SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): September 25, 1996
SUPER VISION INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
(State of Other Jurisdiction of Incorporation)
0-23590 59-3046866
(Commission File No.) (I.R.S. Employer Identification No.)
2442 Viscount Row, Orlando, Florida 32809
(Address of Principal Executive Offices (Zip Code)
(407) 857-9900
(Registrant's Telephone Number, Including Area Code)
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5. Other Events.
On September 25, 1996, Registrant entered into a Stock Purchase
Agreement with Hayward Industries, Inc. ("Hayward") pursuant to which Registrant
sold to Hayward 249,420 shares of its class A Common Stock, $.001 par value per
share ("Class A Common Stock") for a purchase price of $2,000,000. In addition,
the Reistrant entered into a Distributorship Agreement with Hayward Pool
Products, Inc. ("Hayward Pool Products"), a subsidiary of Hayward, pursuant to
which Hayward Pool Products was granted the exclusive worldwide distribution
rights to Registrant's fiber optic pool and spa lighting products in
consideration for guaranteed initial minimum purchases of $12 Million over five
years, renewable after such period. Hayward was also granted a ten year warrant
to purchase an additional 249,420 shares of Class A Common Stock of the
Registrant at $8.02 per share, and a warrant to purchase an additional 522,00
shares of Class A Common Stock at fair market value if the number of outstanding
shares of Class A Common Stock of Registrant is increased as a result of the
exercise of Registrant's currently outstanding warrants (the "Warrants").
Hayward was granted registration rights with respect to the shares of Class A
Common Stock sold pursuant to the Stock Purchase Agreement and the shares of
Class A Common Stock issuable upon exercise of the Warrants. Hayward also has
the right to designate one director to Registrant's Board of Directors.
Exhibits.
1. Stock Purchase Agreement between Registrant and Hayward Industries
Inc., dated as of September 25, 1996, including exhibits.
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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 hereunto duly authorized.
SUPER VISION INTERNATIONAL
Dated: October 1, 1996
/S/ Brett Kingstone
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Brett Kingstone
President
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SUPER VISION INTERNATIONAL, INC.
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STOCK PURCHASE AGREEMENT
Dated as of September 25, 1996
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Class A Common Stock
$.001 Par Value
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TABLE OF CONTENTS
Page
ARTICLE I PURCHASE AND SALE OF SHARES AND WARRANTS................. 2
1.1 Purchase and Sale of Shares and Warrants................. 2
1.2 Purchase Price........................................... 2
1.3 Warrants................................................. 2
1.4 Issue Taxes.............................................. 3
ARTICLE II REPRESENTATIONS AND WARRANTIES
OF THE CORPORATION....................................... 3
2.1 Incorporation; Subsidiaries.............................. 3
2.2 Authorization............................................ 3
2.3 Conflicts................................................ 4
2.4 Capitalization........................................... 4
2.5 Securities Filings....................................... 6
2.6 Financial Statements..................................... 6
2.7 Taxes.................................................... 8
2.8 Title; Sales Arrangements; Defaults...................... 8
2.9 Employee Benefit Plans................................... 9
2.10 Insurance................................................ 9
2.11 Disputes and Litigation.................................. 9
2.12 Compliance With Law; Licenses; Franchises................ 10
2.13 Distributorship Agreement................................ 11
2.14 Private Placement........................................ 11
2.15 Disclosure............................................... 11
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER......................................... 11
3.1 Incorporation............................................ 11
3.2 Authorization............................................ 11
3.3 Conflicts................................................ 12
3.4 Private Placement........................................ 12
ARTICLE IV PRE-CLOSING COVENANTS.................................... 13
4.1 General Conduct of Business.............................. 13
4.2 Capitalization........................................... 13
4.3 Due Diligence; SEC Filings............................... 14
4.4 Lien Searches............................................ 14
4.5 Notification of Certain Matters.......................... 15
4.6 Termination/Modification of Sales Agreements............. 15
4.7 Forbearance.............................................. 15
ARTICLE V CLOSING.................................................. 16
5.1 Time and Place of Closing................................ 16
5.2 Delivery of Shares; Warrants............................. 16
5.3 Delivery of Purchase Price............................... 16
ARTICLE VI CONDITIONS PRECEDENT TO
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OBLIGATIONS OF THE PURCHASER............................. 16
6.1 Opinion of Counsel to the Corporation.................... 16
6.2 Representations; Warranties; Covenants................... 18
6.3 Certified Resolutions.................................... 18
6.4 Consents................................................. 19
6.5 Registration Rights Agreement............................ 19
6.6 Distributorship Agreement................................ 19
6.7 Sales Agreements......................................... 19
6.8 Litigation............................................... 19
6.9 Other Certificates....................................... 19
ARTICLE VII CONDITIONS PRECEDENT TO
OBLIGATIONS OF THE CORPORATION........................... 20
7.1 Opinion of Counsel to the Purchaser...................... 20
7.2 Representations; Warranties; Covenants................... 21
7.3 Certified Resolutions.................................... 21
7.4 Distributorship Agreement................................ 21
7.5 Other Certificates....................................... 21
ARTICLE VIII POST-CLOSING COVENANTS OF THE
CORPORATION.............................................. 21
8.1 Rights to Purchase Additional Stock...................... 21
8.2 Right of First Refusal................................... 23
8.3 Board Representation..................................... 25
8.4 Sales Agreements......................................... 25
ARTICLE IX TERMINATION.............................................. 25
9.1 Termination.............................................. 25
9.2 Effect of Termination.................................... 26
ARTICLE X INDEMNIFICATION.......................................... 26
10.1 Basis of Indemnity....................................... 26
10.2 Procedures for Indemnification........................... 26
10.3 Payment of Indemnity..................................... 27
ARTICLE XI MISCELLANEOUS............................................ 27
11.1 Notices.................................................. 27
11.2 Survival of Representations.............................. 28
11.3 Entire Agreement......................................... 28
11.4 Further Action........................................... 28
11.5 Benefit of Agreement..................................... 29
11.6 Expenses................................................. 29
11.7 Governing Law............................................ 29
11.8 Captions................................................. 29
11.9 Brokerage................................................ 29
11.10 Counterparts............................................. 29
Exhibit A: Initial Warrant Certificate
Exhibit B: Supplemental Warrant Certificate
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Exhibit C: Registration Rights Agreement
Exhibit D: Distributorship Agreement
Schedule 1: Capitalization
Schedule 2: Sales Agreements
Schedule 3: Liens
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of the 25th day of September, 1996, by
and between SUPER VISION INTERNATIONAL, INC., a corporation duly organized and
validly existing under the laws of the State of Delaware (hereinafter referred
to as the "Corporation"), and HAYWARD INDUSTRIES, INC., a corporation duly
organized and validly existing under the laws of the State of New Jersey
(hereinafter referred to as the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Corporation is engaged in the business of manufacturing,
developing, designing and marketing fiber optic products with application in,
among other areas, the pool, spa and hot tub business (hereinafter referred to
as the "Products"); and
WHEREAS, contemporaneously with Closing (as hereinafter defined) pursuant
to this Agreement, the Corporation desires, among other matters, to appoint
Hayward Pool Products, Inc., a wholly- owned subsidiary of the Purchaser, as its
exclusive, worldwide distributor for the Products through the swimming pool, spa
and hot tub business, and the Purchaser desires to procure such appointment upon
the terms and subject to the provisions of a distributorship agreement
(hereinafter defined as the "Distributorship Agreement") as hereinafter
provided; and
WHEREAS, in order to provide funds for the operation and expansion of its
business, without limitation so as to enable the Corporation to fulfill its
obligations under the Distributorship Agreement, the Corporation desires to
issue, sell and deliver to the Purchaser the number of shares (hereinafter
referred to as the "Shares") of the class A common stock, $.001 par value
(hereinafter referred to as the "Class A Common Stock"), of the Corporation
hereinafter identified, and, in consideration of the covenants and agreements of
the Purchaser hereunder, to issue and deliver to the Purchaser warrants
(hereinafter referred to, collectively, as the "Warrants"), respectively, to
acquire an equal number of shares (hereinafter referred to as the "Initial
Warrant Shares") of Class A Common Stock, and further to acquire certain
additional shares (together with the Initial Warrant Shares, hereinafter
referred to as the "Warrant Shares") of Class A Common Stock in the event of
exercise of the rights to acquire securities of the Corporation specified
therein, and the Purchaser desires to purchase and acquire the Shares, together
with Warrants, upon the terms and subject to the conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter set forth, the parties hereto hereby agree as
follows:
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ARTICLE I
PURCHASE AND SALE OF SHARES AND WARRANTS
1.1 Purchase and Sale of Shares and Warrants.
Subject to the terms and conditions of this Agreement, and on the basis of
the representations, warranties and covenants herein contained, effective at
Closing the Corporation hereby agrees to issue, sell and deliver to the
Purchaser 249,480 shares of Class A Common Stock, and the Purchaser hereby
agrees to purchase, acquire and accept the Shares from the Corporation.
1.2 Purchase Price.
(a) The purchase price (hereinafter referred to as the "Purchase Price")
for the Shares shall be $2,000,000.
(b) The Purchaser has heretofore delivered to Messrs. Krugman, Chapnick &
Grimshaw, as escrow agent (hereinafter referred to as the "Escrow Agent"), the
amount of $250,000 (hereinafter referred to as the "Deposit"), which shall be
held pursuant to the terms and conditions set forth in Section 1 (hereinafter
referred to as the "Escrow Agreement") of the letter dated June 24, 1996
(hereinafter referred to as the "Letter of Intent"), and which shall be applied
as hereinafter set forth (subject to the terms of the Escrow Agreement). In the
event of the occurrence of Closing: (i) the Corporation and the Purchaser shall,
jointly, so notify the Escrow Agent, in writing, and the Deposit shall be
delivered to the Corporation by wire transfer of funds directed to the
Corporation's account specified in such notice by the Corporation, and (ii) the
Purchaser shall deliver to the Corporation, by wire transfer of funds directed
to the Corporation's account specified as aforesaid, the amount of the
difference between the Purchase Price and the Deposit (exclusive of all interest
thereon, if any). The parties acknowledge and agree that the foregoing
instructions contemplated under clause (i) immediately preceding are intended in
furtherance of the Escrow Agreement, the provisions of which remain and shall
remain in full force and effect (except that the reference under Paragraph (b)
thereof to "expiration of the Settlement Period" shall be deemed to refer to the
Termination Date [as hereinafter defined]).
1.3 Warrants.
In consideration of the covenants and agreements of the Purchaser set forth
herein, including, without limitation, the execution and delivery of the
Distributorship Agreement at Closing, the Corporation shall issue and deliver
the Warrants to the Purchaser, such Warrants to be evidenced by: (x) the form of
the warrant certificate attached hereto as Exhibit A (the Warrants evidenced by
the Warrant Certificate contemplated by Exhibit A hereinafter referred to as the
"Initial Warrants"); and (y) the form of warrant certificate attached hereto as
Exhibit B (the
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Warrants evidenced by the Warrant Certificate contemplated by Exhibit B
hereinafter referred to as the "Protective Warrants"; both such warrant
certificates hereinafter referred to, collectively, as the "Warrant
Certificates").
1.4 Issue Taxes.
The Corporation shall pay the taxes and governmental fees in connection
with: (a) the issuance, sale, or delivery by the Corporation to the Purchaser of
the Shares and the Warrants and (b) the execution and delivery of this Agreement
and any other documents or instruments executed and delivered at the Closing.
The Corporation shall hold each holder of the Shares and the Warrants harmless,
without limitation as to time, against any and all liabilities with respect to
any such taxes and fees. The obligations under this Section 1.4 shall survive
any transfer of the Shares and the Warrants, or any of them, and the termination
of this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE CORPORATION
The Corporation hereby represents, warrants and covenants that:
2.1 Incorporation; Subsidiaries.
The Corporation is duly organized, validly existing and in good standing
under the laws of the State of Delaware and has full corporate power and
authority to own or hold under lease the assets and properties which it owns or
holds under lease and to perform all its obligations under the agreements to
which it is a party, including, without limitation, this Agreement and the other
Principal Documents (as hereinafter defined). The Corporation is qualified as a
foreign corporation in good standing in each other jurisdiction wherein the
failure so to qualify would, individually or in the aggregate, have a material
adverse effect on its business, properties, operations, income, assets,
prospects or condition, financial or otherwise (hereinafter referred to as the
"Corporation's business or condition"). The copies of the certificate of
incorporation and by-laws of the Corporation which have been delivered to the
Purchaser by the Corporation are complete and correct. The Corporation does not,
directly or indirectly, hold any capital stock or other proprietary interest,
beneficially or of record, in any corporation, partnership, joint venture,
business trust or other legal entity.
2.2 Authorization.
The execution and delivery by the Corporation of this Agreement, the
Distributorship Agreement, the Warrant Certificates, and each of them, and (as
hereinafter defined) the Registration
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Rights Agreement (this Agreement, the Distributorship Agreement, the Warrant
Certificates and the Registration Rights Agreement being herein referred to,
collectively, as the "Principal Documents"), the performance by the Corporation
of its covenants and agreements under the Principal Documents, and each of them,
and the consummation by the Corporation of the transactions contemplated by the
Principal Documents, and each of them, have been duly authorized by all
necessary corporate action. When executed and delivered by the Corporation, the
Principal Documents, and each of them, shall constitute the valid and legally
binding obligations of the Corporation enforceable against the Corporation in
accordance with their respective terms, except as may be limited by bankruptcy,
insolvency or other laws affecting generally the enforceability of creditors'
rights and by limitations on the availability of equitable remedies, whether
considered in an action at law or a proceeding in equity.
2.3 Conflicts.
Neither the execution and delivery of the Principal Documents, nor any of
them, nor the consummation of the transactions contemplated in the Principal
Documents, or any of them, will violate any provision of the certificate of
incorporation or by-laws of the Corporation or any law, rule, regulation, writ,
judgment, injunction, decree, determination, award or other order of any court,
government, or governmental agency or instrumentality, domestic or foreign,
binding upon the Corporation, or conflict with or result in any breach of or
event of termination under any of the terms of, or the creation or imposition of
any mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any nature pursuant to, the terms of any contract or agreement to
which the Corporation is a party or by which the Corporation or any of its
properties or assets is bound. No consents, approvals or authorizations or
filings or registrations with any governmental agency or authority or any other
person or entity are required in connection with the execution and delivery of
the Principal Documents, or any of them, by the Corporation or the consummation
by the Corporation of the transactions contemplated hereby or thereby.
2.4 Capitalization.
(a) The authorized capital stock of the Corporation consists of: (x)
5,000,000 shares of preferred stock, $.001 par value (hereinafter referred to as
the "Preferred Stock"), none of which are issued and outstanding as of the date
of this Agreement; (y) 16,610,866 shares of Class A Common Stock, of which
1,431,466 shares are issued and outstanding as of the date of this Agreement and
an aggregate of 5,656,891 shares (prior to giving effect to the issuance of the
Shares) are reserved for issuance pursuant to exercise of the warrants and
options hereinafter identified; and (z) 3,389,134 shares of class B common
stock, $.001 par value (hereinafter referred to as the "Class B Common Stock",
and, together with the Class A Common Stock, the "Common Stock"), of
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which 3,375,134 are issued and outstanding as of the date of this Agreement. All
of the outstanding shares of Common Stock have been validly issued and are
fully-paid and non-assessable, and the Shares, when issued and delivered in
accordance with this Agreement, will be validly issued, fully-paid and
non-assessable shares of Common Stock, free and clear of any mortgage, deed of
trust, pledge, lien, security interest or any charge or encumbrance of any
nature granted by the Corporation. The Corporation does not hold any shares of
Preferred Stock, or any shares of Common Stock, as treasury stock. The
Corporation has duly reserved for issuance from the authorized but unissued
Common Stock such number of shares thereof sufficient for issuance under this
Agreement. There are no preemptive rights with respect to any shares of the
capital stock of the Corporation, including, without limitation, the Shares or
the Warrant Shares, or any of them.
(b) There are no subscriptions, warrants, options, calls, commitments by or
agreements to which the Corporation is bound relating to the issuance or
purchase of any shares of Preferred Stock, and no such subscriptions, warrants,
options, calls, commitments by or agreements to which the Corporation is bound
relating to the issuance or purchase of any shares of Common Stock except for:
(w) 139,391 shares of Class A Common Stock reserved for issuance upon exercise
of outstanding options as of the date hereof (hereinafter referred to as the
"Employee Options") granted under the Corporation's existing stock option plan,
(x) 120,000 shares of Class A Common Stock reserved for issuance upon exercise
of the Corporation's Unit Purchase Options identified on Schedule 1 attached
hereto (hereinafter referred to as the "Unit Purchase Options"), (y) 1,797,500
shares of Class A Common Stock reserved for issuance upon exercise of the
Corporation's Class A Warrants identified on Schedule 1 attached hereto
(hereinafter referred to as the "Class A Warrants"), including Class A Warrants
issuable upon exercise of Unit Purchase Options, and (z) 3,300,000 shares of
Class A Common Stock reserved for issuance upon exercise of the Class B Warrants
identified on Schedule 1 attached hereto (hereinafter referred to as the "Class
B Warrants"), including Class B Warrants issuable upon exercise of Class A
Warrants and Unit Purchase Options. Except as set forth on Schedule 1, no event
has occurred which will cause any adjustment in any conversion or exercise price
or ratio with respect to any such securities pursuant to any anti-dilution
provisions thereunder, nor, as a result of any such event, will the number of
shares of Common Stock issuable upon such conversion or such exercise, as the
case may be, be subject to adjustment. Except as set forth on Schedule 1, no
such conversion or exercise price or ratio will be subject to adjustment as a
consequence of the transactions contemplated by the Principal Documents, nor, as
a consequence of such consummation, will the numbers of shares of Common Stock
issuable upon such conversion or such exercise, as the case may be, be subject
to adjustment. There are no contracts, agreements, arrangements (written or
oral) or other documents to which the Corporation is a party regulating or
controlling or otherwise affecting the voting or disposition of any shares of
stock of the Corporation, or the
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management thereof, except as set forth in Schedule 1. The Corporation has not
extended any demand or incidental registration rights under the Securities Act
of 1933, as amended (hereinafter referred to as the "Securities Act"), except as
set forth in Schedule 1.
2.5 Securities Filings.
The Corporation has, on a timely basis, since March 24, 1994, made all
filings with the Securities and Exchange Commission (hereinafter referred to as
the "Commission") that it has been required to make under the Securities Act of
1933, as amended (hereinafter referred to as the "Securities Act") and the rules
and regulations thereunder and the Securities and Exchange Act of 1934, as
amended (hereinafter referred to as the "Exchange Act"), and the rules and
regulations thereunder. The Corporation has provided to the Purchaser a complete
and correct copy of the Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, its Quarterly Reports on Form 10-Q for the
quarters ended, respectively, March 31 and June 30, 1996 and its proxy statement
dated May 20, 1996 (hereinafter referred to, collectively, as the "Current SEC
Reports"). The Current SEC Reports comply in all material respects with the
requirements of the Exchange Act, and none of the Current SEC Reports contain
any untrue statement of a material fact or omit to state a 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.
2.6 Financial Statements.
(a) The Corporation has delivered to the Purchaser (i) the balance sheets
of the Corporation as and at December 31, 1995 and 1994, and the related
statements of operations for the fiscal years then ended, accompanied, in each
case, by the report of Coopers & Lybrand, L.L.P. (hereinafter referred to as the
"Accountant") with respect thereto (hereinafter referred to as the "Audited
Financial Statements") and (ii) the unaudited balance sheets of the Corporation
as and at June 30, 1996 and 1995, and the related unaudited statements of
operations for the six months then ended, respectively (hereinafter referred to
as the "Interim Financial Statements", and together with the Audited Financial
Statements, the "Financial Statements"). The Financial Statements have been
prepared in conformity with generally accepted accounting principles
consistently applied throughout the periods to which such financial statements
relate, except as otherwise indicated therein and except, in the case of the
Interim Financial Statements, as permitted by the requirements of Form 10-Q. The
Financial Statements fully and fairly present, in conformity with such
principles as so utilized, the financial position and results of operations of
the Corporation, and the changes in their cash flows, at the dates shown and for
the periods therein specified. The balance sheets constituting a part of the
Financial Statements fully and fairly present as and at the dates thereof all
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liabilities of the Corporation of the types normally reflected in balance sheets
as and at the dates thereof. Other than (in the case of the Interim Financial
Statements) year-end audit adjustments on a basis comparable to past practice,
all adjustments necessary to present fully and fairly the financial position and
results of operations of the Corporation, and the changes in its financial
position, for such periods have been included in the Financial Statements.
Except to the extent disclosed in the Financial Statements, the Corporation does
not have any liabilities, whether accrued, absolute, contingent, or otherwise,
whether due or to become due and whether the amount thereof is readily
ascertainable or not, which, individually or in the aggregate, might be
materially adverse to the Corporation's business or condition.
(b) Subsequent to June 30, 1996, the Corporation has not:
(i) declared, set aside or made any payment or distribution upon any
capital stock or, directly or indirectly, purchased, redeemed or otherwise
acquired or disposed of any shares of capital stock;
(ii) incurred any liability or obligation under agreements or
otherwise, except current liabilities entered into or incurred in the
ordinary course of business consistent with past practice; issued any
equity securities or rights with respect to equity securities; issued any
notes or other corporate debt securities or paid or discharged any
outstanding indebtedness, except in the ordinary course of business
consistent with past practice; or mortgaged, pledged or subjected to any
Lien (as hereinafter defined) any of its assets or properties;
(iii) entered into any transaction other than in the ordinary course
of business consistent with past practice, except in connection with the
execution and performance of this Agreement or the other Principal
Documents and the transactions contemplated hereby and thereby;
(iv) suffered any damage, destruction, or loss to any of its assets or
properties (whether or not covered by insurance); or
(v) suffered any material adverse change in the Corporation's business
or condition;
and, since June 30, 1996, there has been no occurrence, circumstance or
combination thereof which, individually or in the aggregate, might be expected
to result in any such material adverse change. For purposes of this Agreement,
the term "Lien" shall be defined to mean any mortgage, deed of trust, security
interest, pledge, lien, or other charge or encumbrance of any nature except: (a)
liens for taxes, assessments, or governmental charges or levies not yet due and
delinquent, (b) liens consisting of zoning or planning restrictions, easements,
permits, any other restrictions
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or limitations on the use of real property or irregularities in title thereto
which do not materially detract from the value of, or impair the use of, such
property by the Corporation or the Subsidiaries, respectively, and (c) as
expressly set forth in the Financial Statements (or the notes thereto).
