**Exhibit 10.3**

 

*Execution Copy*

 

**AMENDMENT NO. 2 TO**

 

**AMENDED AND RESTATED SHAREHOLDERS’ AGREEMENT**

 

AMENDMENT NO. 2, dated asof December 21, 2004 (the “Amendment”), to AMENDED AND RESTATEDSHAREHOLDERS’ AGREEMENT, dated as of September 29, 2000 and amended on March 15,2004 (the “Shareholders’ Agreement”), among Interline Brands, Inc.,a New Jersey corporation (the “Company”), Interline Brands, Inc., aDelaware corporation (“Holdco”), and Parthenon Investors, L.P., ParthenonInvestors II, L.P., PCIP Investors, J&R Founders Fund, L.P., JP Morgan ChaseBank, as trustee for First Plaza Group Trust, J.P. Morgan Partners (23A SBIC),LLC (formerly, CB Capital Investors, LLC), Sterling Investment Partners, L.P.,JMH Partners Corp., BancBoston Capital Inc., Private Equity Portfolio Fund II,LLC, Svoboda, Collins & Company QP, L.P., Svoboda, Collins &Company, L.P., Allied Capital Corporation, National City Equity Partners, Inc.,Great Lakes Capital Investments II, LLC, Mellon Ventures II, L.P., Key PrincipalPartners, LLC, Blackstone Mezzanine Holdings L.P., Blackstone Mezzanine PartnersL.P., Citizens Capital, Inc., Bain Capital V. Mezzanine, BCM CapitalPartners, L.P., BCIP Trust Associates II, Sankaty High Yield Asset Partners,L.P., Sankaty High Yield Partners II, L.P., Stanfield CLO, Ltd., StanfieldRMF/Transatlantic CDO, Ltd., William S. Green, Michael J. Grebe, William E.Sanford, William R. Pray and such other Persons who from time to time become aparty thereto (collectively, the “Shareholders”, and together with theCompany and Holdco, the “Parties”).

 

WHEREAS, the Board ofDirectors of the Company has determined that it is advisable and in the bestinterests of the Company to engage in (i) the formation and incorporationof Holdco and a wholly-owned subsidiary of Holdco (“Subco”), (ii) themerger of the Company with and into Subco, with the Company to be the survivingentity and Holdco to be the Company’s direct parent, and (iii) an initialpublic offering of shares of the common stock of Holdco (collectively, the “Transactions”);and

 

WHEREAS, pursuant to Section 7.8of the Shareholders’ Agreement, the Shareholders desire to amend theShareholders’ Agreement to permit for the orderly disposition of the commonstock of Holdco in the period of time following the Transactions.

 

NOW, THEREFORE, inconsideration of the foregoing and the mutual agreements and covenants hereincontained, and intending to be legally bound hereby, the Parties hereto agreeas follows:

 

1.                                       Allcapitalized terms used herein but not otherwise defined shall have the meaningsgiven to them in the Shareholders’ Agreement.

 

2.                                       ThisAmendment shall become effective upon its execution and delivery by the partieshereto.

 

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3.                                       Section 1is hereby amended as follows:

 

a.                                       thefollowing new definitions are hereby added:

 

i.                                          “Holdco”shall mean Interline Brands, Inc., a Delaware corporation.

 

ii.                                       “HoldcoCommon Stock” shall mean the common stock of Holdco, par value $0.01 pershare.

 

iii.                                    “SecondaryPublic Offering” shall mean a public offering and sale of Holdco CommonStock held by one or more Shareholders, other than the Initial Public Offering,pursuant to an effective registration statement under the Securities Act(except any registration statement on Form S-4 or Form S-8 or anysuccessor or similar form thereto).

 

b.                                      thedefinition of “Company” is hereby amended and restated in its entiretyto read as follows:  “Company”shall have the meaning specified in the Preamble, and, upon consummation of theInitial Public Offering, shall mean Holdco.

 

c.                                       thedefinition of “Initial Public Offering” is hereby amended and restatedin its entirety to read as follows:  “InitialPublic Offering” shall mean a public offering and sale of Holdco CommonStock pursuant to the initial registration thereof under the Securities Act(excluding any registration pursuant to an effective registration statement on Form S-4or S-8 or any successor or similar form thereto).”

 

d.                                      thedefinition of “Qualified Public Offering” is hereby amended and restatedin its entirety to read as follows:  “QualifiedPublic Offering” shall mean the first underwritten public offering ofHoldco Common Stock or Common Stock that results in aggregate gross proceeds toHoldco, the Company and any selling stockholders of at least $40 million.”

 

4.                                       Section 6(a) ishereby amended and restated in its entirety as follows:  “The provisions of Sections 2, 3  and 4, and Sections 7.1, 7.2, 7.3, 7.4, 7.5,7.6 and 7.14 shall terminate on the date on which any of the following eventsfirst occurs:  (i) the consummationof a Qualified Public Offering, or (ii) the consummation of any sale orother disposition of a majority of the outstanding Common Stock of the Company,merger, consolidation or reorganization involving the Company, or sale of allor substantially all of the assets of the Company or its Subsidiaries, in eachcase where immediately after giving effect to such transaction the Shareholders(as of immediately prior to such transaction) own less than a majority of theoutstanding shares of common stock, on a fully diluted basis, of the surviving,resulting, successor or purchasing Person (as the case may be).”

 

2

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5.                                       Notwithstandinganything to the contrary set forth in the Shareholders’ Agreement, with respectto the Initial Public Offering (as defined in Section 3 hereof) only, anyholder of Registrable Securities may assign its rights under Section 5.1to have any portion or all of its Registrable Securities registered under theSecurities Act, pursuant to the registration statement on Form S-1 ofHoldco filed in connection with the Initial Public Offering, to any otherholder of Registrable Securities.  Anysuch assignment shall be made in writing. For purposes of clarity, it is understood that the provisions of Section 5shall apply to the Initial Public Offering (as defined in Section 3hereof) and the selling stockholders in the Initial Public Offering shall bedeemed to have exercised registration rights under Section 5.1 of theShareholders’ Agreement in respect of the Initial Public Offering.

