.   EXHIBIT 10.15

 

MASTER AGREEMENT

 

This Master Agreement (this “Agreement”) is made and entered into as of July 17,
2003, between BRUNSWICK CORPORATION, a Delaware corporation (“Brunswick”),
FOUNTAIN POWERBOAT INDUSTRIES, INC., a Nevada corporation (“FPII”), FOUNTAIN
POWERBOATS INC., a North Carolina corporation (the “Company”), and REGINALD M.
FOUNTAIN, JR. (“RMF”).

 

RECITALS

 

The Company, a wholly-owned subsidiary of Fountain Powerboat Industries, Inc.
(“FPII”), is in the business of manufacturing, selling, distributing and
marketing high-performance boats (the “Business”) using, in large part, Mercury
outboard, inboard and sterndrive engines (“Mercury Engines”). The Company is
obtaining certain loans intended to enable the Company to achieve financial
stability and to grow and maintain the Business, and Brunswick is willing to
guarantee such loans and to enter into an exclusive supply agreement for Mercury
Engines with the Company. In addition, RMF will give Brunswick the option to
acquire the shares of and options to acquire shares of FPII owned by RMF, and
FPII will grant Brunswick options to acquire certain shares of FPII.

 

In consideration of the foregoing and the mutual covenants, agreements and
warranties herein contained, the parties agree as follows:

 

ARTICLE 1

DEFINITIONS

 

1.1 Definitions. The following terms shall have the meanings set forth herein
for the purposes of the transactions described in this Agreement:

 

“Affiliate” of any Person shall mean any corporation, proprietorship,
partnership or business entity which, directly or indirectly, owns or controls,
is under common ownership or control with, or is owned or controlled by, such
Person, including such Person’s Subsidiaries; except that any
non-marine/powerboat entity of RMF shall not be an Affiliate hereunder.

 

“Bank” shall mean the Bank of America, N.A.

 

“Bank Collateral” shall mean (a) all of the assets of the Company and its
Subsidiaries, including accounts, inventory, equipment, fixtures, general
intangibles, investment property and real estate, and (b) the real estate owned
by RMF that currently secures the GE Notes.

 

“Bank Liabilities” shall mean all obligations of the Company to the Bank under
or in connection with the Loan Documents, including for principal, interest,
fees, costs and expenses, breakage costs and indemnities.

 

“Brunswick”—see the first paragraph of this Agreement. References to Brunswick
shall include Mercury.

 

“Brunswick Guaranty” shall mean the guarantee by Brunswick of the Bank
Liabilities

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substantially in the form of Exhibit A.

 

“Brunswick Indemnified Parties” shall be defined as set forth in Section 11.1.

 

“Brunswick Option Period” shall be defined as set forth in Section 2.7.

 

“Brunswick Purchase Option” shall be defined as set forth in Section 2.7.

 

“Business” shall be defined as set forth in the Recitals.

 

“Capital Stock” shall mean the authorized capital stock of FPII.

 

“Claim” shall mean any claim, suit, action or proceeding.

 

“Closing” shall mean the consummation of the transactions contemplated herein in
accordance with Article 9 hereof.

 

“Closing Date” shall mean the date on which the Closing occurs or is to occur.

 

“Collateral” shall mean the Bank Collateral, the RMF Property Collateral, the
FPII Make-Up Option and the RMF Stock Collateral.

 

“Company” shall be defined as set forth in the first paragraph of this
Agreement.

 

“Company Indemnified Parties” shall be defined as set forth in Section 11.2.

 

“Contingent Purchase Agreement” shall be defined as set forth in Section 2.3.

 

“Contract” shall mean any contract, lease, commitment, sales order, purchase
order, agreement, indenture, mortgage, franchise, note or bond.

 

“Disabled” shall mean an inability or unwillingness to work at least 40 hours
per week fulfilling with competence those duties which a senior executive
officer would be expected to perform managing all operations and exercising
appropriate informed decisions for the company, as a result of physical or
mental impairment of whatever kind or nature.

 

“EBITDA” shall mean (i) FPII’s net income for the applicable period, plus (ii)
the provision for taxes based on income or profits of FPII for such period to
the extent the same was deducted in computing FPII’s net income for such period,
plus (iii) the interest expense of FPII for such period to the extent the same
was deducted in computing FPII’s net income for such period, plus (iv)
depreciation and amortization of FPII for such period to the extent the same was
deducted in computing FPII’s net income for such period, all determined in
accordance with generally accepted accounting principles, consistently applied.

 

“Encumbrance” shall mean any mortgage, lien, charge, security interest,
encumbrance, restriction, claim or right of another.

 

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Engine Supply Agreement” shall mean the exclusive engine supply agreement dated
the Closing Date between the Company and FPII and Brunswick substantially in the
form attached as Exhibit B, pursuant to which the Company and its Affiliates
will purchase Mercury Engines from Mercury pursuant to Mercury’s standard OEM
program (which currently is 1% discount for cash-in-advance, it being understood
that Mercury may, without giving any notice or incurring any liability to the
Company, change its standard OEM terms from time to time in its sole
discretion).

 

“FPII” shall be defined as set forth in the Recitals.

 

“FPII Make-Up Option” shall be defined as set forth in Section 2.9.2.

 

“FPII Purchase Option” shall be defined as set forth in Section 2.9.1.

 

“FPII Shares” shall be defined as set forth in Section 2.9.1.

 

“GE” shall mean General Electric Capital Corporation and GE Capital Small
Business Finance Corporation, as applicable.

 

“Governmental Authority” shall mean the government of the United States, any
state or political subdivision thereof or any foreign country and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.

 

“Indemnified Party” shall be defined as set forth in Section 11.3.1.

 

“Indemnifying Party” shall be defined as set forth in Section 11.3.1.