2.7 Taxes.
The Corporation has filed or caused to be filed all federal, state,
municipal and other tax returns, reports and declarations required to be filed
by it, so as to prevent any valid Lien on its assets or properties and has paid
or shall pay all taxes which have been or shall become due with respect to the
periods covered by said returns or pursuant to any assessment received by it in
connection therewith. All assessments and charges (including penalties and
interest, if any) related to periods ended on or before December 31, 1995 have
been or will be paid by the Corporation, including any necessary adjustments
with state and local tax authorities, and no deficiency in payment of any taxes
for any period has been asserted by any taxing authority which remains unsettled
at the date hereof. Adequate provision has been made in the Financial Statements
for the payment of all then accrued and unpaid federal and other taxes of the
Corporation and the Subsidiaries whether or not yet due and payable and whether
or not disputed by the Corporation or any Subsidiary.
2.8 Title; Sales Arrangements; Defaults.
The Corporation has good, valid, and marketable title to all of its assets
and properties, in each case, except as set forth on Schedule 3 annexed hereto,
free and clear of all Liens; and, without limiting the foregoing, has good,
valid and marketable title to all of its assets and properties shown on the
consolidated balance sheet as and at June 30, 1996 included in the Interim
Financial Statements, in each case free and clear of all Liens, except for such
assets and properties disposed of in the ordinary course of business since that
date. The Corporation leases or owns all properties and assets necessary for the
operation of its business as currently conducted. No event has occurred, or, is
alleged to have occurred, which constitutes, or with lapse of time or giving of
notice or both would constitute, a default or a basis for a claim of force
majeure or other claim of excusable delay or non-performance under any contract
or other arrangement to which the Corporation is a party, which, individually or
in the aggregate, would have a material adverse effect on the Corporation's
business or condition. Set forth on Schedule 2 annexed hereto is a list of all
sales agency, distributorship, manufacturer's representative and similar
arrangements with respect to the Products, or any of them (hereinafter referred
to as the "Sales Agreements"), together with the territory and products covered
thereby and the expiration date thereof, true and complete copies of which have
been delivered by the Corporation to the Purchaser.
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2.9 Employee Benefit Plans.
All pension, profit-sharing, bonus, incentive, welfare, or other employee
benefit plans within the meaning of section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended (hereinafter referred to as "ERISA"), in
which the employees of the Corporation participate (such plans and related
trusts, insurance, and annuity contracts, funding media, and related agreements
and arrangements, other than any "multiemployer plan" (within the meaning of
section 3(37) of ERISA) being hereinafter referred to as the "Benefit Plans",
and such multiemployer plans being hereinafter referred to as the "Multiemployer
Plans") comply in all material respects with all requirements of the Department
of Labor and the Internal Revenue Service promulgated under ERISA and with all
other applicable laws. The Corporation has not taken or failed to take any
action with respect to either the Benefit Plans or the Multiemployer Plans which
might create any liability on the part of the Corporation; no Benefit Plan which
is a "defined benefit plan" (within the meaning of Section 3(35) of
ERISA)(hereinafter referred to as the "Defined Benefit Plans") or Multiemployer
Plan has incurred an "accumulated funding deficiency" (within the meaning of
section 412(a) of the Internal Revenue Code of 1986, as amended [hereinafter
referred to as the "Code"]), whether or not waived; no "reportable event"
(within the meaning of section 4043 of ERISA) has occurred with respect to any
Defined Benefit Plan or any Multiemployer Plan; no "prohibited transaction"
(within the meaning of section 406 of ERISA or section 4975(c) of the Code) has
occurred with respect to any Benefit Plan or any Multiemployer Plan; and the
excess of the aggregate present value of accrued benefits of the Defined Benefit
Plans is not more than the aggregate value of the assets of such plans. Each
"fiduciary" (within the meaning of section 3(21)(A) of ERISA) as to each Benefit
Plan and as to each Multiemployer Plan has complied in all material respects
with the requirements of ERISA and all other applicable law in respect of each
such Plan.
2.10 Insurance.
The Corporation maintains insurance policies covering all of its assets and
properties and general public liability insurance and product liability
insurance, providing such coverage and in such amounts as are customarily
carried by companies engaged in similar businesses and owning similar properties
and assets in the same general areas in which the Corporation competes. Such
policies are in full force and effect, all premiums due thereon have been paid,
and the Corporation has complied with the provisions of such policies.
2.11 Disputes and Litigation.
There is no action, suit, proceeding, or claim, pending or threatened
before any court, government or governmental agency or instrumentality, domestic
or foreign, and no investigation by any court or government or governmental
agency or instrumentality,
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domestic or foreign, pending or threatened, against the Corporation, nor is
there any outstanding order, writ, judgment, stipulation, injunction, decree,
determination, award, or other order of any court or government or governmental
agency or instrumentality, domestic or foreign, against the Corporation, in each
case which would, individually or in the aggregate, have a material adverse
effect on the Corporation's business or condition. The use by the Corporation of
its assets and the conduct of its business do not involve infringement or, to
the best of the Corporation's knowledge, claimed infringement, of any patent,
trademark, servicemark, tradename, copyright, license or similar right.
2.12 Compliance With Law; Licenses; Franchises.
(a) The Corporation has (or has made timely application for) all
franchises, licenses, permits and other governmental and non-governmental
approvals necessary to enable it to carry on its business as currently
conducted. All such franchises, licenses, permits, and governmental and other
approvals (other than those with respect to which timely application is pending)
are in full force and effect, there has been no default or breach thereunder,
and there is no pending or, to the best of the Corporation's knowledge,
threatened proceeding under which any may be revoked, terminated or suspended.
The execution and delivery of this Agreement, and the consummation of the
transactions contemplated hereby, will not conflict with, contravene or
terminate any such franchises, licenses, permits or governmental or other
approvals. The Corporation has not violated, nor, to the best of the
Corporation's knowledge, is it alleged to have violated, any law, rule,
regulation, judgment, stipulation, injunction, decree, determination, award or
other order of any government, or governmental agency or instrumentality,
domestic or foreign, binding upon the Corporation which violation, individually
or in the aggregate, might have a materially adverse effect on the Corporation's
business or condition.
(b) The Corporation: (i) has not filed any notice under any federal, state
or local law, or regulation, indicating past or present treatment, storage or
disposal of a hazardous waste or reporting a spill or release of a hazardous or
toxic waste, substance or constituent, or other substance into the environment,
and (ii) does not have any liability, contingent or otherwise, under any such
law or regulation in connection with any release of any hazardous or toxic
waste, substance or constituent, or other substance into the environment, or the
placement of any hazardous or toxic waste, substance or constituent, or other
substance on property, now or formerly owned or leased by the Corporation. No
hazardous materials and no hazardous substances have been generated, treated,
stored or disposed of by the Corporation or placed by the Corporation in
violation of any applicable law or regulation on any property owned or leased by
the Corporation.
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2.13 Distributorship Agreement.
All representations and warranties made by the Corporation contained in the
Distributorship Agreement are true and correct on the date hereof as if made on
the date hereof, and are hereby incorporated by reference herein.
2.14 Private Placement.
Neither the Corporation nor anyone acting on its behalf has directly or
indirectly offered any shares of Common Stock or any other securities for sale
to, or solicited any offer to buy any of the same from, anyone so as to bring
the offer, sale, issuance and/or delivery of the Shares or Warrants, or any of
them, or the Warrant Shares, within the registration requirements of the
Securities Act. Neither the offer, sale, issuance and/or delivery of the Shares
or Warrants, or the Warrant Shares, nor any of them, hereunder will result in
any contravention of any applicable federal or state securities laws, and will
not require any approval or consent of any governmental authority, commission or
agency.
2.15 Disclosure.
No representation or warranty made under any provisions of the Principal
Documents, or any of them, and none of the information furnished by the
Corporation set forth herein, in the exhibits or schedules hereto or in any
document delivered to the Purchaser, or any authorized representative of the
Purchaser, pursuant to this Agreement, contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
herein or therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
The Purchaser represents, warrants and covenants that:
3.1 Incorporation.
The Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of New Jersey, and has full corporate power
and authority to acquire the Shares and the Warrants hereunder.
3.2 Authorization.
The execution and delivery of this Agreement by the Purchaser, the
performance by the Purchaser of its covenants and agreements hereunder, and the
consummation by the Purchaser of the transactions contemplated hereby have been
duly authorized by all necessary corporate action. When executed and delivered
by the Purchaser this Agreement will constitute the valid and legally
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binding obligation of the Purchaser enforceable against the Purchaser in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
or other laws affecting generally the enforceability of creditors' rights and by
limitations on the availability of equitable remedies, whether considered in an
action at law or a proceeding in equity.
3.3 Conflicts.
Neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated herein will violate any provision of the
certificate of incorporation or by-laws of the Purchaser or any law, rule,
regulation, writ, judgment, injunction, decree, determination, award, or other
order of any court, government or governmental agency or instrumentality,
domestic or foreign, binding upon the Purchaser, or conflict with or result in
any breach of or event of termination under any of the terms of, or constitute a
default under or result in the termination of or the creation or imposition of
any mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any nature pursuant to, the terms of any contract or agreement to
which the Purchaser is a party or by which the Purchaser or any of its assets
and properties is bound. No consents, approvals or authorizations or filings or
registrations with any government agency or authority or any other person or
entity are required in connection with the execution and delivery of the
Principal Documents to which it is party, or any of them, by the Purchaser or
the consummation by the Purchaser of the transactions contemplated hereby or
thereby.
3.4 Private Placement.
Without limiting the scope of the representations and warranties of the
Corporation set forth in Article II of this Agreement, the Purchaser
acknowledges that it has received such financial and other information from the
Corporation and that it has had the opportunity to ask representatives of the
Corporation such questions in connection with the purchase of the Shares and the
transactions contemplated hereby which it has deemed material in connection with
an investment in the Corporation, and to verify the accuracy of the information
so received. The Purchaser is an "accredited investor" as defined under
Regulation D promulgated by the Commission. Except as contemplated by the
Registration Rights Agreement and as permitted by Section 9.5 hereof, the
Purchaser will acquire the Shares and the Warrants for its own account and not
with a view to, or for sale in connection with, the distribution thereof within
the meaning of the Securities Act.
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ARTICLE IV
PRE-CLOSING COVENANTS
4.1 General Conduct of Business.
The Corporation hereby covenants and agrees that from and after the date of
this Agreement and until the Closing, the Corporation shall:
(a) Make no purchase, sale, or lease in respect of, nor introduce any
method of management or operation in respect of, its business or its assets and
properties, except in a manner consistent with prior practice, this Agreement
and the Distributorship Agreement.
(b) Preserve its present business organization intact and not merge into,
or consolidate with, any other entity.
(c) Maintain its books and records in accordance with good business
practices, on a basis consistent with prior practice.
(d) Comply in all material respects with all laws, rules, regulations,
writs, statutes, ordinances, judgments, injunctions, decrees, determinations,
awards, and other orders of every court, government and governmental agency and
instrumentality, domestic or foreign, applicable to it and to the conduct of its
business and perform in all material respects all its obligations without
default.
(e) Not mortgage, pledge, or subject to Lien any of its assets and
properties.
(f) Maintain and pay all premiums with respect to all policies of insurance
relating to its business, and its assets and properties, as are presently held
in its name and timely renew all such policies.
(g) Not take any action or fail to take any action which would result in
any material breach of any of its representations, warranties or covenants
contained herein.
4.2 Capitalization.
From and after the date of this Agreement and until the Closing:
(a) No change shall be made or proposed in the certificate of incorporation
or by-laws of the Corporation.
(b) The Corporation shall not: (i) issue, grant or sell any shares of its
capital stock, (ii) issue, grant or sell any security, option, warrant, put,
call, subscription or other right of any kind, fixed or contingent, that
directly or indirectly calls
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for the acquisition, issuance, sale, pledge or other disposition of any shares
of capital stock or other equity interests of the Corporation, (iii) enter into
any agreement, commitment or understanding calling for any transaction referred
to in clauses (i) or (ii) of this Section 4.2(b), or (iv) make any other changes
in its equity capital structure, in each case except as required pursuant to the
Employee Options, Unit Purchase Options, Class A Warrants and Class B Warrants
outstanding on the date of this Agreement or issuable directly or indirectly
pursuant to any such rights outstanding on the date of this Agreement.
(c) The Corporation shall not split, combine or reclassify any shares of
its capital stock, declare, set aside or pay any dividend or other distribution
(whether in cash, stock, securities, indebtedness, rights or property or any
combination thereof) in respect of any shares of its capital stock or other
equity interests, or redeem or otherwise acquire any shares of the capital stock
or other equity interests (except Class A Warrants and Class B Warrants which
may be called for redemption in accordance with their terms).
4.3 Due Diligence; SEC Filings.
The Corporation hereby agrees that, from and after the date of this
Agreement and until the Closing, the Corporation shall furnish to the Purchaser,
and its authorized representatives, such financial, legal and other information
with respect to the Corporation and its business as the Purchaser, and its
authorized representatives, may from time to time reasonably request, and shall
permit the Purchaser, and its authorized representatives, full access during
normal business hours and upon reasonable advance notice to all properties,
contracts and documents relating to the Corporation and its business and a full
opportunity to make such investigations as it shall desire to make with respect
to the Corporation and its business. The Corporation shall furnish the Purchaser
with copies of all filings with the Commission subsequent to the date hereof,
which shall be prepared in accordance with the rules and regulations promulgated
by the Commission, if any such filings are made prior to the Closing.
4.4 Lien Searches.
Within five business days prior to the Closing, the Corporation, at its
sole cost and expense, shall furnish to the Purchaser Uniform Commercial Code,
judgment and tax lien searches of state records in each jurisdiction in which
the Corporation is qualified to transact business and in state and county
records where filing of financing statements would be effective to perfect a
lien or security interest in any material assets or properties of the
Corporation.
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4.5 Notification of Certain Matters.
Between the date hereof and the Closing, the Corporation will give prompt
notice in writing to the Purchaser, of: (i) the occurrence, or failure to occur,
of any event, which occurrence or failure would cause any representation or
warranty of the Corporation contained in this Agreement to be untrue or
inaccurate in any material respect from the date hereof to the Closing, (ii) any
notice or other communication from any person alleging that the consent of such
person is or may be required in connection with the transactions contemplated by
this Agreement, (iii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement, (iv) any actions, suits, claims, investigations or
proceedings commenced or, to the best of its knowledge, threatened against the
Corporation or relating to or involving or otherwise affecting the Corporation
or which relate to the consummation of the transactions contemplated by this
Agreement, and (v) any material failure of the Corporation to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder. The giving of any such notice under this Section 4.5 shall in no
way change or modify the representations and warranties or the conditions to the
Corporation's obligations contained herein or otherwise affect the remedies
available to the Purchaser hereunder.
4.6 Termination/Modification of Sales Agreements.
Promptly after the date of this Agreement, the Corporation shall take any
and all action as shall be necessary (i) to terminate, effective as soon as
possible, the fourth and fifth and sixth Sales Agreements identified on Part 2
of Schedule 2, pursuant to such notices and agreements as shall in form and
substance be reasonably satisfactory to the Purchaser, and (ii) to amend,
effective as soon as possible, any and all Sales Agreements identified on Part 1
of Schedule 2, and on Part 3 of Schedule 2, so as to exclude therefrom any
rights to the Exclusive Market (as defined in the Distributorship Agreement),
pursuant to such agreements as shall in form and substance be reasonably
satisfactory to the Purchaser.
4.7 Forbearance.
The Corporation agrees that, from and after the date hereof and until the
earlier of the Closing or the termination of this Agreement, it shall not, and
it shall not authorize any officers, directors, employees, agents or
representatives of the Corporation to, directly or indirectly, solicit enter
into or pursue any discussions or negotiations with any other party with respect
to any distributorship or sales agency arrangement relating to the sale of the
Products, or any of them, or the disposition of the Corporation's assets
pertinent thereto, except for this Agreement and the transactions contemplated
hereby. The parties further acknowledge that the agreements contained under
Paragraph (a) of
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Section 8 of the Letter of Intent shall be extended through the
Termination Date; and that the provisions of Section 9 of the Letter of Intent
shall have no further effect.
ARTICLE V
CLOSING
5.1 Time and Place of Closing.
The closing of the purchase and sale of the Shares as set forth herein
(herein referred to as the "Closing") shall be held at the offices of Krugman,
Chapnick & Grimshaw, Park 80 West - Plaza Two, Saddle Brook, New Jersey 07663 at
10:00 a.m., local time, on September 25, 1996, or such other time and date as
may be agreed upon by the Corporation and the Purchaser.
5.2 Delivery of Shares; Warrants.
At the Closing, the Corporation shall deliver to the Purchaser, against
payment of the Purchase Price, a certificate or certificates representing the
Shares registered in the name of the Purchaser or its designated nominee,
together with the Warrant Certificates, each dated the date of Closing and
completed to insert the date of Closing as the Issuance Date thereunder.
5.3 Delivery of Purchase Price.
Delivery of the Purchase Price shall be made at the Closing by the
Purchaser in the manner set forth in Section 1.2 hereof.
ARTICLE VI
CONDITIONS PRECEDENT TO
OBLIGATIONS OF THE PURCHASER
The obligation of the Purchaser to acquire and accept the Shares at the
Closing is subject to the following conditions precedent, any or all of which
may be waived by the Purchaser in its sole discretion, and each of which the
Corporation hereby agrees to use its best efforts to satisfy at or prior to the
Closing:
6.1 Opinion of Counsel to the Corporation.
The Purchaser shall have received an opinion of Messrs. Bachner, Tally,
Polevoy & Misher LLP, counsel for the Corporation, dated the date of the
Closing, in form and substance satisfactory to the Purchaser and its counsel,
Messrs. Krugman, Chapnick & Grimshaw, to the effect that:
(a) The Corporation is duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Corporation is duly
qualified in each other jurisdiction wherein
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the failure so to qualify would have a material adverse effect on the ability of
the Corporation to conduct its business and has full corporate power and
authority to own or hold under lease the assets and properties which it owns or
holds under lease and to perform all its obligations under the agreements to
which it is a party, including, without limitation, the Principal Documents, and
each of them.
(b) The authorized capital stock of the Corporation consists of: (x)
5,000,000 shares of Preferred Stock, none of which are issued and outstanding;
(y) 16,610,866 shares of Class A Common Stock, of which 1,431,466 shares
(together with any shares issued upon exercise of Employee Options, Class A
Warrants or Class B Warrants between the date of this Agreement and the date of
Closing) are issued and outstanding prior to giving effect to the issuance of
the Shares; and (z) 3,389,134 shares of Class B Common Stock, of which 3,375,134
are issued and outstanding. All of the outstanding shares of Common Stock have
been validly issued and are fully-paid and non-assessable, and the Shares, when
issued and delivered in accordance with this Agreement, will be validly issued,
fully-paid and non-assessable shares of Common Stock. The Corporation does not
hold any shares of Preferred Stock, or any shares of Common Stock, as treasury
stock. There are no preemptive rights with respect to any shares of the capital
stock of the Corporation, including, without limitation, the Shares or the
shares to be issued in connection with the Warrants, or any of them. To the best
of the knowledge of such counsel, there are no subscriptions, warrants, options,
calls, commitments by, or agreements to which the Corporation is bound relating
to the issuance of any shares of Preferred Stock, or, except as identified under
Section 2.4(b) of this Agreement, any shares of Common Stock. (c) The Principal
Documents, and each of them, have been duly authorized, executed and delivered
by the Corporation and constitute the valid and legally binding obligations of
the Corporation enforceable against the Corporation in accordance with their
respective terms, except as may be limited by bankruptcy, insolvency or other
laws affecting generally the enforceability of creditors' rights and by
limitations on the availability of equitable remedies, whether considered in an
action at law or proceeding in equity.
(d) The execution and delivery of the Principal Documents, and the
consummation of the transactions contemplated therein, will not violate any
provision of the certificate of incorporation or by-laws of the Corporation or
any law, rule, regulation, or, to the best of the knowledge of such counsel, any
writ, judgment, injunction, decree, determination, award or other order of any
court or government or governmental agency or instrumentality, domestic or
foreign, binding upon the Corporation, or, to the best of the knowledge of such
counsel, conflict with or result in any breach of any of the terms of or
constitute a default under or result in the termination of or the creation or
imposition of any mortgage, deed of trust, pledge, lien, security interest, or
other charge or encumbrance of any nature pursuant to the terms of any
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contract or agreement to which the Corporation is a party or by which the
Corporation or any of its assets and properties is bound (the opinion regarding
such contracts and agreements not set forth on Schedule 2 and not relating to
any securities of the Corporation to be given in reasonable reliance upon the
opinion of Mark Ossinsky, Esq., counsel for the Corporation, dated the date of
Closing, in form and substance satisfactory to the Purchaser and its counsel as
aforesaid).