 

6.                                       Exceptas otherwise expressly provided herein, the Shareholders’ Agreement is, andshall continue to be, in full force and effect and is hereby ratified andconfirmed in all respects except that on and after the date hereof allreferences in the Shareholders’ Agreement to “this Agreement”, “hereto”, “hereof”,“hereunder” or words of like import referring to the Shareholders’ Agreementshall mean the Shareholders’ Agreement as amended by this Amendment.

 

7.                                       ThisAmendment shall be governed by, and construed in accordance with, the internallaws of the State of New York (except with respect to matters involvingcorporate formation, good standing and other corporate procedural matters,which shall be governed by the laws of the State of New Jersey) without regardto the principles of conflicts of laws thereof.

 

8.                                       ThisAmendment may be executed in one or more counterparts, and by the differentParties hereto in separate counterparts, each of which shall be deemed to be anoriginal but all of which taken together shall constitute one and the sameagreement.

 

*(Remainder of this page intentionally leftblank.)*

 

3

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IN WITNESS WHEREOF, theundersigned have executed or caused this Amendment No. 2 to Amended andRestated Shareholders’ Agreement to be executed on the date first set forthabove.

 
|   | INTERLINE BRANDS, INC.,                                    |   |
|--------|------------------------------------------------------------|--------|
|   | a New Jersey corporation                                   |   |
|   |                                                       |   |   |
|   |                                                       |   |   |
|   | By:                                                        |   |   |
|   |                                                       | Name:  |   |
|   |                                                       | Title: |   |
|   |                                                       |   |   |
|   | INTERLINE BRANDS, INC.,                                    |   |
|   | a Delaware corporation                                     |   |
|   |                                                       |   |   |
|   |                                                       |   |   |
|   | By:                                                        |   |   |
|   |                                                       | Name:  |   |
|   |                                                       | Title: |   |
|   |                                                       |   |   |
|   | 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:                                                        |   |   |
|   |                                                       | Name:  | John C. Rutherford |   |
|   |                                                       | Title: | Managing Member |   |
|   |                                                       |   |   |
|   | PCIP INVESTORS                                             |   |
|   |                                                       |   |   |
|   | By: Parthenon Capital, LLC, its Managing Partner           |   |
|   | By: J&R Investment Management Company, LLC,            |   |
|   | its Managing Member                                        |   |
|   |                                                       |   |
|   |                                                       |   |
|   | By:                                                        |   |   |
|   |                                                       | Name:  | John C. Rutherford |   |
|   |                                                       | Title: | Managing Member |   |
|   |                                                       |   |   |
|   | J&R FOUNDERS FUND, L.P.                                |   |
|   |                                                       |   |   |
|   | By: J&R Advisors F.F., Inc., its General  Partner |   |
|   |                                                       |   |   |
|   |                                                       |   |   |
|   | By:                                                        |   |   |
|   |                                                       | Name:  | John C. Rutherford |   |
|   |                                                       | Title: | Director, President and  Secretary |   |

 

4

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|   | PARTHENON INVESTORS II, L.P.             |                                       |
|--------|------------------------------------------|--------------------------------------------|
|   |                                     |                                       |   |
|   | By:                                      | PCap Partners II, LLC, its General Partner |   |
|   | By:                                      | PCap II, LLC, its Managing Member          |   |
|   |                                     |                                       |   |
|   |                                     |                                       |   |
|   | By:                                      |                                       |   |
|   |                                     | Name:                                      | John C. Rutherford |   |
|   |                                     | Title:                                     | Managing Member |   |
|   |                                     |                                       |   |
|   |                                     |                                       |   |
|   | JP MORGAN CHASE BANK, AS                 |                                       |
|   | TRUSTEE FOR FIRST PLAZA GROUP            |                                       |
|   | TRUST                                    |                                       |
|   |                                     |                                       |   |
|   |                                     |                                       |   |
|   | By:                                      |                                       |   |
|   |                                     | Name:                                      |   |   |
|   |                                     | Title:                                     |   |   |
|   |                                     |                                       |   |
|   |                                     |                                       |   |
|   | J.P. MORGAN PARTNERS (23A SBIC,  LLC)    |                                       |
|   |                                     |                                       |   |
|   |                                     |                                       |   |
|   | By:                                      | J.P. Morgan Partners (23A SBIC             |   |
|   | Manager), Inc., its Managing Member |                                       |
|   |                                     |                                       |   |
|   |                                     |                                       |   |
|   | By:                                      |                                       |   |
|   |                                     | Name:                                      |   |   |
|   |                                     | Title:                                     |   |   |
|   |                                     |                                       |   |
|   |                                     |                                       |   |
|   | STERLING INVESTMENT PARTNERS,  L.P.      |                                       |
|   |                                     |                                       |   |
|   |                                     |                                       |   |
|   | By:                                      | Sterling Investment Partners               |   |
|   |                                     | Management, LLC, its General Partner  |   |
|   |                                     |                                       |   |
|   |                                     |                                       |   |
|   | By:                                      |                                       |   |
|   |                                     | Name:                                      |   |   |
|   |                                     | Title:                                     |   |   |
|        |                                          |                                            |  |  |  |

 

