<PAGE>
As filed with the Securities and Exchange Commission on May 16, 1996.
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
VALLEN CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Texas 13333 Northwest Freeway 74-1366847
(State or other jurisdiction) Houston, Texas 77040 (I.R.S. Employer
of incorporation or organization) (Address of principal executive offices) Identification No.)
(Zip Code)
</TABLE>
---------------------
VALLEN CORPORATION
DAVID L. GAINES STOCK OPTION PLAN
(Full title of the plan)
---------------------
James W. Thompson
President
Vallen Corporation
13333 Northwest Freeway
Houston, Texas 77040
(Name and address of agent for service)
(713) 462-8700
(Telephone number, including area code, of agent for service)
----------------------
Copy to:
John B. Clutterbuck
Mayor, Day, Caldwell & Keeton, L.L.P.
700 Louisiana, Suite 1900
Houston, Texas 77002
(713) 225-7100
----------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================================================
TITLE OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE PER SHARE(1) AGGREGATE OFFERING PRICE(1) FEE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01
per share 100,000 shares $ 20.00 $2,000,000 $690
==================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c).
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
ITEM 1. PLAN INFORMATION*
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION*
* Information required by Part I to be contained in the Section 10(a)
prospectus is omitted from the Registration Statement in accordance with
Rule 428 under the Securities Act of 1933 (the "Securities Act") and the
Note to Part I of Form S-8.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Securities and Exchange
Commission are incorporated herein by reference:
(a) The Annual Report of Vallen Corporation (the "Company" or
the "Registrant") on Form 10-K for the year ended May 31, 1995
("1995 Form 10-K") filed on August 22, 1995;
(b) All other reports filed pursuant to Section 13(a) or 15(d)
of the Securities Exchange Act of 1934 (the "Exchange Act") since
the end of the fiscal year covered by the document referred to in
(a) above; and
(c) The description of the Company's common stock contained in
the registration statement pursuant to which the Company's shares of
common stock were registered under Section 12 of the Exchange Act,
and any amendments or reports filed for the purpose of updating such
description.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a
post-effective amendment which indicates that all securities offered
hereby have been sold or which deregisters all securities remaining
unsold, shall be deemed to be incorporated by reference herein and to be
a part hereof from the date of the filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES
Not applicable.
1
<PAGE>
ITEM 5. INTEREST OF NAMED EXPERTS AND COUNSEL
The legality of the common stock offered hereby is being passed upon
for the Company by Mayor, Day, Caldwell & Keeton, L.L.P., 700 Louisiana,
Suite 1900, Houston, Texas 77002.
The consolidated financial statements of Vallen Corporation as of
May 31, 1995 and 1994, and for each of the years in the three-year period
ended May 31, 1995 have been incorporated by reference herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick
LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Restated Articles of Incorporation provide that the
liability of the directors for monetary damages shall be limited to the
fullest extent permissible under Texas law.
Section 7.06 of the Texas Miscellaneous Corporation Laws Act does
not eliminate or limit the liability of a director for:
(1) a breach of the director's duty of loyalty to the
corporation or its shareholders or members;
(2) an act or omission not in good faith that constitutes a
breach of duty of the director to the corporation or an act or
omission that involves intentional misconduct or a knowing violation
of the law;
(3) a transaction from which the director received an improper
benefit, whether or not the benefit resulted from an action taken
within the scope of the director's office; or
(4) an act or omission for which the liability of a director is
expressly provided by an applicable statute.
The Company's Bylaws provide that the Company will indemnify its
officers and directors to the fullest extent possible under Texas law.
Article 2.02-1 of the Texas Business Corporation Act provides as follows:
"A. In this article:
(1) "Corporation" includes any domestic or foreign predecessor
entity of the corporation in a merger, consolidation, or other
transaction in which the liabilities of the predecessor are
transferred to the corporation by operation of law and in any other
transaction in which the corporation assumes the liabilities of the
predecessor but does not specifically exclude liabilities that are
the subject matter of this article.
(2) "Director" means any person who is or was a director of the
corporation and any person who, while a director of the corporation,
is or was serving at the request of the corporation as a director,
officer, partner, venturer, proprietor, trustee, employee, agent, or
2
<PAGE>
similar functionary of another foreign or domestic corporation,
partnership, joint venture, sole proprietorship, trust, employee
benefit plan, or other enterprise.