 

“Interest Account” shall mean an interest-bearing account at the Bank
established in accordance with Section 2.1, or to the extent otherwise agreed in
writing by the parties after the Closing, with Northwestern Mutual.

 

“Law” shall mean any law, statute, regulation, code, ordinance, rule or
governmental requirement (whether Federal, state, local or foreign).

 

“Loan” shall be defined as set forth in Section 2.1.

 

“Loan Agreement” shall be defined as set forth in Section 2.1.

 

“Loan Documents” shall mean the Loan Agreement and all related documentation
between (i) the Bank, (ii) the Company and/or any of its Subsidiaries and FPII.

 

“Losses” shall mean all losses, damages, liabilities, costs and expenses
(including without limitation, reasonable attorneys’ fees and expenses).

 

“Mercury” shall mean Brunswick’s Mercury Marine Division.

 

“Mercury Engines” shall be defined as set forth in the Recitals.

 

“Offer Price” shall be defined as set forth in Section 2.8.

 

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“Option Share Purchase Price” shall mean the price per share determined by
performing the following calculation:

 

(a) the product of

 

(i) the average consolidated EBITDA of FPII from the two immediately past
complete fiscal years times

 

(ii) 6, minus

 

(b) all then-existing interest-bearing loan debt of FPII and its Subsidiaries,
plus

 

(c) all cash on hand of FPII and its Subsidiaries, divided by

 

(d) the number of outstanding shares of Capital Stock of FPII.

 

(e) If the price calculated is less than zero, the Option Share Purchase Price
shall be zero. Notwithstanding the foregoing, in the event that RMF is no longer
living or is Disabled, the multiplier referenced in clause (a)(ii) above shall
be 4 and not 6.

 

“Permitted Encumbrance” shall mean (a) with respect to the Bank Collateral,
Encumbrances in favor of the Bank and all Encumbrances permitted by the negative
assurances section of the Loan Agreement (without giving effect to any
termination thereof or any amendment thereto or waiver thereunder unless
approved in writing by Brunswick); and (b) with respect to the RMF Property
Collateral, Encumbrances in favor of Brunswick and all other Encumbrances
currently on the RMF Property Collateral and which have been approved by
Brunswick.

 

“Person” shall mean an individual, a partnership, a corporation, a business
trust, a joint stock company, a trust, an unincorporated association, a joint
venture, a Governmental Authority or any other entity of whatever nature.

 

“RMF” shall be defined as set forth in the first paragraph of this Agreement.

 

“RMF Guaranty” shall mean the guarantee by RMF of the Bank Liabilities in form
and substance reasonably satisfactory to Brunswick and its counsel.

 

“RMF Reimbursement Agreement” shall be defined as set forth in Section 2.5.

 

“RMF Property Collateral” shall be defined as set forth in Section 2.5.

 

“RMF Sale Period” shall be defined as set forth in Section 2.8.

 

“RMF Shares” shall be defined as set forth in Section 2.7.

 

“RMF Stock Collateral” shall be defined as set forth in Section 2.5.

 

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“SEC” shall mean the Securities and Exchange Commission.

 

“SEC Documents” shall mean each registration statement, report, proxy statement,
information statement, or schedule filed with the SEC by FPII.

 

“Subsidiary” shall mean, with respect to any Person, a corporation or other
entity of which such Person and/or any of such Person’s Subsidiaries own at
least fifty percent (50%) or more of the voting stock or equity interests;
except that any non-marine/powerboat entity of RMF shall not be an Affiliate.

 

“Transaction Documents” shall mean this Agreement, the Engine Supply Agreement,
the Brunswick Guaranty, the Loan Agreement, the Contingent Purchase Agreement,
the RMF Guaranty, the RMF Reimbursement Agreement and all other documents,
instruments and certificates necessary to accomplish the transactions
contemplated hereby.

 

ARTICLE 2

LOAN, GUARANTIES, SECURITY, OPTIONS

 

2.1 Loan. Subject to the satisfaction of the parties hereto with the Loan
Documents, the Company shall, on or before the Closing Date, enter into a term
loan agreement (the “Loan Agreement”) with the Bank providing for a term loan
(the “Loan”) in the amount of $18,000,000. The proceeds of the Loan shall be
used in accordance with Schedule 2.1. To the extent that the uses of proceeds
set forth above do not aggregate $18,000,000, the remainder (but no more than
$2,281,069 without Brunswick’s prior written consent) shall be put in the
Interest Account.

 

2.2 Guaranties and Collateral for the Bank Liabilities. The Bank Liabilities
will be unconditionally guaranteed by FPII and will be secured by the Bank
Collateral. In addition, (a) RMF will personally guarantee all of the Bank
Liabilities pursuant to the RMF Guaranty; and (b) Brunswick will guarantee all
of the Bank Liabilities, up to a maximum of $18,000,000, pursuant to the
Brunswick Guaranty.

 

2.3 Contingent Purchase Option. Pursuant to a contingent purchase agreement
substantially in the form of Exhibit C (the “Contingent Purchase Agreement”)
between Brunswick and the Bank, Brunswick will have the option, under certain
circumstances, to purchase the Loan and all other Bank Liabilities from the
Bank.

 

2.4 Certain Agreements of Company and RMF with respect to the Loan. To induce
Brunswick to issue the Brunswick Guaranty, the Company and RMF agree that (a)
(i) if Brunswick exercises its right to purchase the Loan and the other Bank
Liabilities under the Contingent Purchase Agreement, then Brunswick shall
succeed to all rights of the Bank under the Loan Documents; (ii) Brunswick shall
have a second lien (subject to the first lien of the Bank) on all of the Bank
Collateral; and (iii) if Brunswick makes any payment under the Brunswick
Guaranty, then (subject to any delay of its subrogation rights required by the
Bank pursuant to the Brunswick Guaranty) Brunswick shall be subrogated to all
rights of the Bank under the Loan Documents, and (b) in the case of both clause
(i) and clause (ii), Brunswick may take all actions and exercise all remedies
that would have been available to the Bank under the Loan Documents, including
enforcing any guaranty, foreclosing on any collateral and/or

 

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exercising any right available to a secured creditor under the Uniform
Commercial Code or other applicable law. Notwithstanding the foregoing sentence,
if Brunswick succeeds to the rights of the Bank under the Loan Documents (by
purchase, subrogation or otherwise), the liability of RMF under the RMF Guaranty
shall be limited to the excess (if any) of (i) the Bank Liabilities over (ii)
$14.7 million.