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|   | JMH PARTNERS CORP.                      |                                 |
|--------|-----------------------------------------|--------------------------------------|
|   |                                    |                                 |   |
|   |                                    |                                 |   |
|   | By:                                     |                                 |   |
|   |                                    | Name:                                |   |
|   |                                    | Title:                               |   |
|   |                                    |                                 |   |
|   |                                    |                                 |   |
|   | BANCBOSTON CAPITAL INC.                 |                                 |
|   |                                    |                                 |   |
|   |                                    |                                 |   |
|   | By:                                     |                                 |   |
|   |                                    | Name:                                |   |
|   |                                    | Title:                               |   |
|   |                                    |                                 |   |
|   |                                    |                                 |   |
|   | PRIVATE EQUITY PORTFOLIO                |                                 |
|   | FUND II, LLC                            |                                 |
|   |                                    |                                 |   |
|   |                                    |                                 |   |
|   | By: Fleet National Bank, as Manager     |                                 |
|   |                                    |                                 |   |
|   |                                    |                                 |   |
|   | By:                                     |                                 |   |
|   |                                    | Name:                                |   |
|   |                                    | Title:                               |   |
|   |                                    |                                 |   |
|   |                                    |                                 |   |
|   | SVOBODA, COLLINS & COMPANY QP, |                                 |
|   | L.P.                                    |                                 |
|   |                                    |                                 |
|   |                                    |                                 |
|   | By:                                     | Svoboda, Collins L.L.C., its General |   |
|   | Partner                                 |                                 |
|   |                                    |                                 |   |
|   |                                    |                                 |   |
|   | By:                                     |                                 |   |
|   |                                    | Name:                                |   |
|   |                                    | Title:                               |   |

 

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|   | SVOBODA, COLLINS & COMPANY L.P. |   |
|--------|------------------------------------------|--------|
|   |                                     |   |   |
|   |                                     |   |   |
|   | By: Svoboda, Collins L.L.C., its General |   |
|   | Partner                                  |   |
|   |                                     |   |
|   |                                     |   |
|   | By:                                      |   |   |
|   |                                     | Name:  |   |
|   |                                     | Title: |   |
|   |                                     |   |   |
|   |                                     |   |   |
|   | NATIONAL CITY EQUITY PARTNERS,           |   |
|   | INC.                                     |   |
|   |                                     |   |
|   |                                     |   |
|   | By:                                      |   |   |
|   |                                     | Name:  |   |
|   |                                     | Title: |   |
|   |                                     |   |   |
|   |                                     |   |   |
|   | GREAT LAKES CAPITAL                      |   |
|   | INVESTMENTS II, LLC                      |   |
|   |                                     |   |
|   |                                     |   |
|   | By:                                      |   |   |
|   |                                     | Name:  |   |
|   |                                     | Title: |   |
|   |                                     |   |   |
|   |                                     |   |   |
|   | MELLON VENTURES II, L.P.                 |   |
|   |                                     |   |
|   |                                     |   |   |
|   | By:                                      |   |   |
|   |                                     | Name:  |   |
|   |                                     | Title: |   |
|   |                                     |   |   |
|   |                                     |   |   |
|   | KEY PRINCIPAL PARTNERS, LLC              |   |
|   |                                     |   |   |
|   |                                     |   |   |
|   | By:                                      |   |   |
|   |                                     | Name:  |   |
|   |                                     | Title: |   |

 

7

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|   | ALLIED CAPITAL CORPORATION |   |
|--------|----------------------------|--------|
|   |                       |   |   |
|   |                       |   |   |
|   | By:                        |   |   |
|   |                       | Name:  |   |
|   |                       | Title: |   |
|   |                       |   |   |
|   |                       |   |   |
|   | BLACKSTONE MEZZANINE       |   |
|   | HOLDINGS, L.P.             |   |
|   |                       |   |
|   |                       |   |
|   | By:                        |   |   |
|   |                       | Name:  |   |
|   |                       | Title: |   |
|   |                       |   |   |
|   |                       |   |   |
|   | BLACKSTONE MEZZANINE       |   |
|   | PARTNERS, L.P.             |   |
|   |                       |   |
|   |                       |   |
|   | By:                        |   |   |
|   |                       | Name:  |   |
|   |                       | Title: |   |
|   |                       |   |   |
|   |                       |   |   |
|   | CITIZENS CAPITAL, INC.     |   |
|   |                       |   |   |
|   |                       |   |   |
|   | By:                        |   |   |
|   |                       | Name:  |   |
|   |                       | Title: |   |
|   |                       |   |   |
|   |                       |   |   |
|   | BAIN CAPITAL V. MEZZANINE  |   |
|   |                       |   |   |
|   |                       |   |   |
|   | By:                        |   |   |
|   |                       | Name:  |   |
|   |                       | Title: |   |
|   |                       |   |   |
|   |                       |   |   |
|   | BCM CAPITAL PARTNERS, L.P. |   |
|   |                       |   |   |
|   |                       |   |   |
|   | By:                        |   |   |
|   |                       | Name:  |   |
|   |                       | Title: |   |

 

8

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|   | BCIP TRUST ASSOCIATES II |   |
|--------|--------------------------|--------|
|   |                     |   |   |
|   |                     |   |   |
|   | By:                      |   |   |
|   |                     | Name:  |   |
|   |                     | Title: |   |
|   |                     |   |   |
|   |                     |   |   |
|   | SANKATY HIGH YIELD ASSET |   |
|   | PARTNERS, L.P.           |   |
|   |                     |   |
|   |                     |   |
|   | By:                      |   |   |
|   |                     | Name:  |   |
|   |                     | Title: |   |
|   |                     |   |   |
|   |                     |   |   |
|   | SANKATY HIGH YIELD       |   |
|   | PARTNERS II, L.P.        |   |
|   |                     |   |   |
|   |                     |   |   |
|   | By:                      |   |   |
|   |                     | Name:  |   |
|   |                     | Title: |   |
|   |                     |   |   |
|   |                     |   |   |
|   | STANFIELD CLO, LTD.      |   |
|   |                     |   |   |
|   |                     |   |   |
|   | By:                      |   |   |
|   |                     | Name:  |   |
|   |                     | Title: |   |
|   |                     |   |   |
|   |                     |   |   |
|   | STANFIELD RMF/           |   |
|   | TRANSATLANTIC CDO, LTD.  |   |
|   |                     |   |   |
|   |                     |   |   |
|   | By:                      |   |   |
|   |                     | Name:  |   |
|   |                     | Title: |   |
|   |                     |   |   |
|   |                     |   |
|   | William S. Green    |   |
|   |                     |   |   |
|   |                     |   |
|   | Michael J. Grebe    |   |

 

9

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|   |                    |   |
|--------|-------------------------|--------|
|   |                    |   |
|   | William E. Sanford |   |
|   |                    |   |
|   |                    |   |
|   | William R. Pray    |   |

 

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**ANNEX 1**

** **

**AGREEMENT AND PLAN OFMERGER**

** **

This AGREEMENT AND PLANOF MERGER is dated as of December 10, 2004 (this “Agreement”), byand among Interline Brands, Inc., a New Jersey corporation (“InterlineNJ”), Interline Brands, Inc., a Delaware corporation (“Holdco”),and Interline Subsidiary, Inc., a New Jersey corporation (“Subco”).

