U.S. Federal Income Tax Consequences .

        The following is a general summary of the material U.S. federal income tax consequences of the grant and exercise of awards under the plan and the disposition of shares purchased pursuant to the exercise of such awards and is intended to reflect the current provisions of the Internal Revenue Code and the regulations thereunder. This summary is not intended to be a complete statement of applicable law, nor does it address foreign, state and local tax considerations. Moreover, the U.S. federal income tax consequences to any particular participant may differ from those described herein by reason of, among other things, the particular circumstances of such participant.

        Options.     No income will be realized by a participant upon grant of a non-qualified stock option. Upon the exercise of a non-qualified stock option, the participant will recognize ordinary compensation income in an amount equal to the excess, if any, of the fair market value of the underlying exercised shares over the option exercise price paid at the time of exercise. We will be able to deduct this same amount for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.

         Restricted Stock . A participant will not be subject to tax upon the grant of an award of restricted stock unless the participant otherwise elects to be taxed at the time of grant pursuant to Section 83(b) of the Code. On the date an award of restricted stock becomes transferable or is no longer subject to a substantial risk of forfeiture, the participant will have taxable compensation equal to the difference between the fair market value of the shares on that date over the amount the participant paid for such shares, if any, unless the participant made an election under Section 83(b) of the Code to be taxed at the time of grant. If the participant made an election under Section 83(b), the participant will have taxable compensation at the time of grant equal to the difference between the fair market value of the shares on the date of grant over the amount the participant paid for such shares, if any. (Special rules apply to the receipt and disposition of restricted shares received by officers and directors who are subject to Section 16(b) of the Exchange Act.) We will be able to deduct, at the same time as it is recognized by the participant, the amount of taxable compensation to the participant for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.

        Restricted Share Units.     A participant will not be subject to tax upon the grant of a restricted share unit award. Rather, upon the delivery of shares or cash pursuant to a restricted share unit award, the participant will have taxable compensation equal to the fair market value of the number of shares (or cash) he actually receives with respect to the award. We will be able to deduct the amount of taxable compensation to the participant for U.S. federal income tax purposes, but the deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.

        Section 162(m).     In general, Section 162(m) of the Code denies a publicly held corporation a deduction for U.S. federal income tax purposes for compensation in excess of $1,000,000 per year per person to its chief executive officer and the four other officers whose compensation is disclosed in its proxy statement, subject to certain exceptions. The 2004 Plan is intended to satisfy either an exception or applicable transitional rule requirements with respect to grants of options to covered employees. The 2004 Plan is designed to permit certain awards of restricted share units and other awards to be awarded in a manner intended to qualify under either the "performance-based compensation" exception to Section 162(m) of the Code or applicable transitional rule requirements.

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Management Annual Bonuses

        We anticipate providing management with annual cash bonuses in accordance with their employment agreements. Please refer to the description of the new employment agreements on the following pages. As a result of these cash bonuses, we will incur a charge against our earnings in future periods. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Overview" for more information.

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shares of restricted common stock have been issued and are outstanding under the 2000 Stock Award Plan in addition to the options issued.

Employment Agreements and Other Compensation

        Michael J. Grebe.     Prior to the consummation of this offering, we expect to enter into a new employment agreement with Mr. Grebe, which will become effective when executed and will expire two years thereafter, subject to automatic one-year extensions at the beginning of each calendar year thereafter unless we or Mr. Grebe give at least 90 days' written notice of non-extension. During the term of his agreement, Mr. Grebe will continue to serve as our President and Chief Executive Officer. Mr. Grebe's base salary will be no less than the rate in effect on the effective date of the new agreement with a 5% increase and, subject to annual cost of living increases of at least 5% as of the beginning of each calendar year. Mr. Grebe will also be eligible for an annual cash bonus based upon the achievement of annual performance targets established by our compensation committee, with a maximum annual bonus of 120% of his base salary. Mr. Grebe will be eligible to continue to participate in the benefits plans and arrangements generally available to our senior executives.

        In addition, Mr. Grebe will be entitled to a retention bonus computed pursuant to a formula to be negotiated in good faith and agreed upon between Mr. Grebe and us. This retention bonus will be paid in cash to Mr. Grebe over a period of time to be negotiated in good faith between Mr. Grebe and us. In the event Mr. Grebe terminates his employment with us without "good reason" or we terminate him for "cause" (as defined in his employment agreement) he will forfeit any unpaid portion of the retention bonus. In the event Mr. Grebe's employment is terminated either on account of his death or disability, by us without cause, or by him for good reason, any unpaid portion of the retention bonus will be payable to him or (his estate) within 30 days following the termination.