(e) There is no action, suit, proceeding, or claim pending or, to the best
of the knowledge of such counsel, threatened, and no investigation by any court
or government or governmental agency or instrumentality, domestic or foreign,
pending or, to the best of the knowledge of such counsel, threatened, against
the Corporation, or any of its properties or assets, or its business, before any
court, government or governmental agency or instrumentality, domestic or
foreign, nor is there any outstanding order, writ, judgment, stipulation,
injunction, decree, determination, award or other order of any court or
government or governmental agency or instrumentality, domestic or foreign,
against the Corporation, or any of its assets or properties, or its business.
(f) Assuming the accuracy of the Purchaser's representations and warranties
contained in Section 3.4 hereof, the issuance and delivery to the Purchaser of
the Shares and the Warrants hereunder is, and the issuance and delivery of the
Warrant Shares under the Warrant Certificates will be, exempt from registration
under the Securities Act by virtue of Section 4(2) thereof.
6.2 Representations; Warranties; Covenants.
The representations and warranties of the Corporation contained under
Article II hereof shall be true and correct in all material respects at and as
of the Closing with the same effect as though all such representations and
warranties were made at and as of the Closing (except for representations and
warranties which are as of a specific date or which relate to a specific period
other than or not including the date of the Closing, as the case may be, and
except for changes therein contemplated or permitted by this Agreement) and the
Corporation shall have complied in all material respects with all of its
covenants contained in Article IV hereof; and the Corporation shall have
delivered to the Purchaser a certificate to that effect, dated the date of the
Closing and executed by its President or any Vice President.
6.3 Certified Resolutions.
The Purchaser shall have received a certificate of the Secretary of the
Corporation, in form and substance satisfactory to the Purchaser, with respect
to the authorization by the board of directors of the Corporation of this
Agreement and the Principal Documents to which the Corporation is a party and
the consummation of the transactions contemplated hereby and thereby, the number
of authorized shares of capital stock of the Corporation as of the
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date of Closing and the number of issued and outstanding shares thereof, and the
number of shares subject to outstanding Employee Options, Class A Warrants and
Class B Warrants as of such date.
6.4 Consents.
All consents, acknowledgments, approvals, permits and orders with respect
to the transactions contemplated by the Principal Documents shall have been
obtained.
6.5 Registration Rights Agreement.
The Corporation shall have entered into a registration rights agreement
(herein referred to as the "Registration Rights Agreement") with the Purchaser,
dated the date of the Closing, in the form of Exhibit C attached hereto.
6.6 Distributorship Agreement.
The Corporation shall have entered into the Distributorship Agreement with
Hayward Pool Products, Inc., dated the date of the Closing, in the form of
Exhibit D attached hereto, with Schedule 1 thereto completed as contemplated
pursuant to the provisions of Section 3.2 of such agreement.
6.7 Sales Agreements.
The Corporation shall have terminated the fourth and fifth and sixth Sales
Agreements identified on Part 2 of Schedule 2 (in the first such case, effective
prior to Closing, and in the second and third such cases, effective no later
than 30 days after Closing) and shall have modified, in the manner contemplated
by clause (ii) of Section 4.6 hereof, all Sales Agreements identified on Part 1
of Schedule 2, and on Part 3 of Schedule 2, that extend to the United States,
Canada or Mexico, or any part thereof.
6.8 Litigation.
No action, suit or proceeding against the Corporation or the Purchaser
relating to the consummation of any of the transactions contemplated by this
Agreement nor any governmental action seeking to delay or enjoin any such
transactions shall be pending or threatened.
6.9 Other Certificates.
The Purchaser shall have received such additional certificates, instruments
and other documents, in form and substance satisfactory to the Purchaser and
counsel for the Purchaser, as it shall have reasonably requested in connection
with the transactions contemplated hereunder.
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ARTICLE VII
CONDITIONS PRECEDENT TO
OBLIGATIONS OF THE CORPORATION
The obligation of the Corporation to sell and deliver the Shares and the
Warrants at the Closing are subject to the following conditions precedent, any
or all of which may be waived by the Corporation in its sole discretion, and
each of which the Purchaser hereby agrees to use its best efforts to satisfy at
or prior to the Closing:
7.1 Opinion of Counsel to the Purchaser.
The Corporation shall have received an opinion of Messrs. Krugman, Chapnick
& Grimshaw, counsel for the Purchaser, dated the date of the Closing, in form
and substance satisfactory to the Corporation and its counsel, Messrs. Bachner,
Talley, Polevoy & Misher LLP, to the effect that:
(a) The Purchaser is duly organized, validly existing and in good standing
under the laws of the State of New Jersey. The Purchaser has full corporate
power and authority to acquire the Shares and the Warrants hereunder.
(b) This Agreement and the other Principal Documents to which the Purchaser
is a party have been duly authorized, executed and delivered by the Purchaser
and constitute the valid and legally binding obligation of the Purchaser
enforceable against the Purchaser in accordance with their respective terms,
except as may be limited by bankruptcy, insolvency or other laws affecting
generally the enforceability of creditors' rights and by limitations on the
availability of equitable remedies, whether considered in an action at law or
proceeding in equity.
(c) The execution and delivery of this Agreement and the other Principal
Documents to which the Purchaser is a party and the consummation of the
transactions contemplated herein and therein, will not violate any provision of
the certificate of incorporation or by-laws of the Purchaser or any law, rule,
regulation, or, to the best of the knowledge of such counsel, any writ,
judgment, injunction, decree, determination, award or other order of any court
or government or governmental agency or instrumentality, domestic or foreign,
binding upon the Purchaser, or, to the best of the knowledge of such counsel,
conflict with or result in any breach of any of the terms of or constitute a
default under or result in the termination of or the creation or imposition of
any mortgage, deed of trust, pledge, lien, security interest, or other charge or
encumbrance of any nature pursuant to the terms of any contract or agreement to
which the Purchaser is a party or by which the Purchaser or any of its assets
and properties is bound.
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7.2 Representations; Warranties; Covenants.
The representations and warranties of the Purchaser contained under Article
III hereof shall be true and correct in all material respects at and as of the
Closing with the same effect as though all such representations and warranties
were made at and as of the Closing (except for representations and warranties
which are as of a specific date or which relate to a specific period other than
or not including the date of the Closing, as the case may be, and except for
changes therein contemplated or permitted by this Agreement); and the Purchaser
shall have delivered to the Corporation a certificate to that effect, dated the
date of the Closing executed by its President or one of its Vice Presidents.
7.3 Certified Resolutions.
The Corporation shall have received a certificate of the Secretary of the
Purchaser in form and substance satisfactory to the Corporation, with respect to
the authorization by the board of directors of the Purchaser of this Agreement
and the other Principal Documents to which the Purchaser is a party and the
consummation of the transactions contemplated hereby and thereby.
7.4 Distributorship Agreement.
The Purchaser shall have entered into the Distributorship Agreement with
the Corporation, dated the date of the Closing, in the form of Exhibit D
attached hereto, with Schedule 1 thereto completed as aforesaid.
7.5 Other Certificates.
The Corporation shall have received such additional certificates,
instruments and other documents, in form and substance satisfactory to the
Corporation and counsel for the Corporation, as it shall have reasonably
requested in connection with the transactions contemplated hereunder.
ARTICLE VIII
POST-CLOSING COVENANTS OF THE CORPORATION
8.1 Rights to Purchase Additional Stock.
(a) Upon the issuance (except for Excluded Issuances [as hereinafter
defined]) by the Corporation of any shares of Class A Common Stock, whether
pursuant to exercise of rights or options or otherwise, to any person other than
the Purchaser (each such issuance, hereinafter referred to as a "Non-excluded
Issuance"), the Purchaser shall have the right to subscribe for additional
shares of Class A Common Stock for the purpose of maintaining the Protected
Percentage Interest. For purposes hereof, the "Protected Percentage Interest"
shall mean 10% (hereinafter referred to as the
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"Original Percentage Interest"), as such Original Percentage Interest may be
appropriately reduced from time to time by reason of (i) the election or deemed
election of the Purchaser not to purchase additional shares of Class A Common
Stock pursuant to this Section 8.1, (ii) the election or deemed election of the
Purchaser not to purchase additional shares of Common Stock pursuant to the
Protective Warrants, (iii) sales, transfers or other dispositions by the
Purchaser of any Shares or any shares of Class A Common Stock purchased pursuant
to this Section 8.1 and (iv) Excluded Issuances. In the event that subsequent to
a Non-excluded Issuance the percentage of shares of Class A Common Stock
represented by the Shares owned beneficially or of record by the Purchaser would
be below the Protected Percentage Interest, the Purchaser shall have the right
to purchase that number of shares (hereinafter referred to as the "Additional
Shares") of Class A Common Stock as shall be represented by X in the following
computation:
X = (O) (OS) - D
-------
O'- O
where:
X = the number of shares of Class A Common Stock to be issued
to the Purchaser to maintain its Protected Percentage
Interest
O = the number of shares of Class A Common Stock held by the
Purchaser prior to the Non- excluded Issuance (counting as
issued all shares in which the Warrants are then
exercisable)
O'= the numbers of shares of Class A Common Stock outstanding
immediately prior to the Non- excluded Issuance (counting as
issued all shares in which the Warrants are then
exercisable)
OS= the number of shares of Class A Common Stock issued in the
Non-excluded Issuance
D= the number of additional shares of Class A Common Stock for
which the Initial Warrants are or may become exercisable as
a result of any adjustment in the Initial Warrants caused by
such Non-excluded Issuance
For purposes of this Section 8.1, "Excluded Issuances" shall mean (i) issuances
of Class A Common Stock which trigger the right of the Purchaser to exercise, in
whole or in part, the Protective Warrants, and (ii) issuances of Class A Common
Stock pursuant to the exercise of options under any employee stock option plan
approved by the stockholders of the Corporation now or hereafter in effect, as
any such plan may be amended from time to time.
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(b) In the event the Corporation shall propose to issue Class A Common
Stock in a Non-excluded Issuance, the Corporation shall give written notice
(hereinafter referred to as the "Protection Offer") to the Purchaser, which
shall set forth the number of shares of Class A Common Stock proposed to be
issued in the Non-excluded Issuance, the price therefor in the Non-excluded
Issuance and the number of shares of Class A Common Stock to be offered to the
Purchaser in connection therewith pursuant to this Section 8.1. Such notice
shall be given at least 20 days prior to the issuance of such Class A Common
Stock in the Non-excluded Issuance.
(c) The Protection Offer by its terms shall remain open and irrevocable for
a period of 20 days from the date of its delivery to the Purchaser (hereinafter
referred to as the "Protection Offer Period").
(d) The Purchaser may accept the Protection Offer by delivering a written
notice (hereinafter referred to as the "Protection Notice"), signed by the
Purchaser setting forth the number of Additional Shares which the Purchaser
elects, in its sole discretion, to purchase. The Protection Notice must be
delivered to the Corporation prior to the end of the Protection Offer Period.
Failure so to deliver a Protection Notice shall conclusively be deemed to
constitute the election of the Purchaser not to accept the Protection Offer.
(e) Upon the closing of the sale of shares of Class A Common Stock in a
Non-excluded Issuance, the Purchaser shall purchase from the Corporation, and
the Corporation shall issue and sell to the Purchaser any Additional Shares for
which the Purchaser timely tendered a Protection Notice at a price, in cash,
equal per share to the lesser of the Market Price (as defined in the Initial
Warrants) of such Additional Shares and the dollar price per share at which the
shares of Common Stock offered in the Non-excluded Issuance are sold (which, in
the case of any non-cash consideration shall be the Fair Market Value thereof
determined on a timely basis consistent with the principles set forth in
Paragraph (b) of Section 8.2 hereof).
(f) The rights provided by this Section 8.1 shall terminate on the earlier
of (i) ten years from the date of Closing, (ii) the date on which the
Distributorship Agreement terminates, and (iii) the date of which the Protected
Percentage Interest is equal to or less than 2%.
(g) The rights provided by this Section 8.1 may not be assigned or
otherwise transferred by the Purchaser.
8.2 Right of First Refusal.
(a) The Corporation agrees that, in the event the Corporation shall, from
time to time, determine to sell any securities of the Corporation, pursuant to a
bona fide offer (hereinafter referred to
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as the "Bona Fide Offer"), to any Hayward Competitor (as hereinafter defined),
the Corporation shall, in each instance, first offer such securities
(hereinafter referred to as the "Offered Shares") to the Purchaser by written
notice (hereinafter referred to as the "Initial Sale Notice") to the Purchaser
to that effect. The Purchaser shall have the right and option to purchase all,
but not less than all the Offered Shares by giving written notice of exercise
(hereinafter referred to as an "Acceptance Notice") to the Corporation within
ten days after the receipt of the Initial Sale Notice, or such longer period as
shall expire ten days after calculation of the purchase price as hereinafter set
forth, in each case for a purchase price calculated as hereinafter set forth.
Failure to respond within such period shall conclusively be deemed notice of
rejection. In the event the Purchaser shall not timely have exercised its right
and option under this Section 8.2, the Corporation shall be free, for a period
of 60 days after the expiration of such right and option, to sell all, but not
less than all, securities to which such right and option related pursuant to the
Bona Fide Offer theretofore communicated to the Purchaser, free of the
restrictions of this Section 8.2. In the event that the Purchaser duly delivers
an Acceptance Notice to the Corporation, then the Acceptance Notice, taken in
conjunction with the Initial Sale Notice, shall constitute a valid and legally
binding purchase and sale agreement, and payment in cash for the Offered Shares
purchased shall be made within ten days following the receipt by the Corporation
of the Acceptance Notice. In the event the Corporation fails to complete the
proposed sale, assignment, transfer or other disposition within 60 days after
the rejection or deemed rejection of the offer contained in the Initial Sale
Notice, sale of the Offered Shares shall again be subject to the provisions of
this Section 8.2.
(b) The purchase price for each security offered to the Purchaser pursuant
to this Section 8.2 shall be the dollar value of the consideration per security
offered to the Corporation pursuant to the Bona Fide Offer, which, in the case
of any non-cash consideration, shall be the fair market value thereof determined
by the Corporation and the Purchaser or, should the Corporation and the
Purchaser fail to agree thereon within three days of receipt by the Purchaser of
the Initial Sale Notice, by an independent appraiser, qualified in such matters,
selected by the Corporation and the Purchaser. For purposes hereof: (x) "Hayward
Competitor" means any person or entity engaged in the production, sale,
marketing and distribution in the Target Markets of products or equipment
competitive with those produced, sold, marketed and distributed by the Purchaser
or its Affiliates; (y) "Target Markets" means the swimming pool, spa and hot tub
markets; and (z) an "Affiliate" of any person or entity shall mean any other
person or entity controlled by, under common control with or controlling such
person or entity.
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8.3 Board Representation.
From and after Closing, the Purchaser shall have the right to designate one
member of the Board of Directors of the Corporation (and any successor or
successors to such member) reasonably acceptable to the Corporation (the first
of whom the parties agree shall be Anthony Castor), and the Corporation shall
use its best efforts from time to time to take all such action as may be
necessary to effectuate the election or appointment to its Board of Directors of
such designee and any such successor or successors (without limitation,
including the expansion of the size of the current Board of Directors to include
such designee and any such successor or successors). The parties understand and
agree that the board member designated by the Purchaser as aforesaid (x) shall
be required to execute and deliver to the Corporation a confidentiality
agreement in all material respects in the form of those executed and delivered
to the Corporation by the other members of the Board of Directors of the
Corporation, and (y) together with the Corporation shall enter into an
indemnification agreement in all material respects in the form of those executed
and delivered by the Corporation and the other members of the Board of Directors
of the Corporation.
8.4 Sales Agreements.
Promptly upon Closing and thereafter, the Corporation shall take all such
additional action as shall be necessary, appropriate or reasonably requested by
the Purchaser in order to confirm or complete termination of all Sales
Agreements identified under Part 2 of Schedule 2 (effective in each case no
later than 30 days after Closing), and to modify all Sales Agreements identified
on Part 1 of Schedule 2, and on Part 3 of Schedule 2, so as to exclude therefrom
any rights to the Exclusive Market. Without limiting the foregoing, in the event
any Sales Agreements identified on Schedule 2 intended to be modified as
aforesaid are not so modified prior to the expiration of the respective current
terms thereof, the Corporation shall take all such action as is required so that
such agreements do not renew in a manner so as to extend to any rights to the
Exclusive Market.
ARTICLE IX
TERMINATION
9.1 Termination.
This Agreement may be terminated at any time prior to the Closing:
(a) by either party if there has been a misrepresentation or breach of a
covenant or a warranty in any material respect on the part of the
other party under this Agreement; or
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<PAGE>
(b) by either the Purchaser or the Corporation if the Closing shall not
have occurred prior to September 25, 1996 (herein referred to as the
"Termination Date").
9.2 Effect of Termination.
In the event of termination of this Agreement pursuant to Section 9.1(a)
hereof, all rights of all parties hereto shall cease and terminate, except for
such rights as any party may otherwise have for breach of contract, including,
without limitation, rights for breach of any representations, warranties or
covenants contained herein.
ARTICLE X
INDEMNIFICATION
10.1 Basis of Indemnity.
(a) The Corporation hereby agrees to indemnify and hold harmless the
Purchaser, Hayward Pool Products, Inc., and their respective directors,
officers, employees, agents and respective legal representatives, successors and
assigns, from and against all damages, costs, expenses, losses, claims, demands,
liabilities and/or obligations, including, without limitation, reasonable
counsel fees (hereinafter referred to, collectively, as "Damages"), resulting
from or sustained or incurred by reason of (i) any breach of any warranty,
representation, agreement or covenant of the Corporation set forth in this
Agreement, or (ii) any termination, amendment or modification of, or any failure
to pay commissions or any other amounts under, any distributorship, sales agency
or manufacturer's representative agreement entered into by the Corporation prior
to the date hereof.
(b) The Purchaser hereby agrees to indemnify and hold harmless the
Corporation, its directors, officers, employees, agents and their respective
legal representatives, successors and assigns from and against any and all
Damages resulting from or sustained or incurred by reason of any breach of any
warranty, representation, agreement or covenant of the Purchaser set forth in
this Agreement.
10.2 Procedures for Indemnification.
Promptly after receipt by an Indemnified Party (as hereinafter defined)
under Sections 10.1(a) or (b) of notice of the commencement of any action by any
person not an Indemnified Party (hereinafter referred to as a "Third Party
Claim") for which indemnification is available under Section 10.1(a) or (b),
such Indemnified Party shall, if a claim in respect thereof is to be made
against any Indemnifying Party (as hereinafter defined) under such section, give
notice to the Indemnifying Party of the commencement thereof, but the failure so
to notify the Indemnifying Party shall not relieve it of any liability that it
may have to any
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]Indemnified Party except to the extent the Indemnifying Party demonstrates that
the defense of such Third Party Claim is prejudiced thereby. In case any such
Third Party Claim shall be brought against an Indemnified Party and it shall
give notice to the Indemnifying Party of the commencement thereof, the
Indemnifying Party shall be entitled to participate in the defense (including
negotiation and/or resolution) of such Third Party Claim. Furthermore, unless
the Indemnifying Party shall have failed to participate in such defense of a
Third Party Claim after notice as aforesaid, the Indemnified Party shall from
time to time consult with the Indemnifying Party with respect to any material
actions taken with respect to the conduct of the defense (including negotiation
and/or resolution of such Third Party Claim) and, without limitation, shall give
the Indemnifying Party an additional notice not less than ten days prior to
entering into any settlement thereof. Each Indemnified Party shall use all
reasonable efforts to mitigate the amount of any Damages.
10.3 Payment of Indemnity.
In the event that any party entitled to indemnification hereunder (herein
referred to as an "Indemnified Party") shall incur any Damages in respect of
which indemnity may be sought pursuant to this Agreement, the party responsible
for indemnification (herein referred to as an "Indemnifying Party") shall be
given written notice thereof promptly by such Indemnified Party, which notice
shall, to the extent reasonably available to such Indemnified Party, specify the
amount and nature of the Damages and include the request of such Indemnified
Party for indemnification therefor. The Indemnifying Party shall promptly pay to
such Indemnified Party the amount of the Damages so specified.
ARTICLE XI
MISCELLANEOUS
11.1 Notices.
All notices, requests or instructions hereunder shall be in writing and
delivered personally or sent by registered or certified mail, postage prepaid,
as follows:
(1) if to the Corporation:
2442 Viscount Row
Orlando, Florida 32809
Attention: President
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<PAGE>
with a copy to:
Alison Newman, Esq.
Bachner, Tally, Polevoy & Misher LLP
380 Madison Avenue
New York, New York 10017-2590
(2) if to the Purchaser:
620 Division Street
Elizabeth, New Jersey 07207
Attention: President
with a copy to:
Howard Kailes, Esq.
Krugman, Chapnick & Grimshaw
Park 80 West - Plaza Two
Saddle Brook, New Jersey 07663
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt.
11.2 Survival of Representations.
Each representation, warranty, covenant and agreement of the parties hereto
herein contained, or contained in any certificate delivered pursuant hereto,
shall survive the Closing notwithstanding any investigation at any time made by
or on behalf of any party hereto.
11.3 Entire Agreement.
This Agreement and the documents referred to herein contain the entire
agreement between the parties hereto with respect to the transactions
contemplated hereby, and supersede all prior understandings, arrangements and
agreements with respect to the subject matter hereof. No modification hereof
shall be effective unless in writing and signed by the party against which it is
sought to be enforced.
11.4 Further Action.
Each of the parties hereto shall use its best efforts to take such actions
as may be necessary or reasonably requested by the other party hereto to carry
out and consummate the transactions contemplated by this Agreement.
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11.5 Benefit of Agreement.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, except that neither
party may assign its rights or obligations hereunder without the prior written
approval of the other party having first been obtained.
11.6 Expenses.
Except as otherwise provided herein, each of the parties hereto shall bear
its own expenses in connection with this Agreement and the transactions
contemplated hereby.
11.7 Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New Jersey applicable in the case of agreements made and to
be performed entirely within such State.