 

WHEREAS, as of the datehereof, Holdco is a direct wholly-owned subsidiary of Interline NJ and Subco isa direct wholly-owned subsidiary of Holdco;

 

WHEREAS, Interline NJ andSubco desire to engage in a transaction consisting of the merger of InterlineNJ with and into Subco with Interline NJ as the surviving corporation (the “Merger”),pursuant to the terms and conditions of this Agreement and in accordance with Section 14A:10-1of the New Jersey Business Corporation Act, as amended (the “NJBCA”);

 

WHEREAS, the respectiveboards of directors of Interline NJ, Holdco and Subco have determined that theMerger, structured in the manner contemplated herein, is desirable and in thebest interests of their respective shareholders and, by resolutions dulyadopted, have approved and adopted this Agreement;

 

WHEREAS, Interline NJ hasformed Holdco in connection with the initial public offering (the “IPO”)of shares of common stock of Holdco, par value $0.01 per share (the “HoldcoCommon”), in order to have a Delaware holding company issuer for the IPO;

 

WHEREAS, Holdco, the soleshareholder of Subco, and Interline NJ, the sole shareholder of Holdco, haveeach adopted and approved this Agreement in accordance with Section 14A:10-3of the NJBCA;

 

WHEREAS, for U.S. federalincome tax purposes the parties intend that, so long as former shareholders ofInterline NJ exchange an amount of stock in Interline NJ which constitutes “control”of Interline NJ (within the meaning of Section 368(a)(2)(E) of theInternal Revenue Code of 1986, as amended (the “Code”)), the Merger willqualify as a reorganization within the meaning of Section 368(a) ofthe Code and the rules and regulations promulgated thereunder (the “Regulations”);that this Agreement constitutes a plan of reorganization within the meaning ofRegulation Section 1.368-2(g); and the Merger will be treated as part of atransaction that qualifies under Section 351 of the Code and theRegulations thereunder; and

 

WHEREAS, Interline NJ,Holdco and Subco desire to make certain representations, warranties, covenantsand agreements, each to the other, in connection with the Merger and also toprescribe various conditions to the Merger.

 

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NOW, THEREFORE, inconsideration of the premises and agreements contained herein, and for othergood and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, the parties hereto agree as follows:

 

# **ARTICLE I**

# ** **

# **THE MERGER**

# ** **

## 1.1                                 TheMerger.  Subject to the terms andconditions hereof, Interline NJ shall merge with and into Subco as soon aspracticable following the satisfaction or waiver of the conditions set forth inSection 4.1 hereof. Interline NJ shall be the surviving corporation in the Merger (the “SurvivingCorporation”), and, at the Effective Time (as defined in Section 1.2),the separate existence of Subco shall cease. The corporate existence of Interline NJ, with its purposes, powers andobjects, shall continue unaffected and unimpaired by the Merger, and as theSurviving Corporation it shall succeed to all rights, assets, liabilities andobligations of Subco as and to the extent provided in Section 14A:10-6 ofthe NJBCA.

 

## 1.2                                 EffectiveTime.  The Merger shall becomeeffective (the “Effective Time”) upon the filing by Interline NJ of acertificate of merger (the “Certificate of Merger”) with the Secretaryof State of the State of New Jersey, or such later time as may be setforth in the Certificate of Merger, pursuant to Sections 14A:1-6 and14A:10-4.1(2) of the NJBCA.

 

## 1.3                                 Certificateof Incorporation.  The Certificate ofIncorporation of Interline NJ, as amended and restated at the Effective Time toread in its entirety as set forth on Exhibit A, shall be the SecondAmended and Restated Certificate of Incorporation of the Surviving Corporation(the “Restated Charter”), until duly amended or repealed in accordancewith the provisions thereof and of applicable law.

 

## 1.4                                 By-Laws.  The Bylaws of Interline NJ, as amended andrestated in its entirety at the Effective Time, shall be the Second Amended andRestated By-laws of the Surviving Corporation (the “Restated By-Laws”)until duly amended or repealed in accordance with the provisions thereof and ofapplicable law.

 

## 1.5                                 Officersand Directors.  At the EffectiveTime, the directors and officers of Interline NJ immediately prior to theEffective Time shall be and constitute the directors and officers of theSurviving Corporation until their successors shall have been duly elected orappointed and qualified or until their earlier death, resignation or removal inaccordance with the Restated Charter and By-Laws.

 

2

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# **ARTICLE II**

# ** **

# **CONVERSION OF SECURITIES**

# ** **

2.1                                 Effectof the Merger on Capital Stock.  Atthe Effective Time, by virtue of the Merger and without any action on the partof Interline NJ, Holdco, Subco, or the holder of any shares of capital stock ofInterline NJ, Holdco or Subco:

 

### (a)                                  Conversionof Subco Capital Stock.  Each shareof common stock, without par value, of Subco (the “Subco Common”) issuedand outstanding immediately prior to the Effective Time shall be converted intoand become the right to receive (i) one hundred (100) shares of commonstock, without par value, of the Surviving Corporation and (ii) one shareof Senior Preferred Stock, par value $0.01 per share, of the SurvivingCorporation, each of which shall be fully paid and non-assessable.

###  

### (b)                                 Cancellationof Holdco Stock.  Each share of stockof Holdco owned by Interline NJ immediately prior to the Effective Time shallbe automatically cancelled and shall cease to exist without being convertedinto any stock or other consideration whatsoever.