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        Mr. Grebe's employment may be terminated by us for cause (as defined in his employment agreement) upon 10 days' prior written notice. Upon termination of Mr. Grebe's employment for cause, we are required to pay his accrued and unpaid base salary and benefits through the date of termination. If Mr. Grebe's employment terminates due to disability or death, he or his estate will be entitled to receive (i) any accrued and unpaid base salary and benefits, (ii) continuation of his base salary for a period of two years following the date of termination and (iii) a pro rata bonus for the calendar year in which termination occurs. If his employment is terminated by us without cause, or by Mr. Grebe for good reason (as defined in the employment agreement to include among other actions, a change in control of us), Mr. Grebe will be entitled to receive any accrued and unpaid base salary and benefits and severance equal to (i) two times his base salary payable in a lump sum and (ii) an amount equal to two times the average of the annual bonuses paid to him during the three years prior to his termination payable over a two year period following his termination. In the event Mr. Grebe is terminated in connection with a change in control of us all of his severance will be paid in a lump sum. Mr. Grebe's employment agreement also provides for a tax gross-up for any amounts due or paid to him under the employment agreement or any of our other plans or arrangements that are considered an "excess parachute payment" under the U.S. Internal Revenue Code. In addition, Mr. Grebe will be entitled to continuation of certain health and welfare benefits at our expense for a period of two years following his termination. The termination of Mr. Grebe's employment at the end of the initial term or any successive one-year renewal period on account of us giving notice to Mr. Grebe of our desire not to extend the term will be treated as a termination without cause entitling Mr. Grebe to severance.

        All severance payments under this new agreement are conditioned upon and subject to Mr. Grebe's execution of a general waiver and release. Mr. Grebe is subject to a non-compete agreement during his employment and for the period ending on the later of the expiration of (i) one year following the termination of his employment by us for cause or by Mr. Grebe without good reason and (ii) two years following the termination of his employment by us without cause or by Mr. Grebe for good reason. Mr. Grebe is also subject to a confidentiality agreement during and after his employment with us. As discussed below under Mr. Grebe's prior agreement, Mr. Grebe will be entitled to a one-time payment immediately prior to this offering with respect to the taxes associated with the forgiveness of his loans.

        We anticipate awarding Mr. Grebe immediately prior to and in connection with this offering, stock options to purchase        shares of common stock with an exercise price equal to the fair market value on the date of grant, stock options to purchase        shares of common stock with an exercise price in excess of fair market value on the date of grant, and an award of        restricted share units, all in accordance with and under our 2004 Equity Incentive Plan and the terms and conditions of which are to be governed by the applicable award agreement. See the prior description of our 2004 Equity Incentive Plan.

        Prior Agreement.     Upon the effective date of Mr. Grebe's new employment agreement, the new employment agreement as described above will replace Mr. Grebe's prior agreement. The term of Mr. Grebe's prior employment agreement was from May 16, 2000 to December 31, 2002, subject to automatic one-year extensions unless we or Mr. Grebe gave at least 60 days' prior written notice of non-extension. Such agreement was extended automatically on December 31, 2002 and December 31, 2003. The agreement provided Mr. Grebe with a base salary of $240,000, subject to an annual cost of living increase of at least 5% and eligibility for an annual cash bonus based upon the achievement of an annual EBITDA target established by our board of directors, with a target bonus potentially equal to 100% of his base salary.

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        The prior agreement provided Mr. Grebe severance generally upon his termination of employment by us without "cause," or by Mr. Grebe for either "good reason" or for any reason in the 30-day period commencing on the first anniversary of a "change in control." His severance was (i) any accrued and unpaid base salary and benefits, (ii) continuation of his base salary for a period of two years from the date of termination and (iii) a pro rata bonus. Further under the prior agreement if Mr. Grebe terminated his employment during the 30-day period commencing on the first anniversary of a change in control, he could elect to receive, in lieu of the continuation of his base salary for a period of two years from the date of termination, a single lump sum payment equal to 90% of the value of his continued base salary, payable within 30 days of the termination of his employment. The termination of Mr. Grebe's employment at the end of the initial term or any successive one-year renewal period on account of us giving notice to Mr. Grebe of our desire not to extend the term of his employment was treated as a termination without cause entitling Mr. Grebe to severance.

        Under his prior agreement and as a condition of his employment, Mr. Grebe agreed to buy 115,038 shares of common stock and 56,165 shares of our preferred stock, for an aggregate purchase price of $599,996, paid by delivery of a promissory note to us on May 16, 2000. The promissory note is payable on the earlier of (i) 90 days following a termination of Mr. Grebe's employment by reason of death, disability, by Mr. Grebe for "good reason," or by us without "cause," (ii) immediately upon the termination of Mr. Grebe's employment for any other reason, (iii) upon the sale of the securities purchased in connection with the promissory note or (iv) May 16, 2005. The promissory note, which is secured by the securities purchased with the proceeds of such note, bears interest at a rate equal to the rate payable by us under Interline Opco's former credit facility, as adjusted quarterly, and not to exceed 8%. The note can be prepaid at any time without penalty. Immediately prior to the completion of this offering, we anticipate forgiving the balance of the note, as well as a $150,000 relocation loan previously extended to Mr. Grebe, and making an additional payment to Mr. Grebe in the amount of $529,400 in respect of Mr. Grebe's income tax obligations with respect to the forgiveness of the note and relocation loan.