(3) "Expenses" include court costs and attorneys' fees.
(4) "Official capacity" means
(a) when used with respect to a director, the office of
director in the corporation, and
(b) when used with respect to a person other than a director,
the elective or appointive office in the corporation held by the
officer or the employment or agency relationship undertaken by the
employee or agent in behalf of the corporation, but
(c) in both Paragraphs (a) and (b) does not include service for
any other foreign or domestic corporation or any partnership, joint
venture, sole proprietorship, trust, employee benefit plan, or other
enterprise.
(5) "Proceeding" means any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal,
administrative, arbitrative, or investigative, any appeal in such an
action, suit, or proceeding, and any inquiry or investigation that
could lead to such an action, suit, or proceeding.
B. A corporation may indemnify a person who was, is, or is
threatened to be made a named defendant or respondent in a
proceeding because the person is or was a director only if it is
determined in accordance with Section F of this article that the
person:
(1) conducted himself in good faith;
(2) reasonably believed:
(a) in the case of conduct in his official capacity as a
director of the corporation, that his conduct was in the
corporation's best interests; and
(b) in all other cases, that his conduct was at least not
opposed to the corporation's best interests; and
(3) in the case of any criminal proceeding, had no reasonable
cause to believe his conduct was unlawful.
C. Except to the extent permitted by Section E of this
article, a director may not be indemnified under Section B of this
article in respect of a proceeding:
(1) in which the person is found liable on the basis that
personal benefit was improperly received by him, whether or not the
benefit resulted from an action taken in the person's official
capacity; or
(2) in which the person is found liable to the corporation.
3
<PAGE>
D. The termination of a proceeding by judgment, order, settlement,
or conviction, or on a plea of nolo contendere or its equivalent is
not of itself determinative that the person did not meet the
requirements set forth in Section B of this article. A person shall
be deemed to have been found liable in respect of any claim, issue
or matter only after the person shall have been so adjudged by a
court of competent jurisdiction after exhaustion of all appeals
therefrom.
E. A person may be indemnified under Section B of this article
against judgments, penalties (including excise and similar taxes),
fines, settlements, and reasonable expenses actually incurred by the
person in connection with the proceeding; but if the person is found
liable to the corporation or is found liable on the basis that
personal benefit was improperly received by the person, the
indemnification (1) is limited to reasonable expenses actually
incurred by the person in connection with the proceeding and (2)
shall not be made in respect of any proceeding in which the person
shall have been found liable for willful or intentional misconduct
in the performance of his duty to the corporation.
F. A determination of indemnification under Section B of this
article must be made:
(1) by a majority vote of a quorum consisting of directors who
at the time of the vote are not named defendants or respondents in
the proceeding;
(2) if such a quorum cannot be obtained, by a majority vote of
a committee of the board of directors, designated to act in the
matter by a majority vote of all directors, consisting solely of two
or more directors who at the time of the vote are not named
defendants or respondents in the proceeding;
(3) by special legal counsel selected by the board of directors
or a committee of the board by vote as set forth in Subsection (1)
or (2) of this section, or, if such a quorum cannot be obtained and
such a committee cannot be established, by a majority vote of all
directors; or
(4) by the shareholders in a vote that excludes the shares held
by directors who are named defendants or respondents in the
proceeding.
G. Authorization of indemnification and determination as to
reasonableness of expenses must be made in the same manner as the
determination that indemnification is permissible, except that if
the determination that indemnification is permissible is made by
special legal counsel, authorization of indemnification and
determination as to reasonableness of expenses must be made in the
manner specified by Subsection (3) of Section F of this article for
the selection of special legal counsel. A provision contained in
the articles of incorporation, the bylaws, a resolution of
shareholders or directors, or an agreement that makes mandatory the
indemnification permitted under Section B of this article shall be
deemed to constitute authorization of indemnification in the manner
required by this section even though such provision may not have
been adopted or authorized in the same manner as the determination
that indemnification is permissible.
H. A corporation shall indemnify a director against reasonable
expenses incurred by him in connection with a proceeding in which he
is a named defendant or respondent because he
4
<PAGE>
is or was a director if he has been wholly successful, on the merits
or otherwise, in the defense of the proceeding.
I. If, in a suit for the indemnification required by Section H
of this article, a court of competent jurisdiction determines that
the director is entitled to indemnification under that section, the
court shall order indemnification and shall award to the director
the expenses incurred in securing the indemnification.