###  

### (c)                                  Cancellationof Interline NJ Treasury Stock.  Eachshare of stock of Interline NJ owned by Interline NJ immediately prior to theEffective Time shall be automatically cancelled and shall cease to existwithout being converted into any stock or other consideration whatsoever.

###  

### (d)                                 Effectof Merger on Common Stock and Preferred Stock of Interline NJ.  Each share of common stock, without parvalue, of Interline NJ (the “Interline NJ Common”) and each share ofSenior Preferred Stock, par value $0.01 per share, of Interline NJ, (the “InterlineNJ Preferred”) issued and outstanding immediately prior to the EffectiveTime, shall be converted into the following (the “Merger Consideration”):

###  

#### **(i)**                                     Interline Common Stock.  Each issuedand outstanding share of Interline NJ Common shall be converted into the rightto receive that number of newly issued, fully paid and non-assessable shares ofHoldco Common equal to the Common Stock Equity Consideration Per Share withoutinterest, subject to the fractional share provisions in Section 2.2(c).  Each share of Interline NJ Common that hasbeen converted into the right to receive shares of Holdco Common as provided inthis subsection 2.1(d)(i) shall be canceled in accordance with Section 2.2and shall cease to exist, and the holder of certificates which immediatelyprior to the Effective Time represented those shares (the “Interline NJCommon Certificates”) shall cease to have any rights with respect to thoseshares, other than the right to receive certificates representing shares ofHoldco Stock (“Holdco Certificates”) upon surrender of the Interline NJCommon Certificates in accordance with Section 2.2.

 

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#### **(ii)**                                  Interline Preferred Stock.  Each issuedand outstanding share of Interline NJ Preferred shall be converted into theright to receive (a) cash in an amount equal to the Preferred Stock CashConsideration Per Share without interest and (b) that number of shares ofHoldco Common equal to the Preferred Stock Equity Consideration Per Share,subject to the fractional share provisions in Section 2.2(c).  Each share of Interline NJ Preferred that hasbeen converted into the right to receive shares of Holdco Common and cash asprovided in this subsection 2.1(d)(ii) shall be cancelled inaccordance with Section 2.2 and shall cease to exist, and theholder of certificates which immediately prior to the Effective Timerepresented those shares (the “Interline NJ Preferred Certificates”)shall cease to have any rights with respect to those shares, other than theright to receive Holdco Certificates and the Preferred Stock Cash ConsiderationPer Share upon surrender of the Interline NJ Preferred Certificates inaccordance with Section 2.2.

#### ** **

#### **(iii)**                               Interline Options.  Upon the consummation of theMerger, each option to purchase shares of Interline Common outstandingimmediately prior to the Effective Time (each, an “Interline NJ Option”and collectively, the “Interline NJ Options”) shall by virtue of Section 5of the Wilmar Industries, Inc. 2000 Stock Award Plan (the “Stock Plan”)pursuant to which it was granted, and without any action by the holder of eachsuch Interline NJ Option, be adjusted and deemed to be an option (each, an “ExchangeOption”) such that the holder of the Exchange Option shall have an optionto purchase that number of shares of Holdco Common equal to the number ofshares of Interline NJ Common underlying such Interline NJ Option multiplied bythe Common Stock Equity Consideration Per Share.  Each Exchange Option shall have an exerciseprice equal to the exercise price of the corresponding Interline NJ Optionprior to such adjustment divided by the Common Stock Equity Consideration PerShare.  The Exchange Options shall beadministered by the board of directors of Holdco or such committee thereof asshall be designated from time to time by such board, and shall continue to besubject to the other terms and conditions to which the corresponding InterlineNJ Option was subject immediately prior to the Effective Time.  For the avoidance of doubt, other than asprovided in this paragraph, the Exchange Option will be governed by the StockPlan and the award agreement entered into thereunder.  In connection with the issuance of theExchange Options, Holdco shall reserve for issuance the number of shares ofHoldco Common that will become subject to the Exchange Options pursuant to thisSection 2.1(b)(iii).

#### ** **

For purposes of this Section 2:

 

“*Common Stock EquityConsideration Per Share*” means the Common Stock Equity ConsiderationShare Number divided by the Interline NJ Common Share Number.

 

“*Common Stock EquityConsideration Share Number*” means an amount equal to the greater of(a) the Total Existing Equity Value less the Preferred Stock EquityConsideration Value and (b) the Total Existing Common Minimum EquityConsideration Amount, in each case divided by the IPO Price Per Share.

 

“*Existing Common MinimumEquity Consideration*” means $1,000,000.

 

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“*Existing Holdco CommonShare Number*” means the aggregate number of shares of Holdco Commonto be outstanding immediately after the IPO, less the number of sharesof Holdco Common to be issued in the IPO, in each case as set forth in theProspectus.

 

“*Interline NJ Common ShareNumber*” means the aggregate number of shares of Interline NJ Commonissued and outstanding immediately prior to the Effective Time plus theaggregate number of shares of Interline NJ Common issuable upon exercise of theInterline NJ Warrants issued and outstanding immediately prior to the EffectiveTime.

 

 “*Interline NJ Warrant*” means each outstanding warrant topurchase shares of Interline NJ Common pursuant to the Warrant Agreementbetween Wilmar Industries, Inc. (a predecessor-in-interest to InterlineNJ) and Fleet Corporate Finance, Inc. and Allied Capital Corporation,dated as of May 16, 2000, as amended September 29, 2000.

 

“*IPO Price Per Share*”means the price to the public of each share of Holdco Common to be issued andsold in connection with the IPO, as set forth in the Prospectus.

 

“*Preferred Stock CashConsideration Per Share*” means an amount, calculated as to eachshare of Interline NJ Preferred, equal to the Preferred Stock CashConsideration multiplied by a fraction, the numerator of which is (a) theLiquidation Value per share of Interline NJ Preferred of $10, plus an amountequal to all accrued and unpaid dividends thereon as of the Effective Time, anddenominator of which is (b) the Preferred Stock Liquidation Value.

