<PAGE>
FORM 8-K
[AS LAST AMENDED IN RELEASE NO. 34-30968, JULY 30, 1992, 57 F.R. 36442.]
SECURITIES AND EXCHANGE COMMISSION
Washington D.C.
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) July 24, 1995
VALLEN CORPORATION
(Exact name of registrant as specified in its charter)
Texas 0-10796 74-1366847
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
13333 Northwest Freeway, Houston, Texas 77040
(Address of principal executive office)
Registrant's telephone number, including area code (713) 462-8700
Exhibit Index Located on Page 4
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On July 24, 1995, Vallen Corporation (the "Company") purchased
substantially all of the assets and business of Safety Centers, Inc., an
Illinois corporation ("SCI"), for an aggregate purchase price of
$6,952,286. The purchase price was based on the value of such assets as
determined on May 31, 1995, and is subject to adjustment once June 30, 1995
valuations are available. In addition, the purchase price may be reduced
if, 180 days after the closing of the transaction, any accounts receivable
acquired pursuant to the transaction remain uncollected.
The assets acquired include accounts receivable, inventory, supplies and
furniture, fixtures, equipment, and certain intangibles including customer
lists and goodwill. SCI and its shareholders also agreed not to compete
with the Company with respect to the business purchased for a period of
three years. The Company delivered the purchase price by (i) paying cash
in the amount of $1,561,829, (ii) issuing 22,367 shares of the common stock
of the Company to SCI, and (iii) assuming a $5,000,000 outstanding loan of
SCI (the "Assumed Loan"). The Company held back $366,607 of the cash
payment described in clause (i) above pending the adjustments to the
purchase price described in the preceding paragraph.
The Company has also entered into a three-year consulting agreement with
SCI, pursuant to which SCI will be paid $500,001.00 over the life of the
agreement. In addition, the Company has leased a facility in South
Holland, Illinois from Mr. Neil Sheppard, who is a fifty-percent
shareholder in and the president of SCI.
Immediately prior to the consummation of the acquisition described herein,
Vallen Safety Supply Company, a subsidiary of the Company ("Safety"),
entered into a Credit Agreement with Texas Commerce Bank, N.A. (the
"Bank"), pursuant to which the Bank agreed to lend an aggregate of up to
$6,000,000 to Safety. The Company has agreed to guaranty payment of this
loan. Upon consummation of the acquisition of the assets of SCI, the
Company caused Safety to borrow $5,000,000 under the terms of the Credit
Agreement, and then used such amount to satisfy the Company's assumed
obligations under the Assumed Loan.
Prior to the consummation of the transaction, SCI was engaged in the
business of distributing industrial safety equipment. The registrant
intends to continue to use the facilities, equipment and other physical
property of SCI for such purposes.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of business acquired. It is impractical to
provide the required financial statements for the acquired business at
this time. The required financial statements shall be filed as soon as
practicable, but not later than October 2, 1995.
<PAGE>
(b) Pro forma financial information. It is impractical to provide the
required pro forma financial information at this time. The required
pro forma financial information shall be filed as soon as practicable,
but not later than October 2, 1995.
(c) Exhibits:
(2.1) Asset Sale and Purchase Agreement dated as of June 16, 1995
among Vallen Corporation, Safety Centers, Inc., Neil Sheppard
and Roslyn Sheppard.
(2.2) First Amendment dated as of July 21, 1995 among Vallen
Corporation, Safety Centers, Inc., Neil Sheppard and Roslyn
Sheppard.
(2.3) Consulting Agreement dated as of July 24, 1995 between Vallen
Corporation and Safety Centers, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VALLEN CORPORATION
Date: August 4, 1995 By: /s/ JAMES W. THOMPSON
--------------------------------
James W. Thompson, President
<PAGE>
Exhibit Index
Exhibit numbers are in accordance with the Exhibit Table
in Item 601 of Regulation S-K
<TABLE>
<CAPTION>
Exhibit No. Exhibit Description
----------- -------------------
<S> <C>
2.1 Asset Sale and Purchase Agreement dated
as of June 16, 1995 among Vallen Corporation,
Safety Centers, Inc., Neil Sheppard
and Roslyn Sheppard.
2.2 First Amendment dated as of July 21, 1995 among
Vallen Corporation, Safety Centers, Inc., Neil
Sheppard and Roslyn Sheppard.
2.3 Consulting Agreement dated as of July 24, 1995
between Vallen Corporation and Safety Centers, Inc.
</TABLE>
<PAGE>
Exhibit 2.1
================================================================================
ASSET SALE AND PURCHASE AGREEMENT
Dated as of June 16, 1995
Among
SAFETY CENTERS INCORPORATED,
NEIL SHEPPARD,
ROSLYN SHEPPARD
and
VALLEN CORPORATION
================================================================================
<PAGE>
ASSET SALE AND PURCHASE AGREEMENT
DATED AS OF JUNE 16, 1995
among
SAFETY CENTERS INCORPORATED, NEIL SHEPPARD, ROSLYN SHEPPARD
and
VALLEN CORPORATION
================================================================================
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<C> <S> <C>
1. Certain Definitions................................................... 1
2. Sale and Transfer of Certain Assets................................... 3
3. Consideration......................................................... 5
4. Payment of Purchase Price............................................. 5
5. Optional Payment of Purchase Price in Purchaser Stock................. 7
6. Assumption of Certain Obligations..................................... 7
7. Lease Renegotiations; Discharge of Obligations Under Capitalized
Leases............................................................... 9
8. Closing............................................................... 9
9. Consents to Assignments of Leases..................................... 9
10. Access to Information, Premises....................................... 10
11. Accounts Receivable; Adjustment of Purchase Price..................... 10
12. Representations and Warranties of Sellers............................. 11
13. Representations and Warranties of Purchaser........................... 21
14. Conduct of Business Pending Closing................................... 22
15. Accounts Receivable................................................... 23
16. Conditions Precedent to Purchaser's Obligations....................... 23
17. Conditions Precedent to Sellers' Obligations.......................... 24
18. Further Covenants of Sellers.......................................... 25
19. Non-Competition Agreement............................................. 27
20. Indemnification....................................................... 27
21. Sales Tax............................................................. 31
23. Bulk Sales............................................................ 32
24. Closing Documents..................................................... 32
25. Assignment............................................................ 33
26. Termination of Agreement.............................................. 33
27. Further Assurances.................................................... 34
28. Announcements and Press Releases...................................... 34
29. No Waivers............................................................ 34
</TABLE>
i
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<TABLE>
<S> <C>
EXHIBIT INDEX....................................................... 42
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit A - Acquired Facilities 1,2,10
Exhibit B - Capitalized Leases 2
Exhibit C - Non-Capitalized Leases 2
Exhibit D - [Intentionally Omitted] --
Exhibit E-1 - Assumed Contracts 4,8,15
Exhibit E-2 - Motor Vehicles 4
Exhibit F-1 - Tradenames, Trademarks and Patents 4,16
Exhibit F-2 - Retained Items 5
Exhibit G - Allocation Agreement 6
Exhibit H - Consent to Leasehold Assignment and Estoppel 9,10
Exhibit I - [Intentionally Omitted] --
Exhibit J - List of IF&E 13
Exhibit K - Litigation 16
Exhibit L - Form of Opinion of Sellers' Counsel 23
Exhibit M - Form of Opinion of Purchaser's Counsel 24
Exhibit N - Geographical Areas of Non-Competitive Agreement 27
Exhibit O - Employee Benefit Plans and Employment Agreements 16,20
Exhibit P - Insurance 20
Exhibit Q - Consulting Agreement 42
</TABLE>
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<PAGE>
ASSET SALE AND PURCHASE AGREEMENT
This Agreement made as of the 16th day of June 1995, by and between VALLEN
CORPORATION, a Texas corporation ("Purchaser"), and SAFETY CENTERS INCORPORATED,
an Illinois corporation (the "Company"), Neil Sheppard and Roslyn Sheppard
(collectively, "Sheppard") (the Company and Sheppard shall be individually
referred to as a "Seller", and collectively as the "Sellers"),
W I T N E S S E T H:
WHEREAS, the Company is the owner of that certain safety supply
distribution and sales business operated by the Company; and
WHEREAS, Sheppard owns one hundred percent (100%) of all of the issued and
outstanding capital stock of the Company, and is primarily responsible for the
operation of the Company; and
WHEREAS, the parties hereto desire to enter into an agreement whereby the
Company will transfer to Purchaser, and Purchaser will acquire from the Company,
certain assets associated with said business;
NOW, THEREFORE, in consideration for the mutual premises and covenants set
forth herein, and intending to be legally bound hereby, the parties hereto do
covenant and agree as follows:
1. Certain Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
(a) "Accounts Receivable" shall mean any notes and accounts receivable
or other rights to receive payment owing to the Company on the Closing Date
(as hereinafter defined) which have arisen from the sale of merchandise or
any other activities or operations carried on by the Business and for which
value is reflected on the Initial Balance Sheet (as hereinafter defined),
and any notes, accounts receivable or other rights so arising from April
30, 1995 to the Closing Date;
(b) "Acquired Facilities" shall mean the on-site safety stores and the
distribution/sales centers of the Business identified on Exhibit A (each an
Acquired Facility);
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(c) "Acquired Facility Leases" shall mean the leases covering the
Acquired Facilities (other than those located on the Property, as
hereinafter defined) and evidenced by the documents identified in Exhibit
A;
(d) "Business" shall mean that certain safety supply distribution and
sales business operated by the Company and the goodwill associated
therewith;
(e) "Capitalized Leases" shall mean the leases covering the equipment
and property identified in Exhibit B and evidenced by the documents
identified in Exhibit B;
(f) "Closing Date Balance Sheet" shall mean the Balance Sheet of the
Company dated as of the Closing Date, to be delivered by the Sellers to
Purchaser after the Closing Date.
(g) "Closing Date Balance Sheet Book Value" shall mean the stated
value of all of the Acquired Assets less the sum of (i) the stated amount
of all liabilities of the Company to be assumed by Purchaser hereunder, and
(ii) ten percent of the value of all of the Inventory as of the Closing
Date. The Closing Date Balance Sheet Book Value shall be calculated based
upon the information set forth on the Closing Date Balance Sheet.
(h) "Improvements, Fixtures and Equipment" or "IFE" shall mean all
leasehold improvements and items of tangible personal property (other than
the Inventory and supplies), including without limitation furniture,
fixtures, signs, motor vehicles and equipment, which are owned by the
Company and located at the Acquired Facilities or used or held for use by
the Company in connection with the Business, as at the Closing Date, which
assets shall include all those for which a value is reflected on the
Initial Balance Sheet and all those added between April 30, 1995 and the
Closing Date, excluding, however, any thereof disposed of between April 30,
1995 and the Closing Date in the ordinary course of the Business and in
compliance with this Agreement and any improvements and fixtures at
locations which are not Acquired Facilities;
(i) "Initial Balance Sheet" shall mean the Balance Sheet of the
Company dated April 30, 1995, previously delivered by the Sellers to
Purchaser.
(j) "Initial Balance Sheet Book Value" shall mean the stated value of
all of the Acquired Assets less the sum of (i) the stated amount of all
liabilities of the Company to be assumed by Purchaser hereunder, and (ii)
ten percent of the value of all of the Inventory as of April 30, 1995. The
Initial Balance Sheet Book Value shall be calculated based upon the
information set forth on the Initial Balance Sheet.
(k) "Inventory" shall mean all of the merchandise held for sale or
distribution by the Business at the Acquired Facilities or elsewhere on the
Closing Date;
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(l) "Non-Capitalized Leases" shall mean all leases for facilities,
equipment, software or other property used by or in connection with the
Business, other than Capitalized Leases and Acquired Facility Leases,
identified in Exhibit C.
(m) "Trade Accounts Payable" shall mean the accounts payable to
vendors of the Company which have arisen in the ordinary course of business
from the purchase of merchandise or any other activities or operations
carried on by the Business which are reflected on the Initial Balance Sheet
or any accounts payable to vendors of the Company arising in the normal
course of business from April 30, 1995 to the Closing Date.
2. Sale and Transfer of Certain Assets.
(a) Acquired Assets. Subject to the terms and conditions herein set
forth, the Company agrees to sell, convey, assign, transfer and deliver to
Purchaser all of the assets, properties and business of every kind and
description and wherever situated of the Business as the same exist on the
Closing Date except as expressly stated otherwise in this Section (the
"Assets"). Without limiting the generality of the foregoing, the Assets to
be acquired by Purchaser shall include:
(i) the leasehold estates created by, and all rights
conferred on the lessees under or by virtue of, the Acquired
Facility Leases;
(ii) all of the Improvements, Fixtures and Equipment;
(iii) all of the property subject to the Capitalized Leases;
(iv) all of the Inventory;
(v) all cash and cash equivalents on hand, on deposit or in
transit, except for the cash on hand used to satisfy the Company's
obligations under that certain Promissory Note executed by the Company
in favor of Neil Sheppard (the "Sheppard Note"), all as more
particularly described in Section 29(b) below;
(vi) all of the Accounts Receivable;
(vii) all books and records relating to the Business, including
but not limited to all customer lists, uncollected invoices, credit
files, payroll records, personnel records and files, computer software
and programs, schedules of assets, books of account, contracts, sales
representation agreements, sales agency agreements, files, papers,
books, warranty records, rental payment records, purchase orders, and
all other public and confidential business records (together the
"Business Records"); provided, however, that in the case of Business
Records maintained in common with those of other businesses or
operations of the Company, title to and possession of such Business
Records will be retained by the
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Company and Purchaser will be provided copies thereof, and provided
further that title to and possession of all books and records of the
Company related to or necessary for the continued operation of the
Company after the Closing Date will be retained by the Company and
Purchaser will be provided with reasonable access thereto and, at its
reasonable request, with copies thereof;
(viii) all rights, title and interest in and to the telephone
numbers and telephones used in connection with the Acquired
Facilities;
(ix) all supplies at or held for use by the Business at the
Acquired Facilities or elsewhere on the Closing Date;
(x) all of the Company's right, title and interest in and to
those contracts listed on Exhibit E-1;
(xi) all of the Company's right, title and interest in and to
those certain motor vehicles more particularly described on Exhibit
E-2;
(xii) all prepaid expenses reflected on the Initial Balance
Sheet or arising from April 30, 1995 to the Closing Date;
(xiii) any and all intellectual property rights, including
without limitation any and all patents, patent applications,
trademarks, tradenames, service marks, copyrights or similar rights
relating to the Business, including but not limited to those listed on
Exhibit F-1 hereto;
(xiv) all rights in and to the names "SCI" and "Safety Centers
Incorporated" (the "Business Name") in all circumstances and for all
purposes to the same extent Seller has such rights; and
(xv) all securities, claims, deposits, prepayments, refunds,
causes of action, choses in action, rights of recovery, rights of set-
off, and rights of recoupment.