J. If, upon application of a director, a court of competent
jurisdiction determines, after giving any notice the court considers
necessary, that the director is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances, whether
or not he has met the requirements set forth in Section B of this
article or has been found liable in the circumstances described by
Section C of this article, the court may order the indemnification
that the court determines is proper and equitable; but if the person
is found liable to the corporation or is found liable on the basis
that personal benefit was improperly received by the person, the
indemnification shall be limited to reasonable expenses actually
incurred by the person in connection with the proceeding.
K. Reasonable expenses incurred by a director who was, is, or
is threatened to be made a named defendant or respondent in a
proceeding may be paid or reimbursed by the corporation, in advance
of the final disposition of the proceeding and without the
determination specified in Section F of this article or the
authorization or determination specified in Section G of this
article, after the corporation receives a written affirmation by the
director of his good faith belief that he has met the standard of
conduct necessary for indemnification under this article and a
written undertaking by or on behalf of the director to repay the
amount paid or reimbursed if it is ultimately determined that he has
not met that standard or if it is ultimately determined that
indemnification of the director against expenses incurred by him in
connection with that proceeding is prohibited by Section E of this
article. A provision contained in the articles of incorporation,
the bylaws, a resolution of shareholders or directors, or an
agreement that makes mandatory the payment or reimbursement
permitted under this section shall be deemed to constitute
authorization of that payment or reimbursement.
L. The written undertaking required by Section K of this
article must be an unlimited general obligation of the director but
need not be secured. It may be accepted without reference to
financial ability to make repayment.
M. A provision for a corporation to indemnify or to advance
expenses to a director who was, is, or is threatened to be made a
named defendant or respondent in a proceeding, whether contained in
the articles of incorporation, the bylaws, a resolution of
shareholders or directors, an agreement, or otherwise, except in
accordance with Section R of this article, is valid only to the
extent it is consistent with this article as limited by the articles
of incorporation, if such a limitation exists.
N. Notwithstanding any other provision of this article, a
corporation may pay or reimburse expenses incurred by a director in
connection with his appearance as a witness or other participation
in a proceeding at a time when he is not a named defendant or
respondent in the proceeding.
5
<PAGE>
O. An officer of the corporation shall be indemnified as, and to the
same extent, provided by Sections H, I, and J of this article for a
director and is entitled to seek indemnification under those
sections to the same extent as a director. A corporation may
indemnify and advance expenses to an officer, employee, or agent of
the corporation to the same extent that it may indemnify and advance
expenses to directors under this article.
P. A corporation may indemnify and advance expenses to persons
who are not or were not officers, employees, or agents of the
corporation but who are or were serving at the request of the
corporation as a director, officer, partner, venturer, proprietor,
trustee, employee, agent, or similar functionary of another foreign
or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise to
the same extent that it may indemnify and advance expenses to
directors under this article.
Q. A corporation may indemnify and advance expenses to an
officer, employee, agent, or person identified in Section P of this
article and who is not a director to such further extent, consistent
with law, as may be provided by its articles of incorporation,
bylaws, general or specific action of its board of directors, or
contract or as permitted or required by common law.
R. A corporation may purchase and maintain insurance or
another arrangement on behalf of any person who is or was a
director, officer, employee, or agent of the corporation or who is
or was serving at the request of the corporation as a director,
officer, partner, venturer, proprietor, trustee, employee, agent, or
similar functionary of another foreign or domestic corporation,
partnership, joint venture, sole proprietorship, trust, employee
benefit plan, or other enterprise, against any liability asserted
against him and incurred by him in such a capacity or arising out of
his status as such a person, whether or not the corporation would
have the power to indemnify him against that liability under this
article. If the insurance or other arrangement is with a person or
entity that is not regularly engaged in the business of providing
insurance coverage, the insurance or arrangement may provide for
payment of a liability with respect to which the corporation would
not have the power to indemnify the person only if including
coverage for the additional liability has been approved by the
shareholders of the corporation. Without limiting the power of the
corporation to procure or maintain any kind of insurance or other
arrangement, a corporation may, for the benefit of persons
indemnified by the corporation, (1) create a trust fund; (2)
establish any form of self-insurance; (3) secure its indemnity
obligation by grant of a security interest or other lien on the
assets of the corporation; or (4) establish a letter of credit,
guaranty, or surety arrangement. The insurance or other arrangement
may be procured, maintained, or established within the corporation
or with any insurer or other person deemed appropriate by the board
of directors regardless of whether all or part of the stock or other
securities of the insurer or other person are owned in whole or part
by the corporation. In the absence of fraud, the judgment of the
board of directors as to the terms and conditions of the insurance
or other arrangement and the identity of the insurer or other person
participating in an arrangement shall be conclusive and the
insurance or arrangement shall not be voidable and shall not subject
the directors approving the insurance or arrangement to liability,
on any ground, regardless of whether directors participating in the
approval are beneficiaries of the insurance or arrangement.