11.8 Captions.
The captions appearing herein are for the convenience of the parties only
and shall not be construed to affect the meaning of the provisions of this
Agreement.
11.9 Brokerage.
Each party hereto shall indemnify and hold harmless the other party against
and in respect of any claim for brokerage or other commissions relative to this
Agreement or to the transactions contemplated hereby, based in any way on
agreements, arrangements or understandings made or claimed to have been made by
the indemnifying party with any third party.
11.10 Counterparts.
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which taken together shall constitute one and the
same instrument.
* * * * *
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the date first above written.
ATTEST: SUPER VISION INTERNATIONAL, INC.
_______________________ By______________________________
Name:
Title:
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<PAGE>
ATTEST: HAYWARD INDUSTRIES, INC.
_______________________ By______________________________
Name:
Title:
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<PAGE>
SCHEDULE 1
CAPITALIZATION
Commitments to Issue Shares:
Security Number Expiration
- -------- ------ ----------
Class A Warrants 1,677,500 03/29/99
Class B Warrants 1,382,500 03/29/99
Class B Warrants issuable
upon exercise of Class A
Warrants 1,677,500 03/29/99
Unit Purchase Options 120,000 03/29/99
Class A Warrants issuable
upon exercise of Unit
Purchase Options 120,000 03/29/99
Class B Warrants issuable
upon exercise of Unit
Purchase Options 120,000 03/29/99
Class B Warrants issuable
upon exercise of Class A
Warrants (unit options) 120,000 03/29/99
Incentive/Nonqualified
Options 139,391 10 years from
date of issuance
Registration Rights granted:
Section 6 of Unit Purchase Option dated March 29, 1994 granted
by the Corporation to D.H. Blair Investment Banking Corp.
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SCHEDULE 3
LIENS
1. Secured Party: Barnett Bank of Central Florida, NA
Collateral: All securities registered and/or credited to an account in the
name of the Corporation which account is maintained with Barnett Technologies,
Inc. as custodian of account number #930317 (the "Account"), whether now or
hereafter registered and/or credited to the Account, together with all sums due
the Corporation on or under the Account and all general intangibles relating
thereto, and with all additions, substitutions, and proceeds hereof.
2. Secured Party: Lanier Worldwide, Inc.
Collateral: 6514 Copier SN 36248358
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EXHIBIT A
THE WARRANTS EVIDENCED HEREBY, AND THE SHARES
OF CLASS A COMMON STOCK ISSUABLE UPON EXERCISE OF
SUCH WARRANTS, HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED IN VIOLATION OF SUCH ACT.
WARRANT CERTIFICATE
249,480 Warrants
To Subscribe for and Purchase Class A Common Stock,
$.001 Par Value, of
SUPER VISION INTERNATIONAL, INC.
THIS CERTIFIES that, for value received, HAYWARD INDUSTRIES, INC., or
its registered successors or assigns, is the owner of the number of Warrants set
forth above, each of which entitles the owner thereof to purchase, subject to
clauses (a) through (d), inclusive, immediately succeeding, from SUPER VISION
INTERNATIONAL, INC., a Delaware corporation (hereinafter referred to as the
"Corporation"), from time to time during the period from September 25, 1996
(hereinafter referred to as the "Issuance Date") through 5:00 P.M., New York
time, on the tenth anniversary of the Issuance Date, one fully paid and
nonassessable share of Class A Common Stock (as hereinafter defined), as such
stock is constituted on the Issuance Date, subject to adjustment from time to
time pursuant to the provisions hereinafter set forth, at the initial price of
$8.02 (hereinafter referred to as the "Exercise Price"), subject further to the
conditions hereinafter set forth; provided, however, that the registered holder
hereof:
(a) shall not be entitled to exercise any Warrants evidenced hereby
prior to the later of the first anniversary hereof and the satisfaction by
Hayward Pool Products, Inc. (hereinafter referred to as the "Distributor")
of the first Minimum Purchase Commitment (in the manner set forth under
Section 3.3 of the Distributorship Agreement dated the Issuance Date [the
"Distributorship Agreement"] between the Distributor and the Corporation)
or satisfaction of any deficiency with respect thereto in the manner
thereunder provided, and
(b) shall not be entitled to exercise in excess of 20% of the Warrants
originally evidenced hereby prior to the later of the second anniversary
hereof and the satisfaction by the Distributor of the second Minimum
Purchase Commitment (in the
<PAGE>
manner set forth under Section 3.3 of the Distributorship Agreement) or
satisfaction of any deficiency with respect thereto in the manner
thereunder provided, and, in either case, satisfaction of any deficiency
amounts with respect to Minimum Purchase Commitments for prior years under,
and in accordance with the Distributorship Agreement, and
(c) shall not be entitled to exercise in excess of 40% of the Warrants
originally evidenced hereby prior to the later of the third anniversary
hereof and the satisfaction by the Distributor of the third Minimum
Purchase Commitment (in the manner set forth under Section 3.3 of the
Distributorship Agreement) or satisfaction of any deficiency with respect
thereto in the manner thereunder provided, and, in either case,
satisfaction of any deficiency amounts with respect to Minimum Purchase
Commitments for prior years under, and in accordance with the
Distributorship Agreement, and
(d) shall not be entitled to exercise in excess of 60% of the Warrants
originally evidenced hereby prior to the later of the fourth anniversary
hereof and the satisfaction by the Distributor of the fourth Minimum
Purchase Commitment (in the manner set forth under Section 3.3 of the
Distributorship Agreement) or satisfaction of any deficiency with respect
thereto in the manner thereunder provided, and, in either case,
satisfaction of any deficiency amounts with respect to Minimum Purchase
Commitments for prior years under, and in accordance with the
Distributorship Agreement, and
(e) shall not be entitled to exercise in excess of 80% of the Warrants
originally evidenced hereby prior to the later of the fifth anniversary
hereof and the satisfaction by the Distributor of the fifth Minimum
Purchase Commitment (in the manner set forth under Section 3.3 of the
Distributorship Agreement) or satisfaction of any deficiency with respect
thereto in the manner thereunder provided, and, in either case,
satisfaction of any deficiency amounts with respect to Minimum Purchase
Commitments for prior years under, and in accordance with the
Distributorship Agreement.
This Warrant Certificate is subject to the following provisions, terms
and conditions:
1. The Warrants evidenced hereby may be exercised by the registered holder
hereof, in whole or in part, by the surrender of this Warrant Certificate, duly
endorsed (unless endorsement is waived by the Corporation), at the principal
executive office of the Corporation, 2442 Viscount Row, Orlando, Florida 32809
and upon payment to it by certified or official bank check or checks of the
purchase price of the shares of Class A Common Stock purchased. The Corporation
agrees that the shares of Class A Common Stock
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<PAGE>
so purchased shall be deemed to be issued to the registered holder hereof on the
date on which this Warrant Certificate shall have been surrendered and payment
made for such shares as aforesaid. The certificates for such shares shall be
delivered to the registered holder hereof within a reasonable time, not
exceeding ten business days, after Warrants evidenced hereby shall have been
exercised, and a new Warrant Certificate evidencing the number of the Warrants,
if any, remaining unexercised shall also be issued to the registered holder
within such time unless such Warrants have expired. No fractional shares of
capital stock of the Corporation, or scrip for any such fractional shares, shall
be issued upon the exercise of any Warrants.
2. The number and kind of shares of Class A Common Stock of the Corporation
subject to each Warrant evidenced hereby, and the Exercise Price, shall be
subject to adjustment as follows:
(a) Upon each adjustment of the Exercise Price as provided herein, the
holder of the Warrants evidenced hereby shall thereafter be entitled to
purchase, at the Exercise Price resulting from such adjustment, the number
of shares of Class A Common Stock (calculated to the nearest tenth of a
share) obtained by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of shares purchasable pursuant
hereto immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
(b) No fractional shares of Class A Common Stock or scrip shall be
issued upon exercise of the Warrants evidenced hereby. Instead of any
fractional shares of Class A Common Stock which would otherwise be issuable
upon exercise of the Warrants evidenced hereby (or portion hereof), the
Corporation shall pay a cash adjustment in respect of such fractional share
of Class A Common Stock in an amount equal to the same fraction of the then
current fair value of a share of Class A Common Stock, as determined in
good faith by the Board of Directors of the Corporation.
(c) In case the Corporation shall at any time subdivide its
outstanding shares of Class A Common Stock into a greater number of shares
of Class A Common Stock, the Exercise Price in effect immediately prior to
such subdivision shall be proportionately reduced, and conversely, in case
the outstanding shares of Class A Common Stock of the Corporation shall be
combined into a smaller number of shares of Class A Common Stock, the
Exercise Price in effect immediately prior to such combination shall be
proportionately increased.
(d) If and whenever after the Issuance Date the Corporation shall
issue or sell any shares of its Class A Common Stock for a consideration
per share less than the Market Price (as
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hereinafter defined) in effect immediately prior to the time of such issue
or sale, or without consideration, then, forthwith upon each such issue or
sale, the Exercise Price shall be reduced (but not increased) to the price
(calculated to the nearest cent) equal to the quotient obtained by dividing
(i) the amount equal to the sum of (a) the number of shares of Class A
Common Stock outstanding immediately prior to such issue or sale multiplied
by the then existing Exercise Price, and (b) the consideration, if any,
received by the Corporation upon such issue or sale by (ii) the total
number of shares of Class A Common Stock outstanding immediately after such
issue or sale. "Market Price" for purposes hereof shall mean (i) the
average closing sale price for 30 consecutive business days (or such other
period as the holder hereof may consent to), ending within 15 days of the
date of the subject event, of the Class A Common Stock as reported by the
Nasdaq National Market System, if the Class A Common Stock is so reported,
or (ii) if not so reported, the average last reported sale price for 30
consecutive business days (or such other period as the holder hereof may
consent to), ending within 15 days of the date of the subject event, of the
Class A Common Stock on the primary exchange on which the Class A Common
Stock is traded, if the Class A Common Stock is traded on a national
securities exchange, or (iii) if not so reported or traded, the average of
the last reported bid and asked prices of the Class A Common Stock for 30
consecutive business days (or such other period as the holder hereof may
consent to), ending within 15 days of the date of the subject event, of the
Class A Common Stock, as reported by the Nasdaq SmallCap Market or other
automated quotation system of a registered national securities association,
or (iv) if not so reported or traded, as determined by the Board of
Directors of the Corporation in its reasonable discretion. Any average
calculated as aforesaid shall be proportionately adjusted for any stock
split, stock dividend, combination or reclassification that took effect
during the relevant period. No adjustment of the Exercise Price, however,
shall be made in an amount less than $.001 per share, but any such lesser
adjustment shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which together with any
adjustments so carried forward shall amount to $.001 per share or more. In
addition, the provisions of this Paragraph (d) shall not apply upon: (w)
issuance by the Corporation of shares of Class A Common Stock upon the
exercise of the Warrants evidenced hereby or any other warrants issued to
Hayward Industries, Inc. on the Issuance Date, (x) issuance by the
Corporation of Class A Common Stock upon the exercise of any Eligible
Warrants (as hereinafter defined), (y) issuance by the Corporation of stock
options, or the issuance by the Corporation of shares upon the exercise of
such stock options, under any employee stock option plan approved by the
stockholders of the Corporation now or hereafter in effect, as any such
plan may be amended from time to time, or (z) issuance by the Corporation
of shares for cash pursuant to an underwritten public offering registered
under the
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<PAGE>
Act (as hereinafter defined). "Eligible Warrants" for purposes hereof shall
mean any and all warrants, options or other rights to acquire shares of
Class A Common Stock from the Corporation, or any securities convertible
into or exchangeable for Class A Common Stock, in each case outstanding on
the Issuance Date or issuable directly or indirectly pursuant to warrants,
options or other rights outstanding on the Issuance Date. For purposes of
this Paragraph (d) the following additional sub-paragraphs shall apply:
(i) Issuance of Rights or Options. In case at any time the Corporation
shall in any manner grant (whether directly or by assumption in a merger or
otherwise) any rights to subscribe for or to purchase, or any options for
the purchase of, Class A Common Stock or any stock or securities
convertible into or exchangeable for Class A Common Stock (such rights or
options being herein called "Options" and such convertible or exchangeable
stock or securities being herein called "Convertible Securities") whether
or not such Options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the price per share
for which Class A Common Stock is issuable upon the exercise of such
Options or upon the conversion or exchange of such Convertible Securities
(determined by dividing (i) the total amount, if any, received or
receivable by the Corporation as consideration for the granting of such
Options, plus the aggregate amount of additional consideration payable to
the Corporation upon the exercise of all such Options, plus, in the case of
such Options which relate to Convertible Securities, the aggregate amount
of additional consideration, if any, payable upon the issue or sale of such
Convertible Securities and upon the conversion or exchange thereof, by (ii)
the total maximum number of shares of Class A Common Stock issuable upon
the exercise of such options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such Options) shall be
less than the Market Price in effect immediately prior to the time of the
granting of such Options, then the total maximum number of shares of Class
A Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options shall be deemed to
have been issued for such price per share as of the date of granting of
such Options and thereafter shall be deemed to be outstanding. Except as
otherwise provided in Sub-Paragraph (iii) of this Paragraph (d), no
adjustment of the Exercise Price shall be made upon the actual issue of
such Class A Common Stock or of such Convertible Securities upon exercise
of such Options or upon the actual issue of such Class A Common Stock upon
conversion or exchange of such Convertible Securities.
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(ii) Issuance of Convertible Securities. In case the Corporation shall
in any manner issue (whether directly or by assumption in a merger or
otherwise) or sell any Convertible Securities, whether or not the rights to
exchange or convert any such Convertible Securities are immediately
exercisable, and the price per share for which Class A Common Stock is
issuable upon such conversion or exchange (determined by dividing (i) the
total amount received or receivable by the Corporation as consideration for
the issue or sale of such Convertible Securities, plus the aggregate amount
of additional consideration, if any, payable to the Corporation upon the
conversion or exchange thereof, by (ii) the total maximum number of shares
of Class A Common Stock issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than the Market Price in effect
immediately prior to the time of such issue or sale, then the total maximum
number of shares of Class A Common Stock issuable upon conversion or
exchange of all such Convertible Securities shall be deemed to have been
issued for such price per shares of the date of the issue or sale of such
Convertible Securities and thereafter shall be deemed to be outstanding,
provided that (x) except as otherwise provided in Sub- Paragraph (iii) of
this Paragraph (d), no adjustment of the Exercise Price shall be made upon
the actual issue of such Class A Common Stock upon conversion or exchange
of such Convertible Securities, and (y) if any such issue or sale of such
Convertible Securities is made upon exercises of any Options to purchase
any such Convertible Securities for which adjustments of the Exercise Price
have been or are to be made pursuant to other provisions of this
Sub-Paragraph (ii), no further adjustment of the Exercise Price shall be
made by reason of such issue or sale.
(iii) Change in Option Price or Exercise Rate. Upon the happening of
any of the following events, namely, if the purchase price provided for in
any Option referred to in Sub-Paragraph (i) of this Paragraph (d), the
additional consideration, if any, payable upon the conversion or exchange
of any Convertible Securities referred to in Sub-Paragraphs (i) or (ii) of
this Paragraph (d), or the rate at which any Convertible Securities
referred to in Sub-Paragraphs (i) or (ii) of this Paragraph (d) are
convertible into or exchangeable for Class A Common Stock shall change at
any time (other than under or by reason of provisions designed to protect
against dilution), the Exercise Price in effect at the time of such event
shall forthwith be readjusted to the Exercise Price which would have been
in effect at such time had such Options or Convertible Securities still
outstanding provided for such changed purchase price, additional
consideration or conversion rate, as the case may be, at the time initially
granted, issued or sold; and on the expiration
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<PAGE>
of any such Option or the termination of any such right to convert or exchange
such Convertible Securities, the Exercise Price then in effect hereunder shall
forthwith be increased to the Exercise Price which would have been in effect at
the time of such expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such expiration or
termination, never been issued, and the Class A Common Stock issuable thereunder
shall no longer be deemed to be outstanding. If the purchase price provided for
in any such Option referred to in Sub-Paragraph (i) of this Paragraph (d) or the
rate at which any Convertible Securities referred to in Sub-Paragraphs (i) or
(ii) of this Paragraph (d) are convertible into or exchangeable for Class A
Common Stock shall be reduced at any time under or by reason of provisions with
respect thereto designed to protect against dilution, then, in case of the
delivery of Class A Common Stock upon the exercise of any such Option or upon
conversion or exchange of any such Convertible Securities, the Exercise Price
then in effect hereunder shall forthwith be adjusted to such respective amount
as would have been obtained had such Option or Convertible Securities never been
issued as to such Class A Common Stock and had adjustments been made upon the
issuance of the shares of Class A Common Stock delivered as aforesaid, but only
if as a result of such adjustment the Exercise Price then in effect hereunder is
thereby reduced.
(iv) Stock Dividends. In case the Corporation shall declare a dividend
or make any other distribution upon any stock of the Corporation payable in
Class A Common Stock, Options or Convertible Securities, any Class A Common
Stock, Options or Convertible Securities, as the case may be, issuable in
payment of such dividend or distribution shall be deemed to have been
issued in a subdivision of outstanding shares as provided in Paragraph (c)
immediately preceding.
(v) Consideration for Stock. In case any shares of Class A Common
Stock, Options or Convertible Securities shall be issued or sold for cash,
the consideration received therefor shall be deemed to be the amount
received by the Corporation therefor, without deduction therefrom of any
expenses incurred or any underwriting commissions or concessions paid or
allowed by the Corporation in connection therewith. In case any shares of
Class A Common Stock, Options or Convertible Securities shall be issued or
sold for a consideration other than cash, the amount of the consideration
other than cash received by the Corporation shall be deemed to be the fair
value of such consideration as determined in good faith by the Board of
Directors of the Corporation, without deduction of any expenses incurred or
any underwriting commissions or concessions paid or allowed by the
Corporation in connection therewith. In case any Options shall be issued in
connection
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<PAGE>
with the issue and sale of other securities of the Corporation, together
comprising one integral transaction in which no specific consideration is
allocated to such Options by the parties thereto, such Options shall be
deemed to have been issued without consideration.
(vi) Record Date. In case the Corporation shall take a record of the
holders of its Class A Common Stock for the purpose of entitling them (i)
to receive a dividend or other distribution payable in Class A Common
Stock, Options or Convertible Securities, or (ii) to subscribe for or
purchase Class A Common Stock, Options or Convertible Securities, then such
record date shall be deemed to be the date of the issue or sale of the
shares of Class A Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or
the date of the granting of such right of subscription or purchase, as the
case may be.
(vii) Treasury Shares. The number of shares of Class A Common Stock
outstanding at any given time shall not include shares owned or held by or
for the account of the Corporation, and the disposition of any such shares
shall be considered an issue or sale of Class A Common Stock for the
purposes of this Paragraph (d).
(e) No adjustment in the number of shares of Class A Common Stock issuable
upon exercise of the Warrants evidenced hereby shall be required unless such
adjustment would require an increase or decrease of at least two percent in the
number of shares of Class A Common Stock at the time issuable upon exercise of
the Warrants evidenced hereby; provided, however, that any adjustments which by
reason of this clause (e) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. Except as otherwise set
forth herein, all computations made pursuant to the provisions of this paragraph
2 shall be made to the nearest cent or to the nearest one hundredth of a share,
as the case may be.
(f) For purposes of this Warrant Certificate, the term "Class A Common
Stock" shall mean shares of the class A common stock, $.001 par value, of the
Corporation, and shall also include any shares of capital stock of any class of
the Corporation hereinafter authorized which shall not be limited to a fixed sum
or percentage in respect of the rights of the holders thereof to participate in
dividends and in the distribution of assets upon the voluntary liquidation,
dissolution or winding-up of the Corporation; provided, however, that the shares
of Class A Common Stock receivable upon exercise of the Warrants evidenced
hereby shall include only shares of Class A Common Stock as constituted on
-8-
<PAGE>
the Issuance Date including any stock into which it may be changed, reclassified
or converted.
3. If any consolidation or merger of the Corporation with another
corporation after the Issuance Date, or the sale of all or substantially all of
its assets to another corporation shall be effected after the Issuance Date or
in case of any capital reorganization or reclassification of the capital stock
of the Corporation, then, as a condition of such consolidation, merger or sale,
reorganization or reclassification, lawful and adequate provision shall be made
whereby the holder of this Warrant Certificate shall thereafter have the right
to purchase and receive upon the basis and upon the terms and conditions
specified herein and in lieu of the shares of Class A Common Stock immediately
theretofore purchasable and receivable upon the exercise of each Warrant
evidenced hereby, such shares of stock, securities or assets as may be issuable
or payable with respect to or in exchange for a number of outstanding shares of
Class A Common Stock of the Corporation equal to the number of shares of Class A
Common Stock immediately theretofore purchasable and receivable upon the
exercise of one Warrant evidenced hereby had such consolidation, merger, sale,
reorganization, or reclassification not taken place, and in any such case
appropriate provision shall be made with respect to the rights and interest of
the registered holder of this Warrant Certificate to the end that the provisions
hereof (including without limitation provisions for adjustment of the Exercise
Price) shall thereafter be applicable, as nearly as may be, in relation of any
shares of stock, securities or assets thereafter deliverable upon the exercise
of the Warrants evidenced hereby.
