agreement and those set forth in Section 5.13 shall survive for a period of one
year after termination of this Agreement. Each party agrees that, except for the
representations and warranties contained in this Agreement and the Company
Disclosure Letter, no party to this Agreement has made any other representations
and warranties, and each party disclaims any other representations and
warranties, made by itself or any of its officers, directors, employees, agents,
financial and legal advisors or other Representatives with respect to the
execution and delivery of this Agreement or the transactions contemplated by
this Agreement, notwithstanding the delivery of disclosure to any other party or
any party's representatives of any documentation or other information with
respect to any one or more of the foregoing.
Section 8.3 Counterparts. This Agreement may be executed in any number
of counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts shall together constitute the same
agreement.
Section 8.4 Governing Law and Venue; Waiver of Jury Trial.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL
RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH
THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAW
PRINCIPLES, EXCEPT THAT NEW JERSEY LAW SHALL APPLY TO THE EXTENT REQUIRED IN
CONNECTION WITH THE EFFECTUATION OF THE MERGER. The parties irrevocably submit
to the jurisdiction of the federal courts of the United States of America
located in the State of New York solely in respect of the interpretation and
enforcement of the provisions of this Agreement and of the documents referred to
in this Agreement, and in respect of the transactions contemplated by this
Agreement and by those documents, and hereby waive, and agree not to assert, as
a defense in any action, suit or proceeding for the interpretation or
enforcement of this Agreement or of any such document, that it is not subject to
this Agreement or that such action, suit or proceeding may not be brought or is
not maintainable in said courts or that the venue thereof may not be appropriate
or that this Agreement or any such document may not be enforced in or by such
courts, and the parties hereto irrevocably agree that all claims with respect to
such action or proceeding shall be heard and determined in such a federal court.
The parties hereby consent to and grant any such court jurisdiction over the
person of such parties and over the subject matter of such dispute and agree
that mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 8.5 or in such other manner as may
be permitted by law, shall be valid and sufficient service thereof.
<PAGE>
40
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND
DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDI
TIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION DIRECTLY OR INDIRECTLY ARIS ING OUT OF OR RELATING TO THIS
AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY
CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH
SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii)
EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION 8.4.
Section 8.5 Notices. Any notice, request, instruction or other document
to be given hereunder by any party to the others shall be in writing and
delivered personally or sent by registered or certified mail, postage prepaid,
or by facsimile:
if to Merger Sub:
WM Acquisition, Inc.
c/o Parthenon Capital
200 State Street
Boston, MA 02109
Attention: John Rutherford
Fax: (617) 478-7010
with copies to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: James M. Dubin, Esq.
Fax: (212) 757-3990
and
<PAGE>
41
Chase Capital Partners
380 Madison Avenue
New York, New York 10017
Attention: Christopher C. Behrens
Fax: (212) 622-3755
with copies to:
O'Sullivan, Graev & Karabell
30 Rockefeller Plaza
New York, New York 10112
Attention: William B. Kuesel, Esq.
Fax: (212) 408-2420
if to the Company:
Fred B. Gross
333 Harper Drive
Moorestown, NJ 08057
Attention:
Fax: (856) 533-3104
with copies to:
Morgan, Lewis & Bockius, LLP
502 Carnegie Center
Princeton, New Jersey 08540
Attention: Steven M. Cohen, Esq.
Fax: (609) 919-6639
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
Section 8.6 Entire Agreement. This Agreement (including any exhibits
and annexes to this Agreement), the Company Disclosure Letter and the Merger Sub
Disclosure Letter constitute the entire agreement and supersede all other prior
agreements, understandings, representations and warranties, both written and
oral, among the parties, with respect to the subject matter of this Agreement.
Section 8.7 No Third Party Beneficiaries. Except as provided in Section
5.8 this Agreement is not intended to confer upon any person other than the
parties to this Agreement any rights or remedies under this Agreement.
<PAGE>
42
Section 8.8 Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability or the other provisions of this
Agreement. If any provision of this Agreement, or the application of that
provision to any person or any circumstance, is invalid or unenforceable, (a) a
suitable and equitable provision shall be substituted for that provision in
order to carry out, so far as may be valid and enforceable, the intent and
purpose of the invalid or unenforceable provision and (b) the remainder of this
Agreement and the application of the provision to other persons or circumstances
shall not be affected by such invalidity or unenforceability, nor shall such
invalidity or unenforceability affect the validity or enforceability of the
provision, or the application of that provision, in any other jurisdiction.
Section 8.9 Interpretation. The table of contents and headings in this
Agreement are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions of this Agreement. Where a reference in this Agreement is made to a
section, exhibit or annex, that reference shall be to a section of or exhibit or
annex to this Agreement unless otherwise indicated. Wherever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation."
Section 8.10 Assignment. This Agreement shall not be assignable by
operation of law or otherwise without the prior written consent of the other
party hereto.
[The remainder of this page has been left intentionally blank]
<PAGE>
43
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the parties to this Agreement as of the date
first written above.
WM ACQUISITION, INC.
By: /s/ Drew Sawyer
-----------------------------
Name: Drew Sawyer
Title: Vice President
WILMAR INDUSTRIES, INC.
By: /s/ Fred B. Gross
-----------------------------
Name: Fred B. Gross
Title: Vice President
<PAGE>
EXHIBIT A
Terms of Class C Preferred Stock
Liquidation Preference: $.10 per share
Dividend: Shares pro rata with Common Stock
Voting: On any matter submitted to stockholders, one vote
per share, voting with Common Stock, except as
otherwise required by the NJBC.
[Conformed Copy]
--------- ----
VOTING AND EXCHANGE AGREEMENT
VOTING AND EXCHANGE AGREEMENT, dated as of December 22, 1999 (this
"Agreement"), by and between WM Acquisition, Inc., a New Jersey corporation (the
"Merger Sub"), and Mr. William Green, a stockholder (the "Stockholder") of
Wilmar Industries, Inc., a New Jersey corporation (the "Company").
WHEREAS, the Company and Merger Sub propose to enter into an Agreement
and Plan of Merger and Recapitalization, dated as of the date hereof (the
"Merger Agreement"), which provides for, among other things, the merger of
Merger Sub with and into the Company (the "Merger");
WHEREAS, as of the date hereof, the Stockholder is a holder of record
or Beneficially Owns (as defined herein) shares of common stock, no par value
per share, of the Company ("Company Common Stock"); and
WHEREAS, as a condition to the willingness of Merger Sub to enter into
the Merger Agreement, Merger Sub has required that the Stockholder agree, and in
order to induce Merger Sub to enter into the Merger Agreement, the Stockholder
has agreed to enter into this Agreement with respect to all of the shares of
Company Common Stock and shares of Class C Preferred Stock, par value $.10 per
share, of the Company now held of record or Beneficially Owned and which may
hereafter be acquired by such Stockholder (collectively, the "Shares").
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 General. Capitalized terms used and not defined herein have
the respective meanings ascribed to them in the Merger Agreement.
Section 1.2 Beneficial Ownership. For purposes of this Agreement,
"Beneficially Own" or "Beneficial Ownership" with respect to any securities
shall mean "beneficial ownership" of such securities (as determined pursuant to
Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), including pursuant to any agreement, arrangement or understanding,
whether or not in writing.
<PAGE>
2
ARTICLE II
VOTING
Section 2.1 Voting Agreement. The Stockholder hereby agrees as follows:
(a) to appear, or cause the holder of record on any applicable
record date with respect to any Shares Beneficially Owned by such
Stockholder (the "Record Holder") to appear, in person or by proxy, for
the purpose of obtaining a quorum at any annual or special meeting of
stockholders of the Company and at any adjournment thereof at which
matters relating to the Merger, the Merger Agreement or any transaction
contemplated thereby are considered; and
(b) at any meeting of the stockholders of the Company, however
called, and in any action by consent of the stockholders of the
Company, to vote, or cause to be voted by the Record Holder, in person
or by proxy, the Shares held of record or Beneficially Owned by the
Stockholder: (i) in favor of the Merger, the Merger Agreement (as
amended from time to time) and the transactions contemplated by the
Merger Agreement and (ii) against any proposal for any extraordinary
corporate transaction, such as a recapitalization, dissolution,
liquidation, or sale of assets of the Company or any merger,
consolidation or other business combination (other than the Merger)
between the Company and any Person (other than Merger Sub) or any other
action or agreement in each case that is intended or which reasonably
could be expected to (x) result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the
Company under the Merger Agreement, (y) result in any of the conditions
to the Company's obligations under the Merger Agreement not being
fulfilled or (z) impede, interfere with, delay, postpone or adversely
affect the Merger and the transactions contemplated by the Merger
Agreement.
Section 2.2 Proxy. The Stockholder hereby revokes any and all prior
proxies or powers-of-attorney in respect of any of the Shares and constitutes
and appoints Merger Sub or any nominee of Merger Sub, with full power of
substitution and resubstitution, at any time during the term of this Agreement,
as its true and lawful attorney and proxy (its "Proxy"), for and in its name,
place and stead, to demand that the Secretary of the Company call a special
meeting of the stockholders of the Company for the purpose of considering any
matter referred to in Section 2.1 (if permitted under the Company's Certificate
of Incorporation or By-Laws) and to vote all of the Stockholder's Shares as its
Proxy, at every annual, special, adjourned or postponed meeting of the
stockholders of the Company, including the right to sign his name (as
Stockholder) to any consent, certificate or other document relating to the
Company that New Jersey law may permit or require as provided in Section 2.1.
Section 2.3 No Ownership Interest. Except as set forth in Section 2.1
and Section 2.2, nothing contained in this Voting Agreement shall be deemed to
vest in Merger
<PAGE>
3
Sub any direct or indirect ownership or incidence of ownership of or with
respect to any Shares. All rights, ownership and economic benefits of and
relating to the Shares shall remain and belong to the Stockholder.
Section 2.4 Evaluation of Investment. The Stockholder, by reason of his
knowledge and experience in financial and business matters, believes himself
capable of evaluating the merits and risks of the investment in shares of the
Class C Preferred Stock of the Company and shares of preferred stock and common
stock of Surviving Corporation, contemplated by this Agreement and the Merger
Agreement. The Stockholder acknowledges receipt and review of a copy of the
Merger Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to Merger Sub as
follows:
Section 3.1 Authority Relative to This Agreement. The Stockholder has
all necessary power and authority to execute and deliver this Agreement, to
perform his obligations hereunder and to consummate the transactions
contemplated hereby. Such Stockholder is an individual with the capacity to
enter into this Agreement. This Agreement has been duly and validly executed and
delivered by the Stockholder and, assuming the due authorization, execution and
delivery by the other parties hereto, constitutes a legal, valid and binding
obligation of the Stockholder, enforceable against the Stockholder in accordance
with its terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting creditors'
rights generally or by general principles governing the availability of
equitable remedies.
Section 3.2 No Conflict. (a) The execution and delivery of this
Agreement by the Stockholder does not, and the performance of this Agreement by
the Stockholder shall not, (i) conflict with or violate any agreement,
arrangement, law, rule, regulation, order, judgment or decree to which the
Stockholder is a party or by which the Stockholder (or the Shares held of record
or Beneficially Owned by such Stockholder) is bound or affected or (ii) result
in any breach of or constitute a default (or an event that with notice or lapse
or time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the Shares held of record or
Beneficially Owned by the Stockholder pursuant to any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Stockholder is a party or by which the
Stockholder (or the Shares held of record or Beneficially Owned by the
Stockholder) is bound or affected.
(b) The execution and delivery of this Agreement by the Stockholder
does not, and the performance of this Agreement by the Stockholder shall not,
<PAGE>
4
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental entity except for applicable requirements, if
any, of federal or state securities and antitrust laws.
Section 3.3 Title to the Shares. As of the date hereof, the Stockholder
is the record or Beneficial Owner of the Shares listed opposite the name of the
Stockholder on the signature page hereto. The Shares listed opposite the name of
the Stockholder on the Stockholder's signature page hereto are all the
securities of the Company either held of record or Beneficially Owned by the
Stockholder. Except as set forth in Section 2.2, the Stockholder has not
appointed or granted any proxy, which appointment or grant is still effective,
with respect to the Shares held of record or Beneficially owned by the
Stockholder. The Shares listed opposite the name of the Stockholder on the
signature page hereto are owned free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, limitations on the
Stockholder's voting rights, charges and other encumbrances of any nature
whatsoever.
ARTICLE IV
COVENANTS OF THE STOCKHOLDER
Section 4.1 No Inconsistent Agreements. The Stockholder hereby
represents, warrants, covenants and agrees that, except as contemplated by this
Agreement and the Merger Agreement, the Stockholder has not and shall not enter
into any voting agreement or grant a proxy or power of attorney with respect to
the Shares held of record or Beneficially Owned by the Stockholder.
Section 4.2 Transfer of Title. The Stockholder hereby covenants and
agrees that the Stockholder will not, prior to the termination of this
Agreement, either directly or indirectly, offer or otherwise agree to sell,
assign, pledge, hypothecate, transfer, exchange, or dispose of any Shares or
options, warrants or other convertible securities to acquire or purchase Company
Common Stock or Series C Preferred Stock (collectively, "Derivative Securities")
or any other securities or rights convertible into or exchangeable for Company
Common Stock, owned either directly or indirectly by the Stockholder or with
respect to which the Stockholder has the power of disposition, whether now or
hereafter acquired without the prior written consent of Merger Sub (provided
nothing contained herein will be deemed to restrict the exercise or conversion
of Derivative Securities outstanding on the date hereof). The Stockholder hereby
agrees and consents to the entry of stop transfer instructions by the Company
against the transfer of any Shares inconsistent with the terms of this Section
4.2.
