PARTHENON INVESTORS L.P.
000 Xxxxx Xxxxxx
Xxxxxx, XX 00000
December 22, 1999
WM ACQUISITION, INC.
c/o Parthenon Capital
000 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxx Xxxxxxxxxx
Xxxxxxxxx: (000) 000-0000
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
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
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. Xxxxxx Sub agrees to provide copies of all filings to
be made with and notices to be given by Xxxxxx 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
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
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, Xxxxxx 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
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/ Xxxxx X. XxxXxx
--------------------
Title: Partner
Agreed to and Accepted on this
22nd day of December, 1999.
WM ACQUISITION, INC.
By: /s/ Xxxx Xxxxxx
---------------------
Title: Vice President