 

2.5 RMF Reimbursement Agreement. RMF agrees that at Closing he will issue an
indemnity agreement in favor of Brunswick substantially in the form of Exhibit D
(the “RMF Reimbursement Agreement”) pursuant to which RMF will indemnify
Brunswick for all amounts in excess of $14.7 million which Brunswick may pay to
the Bank (i) to purchase the Loan and the other Bank Liabilities pursuant to the
Contingent Purchase Agreement or (ii) pursuant to the Brunswick Guaranty. The
RMF Reimbursement Agreement will be secured by (a) RMF’s Eastbrooke real
property in Pitt County, North Carolina and RMF’s Fairview Shopping Center
property in Tarboro, Edgecombe County, North Carolina (the “RMF Property
Collateral”), (b) a pledge of RMF’s stock in FPII (including any stock RMF
acquires through FPII’s stock option plan) (the “RMF Stock Collateral”), (c) a
collateral assignment of $2,000,000 of life insurance insuring the life of RMF,
(d) the FPII Make-Up Option and (e) subject to the first lien of the Bank (and
any intercreditor agreement required by the Bank), a second lien on all of the
Bank Collateral.

 

2.6 Engine Supply Agreement. At Closing, FPII and the Company will enter into
the Engine Supply Agreement which will have a term ending the later of (a) the
end of the second model year after the year in which complete repayment of the
Loan (other than through extension or refinancing) and the extinguishment of the
Brunswick Guaranty occur and (b) seven (7) years.

 

2.7 Brunswick Purchase Option. Brunswick shall have the option (the “Brunswick
Purchase Option”) commencing on the earlier of (i) the date the Loan Agreement
has terminated and all amounts outstanding thereunder have been paid in full, or
(ii) July 1, 2007, and ending three months after audited financial statements of
FPII and the Company have been provided to Brunswick covering the two full
fiscal year periods commencing after the Loan Agreement has been terminated and
all amounts outstanding thereunder have been paid in full (the “Brunswick Option
Period”), to purchase any or all of the shares of Capital Stock held by RMF, as
well as all options held by RMF to purchase Capital Stock (the “RMF Shares”) at
the Option Share Purchase Price. To exercise the Brunswick Purchase Option,
Brunswick shall deliver to RMF written notice (in the manner contemplated by
Section 12.6) of its exercise of the Brunswick Purchase Option within the
Brunswick Option Period. Once notice is given RMF shall not be able to exercise
outstanding options. If Brunswick validly exercises the Brunswick Purchase
Option, RMF shall sell, and Brunswick shall purchase, all of RMF Shares as
promptly as practicable after the date of such exercise and in no event later
than the latest to occur of the following: (A) 60 days after the date of such
exercise and (B) five days after receipt of all required or appropriate
approvals to such transaction from any Governmental Authority. Brunswick shall
pursue required approvals from any Governmental Authority promptly. If, after
Brunswick exercises the Brunswick Purchase Option, any Governmental Authority
whose approval is required to consummate the Brunswick Purchase Option imposes a
condition on its approval of such acquisition that, in the sole discretion of
Brunswick, would make the acquisition of the RMF Shares impractical or not
otherwise in the best interests of Brunswick,

 

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Brunswick shall not be required to consummate the Brunswick Purchase Option. If
such decision not to complete the acquisition is made, the Brunswick Purchase
Option shall be deemed not to have been exercised and shall remain in full force
and effect, but it shall expire (if not previously exercised) on the later of
(a) the last day of the Brunswick Option Period, or (b) the last day of the
month that is 18 months after the decision not to consummate was made. At the
closing of the Brunswick Purchase Option, (1) RMF shall deliver to Brunswick the
RMF Shares free and clear of all Encumbrances; and (2) Brunswick shall deliver
to RMF the Option Share Purchase Price multiplied by the number of RMF Shares
purchased. At all times during the Brunswick Option Period, the Company and FPII
shall afford Brunswick free and unfettered access to their books and records in
order that Brunswick can determine whether to exercise the Brunswick Purchase
Option; provided such access is not in violation of any applicable law.

 