Section 4.3 Exchange of Shares. Prior to the Effective Time, the
Stockholder shall exchange 164,384 shares of Common Stock for an equal number of
Shares of Class C Preferred Stock as contemplated by Section 5.16 of the Merger
Agreement pursuant to a plan of recapitalization adopted by the Company.
<PAGE>
5
ARTICLE V
MISCELLANEOUS
Section 5.1 No Solicitation. From the date hereof until the Effective
Time or, if earlier, the termination of the Merger Agreement in accordance with
its terms, the Stockholder (a) shall not have, or shall immediately terminate
any discussions with, any third party concerning a Takeover Proposal and (b)
shall not, and shall not authorize any officer, director, employee, controlled
affiliate, investment banker or other agents (in such agency capacity), or the
Stockholder to, directly or indirectly, (i) solicit, engage in discussions or
negotiate with any Person (whether such discussions or negotiations are
initiated by the Stockholder or otherwise) or take any other action intended or
designed to facilitate the efforts of any Person, other than Merger Sub,
relating to a Takeover Proposal, (ii) provide information with respect to the
Company or any of its subsidiaries to any Person, other than Merger Sub,
relating to a possible Takeover Proposal by any person other than Merger Sub,
(iii) enter into an agreement with any person, other than Merger Sub, providing
for a possible Takeover Proposal, or (iv) make or authorize any statement,
recommendation or solicitation in support of any possible Takeover Proposal by
any Person, other than by Merger Sub.
Section 5.2 Termination. This Agreement shall terminate upon the
earlier to occur of (i) the Effective Time, (ii) the termination of the Merger
Agreement in accordance with its terms or (iii) unless extended by agreement of
each of the parties hereto, [June 30, 2000]. Upon such termination, no party
shall have any further obligations or liabilities hereunder; provided, however,
that nothing in this Agreement shall relieve any party from liability for the
breach of any of its representations, warranties, covenants and agreements set
forth in this Agreement prior to such termination.
Section 5.3 Additional Shares. If, after the date hereof, the
Stockholder acquires the right to vote any additional shares of the Common Stock
or Class C Preferred Stock (any such shares shall be referred to herein as
"Additional Shares"), including, without limitation, upon exercise or conversion
of any Derivative Security or through any stock dividend or stock split, the
provisions of this Agreement applicable to the Shares shall be applicable to
such Additional Shares as if such Additional Shares had been outstanding Shares
as of the date hereof. The provisions of the immediately preceding sentence
shall be effective with respect to Additional Shares without action by any
Person immediately upon the acquisition by a Stockholder of record or Beneficial
Ownership of such Additional Shares.
Section 5.4 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
<PAGE>
6
Section 5.5 Entire Agreement. This Agreement, if an to the extent
entered into by the Stockholder and Merger Sub, constitutes the entire agreement
between Merger Sub and the Stockholder with respect to the subject matter hereof
and supersedes all prior agreements and understandings, both written and oral,
between the Merger Sub and the Stockholder with respect to the subject matter
hereof.
Section 5.6 Amendment. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
Section 5.7 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule or law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of this Agreement is not affected in any manner materially adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereby shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in a mutually acceptable manner in order that the terms of this Agreement remain
as originally contemplated.
Section 5.8 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made and shall be effective upon receipt, if delivered personally, upon
receipt of a transmission confirmation if sent by facsimile (with a confirming
copy sent by overnight courier) and on the next business day if sent by Federal
Express, United Parcel Service, Express Mail or other reputable overnight
courier to the parties at the following addresses (or at such other address for
a party as shall be specified by notice):
If to the Stockholder to:
William Green
Wilmar Industries, Inc.
303 Harper Drive
Moorestown, New Jersey 08057
with a copy to:
Drinker, Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, Pennsylvania 19107
Attention: William M. Goldstein, Esq.
Fax No.: 215-988-2757
<PAGE>
7
If to Merger Sub, to:
WM Acquisition, Inc.
c/o Parthenon Capital
200 State Street
Boston, Massachusetts 02109
Attention: John Rutherford
Fax No.: (617) 478-7010
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Attention: James M. Dubin, Esq.
Fax No.: (617) 478-7010
and
Chase Capital Partners
380 Madison Avenue
New York, New York 10017
Attention: Christopher C. Behrens
Fax No.: (212) 622-3755
with copies to:
O'Sullivan, Graev & Karabell
30 Rockefeller Plaza
New York, New York 10112
Attention: William B. Kuesel, Esq.
Fax No.: (212) 408-2420
Section 5.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such state without giving
effect to the provisions thereof relating to conflicts of law.
Section 5.10 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be an original and all of which, when
taken together, shall constitute one and the same instrument.
<PAGE>
8
IN WITNESS WHEREOF, the Stockholder and Merger Sub have caused this
Agreement to be duly executed on the date hereof.
WM ACQUISITION, INC.
By: /s/ Drew Sawyer
--------------------------
Name: Drew Sawyer
Title: Vice President
/s/ William Green Number of Shares: 2,013,536
- ------------------------------
William Green
PARTHENON INVESTORS L.P.
200 State Street
Boston, MA 02109
December 22, 1999
WM ACQUISITION, INC.
c/o Parthenon Capital
200 State Street
Boston, Massachusetts 02109
Attention: John Rutherford
Facsimile: (617) 478-7010
Ladies and Gentlemen:
Parthenon Investors L.P. (together with one or more of its affiliated
investment funds, the "Fund") is pleased to offer this commitment to purchase
your securities for the purpose of effecting a recapitalization of WILMAR
INDUSTRIES, INC., a New Jersey corporation (the "Company"), pursuant to a Merger
(the "Merger") of WM ACQUISITION, INC., a New Jersey corporation ("Merger Sub")
into the Company. Capitalized terms used but not defined herein have the
meanings ascribed to them in the Merger Agreement (as defined below).
We understand that you have made a proposal to enter into a merger
agreement substantially in the form attached hereto (the "Merger Agreement")
whereby an aggregate of $235 million of consideration (the "Aggregate
Consideration") would be provided to the Company's stockholders based on an
offer price of $18.25 per share. The Aggregate Consideration includes all
amounts necessary to cash out or repay all outstanding shares of preferred
stock, common stock, warrants and options, except for the rollover of
approximately $3 million of stock by the Company's founder. Management of the
Company will invest in common stock and preferred stock of Merger Sub in a cash
or exchange transaction. We understand that the total amount needed to fund the
Merger, including the payment of related fees and expenses of Merger Sub, and
refinancing the Company's outstanding indebtedness, and to provide working
capital availability will be approximately $324.1 million, which is expected to
be
<PAGE>
provided as set forth below:
(in millions)
Senior Secured Credit Facility $150.0
Senior Subordinated Notes 40.0
Redeemable Preferred Stock 133.0
Common Stock 1.1
Total $324.1
1. Commitment. The Fund hereby commits to providing a portion of
the common and preferred stock components of the Aggregate
Consideration through the purchase of up to $65 million of
newly issued shares of Preferred Stock and newly issued shares
of Merger Sub's Common Stock, representing approximately
43.03% and 48.53% of the common and preferred equity to be
outstanding immediately following the closing of the
transaction. The Fund's commitment is subject to the following
conditions:
a. The New Equity Investors (the "Investors") in
Schedule A shall have fully funded their commitments
as set forth therein and, following the Merger, the
capitalization of the Company shall be as set forth
in Schedule A;
b. The terms of the Preferred Stock shall be consistent
with the attached Preferred Stock Term Sheet and
shall be in form reasonably acceptable to the Fund;
c. The execution and delivery of mutually acceptable
Purchase Agreements for the Common Stock and
Preferred Stock between you and the Investors,
containing standard representations, warranties and
covenants; and
d. The execution and delivery of a mutually acceptable
Shareholders Agreement consistent with the attached
Wilmar Shareholders' Agreement
<PAGE>
Term Sheet.
2. Merger Documentation. Merger Sub and the Company will execute
or cause to be executed and delivered on or before the Closing
Date referred to in paragraph 8 hereof, all necessary
documentation, including forms of securities, the Merger
Agreement, the Debt Financing Commitments, the other Equity
Financing Commitments, and the other agreements, documents,
instruments, certificates and assurances from Merger Sub, the
Company and such other persons as the Fund and its counsel may
reasonably request and containing such terms and conditions as
the Fund shall reasonably approve (collectively, the
"Financing Documents"). Prior to the Closing Date, the
Financing Documents may not be amended, supplemented, restated
or terminated and no waiver of any condition contained in the
Financing Documents may be waived without the Fund's consent,
which shall not be unreasonably withheld. Copies of all of the
Financing Documents and other documents to which Merger Sub
is, or the Company will be, a party will be delivered to the
Fund promptly. The Fund and its counsel shall be entitled to
review and comment on all future Financing Documents and other
documents to which Merger Sub is, or the Company will be, a
party.
3. Closing Conditions. In addition to the matters referred to in
paragraphs 1 and 2, the Fund's obligations to consummate this
commitment shall be subject to the conditions that Merger Sub
shall have entered into the Merger Agreement, all conditions
precedent to the closing of the transactions contemplated by
the Merger Agreement shall have been satisfied or waived to
the satisfaction of the Fund and the merger shall be
consummated immediately following the Fund's purchase of your
stock.
4. Filings. Merger Sub agrees to provide copies of all filings to
be made with and notices to be given by Merger Sub or the
Company to any governmental or regulatory authority prior to
making such filing or providing such notice with respect to
the Merger and the related financing transactions and not to
make any such filing to which the Fund is a party without the
Fund's prior consent or to which Merger Sub is a party without
prior consultation with the Fund. The Fund and Merger Sub
agree to jointly prepare, and cooperate with each other with
respect to, any and all governmental or regulatory filings to
which Merger Sub or
<PAGE>
the Fund is a filing or reporting person.
5. No Solicitation. Without the Fund's prior consent, until the
closing of the transactions contemplated hereby or the date
referred to in Section 7.1(b) of the Merger Agreement, Merger
Sub will not and will not authorize any of its affiliates (or
authorize or permit any of their respective representatives)
to take, directly or indirectly, any action to initiate,
assist, solicit, receive, negotiate, encourage or accept any
offer or inquiry from any person (other than persons from
which financing is arranged by the Fund or its affiliates or
persons who you have referred to the Fund or its affiliates
and whom have been approved by the Fund) to (a) provide any
debt or equity financing other than as contemplated by the
Debt Financing Commitments and the Equity Financing
Commitments (collectively, a "Financing") or purchase all or
substantially all of the assets or any capital stock of Merger
Sub or the Company (whether through a purchase of stock,
merger, asset sale or related transaction) (a "Sale of the
Company"), (b) reach any agreement or understanding (whether
or not such agreement or understanding is absolute, revocable,
contingent or conditional) for, or otherwise attempt to
consummate, any Financing or Sale of the Company or (c)
furnish or cause to be furnished any information with respect
to Merger Sub, the Company or any of their respective
affiliates to any person (other than as contemplated by this
letter) who you, or any of your representatives, know or have
reason to believe is in the process of considering any
Financing or Sale of the Company. The obligations under this
paragraph shall terminate and be of no further force and
effect in the event that this letter is terminated by the Fund
in accordance with its terms.
6. Fees and Expenses. (a) If Merger Sub receives any payment
pursuant to Section 7.5 of the Merger Agreement, it will
promptly (a) pay to the Fund its Pro Rata Portion of the
difference between any Termination Amount and the portion of
the Termination Amount payable to PaineWebber Incorporated and
(b) pay or reimburse the Fund for all of its out-of-pocket
expenses (including all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to
the Fund) incurred by the Fund or on its behalf in connection
with or related to the authorization, preparation,
negotiation, execution and performance of this letter, the
preparation, printing, filing and mailing of the Proxy
Statement, the solicitation of stockholder approvals and all
other matters related to the closing of the transactions
contemplated hereby (the "Expenses"); provided that to the
extent
<PAGE>
that the aggregate amount of Expenses to be paid or reimbursed
to the parties to the Equity Financing Commitments exceeds the
maximum amount paid to Merger Sub, then each such person will
be entitled to receive its Pro Rata Portion of such maximum
amount. For purposes hereof, "Pro Rata Portion" shall mean,
with respect to any person signing an Equity Financing
Commitment simultaneously herewith, (a) the number of shares
of Senior Preferred Stock to be purchased by such person
pursuant to the applicable Equity Financing Commitment divided
by (b) the aggregate number of shares of Senior Preferred
Stock to be purchased by all such persons. Upon the
consummation of the Merger, Merger Sub shall reimburse the
Fund and its affiliates for all reasonable out-of-pocket
expenses (including but not limited to expenses of the Fund's
due diligence investigation, consultants' fees, travel
expenses and reasonable fees, disbursements and other charges
of counsel), in each case incurred in connection with this
letter, the Merger, the transactions contemplated hereby and
thereby and any related documentation and the administration,
enforcement, amendment, modification or waiver hereof and
thereof.
(b) In addition to the commitment set forth in
Paragraph 1 hereof, the Fund hereby commits to provide an
equity investment in Merger Sub in an amount equal to its Pro
Rata Portion, not to exceed $500,000, of any amount required
by Merger Sub to satisfy its obligation to pay the Expenses of
the Company pursuant to Section 7.5(d) of the Merger
Agreement.