 

“*Preferred Stock CashConsideration*” means an amount equal to (a) $55,000,000 (orsuch lesser amount as may be authorized by resolution of the Board of Directorsadopted prior to the Effective Time based upon the advice of the underwritersin the IPO regarding market conditions) plus (b) an amount equal to theexcess of the price to the public of shares in the IPO over $200,600,000 (orsuch lesser amount as may be authorized by resolution of the Board of Directorsadopted prior to the Effective Time based upon the advice of the underwritersin the IPO regarding market conditions) (after deducting underwriters’discounts and commissions on such excess amount); provided, thatthat in no event shall the Preferred Stock Cash Consideration be less than$25,000,000.

 

“*Preferred Stock EquityConsideration Per Share*” means an amount, calculated as to eachshare of Interline NJ Preferred, equal to the Preferred Stock EquityConsideration Share Number multiplied by a fraction, the numerator of which is(a) the Liquidation Value per share of Interline NJ Preferred of $10, plusan amount equal to all accrued and unpaid dividends thereon as of the EffectiveTime, and denominator of which is (b) the Preferred Stock LiquidationValue.

 

“*Preferred Stock EquityConsideration Value*” means the Preferred Stock Equity ConsiderationShare Number multiplied by the IPO Price Per Share.

 

“*Preferred Stock EquityConsideration Share Number*” means an amount equal to the lesser of(a) the Preferred Stock Liquidation Value less the Preferred Stock Cash

 

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Consideration and (b) Total Existing Equity Valueless the Existing Common Minimum Equity Consideration, in each case divided bythe IPO Price Per Share.

 

“*Preferred StockLiquidation Value*” means the aggregate Liquidation Value (as definedin the Certificate of Incorporation of Interline NJ) plus an amount equal toall accumulated and unpaid dividends on the Interline NJ Preferred as of theEffective Time.

 

“*Prospectus*”means the prospectus relating to the IPO containing the IPO Price Per Share.

 

“*Total Existing EquityValue*” means the IPO Price Per Share multiplied by the ExistingHoldco Common Share Number.

 

2.2                                 ExchangeProcedures.

 

### (a)                                  Priorto or promptly after the Effective Time, Interline NJ shall cause to be mailedor otherwise delivered to each holder of record of an Interline NJ CommonCertificate or an Interline NJ Preferred Certificate immediately prior to theEffective Time (the “Certificates”), (i) a letter of transmittal(which shall specify that delivery shall be effected, and risk of loss andtitle to the Certificates shall pass, only upon delivery of the Certificates toHoldco (or such exchange agent as shall be designated thereby, hereinafter the “ExchangeAgent”) and shall be in a form and have other such provisions as Holdco mayreasonably specify and (ii) instructions for use in effecting thesurrender of the Certificates for cancellation in exchange for the MergerConsideration.  Upon surrender of aCertificate for cancellation to Holdco or the Exchange Agent together with suchletter of transmittal, duly executed, and such other documents as mayreasonably be required by Holdco or the Exchange Agent, the holder of suchCertificate shall be entitled to receive in exchange therefor, and Holdco orthe Exchange Agent shall promptly deliver, the Merger Consideration for eachshare of Interline NJ stock formerly evidenced by such Certificate, and suchCertificate shall thereupon be cancelled.

###  

### (b)                                 Ifpayment of the Merger Consideration is to be made to a person other than theperson in whose name the surrendered Certificate is registered on the stocktransfer books of Interline NJ, it shall be a condition of payment to theholder of a Certificate that it be endorsed properly or otherwise be in properform for transfer and that the person requesting such payment shall have paidall transfer and other taxes required by reason of the payment of the MergerConsideration to a person other than the registered holder or shall haveestablished to the satisfaction of Holdco that such taxes are notapplicable.  Until surrendered ascontemplated by this Section 2.2(a), each Certificate shall bedeemed at any time after the Effective Time to represent only the right toreceive upon such surrender the Merger Consideration, without interest, intowhich the shares theretofore represented by such Certificate shall have beenconverted pursuant to Article II of this Agreement.

###  

### (c)                                  Deliveryof Merger Consideration to Interline NJ Shareholders Without Certificates.  Promptly after the Effective Time, Holdco orthe

 

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### Exchange Agent shall cause the Merger Consideration tobe mailed or otherwise delivered to each holder of record of Interline NJ stockwho, as of the Effective Time, had not yet been issued a Certificaterepresenting such Interline NJ stock.

###  

### (d)                                 NoFractional Shares.  No certificatesor script representing fractional shares of Holdco Common shall be issued as aresult of any conversion provided for in this Article II.  All fractional shares shall be rounded to thenearest whole number, with 0.5 rounded up. If more than one Certificate shall be surrendered for the account of thesame holder, the number of shares of Interline NJ for which Certificates havebeen surrendered shall be computed on the basis of the aggregate number ofshares (on an as-converted to Holdco Common basis) represented by theCertificates so surrendered. No cash shall be paid in lieu of fractionalshares.

###  

### (e)                                  Withholding.  Interline NJ, the Surviving Corporation andHoldco shall be entitled to deduct and withhold from any Merger Considerationpayable under this Agreement such amounts as may be required to be deducted orwithheld therefrom under any applicable federal, state, local or foreign taxlaws.  To the extent such amounts are sodeducted and withheld, such amounts shall be treated for all purposes underthis Agreement as having been paid to the person in respect of which suchdeduction and withholding was made.

###  

## 2.3                                 NoAppraisal Rights.  No appraisalrights shall be available to the holders of Interline Common or InterlinePreferred in connection with the Merger.

 

## 2.4                                 TaxTreatment.  Each of the partieshereto agrees that it shall take such action, and refrain from taking anyaction, as may be necessary to cause the Merger to qualify as a reorganizationwithin the meaning of Section 368(a) of the Code and the Regulationsthereunder so long as former shareholders of Interline NJ exchange an amount ofstock in Interline NJ which constitutes control of Interline NJ (within themeaning of Section 368(a)(2)(E) of the Code); shall take such action,and refrain from taking any action, as may be necessary to cause the Merger tobe treated as part of a transaction under Section 351 of the Code and theRegulations thereunder; and shall not take any position inconsistent therewithfor U.S. federal income tax purposes, unless required to do so by a change inlaw or final determination in proper proceedings.