2.8 RMF Share Sale. If at any time after the Closing Date and before and
including the date the Brunswick Purchase Option terminates (the “RMF Sale
Period”), RMF receives a bona fide third party written offer to purchase the RMF
Shares containing specific terms, RMF shall give written notice to Brunswick of
such offer together with copies of all documentation related thereto. Upon
receipt of such notice Brunswick (in its discretion) shall have 30 days (i) to
purchase the RMF Shares at seventy percent (70%) of the price set forth in the
written notice (the “Offer Price”), (ii) to exercise the Brunswick Purchase
Option, if available, or (iii) to decline to do either. If Brunswick decides not
to purchase at the Offer Price or to exercise the Brunswick Purchase Option,
then RMF shall be free to sell the RMF Shares at the proposed purchase price for
180 days after the date of Brunswick’s notice informing RMF of its decision not
to proceed; provided that RMF is able to provide replacement collateral for the
RMF Stock Collateral acceptable to Brunswick. In the event that Brunswick
decides to proceed, Brunswick shall purchase all of the RMF Shares as promptly
as practicable after the date of such exercise and in no event later than the
latest to occur of the following: (A) 60 days after notice to the Company of its
decision to proceed and (B) five days after receipt of all required approvals to
such transaction from any Governmental Authorities. Brunswick shall pursue
required approvals from any Governmental Authority promptly. If any Governmental
Authority whose approval is required to consummate the purchase of RMF Shares
imposes a condition on its approval of such acquisition that, in the sole
discretion of Brunswick, would make the acquisition of the RMF Shares
impractical or not otherwise in the best interests of Brunswick, Brunswick shall
not be required to consummate the purchase. If such decision not to complete the
acquisition is made, RMF may not sell the RMF Shares to the original third party
bidder for a time period terminating on the last day of the month that is 18
months after Brunswick’s decision not to consummate was made (the “Termination
Date”)). If at any time prior to the Termination Date, Brunswick decides that it
is in a position to consummate it may do so at the purchase price originally
selected by Brunswick. In addition, in the event that the original third party
bidder elects not to proceed at any time prior to the Termination Date, the
rights granted to Brunswick in this Section 2.8 shall be in full force and
effect with respect to any subsequent offers to purchase until the Termination
Date. At the closing of any purchase, (1) RMF shall deliver to Brunswick the RMF
Shares free and clear of all Encumbrances; and (2) Brunswick shall deliver to
RMF in immediately available funds equal to the purchase price for the RMF
Shares. In the event that Brunswick determines to acquire the RMF Shares solely
to sell them to the proposed purchaser, Brunswick may waive such option in
consideration of the immediate payment of the difference between the proposed
purchase price and the Offer Price.

 

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2.9 FPII Options.

 

2.9.1 FPII Purchase Option. At any time during the Brunswick Option Period,
Brunswick shall have the option (the “FPII Purchase Option”) to purchase that
number of shares of Capital Stock of FPII (the “FPII Shares”) (at a price equal
to the weighted average of the market closing price for the previous 30 days in
which 2,000 shares or more have traded from the date of notice of exercise)
which would result in Brunswick owning, together with the RMF Shares, 50.1% of
the issued and outstanding Capital Stock on a fully diluted basis. To exercise
the FPII Purchase Option, Brunswick shall deliver written notice of its exercise
of the FPII Purchase Option within the Brunswick Option Period. If Brunswick
validly exercises the FPII Purchase Option, FPII shall sell, and Brunswick shall
purchase, the number of shares of capital Stock identified in the notice as
promptly as practicable after the date of such exercise and in no event later
than the latest to occur of the following: (A) 60 days after the date of such
exercise and (B) five days after receipt of all required or appropriate
approvals to such transaction from any Governmental Authority. Brunswick shall
pursue required approvals from any Governmental Authority promptly. If, after
Brunswick exercises the FPII Purchase Option, any Governmental Authority whose
approval is required to consummate the FPII Purchase Option imposes a condition
on its approval of such acquisition that, in the sole discretion of Brunswick,
would make the acquisition of the Capital Stock impractical or not otherwise in
the best interests of Brunswick, Brunswick shall not be required to consummate
the FPII Purchase Option. If such decision not to complete the acquisition is
made, the FPII Purchase Option shall be deemed not to have been exercised and
shall remain in full force and effect, but it shall expire (if not previously
exercised) on the last day of the month that is 36 months after the decision not
to consummate was made. At the closing of the FPII Purchase Option, (1) FPII
shall deliver to Brunswick the FPII Shares free and clear of all Encumbrances,
and (2) Brunswick shall deliver to FPII the FPII Share Purchase Price multiplied
by the number of FPII Shares purchased. At all times during the Brunswick Option
Period, the Company and FPII shall afford Brunswick full access to their books
and records in order that Brunswick can determine whether to exercise the FPII
Purchase Option; provided such access is not in violation of any applicable law.

 

2.9.2 FPII Make-Up Option. At any time (a) that the Brunswick Guaranty remains
in effect or Brunswick is the owner of the Loan and (b) during the period
beginning on the date Brunswick initiates foreclosure or other realization on
the RMF Stock Collateral and ending on the 90th day after completion of such
foreclosure or other realization, Brunswick shall have the option to purchase up
to 273,146 shares of Capital Stock of FPII at a price equal to $.05 per share.
To exercise the FPII Make-Up Option, Brunswick shall deliver written notice to
FPII of its exercise of the FPII Make-Up Option. If Brunswick validly exercises
the FPII Make-Up Option, FPII shall sell, and Brunswick shall purchase, the
number of shares of Capital Stock identified in the notice as promptly as
practicable after the date of such exercise and in no event later than five days
after receipt of all required or appropriate approvals to such transaction from
any Governmental Authority. Brunswick shall pursue required approvals from any
Governmental Authority promptly. If, after Brunswick exercises the FPII Make-Up
Option, any Governmental Authority whose approval is required to consummate the
FPII Make-Up Option imposes a condition on its approval of such acquisition
that, in the sole discretion of Brunswick, would make the acquisition of the
Capital Stock impractical or not otherwise in the best interests of Brunswick,
Brunswick shall not be required to consummate the FPII Make-Up Option. If such
decision not to complete the acquisition is made, the FPII Make-Up Option shall
be deemed

 

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not to have been exercised and shall remain in full force and effect, but it
shall expire (if not previously exercised) on the last day of the month that is
36 months after the decision not to consummate was made. At the closing of the
FPII Make-Up Option, (1) FPII shall deliver to Brunswick the FPII Shares free
and clear of all Encumbrances, and (2) Brunswick shall deliver to FPII the
purchase price therefor.

 

2.10 Antidilution. The parties acknowledge that Brunswick would not enter into
this Agreement without being assured of maintaining its ability to acquire the
percentage of the Shares of Capital Stock of FPII that the RMF Shares represent
on the date hereof. Accordingly, without Brunswick’s prior written consent,
neither FPII nor the Company shall create any new class of Capital Stock nor
issue any Capital Stock or options to purchase Capital Stock.