7. Expiration Date. The commitment set forth herein shall expire
automatically, unless accepted in writing by you before 5:00
p.m. (EDT) on December 23, 1999.
8. Closing Date. The commitment to purchase Common Stock and
Preferred Stock herein, as so accepted by you, shall expire if
the Merger is not closed on or before June 30, 2000.
9. Confidentiality. This letter is delivered to you on the
understanding that neither the existence of this letter nor
any of its terms or substance shall be publicly disclosed,
directly or indirectly, except (a) as may be compelled to be
disclosed in a judicial or administrative proceeding or as
otherwise required by law, (b) on a
<PAGE>
confidential and "need-to-know" basis, to your officers,
directors, employees, agents, financing sources and advisors
who are directly involved in the consideration of this matter
and (c) on a confidential basis to the Company and its
advisors and agents in connection with the Merger.
10. No Assignment. The commitment evidenced by this letter shall
not be assignable by you without the Fund's prior written
consent, and the granting of such consent in a given instance
shall be solely in the discretion of the Fund, and, if
granted, shall not constitute a waiver of this requirement as
to any subsequent assignment.
If the foregoing is acceptable to you, please sign and return
a copy of this letter not later than the expiration date described in paragraph
8, whereupon this letter will constitute the commitment of the Fund to provide
the aforementioned financing subject to the terms and conditions hereof. This
letter supersedes any prior agreements relating to the subject matter hereof,
including the letter, dated December 21, 1999, from the fund to you, which is of
no force and effect. This letter shall be governed b and construed in accordance
with the laws of the State of New York, without regard to principles of
conflicts of law.
Very truly yours,
PARTHENON INVESTORS L.P.
By: /s/ Bruce C. MacRae
--------------------
Title: Partner
Agreed to and Accepted on this
22nd day of December, 1999.
WM ACQUISITION, INC.
By: /s/ Drew Sawyer
---------------------
Title: Vice President
CHASE CAPITAL PARTNERS
380 Madison Avenue, 12th Floor
New York, NY 10017
December 22, 1999
WM ACQUISITION, INC.
c/o Parthenon Capital
200 State Street
Boston, Massachussetts 02109
Attention: John Rutherford
Facsimile: (617) 478-7010
Ladies and Gentlemen:
Chase Capital Partners (together with one or more of its affiliated
investment funds, "CCP") is pleased to offer this commitment to purchase your
securities for the purpose of effecting a recapitalization of WILMAR INDUSTRIES,
INC., a New Jersey corporation (the "Company") pursuant to a Merger (the
"Merger") of WM ACQUISITION, INC., a New Jersey corporation ("Merger Sub") into
the Company. Capitalized terms used but not defined herein have the meanings
ascribed to them in the Merger Agreement (as defined below).
Pursuant to the merger agreement substantially in the form attached
hereto (the "Merger Agreement") you will provide an aggregate of $235 million of
consideration (the "Aggregate Consideration") to the Company's stockholders
based on an offer price of $18.25 per share. The Aggregate Consideration
includes all amounts necessary to cash out or repay all outstanding shares of
preferred stock, common stock, warrants and options, except for the rollover of
approximately $3 million of stock by the Company's founder. Management of the
Company will invest in common stock and preferred stock of Merger Sub in a cash
or exchange transaction. We understand that the total amount needed to fund the
Merger, including the payment of related fees and expenses of Merger Sub, and
refinancing the Company's outstanding indebtedness, and to provide working
capital availability will be approximately $324.1 million, which is expected to
be provided as set forth below:
<PAGE>
(in millions)
Senior Secured Credit Facility $150.0
Senior Subordinated Notes 40.0
Redeemable Preferred Stock 133.0
Common Stock 1.1
Total $324.1
a. Commitment. CCP hereby commits to providing a portion of the
common and preferred stock components of the Aggregate
Consideration through the purchase of up to $40__million of
newly issued shares of Preferred Stock and newly issued shares
of Merger Sub's Common Stock, representing approximately 26.5%
and 29.9% of the common and preferred equity to be outstanding
immediately following the closing of the transaction. After
the Merger, except for an employee option plan pursuant to
which options to acquire up to 5% of the outstanding shares of
common stock of the Company will be outstanding or available
for grant, there will be no outstanding options, warrants or
other rights exercisable for or securities convertible into or
exchangeable for common stock of the Company. CCP's commitment
is subject to the following conditions.
i. The New Equity Investors (the "Investors") referred
to in Schedule A shall have fully funded their
commitments as set forth therein and, following the
Merger, the capitalization of the Company shall be as
set forth in Schedule A;
ii. The terms of the Preferred Stock shall be consistent
with the attached Preferred Stock Term Sheet and
shall be in form reasonably acceptable to CCP;
iii. The execution and delivery of mutually acceptable
Purchase Agreements for the Common Stock and
Preferred Stock between you and the Investors,
containing standard representations, warranties and
covenants; and
<PAGE>
iv. The execution and delivery of a mutually acceptable
Shareholders Agreement consistent with the attached
Wilmar Shareholders' Agreement Term Sheet.
b. Merger Documentation. Merger Sub and the Company will execute
or cause to be executed and delivered on or before the Closing
Date referred to in paragraph__8 hereof, all necessary
documentation, including forms of securities, the Merger
Agreement, the Debt Financing Commitments, the other Equity
Financing Commitments, and the other agreements, documents,
instruments, certificates and assurances from Merger Sub, the
Company and such other persons as CCP and its counsel may
reasonably request and containing such terms and conditions as
CCP shall reasonably approve (collectively, the "Financing
Documents"), correct and complete copies of which you have
delivered to us. Prior to the Closing Date, the Financing
Documents may not be amended, supplemented, restated or
terminated and no condition, covenant or other provision
contained in the Financing Documents may be waived without
CCP's consent which shall not be unreasonably withheld. Copies
of all of the Financing Documents and other documents to which
Merger Sub is, or the Company will be, a party (or between the
Investors or with management) will be delivered to CCP
promptly. CCP and its counsel shall be entitled to review and
comment on all future Financing Documents and other documents
to which Merger Sub is, or the Company will be, a party (or
between the Investors or with management).
c. Closing Conditions. In addition to the matters referred to in
paragraphs 1 and 2, CCP's obligations to consummate this
commitment shall be subject to the conditions that Merger Sub
shall have entered into the Merger Agreement, all conditions
precedent to the closing of the transactions contemplated by
the Merger Agreement shall have been satisfied or waived to
the satisfaction of CCP and the merger shall be consummated
immediately following CCP's purchase of your stock.
d. Filings. Merger Sub agrees to provide copies of all filings to
be made with and notices to be given by Merger Sub or the
Company to any governmental or regulatory authority prior to
making such filing or providing such notice with
<PAGE>
respect to the Merger and the related financing transactions
and not to make any such filing to which CCP is a party
without CCP's prior consent or to which Merger Sub is a party
without prior consultation with CCP. CCP and Merger Sub agree
to jointly prepare, and cooperate with each other with respect
to, any and all governmental or regulatory filings to which
Merger Sub or CCP is a filing or reporting person.
e. No Solicitation. Without CCP's prior consent, until the
closing of the transactions contemplated hereby or the date
referred to in Section__7.1(b) of the Merger Agreement, Merger
Sub and Parthenon Capital will not and will not permit any of
their respective affiliates (or authorize or permit any of
their respective representatives) to take, directly or
indirectly, any action to initiate, assist, solicit, receive,
negotiate, encourage or accept any offer or inquiry from any
person (other than persons from which financing is arranged by
CCP or its affiliates or persons who you have referred to CCP
or its affiliates and whom have been approved by CCP) to (a)
provide any debt or equity financing other than as
contemplated by the Debt Financing Commitments and the Equity
Financing Commitments (collectively, a "Financing") or
purchase all or substantially all of the assets or any capital
stock of Merger Sub or the Company (whether through a purchase
of stock, merger, asset sale or related transaction) (a "Sale
of the Company"), (b)__reach any agreement or understanding
(whether or not such agreement or understanding is absolute,
revocable, contingent or conditional) for, or otherwise
attempt to consummate, any Financing or Sale of the Company or
(c)__furnish or cause to be furnished any information with
respect to Merger Sub, the Company or any of their respective
affiliates to any person (other than as contemplated by this
letter) who you, or any of your representatives, know or have
reason to believe is in the process of considering any
Financing or Sale of the Company. The obligations under this
paragraph shall terminate and be of no further force and
effect in the event that this letter is terminated by CCP in
accordance with its terms.
f. Fees and Expenses.
i. If Merger Sub receives any payment pursuant to
Section__7.5 of the Merger
<PAGE>
Agreement, it will promptly (a)__pay to CCP its Pro
Rata Portion of the difference between any
Termination Amount and the portion of the Termination
Amount payable to PaineWebber Incorporated and
(b)__pay or reimburse CCP for all of its
out-of-pocket expenses (including all fees and
expenses of counsel, accountants, investment bankers,
experts and consultants to CCP) incurred by CCP or on
its behalf in connection with or related to the
authorization, preparation, negotiation, execution
and performance of this letter and the
administration, enforcement, amendment, modification
or waiver hereof, the preparation, printing, filing
and mailing of the Proxy Statement, the solicitation
of stockholder approvals and all other matters
related to the closing of the transactions
contemplated hereby (the "Expenses"); provided that
to the extent that the aggregate amount of Expenses
to be paid or reimbursed to the parties to the Equity
Financing Commitments exceeds the maximum amount paid
to Holdings or Merger Sub, then each such person will
be entitled to receive its Pro Rata Portion of such
maximum amount. For purposes hereof, "Pro Rata
Portion" shall mean, with respect to any person
signing an Equity Financing Commitment simultaneously
herewith, (a)__the number of shares of Preferred
Stock to be purchased by such person pursuant to the
applicable Equity Financing Commitment divided by
(b)__the aggregate number of shares of Preferred
Stock to be purchased by all persons providing Equity
Financing Commitments. Upon the consummation of the
Merger, Merger Sub shall reimburse CCP and its
affiliates for all reasonable out-of-pocket expenses
(including but not limited to expenses of CCP's due
diligence investigation, consultants' fees, travel
expenses and reasonable fees, disbursements and other
charges of counsel), in each case incurred in
connection with this letter, the Merger, the
transactions contemplated hereby and thereby and any
related documentation and the administration,
enforcement, amendment, modification or waiver hereof
and thereof.
ii. In addition to the commitment set forth in paragraph
1 hereof, CCP hereby commits to provide an equity
investment in Merger Sub in an amount equal to its
Pro Rata Portion, not to exceed $307,700, of any
amount required by Merger Sub to satisfy its
obligation to pay the Expenses of the Company
pursuant to Section 7.5(d) of the Merger Agreement.
<PAGE>
g. Expiration Date. The commitment set forth herein shall expire
automatically, unless accepted in writing by you before 5:00
p.m. (EST) on December 23, 1999.
h. Closing Date. The commitment to purchase Common Stock and
Preferred Stock herein, as so accepted by you, shall expire if
the Merger is not closed on or before June 30, 2000.
i. Confidentiality. This letter is delivered to you on the
understanding that neither the existence of this letter nor
any of its terms or substance shall be publicly disclosed,
directly or indirectly, except (a)__as may be compelled to be
disclosed in a judicial or administrative proceeding or as
otherwise required by law, (b)__on a confidential and
"need-to-know" basis, to your officers, directors, employees,
agents, financing sources and advisors who are directly
involved in the consideration of this matter and (c)__on a
confidential basis to the Company and its advisors and agents
in connection with the Merger.
j. No Assignment. The commitment evidenced by this letter shall
not be assignable by you or Merger Sub without CCP's prior
written consent, and the granting of such consent in a given
instance shall be solely in the discretion of CCP, and, if
granted, shall not constitute a waiver of this requirement as
to any subsequent assignment.
<PAGE>
If the foregoing is acceptable to you, please sign and return a copy of
this letter not later than the expiration date described in paragraph 8,
whereupon this letter will constitute the commitment of CCP to provide the
aforementioned financing subject to the terms and conditions hereof. This letter
supersedes any prior agreements relating to the subject matter hereof, including
the letter, dated December 21, 1999, from CCP to you, which is of no force and
effect. This letter shall be governed by and construed in accordance with the
laws of the State of New York, without regard to principles of conflicts of law.
Very truly yours,
CHASE CAPITAL PARTNERS
By: /s/ Christopher C. Behrens
---------------------------
Title: General Partner
Agreed to and Accepted on this
22nd day of December, 1999.
WM ACQUISITION, INC.
By: /s/ Drew Sawyer
---------------------
Title: Vice President
THE CHASE MANHATTAN BANK, AS TRUSTEE
FOR FIRST PLAZA GROUP TRUST
4 Metro Tech Center
Brooklyn, NY 10017
December 22, 1999
WM ACQUISITION, INC.
c/o Parthenon Capital
200 State Street
Boston, Massachusetts 02109
Attention: John Rutherford
Facsimile: (617) 478-7010
Ladies and Gentlemen:
The Chase Manhattan Bank, as Trustee for First Plaza Group Trust
(together with one or more of its affiliated investment funds, the "Fund") is
pleased to offer this commitment to purchase your securities for the purpose of
effecting a recapitalization of WILMAR INDUSTRIES, INC., a New Jersey
corporation (the "Company"), pursuant to a Merger (the "Merger") of WM
ACQUISITION, INC., a New Jersey corporation ("Merger Sub") into the Company.
