General Statement of Beneficial Ownership — Schedule 13D
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SC 13D General Statement of Beneficial Ownership 8 37K
2: EX-1 Exhibit 7(A) 52 207K
3: EX-2 Exhibit 7(B) 14 51K
4: EX-3 Exhibit 7(C) 17 55K
5: EX-4 Exhibit 7(D) 6 22K
6: EX-5 Exhibit 7(E) 23 81K
7: EX-6 Exhibit 7(F) 13 35K
8: EX-7 Exhibit 7(G) 1 7K
[Commitment Letter]
FLEET CORPORATE FINANCE, INC.
100 Federal Street
Boston, Massachusetts 02110
July 7, 2000
Wilmar Industries, Inc.
303 Harper Drive
Moorestown, NJ 08057
Attention: William Sanford
Ladies and Gentlemen:
Wilmar Industries, Inc. (the "Company" or "you") has advised
us that you are forming an entity ("Newco") and with such entity you propose to
acquire (the "Acquisition") all of the outstanding capital stock of Barnett Inc.
(the "Target"). We understand that the Acquisition is proposed to be effected
pursuant to the provisions of an Agreement and Plan of Merger (the "Merger
Agreement") entered into by and among the Company, Newco and the Target, which
contemplates a merger (the "Merger") of Newco with and into the Target, with the
Target being the surviving company of the Merger. As used herein, the term
"Transactions" shall refer collectively to the Acquisition, the Merger and the
related transactions, including the Refinancing (as defined below), 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 (the "Refinancing") all of its outstanding indebtedness
of approximately $169.0 million, including $40.0 million aggregate principal
amount (plus any amounts issued as pay-in-kind interest thereon) of 15% Senior
Subordinated Notes due 2008 of the Company (the "Existing Private Notes"), and
all of the Target's outstanding indebtedness of approximately $33.0 million, and
(b) all of the Target's equity
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interest will be redeemed or purchased for approximately $214.0 million
(excluding transaction costs of approximately $25.2 million). We have further
assumed that such funds will be generated through (i) equity contributions from
Parthenon Investors, L.P. ("Parthenon"), its affiliates and other investors to
the Company of (x) at least $0.7 million in cash through the acquisition of
common equity and (y) at least $94.3 million in cash through the acquisition of
14% pay-in-kind preferred stock (the "Equity Contribution"), (ii) $1.9 million
of rollover equity of existing stockholders of the Target, (iii) $4.3 million of
available cash at the Target and (iv) a $390.0 million debt financing consisting
of a $300.0 million senior secured credit facility (the "Senior Bank Debt"), of
which $250.0 million will be funded at the Acquisition Closing Date and $90.0
million of senior subordinated notes (the "Private Notes") which Private Notes
will 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 and other indebtedness reasonably
satisfactory to Fleet) of the Company, the Target 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, the Company will have pro forma
EBITDA1 for the trailing twelve month period ended the latest available month of
not less than $70.0 million and a pro forma leverage ratio (as defined below)
for the comparable period of not greater than 4.85 to 1.0. As used herein, the
term "leverage ratio" means total consolidated debt to pro forma EBITDA.
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1 Pro forma EBITDA is defined as operating income plus depreciation and
amortization and excludes one-time expenses relating to the
Transactions to the extent required to be expensed prior to the Closing
Date and reasonably acceptable to Fleet; provided that the following
pro forma adjustments shall be taken into account: (x) $2.7 million of
cost savings relating to the Company's acquisition of J.A. Sexauer,
Inc. and (y) $2.0 million of expenses relating to the Target's start-up
of its National Distribution Center ($1.0 million of which has been
incurred on or prior to June 30, 2000), in each case as reasonably
satisfactory to Fleet.
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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 $90.0 million principal amount
of the Private Notes.
Based upon the terms and subject to the conditions set forth
in this letter and the Summary 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 $90.0 million (or such lesser amount
agreed to by the Company 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 Exhibit A hereto.
It is understood and agreed that the Commitment Party shall
only be obligated to purchase the Private Notes pursuant to this letter if they
have received a written request from the Company to do so which written request
(a "Purchase Request") must be delivered on or prior to October 23, 2000. In the
event the Company timely delivers such a Purchase 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 November 7, 2000.