 

2.11 Closing Actions.

 

2.11.1 On the Closing Date, subject to the terms and conditions set forth
herein, Brunswick shall enter into the Brunswick Guarantee, and FPII, the
Company and its Subsidiaries and RMF shall take all actions that Brunswick deems
necessary or appropriate to grant to Brunswick perfected liens on and security
interests in all Collateral, subject to no Encumbrances other than Permitted
Encumbrances.

 

2.11.2 On the Closing Date, subject to the terms and conditions set forth
herein, each party shall execute the Transaction Documents to which it is a
party.

 

2.12 No Liabilities Assumed by Brunswick. Except as set forth in the Brunswick
Guarantee, Brunswick shall not assume, or in any way be liable or responsible
for, any of the liabilities and obligations of FPII, the Company or any of their
respective Subsidiaries or RMF.

 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF FPII, THE COMPANY AND RMF

 

Each of FPII, the Company and RMF, jointly and severally, represents and
warrants as follows:

 

3.1 Due Incorporation, etc. Each of FPII and the Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada and North Carolina, respectively, each of their Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, and each of FPII and each of its
Subsidiaries has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.

 

3.2 Authority; Enforceability. FPII and each of its Subsidiaries has full power
and authority, and has taken all necessary and proper action, including the
approval of its board of directors and shareholders, if necessary, to execute
and deliver this Agreement and the other Transaction Documents to which it is a
party and to consummate the transactions contemplated hereby and thereby. Each
Transaction Document to which FPII or any of its Subsidiaries is a party has
been duly and validly executed and delivered by FPII and/or such Subsidiary, as
applicable, and constitutes the legal, valid and binding obligation of FPII
and/or such Subsidiary, as applicable, enforceable against such entity in
accordance with its terms, except as such

 

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enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws from time to time in effect which affect
creditors’ rights generally and by legal and equitable limitations on the
availability of specific remedies. The execution, delivery and performance by
each of FPII and each of its Subsidiaries of the Transaction Documents to which
it is a party and all other instruments, agreements, certificates and documents
contemplated hereby and thereby to which it is a signatory does not and will
not: (a) violate any decree or judgment of any court or Governmental Authority
applicable to FPII or any of its Subsidiaries or to any of their respective
properties or assets; (b) violate any Law; (c) violate or conflict with, or
result in a breach of, or constitute a default (or an event which, with or
without notice or lapse of time or both, would constitute a default) under, or
permit cancellation of, or result in or require the creation of, any Encumbrance
(other than Permitted Encumbrances) upon any of the properties or assets of FPII
or any of its Subsidiaries under any of the terms, conditions or provisions of
any Contract to which FPII or any of its Subsidiaries is a party, or by which
FPII or any of its Subsidiaries or any of their respective properties or assets
is bound; or (d) violate or conflict with any provision of the Articles of
Incorporation or By-Laws of FPII or any of its Subsidiaries.

 

3.3 No Defaults or Violations. Except as set forth on Schedule 3.3, neither FPII
nor any of its Subsidiaries is in default under the terms of any Contract to the
extent such default could have a material adverse effect on the Business.

 

3.4 Consents. No notice to, filing with, authorization of, exemption by, or
consent of any Person is required for FPII or any of its Subsidiaries to
consummate the transactions contemplated by this Agreement and the other
Transaction Documents.

 

3.5 Litigation. Except as disclosed in Schedule 3.5, there are no actions,
suits, labor disputes or other litigation, legal or administrative proceedings
or governmental investigations pending or, to the knowledge of FPII and the
Company, threatened against or affecting the Business or relating to the
transactions contemplated by this Agreement. Except as disclosed in Schedule
3.5, there are no material actions, suits, labor disputes or other litigation,
legal or administrative proceedings or governmental investigations pending, or
to the knowledge of FPII or the Company, threatened against or affecting FPII or
the Company. Neither FPII nor any of its Subsidiaries is subject to any order,
judgment, decree, stipulation or consent of or with any court or Governmental
Authority which has had, or may have, a material adverse effect on the Business.

 

3.6 Taxes. Each of FPII and the Company has duly and timely filed all federal,
state and local tax returns, reports and other information required to be filed
by it with tax authorities through the Closing Date and has paid all taxes and
other governmental charges indicated by such returns and reports to be due and
payable. FPII and its Subsidiaries have paid all taxes and other governmental
charges claimed by any tax authority to be due and owing, including payroll
taxes, except those being contested in good faith by appropriate proceedings. No
tax liens have been filed against FPII or any of its Subsidiaries or any of
their respective assets. Neither FPII nor any of its Subsidiaries has received
any notice or warning of any tax deficiency or tax lien (except for liens for
taxes not yet due and payable), and FPII does not have reason to believe that it
or any of its Subsidiaries may receive any notice or warning of any tax
deficiency or tax lien (except liens for taxes not yet due and payable).

 

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3.7 Title to Collateral. Each of FPII, each of its Subsidiaries and RMF is (and
shall at the Closing be) the sole and lawful owner of, and has (or shall at the
Closing have) good and marketable title to, all of the applicable Collateral, in
each case free and clear of any Encumbrance other than Permitted Encumbrances.

 

3.8 SEC Documents; Financial Statements. (a) FPII has made available to
Brunswick copies of each SEC Document filed with the SEC by FPII since July 1,
1999. As of their respective dates, as amended or supplemented by subsequent SEC
Documents prior to the date hereof, FPII’s SEC Documents complied in all
material respects with the applicable requirements of the Securities Act of
1933, as amended, and the Securities Exchange Act of 1934, as amended, as the
case may be, and none of such SEC Documents, as amended or supplemented by
subsequent SEC Documents prior to the date hereof, contained any untrue
statement of a material fact or omitted 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.