4. Upon any adjustment of the Exercise Price or the number of shares of
Class A Common Stock subject to the Warrants evidenced hereby, then and in each
such case the Corporation shall give written notice thereof, by first class
mail, postage prepaid, to the holder hereof, which notice shall state the
Exercise Price and/or the number of shares of Class A Common Stock subject to
the Warrants evidenced hereby resulting from such adjustment, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
5. In case at any time:
(a) the Corporation shall declare any dividend upon its shares of
Class A Common Stock payable in stock or make any special dividend or other
distribution (other than a cash dividend to the holders of its shares of
Class A Common Stock);
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<PAGE>
(b) the Corporation shall offer for subscription pro rata to the
holders of its shares of Class A Common Stock any additional shares of
stock of any class or other rights;
(c) there shall be any capital reorganization or reclassification of
the capital stock of the Corporation, or consolidation or merger of the
Corporation with, or sale of all or substantially all its assets to,
another corporation; or
(d) there shall be a voluntary or involuntary dissolution, liquidation
or winding-up of the Corporation;
then, in any one or more of said cases, the Corporation shall give written
notice, by first class mail, postage prepaid, to the holder hereof, of the date
on which (i) the books of the Corporation shall close or a record shall be taken
for such dividend, distribution or subscription rights, or (ii) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of shares of Class A Common
Stock of record shall participate in such dividend, distribution or subscription
rights or shall be entitled to exchange their shares of Class A Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such written notice shall be given at least 30
days prior to the action in question and not less than 30 days prior to the
record date or the date on which the Corporation's transfer books are closed in
respect thereto.
6. The Corporation shall at all times reserve and keep available out of its
authorized shares of Class A Common Stock, solely for the purpose of its issue
upon the exercise of the Warrants evidenced hereby as herein provided, such
number of shares of Class A Common Stock as shall then be issuable upon the
exercise of the Warrants evidenced hereby.
7. The issuance of certificates of shares for Class A Common Stock upon the
exercise of the Warrants evidenced hereby shall be made without charge to the
holders of such Warrants for any issuance tax in respect thereto; provided,
however, that the Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of the Warrants evidenced
hereby.
8. The Corporation will at no time close its transfer books against the
transfer of any Class A Common Stock issued or issuable upon the exercise of the
Warrants evidenced hereby in any manner which interferes with the timely
exercise of such Warrants.
-10-
<PAGE>
9. The shares of Class A Common Stock issuable hereunder shall be subject
to the registration rights set forth in the Registration Rights Agreement dated
this date between the Corporation and Hayward Industries, Inc. to the same
extent as if the provisions of said Agreement were reproduced in their entirety
in this Warrant Certificate.
10. The person in whose name this Warrant Certificate is registered shall
be deemed the owner hereof and of the Warrant evidenced hereby for all purposes.
The registered holder of this Warrant Certificate shall not be entitled to any
rights whatsoever as a stockholder of the Corporation except as herein provided.
11. Upon receipt by the Corporation of evidence satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant Certificate, and (in case
of loss, theft or destruction) of indemnity reasonably satisfactory to it, and
upon surrender and cancellation of this Warrant Certificate, if mutilated, the
Corporation, upon reimbursement to it of all reasonable expenses incidental
thereto, will make and deliver a new Warrant Certificate, of like tenor, in lieu
of this Warrant Certificate.
12. This Warrant Certificate and the Warrants evidenced hereby may not be
transferred unless such transfer would not result in a violation of the
provisions of the Securities Act of 1933, as amended (herein referred to as the
"Act"). Any transfer of this Warrant Certificate and the Warrants evidenced
hereby, in whole or in part, shall be effected upon surrender of this Warrant
Certificate, duly endorsed (unless endorsement is waived by the Corporation), at
the principal office or agency of the Corporation referred to in paragraph 1.
13. All notices, requests or instructions hereunder shall be in writing and
delivered personally or sent by registered or certified mail, postage prepaid as
follows:
(1) if to the Corporation:
2442 Viscount Row
Orlando, Florida 32809
Attention: President
with a copy to:
Alison Newman, Esq.
Bachner, Tally, Polevoy & Misher LLP
380 Madison Avenue
New York, New York 10017-2590
-11-
<PAGE>
(2) if to the holder of the Warrants evidenced hereby:
620 Division Street
Elizabeth, New Jersey 07207
Attention: President
with a copy to:
Howard Kailes, Esq.
Krugman, Chapnick & Grimshaw
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663-5835
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt.
IN WITNESS WHEREOF, Super Vision International, Inc. has caused this
Warrant Certificate to be signed by its duly authorized officers and this
Warrant Certificate to be dated as of September 25, 1996.
ATTEST: SUPER VISION INTERNATIONAL, INC.
__________________________ By_________________________________
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<PAGE>
FORM OF EXERCISE
(to be executed by the registered holder hereof)
The undersigned hereby exercises ______________ Warrants to subscribe for and
purchase shares of Class A common stock, $.001 par value ("Class A Common
Stock"), of Super Vision International, Inc. evidenced by the within Warrant
Certificate and herewith makes payment of the purchase price in full. Kindly
issue certificates for shares of class A Common Stock in accordance with the
instructions given below. The certificate for the unexercised balance of the
Warrants evidenced by the within Warrants Certificate, if any, will be
registered in the name of the undersigned.
Dated:
-------------------------------
Instructions for registration of stock
- --------------------------------
Name (please print)
Social Security or Other Identifying Number:
- --------------------------------
Address:
- --------------------------------
Street
- --------------------------------
City, State and Zip Code
-13-
<PAGE>
EXHIBIT B
THE WARRANTS EVIDENCED HEREBY, AND THE SHARES
OF CLASS A COMMON STOCK ISSUABLE UPON EXERCISE OF
SUCH WARRANTS, HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED IN VIOLATION OF SUCH ACT.
WARRANT CERTIFICATE
522,000 Warrants
To Subscribe for and Purchase Class A Common Stock,
$.001 Par Value, of
SUPER VISION INTERNATIONAL, INC.
THIS CERTIFIES that, for value received, HAYWARD INDUSTRIES, INC., or its
registered successors or assigns, is the owner of the number of Warrants set
forth above, each of which entitles the owner thereof to purchase, subject to
the provisions contained at the end of this sentence, from SUPER VISION
INTERNATIONAL, INC., a Delaware corporation (hereinafter referred to as the
"Corporation"), from time to time during the period from September 25, 1996
(hereinafter referred to as the "Issuance Date") through 5:00 P.M., New York
time, on the Final Expiration Date (as hereinafter defined), one fully paid and
nonassessable share of Class A Common Stock (as hereinafter defined), as such
stock is constituted on the Issuance Date, subject to adjustment from time to
time pursuant to the provisions hereinafter set forth, at the Exercise Price (as
hereinafter defined), subject further to the conditions hereinafter set forth;
provided, however, that the registered holder hereof shall not be entitled to
exercise any Warrants evidenced hereby unless in each case an Exercise Event (as
hereinafter defined) shall have occurred and, then, solely during the applicable
Exercise Period (as hereinafter defined) and with respect to the number of
shares equal to up to ten percent of the Subject Shares (as hereinafter
defined). For purposes hereof, the following terms shall have the meanings set
forth below:
(a) "Eligible Warrants" shall mean any and all warrants, options or other
rights to acquire any shares of Class A Common Stock from the Corporation, or
any securities convertible into or exchangeable for Class A Common Stock, in
each case outstanding on the Issuance Date or issuable directly or indirectly
pursuant to warrants, options or other rights outstanding on the Issuance Date,
and except for: (x) options issued pursuant to the Corporation's 1994 employee
stock option plan, (y) the Warrants evidenced hereby and any other warrants
issued to Hayward Industries, Inc. on the
<PAGE>
Issuance Date, and (z) rights to acquire from the Corporation shares held in
escrow pursuant to an Escrow Agreement dated as of January 24, 1994, as amended
March 17, 1994, among the Corporation, American Stock Transfer & Trust Company
and certain stockholders of the Corporation;
(b) "Exercise Event" shall mean each and every issuance of shares of Class
A Common Stock pursuant to exercise of any Eligible Warrants;
(c) "Subject Shares" shall in each case mean the number of shares of Class
A Common Stock issued pursuant to exercise of any Eligible Warrants upon an
Exercise Event;
(d) "Final Expiration Date" shall mean the date which falls 45 days after
the later of the date of expiration of the last Eligible Warrant to expire or
the issuance of the last share of Class A Common Stock issued pursuant to
exercise of any Eligible Warrants; and
(e) "Exercise Price" shall mean (i) the average closing sale price for 30
consecutive business days (or such other period as the holder hereof may consent
to), ending within 15 days of the date of exercise of the Eligible Warrants in
the related Exercise Event, of the Class A Common Stock as reported by the
Nasdaq National Market System, if the Class A Common Stock is so reported, or
(ii) if not so reported, the last reported sale price for 30 consecutive
business days (or such other period as the holder hereof may consent to), ending
within 15 days of the date of exercise of the Eligible Warrants in the related
Exercise Event, of the Class A Common Stock on the primary exchange on which the
Class A Common Stock is traded, if the Class A Common Stock is traded on a
national securities exchange, or (iii) if not so reported or traded, the average
of the last reported bid and asked prices of the Class A Common Stock for 30
consecutive business days (or such other period as the holder hereof may consent
to), ending within 15 days of the date of exercise of the Eligible Warrants in
the related Exercise Event, of the Class A Common Stock, as reported by the
Nasdaq SmallCap Market or other automated quotation system of a registered
national securities association, or (iv) if not so reported or traded, as
determined by the Board of Directors of the Corporation in its reasonable
discretion (any average calculated as aforesaid to be proportionately adjusted
for any stock split, stock dividend, combination or reclassification that took
effect during the relevant period).
This Warrant Certificate is subject to the following provisions, terms and
conditions:
1. Promptly upon each Exercise Event, the Corporation shall give written
notice thereof, by first class mail, postage prepaid,
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<PAGE>
to the holder hereof, which notice shall set forth in reasonable detail the
nature of such Exercise Event, the number of Subject Shares applicable thereto,
the number of Warrants then exercisable as a result thereof and the Exercise
Price of such Warrants.
2. The Warrants evidenced hereby then exercisable may be exercised by the
registered holder hereof, in whole or in part, by the surrender of this Warrant
Certificate, duly endorsed (unless endorsement is waived by the Corporation), at
the principal executive office of the Corporation, 2442 Viscount Row, Orlando,
Florida 32809 and upon payment to it by certified or official bank check or
checks of the purchase price of the shares of Class A Common Stock purchased, in
each case within 30 days of receipt of notice from the Corporation of an
Exercise Event as aforesaid (each such period herein referred to as an "Exercise
Period"). Any Warrants not exercised during the applicable Exercise Period shall
be deemed to have expired. The Corporation agrees that the shares of Class A
Common Stock so purchased shall be deemed to be issued to the registered holder
hereof on the date on which this Warrant Certificate shall have been surrendered
and payment made for such shares as aforesaid. The certificates for such shares
shall be delivered to the registered holder hereof within a reasonable time, not
exceeding ten business days, after Warrants evidenced hereby shall have been
exercised, and a new Warrant Certificate evidencing the number of the Warrants,
if any, remaining unexercised shall also be issued to the registered holder
within such time unless such Warrants have expired. No fractional shares of
capital stock of the Corporation, or scrip for any such fractional shares, shall
be issued upon the exercise of any Warrants.
3. The number and kind of shares of Class A Common Stock of the Corporation
subject to each Warrant evidenced hereby shall be subject to adjustment as
follows:
(a) Upon each adjustment of the number of shares of Class A Common Stock
directly or indirectly subject to the Eligible Warrants, or any of them (whether
as a consequence of any stock split, stock dividend, combination,
reclassification, issuance of securities, or otherwise), the number of shares of
Class A Common Stock issuable upon exercise hereof shall be similarly adjusted
by an amount equal to ten percent of such adjustment in the Eligible Warrants.
(b) No fractional shares of Class A Common Stock or scrip shall be issued
upon exercise of the Warrants evidenced hereby. Instead of any fractional shares
of Class A Common Stock which would otherwise be issuable upon exercise of the
Warrants evidenced hereby (or portion hereof), the Corporation shall pay a cash
adjustment in respect of such fractional share of Class A Common Stock in an
amount equal to the same fraction of the then current fair value of a share of
Class A Common Stock, as
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<PAGE>
determined in good faith by the Board of Directors of the Corporation.
(c) No adjustment in the number of shares of Class A Common Stock issuable
upon exercise of the Warrants evidenced hereby shall be required unless such
adjustment would require an increase or decrease of at least two percent in the
number of shares of Class A Common Stock at the time issuable upon exercise of
the Warrants evidenced hereby; provided, however, that any adjustments which by
reason of this clause (c) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. Except as otherwise set
forth herein, all computations made pursuant to the provisions of this paragraph
2 shall be made to the nearest cent or to the nearest one hundredth of a share,
as the case may be.
(d) For purposes of this Warrant Certificate, the term "Class A Common
Stock" shall mean shares of the Class A common stock, $.001 par value, of the
Corporation, and shall also include any shares of capital stock of any class of
the Corporation hereinafter authorized which shall not be limited to a fixed sum
or percentage in respect of the rights of the holders thereof to participate in
dividends and in the distribution of assets upon the voluntary liquidation,
dissolution or winding-up of the Corporation; provided, however, that the shares
of Class A Common Stock receivable upon exercise of the Warrants evidenced
hereby shall include only shares of Class A Common Stock as constituted on the
Issuance Date including any stock into which it may be changed, reclassified or
converted.
4. If any consolidation or merger of the Corporation with another
corporation after the Issuance Date, or the sale of all or substantially all of
its assets to another corporation shall be effected after the Issuance Date or
in case of any capital reorganization or reclassification of the capital stock
of the Corporation, then, as a condition of such consolidation, merger or sale,
reorganization or reclassification, lawful and adequate provision shall be made
whereby the holder of this Warrant Certificate shall thereafter have the right
to purchase and receive upon the basis and upon the terms and conditions
specified herein and in lieu of the shares of Class A Common Stock immediately
theretofore purchasable and receivable upon the exercise of each Warrant
evidenced hereby, such shares of stock, securities or assets as may be issuable
or payable with respect to or in exchange for a number of outstanding shares of
Class A Common Stock of the Corporation equal to the number of shares of Class A
Common Stock immediately theretofore purchasable and receivable upon the
exercise of one Warrant evidenced hereby had such consolidation, merger, sale,
reorganization, or reclassification not taken place, and in any such case
appropriate provision shall be made with respect to the rights and interest of
the registered holder of this
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<PAGE>
Warrant Certificate to the end that the provisions hereof (including without
limitation provisions for adjustment of the Exercise Price) shall thereafter be
applicable, as nearly as may be, in relation of any shares of stock, securities
or assets thereafter deliverable upon the exercise of the Warrants evidenced
hereby.
5. Upon any adjustment of the number of shares of Class A Common Stock
subject to the Warrants evidenced hereby, then and in each such case the
Corporation shall give written notice thereof, by first class mail, postage
prepaid, to the holder hereof, which notice shall state the number of shares of
Class A Common Stock subject to the Warrants evidenced hereby resulting from
such adjustment, setting forth in reasonable detail the method of calculation
and the facts upon which such calculation is based.
6. In case at any time:
(a) the Corporation shall declare any dividend upon its shares of
Class A Common Stock payable in stock or make any special dividend or other
distribution (other than a cash dividend to the holders of its shares of
Class A Common Stock);
(b) the Corporation shall offer for subscription pro rata to the
holders of its shares of Class A Common Stock any additional shares of
stock of any class or other rights;
(c) there shall be any capital reorganization or reclassification of
the capital stock of the Corporation, or consolidation or merger of the
Corporation with, or sale of all or substantially all its assets to,
another corporation; or
(d) there shall be a voluntary or involuntary dissolution, liquidation
or winding-up of the Corporation;
then, in any one or more of said cases, the Corporation shall give written
notice, by first class mail, postage prepaid, to the holder hereof, of the date
on which (i) the books of the Corporation shall close or a record shall be taken
for such dividend, distribution or subscription rights, or (ii) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of shares of Class A Common
Stock of record shall participate in such dividend, distribution or subscription
rights or shall be entitled to exchange their shares of Class A Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such written notice
-5-
<PAGE>
shall be given at least 30 days prior to the action in question and not less
than 30 days prior to the record date or the date on which the Corporation's
transfer books are closed in respect thereto.
7. The Corporation shall at all times reserve and keep available out of its
authorized shares of Class A Common Stock, solely for the purpose of its issue
upon the exercise of the Warrants evidenced hereby as herein provided, such
number of shares of Class A Common Stock as shall then be issuable upon the
exercise of the Warrants evidenced hereby.
8. The issuance of certificates of shares for Class A Common Stock upon the
exercise of the Warrants evidenced hereby shall be made without charge to the
holders of such Warrants for any issuance tax in respect thereto; provided,
however, that the Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of the Warrants evidenced
hereby.
9. The Corporation will at no time close its transfer books against the
transfer of any Class A Common Stock issued or issuable upon the exercise of the
Warrants evidenced hereby in any manner which interferes with the timely
exercise of such Warrants.
10. The shares of Class A Common Stock issuable hereunder shall be subject
to the registration rights set forth in the Registration Rights Agreement dated
this date between the Corporation and Hayward Industries, Inc. to the same
extent as if the provisions of said Agreement were reproduced in their entirety
in this Warrant Certificate.
11. The person in whose name this Warrant Certificate is registered shall
be deemed the owner hereof and of the Warrant evidenced hereby for all purposes.
The registered holder of this Warrant Certificate shall not be entitled to any
rights whatsoever as a stockholder of the Corporation except as herein provided.
12. Upon receipt by the Corporation of evidence satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant Certificate, and (in case
of loss, theft or destruction) of indemnity reasonably satisfactory to it, and
upon surrender and cancellation of this Warrant Certificate, if mutilated, the
Corporation, upon reimbursement to it of all reasonable expenses incidental
thereto, will make and deliver a new Warrant Certificate, of like tenor, in lieu
of this Warrant Certificate.
13. This Warrant Certificate and the Warrants evidenced hereby may not be
transferred unless such transfer would not result in a violation of the
provisions of the Securities Act of 1933, as amended (herein referred to as the
"Act"). Any transfer of this
-6-
<PAGE>
Warrant Certificate and the Warrants evidenced hereby, in whole or in part,
shall be effected upon surrender of this Warrant Certificate, duly endorsed
(unless endorsement is waived by the Corporation), at the principal office or
agency of the Corporation referred to in paragraph 2.
14. All notices, requests or instructions hereunder shall be in writing and
delivered personally or sent by registered or certified mail, postage prepaid as
follows:
(1) if to the Corporation:
2442 Viscount Row
Orlando, Florida 32809
Attention: President
with a copy to:
Alison Newman, Esq.
Bachner, Tally, Polevoy & Misher LLP
380 Madison Avenue
New York, New York 10017-2590
(2) if to the holder of the Warrants evidenced hereby:
620 Division Street
Elizabeth, New Jersey 07207
Attention: President
with a copy to:
Howard Kailes, Esq.
Krugman, Chapnick & Grimshaw
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663-5835
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt.
IN WITNESS WHEREOF, Super Vision International, Inc. has caused this
Warrant Certificate to be signed by its duly authorized officers and this
Warrant Certificate to be dated as of September 25, 1996.
ATTEST: SUPER VISION INTERNATIONAL, INC.
__________________________ By_________________________________
-7-
<PAGE>
FORM OF EXERCISE
----------------
(to be executed by the registered holder hereof)
The undersigned hereby exercises ______________ Warrants to subscribe for and
purchase shares of class A common stock, $.001 par value ("Class A Common
Stock"), of Super Vision International, Inc. evidenced by the within Warrant
Certificate and herewith makes payment of the purchase price in full. Kindly
issue certificates for shares of Class A Common Stock in accordance with the
instructions given below. The certificate for the unexercised balance of the
Warrants evidenced by the within Warrants Certificate, if any, will be
registered in the name of the undersigned.
Dated:
-----------------------------------
Instructions for registration of stock
- --------------------------------
Name (please print)
Social Security or Other Identifying Number:
- --------------------------------
Address:
- --------------------------------
Street
- --------------------------------
City, State and Zip Code
<PAGE>
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement dated as of September 25, 1996, between Super
Vision International, Inc., a corporation duly organized and validly existing
under the laws of the State of Delaware (hereinafter referred to as the
"Corporation") and Hayward Industries, Inc., a corporation duly organized and
validly existing under the laws of the State of New Jersey (hereinafter referred
to as the "Purchaser").
W I T N E S S E T H :
WHEREAS, the Corporation and the Purchaser are parties to a Stock Purchase
Agreement dated as of September 25, 1996 (hereinafter referred to as the
"Purchase Agreement") providing for, among other matters, the issuance and
delivery by the Corporation to the Purchaser of certain shares (hereinafter
referred to as the "Closing Shares") of the class A common stock, $.001 par
value (as the same may be constituted from time to time hereinafter referred to
as the "Common Stock"), of the Corporation and its Initial Warrants and
Protective Warrants (as defined in the Purchase Agreement), each dated this date
(hereinafter referred to as the "Warrants") exercisable with respect to the
number of shares of Common Stock specified therein (hereinafter referred to as
the "Warrant Shares" and, together with the Closing Shares, the "Transaction
Shares") of Common Stock; and
WHEREAS, the Purchaser has also entered into an agreement dated as of
September 25, 1996 (hereinafter referred to as the "Option Agreement") with
Brett Kingstone (hereinafter referred to as the "Seller") providing for the
purchase, at the election of the Purchaser, of certain securities of the
Corporation covered thereby (hereinafter referred to as the "Option Shares");
and
WHEREAS, it is a condition to the acquisition and acceptance by the
Purchaser of the Closing Shares and the Warrants that the Corporation execute
and deliver this Agreement to the Purchaser;
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements herein contained the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
------------
As used in this Agreement, the following additional terms shall have the
following respective meanings:
<PAGE>
The term "Mandatory Registration" shall have the meaning set forth in
Paragraph A of Article III hereof.
The term "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
The term "Incidental Registration" shall have the meaning set forth in
Paragraph A of Article IV.
The term "a majority of the Registrable Securities" shall mean more than
50% of the number of shares of the Registrable Securities, and shall apply
mutatis mutandi whenever a percentage of Registrable Securities greater than a
majority is required in this Agreement.