        Pursuant to our Shareholders' Agreement, with respect to any shares of our common or preferred stock held by Mr. Grebe, upon termination of his employment with us, certain call or put options may be exercised. We may repurchase (or call) all the shares of common or preferred stock then held by Mr. Grebe within 30 days of his termination. If Mr. Grebe's employment is terminated for "cause," or if he terminates his employment without "good reason," he will receive a call price amount equal to the lesser of the original per share price paid by Mr. Grebe, or the then fair market value of the shares. If Mr. Grebe terminates his employment with us for "good reason," then the call price amount will be equal to the greater of the original per share price paid by him, or the then fair market value of the shares. If Mr. Grebe's employment with us is terminated for any other reason, the call price amount will be equal to the then fair market value of the shares. In addition, if Mr. Grebe's employment is terminated by us without "cause" or as a result of his death or disability, and we do not exercise our call option within 30 days of his termination, Mr. Grebe (or his estate) may require us to purchase all the shares of common or preferred stock then held by him at their then fair market value. Finally, if Mr. Grebe voluntarily terminates his employment with us for "good reason," and we do not exercise our call option within 30 days of his termination, he may require us to purchase all shares of common or preferred stock then held by him at the greater of the original per share price paid by Mr. Grebe, or such shares' then fair market value. The section of our amended and restated shareholders' agreement governing these call and put options will terminate upon the consummation of this offering.

        Mr. Grebe's prior employment agreement provided that we were obligated, subject to our obligations and the covenants set forth in the terms of our outstanding indebtedness, including any credit facility, to make loans available to him in an amount not to exceed an additional $599,996 upon his election pursuant to our Shareholders' Agreement to exercise certain preemptive rights with respect to new issuances of securities by us. See "Certain Relationships and Related Transactions—Amended

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and Restated Shareholders' Agreement" for a discussion of the terms of our Shareholders' Agreement. His new employment agreement does not contain these provisions.

        In addition, on May 16, 2000, we granted Mr. Grebe options to purchase 74,550 shares of our common stock under Interline Opco's Stock Award Plan. The options had exercise prices of $1.67 per share for 24,852 shares, $5.00 per share for 24,849 shares and $20.33 per share for 24,849 shares. The options become exercisable as to 20% of the underlying shares on each of May 16, 2001, May 16, 2002, May 16, 2003, May 16, 2004 and May 16, 2005. The options become fully exercisable upon a "change in control."

        William E. Sanford.     Prior to the consummation of this offering, we expect to enter into a new employment agreement with Mr. Sanford, which will become effective when executed and will expire two years thereafter, subject to automatic one-year extensions at the beginning of each calendar year thereafter unless we or Mr. Sanford give at least 90 days' written notice of non-extension. During the term of his agreement, Mr. Sanford will serve as our Executive Vice President and Chief Operating Officer. Mr. Sanford's base salary will be no less than the rate in effect on the effective date with a 5% increase and subject to annual cost of living increases of at least 5% as of the beginning of each calendar year. Mr. Sanford will also be eligible for an annual cash bonus based upon the achievement of annual performance targets established by our compensation committee, with a maximum annual bonus of 120% of his base salary. Mr. Sanford will be eligible to continue to participate in the benefits plans and arrangements generally available to our senior executives.

        In addition, Mr. Sanford will be entitled to a retention bonus computed pursuant to a formula to be negotiated in good faith and agreed upon between Mr. Sanford and us. This retention bonus will be paid in cash to Mr. Sanford over a period of time to be negotiated in good faith between Mr. Sanford and us. In the event Mr. Sanford terminates his employment with us without "good reason" or we terminate him for "cause" (as defined in his employment agreement) he will forfeit any unpaid portion of the retention bonus. In the event Mr. Sanford's employment is terminated either on account of his death or disability, by us without cause, or by him for good reason, any unpaid portion of the retention bonus will be payable to him (or his estate) within 30 days following the termination.

        Mr. Sanford's employment may be terminated by us for cause (as defined in his employment agreement) upon 10 days' prior written notice. Upon termination of Mr. Sanford's employment for cause, we are required to pay his accrued and unpaid base salary and benefits through the date of termination. If Mr. Sanford's employment terminates due to disability or death, he or his estate will be entitled to receive (i) any accrued and unpaid base salary and benefits, (ii) continuation of his base salary for a period of two years following the date of termination and (iii) a pro rata bonus for the calendar year in which termination occurs. If his employment is terminated by us without cause, or by Mr. Sanford for good reason (as defined in the employment agreement to include among other actions, a change in control of us), Mr. Sanford will be entitled to receive any accrued and unpaid base salary and benefits and severance equal to (i) two times his base salary payable in a lump sum and (ii) an amount equal to two times the average of the annual bonuses paid to him during the three years prior to his termination payable over a two year period following his termination. In the event Mr. Sanford is terminated in connection with a change in control of us all of his severance will be paid in a lump sum. Mr. Sanford's employment agreement also provides for a tax gross-up for any amounts due or paid to him under the employment agreement or any of our plans or arrangements that are considered an "excess parachute payment" under the U.S. Internal Revenue Code. In addition, Mr. Sanford will be entitled to continuation of certain health and welfare benefits at our expense for a period of two years following his termination. The termination of Mr. Sanford's employment at the end of the initial term or any successive one-year renewal period on account of us giving notice to Mr. Sanford of our desire not to extend the term was to be treated as a termination without cause generally entitling Mr. Sanford to severance.