 

# **ARTICLE III**

# ** **

# **REPRESENTATIONS AND WARRANTIES**

# ** **

## 3.1                                 Representationsand Warranties of Interline NJ. Interline NJ hereby represents and warrants to Holdco and Subco thatInterline NJ (i) is a corporation duly incorporated, validly existing andin good standing under the laws of the State of New Jersey; (ii) hasobtained the approval of its Board of Directors to execute and deliver thisAgreement and to consummate the transactions contemplated hereby, including toeffect the Merger; (iii) subject only to the adoption of this Agreement bythe Requisite Shareholder Vote (as defined in Section 4.1(a) below),has full corporate power and authority to execute, deliver and perform thisAgreement and to consummate the 

 

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## transactions contemplated hereby; (iv) hasadopted and approved this Agreement in accordance with the NJBCA; (v) theexecution of this Agreement and the consummation of the transactionscontemplated hereby do not violate any provisions of its organizationaldocuments or any agreements or instruments to which it is a party, except ascould not be reasonably expected to materially impair or delay its ability toconsummate the transactions contemplated hereby; and (vi) this Agreementhas been duly and validly executed and delivered by Interline NJ andconstitutes a legal, valid and binding agreement of Interline NJ, enforceableagainst Interline NJ in accordance with its terms (except as enforceability maybe limited by bankruptcy, insolvency, moratorium or other similar lawsaffecting creditors’ rights generally or by the principles governing theavailability of equitable remedies (the “Enforceability Exceptions”)).

 

## 3.2                                 Representationsand Warranties of Holdco.  Holdcohereby represents and warrants to Interline NJ and Subco as follows:

 

### (a)                                  Holdco(i) is a corporation duly incorporated, validly existing and in goodstanding under the laws of the State of Delaware; (ii) has full corporatepower and authority to execute, deliver and perform this Agreement and toconsummate the transactions contemplated hereby; (iii) has adopted andapproved this Agreement in accordance with the Delaware General CorporationLaw, (iv) the execution of this Agreement and the consummation of thetransactions contemplated hereby do not violate any provisions of its organizationaldocuments or any agreements or instruments to which it is a party, except ascould not be reasonably expected to materially impair or delay its ability toconsummate the transactions contemplated hereby; and (v) this Agreementhas been duly and validly executed and delivered by Holdco and constitutes alegal, valid and binding agreement of Holdco enforceable against Holdco inaccordance with its terms (except as enforceability may be limited by theEnforceability Exceptions).

###  

### (b)                                 Asof the Effective Time, the authorized capital stock of Holdco will consist of100,000,000 shares of Holdco Common and 20,000,000 shares of preferred stock ofHoldco, par value $0.01 per share.  Uponconsummation of the Merger, each share of Holdco Common issued as part of theMerger Consideration will be duly authorized, validly issued, fully paid andnon-assessable, and each share of Holdco Common to be issued upon exercise ofthe Exchange Options will be duly authorized, validly issued, fully paid andnon-assessable when issued.

###  

## 3.3                                 Representationsand Warranties of Subco.  Subcohereby represents and warrants to Interline NJ and Holdco as follows:

 

### (a)                                  Subco(i) is a corporation duly incorporated, validly existing and in goodstanding under the laws of the State of New Jersey; (ii) has obtainedthe approval of its Board of Directors and Holdco, its sole shareholder, toexecute and deliver this Agreement and to consummate the transactionscontemplated hereby, including to effect the Merger; (iii) has full corporatepower and authority to execute, deliver and perform this Agreement and toconsummate the transactions contemplated hereby; (iv) has adopted andapproved this Agreement in accordance with the NJBCA; (v) the execution ofthis Agreement and the consummation of the transactions

 

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### contemplated hereby do not violate any provisions ofits organizational documents or any agreements or instruments to which it is aparty, except as could not be reasonably expected to materially impair or delayits ability to consummate the transactions contemplated hereby; and(vi) this Agreement has been duly and validly executed and delivered bySubco and constitutes a legal, valid and binding agreement of Subco enforceableagainst Subco in accordance with its terms (except as enforceability may belimited by the Enforceability Exceptions).

###  

### (b)                                 Asof the date of this Agreement and the Effective Time, the authorized capitalstock of Subco consists solely of one share of Subco Common, which share isissued and outstanding and is held by Holdco. Such issued and outstanding shareof Subco has been duly authorized and validly issued and is fully paid andnon-assessable.

###  

### (c)                                  Subcohas been formed solely for the purpose of effectuating the Merger, and hasnever held any assets or had any liabilities, and has never been engaged in anytrade or business, or investment activities.

###  

# **ARTICLE IV**

# ** **

# **CONDITIONS, AMENDMENT AND TERMINATION**

# ** **

## 4.1                                 Conditionsto Effect the Merger.  Theobligations of the parties hereto to consummate the transactions contemplatedhereby, including to effect the Merger, shall be subject to the fulfillment orwaiver at or prior to the Effective Time of the following conditions:

 

### (a)                                  Inaccordance with Section 14A:10-3 of the NJBCA, this Agreement shall havebeen approved by the Requisite Shareholder Vote of Interline NJ.  The “Requisite Shareholder Vote” meansthe adoption of this Agreement by (i) the shareholders of Interline NJholding at least sixty percent (60%) of the Interline NJ Common entitled tovote thereon, (ii) the shareholders of Interline holding at least sixtypercent (60%) of the outstanding shares of Interline NJ Preferred entitled tovote thereon and (iii) a majority of shareholders of Interline NJ entitledto vote thereon.

###  

### (b)                                 Therepresentations and warranties contained in Article III hereofshall be true and correct in all material respects on and as of the EffectiveTime as if made on and as of such date.