After satisfaction of the Bank Debt (as hereinafter defined) as
contemplated in Section 6(a) below, all of such Assets shall be delivered
free and clear of any liens, claims, pledges, security interests, mortgages
or encumbrances of any kind. The sale, conveyance, assignment, transfer
and delivery of the Assets shall be effected by bills of sale, general
warranty deeds, endorsements, assignments, drafts, checks or other
instruments in such reasonable or customary form as shall be requested by
the Purchaser and its counsel. Each Seller shall at any time from and
after the Closing Date, upon the reasonable request of Purchaser and at
such Seller's expense, execute, acknowledge and deliver such additional
conveyances, assignments, transfers or other instruments, as may
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<PAGE>
be reasonably required to assign, transfer or convey the Assets to
Purchaser as contemplated by this Agreement.
(b) Retained Assets. Anything in Section 2(a) to the contrary
notwithstanding, there shall be excluded from the Assets all of those items
set forth on Exhibit F-2 hereto.
3. Consideration. Purchaser agrees that, subject to the terms and
conditions of this Agreement, and in full consideration for the aforesaid sale,
transfer, conveyance, assignment and delivery of the Assets to Purchaser,
Purchaser shall:
(a) pay to the Company a purchase price equal to One Million Nine
Hundred Fifty-Two Thousand Two Hundred Eighty-Six and No/100 Dollars
($1,952,286) (the "Initial Purchase Price"), which amount is equal to the
Initial Balance Sheet Book Value, subject to adjustment as provided for in
Section 4(b) and in Section 11 hereof (the "Purchase Price"); and
(b) assume the specific obligations set out in Section 6 hereof.
4. Payment of Purchase Price. The Purchase Price shall be paid as
follows:
(a) At Closing. At the Closing, Purchaser shall deliver to the
Company One Million Five Hundred Eighty-Five Thousand Six Hundred Seventy-
Nine and No/100 Dollars ($1,585,679) of the Initial Purchase Price (the
"Initial Purchase Price") by wire transfer to an account designated by the
Company and shall retain Three Hundred Sixty-Six Thousand Six Hundred Seven
and No/100 Dollars ($366,607) (as adjusted under Section 4(b) below, the
"Holdback Amount") of the Initial Purchase Price.
(b) Intermediate Post-Closing Adjustment. Within 30 days after the
Closing Date, the Sellers shall deliver to Purchaser the Closing Date
Balance Sheet, together with a certificate of the Sellers that the Closing
Date Balance Sheet is accurate, complete and in accordance with the books
and records of the Company (which books and records are also correct and
complete) and presents fairly the financial position and assets and
liabilities of the Business as of its date and the results of its
operations for the period then ended, in conformity with generally accepted
accounting principles applied on a consistent basis. Within 15 days after
the delivery of the Closing Date Balance Sheet, the Purchase Price shall be
adjusted in the following manner:
(i) if the Closing Date Book Value is less than the Initial
Purchase Price, the Purchase Price shall be reduced by an amount equal
to the difference between (A) the Closing Date Book Value, minus (B)
the Initial Purchase Price, and the Company shall deliver to Purchaser
by wire transfer to an account designated by Purchaser an amount equal
to such difference (less any amount by which the Holdback Amount is
reduced under this Section 4(b), which amount shall be retained by
Purchaser);
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(ii) if the Closing Date Book Value is greater than the Initial
Purchase Price, the Purchase Price shall be increased by an amount
equal to the difference between (A) the Initial Purchase Prince, minus
(B) the Closing Date Book Value, and Purchaser shall deliver to the
Company by wire transfer to an account designated by the Company an
amount equal to such difference (less any amount by which the Holdback
Amount is increased under this Section 4(b), which amount shall be
retained by Purchaser pending the adjustment to be made under Section
11 below);
(iii) if the Closing Date Book Value is the same as the Initial
Purchase Price, no adjustment shall be made.
The Initial Purchase Price, plus or minus the adjustment made under this
Section 4(b), shall be referred to herein as the "Intermediate Purchase Price".
Any adjustment in the Initial Purchase Price hereunder shall result in an
adjustment of the Holdback Amount such that after such adjustment, the Holdback
Amount shall equal ten percent of the Intermediate Purchase Price. Any
adjustment in the Initial Purchase Price hereunder shall affect the cash portion
of the Purchase Price only, and shall not result in any increase or reduction in
the number of shares, if any, issued as a portion of the Purchase Price under
Section 5 hereof.
(c) Final Post-Closing Adjustment. The final Purchase Price
adjustments to occur after the Closing Date (the "Final Post-Closing
Adjustments") shall take place as soon as practicable after the 180th day
following the Closing (the "Final Post-Closing Adjustment Date"). On the
Final Post-Closing Adjustment Date, subject to the terms and conditions of
this Agreement, the Intermediate Purchase Price shall be reduced, if
necessary, as set forth in Section 11 below. After the parties determine
the appropriate reduction (the "Final Adjustment Amount") in the
Intermediate Purchase Price in accordance with Section 11 below, the
parties shall take the following action:
(i) if the Final Adjustment Amount is less than the Holdback
Amount, Purchaser shall deliver to the Company by wire transfer to an
account designated by the Company an amount equal to the difference
between (A) the Holdback Amount, minus (B) the Final Adjustment
Amount, and Purchaser shall retain any balance of the Holdback Amount;
(ii) if the Final Adjustment Amount is greater than or equal to
the Holdback Amount, Purchaser shall retain the Holdback Amount, and
the Seller shall not be liable to Purchaser for the amount, if any, by
which the Final Adjustment Amount is greater than the Holdback Amount.
(d) Allocation Agreement. At or prior to the Closing Date, Purchaser
and the Company shall enter into an agreement (the "Allocation Agreement")
substantially in the form of Exhibit G, specifying the manner in which the
Purchase Price shall be allocated among the Assets and the other rights
conferred on Purchaser pursuant hereto, including
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the non-competition agreement provided for in Section 19. Notwithstanding
anything to the contrary contained herein, the execution and delivery of
the Allocation Agreement shall not be a condition of Closing.
5. Optional Payment of Purchase Price in Purchaser Stock.
(a) Purchaser shall at the Closing have the right to make the payment
of the Initial Purchase Price in either cash as provided in Section 4(a)
above or eighty percent (80%) in cash and twenty percent (20%) in shares of
common stock, par value $.50 per share, of Purchaser ("Purchaser Stock"),
in which case Purchaser shall (i) pay to the Company at the Closing by wire
transfer to an account designated by the Company an aggregate amount of One
Million Five Hundred Sixty-One Thousand Eight Hundred Twenty-Nine and
No/100 Dollars ($1,561,829) less the Holdback Amount, and (ii) deliver to
the Company an aggregate number of shares (rounded up to the nearest whole
share, the "Purchaser Shares") of Purchaser Stock equal to the quotient of
Three Hundred Ninety Thousand Four Hundred Fifty-Seven and No/100 Dollars
($390,457) divided by the Market Price (as hereinafter defined).
(b) "Market Price" shall mean the average of each trading day's high
and low sales prices of Purchaser Stock as reported on The Nasdaq Stock
Market during the five (5) consecutive trading days ending on (and
including) the fifth trading day prior to the Closing Date, provided,
however, that if the Purchaser Stock has not been traded on such five days,
then the Market Price shall be the average of the average of each trading
day's high and low sales prices of Purchaser Stock as reported on The
Nasdaq Stock Market during the last five (5) consecutive trading days prior
to the Closing Date upon which the Purchaser Stock was traded.
(c) If Purchaser Shares are issued, the Company shall have certain
additional rights as set forth below in Section 29(a).
6. Assumption of Certain Obligations.
(a) American National Bank of Chicago Loan. Reference is hereby made
to that certain loan with an outstanding principal balance of Five Million
and No/100 Dollars ($5,000,000), which loan is evidenced by a Promissory
Note executed by the Company in favor of American National Bank and Trust
Company of Chicago (the "Bank Loan"), a copy of which will be provided to
Purchaser. Purchaser agrees that provided that the transactions
contemplated by this Agreement are consummated, it will on the Closing Date
pay or cause to be paid to American National Bank of Chicago all amounts of
outstanding principal, interest and other amounts owing under the Bank Loan
such that each Seller is released from its obligations under or arising out
of the Bank Loan, provided, however, that the Purchaser shall not pay any
amounts owing under the Bank Loan as a result of any Seller's failure to
pay amounts of principal or interest thereunder
7
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when due, including without limitation any additional interest accruing as
a result of any Seller's failure to pay any such amounts when due.
(b) Leases. Purchaser agrees that provided that the transactions
contemplated by this Agreement are consummated, it will accept, assume and
fully perform the obligations of the Company to be performed after the
Closing under those Acquired Facility Leases and Non-Capitalized Leases
assigned to Purchaser at the Closing. Such obligations to be assumed shall
be only those obligations of the Company under those documents listed on
Exhibits A and B and any amendments thereto made in compliance with Section
16(c) hereof.
(c) Contracts. Purchaser agrees that provided the transactions
contemplated by this Agreement are consummated, it will accept, assume and
fully perform the Company's obligations from and after the Closing Date
under those contracts assigned pursuant to Section 2(a)(x). Such
obligations to be assumed shall be only such obligations of the Company
under those contracts listed on Exhibit E-1 and any amendments thereto made
in compliance with Section 16(c) hereof.
(d) Trade Accounts Payable. Purchaser agrees that provided the
transactions contemplated by this Agreement are consummated it will accept,
assume, pay and discharge the Trade Accounts Payable, except for those
Trade Accounts Payable determined by Purchaser in its reasonable discretion
and designated in writing prior to the Closing to be subject to dispute.
(e) Accrued Liabilities. Purchaser agrees that provided the
transactions contemplated by this Agreement are consummated it will accept,
assume, pay and discharge (i) any payroll taxes not yet due and payable as
of the Closing Date and incurred by the Company in connection with the
operation of the Business; and (ii) all salaries and wages owing by the
Company with respect to the payroll period not yet ended as of the Closing
Date.
(f) Non-Assumption. All indebtedness (including the indebtedness
evidenced by the Sheppard Note), obligations, claims and other liabilities
(absolute, contingent or otherwise) of whatsoever nature of the Company not
specifically assumed by Purchaser pursuant to this Section 6 shall be and
remain the sole obligation of the Company, and each Seller shall indemnify
and hold Purchaser harmless against and from any and all such liabilities
and all Costs, as defined in Section 20, incurred by Purchaser and arising
out of or attributable to any such liabilities. Each Seller agrees that it
will pay or otherwise provide for the payment and discharge of all such
liabilities, including without limitation any liabilities or obligations,
tax or otherwise, imposed on or incurred by such Seller as a result of the
transactions contemplated by this Agreement, provided, however, that Seller
may withhold payment with respect to such liabilities in the course of
Seller's good faith dispute of such liabilities so long as the withholding
of such payment does not cause liability or Costs to accrue to Purchaser.
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7. Lease Renegotiations; Discharge of Obligations Under Capitalized
Leases.
(a) Acquired Facility Leases; Non-Capitalized Leases. Purchaser shall
have the right to review all of the lease files of the Company and to
negotiate or attempt to negotiate amendments to the terms of the Acquired
Facility Leases and Non-Capitalized Leases with the respective lessors.
Purchaser shall inform the Company and obtain the Company's approval of any
proposed modification of the terms of any such lease which would materially
increase the lessee's liability under such lease, unless such proposed
modification includes a provision that the Company shall have no liability
with respect to such increased liability.
(b) Capitalized Leases. The Company shall discharge all of its
obligations and liabilities under the Capitalized Leases at or prior to the
Closing and shall transfer the property subject to such leases to Purchaser
at the Closing as provided for in Section 2 hereof; provided, however, that
in the event such obligations and liabilities are not discharged by the
Company at or prior to the Closing, a portion of the Purchase Price to be
paid at the Closing equal to the amount of such obligations and liabilities
shall be withheld and applied to such discharge and arrangements
satisfactory to Purchaser shall be made to provide for the transfer of the
property subject to such leases to Purchaser.
8. Closing. The closing ("Closing") of the sale contemplated herein
shall take place at such place as the parties may mutually agree upon at 9:00
a.m. on July 21, 1995; provided, however, that if the Closing does not take
place on such date, it shall take place on the date following the date on which
all conditions precedent to the Closing have been met or on such other date (the
"Closing Date"), at such other place, or at such other time as the parties may
mutually agree upon, provided however, that Purchaser at its option may elect to
have the Closing occur by mail or by facsimile transmission. The transactions
contemplated by this Agreement shall be effective as of the close of business on
the Closing Date.