6
<PAGE>
S. Any indemnification of or advance of expenses to a director
in accordance with this article shall be reported in writing to the
shareholders with or before the notice or waiver of notice of the
next shareholders' meeting or with or before the next submission to
shareholders of a consent to action without a meeting pursuant to
Section A, Article 9.10, of this Act and, in any case, within the
12-month period immediately following the date of the
indemnification or advance.
T. For purposes of this article, the corporation is deemed to
have requested a director to serve an employee benefit plan whenever
the performance by him of his duties to the corporation also imposes
duties on or otherwise involves services by him to the plan or
participants or beneficiaries of the plan. Excise taxes assessed on
a director with respect to an employee benefit plan pursuant to
applicable law are deemed fines. Action taken or omitted by him
with respect to an employee benefit plan in the performance of his
duties for a purpose reasonably believed by him to be in the
interest of the participants and beneficiaries of the plan is deemed
to be for a purpose which is not opposed to the best interests of
the corporation.
U. The articles of incorporation of a corporation may restrict
the circumstances under which the corporation is required or
permitted to indemnify a person under Section H, I, J, O, P, or Q of
this article."
The Company maintains directors' and officers' liability insurance.
Insofar as the indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions,
or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection
with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed
in the Securities Act and will be governed by the final adjudication of
such issue.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
ITEM 8. EXHIBITS
Reference is made to the Exhibit Index which immediately precedes
the exhibits filed with this Registration Statement.
ITEM 9. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
7
<PAGE>
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933, unless the information required
to be included in a post-effective amendment is contained in a
periodic report filed by the Registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 which
is incorporated by reference in this Registration Statement;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement, unless the information required to be included in a
post-effective amendment is contained in a periodic report
filed by the Registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 which is incorporated by
reference in this Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement.
(2) That for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
The undersigned Registrant hereby undertakes that, for the purpose
of determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of
the Exchange Act that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to
the securities offered herein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
See Item 6, "Indemnification of Directors and Officers," for
the undertaking pursuant to Item 512(h) of Regulation S-K.
8
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-8 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF HOUSTON, STATE OF TEXAS, ON MAY 16, 1996.
VALLEN CORPORATION
By:/s/ James W. Thompson
---------------------
James W. Thompson
President and C.E.O.
POWER OF ATTORNEY
Each of the undersigned directors and officers of Vallen Corporation
does hereby constitute and appoint James W. Thompson and Leighton
Stephenson, or either of them, as the undersigned's true and lawful
attorneys-in-fact and agents to do any and all acts and things in the
undersigned's name and behalf in the undersigned's capacities as director
and/or officer, and to execute any and all instruments for the
undersigned and in the undersigned's name in the capacities indicated
below which such person or persons may deem necessary or advisable to
enable Vallen Corporation to comply with the Securities Act of 1933, as
amended, and any rules, regulations and requirements of the Securities
and Exchange Commission in connection with this Registration Statement,
including specifically, but not limited to, power and authority to sign
for the undersigned in the capacities indicated below any and all
amendments (including post-effective amendments) hereto, and the
undersigned does hereby ratify and confirm all that such person or
persons shall do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
Signature Title Date
--------- ----- ----
/s/ James W. Thompson President and C.E.O., Director May 16, 1996
- --------------------- (Principal Executive Officer)
James W. Thompson
/s/ Leighton J. Stephenson Vice President - Finance May 16, 1996
- -------------------------- Secretary and Treasurer
Leighton J. Stephenson (Principal Financial and
Accounting Officer)
/s/ Leonard J. Bruce Chairman of the May 16, 1996
- -------------------- Board, Director
Leonard J. Bruce
9
<PAGE>
/s/ Darvin M. Winick Director May 16, 1996
- --------------------
Darvin M. Winick
/s/ Kirby Attwell Director May 16, 1996
- -----------------
Kirby Attwell
10
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Sequential
Page
Exhibit No. Description Number*
- ----------- --------------------------------------------------------- ----------
<C> <S> <C>
4.1 Restated Certificate of Incorporation of the Company -
incorporated by reference to exhibit 3a to the
Company's Form 10-K for the fiscal year ended May
31, 1990, as filed with the SEC.