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        All severance payments under this new agreement are conditioned upon and subject to Mr. Sanford's execution of a general waiver and release. Mr. Sanford is subject to a non-compete agreement during his employment and for the period ending on the later of the expiration of (i) one year following the termination of his employment by us for cause or by Mr. Sanford without good reason and (ii) two years following the termination of his employment by us without cause or by Mr. Sanford for good reason. Mr. Sanford is also subject to a confidentiality agreement during and after his employment with us. As discussed below under Mr. Sanford's prior agreement, Mr. Sanford will be entitled to a one time payment immediately prior to this offering with respect to the taxes associated with the foregiveness of his loans.

        We anticipate awarding Mr. Sanford immediately prior to this offering and in connection with the offering stock options to purchase               shares of common stock with an exercise price equal to the fair market value on the date of grant, stock options to purchase               shares of common stock with an exercise price in excess of fair market value on the date of grant, and an award of          restricted share units, all in accordance with and under our 2004 Equity Incentive Plan and the terms and conditions of which are to be governed by the applicable award agreement. See the prior description of our 2004 Equity Incentive Plan.

        Prior Agreement.     Upon the effective date of Mr. Sanford's new employment agreement, the new employment agreement as described above will replace Mr. Sanford's prior agreement. The term of Mr. Sanford's prior employment agreement was from May 16, 2000 to December 31, 2002, subject to automatic one-year extensions, unless we or Mr. Sanford gave at least 60 days' prior written notice of non-extension. Such agreement was extended automatically on December 31, 2002 and December 31, 2003. The agreement provided Mr. Sanford with a base salary of $235,000, subject to an annual cost of living increase of at least 5% and eligibility for an annual cash bonus based upon the achievement of an annual EBITDA target established by our board of directors, with a target bonus potential equal to 100% of his base salary.

        The prior agreement provided Mr. Sanford severance generally upon his termination by us without "cause," or by Mr. Sanford for either "good reason" or for any reason in the 30-day period commencing on the first anniversary of a "change in control." His severance was (i) any accrued and unpaid base salary and benefits, (ii) continuation of his base salary for a period of two years from the date of termination and (iii) a pro rata bonus. Further under the prior agreement, if Mr. Sanford terminated his employment during the 30-day period commencing on the first anniversary of a change in control, he could elect to receive, in lieu of continuation of his base salary for a period of two years from the date of termination, a single lump sum payment equal to 90% of the value of this continued base salary, payable within 30 days of the termination of his employment. The termination of Mr. Sanford's employment at the end of the initial term or any successive one-year renewal period on account of us giving notice to Mr. Sanford of our desire not to extend the term of his employment was to be treated as a termination without cause generally entitling Mr. Sanford to severance.

        Under his prior agreement and as a condition of his employment, Mr. Sanford agreed to buy 81,204 shares of common stock and 57,293 shares of our preferred stock, for an aggregate purchase price of $599,998, paid by delivery of a promissory note to us on May 16, 2000. The promissory note is payable on the earlier of (i) 90 days following a termination of Mr. Sanford's employment by reason of death, disability, by Mr. Sanford for "good reason," or by us without "cause," (ii) immediately upon the termination of Mr. Sanford's employment for any other reason, (iii) upon the sale of the securities purchased in connection with the promissory note or (iv) May 16, 2005. The promissory note, which is secured by the securities purchased with the proceeds of such note, bears interest at a rate equal to the rate payable by us under Interline Opco's former credit facility, as adjusted quarterly, and not to exceed 8%. The note can be prepaid at any time without penalty, and remains outstanding to date. Immediately prior to the completion of this offering, we anticipate forgiving the balance of the note, as well as a $150,000 relocation loan previously extended to Mr. Sandord, and making an additional

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payment to Mr. Sanford in the amount of $529,400 in respect of Mr. Sanford's income tax obligations with respect to the forgiveness of the note and relocation loan.

        Pursuant to our Shareholders' Agreement, with respect to any shares of our common or preferred stock held by Mr. Sanford, upon termination of his employment with us, certain call or put options may be exercised. We may repurchase (or call) all the shares of common or preferred stock then held by Mr. Sanford within 30 days of his termination. If Mr. Sanford's employment is terminated for "cause," or if he terminates his employment with us without "good reason," he will receive a call price amount equal to the lesser of the original per share price paid by Mr. Sanford, or the then fair market value of the shares. If Mr. Sanford terminates his employment with us for "good reason," then the call price amount will be equal to the greater of the original per share price paid by him, or the then fair market value of the shares. If Mr. Sanford's employment with us is terminated for any other reason, the call price amount will be equal to the then fair market value of the shares. In addition, if Mr. Sanford's employment is terminated by us without "cause" or as a result of his death or disability, and we do not exercise our call option within 30 days of his termination, Mr. Sanford (or his estate) may require us to purchase all the shares of common or preferred stock then held by him at their then fair market value. Finally, if Mr. Sanford voluntarily terminates his employment with us for "good reason," and we do not exercise our call option within 30 days of his termination, he may require us to purchase all shares of common or preferred stock then held by him at the greater of the original per share price paid by Mr. Sanford, or such shares' then fair market value. These call and put options will terminate when any of the following events first occur: (i) the consummation of a public offering of our stock, or (ii) the consummation of any sale of a majority of our stock, a merger, consolidation or reorganization, or a sale of all or substantially all of our assets, which results in a change of control.