9. Consents to Assignments of Leases.
(a) Prior to Closing and subject to clause (b) below, the Sellers
shall obtain written consents of lessors to the assignment to Purchaser and
to the subsequent assignment to Vallen Safety Supply Company, a Texas
corporation and the wholly owned subsidiary of Purchaser ("Safety"), of the
Acquired Facility Leases and Non-Capitalized Leases to the extent such
consents are required by such leases or are reasonably deemed to be
required by Purchaser's counsel, such assignments and consents to be
substantially in the form attached hereto as Exhibit H; provided that this
provision shall not be interpreted to require or permit the Sellers to pay
any premium or agree to an extended or additional guaranty of any of such
leases or similarly to enter into any agreement increasing its obligations
under such leases. In the event any such required consent with respect to
an Acquired Facility Lease is not so obtained, Purchaser shall have the
right to reject the assignment of such Acquired Facility Lease; provided,
however, that at the Sellers' request Purchaser shall, if the Sellers
obtains the lessor's consent to the sublease
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to Purchaser and the subsequent sublease to Safety, sublet such Acquired
Facility from the Company on terms and conditions not less favorable than
those applicable to the tenant under the original lease. In the event
Purchaser rejects the assignment of any Acquired Facility Lease as provided
for in the preceding sentence and the Sellers do not require a sublease of
such lease, then, at the option of Purchaser, such Acquired Facility Lease
may be excluded from this transaction. The Sellers shall inform Purchaser
of any failure to obtain any lessor's consent to any assignment of an
Acquired Facility Lease, and of the Sellers' request, if any, that
Purchaser nevertheless accept a sublease of such Acquired Facility Lease,
at least five (5) business, days prior to the Closing Date. The Sellers
agree to use their commercially reasonable best efforts to secure, prior to
the Closing, a written certification in the form of Exhibit H from each of
the Company's lessors with respect to each of the Acquired Facility Leases
or Non-Capitalized Leases.
(b) Purchaser and the Sellers hereby acknowledge and agree that
certain of the Acquired Facilities are subject to an oral agreement between
the Company and the lessor of each such Acquired Facility, all as more
particularly indicated on Exhibit A hereto (the "Oral Lease Agreements").
Prior to Closing, (i) the Sellers shall obtain consents of each such
lessor to the assignment to Purchaser and to the subsequent assignment to
Safety of all of the Company's rights in and under each such oral
agreement, the form and manner of which consents shall be reasonably
acceptable to Purchaser, and (ii) so long as such consents are reasonably
acceptable to Purchaser, Purchaser shall acknowledge in writing that the
Sellers have satisfied all obligations under this Section 9(b).
10. Access to Information, Premises. Prior to the Closing, the Sellers
shall give to Purchaser, its counsel, accountants, employees and other
representatives, access during normal business hours to all of the Company's
properties, books, contracts, commitments and records which relate to the
Business; and the Sellers shall cause Purchaser to be afforded access to the
work papers (insofar as they relate to the Business) of the Company's
independent accountants and shall furnish Purchaser with such information
concerning the Business as Purchaser may reasonably request. Purchaser shall
have the right to conduct an examination of the balance sheets and financial
statements of the Company relating to the Business for any interim period after
July 31, 1994 and to cause audited balance sheets and financial statements of
the Business to be prepared at Purchaser's expense. For a period of three years
from and after the Closing Date, Purchaser shall continue to be afforded such
access to the extent Purchaser shall reasonably require for any proper purpose,
including the preparation of tax returns, financial statements and reports filed
with the Securities and Exchange Commission, and the Sellers agree to preserve
and maintain all such books and records during such period. Pending the
Closing, the Company shall cause its employees, counsel and independent auditors
to be available to assist Purchaser, its counsel, accountants, employees and
other representatives with respect to the transactions contemplated by this
Agreement.
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11. Accounts Receivable; Adjustment of Purchase Price.
(a) Valuation and Adjustment. If any Account Receivable is not paid
within 180 days of Closing, Purchaser shall deliver to the Company, as soon
as practicable after the expiration of such 180-day period an accounting of
Accounts Receivable sums paid and amounts owing as of such 180th day
following the Closing Date (the "Determination Date"). Based upon
Purchaser's accounting of the Accounts Receivable, the Purchase Price shall
then be reduced, if necessary, by an amount (the "Final Adjustment Amount")
equal to the sum of 100% of all Accounts Receivable that remain uncollected
at the end of the 180-day period following the Determination Date (the
"Aged Receivables"), which the Company shall be deemed to have purchased
without recourse to or warranty of any sort from Purchaser.
(b) Return Accounts Receivable. Concurrently with the adjustment to
the Purchase Price provided for in Section 11(a) above, Purchaser shall
convey to the Company all of the Aged Receivables. Purchaser shall execute
and deliver such instruments of conveyance, assignment and transfer and
take such actions as are necessary to convey and transfer to the Company
the Aged Receivables.
12. Representations and Warranties of Sellers. Except as disclosed on the
Disclosure Schedule delivered to Purchaser simultaneously upon the execution and
delivery of this Agreement (the "Disclosure Schedule"), each Seller jointly and
severally represents, warrants, and agrees as follows:
(a) Corporate; The Company's Authority. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Illinois and duly qualified to do business in each jurisdiction in
which such qualification is required, all of which jurisdictions are listed
on the Disclosure Statement. The Company has all requisite corporate power
and authority to enter into and perform its obligations under this
Agreement. All necessary corporate action required to be taken to
authorize the execution, delivery and performance of this Agreement by the
Company has been duly and validly taken. This Agreement constitutes the
valid and legally binding obligations of the Company, enforceable in
accordance with its terms. The execution, delivery and performance of this
Agreement by the Company will not violate the articles of incorporation or
by-laws of the Company. Copies of the articles of incorporation and bylaws
of the Company have previously been delivered to Purchaser and are true and
correct as of the date of this Agreement.
(b) Sheppard's Authority. Sheppard has full right, power and
authority to execute, deliver and perform this Agreement. This agreements
constitutes the legal, valid and binding obligation of Sheppard,
enforceable against Sheppard in accordance with its terms.
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(c) Validity of Contemplated Transactions; Etc. The execution,
delivery and performance of this Agreement by each Seller will not
contravene or violate (a) any law, rule or regulation to which such Seller
is subject or (b) any judgment, order, writ, injunction or decree of any
court, arbitrator or governmental or regulatory official, body or authority
which is applicable to such Seller; nor will such execution, delivery or
performance violate, be in conflict with or result in the breach (with or
without the giving of notice or lapse of time, or both) of any term,
condition or provision of, or require the consent which has not been
obtained of any other party to, any contract, commitment, agreement, lease,
license, permit, authorization, document or other understanding, oral or
written, to or by which such Seller is a party or otherwise bound or
affected. No authorization, approval or consent of, and no registration or
filing with, any governmental or regulatory official, body or authority is
required in connection with the execution, delivery and performance of this
Agreement by each Seller.
(d) Financial Information. The Sellers shall deliver to Purchaser,
prior to the Closing, such financial information pertaining to the Business
as is reasonably necessary, in the judgment of Purchaser or its independent
accountants, to comply with Purchaser's financial and other reporting
requirements. The Sellers have delivered to Purchaser prior to the date
hereof the Initial Balance Sheet and the related consolidated statements of
operations and cash flow of the Business for the nine-month period ended
April 30, 1995 (together, the "Unaudited Financial Statements"). Except as
disclosed on the Disclosure Schedule, such Unaudited Financial Statements
(including without limitation all notes, comments, schedules and
supplemental data contained in or annexed to such statements, correct and
complete copies of all of which have been delivered to the Purchaser), are
accurate, complete and in accordance with the books and records of the
Company (which books and records are also correct and complete) and present
fairly the financial position and assets and liabilities of the Business as
of their date and the results of its operations for the period then ended,
in conformity with generally accepted accounting principles applied on a
consistent basis.
(e) Subsequent Events. Since April 30, 1995, there has not been any
material adverse change in the business, financial condition, operations,
results of operations, or future prospects of any of the Business. Without
limiting the generality of the foregoing, since that date:
(i) The Company has not sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a fair
consideration in the ordinary course of business;
(ii) The Company has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases,
and licenses) either involving more than $25,000 or outside the
ordinary course of business;
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(iii) no party (including the Company) has accelerated,
terminated, modified, or canceled any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and
licenses) involving more than $25,000 to which the Company is a party
or by which it is bound;
(iv) no security interest, mortgage, claims or encumbrance has
been imposed upon any of the Company's assets, tangible or intangible;
(v) the Company has not made any capital expenditure (or series
of related capital expenditures) either involving more than $25,000 or
outside the ordinary course of business;
(vi) the Company has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of, any other
entity (or series of related capital investments, loans, and
acquisition) either involving more than $25,000, or outside the
ordinary course of business;
(vii) the Company has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness
for borrowed money or capitalized lease obligations either involving
more than $5,000 singly or $25,000 in the aggregate;
(viii) the Company has not delayed, postponed or accelerated the
payment of accounts payable and other liabilities outside the ordinary
course of business;
(ix) the Company has not canceled, compromised, waived, or
released any right or claim (or series of related rights and claims)
either involving more than $5,000 or outside the ordinary course of
business;
(x) the Company has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property, or to the
Business Name;
(xi) the Company has not experienced any damage, destruction, or
loss not covered by insurance to its property;
(xii) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the ordinary
course of business involving the Company or the Business; and
(xiii) the Company has not committed to any of the foregoing.
(f) Undisclosed Liabilities. The Company has no liabilities (and, to
the best of each Seller's knowledge, there is no basis for any present or
future action, suit, proceeding, investigation, claim or demand giving rise
to any liability of the Borrower)
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except for liabilities reflected on the Initial Balance Sheet and
liabilities which have arisen since April 30, 1995 in the ordinary course
of business (none of which results from, arises out of, relates to, is in
the nature of or was caused by any breach of contract, breach of warranty,
tort, infringement or violation of law).
(g) Statement of Leasehold Improvements, Fixtures and Equipment.
Exhibit J accurately sets forth the original cost and net (depreciated)
book value of the IFE as of April 30, 1995 prepared in accordance with
generally accepted accounting principles. The Company has made no material
additions to the IFE since April 30, 1995.
(h) Title to Tangible Personal Property; Absence of Liens. The
Company is the owner of and has good and marketable title to the IFE, the
Inventory, and the other tangible Assets to be transferred hereunder, free
and clear of all liens, pledges, mortgages, security interests, conditional
sales agreements, charges, prior leases and encumbrances of any kind. The
Company will convey, sell, assign, transfer and deliver the Assets free and
clear of any liens, pledges, mortgages, security interests, charges or
encumbrances of any kind.
(i) Leases. Exhibits A, B and C set forth a correct description of
the Acquired Facility Leases, Capitalized Leases and the Non-Capitalized
Leases, respectively, and all amendments or modifications thereto as of the
date hereof and all agreements ("related agreements") to which the Company
is a party or by which it is bound and which define any rights or
obligations pertaining to or affecting the operation or use of the property
subject to such leases. The Sellers have delivered to Purchaser complete
and correct copies of all of such instruments. Each such lease is valid
and enforceable and is in full force and effect, all rent and other
payments due thereunder prior to the Closing Date shall have been paid
prior to the Closing Date, and, to each Seller's knowledge, there are no
outstanding claims of a material nature of any lessor relating thereto
which (i) affect the status of any lease or (ii) could be asserted against
an assignee of any such lease. There is no outstanding event of default
under any such lease or any related agreement by the Company, or, to each
Seller's knowledge, by any other party thereto, nor has the Company taken
any action or failed to take any action which, with the passage of time,
would constitute such an event of default, nor does either Seller have any
knowledge of any event or condition which, with the passage of time, would
constitute such an event of default. Subject to obtaining the lessor's
consent where required there will be no default or basis for acceleration
under any Acquired Facility Lease, Capitalized Lease or Non-Capitalized
Lease as a result of the transactions provided for in his Agreement. The
Company is the lessee under each of the Acquired Facility Leases and Non-
Capitalized Leases, has not assigned, surrendered or sublet (except
pursuant to this Agreement) any of such leases, and has full power to
assign such leases to Purchaser, free and clear of any liens, encumbrances
or charges, subject only to the terms and conditions of the respective
leases and to obtaining lessors' consents where required.
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<PAGE>
(j) Adverse Events or Condition Affecting Distribution Centers. The
Company has not been served with or received notice of any condemnation
proceeding or similar action affecting any of the Acquired Facilities and,
to the knowledge of each Seller, there is no such proceeding or action
pending or threatened.
(k) Contract Rights. The Sellers have provided to Purchaser a list or
copies of all material contracts and open purchase orders relating to the
Business. Each Seller jointly and severally represents that the vendor
contracts and quotations listed on Exhibit E-1 are for pricing only and
that the Company has no obligation to purchase any fixed amount of product
other than when purchasing at the prices set forth therein the minimum
quantity per release specified. All of the contracts to be transferred
pursuant to Section 2(a)(x) are valid and enforceable and in full force and
effect, and there is no default by the Company, or to each Seller's
knowledge, any other parties thereto. If services are to be provided to the
Company under any of such contracts, such services have been and are being
performed satisfactorily and timely, substantially in accordance with the
terms of the contract.
(l) Inventory and Revenue Producing Equipment. All inventory and
revenue producing equipment of the Business reflected on the Initial
Balance Sheet, and all inventory and revenue producing equipment owned by
the Business as of the date hereof, (a) was acquired in accordance with the
regular business practices of the Business, (b) consisted and consists of
items of a quality and quantity useable in the ordinary course of its
business consistent with past practice, (c) was and is valued in conformity
with generally accepted accounting principles applied on a consistent basis
and (d) conformed and conforms to all applicable laws, ordinances, codes,
rules and regulations relating thereto and to the construction, use,
operation and maintenance thereof (except for such failures to conform as
do not have a material adverse effect on the business, assets, operations,
prospects or financial condition of the Business). None of such inventory
or revenue producing equipment has been maintained other than in accordance
with the regular business practices of the Business, and none of such
revenue producing equipment is obsolete, other than any such revenue
producing equipment that is fully depreciated on the Closing Date Balance
Sheet.
(m) Compliance with Laws. To each Seller's knowledge, the Business
has been and is currently conducted in all material respects in conformity
with all applicable federal, state and local laws and regulations which, if
violated, would impair the conduct of such Business or impose liability in
excess of $2,500 on the owner of such Business including, without
limitation, zoning ordinances, the Occupational Safety and Health Act and
all regulations thereunder, building codes and fire and environmental
regulations and laws. The Company has not received any notice of an
alleged violation of any such law which has not been remedied. The Company
has obtained and maintained all permits, licenses, authorizations or orders
of governmental or regulatory bodies which are material and necessary for
the operation of the Business.