The term "Person" shall mean an individual, partnership, corporation, trust
or unincorporated organization, or a government or agency or political
subdivision thereof.
The term "Prospectus" shall mean the prospectus included in any
Registration Statement, as amended or supplemented by any prospectus supplement
with respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement and all other amendments and
supplements to the Prospectus, including post-effective amendments and all
material incorporated by reference in such Prospectus.
The term "Registration Expenses" shall have the meaning set forth in
Article VII.
The term "Registrable Securities" shall mean (i) the Transaction Shares,
(ii) the Option Shares, and (iii) any securities issued or issuable with respect
to the securities referred to in clauses (i) and/or (ii) immediately preceding
by way of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization;
provided, however, that a security ceases to be a Registrable Security when it
is no longer a Restricted Security.
The term "Registration Statement" shall mean any registration statement of
the Corporation which covers Registrable Securities pursuant to the provisions
of this Agreement, including the Prospectus, amendments (including
post-effective amendments) and supplements to such Registration Statement.
The term "Restricted Securities" shall mean any security unless or until:
(i) it has been effectively registered under the Securities Act and disposed of
in accordance with the Registration Statement covering it; (ii) it is
distributed to the public pursuant to Rule 144 (or any similar provisions then
in force)
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<PAGE>
under the Securities Act; or (iii) it has otherwise been transferred and a new
certificate or other evidence of ownership for it not bearing a restrictive
legend pursuant to the Securities Act and not subject to any stop transfer order
has been delivered by or on behalf of the Corporation.
The term "Securities Act" shall mean the Securities Act of 1933, as
amended, as amended from time to time.
The term "Selling Expenses" shall have the meaning set forth in Article
VII.
The term "SEC" shall mean the Securities and Exchange Commission.
The term "underwritten registration" or "underwritten offering" shall mean
a registration in which securities of the Corporation are sold pursuant to a
firm commitment underwriting to an underwriter at a fixed price for reoffering
or pursuant to agency or best efforts arrangements with an underwriter.
ARTICLE II
SECURITIES SUBJECT TO THIS AGREEMENT
------------------------------------
A. Registrable Securities. The securities entitled to the benefits of this
Agreement are the Registrable Securities.
B. Holders of Registrable Securities. A Person is deemed to be a holder of
Registrable Securities whenever such Person owns Registrable Securities or has
the right to acquire such Registrable Securities, whether or not such
acquisition has actually been effected, and whether or not such Registrable
Securities or such rights are in the name of a nominee or custodian, and
disregarding any contractual conditions relating to the exercise of such right.
Without limiting the generality of the foregoing, each holder of the Warrants
shall be deemed a holder of Registrable Securities. Notwithstanding the
foregoing, no beneficiary of any rights under the Option Agreement shall be
deemed to hold any Option Shares unless and until the conditions to release
thereof to the Seller pursuant to the escrow agreement dated January 21, 1994
between the Seller and the Corporation have been met.
ARTICLE III
MANDATORY REGISTRATION
----------------------
A. Required Registration. The Corporation covenants that:
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<PAGE>
(i) as promptly as practicable subsequent to the date hereof (but in
no event later than the first anniversary of the date hereof), and
(ii) as promptly as practicable after the exercise of any Warrants
(but in no event later than the first anniversary of the date of such
exercise), and
(iii) as promptly as practicable after the acquisition of any Option
Shares pursuant to the Option Agreement (but in no event later than the
first anniversary of such acquisition),
it shall prepare and file with the Securities and Exchange Commission a
Registration Statement covering the proposed offer and sale of such Registrable
Securities (each herein referred to as a "Mandatory Registration"); provided,
however, that, subject to compliance with applicable securities laws, the
Corporation, at its option, may in any such case earlier prepare and file with
the Securities and Exchange Commission a Registration Statement with respect to
all such Registrable Securities at any time after the date of this Agreement (it
being understood and agreed that the obligations of the Corporation under
clauses (ii) and (iii) immediately preceding shall not be deemed satisfied under
such earlier filed Registration Statement unless such Registration Statement is
kept effective through the period required under Paragraph B of Article VI
hereof (but with the applicable period measured by initial reference in each
case to the date of exercise of the Warrants, or acquisition of the Option
Shares, requiring such Mandatory Registration), failing which an additional
Mandatory Registration or Mandatory Registrations shall be effectuated as
contemplated without reference to this proviso).
B. Expenses. The Corporation shall pay all Registration Expenses related to
each such registration, whether or not the Registration Statement with respect
to such registration has become effective, and all other expenses incurred by
the Corporation in complying with this Article III. All Selling Expenses related
to such registration shall be borne by the participating sellers (including the
Corporation, if a seller), in proportion to the number of shares sold by each,
or by such sellers as they may agree.
C. Incidental Rights to Mandatory Registrations
The Corporation and any of its securityholders shall have the
right to include any of the Corporation's securities in any registration
initiated under Paragraph A of this Article III. If any securityholders of the
Corporation (other than the holders of Registrable Securities in such capacity)
register securities of the Corporation in a Mandatory Registration (in
accordance with
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<PAGE>
the provisions of this Paragraph C), such holders shall pay the fees and
expenses of counsel to such holders and the incremental amount of Registration
Expenses incurred as a result of their participation unless the Corporation has
agreed to pay such expenses and, in the opinion of counsel to the Corporation,
such payment shall not affect the ability of the Registrable Shares to be
qualified under the blue sky laws of any jurisdiction.
ARTICLE IV
INCIDENTAL REGISTRATIONS
------------------------
A. Notice and Request for Incidental Registration. Whenever the Corporation
proposes to register any of its securities under the Securities Act, other than
pursuant to a Mandatory Registration or a registration on Forms S-4 or S-8 or
comparable forms (hereinafter referred to as an "Incidental Registration"), the
Corporation shall give written notice to all holders of Registrable Securities
of its intention to effect such a registration not later than the earlier to
occur of (i) the tenth day following receipt by the Corporation of notice of
exercise of other demand registration rights or (ii) 45 days prior to the
anticipated filing date. Subject to the provisions of Paragraphs C and D of this
Article IV, the Corporation shall include in such Incidental Registration all
Registrable Securities with respect to which the Corporation has received
written requests for inclusion therein within 15 business days after the receipt
by the applicable holder of the Corporation's notice. If an Incidental
Registration is an underwritten offering effected:
(i) under Paragraph C of this Article IV hereof, all Persons whose
securities are included in the Incidental Registration shall be obligated
to sell their securities on the same terms and conditions as apply to the
securities being issued and sold by the Corporation; or
(ii) under Paragraph D of this Article IV hereof, all Persons whose
securities are included in the Incidental Registration shall be obligated
to sell their securities on the same terms and conditions as apply to the
securities being sold by the Person or Persons who initiated the Incidental
Registration under said paragraph.
B. Incidental Registration Expenses. The Corporation shall pay all
Registration Expenses related to such registration, or incurred as a result of
the participation in an Incidental Registration of the holders of Registrable
Securities, whether or not the Registration Statement with respect to such
registration has become effective,and all other expenses incurred by the
Corporation in complying with this Article IV. Any Selling Expenses related to
such registration shall be borne by the participating sellers (including the
Corporation, if a seller), in proportion to the number of shares sold by each,
or by such sellers as they may agree.
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<PAGE>
C. Priority on Underwritten Primary Registration. If an Incidental
Registration is an underwritten primary registration on behalf of the
Corporation, and the managing underwriters advise the Corporation in writing
that in their sole discretion the total number or dollar amount of securities
requested to be included in such registration would reduce the number of shares
to be offered by the Corporation or interfere with the successful marketing of
the shares of stock offered by the Corporation, the Corporation shall include in
such registration:
(i) first, all securities the Corporation proposes to sell; and
(ii) second, the Registrable Securities and such other securities
(provided such securities are of the same class as the securities being
sold by the Corporation) requested to be included in such registration in
excess of the number of securities the Corporation proposes to sell which,
in the sole discretion of such underwriters, would not interfere with the
successful marketing of the shares of stock offered by the Corporation
(allocated pro rata among the holders of such Registrable Securities and
other securities on the basis of the number of securities requested to be
included therein by each such holder).
D. Priority on Underwritten Secondary Registration. If an Incidental
Registration is an underwritten secondary registration on behalf of holders of
the Corporation's securities, and the managing underwriters advise the
Corporation in writing that in their sole discretion the number of securities
requested to be included in such registration would reduce the number of shares
to be offered by the securityholders initiating such registration or interfere
with the successful marketing of the shares of stock offered by the
securityholders initiating such registration, the Corporation shall include in
such registration:
(i) first, all securities requested to be included in such
registration by the securityholders initiating such registration; and
(ii) second, up to the full number of Registrable Securities and such
other securities (provided such securities are of the same class as the
securities being sold by the Corporation) requested to be included in such
registration in excess of the number of securities the securityholders
initiating such registration propose to sell which, in the sole discretion
of such underwriters, would not interfere with the successful marketing of
the shares of stock offered by the securityholders initiating such
registration (allocated pro rata among the holders of such Registrable
Securities and other securities on the basis of the number of securities
requested to be included therein by each such holder).
E. Selection of Underwriters. If any Incidental Registration is an
underwritten offering, the Corporation shall have the right to
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<PAGE>
select the investment banker or investment bankers and manager or managers to
administer the offering.
ARTICLE V
HOLDBACK AGREEMENTS
-------------------
Each holder of Registrable Securities whose Registrable Securities are
covered by a Registration Statement filed pursuant to Article IV hereof agrees,
if requested by the managing underwriters, not to effect any public sale or
distribution of securities of the Corporation of the same class as the
securities included in such Registration Statement, including a sale pursuant to
Rule 144 under the Securities Act (except as part of such underwritten
registration) during the 30-day period prior to, and during the 180-day period
beginning on, the closing date of each underwritten offering of Registrable
Securities made pursuant to such Registration Statement, to the extent timely
notified in writing by the Corporation or the managing underwriters. The
foregoing provisions shall not apply to any holder of Registrable Securities if
such holder is prevented by applicable statute or regulation from entering any
such agreement.
ARTICLE VI
REGISTRATION PROCEDURES
-----------------------
Whenever Registrable Securities are required to be registered pursuant to
this Agreement, the Corporation shall use its best efforts to effect such
registration to permit the sale of such Registrable Securities in accordance
with the intended method or methods of disposition thereof, and pursuant thereto
the Corporation shall as expeditiously as possible:
A. prepare and file with the SEC, not later than twelve months after
required to file a Registration Statement for a Mandatory Registration, a
Registration Statement on a form for which the Corporation then qualifies which
is satisfactory to the Corporation and the holders of a majority of the
Registrable Securities being registered and which form shall be available for
the sale of the Registrable Securities in accordance with the intended method or
methods of distribution thereof, and use its best efforts to cause such
Registration Statement to become effective; provided, however, that before
filing a Registration Statement or Prospectus or any amendments or supplements
thereto, including documents incorporated by reference after the initial filing
of the Registration Statement, the Corporation shall furnish to a representative
designated by the holders of a majority of the Registrable Securities covered by
such Registration Statement copies of all such documents proposed to be filed,
which documents will be subject to the review of such holders, and the
Corporation shall not file any Registration Statement or amendment thereto or
any Prospectus or any supplement thereto (including such documents incorporated
by reference) to which the holders of a majority of the
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<PAGE>
Registrable Securities covered by such Registration Statement, if any, shall
reasonably object;
B. prepare and file with the SEC such amendments and post effective
amendments to the Registration Statement as may be necessary to keep the
Registration Statement effective for a period of not less than six months (or,
in the event of a Mandatory Registration, and subject to the provisions with
respect to measurement of such period under the proviso contained in Paragraph A
of Article III hereof, three years), or such shorter period which will terminate
when all Registrable Securities covered by such Registration Statement have been
sold or withdrawn; cause the Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
under the Securities Act (except that, in each case upon prior written notice to
the holders of Registrable Securities covered by such Prospectus, the
Corporation shall not be obligated to maintain the currentness of the Prospectus
for up to three periods not in excess of 90 days in the aggregate in each
calendar year after registration, if the Board of Directors of the Corporation
in good faith determines that the best interests of the Corporation would be
materially impaired by disclosure at that time in the Prospectus of material,
non-public information with respect to the Corporation); and comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during the applicable period
in accordance with the intended methods of disposition by the sellers thereof
set forth in such Registration Statement or supplement to the Prospectus;
C. notify the selling holders of Registrable Securities promptly,
(i) when the Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to the Registration Statement
or any post-effective amendment, when the same has become effective;
(ii) of any request by the SEC for amendments or supplements to the
Registration Statement or the Prospectus or for additional information;
(iii) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose;
(iv) of the receipt by the Corporation of any notification with
respect to the suspension of the qualification of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose; and
(v) of the happening of any event which makes any statement made in
the Registration Statement, the Prospectus
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<PAGE>
or any document incorporated therein by reference untrue or which requires
the making of any changes in the Registration Statement, the Prospectus or
any document incorporated therein by reference in order to make the
statements therein not misleading;
D. make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of the Registration Statement at the earliest
possible moment;
E. if requested by a holder of Registrable Securities being sold,
immediately incorporate in a Prospectus supplement or post-effective amendment
such information as the holders of a majority of the Registrable Securities
being sold and their respective counsel reasonably conclude should be included
in the Registration Statement, so that such Registration Statement conforms in
both form and substance to the requirements of the Securities Act, and make all
required filings of such Prospectus supplement or post-effective amendment as
soon as notified of the matters to be incorporated in such Prospectus supplement
or posteffective amendment; in each case under this Paragraph E subject to the
exception contained under Paragraph B of this Article VI;
F. promptly prior to the filing of any document which is to be incorporated
by reference into the Registration Statement or the Prospectus (after initial
filing of the Registration Statement) provide copies of such document to a
representative designated by the holders of a majority of Registrable Securities
covered by the Registration Statement, make the Corporation's representatives
available for discussion of such document and make such changes in such document
prior to the filing thereof as counsel for such selling holders may reasonably
request;
G. furnish to each selling holder of Registrable Securities, without
charge, at least one signed copy of the Registration Statement and any
post-effective amendment thereto, including financial statements and schedules,
all documents incorporated therein by reference and all exhibits (including
those incorporated by reference);
H. deliver to each selling holder of Registrable Securities without charge,
a reasonable number of copies of the Prospectus (including each preliminary
prospectus) and any amendment or supplement thereto as such Persons may
reasonably request (and the Corporation hereby consents to the use of the
Prospectus or any amendment or supplement thereto by each of the selling holders
of Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or any amendment or supplement
thereto);
I. prior to any public offering of Registrable Securities, register or
qualify or cooperate with the selling holders of Registrable Securities, and
their respective counsel in connection
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with the registration or qualification of such Registrable Securities for offer
and sale under the securities or blue sky laws of such jurisdictions as any
seller reasonably requests in writing and do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by the Registration Statement; provided, however,
that the Corporation shall not be required to qualify generally to do business
in any jurisdiction where it is not then so qualified or to take any action
which would subject it to general service of process in any such jurisdiction
where it is not then so subject;
J. cooperate with the selling holders of Registrable Securities to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any restrictive legends;
K. upon the occurrence of any event contemplated by clause (v) of Paragraph
C of this Article VI, prepare a supplement or post-effective amendment to the
Registration Statement or the Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter delivered
to the purchasers of the Registrable Securities, the Prospectus shall not
contain an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading; in each case under
this Paragraph K subject to the exception contained under Paragraph B of this
Article VI;
L. cause all Registrable Securities covered by the Registration Statement
to be listed on each securities exchange on which similar securities issued by
the Corporation are then listed if requested by the holders of a majority of
such Registrable Securities if the listing of such securities is then permitted
under the rules of such exchange;
M. take all such other actions in connection therewith in order to expedite
or facilitate the disposition of such Registrable Securities as may be
reasonably requested by the selling holders of Registrable Securities;
N. make available for inspection by a representative of the sellers of
Registrable Securities, and any attorney, accountant or other agent retained by
the sellers, all financial and other records, pertinent corporate documents and
properties of the Corporation, and cause the Corporation's officers, directors
and employees to supply all information reasonably requested by any such
representative, attorney, accountant or agent solely for use in connection with
such registration statement; provided, however, that any records, information or
documents that are designated by the Corporation in writing as confidential
shall be kept confidential by such Persons pursuant to such reasonable
confidentiality agreements as the Corporation may request;
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<PAGE>
O. otherwise use its best efforts to comply with all applicable rules and
regulations of the SEC, and make generally available to its security holders,
earnings statements satisfying the provisions of Section 11(a) of the Securities
Act, no later than 45 days after the end of any twelve-month period (or 90 days,
if such period is a fiscal year) beginning with the first month of the
Corporation's first fiscal quarter commencing after the effective date of the
Registration Statement, which statements shall cover said twelve-month periods.
ARTICLE VII
REGISTRATION AND SELLING EXPENSES
---------------------------------
For purposes of this Agreement, all underwriting discounts and selling
commissions, and transfer taxes and fees and expenses of counsel to the holders
of Registrable Securities, applicable to the sale of Registrable Securities (all
such expenses being herein referred to as "Selling Expenses"), and all expenses
incident to the Corporation's performance of or compliance with this Agreement,
including without limitation:
A. all registration and filing fees (including with respect to filings
required to be made with the National Association of Securities Dealers, Inc.);
B. fees and expenses of compliance with securities or blue sky laws;
C. printing, messenger, telephone and delivery expenses;
D. fees and disbursements of counsel for the Corporation;
E. fees and disbursements of all independent certified public accountants
of the Corporation; and
F. fees and expenses of other Persons retained by the Corporation;
(all such expenses being herein called "Registration Expenses") shall be borne
as provided in this Agreement; it being understood and agreed that the
Corporation shall, in any event, pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit conducted at the
end of the Corporation's fiscal year in the ordinary course of business, and the
fees and expenses incurred in connection with the listing of the securities to
be registered on each securities exchange and securities association.
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ARTICLE VIII
INDEMNIFICATION
---------------
A. Indemnification by Corporation. The Corporation agrees to indemnify, to
the full extent permitted by law, each holder of Registrable Securities, its
officers, directors, employees and agents and each Person who controls such
holder (within the meaning of the Securities Act) against all losses, claims,
damages, liabilities and expenses caused by any untrue or alleged untrue
statement of a material fact contained in any Registration Statement, Prospectus
or preliminary prospectus or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are caused by or contained in
any information furnished in writing to the Corporation by such holder expressly
for use therein or by such holder's failure to deliver a copy of the
Registration Statement or Prospectus after the Corporation has furnished such
holder with a sufficient number of copies of the same.
B. Indemnification by Holder of Registrable Securities. In connection with
any Registration Statement in which a holder of Registrable Securities is
participating, each such holder will furnish to the Corporation in writing such
information and affidavits as the Corporation reasonably requests for use in
connection with any Registration Statement or Prospectus and agrees to
indemnify, to the full extent permitted by law, the Corporation, its directors,
officers, employees and agents and each Person who controls the Corporation
(within the meaning of the Securities Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged untrue statement
of a material fact or any omission or alleged omission of a material fact
required to be stated in the Registration Statement or Prospectus or preliminary
Prospectus or necessary to make the statements therein not misleading, to the
extent, but only to the extent, that such untrue statement or omission is
contained in any information or affidavit so furnished in writing by such holder
to the Corporation specifically for inclusion in such Registration Statement or
Prospectus. In no event shall the liability of any selling holder of Registrable
Securities hereunder be greater in amount than the dollar amount of the proceeds
received by such holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
C. Conduct of Indemnification Proceedings. Any Person entitled to
indemnification hereunder shall (i) give prompt notice to the indemnifying party
of any claim with respect to which it seeks indemnification and (ii) permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided, however, that any Person
entitled to indemnification hereunder shall have the right to employ separate
counsel and to participate in the defense of such claim, but the reasonable fees
and expenses of such counsel
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shall be at the expense of such Person unless (a) the indemnifying party has
agreed to pay such fees or expenses, or (b) the indemnifying party shall have
failed to assume the defense of such claim and employ counsel reasonably
satisfactory to such Person, or (c) in the reasonable judgment of any such
Person and the indemnifying party, based upon advice of their respective
counsel, a conflict of interest may exist between such Person and the
indemnifying party with respect to such claims (in which case, if the Person
notifies the indemnifying party in writing that such Person elects to employ
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such claim on behalf of
such Person). If such defense is not assumed by the indemnifying party, the
indemnifying party shall not be subject to any liability for any settlement made
without its consent (but such consent will not be unreasonably withheld). No
indemnifying party shall be required to consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or litigation. An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the reasonable fees and expenses of
such additional counsel or counsels.
D. Contribution. If the indemnification provided for in this Article VIII
is unavailable or insufficient to hold harmless an indemnified party under
Paragraphs A or B immediately preceding, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of the losses, claims, damages or liabilities referred to in said Paragraphs A
or B, in such proportion as is appropriate to reflect the relative fault of the
Corporation, on the one hand, and the participating holders of Registrable
Securities, on the other, in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Corporation on the one hand or such
holders on the other, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The parties agree that it would not be just and equitable if
contributions pursuant to this Paragraph D were to be determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the prior provisions of this
Paragraph D. The amount paid by an indemnified party as a result of the losses,
claims,
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damages or liabilities referred to in the prior provisions of this Paragraph D
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending against any
action or claim that is the subject of this Paragraph D. Notwithstanding the
provisions of this Paragraph D, no participating holder of Registrable
Securities shall be required to contribute any amount in excess of the amount by
which the net proceeds received from the sale of its shares exceeds the amount
of any damages that it has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. For purposes
of this Paragraph D no person guilty of fraudulent misrepresentation (within the
meaning of Section V(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
ARTICLE IX
RULE 144
--------
The Corporation covenants that it shall file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder, all to the extent required from time
to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (i) Rule 144 under the Securities Act, as such rule may be amended
from time to time, or (ii) any similar rule or regulation hereafter adopted by
the SEC.