 

(b) As of the date of this Agreement, neither FPII nor any of its Subsidiaries,
nor any of their respective assets, businesses or operations, is a party to, or
is bound or affected by, or receives benefits under, any contract or agreement
or amendment thereto that, in any such case, would be required to be filed as an
exhibit to a Form 10-K as of the date of this Agreement that has not been filed
as an exhibit to an SEC Document filed prior to the date of this Agreement.

 

(c) As of their respective dates, the consolidated financial statements included
in the FPII’s SEC Documents, as amended or supplemented by subsequent SEC
Documents prior to the date hereof, conformed as to form in all material
respects with then applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto, were prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated therein or in the notes
thereto) and fairly presented FPII’s consolidated financial position and that of
its consolidated Subsidiaries as at the dates thereof and the consolidated
results of their operations and statements of cash flows for the periods then
ended (subject, in the case of unaudited statements, to the lack of footnotes
thereto, to normal year-end audit adjustments and to any other adjustments
described therein).

 

3.9 Absence of Certain Changes; No Undisclosed Liabilities. (a) Since July 1,
1999, except as disclosed in the SEC Documents prior to the date hereof, neither
FPII nor any of its Subsidiaries has (i) incurred any liability, whether or not
accrued, contingent or otherwise, or suffered any event or occurrence which,
individually or in the aggregate, could reasonably be expected to have a
material adverse effect, (ii) made any change in accounting methods, principles
or practices, or (iii) issued, or agreed to issue, any capital stock except
pursuant to outstanding options or warrants.

 

(b) Except as and to the extent disclosed by FPII in the SEC Documents, neither
FPII nor any of its Subsidiaries has any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, that would be required
by generally accepted accounting principles to be reflected on a consolidated
balance sheet of FPII and its Subsidiaries (including the notes thereto) or
which could reasonably be expected to have, individually or in the aggregate, a
material adverse effect.

 

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(c) FPII has no subsidiaries other than the Company and is not engaged in any
business other than the design, manufacture and sale of boats and related
products.

 

3.10 Capitalization. The Capital Stock consists of 200,000,000 authorized shares
of common stock, par value $0.01 per share. As of the date hereof, there are
4,745,108 shares of Capital Stock issued and outstanding. As of the date hereof,
there were outstanding options to purchase 663,500 shares under FPII’s option
plans at a weighted average exercise price of $3.98. As of the date hereof, no
shares are subject to issuance upon exercise of warrants. All issued and
outstanding shares are duly authorized and validly issued, fully paid,
non-assessable and free of preemptive rights with respect thereto. FPII shall at
all times keep available for issuance the shares of Capital Stock issuable under
the FPII Purchase Option and the FPII Make-Up Option.

 

3.11 Benefit Plans. All employee benefit plans, programs, policies and
arrangements maintained or contributed to by FPII and its Subsidiaries complies
with and has been administered in compliance with all applicable requirements of
Law. Neither FPII nor any of its subsidiaries or Affiliates has any liability or
contingent liability with respect to any such employee benefit plan, program,
policy or arrangement and no action has been taken to contravene any requirement
of any provision of any of the foregoing.

 

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF BRUNSWICK

 

Brunswick represents and warrants to FPII, the Company and RMF as follows:

 

4.1 Due Incorporation, etc. Brunswick is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted.

 

4.2 Corporate Authority; Enforceability. Brunswick has full corporate power and
authority, and has taken all necessary and proper action, to execute and deliver
this Agreement and the other Transaction Documents to which it is a party and to
consummate the transactions contemplated hereby and thereby. Each Transaction
Document to which Brunswick is a party has been duly and validly executed by
Brunswick and constitutes the legal, valid and binding obligation of Brunswick
enforceable against Brunswick in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws from time to time in effect which affect
creditors’ rights generally and by legal and equitable limitations on the
availability of specific remedies. The execution, delivery and performance by
Brunswick of the Transaction Documents to which it is a party and all other
instruments, agreements, certificates and documents contemplated hereby to which
it is a signatory does not and will not (i) violate any decree or judgment of
any court or Governmental Authority applicable to Brunswick or to its properties
or assets; (ii) violate any Law; or (iii) violate or conflict with any provision
of the Certificate of Incorporation or By-Laws of Brunswick.

 

4.3 Consents. No notice to, filing with, authorization of, exemption by, or
consent of any Person is required for Brunswick to consummate the transactions
contemplated by this Agreement and the other Transaction Documents.

 

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ARTICLE 5

COVENANTS OF FPII, THE COMPANY AND RMF

 

FPII, the Company and RMF agree that from the date hereof through and including
the Closing Date:

 

5.1 Implementing Agreement. FPII, the Company and RMF will take all reasonable
action required or appropriate for it to fulfill its obligations under the terms
of this Agreement and the transactions contemplated hereby, including (i) the
obtaining of all necessary consents and approvals to the performance of this
Agreement and the transactions contemplated hereby, (ii) affording Brunswick,
its counsel, accountants and other representatives full access to all of the
facilities, properties, books, Contracts, commitments and records of FPII and
its Subsidiaries and (iii) causing the officers and employees of FPII and its
Subsidiaries to be available to Brunswick as Brunswick shall from time to time
reasonably request.

 

5.2 Ordinary Course. FPII and the Company shall operate in the ordinary course
of business.

 

5.3 Books and Records. FPII and the Company shall maintain its books, accounts
and records in the usual, regular and ordinary manner, and on a basis consistent
with prior years.

 

ARTICLE 6

COVENANT OF BRUNSWICK

 

6.1 Implementing Agreement. Brunswick agrees that from the date hereof to the
Closing Date, it will take all reasonable action required or appropriate for
Brunswick to fulfill the obligations of Brunswick under the terms of this
Agreement and the transactions contemplated hereby, including the obtaining of
all necessary consents and approvals to the performance of its obligations under
this Agreement and the transactions contemplated hereby.