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<PAGE>
(n) Litigation. To each Seller's knowledge, there is no litigation,
action, suit, claim, proceeding or investigation pending, or to the
knowledge of each Seller, threatened, nor is there any basis known to
either Seller for any litigation, action, suit, claim, proceeding or
investigation against either Seller or relating to the Assets which would
(i) affect the title of the Company to the Assets, (ii) affect the
Company's right to convey the Assets, (iii) adversely impair or affect in
any way the use and enjoyment of the Assets, (iv) question, directly or
indirectly, the Company's method of conducting the Business, or (v)
question the validity of any action to be taken pursuant to or in
connection with this Agreement. Except as listed on Exhibit K, the Company
is not a party to any suit for breach of warranty, product liability or of
a similar nature relating to or arising out of the sale of any of the types
of merchandise to be sold hereunder as part of the Inventory.
(o) Intellectual Property. The Company owns the entire right, title
and interest in and to the intellectual property listed on Exhibit F-1
hereto. The Company has not assigned any of such intellectual property or
granted any licenses to third parties with respect to such intellectual
property. There is no pending, or to the knowledge of each Seller,
threatened challenge to the use of such intellectual property. Use of such
intellectual property does not infringe on the right, title or interest of
any third party.
(p) Employee Benefit Matters.
(i) Exhibit O attached hereto provides a description of the
following which is currently sponsored, maintained, or contributed to
by the Company, or to which the Company is required to contribute, for
the benefit of the employees of the Company:
(A) each "employee benefit plan," as such term is defined in
Section 3(3) of ERISA ("Plan"); and
(B) each personnel policy, stock option, stock purchase or
stock grant plan, bonus, profit sharing or annuity plan or
arrangement, commission and/or incentive award or compensation
plan or arrangement, vacation policy, severance pay plan, policy
or agreement, deferred compensation agreement or arrangement,
executive compensation excess or supplemental income plan or
arrangement, consulting agreement, employment agreement,
collective bargaining agreement, or any other plan, agreement,
arrangement, program, practice or understanding providing
holiday, sickness, option days (including notice), termination of
job guarantee pay or benefits, or fringe benefits, and each other
employee benefit plan, agreement, arrangement, program, practice,
or understanding which is not described in Section (p)(i)(A)
("Benefit Program or Agreement"), whether written or unwritten,
formal or informal,
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enforceable or unenforceable and under which the Company has or
may have any liability or obligation, contingent or otherwise.
(ii) To the Company's knowledge, true, correct, and complete
copies of each of the Plans, and related trusts or other funding
medium, if applicable, including all amendments thereto, have been
furnished to Purchaser. There have also been furnished to Purchaser,
true, correct, and complete copies of all Benefit Programs or
Agreements. There have also been furnished to Purchaser with respect
to each Plan and Benefit Program or Agreement (a) the most recent
Internal Revenue Service determination or ruling letter, if
applicable, (b) the most recent summary plan description, if
applicable, and (c) the most recent annual report (and all schedules
and exhibits appurtenant thereto), if applicable.
(iii) Neither the Company nor any other entity, whether or not
incorporated, which is deemed to be under common control (as defined
in Section 414 of the Code, or 4001(b) of ERISA) with the Company
("Commonly Controlled Entity") maintains or contributes to any
employee pension benefit plan (as defined in Section 3(2) of ERISA)
that both (I) is a defined contribution plan described in Section
3(34) of ERISA or Section 414(i) of the Code, or that is a defined
benefit plan described in Section 3(35) of ERISA or Section 414(j) of
the Code, and (II) gives, or will give, rise to any liability of the
Company for (i) any delinquent premium payments due under Section 4007
of ERISA with respect to any such defined benefit plan, or (ii) any
unpaid minimum funding contributions that would result in the
imposition of a lien on any Assets pursuant to Section 412(c)(11) of
the Code or Section 302(c)(11) of ERISA. Neither the Company nor any
Commonly Controlled Entity sponsors or sponsored, or maintains or
maintained any defined benefit plan (described in the immediately
preceding sentence) that has been, or will be, terminated in a manner
that would result in any liability of the Company to the Pension
Benefit Guaranty Corporation or that would result in the imposition of
a lien on any Assets, pursuant to Section 4068 of ERISA. At no time
during the five (5) consecutive year period immediately preceding the
first day of the year in which the Closing Date occurs has the Company
or any Commonly Controlled Entity participated in or contributed to
any multiemployer plan defined in Section 4001(a)(3) of ERISA, or
Section 414(f) of the Code, nor during such period has the Company or
any Commonly Controlled Entity had an obligation to participate in or
contribute to any such multiemployer plan. No agreement subject to
Section 4204 of ERISA has been entered into in connection with the
transactions contemplated by this Agreement. The Company is not
obligated under any agreement or other arrangement pursuant to which
compensation or benefits will become payable as a result of the
consummation of the transactions contemplated in this Agreement other
than the Plans or Benefit Programs or Agreements. Neither the Company
nor any of its respective directors, officers, employees or agents,
has, with respect to any Plan, that is or has been established by or
contributed to, or with respect to which costs
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<PAGE>
or liabilities are accrued by the Company, engaged in any conduct that
would result in any material taxes or penalties on prohibited
transactions under Section 4975 of the Code or under Section 502(i) or
(1) of ERISA or in breach of fiduciary duty liability under Section
409 of ERISA which, in the aggregate, could have a material adverse
effect on the Business or on the use or value of the Assets and no
actions, investigations, suits or claims with respect to the
fiduciaries, administrators or assets of any such Plan (other than
routine claims for benefits) is pending or threatened, which, in the
aggregate could reasonably be expected to give rise to material
liability of the Company, that could have a material adverse effect on
the Business or on the use or value of the Assets. None of the
Company's welfare benefit plans (as defined in Section 3(1) of ERISA)
provides for or promises retiree medical, disability or life insurance
benefits to any current or former employee, officer or director of the
Company. Any and all plans, policies, programs or arrangements of the
Company or any Commonly Controlled Entity which are subject to Section
4980B of the Code have been and are in compliance with the
requirements of Section 4980B of the Code and Part 6 of Title I of
ERISA. The consummation of any of the transactions contemplated by
this Agreement shall not cause a transfer of liability with respect to
any of the Plans or Benefit Programs or Agreements from the Company to
Purchaser either by law or pursuant to the terms of any such Plan or
Benefit Program or Agreement.
(q) Tax Matters. (i) The Company has timely filed all federal, state
and local tax returns with respect to all federal, state and local taxes
that it was required to file with respect to the Business. All such tax
returns were correct and complete in all respects. All taxes owed with
respect to the Business (whether or not shown on any tax return) have been
paid. The Company is not currently the beneficiary of any extension of
time within which to file any tax return. No claim has ever been made by
an authority in a jurisdiction where the Business does not file tax returns
that it is or may be subject to taxation by that jurisdiction. There are
no security interests, liens or encumbrances on any of the assets of any of
the Business that arose in connection with any failure (or alleged failure)
to pay any tax; (ii) The Company has withheld and paid all taxes required
to have been withheld and paid in connection with amounts paid or owing to
any employee, independent contractor, creditor, or other third party of or
with respect to the Business. There is no dispute or claim concerning any
tax liability of the Business either (A) claimed or raised by any authority
in writing or (B) as to which either Seller has knowledge based upon
personal contact with any agent of such authority; (iv) the Company has not
waived any statute of limitations in respect of taxes or agreed to any
extension of time with respect to a tax assessment or deficiency; (vi) the
Company is not a party to any tax allocation or tax sharing agreement nor
is the Company subject to any liability for taxes of any other party; and
(vii) the Unaudited Financial Statements properly make provision for any
tax liability of the Company through the dates thereof.
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(r) Environmental Matters. In addition to the representations and
warranties in Section 12(m) hereof and not in limitation thereof, and
except as disclosed on the Disclosure Schedule, (a) no releases of
Hazardous Materials (as defined in this Section 12(r)) have occurred at or
from the South Holland Facility (as hereinafter defined), (b) there are no
past, pending, or threatened Environmental Claims (as defined in this
Section 12(r)) against the Company relating to the South Holland Facility,
(c) there are no leaking underground storage tanks located at the South
Holland Facility and (d) there are no facts, circumstances, or conditions
that could reasonably be expected to restrict, under any Environmental Law
or Environmental Permit (each as defined in this Section 12(r)) in effect
prior to or at the Closing Date, the ownership, occupancy, use or
transferability of any of the Assets. No Seller has actual knowledge of
any release of Hazardous Materials having occurred at or from any Acquired
Facility, or of any past, pending or threatened Environmental Claims
against the Company relating to any Acquired Facility. As used in this
Section 12(r):
(i) "Environmental Claims" means any and all administrative or
judicial actions, suits, orders, claims, liens, notices, violations or
proceedings related to any applicable Environmental Law or any
Environmental Permit brought, issued or asserted by: (A) a
governmental authority for compliance, damages, penalties, removal,
response, remedial or other action pursuant to any applicable
Environmental Law or (B) a third party seeking damages for personal
injury or property damage resulting from the release of a Hazardous
Material at, to or from any Acquired Facility, including without
limitation employees of the Business seeking damages for exposure to
Hazardous Materials;
(ii) "Environmental Laws" means all federal, state and local
laws, statutes, ordinances, codes, rules and regulations related to
protection of the environment or the handling, use, generation,
treatment, storage, transportation or disposal of Hazardous Materials;
(iii) "Environmental Permit" means all permits, licenses,
approvals, authorizations or consents required by any governmental
authority under any applicable Environmental Law and includes any and
all orders, consent orders or binding agreements issued or entered
into by a governmental authority under any applicable Environmental
Law; and
(iv) "Hazardous Material" means any hazardous or toxic substance,
material or waste which is regulated as of the Closing Date by any
state or local government authority or the United States of America,
including without limitation any material or substance that is: (A)
defined as a "hazardous substance" under applicable state law, (B)
petroleum, (C) friable asbestos, (D) designated as a "hazardous
substance" pursuant to section 311 of the Federal Water Pollution
Control Act, as amended, 33 U.S.C. (S)1251 et seq. (33 U.S.C.
(S) 1321), (E) defined as a "hazardous waste" pursuant to section
1004 of the
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Resource Conservation and Recovery Act, as amended, 42 U.S.C. (S)6901
et seq. (42 U.S.C. (S)6903), (F) defined as a "hazardous substance"
pursuant to section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. (S)9601 et seq.
(42 U.S.C. (S)9601), (G) defined as a "regulated substance" pursuant
to section 9001 of the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. (S)6901 et seq. (42 U.S.C. (S)6991) or (H)
otherwise regulated under the Toxic Substances Control Act, 15 U.S.C.
(S)2601, et seq., the Clean Air Act, as amended, 42 U.S.C. (S)7401, et
seq., the Hazardous Materials Transportation Act, as amended, 49
U.S.C. (S)1801, et seq., or the Federal Insecticide, Fungicide and
Rodenticide Act, as amended, 7 U.S.C. (S)136, et seq.
(s) Accounts Receivable. All accounts receivable, notes receivable
and other receivables of the Company, whether reflected in the Initial
Balance Sheet or otherwise, represent amounts due in respect of bona fide
transactions and operations in the ordinary course of business as currently
conducted by the Company in accordance with its normal credit practices,
and there are no facts or circumstances which will cause such receivables
not to be current and collectable net of any reserves or allowances for
accounts receivable reflected in the Initial Balance Sheet (which reserves
or allowances were calculated on a basis consistent with past practice) and
are adequate.
(t) Employees. Except as set forth on Exhibit O, there are no
existing employment agreements with employees of the Business. To each
Seller's knowledge, no executive, key employee, or group of employees has
any plans to terminate employment with the Business, except as contemplated
in the Company Consulting Agreement with respect to Neil Sheppard. The
Business is not a party to or bound by any collective bargaining agreement
or other contracts or agreements with any labor organization, nor has it
experienced any strikes, grievances, claims of unfair labor practices, or
other collective bargaining disputes. There are no pending charges or
petitions before the National Labor Relations Board with respect to the
Business or any of its employees, nor is the Company party to any
settlement agreement or any order with respect thereto. Neither Seller has
knowledge of any organizational effort presently being made or threatened
by or on behalf of any labor union with respect to employees of the
Business.
(u) Accurate Copies. All copies of leases, financial statements,
schedules and any other document or instruments required to be delivered to
Purchaser by the Company pursuant to the terms of this Agreement are and
will be true, correct and complete copies of the document or instrument
represented thereby.
(v) Brokers. Neither Seller has agreed to pay any party a commission,
finder's fee or similar payment in regard to this Agreement or any matter
related hereto and has not taken any action on which a claim for any such
payment could be based.
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(w) Condition of IFE. The Improvements, Fixtures and Equipment are in
good operating condition and repair and fit for the use for which intended,
ordinary wear and tear excepted.
(x) Insurance. Exhibit P contains a true and complete description of
the insurance coverage in effect currently and of any general liability,
property and casualty insurance coverage in effect at any time during the
past five years with respect to the Company and its business and
properties, together with a description of any and all insurance claims in
excess of $10,000 individually and $50,000 in the aggregate made by the
Company during the past five years. The Company has at all times during
the past five years maintained insurance coverage substantially similar to
the insurance coverage currently in effect. There has been no material
default under any such coverage, nor has there been any failure to give any
notice or present any claim under any such coverage in a timely fashion or
in the manner or detail required by the policy or binder. There are no
outstanding unpaid premiums other than premiums accrued but not yet payable
in the ordinary course of business of the Company, and there are no
provisions in any insurance coverage of the Company for retroactive or
retrospective premium adjustments. No notice of cancellation or nonrenewal
with respect to, or disallowance of any claim under, any such coverage has
been received by the Company. All general liability insurance policies and
all products liability policies maintained by the Company are and
historically have been occurrence policies. There are no outstanding
performance bonds or other surety arrangements covering or issued for the
benefit of either the Company or its business or as to which the Company
has or may incur any liability.