4.2 By-laws of the Company, as amended through June 23,
1994 - incorporated by reference to exhibit 3ii to the
Company's Form 10-Q for the quarter ended November
30, 1995, as filed with the SEC.
4.3 Stock Option Agreement for Craig L. Gaines.
5 Opinion of Mayor, Day, Caldwell & Keeton, L.L.P.
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Mayor, Day, Caldwell & Keeton, L.L.P.
(included in Exhibit 5).
24 Powers of Attorney (included on signature page of this
Registration Statement).
</TABLE>
____________________
* This information appears only in the manually signed original.
<PAGE>
EXHIBIT 4.3
VALLEN CORPORATION
STOCK OPTION AGREEMENT
1. Grant of Option. Vallen Corporation, a Texas corporation (the "Company" or
---------------
"Optionor"), hereby grants to David L. Gaines ("Optionee"), for
compensatory services, the right, privilege and option (the "Option") to
purchase 100,000 Shares of Common Stock of Optionor, fifty cents ($.50) par
value per share (the "Shares"), in accordance with the terms of this
Agreement. The Shares, when delivered to Optionee upon the exercise of the
Option, shall be fully paid and nonassessable. The Option is being granted
pursuant to that certain Employment Agreement (the "Employment Agreement"),
dated as of the date hereof, between the Optionee and All Supplies, Inc., a
wholly owned subsidiary of the Company.
2. Purchase Price. The purchase price of the Shares shall be $14.75 per share
--------------
for Shares purchased during the Option Period, as defined below. Payment
of the purchase price shall be paid in full upon each exercise of the
Option, with such payment to be, at the sole option of the Optionee, either
in cash or by surrender to the Company of shares of the Company's Common
Stock already owned by the Optionee at the time of exercise of the Option
or comprising a portion of the shares to be received by the Optionee upon
such exercise or by a combination thereof. To the extent payment is made
in shares of the Company's Common Stock, such shares shall be valued at
their Fair Market Value (the mean between the highest and lowest sales
price per share of Common Stock of the Company as reported by The Nasdaq
Stock Market) on the date of the exercise of the Option.
3. Exercise of Option. The Option shall terminate on August 18, 2005, unless
------------------
earlier terminated, lapsed or expired pursuant to the provisions of this
Agreement. The period during which the Option is in effect shall be
referred to as the "Option Period". The Option shall vest and become
exercisable as follows:
(a) when the Optionor reports earnings per share for a fiscal year ending
after the date of this Agreement less than $1.20 (adjusted for stock
dividends, splits or recombinations), multiply the number determined
in accordance with subsection (b) below by 0; when the Optionor
reports earnings per share for a fiscal year ending after the date of
this Agreement equal to or greater than $1.20 but less than $1.40
(adjusted for stock dividends, splits or recombinations), multiply the
number determined in accordance with subsection (b) below by .33; when
the Optionor reports earnings per share for a fiscal year ending after
the date of this Agreement equal to or greater than $1.40 but less
than $1.60 (adjusted for stock dividends, splits or recombinations),
multiply the number determined in accordance with subsection (b) below
by .67; when the Optionor reports earnings per share for a fiscal year
ending after the date of this Agreement equal to or
<PAGE>
greater than $1.60 (adjusted for stock dividends, splits or
recombinations), multiply the number determined in accordance with
subsection (b) below by 1.