 

ARTICLE 7

CONDITIONS PRECEDENT TO OBLIGATIONS OF BRUNSWICK

 

The obligations of Brunswick under this Agreement are, at the option of
Brunswick, subject to satisfaction of the following conditions precedent on or
before the Closing Date:

 

7.1 Warranties True as of Both Present Date and Closing Date. The
representations and warranties of FPII, the Company and RMF contained herein
shall be true on and as of the date of this Agreement, and, except as set forth
below, shall also be true on and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date.

 

7.2 Compliance with Agreements and Covenants. FPII, the Company and RMF shall
have performed all obligations and agreements and complied with all covenants
contained in this Agreement to be performed and complied with by it on or prior
to the Closing Date.

 

7.3 Documents from Company. FPII, the Company and RMF shall have delivered to
Brunswick the documents and other items specified in Section 9.2.

 

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7.4 Actions or Proceedings. No action or proceeding by any Governmental
Authority or other Person shall have been instituted which would enjoin,
restrain or prohibit, or might result in substantial damages in respect of, this
Agreement or the complete consummation of the transactions as contemplated by
this Agreement, and which would, in the reasonable judgment of Brunswick, make
it inadvisable to consummate such transactions, and no court order shall have
been entered in any action or proceeding which enjoins, restrains or prohibits
this Agreement or the complete consummation of the transactions contemplated by
this Agreement.

 

7.5 Material Adverse Change. There shall not have occurred a material adverse
change in the business, operation or prospects of FPII, the Company, RMF or the
Business since June 30, 2002.

 

7.6 Loan Documents. FPII, the Company and RMF shall have entered into the Loan
Documents on terms satisfactory to Brunswick and delivered copies thereof to
Brunswick.

 

7.7 Release of Security Interests. Concurrently with the Closing, Brunswick
shall have received evidence satisfactory to it of the release of all
Encumbrances on the Collateral (other than Permitted Encumbrances), including
all Encumbrances under the security agreements between FPII and GE.

 

7.8 Collateral. Brunswick shall have a perfected security interest in the
Collateral subject to Permitted Encumbrances.

 

7.9 Intercreditor Agreement. The Bank and Brunswick shall have entered into any
intercreditor agreement required by the Bank with respect to their respective
interests in the Bank Collateral.

 

7.10 RMF Reimbursement Agreement. RMF shall have entered into the RMF
Reimbursement Agreement.

 

ARTICLE 8

CONDITIONS PRECEDENT TO OBLIGATIONS OF FPII, THE COMPANY AND RMF

 

The obligations of FPII, the Company and RMF under this Agreement are, at the
option of FPII, the Company and RMF, subject to the satisfaction of the
following conditions precedent on or before the Closing Date:

 

8.1 Warranties True as of Both Present Date and Closing Date. The
representations and warranties of Brunswick contained herein shall be true in
all material respects on and as of the date of this Agreement, and shall also be
true in all material respects on and as of the Closing Date with the same force
and effect as though made by Brunswick on and as of the Closing Date.

 

8.2 Compliance with Agreements and Covenants. Brunswick shall have performed all
obligations and agreements and complied with all covenants contained in this
Agreement to be performed and complied with by it on or prior to the Closing
Date.

 

8.3 Documents from Brunswick. Brunswick shall have delivered to FPII, the
Company and RMF the documents and other items specified in Section 9.3.

 

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8.4 Actions or Proceedings. No action or proceeding by any Governmental
Authority or other Person shall have been instituted which would enjoin,
restrain or prohibit, or might result in substantial damages in respect of, this
Agreement or the complete consummation of the transactions as contemplated by
this Agreement, and which would in the reasonable judgment of FPII, the Company
or RMF make it inadvisable to consummate such transactions, and no court order
shall have been entered in any action or proceeding which enjoins, restrains or
prohibits this Agreement or the complete consummation of the transactions
contemplated by this Agreement.

 

8.5 Brunswick Guaranty. Brunswick shall have entered into the Brunswick
Guaranty.

 

ARTICLE 9

CLOSING

 

9.1 Closing Date. Assuming satisfaction of the conditions precedent, the Closing
Date shall be July 17, 2003, or such other date as shall be mutually acceptable
to Brunswick and the Company; and the Closing on that date shall be held at the
offices of Ward & Smith, 1001 College Court, New Bern, NC 28563, at 8:00 A.M.,
or at such other place or time as the parties hereto may agree.

 

9.2 Deliveries by the Company at the Closing. At the Closing, FPII and the
Company will deliver to Brunswick the following documents and other items, each
of which shall be in form and substance reasonably satisfactory to Brunswick and
its counsel:

 

9.2.1 A certificate of FPII and the Company dated as of the Closing Date,
certifying as to compliance with Sections 7.1 and 7.2;

 

9.2.2 An opinion, dated the Closing Date, of Ward & Smith, counsel for Company,
substantially in the form of Exhibit E.

 

9.2.3 The Transaction Documents to which FPII and/or the Company is a party.

 

9.2.4 Such other documents and instruments (including certified copies of the
Articles of Incorporation, By-Laws and resolutions of FPII and the Company) as
may be required by any other provision of this Agreement or as may be reasonably
required to carry out the terms and intent of this Agreement.

 

9.3 Deliveries by Brunswick at the Closing. At the Closing, Brunswick shall
deliver (a) the Brunswick Guaranty to the Bank (together with such other
documents and instruments as the Bank may reasonably request in connection
therewith) and (b) the following documents and other items to FPII and the
Company, each of which shall be in form and substance reasonably satisfactory to
FPII and its counsel:

 

9.3.1 A certificate, dated as of the Closing Date, of a Vice President of
Brunswick certifying as to compliance with Sections 8.1 and 8.2;

 

9.3.2 An opinion, dated the Closing Date, of the general counsel of Brunswick,
to the following effect:

 

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(a) Brunswick is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, with all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted.