(y) Conduct of Business. Since April 30, 1995, the Business has been
conducted in the ordinary course and consistently with past practices. All
dispositions of assets and acquisition of Inventory since such date were
made in the ordinary course of business.
(z) Disclosure. No representation or warranty by the Sellers in this
Agreement or in any document, certificate or schedule furnished or to be
furnished by the Sellers to Purchaser pursuant to this Agreement or in
connection with the transactions contemplated hereby, contains or shall
contain any untrue statement of a material fact or omits or shall omit to
state a material fact necessary to make the facts contained therein not
misleading.
13. Representations and Warranties of Purchaser. Purchaser represents and
warrants as follows:
(a) Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas, with the corporate
power to carry on its business as now conducted.
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(b) Purchaser has the corporate power to enter into and perform its
obligations under this Agreement. The execution, delivery and performance
by Purchaser of this Agreement have been duly and validly authorized by
Purchaser. The execution, delivery and performance of this Agreement by
Purchaser will not violate the articles of incorporation or by-laws of
Purchaser or the terms of any material agreement to which Purchaser is a
party or by which it or its properties are bound or any statute,
regulation, judgment, order, writ, decree or injunction applicable to
Purchaser. This Agreement constitutes the valid and legally binding
obligation of Purchaser, enforceable in accordance with its terms. All
consents, approvals, orders, authorizations or filings with any federal or
state governmental authority on the part of Purchaser required in
connection with the consummation of the transactions contemplated hereby
shall have been obtained prior to and be effective as of the Closing Date.
No consent of third parties which has not or will not be received by the
Closing is required to permit Purchaser to validly consummate the
transactions contemplated hereunder.
(c) There is no litigation, proceeding or investigation pending, or to
the knowledge of the Purchaser threatened, nor is there any basis known to
Purchaser for any litigation, proceeding or investigation against Purchaser
which would question the validity of any action to be taken pursuant to or
in connection with this Agreement.
(d) Neither Purchaser nor any party acting on its behalf has agreed to
pay any party a commission, finder's fee or other similar payment in regard
to this Agreement or any matter related hereto or taken any action on which
a claim for any such payment could be based.
(e) No representation or warranty made by Purchaser in this Agreement
or in any document, certificate or schedule furnished or to be furnished by
Purchaser to the Sellers pursuant to this Agreement or in connection with
the transactions contemplated hereby, contains or shall contain any untrue
statement of a material fact or omits or shall omit to state a material
fact necessary to make the facts contained therein not misleading.
14. Conduct of Business Pending Closing. Each Seller jointly and
severally agrees that pending the Closing and except as otherwise consented to
or approved by Purchaser in writing:
(a) The Company shall, and Sheppard shall cause the Company to carry
on the Business diligently, in the normal course and substantially in the
same manner as heretofore. The Company shall, and Sheppard shall cause the
Company to acquire Inventory in the operation of the Business in accordance
with its normal course of business and not to acquire any new types or
lines of merchandise.
(b) Each Seller will use its best efforts to preserve the organization
of the Business intact and to preserve for Purchaser the goodwill of the
Company's suppliers, customers and others having business relations with
the Business.
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(c) The Company shall, and Sheppard shall cause the Company to duly
comply with all provisions of the Acquired Facility Leases, the Capitalized
Leases and the Non-Capitalized Leases and with all applicable laws and
regulations which if violated might impair the conduct of the Business or
impose material liability on the owner of such Business.
(d) The Company shall, and Sheppard shall cause the Company to
continue all normal repairs, servicing, replacement, maintenance and upkeep
of the IFE and the Inventory, provided however, that the Company shall not,
and Sheppard shall cause the Company to not undertake any remodeling of the
IFE without Purchaser's consent. The Company shall not, and Sheppard shall
cause the Company to not make any capital addition to the IFE without the
consent of Purchaser. The Company shall, and Sheppard shall cause the
Company to maintain all insurance now in force covering the Assets.
15. Accounts Receivable. The Sellers will deliver to Purchaser at the
Closing a listing of all the Accounts Receivable and the balances thereof. If
the Company receives any remittance in payment of an Account Receivable it will
immediately forward such remittance to Purchaser in the form received, properly
endorsed to Purchaser. In connection with any efforts to collect any of the
Accounts Receivable, no Seller shall take actions that would reasonably be
expected to adversely affect or impair the Purchaser's ongoing relationships
with the customers of the Business. Purchaser shall notify the obligors under
the Accounts Receivable of the transfer of such Accounts Receivable and direct
that payment of such Accounts Receivable be made directly to Purchaser.
Purchaser shall make collection efforts with regard to the Accounts Receivable
in accordance with normal and customary industry practices.
16. Conditions Precedent to Purchaser's Obligations. All obligations of
Purchaser under this Agreement are subject to the fulfillment prior to Closing
of each of the following conditions:
(a) Representations and Warranties. Purchaser shall not have
discovered any material error, misstatement or omission in the
representations and warranties by the Sellers contained in this Agreement.
(b) True and Correct at Closing. The Sellers' representations and
warranties contained in this Agreement shall be true as of the Closing; all
obligations and agreements required by this Agreement to be performed by
either Seller (or both Sellers) shall have been performed, and the Sellers
shall have delivered to Purchaser an appropriate certificate to such
effect.
(c) Leases and Contracts. No amendment or modification shall have
been made to or termination or cancellation effected with respect to any of
the leases or other agreements or instruments listed in Exhibits A, B, C or
E except as contemplated by Section 7 or with the express written consent
of Purchaser which consent shall not be unreasonably withheld.
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(d) Opinion of Sellers' Counsel. Purchaser shall have received from
counsel for the Sellers, a favorable written opinion, dated the Closing
Date, addressed to Purchaser and reasonably satisfactory in form and
substance to Purchaser and its counsel as to matters set out on Exhibit L.
(e) Form of Documents. The form of all documents required to be
delivered to Purchaser hereunder shall be approved by Mayor, Day, Caldwell
& Keeton, L.L.P., counsel for Purchaser, provided that any objections
raised by such counsel shall be reasonable and consistent with this
document, and there shall have been furnished to such counsel by the
Sellers such corporate and other records, certificates of officers of the
Company and other information as such counsel may reasonably request.
(f) No Litigation. None of the parties hereto shall be a party to or
shall have received notice of any suit or threatened suit to enjoin or
restrain any or all of the transactions contemplated herein or to nullify
or render ineffective all or any part of such transactions if accomplished
or alleging damages in connection therewith.
(g) Environmental Report. The Purchaser shall have received a report,
in form and substance satisfactory to Purchaser, of an environmental
engineering firm selected by Purchaser, at its sole cost and in its
discretion, with respect to the condition of the Acquired Facilities and
the environmental aspects of Business.
(h) Sheppard Lease. Purchaser and Sheppard shall have executed and
delivered a triple net lease agreement (the "Sheppard Lease") in form
satisfactory to each such party, pursuant to which Purchaser agrees to
lease from Sheppard that certain facility located in South Holland,
Illinois and more particularly described in the Sheppard Lease (the "South
Holland Facility"), all pursuant to the terms and conditions more
specifically set forth therein.
(i) No Material Adverse Change. There shall not have occurred a
material adverse change in the business, assets, operations, prospects or
condition (financial or otherwise) of the Business.
17. Conditions Precedent to Sellers' Obligations. All obligations of the
Sellers under this Agreement are subject to the fulfillment prior to Closing of
each of the following conditions:
(a) Representations and Warranties. Neither Seller shall have
discovered any material error, misstatement or omission in the
representations and warranties by Purchaser contained in this Agreement.
(b) True and Correct at Closing. All representations and warranties
of Purchaser contained in this Agreement shall be true as of the Closing;
all obligations and agreements required by this Agreement to be performed
by Purchaser shall have been performed, and Purchaser shall have delivered
an appropriate certificate to such effect.
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(c) Opinion of Purchaser's Counsel. The Sellers shall have received
from Mayor, Day, Caldwell & Keeton, L.L.P., a favorable written opinion
dated the Closing Date, addressed to each Seller and reasonably
satisfactory in form and substance to the Sellers and its counsel, as to
the matters set out in Exhibit M hereto.
(d) No Litigation. None of the parties hereto shall be a party to or
shall have received notice of any suit or threatened suit or enjoin or
restrain any or all of the transactions contemplated herein or to nullify
or render ineffective such transactions if accomplished or alleging any
damages in connection therewith.
(e) Sheppard Lease. Purchaser and Sheppard shall have executed and
delivered the Sheppard Lease.
(f) Form of Documents. The form of all documents required to be
delivered to the Sellers hereunder shall be approved by counsel for the
Sellers, provided that any objections raised by such counsel shall be
reasonable and consistent with this document, and there shall have been
furnished to such counsel by Purchaser such corporate and other records,
certificates of officers of Purchaser and other information as such counsel
may reasonably request.
18. Further Covenants of Sellers. Each Seller hereby covenants and agrees
as follows:
(a) Notices and Consents. Each Seller will give any notices to third
parties, and such Seller shall obtain any third party consents, that may be
necessary in connection with its consummation of the transaction
contemplated by this Agreement, provided, however, that the Sellers shall
have 90 days after the Closing to obtain any third party consents necessary
for the transfer of any Inventory items to Purchaser, which Inventory items
bear the trademark, logo or other protected intellectual property of such
third party. Each of the parties will give any notices to, make any
filings with, and use its commercially reasonable best efforts to obtain
any authorizations, consents, and approvals of governments and governmental
agencies in connection with the matters referred to in this Agreement.
(b) Acquired Facility Leases. From and after the Closing, the Company
will not take any action or fail to take any action required of the Company
and not assumed by Purchaser which would cause a default under any Acquired
Facility Lease covering an Acquired Facility sublet to Purchaser pursuant
to Section 9 hereof.
(c) Employment Matters. It is understood that the Company's employees
directly involved in the operation of the Business will be terminated as of
the Closing Date. Purchaser shall have the right but not the obligation to
enter into employment arrangements with any such employee from and after
the Closing Date. Purchaser shall have the opportunity to interview and
consider the Company's employees for employment
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in connection with Purchaser's operation of the Assets. Purchaser may
interview all such employees who duly submit applications to Purchaser and
shall have the right but not the obligation to discuss employment
arrangements with any such employees. Such interviews may be conducted on
premises owned or operated by the Company and the Company shall permit any
employee to attend such an interview during normal working hours.
Purchaser shall not be under any obligation to employ, and neither Seller
shall be under any obligation to attempt to cause Purchaser to employ those
persons interviewed by Purchaser. In the event Purchaser elects to offer
employment to any such employee of the Company, neither Seller shall
attempt to prevent or dissuade any such employee from entering into the
employ of Purchaser. At the request of Purchaser, the Sellers shall
cooperate fully with Purchaser to transfer to Purchaser the Company's
experience rating with any and all applicable state agencies or
authorities. Except as otherwise expressly provided in this Agreement, all
liabilities for salaries, compensation, vacation time, sick time, severance
pay and other benefits accrued for the benefit of employees prior to the
Closing Date shall be the sole responsibility of the Company and shall not
be assumed by Purchaser. The employees of the Company shall not be deemed
to be third party beneficiaries of the provisions of this Section 18(c) and
no such employee shall acquire any right hereunder. The Company shall give
any notice required under the Worker Adjustment and Retraining Act of 1988,
as amended, and shall be responsible for payments, if any, to the Company's
employees pursuant to such Act.
(d) Tax Receipts. As promptly as possible after the Closing, the
Sellers shall furnish to Purchaser receipts, tax certificates or other
evidence satisfactory to Purchaser showing payment of all sales and use
taxes payable with respect to the Assets.
(e) No Solicitation. Neither the Company nor Sheppard, nor any of
their officers, directors, employees, representatives, agents or
affiliates, as applicable, shall, directly or indirectly, knowingly
encourage, solicit or initiate in any way any discussions or negotiations
with, or, except (i) to the extent otherwise required by their fiduciary
obligations under applicable law pursuant to advice of counsel for the
Sellers (the receipt of which shall be confirmed in writing to Purchaser by
the Sellers) or (ii) to the extent necessary to effect the terms of this
Agreement, knowingly provide any information to any corporation,
partnership, person or other entity or group (other than Purchaser or any
affiliate or associate of Purchaser or any authorized adviser to or
representative of Purchaser) concerning any acquisition, purchase, sale or
other similar transaction involving the Business or the Assets. Promptly
after the execution of this Agreement, the Sellers will terminate all
discussions and negotiations with any person (other than Purchaser) with
respect to any of the foregoing. Nothing contained in this Section 18(e)
shall prohibit the Company or its Board of Directors from making such
disclosure to the Company's stockholders or taking such other action which,
in the judgment of the Board of Directors with the advice of counsel, may
be required under applicable law or under its fiduciary duties. The
Sellers will promptly communicate to Purchaser the terms of any proposal or
inquiry which it may receive in respect of any such transaction, or of
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any such information requested from it or of any such negotiations or
discussions being sought to be initiated with the Seller.
(f) Change of Name. On or within fifteen (15) days after the date
hereof, the Sellers shall take all necessary action to change the Company's
current name, Safety Centers Incorporated, to a name not the same as or
similar to the Business Name or any other symbol, trademark, service mark,
logo or trade name now used by any Seller.
(g) Use of Business Name. Each Seller covenants not to use the
Business Name or any similar names from and after the Closing Date.