ARTICLE X
PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
-------------------------------------------
No holder of Registrable Securities may participate in any underwritten
registration under Article IV hereof unless such holder (i) agrees to sell such
holder's securities on the basis and pursuant to the terms provided in any
underwriting approved by the Corporation or the Persons entitled to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
ARTICLE XI
MISCELLANEOUS
--------------
A. Remedies. Each holder of Registrable Securities, in addition to being
entitled to exercise all rights provided herein or granted by law, including
recovery of damages, shall be entitled to specific performance of its rights
under this Agreement. The Corporation agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agrees to waive the
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defense in any action for specific performance that a remedy at law would be
adequate.
B. Notices. All notices, requests or instructions hereunder shall be in
writing and delivered personally or sent by registered or certified mail,
postage prepaid, as follows:
(1) if to the Corporation:
2442 Viscount Row
Orlando, Florida 32809
with a copy to:
Alison Newman, Esq.
Bachner, Tally, Polevoy & Misher LLP
380 Madison Avenue
New York, New York 10017-2590
(2) if to the Purchaser:
900 Fairmount Avenue
Elizabeth, New Jersey 07207
with a copy to:
Howard Kailes, Esq.
Krugman, Chapnick & Grimshaw
Park 80-West Plaza Two
Saddle Brook, New Jersey 07663-5835
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt.
C. Entire Agreement. This Agreement and the documents referred to
herein contain the entire agreement of the parties hereto with respect to the
transactions contemplated hereby, and supersede all prior understandings,
arrangements, and agreements with respect to the subject matter hereof. No
modification hereof shall be effective unless in writing and signed by the party
against Which it is sought to be enforced.
D. Further Action. Each of the parties hereto shall use such party's
best efforts to take such actions as may be necessary or reasonably requested by
the other party hereto to carry out and consummate the transactions contemplated
by this Agreement.
E. Successors and Assigns. The registration rights granted to the
Purchaser under Article III and under Article IV may be transferred to a
transferee who acquires any Transaction Shares or the Warrants, or any of them,
or the Purchaser's rights under the Option Agreement, which transfer shall be
effective when the
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Corporation is given written notice by the transferor at the time of such
transfer stating the name and address of the transferee and identifying the
securities with respect to which the rights under Article III and IV are being
assigned; provided, however, that the rights granted hereunder shall not inure
to the benefit of any subsequent holder of Registrable Securities who purchased
such Registrable Securities in a registered public offering or pursuant to Rule
144 promulgated under the Securities Act.
F. Notice of Shares. All references herein to numbers of shares of
Registrable Securities shall be subject to appropriate adjustment for stock
splits, stock dividends and recapitalizations of the Corporation.
G. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable in the case of
agreements made and to be performed entirely within such State.
H. Captions. The captions appearing herein are for the convenience of the
parties only and shall not be construed to affect the meaning of the provisions
of this Agreement.
I. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
ATTEST: SUPER VISION INTERNATIONAL, INC.
_________________________ By______________________________
ATTEST: HAYWARD INDUSTRIES, INC.
__________________________
By______________________________
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EXHIBIT D
================================================================================
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DISTRIBUTORSHIP AGREEMENT
dated as of September 25, 1996
--------------------------------------
SUPER VISION INTERNATIONAL, INC.
---------------------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I APPOINTMENT OF DISTRIBUTOR ................................. 1
1.1 Appointment................................................. 1
ARTICLE II TERM........................................................ 2
2.1 Term of Appointment......................................... 2
2.2 Consequences of Expiration or Termination................... 3
ARTICLE III PURCHASE ORDERS; PRICES; COVENANTS.......................... 3
3.1 Purchase Orders............................................. 3
3.2 Purchase Prices; Payment.................................... 3
3.3 Minimum Purchases........................................... 5
3.4 Forecasts................................................... 6
3.5 Product Improvements; New Products; Product
Warranty.................................................... 7
3.6 Packaging; Shipment......................................... 7
3.7 Training.................................................... 7
3.8 Insurance................................................... 8
3.9 Tradenames.................................................. 8
3.10 Taxes; Compliance with Laws................................. 9
3.11 Protection of Rights........................................ 9
3.12 Exclusivity................................................. 10
3.13 Confidential Material....................................... 10
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF THE CORPORATION.......................................... 11
4.1 Incorporation............................................... 11
4.2 Authorization............................................... 11
4.3 Conflicts................................................... 11
4.4 Adequacy of Facilities...................................... 12
4.5 Proprietary Rights in Products.............................. 12
4.6 Infringement................................................ 12
ARTICLE V REPRESENTATIONS AND WARRANTIES
OF THE DISTRIBUTOR.......................................... 13
5.1 Incorporation............................................... 13
5.2 Authorization............................................... 13
5.3 Conflicts................................................... 13
ARTICLE VI INDEMNIFICATION............................................. 14
6.1 Basis of Indemnity.......................................... 14
6.2 Procedures for Indemnification.............................. 14
6.3 Payment of Indemnity........................................ 15
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ARTICLE VII RELATIONSHIP OF THE PARTIES................................. 15
7.1 Independent Contractors..................................... 15
ARTICLE VIII EMPLOYMENT OF SUPER VISION STAFF............................ 15
8.1 No-Raid..................................................... 15
8.2 Indirect Action Prohibited.................................. 16
8.3 Survival.................................................... 16
ARTICLE IX MISCELLANEOUS............................................... 16
9.1 Notices..................................................... 16
9.2 Entire Agreement............................................ 17
9.3 Further Action.............................................. 17
9.4 Most Favored Customer....................................... 17
9.5 Benefit of Agreement........................................ 17
9.6 Expenses.................................................... 17
9.7 Governing Law............................................... 17
9.8 Captions.................................................... 18
9.9 Counterparts................................................ 18
Schedule 1 - Product Warranty
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<PAGE>
DISTRIBUTORSHIP AGREEMENT
AGREEMENT dated as of the 25th day of September, 1996 by and between SUPER
VISION INTERNATIONAL, INC., a corporation duly organized and validly existing
under the laws of the State of Delaware (hereinafter referred to as the
"Corporation"), and HAYWARD POOL PRODUCTS, INC., a corporation duly organized
and validly existing under the laws of the State of New Jersey (hereinafter
referred to as the "Distributor").
W I T N E S S E T H:
WHEREAS, the Corporation is engaged in the business of manufacturing,
developing, designing and marketing products with application in, among other
areas, the pool, spa and hot tub markets, including, without limitation, any and
all applications in or related to pools, spas and hot tubs and the design,
construction and installation thereof (such products, whether hereinbefore or
hereinafter developed, referred to herein as the "Products" and such markets
hereinafter referred to as the "Exclusive Market"); and
WHEREAS, the Corporation desires, among other matters, to appoint the
Distributor as the exclusive, worldwide distributor for the Products in the
Exclusive Market, and the Distributor desires to accept such appointment upon
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, the parties hereto hereby agree as follows:
ARTICLE I
APPOINTMENT OF DISTRIBUTOR
1.1 Appointment.
(a) Subject to the terms and provisions of this Agreement, the Corporation
hereby appoints the Distributor as its exclusive, worldwide distributor for the
marketing, sale and distribution of the Products and each of them: (x) to and
through any and all other distributors, agents, representatives and other
parties who market, sell and distribute products or services in or to the
Exclusive Market, and (y) to end users of the Products insofar as applied in the
Exclusive Market.
(b) Notwithstanding any other provision contained in this Agreement, the
parties understand and agree that: the Distributor shall, in each case, direct
its efforts pursuant hereto to the marketing, sale and distribution of the
Products to distributors, agents, representatives and other parties who the
Distributor believes intend to market, sell and distribute the Products in or to
the Exclusive Market, and/or to end users who
<PAGE>
the Distributor believes intend to use the Products insofar as applied in the
Exclusive Market; provided, however, that the Distributor shall have no
liability or obligation in the event any Product sold hereunder shall be
marketed, distributed or sold other than in or to the Exclusive Market or
utilized for any applications other than in the Exclusive Market unless such
marketing, distribution, sale or utilization occurs as a result of the gross
negligence or wilful misconduct of the Distributor.
(c) For as long as the Corporation shall not have breached its obligations
hereunder in any material respect and the term of this Agreement shall remain in
effect (and until prior written notice in each event by the Distributor to the
Corporation of any purchases theretofore covered by this paragraph (c)), the
Distributor shall not purchase or manufacture or distribute any fiber optic
lighting products as are within the design and manufacturing capabilities of the
Corporation except insofar as incorporated into the Products acquired hereunder
from the Corporation and other than molded components, light source housings and
landscape fixtures.
ARTICLE II
TERM
-----
2.1 Term of Appointment.
(a) The initial term of this Agreement shall expire on December 31, 2001,
subject to earlier termination pursuant to the provisions hereinafter set forth.
On each December 31 commencing with December 31, 1997, the term of this
Agreement shall be automatically extended so as to expire five years thereafter
unless, on or prior to the September 30 immediately prior to any such December
31, the Distributor shall have delivered written notice to the Corporation that
this Agreement shall not be so extended beyond its then current term and
provided that on such December 31 the Distributor shall theretofore not have
breached its obligations under Article 3.3 hereof (unless such breach shall have
been cured or waived).
(b) Notwithstanding any other provision contained herein, this Agreement
shall be terminable by either party upon ten days' prior written notice to the
other party upon: (i) the liquidation or dissolution of the other party; (ii)
the filing by the other party of a petition in bankruptcy or for reorganization
or the adoption of any arrangement under the bankruptcy laws at any time in
effect in any jurisdiction, or any admission seeking the relief therein
provided; (iii) the making by the other party of any assignment for the benefit
of its creditors; (iv) the consent by the other party to the appointment of a
receiver or trustee for all or a substantial part of its property or to the
filing of a petition against it under said bankruptcy laws; or (v) the
adjudication of the other party as a bankrupt.
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(c) Notwithstanding any other provision contained herein, this Agreement
shall further be terminable by either party (hereinafter referred to as the
"Non-Defaulting Party"), without prejudice to any of its other legal and
equitable rights and remedies, in the event that the other party (hereinafter
referred to as the "Defaulting Party") shall have breached any of the material
terms or conditions and agreements contained herein to be kept, observed or
performed by it, by giving the Defaulting Party 90 days' prior notice in
writing, specifying the breach; provided, however, that the Defaulting Party
shall have the right to cure such breach within such 90-day period (or if such
breach is capable of cure, but such cure cannot reasonably be completed within
such period, the Defaulting Party shall have the right to cure such breach
within a reasonable time thereafter), in which case this Agreement shall not
terminate.
2.2 Consequences of Expiration or Termination.
Upon expiration or termination of this Agreement, the Corporation shall be
required to deliver and the Distributor shall be required to accept only such
Products theretofore ordered from the Corporation pursuant to purchase orders
placed in accordance with the terms of this Agreement before such expiration or
termination becomes effective.
ARTICLE III
PURCHASE ORDERS; PRICES; COVENANTS
----------------------------------
3.1 Purchase Orders.
Subject to the provisions of this Agreement (including, without limitation,
Section 3.3 hereof), during the term of this Agreement the Distributor shall
have the right to place orders with the Corporation for such quantities of the
Products, and each of them, as in the Distributor's sole discretion it may
require from time to time for sales pursuant thereto, and the Corporation shall
promptly manufacture and deliver all such quantities of Products in accordance
with the terms of this Agreement.
3.2 Purchase Prices; Payment.
(a) The purchase price to the Distributor for each Product during the term
of this Agreement, f.o.b. the Corporation's facility in Orlando, Florida, shall
be as set forth in the schedule exchanged by the parties contemporaneously
herewith, calculated in each case at the date hereof so as to provide to the
Distributor a gross margin of 25% (determined in accordance with generally
accepted accounting principles), as if the Distributor's prices to customers on
the date hereof were equal to the Corporation's selling prices to its other
distributors in effect immediately prior to the effectiveness of this Agreement.
In the event that, subsequent to the date of this
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Agreement, any Products become covered by this Agreement that are not identified
on said schedule, the purchase price to the Distributor therefor, f.o.b. the
Corporation's facility in Orlando, Florida, shall initially be determined by the
parties in good faith so as to provide to the Distributor a gross margin of 25%
(determined as aforesaid) based upon competitive selling prices to the
Distributor's customers reasonably calculated. All purchase prices shall be
exclusive of local, state and federal taxes, which amounts shall be included in
each invoice delivered by the Corporation to the Distributor as a separate
charge to be paid by the Distributor.
(b) During the term of this Agreement, all purchase prices hereunder shall
be subject to downward adjustment from time to time in each case upon written
notice by the Distributor to the Corporation that the Distributor's gross margin
(determined in accordance with generally accepted accounting principles) in
respect thereof during any fiscal quarter is less than 23%. Each such reduction
shall be in an amount sufficient to maintain for the Distributor a gross margin
(as so determined) in respect thereof of 25%, based on the Distributor's then
current selling price. In each such case, the Distributor shall furnish to the
Corporation, together with its written notice, reasonably detailed evidence of
its calculations as aforesaid, and the Corporation shall have the right to
inspect the books and records of the Distributor related thereto, upon
reasonable prior notice and during reasonable business hours, in order to
substantiate such calculation.
(c) Payment by the Distributor to the Corporation of the net amount of each
invoice in respect of Products delivered hereunder shall in each case be made
within 30 days of the date of the invoice of such shipment; provided, however,
that, the Distributor shall have the right (at its election), in respect of
purchase orders submitted by the Distributor during the last calendar quarter of
any year during the term hereof, to defer the amount of any related invoice,
which amount shall be payable in two equal installments on the ensuing May 25
and June 25; provided, however, that the aggregate amount of all such deferred
payments (hereinafter referred to as "Early Buy Payments") shall not exceed 25%
of any Minimum Purchase Commitment (as hereinafter defined) in effect for such
ensuing year. All invoices in respect of Products delivered hereunder by the
Corporation to the Distributor shall be dated the date of shipment, and shall
not contain any term or condition inconsistent with or supplementing those set
forth in this Agreement. Upon discovery by the Distributor that the materials,
goods or work furnished contain any defect, patent or latent, or that they fail
to conform to any applicable warranties, the Distributor shall, notwithstanding
any prior payment therefor and without limiting any other rights available to
the Distributor, have the right to reject the materials, goods and work or, if
materials or goods have been accepted, to return them to the Corporation,
subject to the Corporation's form of product warranty annexed to this Agreement
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<PAGE>
as Schedule 1 except as otherwise set forth in this Agreement. In the event of
Catastrophic Failure (as hereinafter defined), the Distributor will further have
the right to recover all freight, storage, handling or other expense incurred by
the Distributor and be relieved of any payment for the purchase price so paid
and/or cancel the order with respect thereto, and Products so returned shall not
be replaced without the Distributor's written replacement order. The rights of
the Distributor under the immediately preceding sentence shall not extend to end
users of the Products, whose rights shall be governed by the form of product
warranty hereinafter described. For purposes hereof, "Catastrophic Failure"
shall mean a full or partial recall or field service/replacement by the
Corporation of any Product, such determination to be made by the Corporation in
good faith in the exercise of its reasonable judgment with respect to the
existence of any defect, patent or latent, or the failure to conform to any
applicable warranties, subject to consultation with the Distributor.
3.3 Minimum Purchases.
(a) The Distributor hereby agrees that it shall, during each period set
forth below, purchase hereunder Products covering in the aggregate at least the
minimum purchase commitment (each hereinafter referred to as a "Minimum Purchase
Commitment") identified opposite such period:
Minimum
Period Period Purchase Commitment
------ --------------------------
through December 27, 1997 $1,600,000
December 28, 1997 through December 26, 1998 2,000,000
December 27, 1998 through December 25, 1999 2,400,000
December 26, 1999 through December 30, 2000 2,800,000
December 31, 2000 through December 29, 2001 3,200,000
; provided, however, that in the event the Distributor does not purchase from
the Corporation with respect to any such period an amount equal to or greater
than the applicable Minimum Purchase Commitment but purchases from the
Corporation with respect to such period an amount equal to or greater than 75%
of such Minimum Purchase Commitment, the Distributor shall not be liable to the
Corporation in respect thereof and shall not be deemed in breach of this
Agreement, provided that there are no outstanding uncovered shortfalls with
respect to prior periods and the Distributor purchases from the Corporation an
amount which satisfies the deficiency in the next such period (failing which the
Distributor shall pay to the Corporation within 30 days after the expiration of
such next period an amount equal to 40% of the amount of such deficiency not so
satisfied; and, provided, further that, if, during any period (or portion
thereof) the Corporation shall not have completed modification of the Sales
Agreements (as defined in the Stock Purchase Agreement dated September 25, 1996
between the Corporation and Hayward Industries, Inc. [hereinafter referred to as
the "Purchase
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Agreement"]) identified on Schedule 2 of the Purchase Agreement in the manner
contemplated by clause (ii) of Section 4.6 and Section 8.4 of the Purchase
Agreement, the amount of the Minimum Purchase Commitment applicable to such
period shall be reduced by an amount equal to (x) the aggregate amount of all
sales quotas, minimum purchase targets or similar amounts pursuant to all such
Sales Agreement containing exclusive rights plus (y) the aggregate sales in the
Excluded Market of all parties to the remaining such Sales Agreements (all
amounts described by clauses (x) and (y) immediately preceding in each case to
be promptly communicated by the Corporation to the Distributor, and be subject
to review by the Distributor pursuant to the procedures described under the
final sentence of Paragraph (b) of Section 3.2 hereof). The parties acknowledge
and agree that any purchases of Products hereunder in any period, may, at the
election of the Distributor, be allocated toward achievement of a Minimum
Purchase Commitment with respect to the next subsequent period in an amount
(exclusive of Early Buy Payments) not to exceed 20% of the Minimum Purchase
Commitment for any such period. The parties further acknowledge and agree that
the Distributor shall not be liable to the Corporation in respect of an amount
(hereinafter referred to as the "Forgiven Shortfall") of the applicable Minimum
Purchase Commitment for any period equal in each case to the purchase price of
purchase orders with respect to which the Distributor has submitted its purchase
order or orders during such period and shipment thereof is unduly delayed beyond
the expiration of such period or shipment consists of non-conforming goods.
Purchases under purchase orders giving rise to any Forgiven Shortfall shall not
be credited toward the Minimum Purchase Commitment for any period subsequent to
that in which the Forgiven Shortfall occurs.
(b) In the event of the extension of the term of this Agreement pursuant to
paragraph (a) of Section 2.1 hereof, the parties shall, on or prior to August 30
immediately preceding each of the Distributor's additional annual fiscal year
periods of such extended term beyond December 29, 2001, consult with each other
so as to determine the Minimum Purchase Commitment applicable to such ensuing
fiscal year, which shall be equal to 80% of the Distributor's sales forecast for
such year determined in good faith based upon its reasonable evaluation of such
criteria as market size, competitive factors and industry and Distributor growth
trends; subsequent to which all provisions applicable to Minimum Purchase
Commitments set forth in paragraph (a) of this Section 3.3 shall apply to such
Minimum Purchase Commitment determined under this paragraph (b).
3.4 Forecasts.
On the first business day of each calendar quarter during the term of this
Agreement, the Distributor shall prepare and deliver to the Corporation a
forecast of its anticipated purchases of Products during the ensuing
twelve-month period (or such shorter period as shall expire with the expiration
of the
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term of this Agreement). The parties understand and agree that each such
forecast shall constitute the Distributor's good faith estimate of such
purchases but shall not in any manner be construed as a purchase commitment or
be binding upon the Distributor.
3.5 Product Improvements; New Products; Product Warranty.
(a) The Corporation hereby covenants that the Products, and each of them,
conform to the product specifications therefor heretofore delivered to the
Distributor, and that the Corporation shall maintain a program of regular
Product improvements and Product development, it being understood and agreed
that any and all improvements on, modifications to, substitutions in and
extensions of the Products, or any of them, and any and all new Products, shall
be submitted in writing to the Distributor (in each instance in such detail as
shall reasonably be required by the Distributor for its evaluation thereof) for
approval thereby. In no event shall such approval be deemed to confer on the
Distributor any responsibility or liability of any nature whatsoever therefor or
for the design or development of any Products. In addition, the Distributor may
from time to time propose modifications to the Products, or any of them, and new
Products, in each case consistent with the fiber optic lighting expertise of the
Corporation, which the Corporation shall use its reasonable commercial efforts
to design, develop and manufacture for distribution hereunder.
(b) Subject to the provisions of paragraph (c) of Section 3.2 hereof, the
Corporation shall warrant the Products, and each of them, sold hereunder
pursuant to the form of product warranty annexed to this Agreement as Schedule
1.
3.6 Packaging; Shipment.
All Products shall be packaged in accordance with specifications approved
by the Distributor, and shall be forwarded in accordance with the Distributor's
instructions. Specialized packaging requirements of the Distributor not subject
to written agreement between the Corporation and the Distributor shall be at the
Distributor's expense. When usual terms of tariffs do not include insurance,
shipments shall be forwarded properly insured to their full sales price
hereunder with the cost of insurance borne by the Distributor. A packing slip
bearing a complete record of the shipment, including the number of the purchase
order to which it applies, shall be required with each shipment hereunder.
3.7 Training.
The Corporation shall, during the term of this Agreement, be responsive to
all requests by the Distributor for information relative to the marketing and
sale of the Products, including, without limitation, making its facilities,
management
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and employees available to respond to such requests on reasonable prior notice
and during regular business hours. Without limiting the generality of the
foregoing, subject to the Distributor's providing a training schedule reasonably
satisfactory to both parties, the Corporation, at the Corporation's expense
(except for international travel expenses incurred at the request of, and
approved in advance by, the Distributor, which shall be borne by the
Distributor), shall for a period of six months from the date hereof provide
adequate training to such personnel as shall be designated by the Distributor in
the use and sale of the Products.