        Mr. Sanford's prior employment agreement provided that we were obligated, subject to our obligations and the covenants set forth in the terms of our outstanding indebtedness, including any credit facility, to make loans available to him in an amount not to exceed an additional $599,996, upon his election pursuant to our Shareholders' Agreement to exercise certain pre-emptive rights over new issuances of securities by us. See "Certain Relationships and Related Transactions—Amended and Restated Shareholders' Agreement" for a discussion of the terms of our Shareholders' Agreement. His new employment agreement does not contain these provisions.

        In addition, on May 16, 2000, we granted Mr. Sanford options to purchase 51,255 shares of our common stock under our Stock Award Plan. The options had exercise prices of $1.67 per share for 17,085 shares, $5.00 per share for 17,085 shares and $20.33 per share for 17,085 shares. The options become exercisable as to 20% of the underlying shares on each of May 16, 2001, May 16, 2002, May 16, 2003, May 16, 2004 and May 16, 2005. The options become fully exercisable upon a change in control.

William R. Pray.

        Prior to the consummation of this offering, we expect to enter into a new employment agreement with Mr. Pray that is better aligned with the agreements we have generally entered into with our senior vice presidents. The term of Mr. Pray's agreement will become effective immediately prior to the consummation of this offering and expire September 29, 2005, subject to automatic one-year extensions unless we or Mr. Pray gives at least 60 days' written notice of non-extension. During the term of his agreement, Mr. Pray will serve as our Senior Vice President. The agreement provides that we will pay Mr. Pray a base salary of $506,378, subject to increase at the discretion of our company President. Mr. Pray is eligible to receive an annual bonus of no greater than $300,000. In connection with terminating a historical split dollar life insurance and deferred compensation arrangement, we will make a one time payment to Mr. Pray of $525,900.

        The agreement may be terminate by us for cause (as defined in his employment agreement). Upon termination of Mr. Pray's employment for cause, we will pay him his accrued and unpaid base salary

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and benefits (as defined in his employment agreement) through the date of termination. If Mr. Pray's employment terminates due to disability or death, he or his estate will be entitled to receive (i) any accrued and unpaid base salary and benefits and (ii) a pro rata bonus for the calendar year in which termination occurs. If Mr. Pray's employment is terminated by us without "cause," or by Mr. Pray for "good reason" (as defined in his employment agreement), he will be entitled to receive (i) any accrued and unpaid base salary and benefits, (ii) continuation of his base salary for one year, (iii) continuation of his health benefits and (iv) a pro rata bonus. Mr. Pray is required to provide us 30 days' advance written notice in the event he terminates his employment other than for "good reason."

        All severance payments are conditioned upon and subject to Mr. Pray's execution of a general waiver and release. Mr. Pray is subject to a non-compete agreement during his employment and for two years thereafter. Mr. Pray is subject to a non-solicitation agreement during his employment and for one year thereafter. Mr. Pray is subject to a confidentiality agreement during and after his employment.

Prior Agreement.

        We anticipate that immediately prior to this offering, Mr. Pray's prior employment agreement with us will be replaced by the new employment described above.

        The term of Mr. Pray's prior employment agreement was for five years from September 29, 2000, subject to automatic one-year extensions, unless we or Mr. Pray gave at least 13 months' prior written notice of non-extension. The agreement provided that we would pay Mr. Pray a base salary of $450,000, subject to an annual cost of living increase of at least 4% and eligibility for an annual cash bonus of up to $300,000 per year, 50% of which was based upon earning targets established by our board of directors and 50% of which was based upon the discretion of our board of directors.

        The prior agreement provided severance generally upon Mr. Pray's termination by us without cause, or by Mr. Pray for good reason, entitling him to receive any unpaid base salary through the later of (i) the month in which the termination occurred or (ii) the date upon which he commences receiving payments of disability benefits under the disability benefit programs maintained us and a pro rata bonus. In addition, we will continue to provide to him, for a year following his termination due to disability, certain benefits under his employment agreement. If his employment is terminated by us without "cause," or by Mr. Pray for "good reason," he will receive (i) his base salary, for a period equal to the greater of the remainder of the term of his employment or one year and (ii) the product of the average of the bonus compensation paid to him with respect to the three years preceding the year in which he terminates his employment for a good reason, whether or not such years are part of the term of his employment under the employment agreement, multiplied by the greater of the number of years remaining in the term of the employment agreement, and one year, all reduced to present value. In addition, if the receipt of the lump sum pursuant to the foregoing sentence would cause him to pay federal income tax for the year of receipt at a higher marginal rate than he would have paid for such year had his employment not been terminated, or the original marginal rate, he would receive an additional amount such that the amount retained by him after the payment of federal income taxes on such lump sum will be the same as if this lump sum had been taxed at the original marginal rate.

        Mr. Pray was subject to a non-compete agreement during his employment and for a period ending 24 months following the date of his termination, and to a confidentiality agreement during and after his employment with us.