Capitalized terms used but not defined herein have the meanings ascribed to them
in the Merger Agreement (as defined below).
We understand that you have made a proposal to enter into a merger
agreement substantially in the form attached hereto (the "Merger Agreement")
whereby an aggregate of $235 million of consideration (the "Aggregate
Consideration") would be provided to the Company's stockholders based on an
offer price of $18.25 per share. The Aggregate Consideration includes all
amounts necessary to cash out or repay all outstanding shares of preferred
stock, common stock, warrants and options, except for the rollover of
approximately $3 million of stock by the Company's founder. Management of the
Company will invest in common stock and preferred stock of Merger Sub in a cash
or exchange transaction. We understand that
<PAGE>
2
the total amount needed to fund the Merger, including the payment of related
fees and expenses of Merger Sub, and refinancing the Company's outstanding
indebtedness, and to provide working capital availability will be approximately
$324.1 million, which is expected to be provided as set forth below:
(in millions)
Senior Secured Credit Facility $150.0
Senior Subordinated Notes 40.0
Redeemable Preferred Stock 133.0
Common Stock 1.1
Total $324.1
1. Commitment. The Fund hereby commits to providing a portion of
the common and preferred stock components of the Aggregate
Consideration through the purchase of up to $25 million of
newly issued shares of Preferred Stock and newly issued shares
of Merger Sub's Common Stock, representing approximately
16.55% and 18.67% of the common and preferred equity to be
outstanding immediately following the closing of the
transaction. The Fund's commitment is subject to the following
conditions:
a. The New Equity Investors (the "Investors") in
Schedule A shall have fully funded their commitments
as set forth therein and, following the Merger, the
capitalization of the Company shall be as set forth
in Schedule A;
b. The terms of the Preferred Stock shall be consistent
with the attached Preferred Stock Term Sheet and
shall be in form reasonably acceptable to the Fund;
c. The execution and delivery of mutually acceptable
Purchase Agreements for the Common Stock and
Preferred Stock between you and the Investors,
<PAGE>
3
containing standard representations, warranties and
covenants; and
d. The execution and delivery of a mutually acceptable
Shareholders Agreement consistent with the attached
Wilmar Shareholders' Agreement Term Sheet.
2. Merger Documentation. Merger Sub and the Company will execute
or cause to be executed and delivered on or before the Closing
Date referred to in paragraph 8 hereof, all necessary
documentation, including forms of securities, the Merger
Agreement, the Debt Financing Commitments, the other Equity
Financing Commitments, and the other agreements, documents,
instruments, certificates and assurances from Merger Sub, the
Company and such other persons as the Fund and its counsel may
reasonably request and containing such terms and conditions as
the Fund shall reasonably approve (collectively, the
"Financing Documents"). Prior to the Closing Date, the
Financing Documents may not be amended, supplemented, restated
or terminated and no waiver of any condition contained in the
Financing Documents may be waived without the Fund's consent,
which shall not be unreasonably withheld. Copies of all of the
Financing Documents and other documents to which Merger Sub
is, or the Company will be, a party will be delivered to the
Fund promptly. The Fund and its counsel shall be entitled to
review and comment on all future Financing Documents and other
documents to which Merger Sub is, or the Company will be, a
party.
3. Closing Conditions. In addition to the matters referred to in
paragraphs 1 and 2, the Fund's obligations to consummate this
commitment shall be subject to the conditions that Merger Sub
shall have entered into the Merger Agreement, all conditions
precedent to the closing of the transactions contemplated by
the Merger Agreement shall have been satisfied or waived to
the satisfaction of the Fund and the merger shall be
consummated immediately following the Fund's purchase of your
stock.
4. Filings. Merger Sub agrees to provide copies of all filings to
be made with and notices to be given by Merger Sub or the
Company to any governmental or regulatory authority prior to
making such filing or providing such notice with respect to
the Merger and the related financing transactions and not to
make any
<PAGE>
4
such filing to which the Fund is a party without the Fund's
prior consent or to which Merger Sub is a party without prior
consultation with the Fund. The Fund and Merger Sub agree to
jointly prepare, and cooperate with each other with respect
to, any and all governmental or regulatory filings to which
Merger Sub or the Fund is a filing or reporting person.
5. No Solicitation. Without the Fund's prior consent, until the
closing of the transactions contemplated hereby or the date
referred to in Section 7.1(b) of the Merger Agreement, Merger
Sub will not and will not authorize any of its affiliates (or
authorize or permit any of their respective representatives)
to take, directly or indirectly, any action to initiate,
assist, solicit, receive, negotiate, encourage or accept any
offer or inquiry from any person (other than persons from
which financing is arranged by the Fund or its affiliates or
persons who you have referred to the Fund or its affiliates
and whom have been approved by the Fund) to (a) provide any
debt or equity financing other than as contemplated by the
Debt Financing Commitments and the Equity Financing
Commitments (collectively, a "Financing") or purchase all or
substantially all of the assets or any capital stock of Merger
Sub or the Company (whether through a purchase of stock,
merger, asset sale or related transaction) (a "Sale of the
Company"), (b) reach any agreement or understanding (whether
or not such agreement or understanding is absolute, revocable,
contingent or conditional) for, or otherwise attempt to
consummate, any Financing or Sale of the Company or (c)
furnish or cause to be furnished any information with respect
to Merger Sub, the Company or any of their respective
affiliates to any person (other than as contemplated by this
letter) who you, or any of your representatives, know or have
reason to believe is in the process of considering any
Financing or Sale of the Company. The obligations under this
paragraph shall terminate and be of no further force and
effect in the event that this letter is terminated by the Fund
in accordance with its terms.
6. Fees and Expenses. (a) If Merger Sub receives any payment
pursuant to Section 7.5 of the Merger Agreement, it will
promptly (a) pay to the Fund its Pro Rata Portion of the
difference between any Termination Amount and the portion of
the Termination Amount payable to PaineWebber Incorporated and
(b) pay or reimburse the Fund for all of its out-of-pocket
expenses (including all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to
the Fund) incurred by the Fund or on its behalf in connection
with or related to the authorization, preparation,
negotiation, execution and performance of this letter,
<PAGE>
5
the preparation, printing, filing and mailing of the Proxy
Statement, the solicitation of stockholder approvals and all
other matters related to the closing of the transactions
contemplated hereby (the "Expenses"); provided that to the
extent that the aggregate amount of Expenses to be paid or
reimbursed to the parties to the Equity Financing Commitments
exceeds the maximum amount paid to Merger Sub, then each such
person will be entitled to receive its Pro Rata Portion of
such maximum amount. For purposes hereof, "Pro Rata Portion"
shall mean, with respect to any person signing an Equity
Financing Commitment simultaneously herewith, (a) the number
of shares of Senior Preferred Stock to be purchased by such
person pursuant to the applicable Equity Financing Commitment
divided by (b) the aggregate number of shares of Senior
Preferred Stock to be purchased by all such persons. Upon the
consummation of the Merger, Merger Sub shall reimburse the
Fund and its affiliates for all reasonable out-of-pocket
expenses (including but not limited to expenses of the Fund's
due diligence investigation, consultants' fees, travel
expenses and reasonable fees, disbursements and other charges
of counsel), in each case incurred in connection with this
letter, the Merger, the transactions contemplated hereby and
thereby and any related documentation and the administration,
enforcement, amendment, modification or waiver hereof and
thereof.
(b) In addition to the commitment set forth in
Paragraph 1 hereof, the Fund hereby commits to provide an
equity investment in Merger Sub in an amount equal to its Pro
Rata Portion, not to exceed $192,300, of any amount required
by Merger Sub to satisfy its obligation to pay the Expenses of
the Company pursuant to Section 7.5(d) of the Merger
Agreement.
7. Expiration Date. The commitment set forth herein shall expire
automatically, unless accepted in writing by you before 5:00
p.m. (EDT) on December 23, 1999.
8. Closing Date. The commitment to purchase Common Stock and
Preferred Stock herein, as so accepted by you, shall expire if
the Merger is not closed on or before June 30, 2000.
9. Confidentiality. This letter is delivered to you on the
understanding that neither the existence of this letter nor
any of its terms or substance shall be publicly
<PAGE>
6
disclosed, directly or indirectly, except (a) as may be
compelled to be disclosed in a judicial or administrative
proceeding or as otherwise required by law, (b) on a
confidential and "need-to-know" basis, to your officers,
directors, employees, agents, financing sources and advisors
who are directly involved in the consideration of this matter
and (c) on a confidential basis to the Company and its
advisors and agents in connection with the Merger.
10. No Assignment. The commitment evidenced by this letter shall
not be assignable by you without the Fund's prior written
consent, and the granting of such consent in a given instance
shall be solely in the discretion of the Fund, and, if
granted, shall not constitute a waiver of this requirement as
to any subsequent assignment.
<PAGE>
7
If the foregoing is acceptable to you, please sign and return
a copy of this letter not later than the expiration date described in paragraph
8, whereupon this letter will constitute the commitment of the Fund to provide
the aforementioned financing subject to the terms and conditions hereof. This
letter supersedes any prior agreements relating to the subject matter hereof,
including the letter, dated December 21, 1999, from the Fund to you, which is of
no force and effect. This letter shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law.
Very truly yours,
THE CHASE MANHATTAN BANK, AS TRUSTEE
FOR FIRST PLAZA GROUP TRUST
By: /s/ Norma J. Duckson
-------------------------------
Title: Vice President
Agreed to and Accepted on this
22nd day of December, 1999.
WM ACQUISITION, INC.
By: /s/ Drew Sawyer
---------------------
Title: Vice President
FLEETBOSTON ROBERTSON STEPHENS INC.
100 Federal Street
Boston, Massachusetts 02110
FLEET NATIONAL BANK
100 Federal Street
Boston, Massachusetts 02110
December 22, 1999
Parthenon Investors L.P.
200 State Street
Boston, MA 02109
Attention: Ernest K. Jacquet, Managing Partner
Samantha Trotman, Principal
Ladies and Gentlemen:
We are pleased to inform you of the commitment, subject to the terms
and conditions of this letter, of Fleet National Bank (individually, the "Bank"
and in its capacity as Agent described below, the "Agent") to provide senior
bank financing of up to $160,000,000 (the "Financing") to Wilmar Industries,
Inc. (the "Borrower") in connection with (x) the funding of the recapitalization
of the Borrower, (y) the refinancing of certain indebtedness previously incurred
by the Borrower in connection with its acquisition of J.A. Sexauer, Inc. and
Trayco of South Carolina, Inc., and (z) the general corporate and working
capital purposes of the Borrower and its Subsidiaries, including to pay
transaction costs relating to the recapitalization transactions described
herein. In addition to the other terms and conditions of this letter, the Bank's
willingness to provide the Financing, and FleetBoston Robertson Stephens Inc.'s
willingness to arrange the Financing (in such capacity, the "Arranger"), is
conditioned upon the following matters:
(a) The Borrower shall have confirmed that its acquisition of J.A. Sexauer,
Inc. and Trayco of South Carolina, Inc. has been completed and provided
evidence that all of the outstanding capital stock of J.A. Sexauer,
Inc. and Trayco of South Carolina, Inc. has been acquired by the
Borrower.
(b) Parthenon Investors L.P. ("Parthenon") shall have formed WM
Acquisition, Inc. ("Newco"), and Parthenon, together with certain other
investors to be arranged by Parthenon and which are reasonably
acceptable to the Agent and the Arranger (Parthenon and such investors,
the "Investor Group") shall have invested a minimum of $130,000,000 in
Newco. In addition, certain existing management shareholders of the
Borrower shall have rolled-over their current investments in the
Borrower and maintained common stock and preferred stock of the
Borrower having an aggregate value of approximately $3,000,000. All
such investments (the "Investments") shall be on terms reasonably
satisfactory in all respects to the Agent and the Arranger.
<PAGE>
(c) Newco shall have been merged with and into the Borrower immediately
prior to the funding of the Financing (the "Merger"). Upon consummation
of the Merger, the Investor Group shall own at least the number of
shares of issued and outstanding common stock of the Borrower necessary
to give the Investor Group control of the voting interests in the
Borrower. In connection with the Merger, the Agent shall have reviewed
and approved the portion of the Proxy Statement that relates to the
financial aspects of this transaction to be sent to the shareholders of
the Borrower, with such approval not to be unreasonably withheld or
delayed.
(d) The Borrower shall have received proceeds of subordinated debt from
Fleet Corporate Finance, Inc. in an aggregate amount of at least
$40,000,000, the terms of which (including the warrant, dividend,
redemption and subordination terms) shall be reasonably satisfactory in
all respects to the Agent and the Arranger (the "Subordinated Debt").
The Financing, the Investments, the Merger and the Subordinated Debt
are referred to collectively herein as the "Recapitalization
Transactions". The Borrower and it's Subsidiaries are referred to
collectively herein as the "Borrower Affiliated Group".