(b) (i) if, for any fiscal year of All Supplies, Inc., a Louisiana
corporation ("ASI") (which fiscal year shall be the same as Optionor's
fiscal year), ASI's gross profits are equal to or greater than
$2,500,000 but less than $3,000,000, multiply the number specified in
subsection (a) above by 20,000; (ii) if, for any fiscal year of ASI,
ASI's gross profits are equal to or greater than $3,000,000 but less
than $4,000,000, multiply the number specified in subsection (a) above
by 24,000; (iii) if, for any fiscal year of ASI, ASI's gross profits
are equal to or greater than $4,000,000 but less than $5,000,000,
multiply the number specified in subsection (a) by 32,000; (iv) if,
for any fiscal year of ASI, ASI's gross profits are equal to or
greater than $5,000,000 but less than $6,000,000, multiply the number
specified in subsection (a) above by 40,000; (v) if, for any fiscal
year of ASI, ASI's gross profits are equal to or greater than
$6,000,000 but less than $7,000,000, multiply the number specified in
subsection (a) by 50,000; (vi) if, for any fiscal year of ASI, ASI's
gross profits are equal to or greater than $7,000,000 but less than
$7,200,000, multiply the number specified in subsection (a) by 66,667;
(vii) if, for any fiscal year of ASI, ASI's gross profits are equal to
or greater than $7,200,000 but less than $7,660,000, multiply the
number specified in subsection (a) above by 75,000; (viii) if, for any
fiscal year of ASI, ASI's gross profits are equal to or greater than
$7,660,000 but less than $8,160,000, multiply the number specified in
subsection (a) by 83,350; (ix) if, for any fiscal year of ASI, ASI's
gross profits are equal to or greater than $8,160,000 but less than
$8,640,000, multiply the number specified in subsection (a) above by
91,667; (x) if, for any fiscal year of ASI, ASI's gross profits are
equal to or greater than $8,640,000, multiply the number specified in
subsection (a) above by 100,000.
(c) if ASI's net sales during any fiscal year after the date of this
Agreement exceed $36,000,000, then effective on the last day of such
fiscal year the Option shall vest in its entirety.
(d) if on August 18, 1999 the Option has not otherwise vested in its
entirety pursuant to the provisions of subsection (a) and (b) or (c)
above, if on August 18, 1999 the Option has not otherwise terminated,
lapsed or expired pursuant to the provisions of this Agreement, and if
the Optionee has reasonably performed his duties under the Employment
Agreement for such four-year period, as determined by the Company's
Board of Directors, then the number determined according to the
formula specified in subsection (b) above shall be deemed to be
100,000. (For example, and for illustrative purposes only, if the
Optionor reported earnings per share for the 1996 fiscal year of
$1.35, if none of the requirements set forth in subsection (b) were
satisfied, if the Option has not otherwise terminated, lapsed or
expired, and if the Optionee has reasonably performed his duties under
the
2
<PAGE>
Employment Agreement, then on August 18, 1999 the option to
purchase 33,333 shares of the Optionor's Common Stock shall vest and
become exercisable.)
For purposed of the above provisions, earnings are deemed "reported"
on the first date as of which the Optionor issues a press release
reporting such earnings, or files any publicly available report with
the Securities and Exchange Commission setting forth such earnings, or
otherwise makes such earnings available to the public.
For purposes of the above provisions, the following terms shall be defined
as follows:
(a) "Gross profits" shall be determined in accordance with generally
accepted accounting principles and shall equal net sales less direct
costs of sales. The gross profits of the Optionor (or any of its
subsidiaries) directly relating to or directly arising in connection
with ASI's mill supplies operations shall be included in the
calculation of ASI's gross profits.
(b) "Net sales" shall be determined in accordance with generally accepted
accounting principles and shall equal gross sales minus returns.
(c) "Direct costs of sales" shall be determined in accordance with
generally accepted accounting principles and shall equal the cost of
inventory actually sold and costs relating directly thereto.
Exercisable but unexercised portions shall remain exercisable during the
remainder of the Option Period. Optionee may exercise portions of the
Option simultaneously in exchange for cash or shares of stock or a
combination thereof and may request Optionor to automatically apply the
Shares issued upon such exercise to satisfy all or a portion of the
purchase price for additional Shares issued upon the simultaneous exercise
of additional portions of the Option. Optionee shall deliver written
notice to Optionor stating (i) the number of Shares with respect to which
the Option is being exercised, (ii) the method of payment of the purchase
price of such Shares, (iii) whether portions of the Option are being
exercised simultaneously, and (iv) a date, not less than five (5) nor more
than ten (10) days after the date of such notice, as the date on which the
Shares will be taken up for payment, exclusive of Shares automatically
applied to satisfy all or a portion of the purchase price of additional
Shares issued upon the simultaneous exercise of portions of the Option,
made by Optionee therefor in cash or in Shares of Common Stock or an
combination thereof at the principal office of Optionor. If any law or
regulation requires Optionor to take any action with respect to the Shares
specified in such notice, then the date for the delivery of such Shares
against payment therefor shall be extended for the period necessary to take
such action. In the event of any failure to take up and pay for the number
of Shares specified in such notice on the date set forth therein, as the
same may be extended as provided above, the exercise of the Option with
respect to such number of Shares shall be treated as if it had never been
made.