        We have also entered into a deferred compensation agreement with Mr. Pray, which provides for deferred compensation in an amount equal to $1,707,708, vesting over a two-year period ending on September 1, 2002 and payable upon a termination of employment. The agreement also provides Mr. Pray with certain fringe benefits, including deferred compensation/split dollar life insurance arrangements. See compensation table above for more information. We anticipate terminating the split dollar life insurance arrangements prior to this offering.

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        Mr. Pray executed and delivered a promissory note in favor of us on September 29, 2000 in the amount of $1,707,708, which is secured by the securities purchased in connection with such note. The note becomes due and payable on the earlier of a termination of employment for any reason, or September 29, 2010, and bears interest at a rate compounded semi-annually equal to the Applicable Federal Rate of Interest under the Internal Revenue Code as of the date the note was issued. The note may be prepaid at any time without penalty. On September 27, 2002, this note was satisfied through a reduction in the deferred compensation liability.

        On September 29, 2000, Mr. Pray was granted a restricted stock award consisting of 102,168 shares of our common stock, which became nonforfeitable on September 29, 2001, except if we terminate Mr. Pray's employment for "cause." Upon termination of Mr. Pray's employment by us for any reason other than "cause," or by Mr. Pray for "good reason," we have the right but not the obligation to call all or a portion of the shares of restricted stock for their then fair market value (the Call Option) by giving Mr. Pray 30 days' written notice of our intent to exercise the Call Option. Any shares of restricted stock not purchased upon exercise of the call option may be called by us at a later date. We will purchase that number of shares of the restricted stock subject to the Call Option within 20 days of the date on which their fair market value is established. If Mr. Pray's employment with us is terminated (i) by us for any reason other than for "cause" or (ii) by Mr. Pray for "good reason," Mr. Pray will sell and we will purchase all of his restricted stock at its then fair market value (the Required Purchase) within 30 days of his termination date. We may pay the purchase price in connection with our exercise of the Call Option or with the Required Purchase in cash, or if full or partial payment of the purchase price is prohibited by any of our equity or debt financing instruments, we may either (1) delay full or partial payment until the prohibitions lapse, provided interest accrues on the purchase price at the then prevailing prime interest rate as announced by Fleet National Bank, up to 8% per annum (the Deferred Interest Rate) or (2) pay any unpaid purchase price in the form of a promissory note bearing interest at the Deferred Interest Rate. The Call Option and Required Purchase will terminate when any of the following events first occur: (i) the consummation of a public offering of our stock or (ii) the consummation of any sale of a majority of our stock, a merger, consolidation or reorganization, or a sale of all or substantially all of our assets, which results in a change of control.

        Pamela L. Maxwell.     The term of Ms. Maxwell's employment agreement is from January 7, 2004 to January 6, 2005, subject to automatic one-year extensions unless we or Ms. Maxwell give at least 60 days' prior written notice of non-extension. The agreement provides that we will pay Ms. Maxwell a base salary of $161,737, subject to increase at the discretion of our company President. Ms. Maxwell is eligible to receive an annual bonus of up to 50% of her base salary.

        The agreement may be terminated by us for "cause." Upon termination of Ms. Maxwell's employment for cause, we will pay her accrued and unpaid base salary and benefits (as defined in her employment agreement) through the date of termination. If Ms. Maxwell's employment terminates due to disability or death, she or her estate will be entitled to receive (i) any accrued and unpaid base salary and benefits and (ii) a pro rata bonus for the calendar year in which termination occurs. If her employment is terminated by us without "cause," or by Ms. Maxwell for "good reason", she will be entitled to receive (i) any accrued and unpaid base salary and benefits, (ii) continuation of her base salary for a period of one year from the date of termination, (iii) continuation of her medical benefits and (iv) a pro rata bonus. Ms. Maxwell is required to provide us 30 days' advance written notice in the event she terminates her employment other than for "good reason."

        All severance payments are conditioned upon and subject to Ms. Maxwell's execution of a general waiver and release. Ms. Maxwell is subject to a non-compete agreement during her employment and for one year thereafter. Ms. Maxwell is subject to a non-solicitation agreement during her employment and for two years thereafter. Ms. Maxwell is subject to a confidentiality agreement during and after her employment with us.

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        On January 31, 2003, we granted Ms. Maxwell options to purchase 1,208 shares of our common stock and a restricted stock award consisting of 9,024 shares of our common stock, both under the Stock Award Plan. The options have an exercise price of $0.50 per share. The options are exercisable as to 40% of the underlying shares as of the date of grant, and 20% of the remaining shares underlying the option will become exercisable on each of January 1, 2004, January 1, 2005 and January 1, 2006. The options become fully exercisable upon a change in control. The restricted stock award is 40% vested as of the grant date with 20% of the remaining shares of restricted stock vesting on each of January 1, 2004, January 1, 2005 and January 1, 2006. Prior to a public offering of our stock, if Ms. Maxwell's employment with us terminates for any reason, we have the right, but not the obligation, to purchase any or all vested shares of restricted stock, and/or any shares acquired upon the exercise of options, then held by Ms. Maxwell at their then fair market value. If, however, Ms. Maxwell's employment with us is terminated for "cause," the call price of the stock will be $0.01 per share.