19. Non-Competition Agreement. As a material inducement to Purchaser to
purchase the Assets, each Seller agrees that for a period of five years from and
after the Closing Date, neither of the Sellers nor any person or entity
controlling, controlled by or under common control with such Seller (an
"affiliate") shall, directly or indirectly, own, manage, control, or have any
interest in any corporation, partnership, or other entity which carries on a
business similar to and which would be competitive with the Business, as
operated on the Closing Date, in those geographical areas specified in Exhibit
N. Notwithstanding the foregoing, none of the following activities shall be a
violation of this Section 19:
(a) Neil Sheppard's activities in connection with Shepco Partners, an
Illinois partnership ("Partners"), manufacturing and distributing safety
shoes under an agreement (the "Shoe Contract") to be entered into between
Partners and Florsheim, Inc. ("Florsheim"), so long as any safety products
and other equipment other than safety shoes provided by Partners to
Florsheim under the Shoe Contract shall be provided to Partners by
Purchaser or Safety for consideration equal to an amount that would be paid
in a third party contract for substantially similar equipment;
(b) Unless and until Purchaser acquires substantially all of the
assets of [Shepco Manufacturing Company] ("Shepco"), activities involving
the business of Shepco as such business is conducted as of the Closing
Date, whether through ownership or operation of, or consultation with
Shepco by any Seller, so long as the product line of Shepco is not expanded
beyond the scope such product line as it exists as of the Closing Date;
(c) activities involving the distribution of insoles and anti-
vibration grip kits by Viscolas, Inc. ("Viscolas"), whether through
ownership or operation of, or consultation with Viscolas by any Seller;
Should any court of competent jurisdiction determine that, consistent with
the established precedent of the forum state, the public policy of such state
requires a more limited restriction in the territory, duration, nature of
restricted activity, or any combination thereof, it would be in furtherance of
the intentions of the parties hereto for the court to so interpret and construe
the terms of this section to apply to only such more limited restriction to an
appropriate degree.
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20. Indemnification.
(a) Indemnification by Sellers. Each Seller jointly and severally
agrees to indemnify and hold Purchaser harmless against and from any and
all taxes, claims, liabilities, damages, losses, costs and expenses,
including without limitation reasonable attorneys' fees and other expenses
of defending any actions or claims, amounts of judgments and amounts paid
in settlement (collectively, all of the foregoing being called "Costs"),
incurred by Purchaser and arising out of or attributable to (i) any breach
of any representation, warranty or covenant made by either Seller herein or
in any certificate or writing furnished by either Seller pursuant hereto,
(ii) any nonfulfillment of any agreement hereunder or entered into in
connection herewith by either Seller; (iii) the Company's performance or
non-performance prior to the Closing of or under any lease or other
contract assigned to Purchaser hereunder, (iv) the existence of any lien,
claim, pledge, security interest, mortgage, interest or minor defect in
title subject to which the Assets are delivered to Purchaser pursuant to
this Agreement, (v) the sublease of any Acquired Facility Lease to
Purchaser made at the request of the Sellers as provided for in Section 9
hereof or (vi) any claim, known or unknown, arising out of, or by virtue
of, or based upon the Company's business and operations (including, without
limitation, any product liability or warranty claim arising out of the
sale) except to the extent expressly assumed by Purchaser pursuant to
Section 6 hereof, and (vii) any liability or obligation involving an
Environmental Claim or which otherwise relates to or involves a claim,
liability or obligation which arises out of is based upon any Environmental
Law to the extent that such liability or obligation relating to or arises
out of, in whole or in part, any activity occurring, condition existing,
omission to act or other matters existing prior to the Closing Date.
(b) Indemnification by Purchaser. Purchaser agrees to indemnity and
hold each Seller harmless against any and all Costs, as defined in Section
20(a), incurred by such Seller and arising out of or attributable to (i)
any breach of any representation, warranty or covenant made by Purchaser
herein or in any certificate or writing furnished by Purchaser pursuant
thereto; (ii) any nonfulfillment of any agreement hereunder or entered into
in connection herewith by Purchaser; (iii) the failure of Purchaser to
fulfill the obligations specifically assumed by it pursuant to Section 6
hereof or (iv) any claim arising out of or by virtue of or based upon
Purchaser's operation of the Business after the Closing Date, except to the
extent that such claim is one as to which either Seller is required to
indemnify Purchaser pursuant to this Agreement or any other document or
agreement executed and delivered pursuant hereto.
(c) Survival of Representations and Warranties. The representations
and warranties given or made by the Sellers or Purchaser in this Agreement
or in any certificate or other writing furnished in connection herewith
shall survive the Closing. Notwithstanding any investigation or audit
conducted before or after the Closing Date or the decision of any party to
complete the Closing, each party shall be entitled to rely upon the
representations and warranties of the other party or parties set forth
herein.
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(d) No Limitation. Nothing herein shall be deemed to limit or restrict
in any manner any rights or remedies which Purchaser has, or might have, at
law, in equity or otherwise, against either Seller, or which either Seller
has or might have against Purchaser.
(e) Payment of Indemnification Obligations. In the event that either
Seller or Purchaser is required to make any payment under this Section 20,
such party shall promptly pay the indemnified party, the amount of such
indemnity obligation. If there should be a dispute as to such amount, such
Seller or Purchaser, as the case may be, shall nevertheless pay when due
such portion, if any, of the obligation as shall not be subject to dispute.
The difference, if any, between the amount of the obligation ultimately
determined as properly payable under this Section 20 and the portion, if
any, theretofore paid shall bear interest for the period from the date the
amount was demanded by the indemnified party until payment in full, payable
on demand, at the fluctuating rate per annum which at all times shall be
the rate which is publicly announced from time to time by NationsBank of
Texas, N.A. or its successor as its "prime rate".
(f) Indemnification Procedure. All claims for indemnification under
Sections 20(a) and 20(b) hereof shall be asserted and resolved as follows:
(i) In the event that any claim or demand for which an
indemnifying party would be liable to an indemnified party hereunder
is asserted against an indemnified party by a third party, the
indemnified party shall with reasonable promptness notify the
indemnifying party of such claim or demand, specifying the nature of
such claim or demand and the amount or the estimated amount thereof to
the extent then feasible (which estimate shall not be conclusive of
the final amount of such claim or demand) (the "Claim Notice"). The
indemnifying party shall have 30 days from the receipt of the Claim
Notice (the "Notice Period") to notify the indemnified party (i)
whether or not the indemnifying party disputes the indemnifying
party's liability to the indemnified party hereunder with respect to
such claim or demand and (ii) if the indemnifying party does not
dispute such liability, whether or not the indemnifying party desires,
at the sole cost and expense of the indemnifying party, to defend
against such claim or demand, provided that the indemnified party is
hereby authorized (but not obligated) prior to and during the Notice
Period to file any motion, answer or other pleading which the
indemnified party shall deem necessary or appropriate to protect the
indemnified party's interests. In the event that the indemnifying
party notifies the indemnified party within the Notice Period that the
indemnifying party does not dispute the indemnifying party's
obligation to indemnify hereunder and desires to defend the
indemnified party against such claim or demand and except as
hereinafter provided, the indemnifying party shall have the right to
defend by appropriate proceedings, which proceedings shall be promptly
settled or prosecuted by the indemnifying party to a final conclusion.
If the indemnified party desires to participate in, but not control,
any such defense or settlement the
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indemnified party may do so at the indemnified party's sole cost and
expense. If the indemnifying party elects not to defend the
indemnified party against such claim or demand, whether by not giving
the indemnified party timely notice as provided above or otherwise,
then the indemnified party, without waiving any rights against the
indemnifying party, may settle or defend against any such claim in the
indemnified party's sole discretion and, if it is ultimately
determined that the indemnifying party is responsible therefor under
this Section 20, then the indemnified party shall be entitled to
recover from the indemnifying party the amount of any settlement or
judgment and all indemnifiable costs and expenses of the indemnified
party with respect thereto, including interest as provided herein.
(ii) If, in the reasonable opinion of the indemnified party,
notice of which shall be given in writing to the indemnifying party,
any such claim or demand seeks material prospective relief which could
have a materially adverse effect on the assets, liabilities, financial
condition, results of operations or business prospects of the
indemnified party, the indemnified party shall have the right to
control the defense of any such claim or demand and the amount of any
judgment or settlement and the reasonable costs and expenses of
defense shall be included as part of the indemnification obligations
of the indemnifying party hereunder. If the indemnified party should
elect to exercise such right, the indemnifying party shall have the
right to participate in, but not control, the defense of such claim or
demand at the sole cost and expense of the indemnifying party.
(iii) In the event the indemnified party should have a claim
against the indemnifying party hereunder which does not involve a
claim or demand being asserted against or sought to be collected by a
third party, the indemnified party shall with reasonable promptness
send a Claim Notice with respect to such claim to the indemnifying
party. If the indemnifying party does not notify the indemnified
party within the Notice Period that the indemnifying party disputes
such claim, the amount of such claim shall be conclusively deemed a
liability of the indemnifying party hereunder.
(iv) Nothing herein shall be deemed to prevent the indemnified
party from making a claim hereunder for potential or contingent claims
or demands provided the Claim Notice sets forth the specific basis for
any such potential or contingent claim or demand to the extent then
feasible and the indemnified party has reasonable grounds to believe
that such a claim or demand may be made.
(v) The indemnified party's failure to give reasonably prompt
notice to the indemnifying party of any actual, threatened or possible
claim or demand which may give rise to a right of indemnification
hereunder shall not relieve the indemnifying party of any liability
which the indemnifying party may have to the
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indemnified party unless and to the extent the failure to give such
notice materially and adversely prejudiced the indemnifying party.
(vi) The indemnifying party shall be subrogated to the rights of
the indemnified party with respect to any matter as to which the
indemnifying party shall have fully indemnified the indemnified party
and shall have the right to pursue, at the indemnifying party's sole
cost and expense, any and all claims arising out of such matter in the
name of and with the full authority of the indemnified party;
provided, however, that the indemnifying party shall not pursue such
claims in a manner that is likely to give rise to a claim against the
indemnified party, and it hereby agrees to indemnify and hold harmless
the indemnified party against any and all claims, losses, liabilities
and expenses (including without limitation reasonable legal fees and
expenses) arising out of or incident to any such pursuit.
(vii) If an indemnified party receives a recovery from a third
party, whether by judgment, settlement or otherwise, on account of any
matter for which it has received an indemnification payment or
payments from an indemnifying party, and if such recovery exceeds the
sum of (i) any indemnification claims of the indemnified party on
account thereof which have not been paid and (ii) any expenses of the
indemnified party not included in clause (i) above, such excess shall
be promptly remitted to the indemnifying party up to the amount of all
the indemnification payments on account thereof previously made by the
indemnifying party to the indemnified party.
(g) WITHOUT LIMITING OR ENLARGING THE SCOPE OF THE INDEMNIFICATION,
RELEASE AND ASSUMPTION OBLIGATIONS SET FORTH IN SECTION 20 HEREOF, AN
INDEMNIFIED PARTY SHALL BE ENTITLED TO INDEMNIFICATION UNDER SECTION 20 IN
ACCORDANCE WITH THE TERMS THEREOF, REGARDLESS OF WHETHER THE INDEMNIFIABLE
LOSS GIVING RISE TO SUCH INDEMNIFICATION OBLIGATION IS THE RESULT OF THE
SOLE, GROSS, ACTIVE, PASSIVE, CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT
LIABILITY OR OTHER FAULT OR VIOLATION OF ANY LAW OF OR BY SUCH INDEMNIFIED
PARTY. THE PARTIES AGREE THAT THIS STATEMENT CONSTITUTES A CONSPICUOUS
LEGEND.
21. Sales Tax. The Sellers shall pay any and all sales tax due and owing
as a result of the sale, transfer, conveyance and assignment of Assets provided
for herein and shall furnish to Purchaser receipts, certificates or other
evidence of such payment satisfactory to Purchaser.
22. Inventory. Each Seller and Purchaser hereby agrees that the value of
the Inventory set forth on the Closing Date Balance Sheet shall reflect the
results of the physical inventory count conducted and agreed to by Purchaser and
the Sellers in their reasonable
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<PAGE>
discretion prior to the Closing Date, which inventory count shall be conducted
in connection with Purchaser's due diligence relating to this Agreement.
23. Bulk Sales. The parties hereto agree to comply with any applicable
bulk transfer statutes and in connection with this transaction and to reasonably
assist each other so to comply. Each parties shall bear its own expenses
(including legal fees) incurred in rendering such assistance.
24. Closing Documents.
(a) At the Closing, each Seller, as applicable, shall deliver to
Purchaser (or to the appropriate third party):
(i) All consents to assignment or other documents required by
Section 9 and in Section 18(a) hereof (except for consents to be
obtained after the Closing under Section 18(a));
(ii) The Sheppard Lease;
(iii) A Consulting Agreement dated as of the Closing Date by and
between the Company and Purchaser, in the form attached hereto as
Exhibit Q (the "Company Consulting Agreement").
(iii) instruments of assignment covering the leases assigned
hereunder and such instruments of sale, transfer and conveyance
covering the other Assets as shall, in the reasonable opinion of
Purchaser's counsel, be necessary to vest in Purchaser good and
marketable title to such Assets. Such instruments shall be in form
and substance reasonably satisfactory to Purchaser and its counsel;
(iv) Opinion of counsel as required by Section 16(d);
(v) The certificate required by Section 16(b); and
(vi) Such certificates and other instruments as may be necessary
to consummate the transactions herein contemplated or fulfill the
conditions to Closing as herein described.
(b) At the Closing, Purchaser shall deliver (or shall cause the
appropriate third party to deliver) to the Sellers or the applicable party:
(i) The Sheppard Lease;
(ii) An instrument of assumption of the obligations of the
Company under each of the Acquired Facility Leases and Non-capitalized
Leases and
32
<PAGE>
instruments of assumption of each of the other contracts and
obligations to be assumed by Purchaser in accordance with Section 6,
such instruments to be in form and substance reasonably satisfactory
to the Sellers and its counsel;
(iii) The certificate required by Section 17(b);
(iv) The Employment and Consulting Agreement;
(v) Opinion of counsel required by Section 17(c); and
(vi) Such certificates and other instruments as may be
necessary to consummate the transactions contemplated herein or to
fulfill the conditions to Closing as herein described.
25. Assignment. This Agreement shall not be assigned by either Seller.
This Agreement may be assigned by Purchaser in whole or in part to one or more
wholly-owned subsidiaries of Purchaser, provided that upon making such
assignment, any such assignee-subsidiary shall assume and become bound by all of
Purchaser's agreements and covenants herein contained, that such assignee-
subsidiary shall be deemed to have made for itself all of the representations
and warranties to the Sellers under this Agreement or in connection with any
transaction entered into by Purchaser pursuant to the terms of this Agreement.