3
<PAGE>
4. Termination of Employment. In the event the employment of Optionee by
-------------------------
Optionor or one of its subsidiaries is terminated during the Option Period
death or disability or for Cause (as defined in the Employment Agreement),
the Option shall automatically lapse and terminate upon expiration of the
Optionee's noncompetition covenant set forth in Section 6 of the Employment
Agreement, with respect to all Shares which have not been previously
exercised; provided, however, that the Optionee shall comply with the terms
of such noncompetition covenant. If the Optionee is terminated for Cause,
then the Option shall automatically lapse and terminate upon the Optionee's
termination of employment.
5. Disability or Death of Optionee. In the event of the termination of
-------------------------------
employment of Optionee by Optionor or one of its subsidiaries by reason of
disability or death of Optionee during the Option Period, (i) the Option
shall not thereafter become exercisable with respect to any further Shares
in addition to those which had already become exercisable at the date of
such termination of employment and (ii) the Option shall terminate at the
end of twelve months after such termination of employment with respect to
all shares which have not been exercised and (iii) the Option may be
exercised (to the extent Optionee was entitled to do so at the date of his
disability or death) at any time and from time to time within a period of
twelve months after his disability or death, by Optionee, by the executor
or administrator of Optionee's estate or by the person or persons to whom
his rights under the Option shall pass by will or the laws of descent and
distribution, but in no event may such person or persons exercise the
Option after the end of the Option Period.
6. Reorganization of Optionor and Subsidiaries. The existence of the Option
-------------------------------------------
shall not affect in any way the right or power of Optionor or its
shareholders to make or authorize any or all adjustments,
recapitalizations, reorganizations, or other changes in Optionor's capital
structure or its business, or any merger or consolidation of Optionor or
any issue of bonds, debentures, preferred or prior reference stock ahead of
or affecting the Shares or the rights thereof, or the dissolution or
liquidation of Optionor, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
In the event of involuntary dissolution of Optionor, the Option shall be
deemed canceled to the extent not previously exercised. If Optionee is an
employee of a subsidiary of Optionor, in the event of the complete
liquidation or dissolution of such subsidiary, or in the event that such
corporation ceases to be a subsidiary of Optionor, the Option shall be
deemed canceled to the extent not previously exercised unless Optionee
shall become employed by Optionor or by another subsidiary on the
occurrence of such event.
If during the Option Period, Optionor is merged into or consolidated with
another corporation under circumstances where Optionor is not the surviving
corporation or the Shares are converted into other securities, cash or
other property in connection with such merger or consolidation; or if
Optionor is liquidated or dissolves voluntarily, or sells or
4
<PAGE>
otherwise disposes of substantially all of its assets to another
corporation; then (a) subject to the provisions of clause (c) below, after
the effective date of such merger, consolidation, liquidation,
dissolution, sale or other distribution, as the case may be, Optionee shall
be entitled, upon exercise of the Option, to receive, in lieu of Shares of
Optionor, the same consideration as the holders of a like number of Shares
of Optionor received pursuant to the terms of the merger, consolidation,
liquidation, dissolution, sale or other disposition; (b) the limitations
set forth in or imposed upon the exercise of the Options pursuant to
Section 3 hereof shall be waived so that the Option, from and after a date
of at least ten (10) days prior to the effective date of such merger,
consolidation, liquidation or sale, as the case may be, specified by the
Board of Directors of Optionor, shall be exercisable in full; and (c) the
Option may be canceled by the Board of Directors of Optionor as of the
effective date of any such merger, consolidation, liquidation or sale
provided that (i) notice of such cancellation shall be given to Optionee
and (ii) Optionee shall have the right to exercise the option in full
(without regard to any limitations set forth in or imposed pursuant to
Section 3 hereof) during a 30-day period preceding the effective date of
such merger, consolidation, liquidation, sale or acquisition.
7. Adjustment of Shares. In the event that, prior to the end of the Option
--------------------
Period, Optionor shall have effected one or more stock splits or
readjustments, stock dividends or other increases or reductions of the
number of its shares outstanding without receiving compensation therefor in
money, resources, or property, the remaining number of Shares still subject
to the Option and the purchase price for such Shares shall be adjusted to
reflect such changes.