        Fred M. Bravo.     The term of Mr. Bravo's employment agreement is from January 7, 2004 to January 6, 2005, subject to automatic one-year extensions unless we or Mr. Bravo give at least 60 days' prior written notice of non-extension. The agreement provides that we will pay Mr. Bravo a base salary of $166,368, subject to increase at the discretion of our company President. Mr. Bravo is eligible to receive an annual bonus of up to 50% of his base salary.

        The agreement may be terminated by us for "cause." Upon termination of Mr. Bravo's employment for cause, we will pay his accrued and unpaid base salary and benefits (as defined in his employment agreement) through the date of termination. If Mr. Bravo's employment terminates due to disability or death, he or his estate will be entitled to receive (i) any accrued and unpaid base salary and benefits and (ii) a pro rata bonus for the calendar year in which termination occurs. If his employment is terminated by us without "cause," or by Mr. Bravo for "good reason", he will be entitled to receive (i) any accrued and unpaid base salary and benefits, (ii) continuation of his base salary for a period of one year from the date of termination, (iii) continuation of his medical benefits and (iv) a pro rata bonus. Mr. Bravo is required to provide us 30 days' advance written notice in the event he terminates his employment other than for "good reason."

        All severance payments are conditioned upon and subject to Mr. Bravo's execution of a general waiver and release. Mr. Bravo is subject to a non-compete agreement during his employment and for one year thereafter. Mr. Bravo is subject to a non-solicitation agreement during his employment and for two years thereafter. Mr. Bravo is subject to a confidentiality agreement during and after his employment with us.

        On January 31, 2003, we granted Mr. Bravo options to purchase 1,208 shares of our common stock and a restricted stock award consisting of 9,024 shares of our common stock, both under the Stock Award Plan. The options have an exercise price of $0.50 per share. The options are exercisable as to 40% of the underlying shares as of the date of grant, and 20% of the remaining shares underlying the option will become exercisable on each of January 1, 2004, January 1, 2005 and January 1, 2006. The options become fully exercisable upon a change in control. The restricted stock award is 40% vested as of the grant date with 20% of the remaining shares of restricted stock vesting on each of January 1, 2004, January 1, 2005 and January 1, 2006. Prior to a public offering of our stock, if Mr. Bravo's employment with us terminates for any reason, we have the right, but not the obligation, to purchase any or all vested shares of restricted stock then held by Mr. Bravo, and/or any shares acquired upon the exercise of options, at their then fair market value. If, however, Mr. Bravo's employment with us is terminated for "cause," the call price of the stock will be $0.01 per share.

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PRINCIPAL STOCKHOLDERS

        The following table sets forth the number and percentage of outstanding shares of common and preferred stock of Interline Opco beneficially owned by (1) each of our named executive officers and directors individually, (2) all executive officers and directors as a group and (3) certain principal stockholders who are known to us to be the beneficial owner of more than five percent of our common stock as of June 1, 2004. The shares of Interline Opco common stock will be converted into shares of our common stock and the shares of Interline Opco preferred stock will be converted into cash and shares of our common stock in connection with the Transactions. The amounts in the columns under the heading "Shares of Interline Opco Beneficially Owned Before the Offering" do not give effect to the reincorporation merger and the other Transactions described more fully in "Certain Relationships—Reorganization Transactions." The amounts in the columns under the heading "Shares of our Common Stock Beneficially Owned After the Offering" do give effect to the reincorporation merger and the Transactions.

*

Indicates less than 1% ownership.

(1)

Unless otherwise noted, the business address is Interline Brands, Inc., 801 W. Bay Street, Jacksonville, Florida 32204.

(2)

Our senior preferred stock is non-convertible and non-voting, accrues cumulative dividends at an annual rate of 14% and has preferential rights over all other classes of stock in the event of a liquidation and with respect to certain distributions.

(3)

Determined in accordance with Rule 13(d)-3 under the Exchange Act.

(4)

Parthenon Capital, LLC is the investment advisor to the following Parthenon partnerships: Parthenon Investors, L.P., PCIP Investors, J&R Founders Fund and Parthenon Investors II, L.P. Their business address is 200 State Street, Boston, Massachusetts 02109.

(5)

Includes common stock and preferred stock beneficially owned by Parthenon Investors, L.P., PCIP Investors, J&R Founders Fund and Parthenon Investors II, L.P. The Co-CEOs of Parthenon Capital, Mr. Jacquet and Mr. Rutherford, each have beneficial ownership of (i) 1,058,859 shares of common stock and 4,910,622 shares of preferred stock held by Parthenon Investors, L.P. through their indirect control of Parthenon Investment Advisors, LLC, the general partner of Parthenon Investors, L.P., (ii) 44,420 shares of common stock and 212,451 shares of preferred stock held by PCIP Investors, a general partnership of which they have control as general partners, (iii) 5,351 shares of common stock and 30,456 shares of preferred stock held by J&R Founders Fund, a general

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partnership of which they have control as general partners and (iv) 169,652 shares of common stock and 965,117 shares of preferred stock held by Parthenon Investors II, L.P., through their indirect control of PCap Partners II LLC, the general partner of Parthenon Investors II, L.P. Under certain circumstances, Parthenon Investors, L.P. has shared voting power over an aggregate of 1,513,038 shares of common stock held by William S. Green, Michael J. Grebe, William E. Sanford, William R. Pray, JMH Partners Corp., BancBoston Capital Inc., Svoboda QP, L.P., Private Equity Portfolio Fund II, Mellon Ventures II, L.P., Svoboda, L.P., National City Equity Partners and Great Lakes Capital Investments II, LLC pursuant to the Amended and Restated Shareholders' Agreement, dated as of September 29, 2000, as amended, by and among our company and the parties thereto. See "Certain Relationships and Related Transactions—Amended and Restated Shareholders' Agreement."