(e) The financial information previously delivered to the Agent, the
Arranger and the Bank, including, without limitation, the pro-forma
financial statements prepared as if the Recapitalization Transactions
had been effected, fairly presents in all material respects the
business and financial condition and prospects of the respective
businesses and assets owned and operated by the Borrower Affiliated
Group taken as a whole and the historic results and pro-forma
projections of operations for the periods covered thereby, and that
there has been no material adverse change in the business, operations,
assets, condition (financial or otherwise) or prospects of the
businesses and assets operated and owned by the Borrower Affiliated
Group taken as a whole since the date of the most recent financial
information delivered to the Agent, the Arranger and the Bank. It is
recognized by the Agent, the Arranger and the Bank that projections as
to future results are not to be viewed as facts and that the actual
results during the period or periods covered by the projections may
differ from the projected results.
(f) A loan agreement (the "Loan Agreement") and other loan and security
documentation reasonably satisfactory to you, the Agent and the Bank
and to each of such parties' counsel shall have been negotiated,
executed and delivered. While this commitment letter sets forth the
principal terms of the proposed Financing, you should understand that
it does not purport to include all of the customary representations and
warranties, conditions, covenants, events of default and other
customary terms which will be included in the definitive documents for
the Financing, all of which must be reasonably satisfactory in form and
substance to the Agent and the Bank and our counsel, and to you and
your counsel, prior to proceeding with the proposed Financing.
<PAGE>
(g) The Borrower Affiliated Group shall have received any and all
regulatory approvals necessary in connection with the Recapitalization
Transactions and shall be in compliance in all material respects with
all applicable laws, including, without limitation, all applicable
federal, state and local environmental laws, securities laws, pension
statutes, labor laws, margin stock rules and other laws applicable to
the Borrower Affiliated Group. In addition, the Borrower Affiliated
Group shall provide evidence to the Agent that it is qualified to
conduct business in each jurisdiction in which it actually conducts
business, except for such jurisdictions where the failure to be so
qualified could not reasonably be expected to result in a material
adverse effect on the business, operations, assets, or condition
(financial or otherwise) of the businesses and assets operated and
owned by the Borrower Affiliated Group taken as a whole.
(h) The Agent and the Bank shall have received reasonably satisfactory
evidence of appropriate corporate or other entity approval and, in
connection with the Merger, shareholder approval, of all proposed
transactions (including each of the Recapitalization Transactions), as
well as legal opinions (or reliance letters) of independent counsel
(or, with respect to certain limited issues which may be agreed to by
the Agent, in-house counsel of the Borrower; and including local real
estate counsel, where applicable) to the Borrower Affiliated Group
satisfactory to the Agent and the Bank in form and substance as to,
among other things, the due authorization and enforceability of all
loan, security, recapitalization, merger, subordinated debt and related
documents, the perfection of the liens of the security documents, the
absence of any violation of any federal, state or local law or
regulation applicable to the Recapitalization Transactions or any of
the parties thereto, the absence of any conflicts with material
agreements, the absence of any material adverse litigation and, unless
independent counsel admitted in the State of New York provides an
enforceability opinion, choice of law. The Agent and the Bank shall
also have received copies of any and all fairness and other opinions
rendered in connection with any of the Recapitalization Transactions
and shall be entitled to rely upon each of such opinions (other than
any fairness opinion).
(i) All of the representations made by the Borrower Affiliated Group and
all other factual information furnished by the Borrower Affiliated
Group to the Agent, the Arranger and the Bank shall be accurate in all
material respects, and it is acknowledged that the Loan Agreement shall
contain a representation and warranty to the effect that all
information which has been or will hereafter be made available to the
Agent, the Arranger, the Bank and any other lender by the Borrower
Affiliated Group or any of their respective representatives in
connection with the Recapitalization Transactions, taken as a whole and
as supplemented from time to time prior to the Closing, is or will be
when furnished complete and correct in all material respects and does
not or will not when furnished contain any untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements contained therein not materially misleading in
<PAGE>
light of the circumstances under which such statements were or are
made. It is recognized by the Agent, the Arranger and the Bank that
projections, pro forma financial statements, financial models, and
business plans, to the extent they project future results, are not to
be viewed as facts and that the actual results during the period or
periods covered by such documents may differ from the projected
results.
(j) No material changes in governmental regulation or policy adversely
affecting the Agent, the Arranger or the Bank, and no material changes
or disruptions in the syndication, financial or capital markets that,
in each case, would be expected to materially impair the syndication of
the Financing shall have occurred prior to the Closing.
The principal terms and conditions of the financing will be as follows:
Facilities:
-----------
Facility 1:
- -----------
A five-year secured revolving credit facility of up to $60,000,000 (the
"Revolving Credit Commitment"; and the loans made thereunder, the
"Revolving Loans"). Availability of Revolving Loans shall, within 60
days after the Closing and at all times thereafter, be subject to the
Borrowing Base restrictions described below. There will be a sublimit
established for issuance of standby letters of credit under this
facility, the issuance of which will reduce the availability under the
Revolving Credit Commitment and Borrowing Base.
Facility 2:
- -----------
A five-year secured term loan of $50,000,000 ("Term Loan A"), to be
drawn in full at Closing.
Facility 3:
- -----------
A seven-year secured term loan of $50,000,000 ("Term Loan B"), to be
drawn in full at Closing.
Facility 1, Facility 2 and Facility 3 will hereinafter be referred to
collectively as the "Facilities". Term Loan A and Term Loan B will
hereinafter be referred to collectively as the "Term Loans". The
Revolving Loans and the Term Loans will hereinafter be referred to
collectively as the "Loans".
Bank's Commitment:
- ------------------
The Bank's commitment under the Facilities will be the entire aggregate
principal amount of $160,000,000 (the "Bank's Commitment"), provided
that the Bank's Commitment will be reduced by the aggregate amount of
commitments obtained from other financing institutions prior to the
Closing or assigned by the Bank subsequent thereto (see the Section
entitled "Syndicated Bank Group" below).
<PAGE>
Syndicated Bank Group:
- ----------------------
While the Bank shall not be obligated to do so, the Bank intends to
seek commitments, both before and after the Closing, from other
financial institutions which (unless a default has occurred and is
continuing under the Loan Agreement) shall be reasonably acceptable to
you and the Borrower (provided that your approval of such lending
institutions shall not be unreasonably withheld or delayed) to be
co-lenders under the Facilities (together with the Bank, the "Bank
Group"), provided that the aggregate commitment amount of the Bank
Group shall not exceed $160,000,000 (the "Co- Lenders' Commitment").
The commitment of any additional lender must at all times be equal to
at least $5,000,000. In the event that additional co-lender(s) are
obtained, the Bank will serve as the sole administrative agent for the
Bank Group (as defined above, the "Agent"). FleetBoston Robertson
Stephens Inc. will serve as the sole syndication agent and arranger for
the co-lenders (as defined above, the "Arranger"). The commitment of
the Bank to provide the full principal amount of the Facilities, upon
and subject to the terms and conditions of this letter, is not subject
in any respect to syndication of the Facilities.
<PAGE>
By your signature below, you agree to assist and cooperate with the
Arranger in its syndication efforts, including, but not limited to,
promptly preparing and providing material and information available to
you reasonably deemed necessary by the Arranger to successfully
complete and otherwise facilitate the syndication of the proposed
Financing described herein with a group of lending institutions
reasonably satisfactory to the Agent and the Arranger and, unless a
default has occurred and is continuing under the Loan Agreement, to you
(provided that your approval of such lending institutions shall not be
unreasonably withheld or delayed). You agree that the Agent and the
Arranger shall be entitled, after consultation with the Borrower and
Parthenon, to change the structure, terms, pricing or amount of any
portion of the Financing if the Agent or the Arranger determine that
such changes are necessary to ensure a successful syndication or an
optimal credit structure for the Financing, provided that (x) the
aggregate commitment amount of $160,000,000 shall not be reduced, (y)
the Revolving Credit Commitment shall not be reduced below $40,000,000
and (z) the fees and other amounts required to be paid under the Fee
Letter remain unchanged. Without limiting the foregoing, you hereby
agree (a) that the Arranger shall have the exclusive right to syndicate
the proposed Financing contemplated by this commitment letter and
manage, in consultation with the Borrower and Parthenon, all aspects of
such syndication (including, without limitation, decisions as to the
selection of institutions to be approached and when they will be
approached, when their commitments will be accepted, which institutions
will participate, the allocations of the commitments among the
syndicate lenders and any titles to be given to any lender
participating in the Facilities) and that you will assist the Arranger
in contacting and soliciting potential co- lenders and will provide to
the Arranger, at its reasonable request, financing and organizational
information available to you as well as financial projections available
to you needed for syndication purposes; (b) that the Arranger shall be
expressly permitted to distribute any and all documents and information
relating to the transactions contemplated hereby and received from you,
your representatives or the Borrower Affiliated Group or its
representatives, or (after consultation with you or the Borrower) any
other source, to any potential lender, participant or assignee, on a
confidential basis and subject to reasonable confidentiality provisions
requested by you; (c) to make available, at reasonable times, the
relevant management personnel related to the proposed Financing or
operations of the Borrower Affiliated Group for meeting with potential
syndicate members upon reasonable notification; (d) to permit the
Arranger to publicize information in respect of this facility
(including the Agent's and the Arranger's role in the structuring and
the proposed financing thereof) subject to your prior reasonable
approval of the form and content thereof; and (e) that prior to or
after the execution of the definitive documentation for the Facilities,
the Bank reserves the right to syndicate all or any portion of its
commitment hereunder to one or more financial institutions after
consultation with you, the Borrower and the Arranger, and so long as no
default has occurred and is continuing under the Loan Agreement, you
and the Borrower shall have the right to approve such financial
institutions (such approval not to be unreasonably withheld or
delayed). You agree that, prior to and during the
<PAGE>
syndication of the Facilities, you will not permit any offering,
placement or arrangement of any competing issues of debt securities
(other than the Subordinated Debt) or commercial bank facilities of the
Borrower Affiliated Group without the prior written consent of the
Agent and the Arranger.
Assignments/Participations:
- ---------------------------
Each member of the Bank Group shall have the right to assign or
participate any portion of its commitment amount to other institutional
lenders, provided that (i) with respect to assignments only, the Agent,
and so long as no default has occurred and is continuing, the Borrower,
shall have the right to approve any assignee, which approvals may not
be unreasonably withheld, and (ii) each assignee and participant shall
have a commitment amount of at least $5,000,000. No such assignment or
participation shall entitle the purchaser to a greater payment than the
seller would have been entitled to receive under the increased costs
and tax provisions of the credit documentation.
Borrowing Base:
- ---------------
Availability under the Revolving Loans (including any letters of credit
issued) will, within 60 days after the Closing and at all times
thereafter, be limited to the purposes and corresponding amounts set
forth in the Section entitled Use of Proceeds below, and to the lesser
of:
(i) The Revolving Credit Commitment then in effect, and
(ii) the sum of (a) 85% of the Borrower's eligible accounts receivable, plus
(b) 60% of the Borrower's eligible inventory (the "Borrowing Base").
Eligible accounts receivable shall exclude such accounts receivable as
the Agent customarily excludes, with account receivable guidelines to
be determined.
Eligible inventory shall exclude such inventory as the Agent
customarily excludes, with inventory guidelines to be determined.
Use of Proceeds of the Loans:
- -----------------------------
The proceeds of the Loans may be used for the following purposes: (i)
to refinance up to $65,500,000 of existing indebtedness of the Borrower
to First Union (and certain other existing lenders for which First
Union serves as Agent); (ii) to effectuate the Recapitalization
Transactions (including payment of transaction costs relating thereto);
and (iii) to finance the working capital needs of the Borrower and its
Subsidiaries.
Closing Date:
- -------------
On or before May 1, 2000, or such later date as may be mutually agreed
upon (the "Closing").
<PAGE>
Maturity:
- ---------
Revolving Loans:
- ----------------
The Revolving Loans will mature and will be payable in full five years
after the Closing. Subject to the Section entitled "Mandatory
Prepayments" below, there will be no required amortization of principal
of the Revolving Loans prior to maturity.
Term Loan A:
- ------------
Term Loan A will mature and will be payable in full five years after
the Closing. Term Loan A will amortize quarterly (in arrears) in
accordance with the following annual schedule:
Year After Aggregate Annual
Closing Amortization
------- ------------
1 $5,000,000
2 $7,500,000
3 $10,000,000
4 $12,500,000
5 $15,000,000
The foregoing schedule is subject to the "Mandatory Prepayment" Section
below.
Term Loan B:
- ------------
Term Loan B will mature and will be payable in full seven years after
the Closing. Term Loan B will amortize quarterly (in arrears) in
accordance with the following annual schedule:
Year After Aggregate Annual
Closing Amortization
------- ------------
1 $500,000
2 $500,000
3 $500,000
4 $500,000
5 $500,000
6 $23,750,000
7 $23,750,000
Pricing:
- --------
The Revolving Loans and the Term Loans will bear interest at either the
Agent's Prime Rate plus the Applicable Prime Rate Margin or, at the
Borrower's election, the LIBOR
<PAGE>
rate (reserve adjusted) plus the Applicable LIBOR Margin, each as
determined by the Agent from time to time.
For purposes of this Section, the following terms have the following
meanings:
"Prime Rate":
- -------------
The greater of (i) the Agent's "Prime Rate" as announced from time to
time, and (ii) 50 basis points plus the federal funds effective rate,
as customarily determined by the Agent.