You agree that prior to the closing date of any of the
Transactions there shall be no issues of debt securities or commercial bank
facilities (other than as contemplated in this letter or the attached Summary of
Terms and other than pay-in-kind interest on the Existing Private Notes) of the
Company, Newco or the Target, any direct or indirect holding company thereof or
any of their respective subsidiaries being offered,
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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 Target to agree to provide or make available) to the
Commitment Party all necessary financial and other information in your or the
Target's possession with respect to the Company or the Target, the Transactions
and any other transactions contemplated therewith, including but not limited to
information and projections (such projections to include one year of quarterly
projections and five years of annual projections) prepared by you or by your
advisors on your behalf relating to the Company, the Target, the Transactions
and the other transactions contemplated therewith, (b) use your commercially
reasonable efforts to make your (and to obtain the agreement of the Target 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 reasonable 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 reasonably 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 a 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 Commitment Amount
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(the "Commitment") pursuant to this letter, you hereby agree 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 Commitment Party and the Company
(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 Target'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 entered into
between the Company and Parthenon and the other equity investors)) are
reasonably satisfactory to the Commitment Party, (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 reasonably satisfactory to the
Commitment Party, (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 the Target (including conditions with respect to funding) are
reasonably satisfactory to the Commitment Party, (iv) that the Company has made
satisfactory representations and warranties with respect to legal, tax,
environmental and other matters, (v) that the Company's pro forma EBITDA (as
defined above) for the trailing twelve month period ended the latest available
month (which shall be no later than 21 days after the end of such month) shall
not be less than $70.0 million and the Company shall not have a pro forma
leverage ratio (as defined above) of greater than 4.85 to 1.0, and (vi) that the
Target's pro forma EBITDA (as defined above) for each of the fiscal year ended
June 30, 2000 and, if a different period, for the trailing twelve month period
ended the latest available month (which shall be no later than 21 days after the
end of such month) shall not be less than $33.7 million, (b) the receipt by the
Commitment Party by the Acquisition Closing Date of audited and unaudited
financial statements (including notes thereto, if any) of the Company and the
Target and pro forma financial statements of the Company, in each case as would
be required under Regulation S-X under the Securities Exchange Act of 1934 of a
registrant on Form S-1 under the Securities Act of 1933, and, in any event,
including audited financial statements of the Target for the fiscal year ended
June 30, 2000, and the Commitment Party
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shall have the right to request that a review (such review to include procedures
reasonably requested by the Commitment Party and, in the case of the Company
only, only with respect to adjustments to pro forma EBITDA) be performed by
PricewaterhouseCoopers LLP with respect to each of the trailing twelve month
periods referred to in clauses (II)(a)(v) and (vi) above for the Company and the
Target, (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, (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 commercial
bank facilities (other than as contemplated in this letter or the attached
Summary of Terms) of the Company, Newco or the Target and (e) the Commitment
Party's reasonable satisfaction with the results of its counsel's confirmatory
legal due diligence with respect to the Target. 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 or the Target 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 or the Target and its subsidiaries taken as a
whole, (ii) there shall have been a material disruption 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
relevant 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 investigation.
The Commitment will expire at 5:00 p.m., New York City time,
on July 10, 2000, 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 the
Company shall not have previously delivered a Purchase Request to the Commitment
Party, October 23, 2000, or (ii) if the Company shall have delivered a Purchase
Request to the Commitment Party, November 7, 2000 (unless all conditions
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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 obligations 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
the Company have executed the Indemnity Letter attached as Exhibit B hereto.
Upon execution and delivery of definitive documentation with respect to the
purchase and sale of the Private Notes, such Indemnity 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, the Target or any of their respective
subsidiaries (or any persons who own controlling interests in any competitor of
the Company, the Target or any of their respective 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.
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 contemplated 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
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to any other person or entity, and this letter is not assignable by us without
your consent.
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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 Commitment 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 Target, the Target's
stockholders, its management, Board of Directors (or any committee thereof) and
financial, legal and other professional advisors (including advisors to any
committee of the Target's Board of Directors and to your 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/ Timothy C. Shoyer
---------------------------------
Name: Timothy C. Shoyer
Title: Managing Director
Commitment Amount: $90.0 million.
Agreed to and Accepted as of the date first above written:
WILMAR INDUSTRIES, INC.
By: /s/ William Sanford
---------------------------------
Name: William Sanford
Title: Senior Vice President
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Exhibit A
SUMMARY OF TERMS
Placement Agent: FLEETBOSTON ROBERTSON STEPHENS INC. ("FRS")
Issuer: Wilmar Industries, Inc., ("Issuer" or the "Company").
Issue: Senior Subordinated Notes (the "Private Notes").
Principal Amount: $90.0 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 on a basis
consistent with the Existing Private Notes.
Guarantors: All of the Company's existing and future domestic
subsidiaries, including the Target and its
subsidiaries.
Rate of Interest: 17.00% fixed rate ("Coupon"), comprised of a 13.00%
cash coupon payable quarterly in arrears and 4.00%
paid-in-kind ("PIK") coupon for the first five years
and a 17.00% cash coupon thereafter.
Interest Payments: Interest will be compounded quarterly, calculated on a
twelve 30-day months, 360-day year, basis.
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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 0-24 months: 100.0% of the principal
amount plus a make whole premium computed using a
discount rate of treasuries plus 200 basis points,
Months 25-36: 107.0% of the principal amount,
Months 37-48: 105.0% of the principal amount,
Months 49-60: 103.0% of the principal amount,
Months 61-72: 101.0% of the principal amount,
Thereafter: 100.0% of the principal amount.
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:
1. Maximum Total Funded Debt to reported rolling four
quarter EBITDA, with certain step-down provisions.
2. Minimum Fixed Charge Coverage Ratio, defined as (i)
actual reported EBITDA minus capital expenditures
minus cash taxes on income paid during such period
to (ii) interest expense plus current maturities of
long-term debt, measured on a rolling four quarter
basis, with certain step-up provisions.
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3. Minimum Interest Coverage Ratio, defined as (i)
actual reported EBITDA to (ii) interest expense,
measured on a rolling four quarter basis, with
certain step-up provisions.
Other Covenants: Usual and customary for transactions of this nature
including, but not limited to, the following:
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 and other affirmative covenants.
Events of Default: Usual and customary for financings of this size, type
and purpose.
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Warrants: On the Acquisition 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 and Warrants, but including changes to
Optional Prepayments; provided, that to the extent
Allied Capital Corporation agrees to the Optional
Prepayment terms herein, then this paragraph shall
exclude changes thereto) in consultation with 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.
Dates Referenced Herein and Documents Incorporated by Reference
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