###  

## 4.2                                 Amendments.  At any time prior to the Effective Time, thisAgreement may be amended, modified or supplemented by the parties hereto, solong as (a) no amendment that requires shareholder approval underapplicable laws shall be made without such required approval and (b) suchamendment, modification or supplement has been duly approved by the board ofdirectors of each of the parties hereto.

 

## 4.3                                 Waiver.  At any time prior to the Effective Time, theparties hereto by action taken by their respective boards of directors may(a) waive any inaccuracies in

 

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## the representations and warranties contained herein orin any document delivered pursuant hereto and (b) waive compliance withany of the agreements or conditions contained herein; provided, however, thatthe parties may not waive compliance with the conditions set forth in Section 4.1(a) hereof.  Any agreement on the part of a party heretoto any such extension or waiver shall be valid only if set forth in aninstrument in writing signed on behalf of such party.

 

## 4.4                                 Termination.  This Agreement may be terminated at any timeprior to the Effective Time, notwithstanding the approval by the shareholdersof any or all of Interline NJ, Holdco or Subco, (a) by mutual consent ofthe respective boards of directors of Interline NJ, Holdco and Subco or(b) by any of Interline NJ, Holdco or Subco if the Merger shall not havebeen consummated on or before January 31, 2005 (or such later date as maybe agreed to by Interline NJ, Holdco and Subco in writing).  In the event of the termination of thisAgreement in accordance with the previous sentence, this Agreement shallthereafter become void and have no effect and no party hereto shall have anyliability to the other parties hereto or its shareholders or directors orofficers in respect thereof.

 

# **ARTICLE V**

# ** **

# **MISCELLANEOUS PROVISIONS**

# ** **

## 5.1                                 Non-Survivalof Representations and Warranties. All representations and warranties in this Agreement or in anyinstrument delivered pursuant to this Agreement shall not survive the EffectiveTime.

 

## 5.2                                 FurtherAssurances.  Each of the partiesagrees to execute such documents and instruments and to take whatever actionmay be necessary or desirable to consummate the transactions contemplatedhereby, including to effect the Merger.

 

## 5.3                                 GoverningLaw.  This Agreement shall beconstrued under and in accordance with the laws of the State of New Jerseyapplicable to contracts to be fully performed in such State, without givingeffect to choice of law principles.

 

## 5.4                                 BindingEffect; Successors and Assigns.  ThisAgreement may not be assigned by any party without the written consent of eachof the other parties hereto. This Agreement shall be binding upon and inure tothe benefit of the respective successors and permitted assigns of the partieshereto.

 

## 5.5                                 NoOther Agreement or Understandings. This Agreement embodies all of the agreements and understanding inrelation to the subject matter of this Agreement, and no covenants,understandings or agreements in relation to this Agreement exist among the parties,except as expressly set forth in this Agreement.

 

## 5.6                                 NoThird Party Benefit.  Nothingexpressed or implied in this Agreement shall be construed to confer upon orgive to any person, firm or limited

 

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## liability company, other than a party to thisAgreement, any rights or remedies under or by reason of this Agreement.

 

## 5.7                                 Severability.  If any one or more of the provisionscontained herein, or the application thereof in any circumstance, is held invalid,illegal or unenforceable in any respect for any reason, the validity, legalityand enforceability of any such provision in every other respect and of theremaining provisions hereof shall not be in any way impaired, unless theprovisions held invalid, illegal or unenforceable shall substantially impairthe benefits of the remaining provisions hereof.

 

## 5.8                                 Rules ofConstruction.  Unless the contextotherwise requires, references to sections or subsections refer to sections orsubsections of this Agreement.  Anyambiguities or interpretations of the provisions of this Agreement shall bemade in good faith by the Board of Directors of Holdco, and shall be bindingand determinative on all parties.

 

## 5.9                                 Counterparts..  This Agreement may be executed inseparate counterparts, each of which, when so executed, shall be deemed to bean original, and such counterparts when taken together shall constitute but oneand the same instrument.

 

*[Remainder of page intentionally left blank]*

 

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IN WITNESS WHEREOF,Interline NJ, Holdco and Subco have caused this Agreement to be signed by theirrespective officers thereunto duly authorized as of the day first writtenabove.

 

 
|   | Interline Brands, Inc., a New Jersey  Corporation:    |
|--------|-----------------------------------------------------------------|
|   |                                                            |   |   |
|   | INTERLINE BRANDS, INC.                                          |   |
|   |                                                            |   |   |
|   |                                                            |   |   |
|   | By:                                                             |    /s/ William  E. Sanford |   |
|   |                                                            | Name: | William E. Sanford |   |
|   |                                                            | Title: | Executive Vice  President and |   |
|   |                                                            |   | Chief Operating Officer |   |
|   |                                                            |   |   |
|   |                                                            |   |   |
|   | Interline Brands, Inc., a Delaware Corporation:            |   |
|   |                                                            |   |   |
|   | INTERLINE BRANDS, INC.                                          |   |
|   |                                                            |   |   |
|   |                                                            |   |   |
|   | By:                                                             |    /s/ William  E. Sanford |   |
|   |                                                            | Name: | William E. Sanford |   |
|   |                                                            | Title: | Executive Vice  President and |   |
|   |                                                            |   | Chief Operating Officer |   |
|   |                                                            |   |   |
|   |                                                            |   |   |
|   | Interline Subsidiary, Inc., a New Jersey  Corporation |   |
|   |                                                            |   |   |
|   | INTERLINE SUBSIDIARY, INC.                                      |   |
|   |                                                            |   |   |
|   |                                                            |   |   |
|   | By:                                                             |    /s/ William  E. Sanford |   |
|   |                                                            | Name: | William E. Sanford |   |
|   |                                                            | Title: | Executive Vice  President and |   |
|   |                                                            |   | Chief Operating Officer |   |

 

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**EXHIBITS**

 

EXHIBIT A:                               SecondAmended and Restated Certificate of Incorporation of InterlineBrands, Inc.

 

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