"Applicable Prime Rate Margin" and "Applicable LIBOR Margin":
- -------------------------------------------------------------
From the Closing through the day which is two business days after the
date upon which the financial statements are delivered with respect to
the second full fiscal quarter of the Borrower following the Closing,
the Applicable Prime Rate Margin for Revolving Loans and Term Loan A
shall be 2.00% and the Applicable LIBOR Margin for Revolving Loans and
Term Loan A shall be 3.25%. Thereafter, the Applicable Prime Rate
Margin and the Applicable LIBOR Margin for Revolving Loans and Term
Loan A shall be determined for each Rate Period in accordance with
Table 1 below. From the Closing through the day which is two business
days after the date upon which the financial statements are delivered
with respect to the second full fiscal quarter of the Borrower
following the Closing, the Applicable Prime Rate Margin for Term Loan B
shall be 2.50% and the Applicable LIBOR Margin for Term Loan B shall be
3.75%. Thereafter, the Applicable Prime Rate Margin and the Applicable
LIBOR Margin for Term Loan B shall be determined for each Rate Period
based upon a pricing grid to be agreed upon, with two step-downs in
pricing levels to be negotiated.
"Rate Period"
- -------------
means the period beginning on the second business day following
delivery to the Agent of the Borrower Affiliated Group's quarterly
financial statements and ending on the day on which the next such
financial statements are delivered.
Table 1
-------
Revolving Loans and Term Loan A
Ratio of Total Funded Debt Applicable Applicable
to EBITDA (see Financial Prime Rate LIBOR
Covenants below) Margin Margin
---------------- ------ ------
a) greater than or equal to 4.5 to 2.00% 3.25%
1
b) less than 4.5 to 1 but greater 1.75% 3.00%
than or equal to 4.0 to 1
<PAGE>
c) less than 4.0 to 1 but greater 1.50% 2.75%
than or equal to 3.5 to 1
d) less than 3.5 to 1 but greater 1.25% 2.50%
than or equal to 3.0 to 1
e) less than 3.0 to 1 1.00% 2.25%
For purposes of determining the Applicable Prime Rate Margin and the
Applicable LIBOR Margin for Revolving Loans and Term Loan A, the ratio
of Total Funded Debt to EBITDA will be tested quarterly, commencing
with the third full fiscal quarter of the Borrower following the
Closing, with EBITDA being measured on a rolling four quarter basis.
Subject to the availability of funds, the Borrower may elect LIBOR
borrowings for periods of one, two, three or six months, provided that
at no time may there be more than eight LIBOR advances outstanding.
LIBOR borrowings shall be in increments of not less than $500,000.
Interest on Prime Rate Loans shall be payable monthly in arrears and
interest on LIBOR Loans shall be payable on the last day of the
interest period relating thereto, or if any interest period is longer
than three months, on the last day of each three-month period following
the beginning of such interest period and on the last day thereof. All
interest shall be computed on the basis of a 360 day year and the
actual number of days elapsed.
Upon the occurrence and during the continuance of any event of default,
all interest rates and letter of credit fees will accrue at 2% per
annum above the otherwise applicable rate.
All payments of principal, interest, fees, costs and expenses due to
the Agent or the Bank under the Loan Agreement may be paid by the Agent
by making an advance under the Revolving Loans or by debiting any
account of the Borrower with the Agent.
Interest Rate Protection:
- -------------------------
Within 60 days after the Closing, the Borrower will be required to
enter into and maintain interest rate protection arrangements on
$66,500,000 of the Loans, which such arrangements shall be in form and
substance reasonably satisfactory to the Agent and the Bank in all
respects. All interest rate protection agreements will constitute
security for the Loans.
<PAGE>
Mandatory
Prepayments:
- ------------
The Borrower shall be required to make mandatory prepayments of the
Loans as follows:
(i) an amount equal to 100% of the net proceeds received by the Borrower
from the sale or other disposition (including insurance proceeds
resulting from a casualty) of all or any portion of its assets (subject
to covenant limitations on asset sales), except for (x) sales of
inventory in the ordinary course of business, (y) sales of assets not
in the ordinary course of business in an aggregate amount in any fiscal
year not to exceed an amount to be determined, provided that such sales
are at fair market value, and (z) certain limited exceptions for
reinvestment of insurance proceeds and replacement of obsolete
equipment;
(ii) 100% of the net proceeds received from the issuance of debt (excluding
certain permitted debt and debt issued in connection with the
Recapitalization Transactions) by the Borrower and 50% of the net
proceeds received from the issuance of equity (excluding equity issued
in connection with the Recapitalization Transactions and equity
contributed by the Investor Group in connection with any permitted
acquisition (it being acknowledged that the Loan Agreement will contain
a basket for acquisitions that meet conditions to be agreed upon)),
subject to exceptions to be agreed upon (including, without limitation,
with respect to benefit and option plans) by the Borrower (in each case
subject to covenant limitations); and
(iii) 75% of excess cash flow of the Borrower, as determined based upon the
annual audited financial statements of the Borrower. Step-downs in the
percentage of excess cash flow recapture to be negotiated.
Mandatory Prepayments shall be applied ratably (based on outstandings
at the time of prepayment) to the outstanding installments of Term Loan
A and Term Loan B, and with respect to each Term Loan, shall be applied
to outstanding installments pro rata, provided that holders of Term
Loan B shall have the right, until Term Loan A is paid in full, to
reject any Mandatory Prepayment of Term Loan B (in which case such
amounts will be applied to Term Loan A). Once the Term Loans are paid
in full, Mandatory Prepayments shall be applied to Revolving Loans
outstanding at such time, without any required reduction in commitment
amount. Mandatory prepayments of Base Rate Loans shall be made without
any premium or penalty. Mandatory prepayments of LIBOR Loans shall be
made without premium or penalty but shall be accompanied by any
"breakage" prepayment amount specified in the Loan Agreement.
<PAGE>
Voluntary
Prepayments:
- ------------
The Borrower may prepay, in whole or in part, upon 5 days' prior
written notice to the Bank, outstanding amounts under the Loans,
provided that such prepayments shall be in an amount equal to $500,000
or an integral multiple thereof. Additionally, the Borrower may, at its
option, permanently reduce (without premium or penalty) the aggregate
unutilized commitments under the Revolver in part (in minimum principal
amounts to be agreed) or in whole. Any such reductions shall be applied
to the Revolving Credit Commitments pro rata. Voluntary prepayments of
Prime Rate Loans may be made without premium or penalty. Voluntary
prepayments of LIBOR Loans shall be accompanied by any "breakage"
prepayment amount specified in the Loan Agreement. Voluntary partial
prepayments of the Term Loans shall be applied in the same manner as
Mandatory Prepayments are applied.
Guaranties:
- -----------
All direct and indirect subsidiaries of the Borrower, now existing or
hereafter acquired, will be required to guaranty the Loans and other
obligations on a joint and several basis, provided, however, that no
guaranty shall be required from a foreign subsidiary unless such
foreign subsidiary has an election in effect under ss.1504(d) of the
Internal Revenue Code of 1986, as amended.
Collateral:
- -----------
The Borrower Affiliated Group will provide the following security for
the Loans pursuant to documentation reasonably satisfactory to the
Agent and the Bank:
1) A perfected first-priority lien on and security interest in all
property of the Borrower Affiliated Group, whether now owned or
hereafter acquired, both tangible and intangible, and all proceeds
thereof, including, without limitation, all accounts receivable,
inventory, plant, machinery, equipment, general intangibles (including
contract rights and all intellectual property such as trademarks,
tradenames, service marks and patents) and fixtures, except for assets
as to which the Agent shall have determined in its reasonable judgment
that the costs of obtaining such a lien and security interest are
excessive in relation to the value of the security to be afforded
thereby. The Borrower shall agree (i) not to grant a lien in its motor
vehicles to any other party, and (ii) not to enter into any agreement
with any other party which prohibits the Borrower from granting a lien
in its motor vehicles to the Agent.
2) A perfected first-priority mortgage or leasehold mortgage on and
security interest in the fee or leasehold interest, as applicable, in
each of the real properties owned or leased by the Borrower Affiliated
Group including a perfected first priority assignment of all rents,
issues and profits from such leased properties (such leased properties
being referred to individually as a "Real Estate Collateral Property"
and collectively as the "Real Estate Collateral Properties"). The
holder of landlord's leasehold interest and any mortgagee of a fee
interest in any of the leased facilities shall be required to recognize
the leasehold interest of the applicable member of the Borrower
Affiliated Group and the Agent's leasehold mortgage interest by
documents reasonably
<PAGE>
satisfactory to the Bank in form and substance. In addition, each lease
shall be delivered to the Agent. With respect to any owned properties,
the Agent reserves the right to require customary diligence and title
insurance in the definitive loan documentation. Obligations of the
Borrower under this paragraph shall require the Borrower to use its
commercially reasonable efforts.
3) A perfected, first-priority pledge of the voting stock of each
subsidiary of the Borrower (or to the extent such a pledge by the
Borrower or any of its subsidiaries of a foreign subsidiary would
create a United States "deemed dividend" withholding problem, then only
65% of the stock of such foreign subsidiary will be required to be
pledged).
The Revolving Loan Facility and the Term Loan Facilities (including any
interest rate protection arrangements) will be fully
cross-collateralized and cross-defaulted.
The Agent will require periodic field examinations of the collateral
and examinations of the Borrower Affiliated Group at the Borrower's
expense, provided that unless an event of default has occurred and is
continuing, the Agent will not conduct more than one field examination
in any fiscal year.
The Agent shall have received full releases and/or terminations of any
existing mortgages or other security interests held by any other party
prior to Closing. The Agent shall also have received evidence of the
completion of all necessary filings and recordings against all real and
personal property of the Borrower Affiliated Group, including, without
limitation, UCC-1 filings.
Initial Fee:
- ------------
See attached Fee Letter.
Agent's Fee:
- ------------
See attached Fee Letter.
Commitment
Fee :
- -----
With respect to the Revolving Loans, the Borrower shall pay to the
Agent, for the ratable account of the Bank Group, a commitment fee
calculated at the rate of 0.50% on the average daily amount, during
each fiscal quarter or portion thereof from the Closing to the maturity
of the Revolving Loans, by which the Revolving Credit Commitment then
in effect exceeds the outstanding amount of Revolving Loans during such
calendar quarter (the "Commitment Fee").
<PAGE>
Letter of
Credit Fees:
- ------------
For each standby letter of credit, a per annum fee, payable in advance
for the ratable account of the Bank Group at a per annum rate equal to
the Applicable LIBOR Margin for Revolving Credit Loans, as determined
by the pricing grid, multiplied by the face amount of such standby
letter of credit. In addition, a fronting fee shall be payable in
advance to the Issuer (as defined below), solely for its account, equal
to 1/4% of the face amount of the applicable standby letter of credit.
In addition, standard documentary processing and other fees shall be
payable to the Issuer solely for its account when customarily charges
by the Issuer.
The Issuer shall be Fleet National Bank.
Financial
Covenants:
- ----------
The following financial covenants of the Borrower Affiliated Group,
with ratios to be determined, will be included in the Loan Agreement,
in addition to other non-financial covenants, representations and
warranties which are customarily included in a credit facility relating
to transactions of this type:
Maximum Total Funded Debt to EBITDA
Minimum Fixed Charge Coverage Ratio
Minimum EBITDA
Minimum EBITDA to Interest Ratio
Additional
Covenants:
- ----------
The Loan Agreement shall include such other covenants as are customary
in the Agent's financing documents and transactions of this type,
including, without limitation, limitations on: (i) the incurrence of
additional indebtedness, (ii) liens other than those approved by the
Bank Group, (iii) types and amounts of investments, (iv) stock
redemptions or repurchases, dividends, distributions, management fees
and other restricted payments to shareholders, (v) change of ownership
or control, (vi) transactions with affiliates, and (vii) acquisitions,
mergers, asset sales (other than sales of inventory in the ordinary
course of business and other fair market value sales not to exceed,
annually, an amount to be determined) and capital expenditures.
Financial
and other
Reporting:
- ----------
The Borrower will provide the Bank Group with the following financial
and other reports:
1) Within 90 days after the end of each fiscal year, annual audited
financial statements prepared in accordance with GAAP and certified by
a "Big-5" accounting firm for the Borrower Affiliated Group on a
consolidated and consolidating basis.
<PAGE>
2) Within 45 days after the end of each fiscal quarter, quarterly
unaudited financial statements prepared in accordance with GAAP
(subject to year-end adjustments, none of which shall be materially
adverse, and without footnotes) for the Borrower Affiliated Group on a
consolidated and consolidating basis, along with a covenant compliance
certificate prepared by management.
3) Within 30 days after the end of each fiscal month, monthly unaudited
financial statements prepared in accordance with GAAP (subject to
year-end adjustments, none of which shall be materially adverse, and
without footnotes) for the Borrower Affiliated Group on a consolidated
basis.
4) Within 15 days after the end of each fiscal month, a borrowing base
certificate in form and substance satisfactory to the Agent.
5) On or before the first day of each fiscal year, pro-forma projections
for the Borrower Affiliated Group for such fiscal year.
6) Within 90 days after the Closing, a consolidated and consolidating
opening balance sheet of the Borrower Affiliated Group, dated as of the
day of the Recapitalization Transactions (and after giving effect
thereto), reflecting actual figures for the Borrower Affiliated Group
after the consummation of the Recapitalization Transactions, prepared
by the chief financial officer of the Borrower and reviewed by Deloitte
and Touche. Such balance sheet shall not differ in any material respect
from the pro-forma balance sheet furnished to the Agent and the Bank
prior to Closing.
7) Other financial and non-financial information and reports regarding the
business and assets of the Borrower Affiliated Group as may be
reasonably required by the Agent or the Bank Group.