3.8 Insurance.
The Corporation shall, at its sole cost and expense, secure and maintain a
policy or policies of liability insurance providing itself and the Distributor
coverage thereunder and insuring itself and the Distributor against any
liability to the public or any users for defects in the design or manufacture of
the Products sold. Such policy or policies shall be on an occurrence form per
occurrence and in the aggregate in an amount not less than $2,000,000 and upon
terms providing coverage which are at least as extensive as those terms which
the Distributor shall reasonably deem necessary or appropriate, and shall be
issued by insurers of recognized responsibility which are highly rated by a
national rating organization. The Corporation shall promptly furnish to the
Distributor a copy of each such policy, which policy shall provide, inter alia,
written notice to the Distributor of each notice of cancellation of each such
policy no less than 30 days prior to the effective date of cancellation.
3.9 Tradenames.
The Distributor shall, in its sole discretion, formulate its marketing
plans and systems with respect to the Products, and each of them. The
Corporation hereby grants to the Distributor, for the term of this Agreement,
the non-exclusive, worldwide royalty-free right and license to utilize any and
all of the Corporation's trademarks, tradenames, service marks, labels and
copyrights (hereinafter referred to, collectively, as the "Trademarks") in the
Exclusive Market in connection with the Products (it being acknowledged and
agreed that no other party shall hold any such right with respect to the
Exclusive Market during such term). The Products, and each of them, shall be
marketed and distributed by the Distributor utilizing the designation
"Supervision by Hayward", or variant thereof, singly or in combination with any
other term. Subject to the foregoing, the Distributor shall determine the
trademarks and related indicia accompanying Products sold pursuant hereto. All
proprietary rights in the Trademarks (exclusive of any trademarks, tradenames,
service marks, labels and copyrights of the Distributor utilized in conjunction
therewith) shall remain the exclusive property of the Corporation, subject to
the Distributor's license to use such Trademarks. The Distributor
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<PAGE>
hereby agrees that, during the term of this Agreement, the Corporation shall
have the right to utilize the Distributor's corporate name and logo in
connection with identification by the Corporation of the appointment of the
Distributor hereunder. Notwithstanding the foregoing: (i) contemporaneously with
the execution and delivery of this Agreement, the Distributor shall acquire the
Corporation's entire inventory of sales and marketing materials in exchange for
a payment in the amount of $100,000; and (ii) the Distributor shall thereafter,
during the term of this Agreement, include the fiber optic lighting category in
its builder (MIP) program as from time to time in effect. In addition, the
Distributor agrees that, in the event it receives a refund, in whole or in part,
of the Corporation's deposit in the amount of $6,200 made with respect to the
NSPI trade show, the Distributor shall remit all such amounts to the
Corporation, in the same form as received (together with any endorsement
necessary for transfer by delivery), and the Corporation shall be entitled to
retain same.
3.10 Taxes; Compliance with Laws.
The Corporation shall promptly pay when due all taxes and assessments
against the premises or the equipment used in connection with its business, and
all liens or encumbrances of every kind or character created or placed upon or
against any of said property, and all accounts and other indebtedness of every
kind incurred by the Corporation in the conduct of said business. The
Corporation shall comply with all applicable federal, state, county and
municipal laws and regulations, now in effect or hereafter enacted, including,
without limitation, all environmental laws and all occupational safety and
health laws and shall timely obtain any and all permits, certificates, or
licenses necessary for the full and proper conduct of its business.
3.11 Protection of Rights.
The Corporation shall give prompt notice to the Distributor: (i) of any
litigation, arbitration or governmental proceeding, or any threatened
litigation, arbitration or governmental proceeding, involving or affecting the
Products in any material respect, or any of them; and (ii) any notice received
by the Corporation of any lapse, termination, expiration or forfeiture of any
right with respect to the Products, or any of them. In addition, in the event
failure to do so would have a material adverse effect on the economic benefits
conferred on the Distributor under this Agreement in any jurisdiction, and the
Distributor requests that the Corporation take such action, the Corporation
shall, at its expense, promptly and diligently: (x) pursue filing and
prosecuting any and all patent applications based on inventions included within
the Products, or any of them, whether made prior or subsequent to the date
hereof, and the filing and prosecution of all divisions, continuations,
continuations-in-part, reissues or re-examinations thereof, and
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file, pursue, maintain and renew the registrations of all registered Trademarks
and perform all other acts which the Distributor may reasonably request in order
to maintain and renew such registrations for use hereunder; and (y) prosecute
all such actions or proceedings as are required to terminate infringement on any
rights to the Products, the Trademarks, or any of them. In the event the
Corporation shall fail to perform any obligation under this Section 3.11, the
Distributor may perform such obligation at the expense of the Corporation and
upon consultation with the Corporation.
3.12 Exclusivity.
In order to enhance the efficiency of the Distributor's exclusive marketing
efforts hereunder and avoid realization by third parties of any benefits of the
Distributor's efforts to achieve sales of the Products in the Exclusive Market,
the Corporation hereby agrees that: (i) it shall not, directly or indirectly,
market, sell or distribute the Products to any party who intends, to the best of
the Corporation's knowledge, directly or indirectly, to market, sell or
distribute products in or to the Exclusive Market, or to any customer who
intends, to the best of the Corporation's knowledge, directly or indirectly, to
apply the Products in the Exclusive Market; and (ii) in all agreements entered
into by it with respect to the distribution of Products, it shall provide for
the termination thereof if, after written notice delivered by the Corporation to
cease all activities in conflict with the appointment hereunder, such activities
continue, and it shall forthwith in each case terminate any such agreement in
the event Products continue to be marketed thereunder subsequent to the delivery
of such notice.
3.13 Confidential Material.
(a) In the event that either party to this Agreement (hereinafter referred
to as the "Restricted Party") shall come into possession or obtain knowledge of
Confidential Material (as hereinafter defined) of the other party (hereinafter
referred to as the "Confidential Party"), such Confidential Material shall be
held in absolute secrecy and treated confidentially, and shall not be disclosed,
reproduced, published, distributed or by any other means disseminated, in whole
or in part, by the Restricted Party or in any manner used for its benefit or the
benefit of others, except as shall be specifically necessary for a party to
disclose Confidential Material to its directors, officers, employees, agents or
representatives to exercise its rights and perform its obligations under this
Agreement. Notwithstanding the foregoing, if, as a consequence of no action
taken by a Restricted Party in violation of this Section 3.13, such party shall
be compelled, by subpoena, civil investigative demand or similar process, to
disclose any Confidential Material, such party may disclose such information
without liability hereunder, subject to written notice thereof to the
Confidential Party. For purposes hereof, "Confidential Material" shall mean all
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information furnished to the Restricted Party by the Confidential Party, or any
of its directors, officers, employees, agents or representatives; provided,
however, that the term "Confidential Material" shall not include information
which:
(i) becomes generally available to the trade or public other than as a
result of a disclosure by any Restricted Party;
(ii) was available to any Restricted Party on a non- confidential
basis prior to its disclosure to a Restricted Party by the Confidential
Party or any of its directors, officers, employees, agents or
representatives; or
(iii) becomes available to any Restricted Party on a non- confidential
basis from a source other than the Confidential Party or any of its
directors, officers, employees, agents or representatives and, to the
knowledge of such Restricted Party, such source has a lawful and
unrestricted right to convey such information.
(b) The parties acknowledge and agree that their respective agreements
contained under this Section 3.13 are of a special, unique, and extraordinary
nature and that the non- breaching party would suffer irreparable injury as a
consequence of the violation thereof, and by reason thereof each party consents
and agrees that, if it should in any way violate such provisions, the other
party shall be entitled to an injunction to be issued by any court of competent
jurisdiction, restraining the violator from committing or continuing any such
violation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE CORPORATION
-------------------------------
The Corporation hereby represents, warrants and covenants that:
4.1 Incorporation.
The Corporation is duly organized, validly existing and in good standing
under the laws of the State of Delaware and has full corporate power and
authority to enter into this Agreement and to carry out the provisions hereof.
4.2 Authorization.
The execution and delivery by the Corporation of this Agreement, the
performance by the Corporation of its covenants and agreements hereunder, and
the consummation by the Corporation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action. When executed and
delivered by the Corporation, this Agreement shall constitute the valid and
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legally binding obligation of the Corporation enforceable against the
Corporation in accordance with its terms, except as may be limited by
bankruptcy, insolvency or other laws affecting generally the enforceability of
creditors' rights and by limitations on the availability of equitable remedies.
4.3 Conflicts.
Neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will violate any provision of the
certificate of incorporation or by-laws of the Corporation or any law, rule,
regulation, writ, judgment, injunction, decree, determination, award or other
order of any court, government, or governmental agency or instrumentality,
domestic or foreign, binding upon the Corporation, or conflict with or result in
any breach of or event of termination under any of the terms of, or the creation
or imposition of any mortgage, deed of trust, pledge, lien, security interest or
other charge or encumbrance of any nature pursuant to, the terms of any contract
or agreement to which the Corporation is a party or by which the Corporation or
any of its properties or assets is bound.
4.4 Adequacy of Facilities.
The Corporation owns, licenses or leases, and has the unimpaired use of,
all properties, assets and facilities necessary for the fulfillment of its
obligations under this Agreement, and shall continue ownership, license or lease
of such properties, assets and facilities, as the case may be, and such use, in
effect for as long as its obligations hereunder remain outstanding. Without
limiting the generality of the foregoing, the Corporation shall utilize all
proceeds from the sale of securities to the Distributor, or to any person or
entity controlling, controlled by or under common control with the Distributor,
solely in furtherance of its performance under this Agreement.
4.5 Proprietary Rights in Products.
Neither the Corporation, nor any of its agents, employees or independent
contractors, has taken or shall take any action in any way inconsistent with the
exclusive ownership by the Corporation of all right, title and interest in and
to the Products, as heretofore developed or as hereafter may be developed, free
and clear of any encumbrance, lien or charge of any nature whatsoever. No party
other than the Corporation has or shall have any right, title or interest
whatsoever in the Products which in any way prohibits or restricts the use
thereof or any transaction contemplated hereunder, and the Corporation, its
agents, employees or independent contractors shall not enter into any
arrangement which would have such effect. There are no outstanding options,
licenses or agreements of any kind whatsoever entered into by the Corporation,
or any agent,
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employee or independent contractor of the Corporation, relating to the Products,
or any of them, or the development thereof. Any and all patents relating to the
Products, or any of them, or the manufacture thereof, are valid and in full
force and effect, and no event has occurred and is continuing which, after
notice or lapse of time or otherwise, would result in the invalidity or
forfeiture of any such patents, or any part thereof, or any of the Corporation's
rights thereto.
4.6 Infringement.
There are no claims, disputes, actions, suits or proceedings, including,
without limitation, suits for infringement, pending or, to the best of the
Corporation's knowledge, threatened against or affecting the Products, or any of
them, or the manufacture, marketing, distribution, sale or use thereof. Neither
the Products, nor any of them, nor the manufacture, marketing, distribution,
sale or use thereof by the Corporation or by the Distributor in the manner
contemplated by this Agreement, will infringe or conflict with any patents,
patent applications, know-how, processes, trade secrets, techniques, procedures
or other proprietary property rights held by any third party. The Corporation
has not failed to comply with any law, rule, regulation, writ, judgment,
injunction, decree, determination, award or other order of any court or other
governmental agency or instrumentality, which relates to the Products, or any of
them, or any part thereof, and there is no basis for any claim for compensation,
damages or otherwise arising out of any violation of the foregoing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE DISTRIBUTOR
-------------------------------
The Distributor represents, warrants and covenants that:
5.1 Incorporation.
The Distributor is a corporation duly organized, validly
existing and in good standing under the laws of the State of New Jersey, and has
full corporate power and authority to enter into this Agreement and to carry out
the provisions hereof.
5.2 Authorization.
The execution and delivery of this Agreement by the
Distributor, the performance by the Distributor of its covenants and agreements
hereunder, and the consummation by the Distributor of the transactions
contemplated hereby have been duly authorized by all necessary corporate action.
When executed and delivered by the Distributor this Agreement will constitute
the valid and legally binding obligation of the Distributor enforceable against
the Distributor in accordance with its terms, except as may be
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limited by bankruptcy, insolvency, or other laws affecting generally the
enforceability of creditors' rights and by limitations on the availability of
equitable remedies.
5.3 Conflicts.
Neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated herein will violate any provision of the
certificate of incorporation or by-laws of the Distributor or any law, rule,
regulation, writ, judgment, injunction, decree, determination, award, or other
order of any court, government or governmental agency or instrumentality,
domestic or foreign, binding upon the Distributor or conflict with or result in
any breach of or event of termination under any of the terms of, or constitute a
default under or result in the termination of or the creation or imposition of
any mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any nature pursuant to, the terms of any contract or agreement to
which the Distributor is a party or by which the Distributor or any of its
assets and properties is bound.
ARTICLE VI
INDEMNIFICATION
---------------
6.1 Basis of Indemnity.
(a) The Corporation hereby agrees to indemnify and hold harmless the
Distributor, its directors, officers, employees, agents and their respective
legal representatives, successors and assigns, from and against all damages,
costs, expenses, losses, claims, demands, liabilities and/or obligations,
including, without limitation, reasonable counsel fees (hereinafter referred to,
collectively, as "Damages"), resulting from or sustained or incurred by reason
of (i) any breach of any warranty, representation, agreement or covenant of the
Corporation set forth in this Agreement, or (ii) any allegation that the
Products, or any of them, infringe upon any patents, patent applications,
know-how, technology, procedures or process of any third party.
(b) The Distributor hereby agrees to indemnify and hold harmless the
Corporation, its directors, officers, employees, agents and their respective
legal representatives, successors and assigns from and against any and all
Damages resulting from or sustained or incurred by reason of any breach of any
warranty, representation, agreement or covenant of the Distributor set forth in
this Agreement.
6.2 Procedures for Indemnification.
Promptly after receipt by an Indemnified Party (as hereinafter defined)
under Sections 6.1(a) or (b) of notice of
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the commencement of any action by any person not an Indemnified Party
(hereinafter referred to as a "Third Party Claim") for which indemnification is
available under Section 6.1(a) or (b), such Indemnified Party shall, if a claim
in respect thereof is to be made against any Indemnifying Party (as hereinafter
defined) under such section, give notice to the Indemnifying Party of the
commencement thereof, but the failure so to notify the Indemnifying Party shall
not relieve it of any liability that it may have to any Indemnified Party except
to the extent the Indemnifying Party demonstrates that the defense of such Third
Party Claim is prejudiced thereby. In case any such Third Party Claim shall be
brought against an Indemnified Party and it shall give notice to the
Indemnifying Party of the commencement thereof, the Indemnifying Party shall be
entitled to participate in the defense (including negotiation and/or resolution)
of such Third Party Claim. Furthermore, unless the Indemnifying Party shall have
failed to participate in such defense of a Third Party Claim after notice as
aforesaid, the Indemnified Party shall from time to time consult with the
Indemnifying Party with respect to any material actions taken with respect to
the conduct of the defense (including negotiation and/or resolution of such
Third Party Claim) and, without limitation, shall give the Indemnifying Party an
additional notice not less than ten days prior to entering into any settlement
thereof. Each Indemnified Party shall use all reasonable efforts to mitigate the
amount of any Damages.
6.3 Payment of Indemnity.
In the event that any party entitled to indemnification hereunder (herein
referred to as an "Indemnified Party") shall incur any Damages in respect of
which indemnity may be sought pursuant to this Agreement, the party responsible
for indemnification (herein referred to as an "Indemnifying Party") shall be
given written notice thereof promptly by such Indemnified Party, which notice
shall, to the extent reasonably available to such Indemnified Party, specify the
amount and nature of the Damages and include the request of such Indemnified
Party for indemnification therefor. The Indemnifying Party shall promptly pay to
such Indemnified Party the amount of the Damages so specified. Notwithstanding
any provision contained under this Article VI to the contrary, no Indemnified
Party shall assert any claim for indemnification of any amount if and to the
extent entitled to recovery thereof under the insurance described under Section
3.8 hereof.
ARTICLE VII
RELATIONSHIP OF THE PARTIES
---------------------------
7.1 Independent Contractors.
This Agreement does not constitute either party as an agent, legal
representative, joint venturer, partner, employee or
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servant of the other party for any purpose whatsoever and it is understood
between the parties that the relationship is that of independent contractors and
under no circumstances shall the employees or consultants of one party be deemed
to be employees of the other party. This Agreement shall not be construed as
authority for either party to act for, or make any commitment on behalf of, the
other party.
ARTICLE VIII
EMPLOYMENT OF SUPER VISION STAFF
--------------------------------
8.1 No-Raid.
The Distributor agrees that, for a period commencing on the date hereof and
ending five years following termination of this Agreement, the Distributor shall
not, on behalf of any person, firm, corporation, association or any other
entity, including itself, directly or indirectly, employ or seek to employ any
person who is known to the Distributor, after reasonable inquiry, to be an
employee of the Corporation or any of its subsidiaries.
8.2 Indirect Action Prohibited.
The Distributor agrees that, during the term of this Agreement, it will
not, directly or indirectly, assist or encourage any other person or entity in
carrying out, directly or indirectly, any activity that would be prohibited by
the provisions of Section 8.1 if such activity were carried out by the
Distributor either directly or indirectly and in particular, the Distributor
agrees that it will not, directly or indirectly, induce any employee of the
Corporation to carry out directly or indirectly any such activity.
8.3 Survival.
The provisions of this Article VIII shall survive the termination of this
Agreement for any reason.
ARTICLE IX
MISCELLANEOUS
-------------
9.1 Notices.
All notices, requests or instruction hereunder shall be in writing and
delivered personally or sent by registered or certified mail, postage prepaid,
as follows:
(1) if the Corporation
2442 Viscount Row
Orlando Florida 32809
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Attention: President
(2) if to the Distributor
620 Division Street
Elizabeth, New Jersey 07207
Attention: President
Any of the above addresses may be changed at any time by notice delivered to the
other party as provided above; provided, however, that any such notice with
respect to change of address shall be effective only upon receipt.
9.2 Entire Agreement.
This Agreement contains the entire agreement between the parties hereto
with respect to the transaction contemplated hereby, and supersedes all prior
understandings, arrangements and agreements with respect to the subject matter
hereof. No modification hereof shall be effective unless in writing and signed
by the party against which it is sought to be enforced.
9.3 Further Action.
Each of the parties hereto shall use its best efforts to take such actions
as may be necessary or reasonably requested by the other party hereto to carry
out and consummate the transactions contemplated by this Agreement.
9.4 Most Favored Customer.
In the event the Corporation is or becomes party to any distributorship or
similar arrangement, and such arrangements contain terms materially more
favorable to the purchaser or agent thereunder than are contained herein with
respect to the Distributor, then, at the option of the Distributor, this
Agreement shall be amended to incorporate such more favorable terms. The
Corporation shall as soon as practicable deliver notice to the Distributor of
the existence of any such distributorship or similar arrangement, identifying
any such more favorable terms or the absence thereof.
9.5 Benefit of Agreement.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, except that, other
than as provided hereunder, neither party may assign or subcontract its rights
or obligations hereunder without the prior written approval of the other party.
9.6 Expenses.
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Except as otherwise provided herein, each of the parties hereto shall bear
its own expenses in connection with this Agreement and the transactions
contemplated hereby.
9.7 Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New Jersey applicable in the case of agreements made and to
be performed entirely within such state.
9.8 Captions.
The captions appearing in this Agreement are inserted for the convenience
of the parties only and shall not be construed to affect the meaning of the
provisions of this Agreement.
9.9 Counterparts.
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but both of which taken together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, this Agreement had duly executed by the parties hereto
as of the date first above written.
ATTEST: SUPER VISION INTERNATIONAL, INC.
_______________________________ By_______________________________
Name:
Title:
ATTEST: HAYWARD POOL PRODUCTS, INC.
_______________________________ By_______________________________
Name:
Title:
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SCHEDULE 1
LIMITED WARRANTY
----------------
SUPERVISION(R) International, Inc. warranties its products, excluding lamps, to
be free from defects in material and/or workmanship, under normal use,
conditions and service, for a period of ONE YEAR from the date of original
purchase.
In the event of a defect in material or workmanship during the warranty period,
SUPERVISION(R) will repair or replace (at its discretion) its products under the
conditions of the Warranty. SUPERVISION(R) will do so as its expense for the
materials but not for shipping. THIS REMEDY IS THE SOLE AND EXCLUSIVELY REMEDY
FOR ANY AND ALL CLAIMS RELATING TO ANY BREACH OF WARRANTY BY SUPERVISION(R).
LIMITATIONS, EXCLUSIONS AND OTHER RIGHTS:
1. Except as provided herein, SUPERVISION(R) makes no other warranties,
express or implied, including but not limited to the implied
warranties of merchantability or fitness for a particular purpose, and
all such warranties are expressly disclaimed. Some states do not allow
the exclusion of an implied warranty, so the above exclusion may not
apply to you.
2. SUPERVISION(R) is not responsible for defects or malfunctions in
and/or damage to Lighting Systems where a sale is specifically made
without warranty. In such sales the disclaimers of warranty and
liability; set forth above, shall continue to apply.
3. The Warranty covers normal consumer use and does not cover damage
which occurs in shipment or damage or failure which results from
alteration, accident, theft, misuse, abuse, abnormal use, negligent
installation, improper maintenance or where adequate care has not been
taken to prevent damage to the Lighting System.
4. THIS WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS, AND YOU MAY ALSO HAVE
OTHER RIGHTS WHICH VARY FROM STATE TO STATE.
If you discover a defect or malfunction during the period to which this Warranty
applies, write or phone SUPERVISION(R) for information on receiving warranty
service.