Purchaser shall give prompt notice of any such assignment to the Sellers.
26. Termination of Agreement.
(a) Termination. This Agreement may be terminated prior to the
Closing Date as provided below:
(i) Purchaser and the Sellers may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) Purchaser may terminate this Agreement by giving written
notice to the Sellers on or before the 60th day following the date of
this Agreement if Purchaser is not satisfied with the results of its
continuing business, legal, and accounting due diligence regarding the
Business, which due diligence shall include due diligence with respect
to the results of operations of the Company subsequent to the
execution of this Agreement;
(iii) Purchaser may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing (A) in the
event either Seller has breached any material representation,
warranty, or covenant contained in this Agreement in any material
respect, the Purchaser has notified the Sellers of the breach, and the
breach has continued without cure for a period of 30 days after the
notice of breach or (B) if the Closing shall not have occurred on or
before
33
<PAGE>
August 31, 1995 by reason of the failure of any condition precedent
under Section 16 hereof (unless the failure results primarily from
Purchaser itself breaching any representation, warrant, or covenant
contained in this Agreement); and
(iv) Either Seller may terminate this Agreement by giving written
notice to the Purchaser at any time prior to the Closing (A) in the
event Purchaser has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, such
Seller has notified the Purchaser of the breach, and the breach has
continued without cure for a period of 30 days after the notice of
breach or (B) if the Closing shall not have occurred on or before
August 31, 1995 by reason of the failure of any condition precedent
under Section 17 hereof (unless the failure results primarily from
either Seller itself breaching any representation, warrant, or
covenant contained in this Agreement).
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 25(a) above, all rights and obligations of the parties
hereunder shall terminate without any liability of any party to any other
party (except for any liability of any party then in breach).
27. Further Assurances. From time to time hereafter and without further
consideration, each Seller shall execute and deliver such additional or further
instruments of conveyance, assignment and transfer and take such actions as
Purchaser may reasonably request in order to more effectively convey and
transfer to Purchaser the assets sold to Purchaser hereunder or as shall be
reasonably necessary or appropriate in connection with the carrying out of the
Sellers' obligations hereunder or the purposes of this Agreement. From time to
time hereafter and without further consideration, Purchaser shall execute and
deliver such additional or further instruments of assumption and take such
actions as either Seller may reasonably request in order to more effectively
consummate the assumption of the obligations of Purchaser specified herein or as
shall be reasonably necessary or appropriate in connection with the carrying out
of Purchaser's obligations hereunder or the purposes of this Agreement.
28. Announcements and Press Releases. Any press releases or any other
public announcements concerning this Agreement or the transactions contemplated
hereby shall be approved by both the Sellers and Purchaser provided that if
either party reasonably believes, after consultation with its outside legal
counsel, that it has a legal obligation to make a press release or any other
announcement or communication concerning this Agreement or the transactions
contemplated hereby and the approval of the other party cannot be obtained, then
such release, announcement or communication may be made without such approval.
29. No Waivers. Investigators or examinations made by either party, its
counsel, accountants, employees or representatives and information obtained as a
result thereof shall not constitute a waiver of any representation, warranty,
obligations, covenant or agreement of the other party.
34
<PAGE>
30. Miscellaneous.
(a) Issuance of Purchaser Shares. If Purchaser elects to pay a
portion of the Initial Purchase Price in Purchaser Shares pursuant to
Section 5, then the following provisions shall apply:
(i) In addition to the representations and warranties contained
in Section 13, Purchaser hereby represents and warrants to the Company
as of the Closing Date that upon the delivery to the Company of a
certificate representing the Purchaser Shares as contemplated by this
Agreement, and without the consent or approval of any other party, the
Purchaser Shares will be validly issued and outstanding, fully paid
and nonassessable and free and clear of all liens, options, charges,
equities, encumbrances and claims of any kind. The Purchaser has made
available to the Company true and complete copies of Purchaser's
Annual Report on Form 10-K for the fiscal year ended May 31, 1994 and
copies of each of Purchaser's Quarterly Reports on Form 10-Q for the
fiscal quarters since such Annual Report.
(ii) The Company acknowledges that the Purchaser Shares will not
have been registered under the Securities Act of 1933, as amended (the
"Securities Act") or any state securities laws, will contain a legend
to that effect, and may not be sold, pledged or otherwise transferred
unless so registered or unless an exemption from such registration
exists.
(iii) Purchaser will, at its expense, use its commercially
reasonable best efforts to effect the registration for resale of the
Purchaser Shares under the Securities Act and in connection therewith
will
(A) prepare and file with the United States Securities
Exchange Commission ("SEC") a registration statement on any form
for which the Company then qualifies or which counsel for the
Company shall deem appropriate in accordance with the intended
method of distribution thereof, and use its commercially
reasonable best efforts and proceed diligently and in good faith
to cause such filed registration statement to become effective
under the Securities Act no later than September 30, 1995;
(B) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such
registration statement effective for a period (except as provided
in the last paragraph of this Section) of not less than 90
consecutive days or, if shorter, the period terminating when all
Purchaser Shares covered by such registration statement have been
sold;
35
<PAGE>
(C) furnish to the Company such number of copies of such
registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement and such
other documents as the Holders may reasonably request in order to
facilitate the disposition of the Purchaser Shares owned by them;
the Company consents to the use of any such prospectus or any
amendment or supplement thereto by the Company in connection with
the offering and sale of the Purchaser Shares covered by such
prospectus that is in accordance with the intended methods of
distribution set forth in such prospectus;
(D) notify the Company promptly of the happening of any
event which makes any statement made in such registration
statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any
material respect or that requires the making of any changes in
such registration statement, prospectus or documents so that, in
the case of the registration statement, it will not contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading, and that in the case of the
prospectus, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading;
(E) use its commercially reasonable best efforts to cause
all Purchaser Shares to be listed on The Nasdaq Stock Exchange;
(F) if any event contemplated by clause (iv) above shall
occur, promptly prepare a supplement or amendment or post-
effective amendment to such registration statement or the related
prospectus or any document incorporated therein by reference or
promptly file any other required document so that, as thereafter
delivered to the purchasers of the Purchaser Shares, the
prospectus will not contain an untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading.
(iv) The Company agrees that, upon receipt of any notice from
Purchaser of the happening of any event of the kind described in
clause (iv) of paragraph (c) above, the Company will forthwith
discontinue disposition of Purchaser Shares pursuant to the
registration statement covering such Purchaser Shares until the
Company's receipt of the copies of the supplemented or amended
prospectus contemplated by such clause and, if so directed by
Purchaser, the Company will deliver to Purchaser all copies, other
than permanent file copies, then in the Company's possession, of the
most recent prospectus covering such
36
<PAGE>
Purchaser Shares at the time of receipt of such notice. In the event
Purchaser shall give such notice, Purchaser shall extend the period
during which such registration statement shall be maintained effective
by the number of days during the period from and including the date of
the giving of notice to the date when Purchaser shall make available
to the Company a prospectus supplemented or amended to conform with
the requirements of clause (iv) of paragraph (c) above.
(v) If for any reason Purchaser is unable to cause the
registration statement to be declared effective under the Securities
Act on or before September 30, 1995, then Purchaser shall on October
1, 1995 (or such later date as the Company shall agree) pay to the
Company, by cashier's or certified check, or by wire transfer of same-
day funds, an aggregate amount of Three Hundred Ninety Thousand Four
Hundred Fifty-Seven and No/100 Dollars ($390,457), and the Company
shall deliver to Purchaser the certificates representing the Purchaser
Shares. Such delivery of funds and return of certificates shall be in
full satisfaction of all of Purchaser's and the Sellers' respective
rights and obligations in connection with the delivery of the
Purchaser Shares.
(b) Sheppard Note. Notwithstanding anything to the contrary contained
herein, the Company shall be permitted prior to the Closing Date to repay
in part or in full the outstanding principal balance of the Sheppard Note,
provided, however, that in no event shall the total amount paid under this
Section 29(b) exceed the total amount of cash on hand reflected on the
Initial Balance Sheet. Neil Sheppard hereby acknowledges that the Sheppard
Note will not be assumed by Purchaser, and that Purchaser shall have no
obligations with respect thereto, regardless of whether the cash on hand
reflected on the Initial Balance Sheet is adequate to satisfy the Company's
obligations under the Sheppard Note in full.
(c) Covenant to Market South Holland Facility. Neil Sheppard hereby
covenants that, on or before the Closing, he will engage a reputable real
estate broker acceptable to Purchaser in its sole discretion, for the
purposes of marketing for sale the South Holland Facility. In conjunction
with the foregoing, Neil Sheppard further agrees to use his commercially
reasonable best efforts to effect a sale of the South Holland Facility as
soon as practicable following the Closing.
(d) Expenses. The parties hereto shall pay their own expenses
incidental to the negotiation of this Agreement and the consummation of the
transactions contemplated hereby, and no such expenses of the Sellers shall
be paid by or out of any of the Assets.
(e) Contents of Agreement; Parties in Interest; Etc. This Agreement,
together with the agreements contemplated hereby, sets forth the entire
understanding of the parties hereto with respect to the transactions
contemplated hereby. It shall not be amended or modified except by a
written instrument duly executed by each of the parties hereto. Any and
all previous agreements and understandings between or among the
37
<PAGE>
parties regarding the subject matter hereof, whether written or oral, are
superseded by this Agreement.
(f) Binding Effect. All of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
successors and assigns of the parties hereto.
(g) Waiver. Any term or provision of this Agreement may be waived at
any time by the party entitled to the benefit thereof by a written
instrument duly executed by such party.
(h) Notices. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder
shall be in writing and shall be deemed given if delivered personally or
sent by telegram, facsimile, by registered or certified mail, postage
prepaid, by airmail if to an address outside of the United States or by
recognized courier service, as follows:
If to Purchaser, to:
Vallen Corporation
13333 Northwest Freeway
Houston, Texas 77040
Attention: James W. Thompson, President
With a copy to:
Mayor, Day, Caldwell & Keeton, L.L.P.
700 Louisiana, Suite 1900
Houston, Texas 77002
Attention: Richard B. Mayor
If to the Sellers, to:
Safety Centers Incorporated
510 W. 172nd Street
South Holland, Illinois 60473
Attention: Neil Sheppard
With a copy to:
Jenner & Block
One IBM Plaza
Chicago, Illinois 60611
Attention: Richard Brown
38
<PAGE>
or to such other address as the person to whom notice is to be given may
have specified in a notice duly given to the sender as provided herein.
Such notice, request, claim, demand, waiver, consent, approval or other
communication shall be deemed to have been given as of the date so
delivered, telegraphed, telecopied, mailed or dispatched or, if given by
any other means, shall be deemed given only when actually received by the
addressee.
(i) Texas Law to Govern; Consent to Jurisdiction. This Agreement
shall be governed by and interpreted and enforced in accordance with the
laws of the State of Texas. Each of Purchaser and each Seller irrevocably
and unconditionally (a) agrees that any suit, action or other legal
proceeding (collectively, "Suit") arising out of this Agreement may be
brought and adjudicated in the United States District Court for the
Southern District of Texas, Houston Division, or, if such court will not
accept jurisdiction, in any court of competent civil jurisdiction sitting
in Harris County, Texas, (b) submits to the non-exclusive jurisdiction of
any such court for the purposes of any such Suit and (c) waives and agrees
not to assert by way of motion, as a defense or otherwise in any such Suit,
any claim that it not subject to the jurisdiction of the above courts, that
such Suit is brought in an inconvenient forum or that the venue of such
Suit is improper. Each of Purchaser and each Seller also irrevocably and
unconditionally consents to the service of any process, pleadings, notices
or other papers in a manner permitted by the notice provisions hereof.
(j) No Benefit to Others. The representations, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
parties hereto and, shall not be construed as conferring any rights on any
other persons.
(k) Headings; Gender; "Person". All section headings contained in
this Agreement are for convenience of reference only, do not form a part of
this Agreement and shall not affect in any way the meaning or
interpretation hereof. Words used herein, regardless of the number and
gender specifically used, shall be deemed and construed to include any
other number, singular or plural, and any other gender, masculine, feminine
and neuter, as the context requires. Any reference to a "person" herein
shall include an individual, firm, corporation, partnership, trust,
governmental authority or body, association, unincorporated organization or
any other entity.
(l) Severability. If any provision of this Agreement or the
application thereof to any person or circumstance is held invalid or
unenforceable in any jurisdiction, the remainder hereof, and the
application of such provision to such person or circumstances in any other
jurisdiction or to other persons or circumstances in any jurisdiction,
shall not be affected thereby, and to this end the provisions of this
Agreement shall be severable.
(m) Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when
39
<PAGE>
executed and delivered shall be deemed to be an original and all of which
counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more
counterparts taken together shall have been executed and delivered by the
parties. It shall not be necessary in making proof of this Agreement or
any counterpart hereof to produce or account for any of the other
counterparts.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
SAFETY CENTERS INCORPORATED
By:
---------------------------------------------
VALLEN CORPORATION
By:
----------------------------------------------
--------------------------------------------------
Neil Sheppard
--------------------------------------------------
Roslyn Sheppard
40
<PAGE>
Exhibit 2.2
FIRST AMENDMENT
THIS FIRST AMENDMENT (the "Amendment"), dated and effective as of July 21,
1995, is by and among SAFETY CENTERS INCORPORATED, NEIL SHEPPARD, ROSLYN
SHEPPARD and VALLEN CORPORATION.
RECITALS
A. The parties hereto have executed and delivered that certain Asset Sale
and Purchase Agreement, dated as of June 16, 1995 (the "Purchase Agreement").
B. The parties hereto desire to amend the Purchase Agreement for the
purpose of, among other things, incorporating certain items deemed necessary in
light of the due diligence performed since the date of the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Definitions. Any capitalized term not defined herein shall have the
meaning ascribed to such term in the Purchase Agreement.