Insurance:
- ----------
The Loan Documents shall provide for such insurance coverage as the
Agent may reasonably require from time to time in amounts and from
companies reasonably acceptable to the Agent. The policies shall
contain the proper mortgagee, additional insured and loss payee
clauses. All policies shall contain a provision requiring at least 30
days' advance notice to the Agent before any policy cancellation or
modification.
Cash
Management:
- -----------
The Borrower Affiliated Group shall have entered into reasonably
satisfactory cash management arrangements with the Agent prior to
Closing, including, without limitation, opening their primary operating
accounts with the Agent. Such arrangements may include the opening of
accounts by the Borrower with other institutions in locations where the
Agent has no operations, provided that any such institution has
provided a reasonably satisfactory agency agreement to the Agent.
<PAGE>
Events of
Default:
- --------
The Loan Agreement shall include customary events of default (subject
to grace periods to be agreed), including, without limitation, defaults
based upon late payment, misrepresentations, covenant breach,
bankruptcy or insolvency, problems relating to ERISA, judgments, change
of ownership or control and cross default provisions.
Voting
Rights:
- -------
Majority Banks for waivers and amendments--except waivers and
amendments customarily requiring unanimous consent, including without
limitation increases in any lender's loans or commitments, reductions
in principal, interest rates or fees, postponement of any due date for
scheduled payments of principal, interest or fees, extensions of any
maturity date, release of any substantial part of the collateral, or
change to the definition of Majority Banks, will require the consent of
100% of the Bank Group. Majority Banks shall mean lenders holding at
least 51% of the outstanding Loans and unused Commitments.
Other
Conditions
Precedent:
- ----------
The Bank's obligations to perform under this letter are subject to
additional customary conditions in transactions of this type, including
without limitation, the following:
1) Receipt and review of the following financial statements (including
notes thereto) of the Company: (i) a consolidated balance sheet as of
December 31, 1999, which will be audited if the Closing occurs after
March 1, 2000, (ii) a consolidated statement of operations and cash
flows for the fiscal year ended December 31, 1999, which will be
audited if the Closing occurs after March 1, 2000, (iii) pro forma
unaudited statement of income and balance sheet for December 31, 1999.
2) A review of the assets of the Borrower Affiliated Group, and an
examination to be completed by the Agent's field examiners, provided
that the results of such examination shall not prevent the Closing or
funding of the Loans.
3) Opening pro-forma balance sheet reflecting all of the transactions
contemplated by the Facilities and the Recapitalization Transactions,
prepared in accordance with GAAP and reviewed by the Borrower's
accountant.
4) Reasonably satisfactory evidence that, after giving effect to the
Recapitalization Transactions, the Borrower's pro forma EBITDA
(excluding one-time transaction- related expenses) for the most
recently available twelve month period, as determined in accordance
with GAAP, is at least equal to $33,800,000. For purposes hereof,
EBITDA is defined as operating income plus depreciation and
amortization, and certain pro forma adjustments in accordance with
Regulation S-X under the Securities Act of 1934.
<PAGE>
5) Reasonably satisfactory evidence that, after giving effect to the
Recapitalization Transactions, the Borrower's pro forma leverage ratio
calculated as of December 31, 1999 for the four consecutive fiscal
quarters then ending, as determined in accordance with GAAP, does not
exceed 5.20 to 1.0. For purposes hereof, the leverage ratio is the
ratio of total consolidated debt to pro forma EBITDA.
6) All necessary waivers and/or consents to the Recapitalization
Transactions and the Facilities and Collateral shall have been
obtained.
7) Receipt of reasonably satisfactory evidence that each member of the
Borrower Affiliated Group is solvent, and will be solvent after giving
effect to the Facilities and the Recapitalization Transactions,
including delivery of a solvency certificate by each member of the
Borrower Affiliated Group.
8) No pending or threatened (in writing) materially adverse litigation
against the Borrower Affiliated Group prior to Closing.
9) The Loan Agreement will contain representations and warranties of the
Borrower (including, without limitation, representations and warranties
relating to legal, tax and environmental matters), rates and charges,
covenants of the Borrower Affiliated Group and events of default
(which, in each case, must be reasonably satisfactory to the Agent and
the Bank) which will permit the Agent or the Bank Group to accelerate
the maturity of the debt and pursue its or their legal remedies under
the loan documents if such events occur, and closing conditions,
including delivery of legal opinions (corporate and real estate) of
independent counsel to the Borrower Affiliated Group, each in form and
substance reasonably satisfactory to the Agent.
10) The Loan Agreement will contain provisions permitting the Bank Group to
increase the fees or interest payable by the Borrower if governmental
reserve requirements applicable to the Loans are increased or in
connection with the Loans constituting a highly leveraged transaction.
11) The receipt of the fees described in the Fee Letter and due on the
closing date.
12) Reasonably satisfactory corporate and capital structure, including a
minimum cash equity contribution of $130,000,000 from the Investor
Group on terms acceptable to the Agent and the Arranger and $40,000,000
of subordinated debt from Fleet Corporate Finance, Inc. on terms
reasonably satisfactory to the Agent. The Agent shall be reasonably
satisfied in all respects with the documentation entered into in
connection with the Recapitalization Transactions and no material
conditions contained therein shall have been waived or amended without
the consent of the Agent and the Bank, which consent will not be
unreasonably withheld or delayed), and each of the Recapitalization
Transactions (other than the Financing) shall have been consummated.
<PAGE>
Expenses:
- ---------
The Borrower Affiliated Group shall reimburse the Agent, the Arranger
and the Bank for all reasonable expenses incurred by the Agent, the
Arranger and the Bank relating to the transactions contemplated herein
(in connection with the closing, syndication, and administration of the
Loans), including but not limited to, syndication expenses, and
reasonable legal fees of a single law firm (and any necessary local
counsel), appraisal fees and audit and exam fees, regardless of whether
or not the financing contemplated herein is ultimately consummated.
Such expenses will be payable at Closing or on such date as the Agent,
the Arranger and the Bank determine in their commercially reasonable
judgment, exercised in good faith, that the transaction referred to
herein will not be consummated. Further, in consideration of the
commitment contained herein, you agree to pay to the Agent and the
Arranger the fees described in the attached fee letter (the "Fee
Letter") on the dates and in the amounts provided therein and on the
terms provided therein.
Indemnification:
----------------
The Borrower Affiliated Group will indemnify and hold the Agent, the
Arranger, the Bank, our respective affiliates and our respective
shareholders, directors, agents, officers, and subsidiaries harmless
from and against any and all damages, losses, settlement payments,
obligations, liabilities, claims, actions or causes of action, and
reasonable costs and expenses actually incurred, suffered, sustained or
required to be paid by an indemnified party by reason of or resulting
from the transactions contemplated hereby or which otherwise arise in
connection with the financing, unless directly caused by the gross
negligence or willful misconduct of the Agent, the Arranger or the
Bank, as applicable. In litigation, or the preparation therefor, the
Bank, the Agent and the Arranger shall be entitled to select their own
counsel, and, in addition to the foregoing indemnity, you agree to pay
promptly the reasonable fees and expenses of such counsel. The Loan
Agreement shall contain similar indemnification provisions which shall
survive the termination of the Loan Agreement.
Governing Law:
- --------------
State of New York.
Confidentiality:
----------------
You agree that this letter is for your confidential use only and that
it will not be disclosed by you to any person (included any lender
bidding for the financing contemplated by this letter) other than (i)
any of your employees, officers, directors, partners, accountants,
attorneys, and other advisors, (ii) the Borrower, its board of
directors (and any committee thereof), employees, officers,
accountants, attorneys (including any advisors for its board of
directors or any committee thereof) and other professional advisors and
(iii) each member of the Investor Group and their respective advisors,
and then in each case only in connection with the transactions
contemplated hereby and on a confidential basis, except (a) upon the
order of any court or administrative agency, (b) upon the request or
demand of any regulatory agency or
<PAGE>
authority, (c) to the extent that such information has been publicly
disclosed, other than as a result of a disclosure by either because the
information became available to you on a non-confidential basis or is
generally available to the public, or (d) otherwise as required by law
or any rules of any applicable stock exchange.
If the foregoing terms and conditions are satisfactory to you,
please sign the enclosed copy of this letter and the related Fee Letter
and return them to our attention at the Bank no later than 5:00 p.m. on
December 23, 1999. Failure to return the signed copy of this letter and
the Fee Letter by that date will result in termination of the offer of
financing contained herein. This letter, once signed by all the parties
hereto, shall supersede all of our prior discussions with and writings
to you regarding the subject of this letter. This commitment shall
expire if the Facilities are not closed by May 1, 2000.
Parthenon shall be automatically released from all of its
obligations and liabilities under this letter upon the consummation of
the Merger, the payment of all fees and other amounts owing at Closing
to the Arranger, the Agent and the Bank and the making of the initial
borrowing under the Facilities.
<PAGE>
We appreciate the opportunity to provide this financing, and
we look forward to working with you.
Very truly yours,
FLEET NATIONAL BANK
By: /s/ Timothy G. Clifford
--------------------------------
Timothy G. Clifford
Title: Director
FLEETBOSTON ROBERTSON STEPHENS INC.
By: /s/ Christopher R. Carmosino
--------------------------------
Christopher R. Carmosino
Title: Managing Director
Accepted and agreed to this 22nd day of December, 1999:
PARTHENON INVESTORS L.P.
By: /s/ Bruce MacRae
-------------------
Title: Partner
FLEET CORPORATE FINANCE, INC.
100 Federal Street
Boston, Massachusetts 02110
December 22, 1999
Parthenon Investors, L.P.
Attention: Ernest K. Jacquet
Samantha Trotman
200 State Street
Boston, MA 02210-2227
Ladies and Gentlemen:
Parthenon Investors, L.P. ("Parthenon" or "you") has advised us that
you are forming an entity ("Newco") and with such entity you propose to acquire
(the "Acquisi tion") all of the outstanding capital stock of Wilmar Industries,
Inc., a New Jersey corporation (the "Company"). We understand that the
Acquisition is proposed to be ef fected pursuant to the provisions of an
Agreement and Plan of Merger (the "Merger Agreement") entered into by and among
the Company and Newco, which contemplates a merger (the "Merger") of Newco with
and into the Company, with the Company be ing the surviving company of the
Merger. As used herein, the term "Transactions" shall refer collectively to the
Acquisition, the Merger and the related transactions and the term "Acquisition
Closing Date" shall mean the date on which the Acquisition is consummated.
We have assumed that in connection with the Transactions (a) the
Company will repay its outstanding indebtedness of approximately $64.5 million,
(b) all of the Com pany's equity interest will be redeemed or purchased for
approximately $233.7 million (excluding transaction costs of approximately $7.5
million) and (c) additional uses of funds will include a $0.4 million cash
infusion into the Company. We have further as sumed that such funds will be
generated through (i) equity contributions from Parthe non, its affiliates and
other investors to Newco of (x) at least $1.1 million in cash through the
acquisition of common equity and (y) at least $132.0 million in cash through the
acquisition of redeemable preferred stock (the "Equity Contribution") and (ii) a
$200.0 million debt financing consisting of a $160.0 million senior secured
credit facility (the "Senior Bank Debt"), of which $133.0 million will be funded
at the Acquisition Closing Date and $40.0 million of senior subordinated notes
(the "Private Notes") which Private Notes may be issued with detachable warrants
and (c) on the Acquisition Closing Date, the only indebtedness (other than trade
indebtedness and capital leases permitted under the Senior Bank Debt) of Newco,
the Company or any of their subsidiaries will be the Senior Bank Debt and the
Private Notes. We have further assumed that, upon consummation of the
Transactions, (i) all of Newco's obligations will be assumed by the Company and
(ii) the Company will have pro forma EBITDA1
- -------------------------
1 Pro forma EBITDA is defined as operating income plus depreciation and
amortization and certain pro forma adjustments in accordance with Regulation S-X
<PAGE>
-2-
for the trailing twelve month period ended the latest available month of not
less than $33.8 million and a pro forma leverage ratio (as defined below) for
the comparable pe riod of not greater than 5.2 to 1.0. As used herein, the term
"leverage ratio" means total consolidated debt to pro forma EBITDA. In
connection with the Transactions, pursuant to an engagement letter dated the
date hereof (the "Engagement Letter"), FleetBoston Robertson Stephens, Inc.
("FRS") has been retained to act as sole placement agent with respect to a
placement (the "Placement") of up to $40.0 million principal amount of the
Private Notes. Based upon the terms and subject to the conditions set forth in
this letter and the Sum mary of Terms attached as Exhibit A hereto, on the
Acquisition Closing Date, Fleet Corporate Finance, Inc. ("Fleet" or the
"Commitment Party") will purchase from the Company the Private Notes in an
aggregate principal amount equal to 100% of the Commitment Amount. The
"Commitment Amount" means an aggregate of $40.0 mil lion (or such lesser amount
agreed to by Parthenon that is required to consummate the Acquisition). The
Private Notes purchased pursuant to this paragraph will be purchased at par and
on the terms contained in the Summary of Terms attached as Ex hibit A hereto.