8. No Rights in Shares. Optionee shall have no rights as a shareholder in
-------------------
respect of Shares as to which the Option shall not have been exercised,
payments made as herein provided and such Shares issued, and shall have no
rights with respect to such Shares no expressly conferred by this
Agreement.
9. Certain Restrictions. Optionee will acquire his Shares for his own account
--------------------
and without a view to resale or distribution in violation of the Securities
Act of 1933 ("Act") or any other securities law, and upon any such
acquisition Optionee will enter into such written representations,
warranties and agreements as Optionor may reasonably request in order to
comply with the Act or any other securities law or with this Agreement.
Shares of common stock issued upon the exercise of options which are not
subject to an effective registration under the Act, as amended, will bear
the following legend restricting the transfer of such shares:
"The Shares evidenced by this certificate have been issued in a
transaction that was not registered under the Securities Act of 1933
or any other securities law. Such shares may not be offered, sold,
transferred, pledged or hypothecated in the absence of an effective
registration statement for such shares under the Securities Act of
5
<PAGE>
1933 and each other applicable securities law or except in
transactions which, in the opinion of counsel acceptable to Vallen
Corporation, which opinion must be delivered to Vallen Corporation
prior to the proposed transactions, do not require such registration."
10. Withholding Taxes. Optionee shall pay to Optionor, on the date of exercise
-----------------
of the Option, the appropriate amount of taxes required to be withheld as a
result of exercise of the Option from Optionee's compensation.
11. Shares Reserved. Optionor shall at all times during the Option Period
---------------
reserve and keep available such number of authorized but unissued shares or
previously issued shares of Common Stock held in its treasury as will be
sufficient to satisfy the requirements of this Agreement.
12. Nonassignability. The Option shall not be encumbered, assigned,
----------------
transferred, sold, or otherwise disposed of in whole or in part other than
upon the death of the Optionee by will or pursuant to applicable laws of
descent and distribution. All Shares purchased pursuant to the Option
shall be purchased for investment.
13. Amendment and Termination. No amendment or termination of this Agreement
-------------------------
shall be made by Optionor at any time without the written consent of
Optionee.
14. Successors. This Agreement shall be binding upon any successors of
----------
Optionor.
DATED AND EFFECTIVE AS OF THE 18TH DAY OF AUGUST, 1995.
VALLEN CORPORATION
By:/s/ James Thompson
------------------------------
James Thompson
President
By:/s/ David L. Gaines
------------------------------
David L. Gaines
6
<PAGE>
[LETTERHEAD FOR MAYOR, DAY, CALDWELL & KEETON, L.L.P. APPEARS HERE]
EXHIBIT 5
---------
May 16, 1996
Vallen Corporation
13333 Northwest Freeway
Houston, Texas 77040
Re: The Vallen Corporation David L. Gaines
Stock Option Plan
Dear Sirs:
We have acted as counsel for Vallen Corporation, a Texas corporation (the
"Company"), in connection with the proposed offering of up to 100,000 shares of
Common Stock, par value $.01 per share (the "Common Stock"), of the Company
pursuant to the Company's David L. Gaines Stock Option Plan (the "Plan").
In connection therewith, we have examined among other things, the Articles
of Incorporation and the Bylaws of the Company, and the relevant corporate
proceedings with respect to the registration statement on Form S-8 to be filed
by the Company with the Securities and Exchange Commission for the registration
of the Common Stock under the Securities Act of 1933, as amended (the
"Registration Statement").
Based on the foregoing, and having regard for such legal considerations as
we have deemed relevant, we are of the opinion that the shares of Common Stock
to be issued by the Company, when issued in accordance with the Plan, subject to
the Registration Statement becoming effective under the Securities Act of 1933,
as amended, and to compliance with applicable Blue Sky laws, will be legally
issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to our firm under "Interest of Named
Experts and Counsel" in the Prospectus forming a part of the Registration
Statement.
Very truly yours,
/s/ MAYOR, DAY, CALDWELL & KEETON, L.L.P
----------------------------------------
MAYOR, DAY, CALDWELL & KEETON, L.L.P
<PAGE>
EXHIBIT 23.1
The Board of Directors
Vallen Corporation:
We consent to the use of our reports incorporated by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK L.L.P.
Houston, Texas
May 16, 1996