(6)

The general partner of JPMP (23A SBIC) is J.P. Morgan Partners (23A SBIC Manager), Inc., or JPMP (23A SBIC Manager), a wholly owned subsidiary of J.P. Morgan Chase Bank, or JPM Chase Bank, a wholly-owned subsidiary of J.P. Morgan Chase & Co., or JPM Chase, a publicly traded company. Each of JPMP (23A SBIC Manager), JPM Chase Bank and JPM Chase disclaim beneficial ownership of the shares held by JPMP (23A SBIC).

(7)

These shares are held by First Plaza Group Trust, for which JPMorgan Chase Bank serves as trustee. The trust is a pension trust formed pursuant to the laws of the State of New York for the benefit of certain employee benefit plans of General Motors Corporation, or GM, its subsidiaries and unrelated employers. These shares may be deemed to be owned beneficially by General Motors Investment Management Corporation, or GMIMCo, a wholly-owned subsidiary of GM. GMIMCo is registered as an investment adviser under the Investment Advisers Act of 1940. GMIMCo's principal business is providing investment advice and investment management services with respect to the assets of certain employee benefit plans of GM, its subsidiaries and unrelated employers, and with respect to the assets of certain direct and indirect subsidiaries of GM and associated entities. GMIMCo is serving as investment manager with respect to these shares and in that capacity it has the sole power to direct the trustee as to the voting and disposition of these shares. Because of the trustee's limited role, beneficial ownership of the shares by the trustee is disclaimed. The address of GMIMCo is 767 Fifth Avenue, New York, New York 10153.

(8)

The business address is 276 Post Road West, Westport, Connecticut 06880. Mr. Santoro is a managing member of Sterling Investment Partners Management, LLC, the general partner of Sterling Investment Partners, L.P., and disclaims beneficial ownership other than his membership interest.

(9)

Includes 44,730 shares of common stock issuable pursuant to stock options exercisable within 60 days of June 1, 2004.

(10)

Includes 30,753 shares of common stock issuable pursuant to stock options exercisable within 60 days of June 1, 2004.

(11)

Includes 725 shares of common stock issuable pursuant to stock options exercisable within 60 days of June 1, 2004.

(12)

Mr. Sawyer is a partner of PCIP Investors and a member of PCap Partners II, LLC, the general partner of Parthenon Investors II, L.P., but has no beneficial ownership of our shares as a result.

(13)

Reflects the shares owned by JPMP (23A SBIC) due to his status as an executive officer of JPMP (23A SBIC Manager), the general partner of JPMP (23A SBIC), a wholly owned subsidiary of JPM Chase Bank, a wholly owned subsidiary of JPM Chase. Mr. Behrens is a Partner at J.P. Morgan Partners, LLC, and a limited partner of JPMP Master Fund Manager, L.P., an entity which has a carried interest in investments of JPMP (23A SBIC). Mr. Behrens disclaims beneficial ownership and the foregoing shall not be construed as an admission that Mr. Behrens is the beneficial owner of the shares held by JPMP (23A SBIC). The actual pecuniary interest which may be attributable to Mr. Behrens is not readily determinable because it is subject to several variables, including without limitation, JPMP (23A SBIC)'s internal rate of return and vesture of interests. The address of Mr. Behrens and JPMP (23A SBIC Manager) is c/o J.P. Morgan Partners, LLC, 1221 Avenue of the Americas, New York, New York 10020.

(14)

Mr. McKenna is a Principal at J. P. Morgan Partners, LLC, and a limited partner of JPMP Master Fund Manager, L.P. (or JPMP MFM), an entity which has a carried interest in investments of JPMP (23A SBIC). While Mr. McKenna does not have beneficial ownership of these shares held by JPMP (23A SBIC) under Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Securities and Exchange Commission thereunder because he does not have the ability to control the voting or investment power of JPMP (23A SBIC Manager), he does have an indirect pecuniary interest in the shares of the Company held by JPMP (23A SBIC) as a result of his status as a limited partner of JPMP MFM. Mr. McKenna disclaims beneficial ownership of these shares. The actual pecuniary interest which may be attributable to Mr. McKenna is not readily determinable because it is subject to several variables, including without limitation, JPMP (23A SBIC)'s internal rate of return and vesting of interests. Mr. McKenna's address is c/o J. P. Morgan Partners, LLC, 1221 Avenue of the Americas, New York, New York 10020.

(15)

Mr. Argov is a partner of PCIP Investors and a member of PCap Partners II, LLC, the general partner of Parthenon Investors II, L.P., but has no beneficial ownership of our shares as a result.

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