It is understood and agreed that the Commitment Party shall only be
obligated to pur chase the Private Notes pursuant to this letter if they have
received a written request from Parthenon to do so which written request (a
"Purchase Request") must be deliv ered on or prior to April 15, 2000. In the
event Parthenon timely delivers such a Pur chase Request, the Commitment Party
will consummate the purchase of the Private Notes as contemplated herein, but
subject to the terms and conditions contained herein and in the Summary of Terms
attached as Exhibit A hereto, within five business days after the date of such
Purchase Request but in any event no later than May 1, 2000. You agree that
prior to the closing date of any of the Transactions there shall be no is sues
of debt securities or commercial bank facilities (other than as contemplated in
this letter or the attached Summary of Terms) of the Company or Newco, any
direct or indi rect holding company thereof or any of their respective
subsidiaries being offered, placed or arranged that compete in the high yield or
private placement market with the Private Notes.
You agree, upon the Commitment Party's reasonable request, to (a)
promptly provide or make available (and to use your commercially reasonable
efforts to cause the Com pany to agree to provide or make available) to the
Commitment Party all necessary fi nancial and other information in your or the
Company's possession with respect to the Company, the Transactions and any other
transactions contemplated therewith, includ ing but not limited to information
and projections prepared by you or by your advisors on your behalf relating to
the Company, the Transactions and the other transactions contemplated therewith,
(b) use your commercially reasonable efforts to make your
- -------------------------
under the Securities Exchange Act of 1934; and therefore excludes one-time
transaction related expenses.
<PAGE>
-3-
(and to obtain the agreement of the Company to make its) senior officers
available to the Commitment Party and its affiliates in connection with the
issuance and placement of the Private Notes (including any resale of such
Private Notes by the Commitment Party (a "Resale")), including making them
available at reasonable times upon reason able notice to assist in the
preparation of an offering document (including assistance in obtaining industry
data), to participate at reasonable times upon reasonable notice in due
diligence sessions, and (c) use your commercially reasonable efforts to prepare,
and to cause your affiliates and advisors to prepare, an appropriate offering
document, and to assist the Commitment Party in preparing other appropriate
marketing materials rea sonably requested by it, in each case, to be used in
connection with the Private Notes (including any Resale). The commitment of
Fleet to purchase from the Company the Private Notes on the Acquisition Closing
Date in an aggregate principal amount equal to 100% of the Commitment Amount,
upon the terms and subject to the conditions set forth in this letter and the
attached Summary of Terms, is not subject in any respect to any placement of the
Private Notes or Resale.
In consideration for the Commitment Party's commitment to purchase from
the Company the Private Notes in an aggregate principal amount equal to 100% of
the Commit ment Amount(the "Commitment") pursuant to this letter, you hereby
agree to pay, or cause the Company to pay, in cash to the Commitment Party the
applicable fees set forth in the Fee Letter dated the date hereof and delivered
herewith among the Commit ment Party and Parthenon (in each case upon the terms
and subject to the conditions set forth in such fee letter).
The Commitment of the Commitment Party is subject to (I) the requisite
approval of the Company's stockholders to the Merger and (II) (a) the Commitment
Party's reasonable satisfaction in all material respects (i) that the material
terms of all definitive agreements relating to the Acquisition (including,
without limitation, conditions relating to the consummation of the contemplated
Merger and all other material agreements to be entered into in connection with
the Acquisition (including all agreements to be en tered into between the
Company and Parthenon) are substantially consistent with the terms of such
agreements reviewed by the Commitment Party prior to the execution by Parthenon
of this letter (and have not been waived or amended without the consent of FRS
(which consent shall not unreasonably be withheld)), (ii) that the material
terms of the Senior Bank Debt (including conditions with respect to funding)
expected to be available at the Acquisition Closing Date are substantially
consistent with the terms of such Senior Bank Debt reviewed by the Commitment
Party prior to the execution by Parthenon of this letter, (iii) that the
material terms of the Equity Contribution or any other agreement, if any,
entered into by Parthenon or its affiliates and any agreement, if any, among the
holders of the indebtedness or capital stock of the Company or Newco (including
conditions with respect to funding) are substantially consistent with the terms
of such agreements, if any, reviewed by the Commitment Party prior to the
execution by Parthenon of this letter, (iv) that the Company has made
satisfactory representations and warranties with respect to legal, tax,
environmental and other matters, and (v) that the Company's pro forma EBITDA (as
defined above) for the trailing twelve month
<PAGE>
-4-
period ended the latest available month shall not be less than $33.8 million and
the Company shall not have a pro forma leverage ratio (as defined above) of
greater than 5.2 to 1.0, (b) the receipt by the Commitment Party by the
Acquisition Closing Date of financial statements (including notes thereto, if
any) of the Company consisting of (A) consolidated balance sheet as of December
31, 1999 which will be audited if the Acqui sition Closing Date is after March
1, 2000, (B) consolidated statement of operations and cash flows for the
fiscal-year period ended December 31, 1999 which will be audited if the
Acquisition Closing Date is after March 1, 2000, (C) pro forma unaudited
statement of income and balance sheet for December 31, 1999, (c) the
preparation, execution and delivery of definitive documentation reasonably
satisfactory to the Commitment Party, including appropriate purchase
documentation, incorporating the terms and conditions set forth herein and in
the attached Summary of Terms, and (d) the Commitment Party's reasonable
satisfaction that, immediately prior to the marketing period for the Placement,
there shall be no competing marketing of issues of debt securities or com
mercial bank facilities (other than as contemplated in this letter or the
attached Sum mary of Terms) of Newco or the Company. In addition, the Commitment
Party shall be released from its Commitment if, in the Commitment Party's sole
discretion, prior to the Acquisition Closing Date, (i) there shall have
occurred, exist or become known to the Commitment Party any event, condition or
change in or affecting the Company that singly or in the aggregate would
reasonably be expected to have a material adverse effect on the business,
results of operations, financial condition or prospects of the Company and its
subsidiaries taken as a whole, (ii) there shall have been a material dis ruption
in the capital markets for securities similar to the Private Notes or (iii)
material information relevant to the Transactions become known to FRS that FRS
in good faith believes is inconsistent in a material and adverse manner with (x)
any information rele vant to the Transactions disclosed to FRS prior to the date
of this Agreement or (y) any information relevant to the Transactions obtained
by FRS during its due diligence inves tigation.
The Commitment will expire at 5:00 p.m., New York City time, on
December 23, 1999, unless accepted prior to such time and, if accepted prior to
such time, the Commitment will expire at 5:00 p.m., New York City time, on the
earlier of (a) the termination or abandonment of the Merger and Acquisition or
the definitive agreements relating to any of the Transactions and (b) (i) if
Parthenon shall not have previously delivered a Purchase Request to the
Commitment Party, April 15, 2000, or (ii) if Parthenon shall have delivered a
Purchase Request to the Commitment Party, May 1, 2000 (unless all conditions
precedent to the purchase of the Private Notes by the Commitment Party shall
have been satisfied or waived prior to such time). Expiration or termination of
the Commitment shall not affect your obligations under the following sentence,
which obli gations shall remain in full force and effect regardless of any
termination of the Commitment or the completion of the Acquisition and related
financings. In connection with this Commitment Letter, the Commitment Party and
Parthenon have executed the Indemnity Letter attached as Exhibit B hereto. Upon
execution and delivery of defini-
<PAGE>
-5-
tive documentation with respect to the purchase and sale of the Private Notes,
such In demnity Letter shall be superseded thereby and shall be of no further
force and effect. The dollar amount of Fleet's maximum obligation is set forth
on the signature page hereof.
Fleet may syndicate, sell, transfer, assign, participate or otherwise
reduce or transfer its risk (including by way of derivatives or otherwise)
(each, a "Disposition") at any time with respect to the Commitment to (i)
institutional accredited investors and (ii) qualified institutional buyers;
provided, however, that in each such case no such Disposition can be made (x) to
any competitors of the Company or any of its subsidiaries (or any per sons who
own controlling interests in any competitor of the Company or any of its
subsidiaries) and (y) in an aggregate principal amount of less than $2.5 million
(unless such lesser amount is agreed to by the Company); provided further,
however, that no Disposition shall reduce Fleet's obligation to purchase the
entire Commitment Amount. You agree that, upon the consummation of the
Acquisition, you will use your commercially reasonable best efforts to cause the
Company (the "Additional Party") to become a party to all letter agreements
(including the Indemnity Letter attached as Exhibit B hereto) contemplated by
this Agreement by executing and delivering to the Commitment Party counterparts
of each such agreement. The Additional Party will have the same rights, duties
and obligations as Parthenon as if it were an original signatory hereto and
thereto. The Commitment Party agrees that, upon such execution and delivery of
each letter agreement by the Additional Party, Parthenon shall automatically be
released from all of its rights, duties and obligations, if any, under each such
agreement.
This letter shall be governed by and construed in accordance with the
laws of the State of New York without regard to principals of conflicts of laws.
You hereby submit to the non-exclusive jurisdiction of the Federal and State
courts located in the City of New York in connection with any dispute related to
this Agreement or any matters contem plated hereby. Delivery of an executed
counterpart of this letter by telecopier shall be effective as delivery of a
manually executed counterpart of this letter. This letter is not assignable by
you to any other person or entity, and this letter is not assignable by us
without your consent.
[Remainder of this page intentionally left blank]
<PAGE>
-6-
This letter has been delivered to you for your information and is not
to be distributed or disclosed to, or otherwise relied upon by, any other person
(including pursuant to any tender offer or proxy statement or other publicly
filed document) without the Commit ment Party's prior written consent (which
shall not be unreasonably withheld or delayed), except that you may disclose
this letter (a) on a confidential basis to the Com pany, the Company's
stockholders, its management, Board of Directors (or any com mittee thereof) and
financial, legal and other professional advisors (including advisors to any
committee of the Company's Board of Directors and to your partners,
equityholders (and their partners, stockholders, management, Board of Directors
and advisors), management and advisors and the investors (and their advisors)
effecting the Equity Contribution (b) as required by applicable law, any rules
of any applicable stock exchange, any governmental or regulatory authority or
compulsory legal process.
Very truly yours,
FLEET CORPORATE FINANCE, INC.
By: /s/ Michael Browne
- ----------------------
Name: Michael Browne
Title: Managing Director
Commitment Amount: $40.0 million.
Agreed to and Accepted
as of the date first above
written:
PARTHENON INVESTORS, L.P.
By: _____________________________
Name:
Title:
<PAGE>
-1-
SUMMARY OF TERMS
Placement Agent: FLEETBOSTON ROBERTSON STEPHENS INC.
("FRS")
Issuer: Wilmar Indudstries, Inc., ("Issuer" or
the "Company").
Issue: Senior Subordinated Notes (the "Private
Notes").
Principal Amount: $40.0 million.
Purchaser: Fleet Corporate Finance, Inc.
Maturity: 8 years (2008)
Ranking Priority: The Notes will constitute senior
subordinated debt of the Company, will
be unsecured and will be subordinated
only to the Senior Debt of the Company.
Rate of Interest: 15.00% fixed rate ("Coupon"), comprised
of a 10.00% cash coupon payable
quarterly in arrears and 5.00%
paid-in-kind ("PIK") coupon deferred for
up to five years.
Interest Payments: Interest will be compounded quarterly,
calculated on a twelve 30-day months,
360-day year, basis.
Mandatory Redemption: No scheduled amortization. The Company
will redeem the full principal amount of
the Private Notes, plus accrued
interest, upon Maturity.
Optional Prepayment: The Notes are prepayable at any time at
the Company's option, at par plus
accrued interest and subject to a
Prepayment penalty calculated as
follows:
For the first 0-18 months: 6.00% of the
principal amount outstanding,
Months 19-24: 4.00% of the principal
amount outstanding,
Year 3: 2.00% of the principal amount
outstanding,
Year 4: Par
Change of Control: Upon a Change of Control, the Company
will offer to repurchase the Notes from
the Noteholder(s) at 101% of the
principal amount together with accrued
interest.
Financial Covenants: Financial covenants to be tested
quarterly on the Issuer and its
consolidated subsidiaries. Covenants
will include, but not be limited to, the
following:
<PAGE>
-2-
1. Total Funded Debt to reported rolling
four quar ter EBITDA, with certain
step-down provisions.
2. Minimum Fixed Charge Coverage Ratio,
defined as (i) actual reported EBITDA
minus capital expenditures to (ii)
Interest Expense plus current maturities
of long-term debt, measured on a rolling
four quarter basis, with certain
step-down provisions.
Other Covenants: Usual and customary for transactions of
this nature including, but not limited
to, the fol lowing: Limitation on
Restricted Payments and Investments,
Limitation on the Incurrence of Debt,
Limitation on Consolidations and
Mergers, Limitation on the Sale of
Assets, Limitation on Acquisitions,
Limitation on Operating Leases, No
material change in nature of business
and standard representations, warranties
and reporting requirements.
<PAGE>
-3-
Events of Default: Usual and customary for financings of
this size, type and purpose.
Warrants: On the Closing Date, Fleet Corporate
Finance, Inc. shall receive warrants for
4.0% of the then outstanding
fully-diluted common equity of the
Company.
Placement Matters: Usual and customary placement for notes
of this type and nature, including, but
not limited to, the following: Prior to
the Acquisition Closing Date, FRS shall
be entitled, at their sole reasonable
discretion, to change the structure,
covenants, or terms of the Private Notes
(excluding changes to the Rate of
Interest, Warrants and Optional
Prepayments) in consultation with
Parthenon and the Company if FRS
determines that such changes are
necessary in order to ensure a
successful placement of the Private
Notes so long as the aggregate principal
amount of the Private Notes is not
reduced.