2. Amendments to Purchase Agreement.
a. Section 4(b)(i) of the Purchase Agreement is hereby deleted and
restated in its entirety to read as follows:
"(i) if the Closing Date Book Value is less than the Initial
Purchase Price, the Purchase Price shall be reduced by an amount equal
to the difference between (A) the Initial Purchase Price, and (B) the
Closing Date Book Value, and the Company shall deliver to Purchaser by
wire transfer to an account designated by Purchaser an amount equal to
such difference (less any amount by which the Holdback Amount is
reduced under this Section 4(b), which amount shall be retained by
Purchaser);"
b. Section 4(b)(ii) of the Purchase Agreement is hereby deleted and
restated in its entirety to read as follows:
"(ii) if the Closing Date Book Value is greater than the Initial
Purchase Price, the Purchase Price shall be increased by an amount
equal to the difference between (A) the Closing Date Book Value, and
(B) the Initial Purchase Price, and Purchaser shall deliver to the
Company by wire transfer to an account designated by the Company an
amount equal to such difference (less any amount by which the Holdback
Amount is increased under this Section 4(b), which amount shall be
retained by Purchaser pending the adjustment to be made under Section
11 below);"
<PAGE>
c. Section 5(b) of the Purchase Agreement is hereby deleted and
restated in its entirety to read as follows:
"(b) "Market Price" shall mean $17.457 per Purchaser Share."
d. The last sentence of Section 12(p)(iii) of the Purchase Agreement
is hereby deleted in its entirety and replaced with the following:
"Seller shall be solely responsible for satisfying any liabilities or
obligations under Section 4980B of the Code with respect to
continuation of group health plan coverage with respect to all the
employees or former employees of the Company, and the dependents
thereof, who are receiving, or who are eligible to receive, such
continuation coverage as the result of any qualifying event that
occurred on or before the Closing Date including, without limitation,
those employees whose employment with the Company is terminated
incident to the sale of assets pursuant to this Agreement. Purchaser
shall not be deemed to be a successor employer to Company with respect
to any Plan or Benefit Program or Agreement. The consummation of any
of the transactions contemplated by this Agreement shall not cause a
transfer of liability or assets with respect to any of the Plans or
Benefit Programs or Agreements from the Company to Purchaser either by
law or pursuant to the terms of any such Plan or Benefit Program or
Agreement."
e. The following Section 12(p)(iv) is hereby added in its entirety to
the Purchase Agreement:
"(iv) The Company's 401(k) Plan (as described in Exhibit O) was
established by adoption of a standardized prototype plan which meets
the requirements of Section 401(a) and 401(k) of the Code and the
related trust is tax exempt under Section 501(a) of the Code and there
are no material actions, suits, claims (other than routine claims for
benefits in the ordinary course) under the Company's 401(k) Plan or
examinations of the Company's 401(k) Plan by a governmental agency
that are pending, and the Company has no knowledge of any facts that
can reasonably be expected to give rise to any such actions."
f. The last two sentences of Section 18(c) of the Purchase Agreement
are hereby deleted in their entirety and replaced with the following:
"No non-competition, confidentiality, non-solicitation or similar
agreement with any employee, representative or agent of the Company
shall apply to any engagement or employment by Purchaser of any
employee, representative or agent on or after the Closing Date. The
employees of the Company shall not be deemed to be third party
beneficiaries of the provisions of this Section 18(c) and no such
employee shall acquire any right hereunder. The Company shall give
any notice required under the Worker Adjustment and Retraining Act of
1988, as
2
<PAGE>
amended, and shall be responsible for payments, if any, to the
Company's employees pursuant to such Act."
g. Section 18(f) of the Purchase Agreement is hereby deleted and
restated in its entirety to read as follows:
"(f) Change of Name. On or within fifteen (15) days after the
Closing Date, the Sellers shall take all necessary action to change
the Company's current name, Safety Centers, Inc., to a name not the
same as or similar to the Business Name or any other symbol,
trademark, service mark, logo or trade name now used by any Seller."
h. Exhibit A to the Purchase Agreement is hereby amended to add the
following:
"Property located at 14805 Telegraph Road, Taylor, Michigan 48180 is
also subject to a written lease."
i. Exhibit E-1 of the Purchase Agreement is hereby amended to add the
following:
"Purchase Order by and between Shepco Manufacturing Co. and the
Company"
j. References to Section 29 of the Purchase Agreement contained in
Sections 2(a)(v), 5(c), and 30(b) thereof shall be amended to refer to
Section 30 of the Purchase Agreement.
3. Effect. This amendment shall be effective only for the specific
purposes set forth herein, and, except as modified by this Agreement, the terms,
covenants and provisions of the Purchase Agreement are hereby ratified and
confirmed and shall continue in full force and effect.
IN WITNESS WHEREOF, the parties have executed this First Amendment as of
July 21, 1995.
SAFETY CENTERS INCORPORATED
By:
-----------------------------------
Neil Sheppard, President
3
<PAGE>
VALLEN CORPORATION
By:
--------------------------------------
James W. Thompson, President
------------------------------------------
NEIL SHEPPARD
------------------------------------------
ROSLYN SHEPPARD
4
<PAGE>
Exhibit 2.3
CONSULTING AGREEMENT
BETWEEN
VALLEN CORPORATION
AND
SAFETY CENTERS INCORPORATED
EFFECTIVE AS OF JULY 24, 1995
<PAGE>
CONSULTING AGREEMENT
This Consulting Agreement ("Agreement") is entered into effective as of
July 24, 1995 between Vallen Corporation, a Texas corporation ("Company") and
SCI Incorporated ("SCI"). In consideration of their mutual agreements, the
Company and SCI agree as follows:
WHEREAS, SCI has sold substantially all of its assets to the Company, all
pursuant to that certain Asset Sale and Purchase Agreement (the "Purchase
Agreement") dated as of June 16, 1995 by and among SCI, the Company, Neil
Sheppard and Roslyn Sheppard;
WHEREAS, SCI possesses an intimate knowledge of the Assets (as defined in
the Purchase Agreement), and the operation thereof;
WHEREAS, the Company intends to transfer the Assets to Vallen Safety Supply
Company, a Texas corporation and the wholly owned subsidiary of the Company
("Safety");
WHEREAS, the Company and SCI recognize that the continued application of
SCI's experience, abilities and services to Safety's operation of the Assets
would be extremely beneficial to Safety and to the Company;
WHEREAS, in connection with the transactions contemplated in the Purchase
Agreement, the Company wishes to be assured that following such acquisitions SCI
will be available to consult with Safety and the Company;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants herein set forth and for other good and valuable consideration,
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. TERM OF AGREEMENT. The term of this Agreement shall commence on the
date hereof and shall expire on the third (3rd) anniversary of such date.
2. DUTIES. From time to time, as and when requested by the Chief
Executive Officer or the Board of Directors of the Company, SCI will consult and
cooperate with and advise them, or either of them, to the best of his ability
with respect to such matters involving the business and affairs of the Company
as they, or either of them, may present to SCI. SCI agrees that it shall
designate Neil Sheppard, president of SCI ("Sheppard"), to perform all of SCI's
duties and obligations hereunder, and that no other person shall perform such
duties and obligations, provided, however, that in the event of Sheppard's death
or permanent disability, SCI shall appoint a successor reasonably satisfactory
to the Company to perform SCI's duties and obligations hereunder, Roslyn
Sheppard being hereby deemed a satisfactory successor to Sheppard. For the
period beginning on the date hereof and ending on the six-month anniversary of
such date, SCI will perform such services on a full-time basis, and shall devote
all of the skills and best efforts of Sheppard full time to the business and
affairs of the Company and its subsidiaries. For the period beginning on the
day after the six-month anniversary of the date hereof and ending on the third
anniversary of the date hereof, SCI will perform such services
<PAGE>
on a limited time basis, and in no event more than 200 hours per year, or more
than 16 hours per week. SCI shall perform its duties hereunder as an
independent contractor to, and not as an employee of, the Company.
3. BASE LOCATION. During the term of this Agreement, the Company shall
make available for Sheppard's (or Sheppard's successor named under Section 2)
use an office, of size and appointments appropriate to his position. Unless the
Company's Board of Directors provides otherwise, SCI's base location for
providing services hereunder shall be in South Holland, Illinois for the first
six months of the term of this Agreement, and thereafter at any other place in
the Chicago, Illinois area.
4. COMPENSATION. As compensation for SCI's services to the Company under
this Agreement, the Company will pay to SCI, in substantially equal
installments, in arrears, and in substantially the same manner that amounts are
paid by the Company to its independent consultants (but in no event less
frequently than monthly), an amount of $166,667 per calendar year (and a pro
rata portion of such amount for any part of a calendar year), subject to all
applicable tax requirements.
5. REIMBURSEMENT OF EXPENSES. The Company shall reimburse SCI for its
reasonable and proper travel and other out-of-pocket expenses incurred by SCI
for the purpose of and in connection with the performance of its duties during
its engagement under this Agreement, all in accordance with applicable policies
as to the allowable amounts of such expenses for independent contractors of the
Company holding comparable positions and as to the submission of itemized
reports with respect to such expenses which may from time to time be implemented
by the Company.
6. TERMINATION OF ENGAGEMENT. The engagement of SCI by the Company
pursuant to this Agreement shall be terminated immediately (a) in the event
SCI's engagement with the Company is terminated by the Company for "Cause," as
defined below, (b) in the event SCI resigns its engagement with the Company, or
(c) in the event the Board of Directors of the Company elects, in its sole
discretion, to terminate the SCI engagement with the Company without Cause. The
provisions of this Section 5 of the Agreement supersede and control any other
provisions of this Agreement to the contrary, whether express or implied. If
SCI's engagement hereunder is terminated for Cause by the Company or without
Cause by SCI, then all obligations of the Company hereunder shall cease as of
the effective date of such termination. If SCI's engagement hereunder is
terminated without Cause by the Company, then the Company's obligations under
Section 4 hereof shall survive such termination.
Termination for "Cause" shall mean the Company's termination of SCI's
engagement with the Company because of (i) the conviction SCI or Sheppard (or
Sheppard's successor named under Section 2 hereof) of a felony that has or can
reasonably be expected to have a material adverse effect on the Company or its
business; (ii) SCI's engaging in willful misconduct that has or can reasonably
be expected to a have a material adverse effect on the Company or its business;
and (iii) a material failure by SCI to comply upon reasonable notice with the
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reasonable written orders of the Board of Directors of the Company, provided,
however, that if such orders entail the performances of services by SCI outside
of normal business hours, SCI shall have seven days to cure its failure to
comply with such orders.
7. CONFIDENTIALITY. SCI agrees to keep in strict secrecy and confidence
any and all information SCI acquires, including, but not limited to, customer
information and price lists, or to which SCI has access during employment by the
Company and which has not been publicly disclosed and is not a matter of common
knowledge in the fields of work of the Company. SCI agrees that both during and
after the term of his employment by the Company, he will not, without prior
written consent of the Company, disclose any such confidential information to
any third person, partnership, joint venture, company, corporation, or other
organization. The provisions of this Section 6 shall survive the termination of
this Agreement without limitation.
8. SUCCESSORS AND ASSIGNS. This Agreement is personal in its nature and
neither of the parties hereto shall, without the consent of the other, assign or
transfer this Agreement or any rights or obligations hereunder; provided,
however, that the provisions hereof shall inure to the benefit of, and be
binding upon, each successor of the Company, whether by merger, consolidation,
transfer of all or substantially all of its assets, or otherwise.
9. COMPANY PROPERTY. From time to time during the term of this
Agreement, the Company will entrust items of its property, including, but not
limited to, computer equipment, hardware or software, customer lists, price
lists, literature, sales brochures and manuals, product samples, motor vehicles
and keys, to SCI. SCI agrees to use these items safely, for their intended use,
and only in furtherance of the business of the Company, and to return them upon
request by the Company at any time. SCI agrees not to duplicate by any means
such Company property at any time without the consent of the Company.
10. DISCLOSURE. SCI agrees during the term of this Agreement to disclose
only to the Company all proprietary information, ideas, methods, plans,
developments, or improvements known by SCI which related directly or indirectly
to the business of the Company, whether acquired by SCI before or during
employment by the Company. Nothing in this paragraph shall be construed as
requiring any such communication where the idea, plan, method, or development is
lawfully protected from disclosure as a trade secret of a third party or by any
other lawful prohibition against such communication.
11. CONFLICTING AGREEMENTS. SCI represents and warrants that the
execution of this Agreement and SCI's performance of obligations hereunder will
not conflict with, result in the breach of any provision or the termination of,
or constitute a default under any agreement to which SCI is a party or by which
SCI is or may be bound.
12. NOTICES. Any notice required or permitted to be given hereunder shall
be in writing and shall be sufficiently given if sent by registered or certified
mail or delivered, if to SCI at 410 W. 172nd Street, South Holland, Illinois
60473, or at such other address or addresses as he shall designate by written
notice to the Company, and if to the Company at
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13333 Northwest Freeway, Houston, Texas 77040, Attention: Chairman of the Board,
with a copy to Mayor, Day, Caldwell & Keeton, L.L.P., 700 Louisiana, Suite 1900,
Houston, Texas 77002, Attention: Richard B. Mayor, or such other address as the
Company shall designate by written notice to SCI.
13. SOLE AGREEMENT. This Agreement supersedes any prior or other
agreements of SCI and the Company and constitutes the full and complete
agreement between SCI and the Company with respect to the employment of SCI. No
amendment or modification to this Agreement (including, but not limited to, any
renewal or extension of this Agreement) shall be effective unless made in
writing and signed by the party against whom or which enforcement is sought.
14. MISCELLANEOUS. It is understood and agreed by the parties hereto that
the provisions of each of the preceding sections of this Agreement, which
Agreement includes the Exhibit hereto, are independent of and severable from
each other, and the invalidity of any paragraph or portion shall not affect the
validity or hinder the enforceability of the remaining paragraphs or portions.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Texas, exclusive of any provision thereof under which the law of
any other jurisdiction would apply.
EXECUTED and DELIVERED at Houston, Texas, effective as of the date first
stated above.
SCI:
By:
------------------------------------------
Neil Sheppard
President
VALLEN CORPORATION
By:
-----------------------------------------
James W. Thompson
President
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