 

(b) Brunswick has full corporate power and authority, and has taken all
necessary and proper action, to execute and deliver this Agreement and, in the
case of Brunswick, the other Transaction Documents to which it is a party and to
consummate the transactions contemplated thereby.

 

(c) This Agreement and the other Transaction Documents to which Brunswick is a
party have been duly and validly executed and delivered by Brunswick and
constitute the legal, valid and binding obligation of Brunswick, enforceable
against Brunswick in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws from time to time in effect which affect
creditors’ rights generally and by legal and equitable limitations on the
availability of specific remedies.

 

(d) The execution, delivery and performance by Brunswick of this Agreement and
the other Transaction Documents to which Brunswick is a party and all other
instruments, agreements, certificates and documents contemplated hereby do not
and will not: (i) to the knowledge of such counsel violate any decree or
judgment of any court or Governmental Authority applicable to Brunswick or to
its properties or assets; (ii) violate any Law; (iii) to the knowledge of such
counsel violate or conflict with, or result in a breach of, or constitute a
default (or an event which, with or without notice or lapse of time or both,
would constitute a default) under, or permit cancellation of, or result in the
creation of any Encumbrance upon any of the properties or assets of Brunswick
under any of the terms, conditions, or provisions of any Contract to which it is
a party, or by which any of its properties or assets are bound; (iv) to the
knowledge of such counsel permit the acceleration of the maturity of any
indebtedness of, or indebtedness secured by any property of, Brunswick; or (v)
violate or conflict with any provision of the Certificate of Incorporation or
By-Laws of Brunswick.

 

(e) There are to the knowledge of such counsel no claims, actions, suits,
proceedings, or investigations pending or threatened by or against Brunswick
with respect to this Agreement or the other Transaction Documents to which
Brunswick is a party, or in connection with the transactions contemplated
thereby.

 

(f) To the knowledge of such counsel, no notice to, filing with, authorization
of, exemption by, or consent of any Governmental Authority is required for
Brunswick to consummate the transactions contemplated by the Transaction
Documents.

 

9.3.3 The Transaction Documents (excluding the Brunswick Guaranty) to which
Brunswick is a party.

 

9.3.4 Such other documents and instruments as may be required by any other
provision of this Agreement or as may be reasonably required to carry out the
terms and intent of this Agreement.

 

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ARTICLE 10

OPERATIONAL COVENANTS

 

Each of FPII, RMF and the Company agrees that, for so long as the Loan Agreement
is in effect or any Loan is outstanding, FPII and the Company will:

 

10.1 Brunswick Approvals. Obtain the prior written approval of Brunswick for:

 

10.1.1 Loan Prepayments. Any prepayment of the Loan using cash or proceeds that
have not been internally generated from operations.

 

10.1.2 Dividends and Distributions. The payment of any dividend or other
distribution to the FPII’s shareholders.

 

10.1.3 Capital Spending. Each annual budget and annual capital spending plan for
FPII and the Company and for any amounts proposed to be spent in any year not
included in the approved capital spending plan for such year (which shall be
approved or rejected within 30 days of being provided and if no rejection shall
be deemed approved).

 

10.1.4 Indebtedness. Any increase in loan indebtedness of $50,000 or more unless
specifically included in an approved budget or capital spending plan.

 

10.1.5 Key Employee Compensation. Any compensation to be paid to RMF, any of his
family members or any of their respective Affiliates.

 

10.1.6 Lease Obligations. The incurrence of any lease obligation which will in
the aggregate require payments in excess of $50,000 unless specifically included
in an approved budget or capital spending plan.

 

10.1.7 Fundamental Transaction. Any sale of all or substantially all of the
assets of the Company or any of its Subsidiaries, any merger of the Company or
any of its Subsidiaries, or any other “change of control” transaction of FPII.

 

10.1.8 Interest Account. Any withdrawal from the Interest Account unless
specifically included in an approved budget or capital spending plan.

 

10.1.9 Other Businesses. The creation of any subsidiary or the entry into any
line of business other than the design, manufacture and sale of boats and
related products.

 

10.2 Information. Deliver to Brunswick:

 

10.2.1 Budgets and Capital Spending Plans. No later than the earlier of 60 days
prior to the first day of each fiscal year and 45 days prior to finalization
thereof, copies of the Company’s proposed annual budget and capital spending
plans for such fiscal year.

 

10.2.2 Financial Information. Not later than 50 days after the end of each
fiscal quarter (except the last quarter of each fiscal year) and 95 days after
the end of each fiscal year, financial statements in the form required to be
filed with the SEC.

 

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10.2.3 Bank Information. Concurrently with delivery to the Bank, copies of all
financial statements, certificates and other written documents delivered to the
Bank pursuant to the Loan Agreement.

 

10.2.4 Other Information. Promptly from time to time, such other information
regarding FPII or the Company as Brunswick may reasonably request.

 

10.3 Board Observation Rights. Permit a representative of Brunswick to attend
all meetings of the Board of Directors of FPII and the Company and of any
committee thereof.

 

10.4 Test Facility. At all times during the term of the Engine Supply Agreement,
Mercury shall have reasonable access, upon reasonable notice, to the Company’s
facilities for testing purposes on an as needed basis. Access shall include boat
storage, covered work space sufficient for boat rigging, engine mounting and
repair, and secured facilities sufficient to maintain requisite privacy and
confidentiality; provided however that company shall have sole discretion as to
availability of any of its facilities at any time to Mercury and failure to
provide shall not be a default. Company will make available reasonable access to
reasonable land area for Mercury to build and maintain its own facilities.

 

10.5 COO and CFO. Company will establish a committee of its Board of Directors
consisting of three directors which will be responsible from time to time to
screen and recommend to the Board of Directors candidates for the positions of
chief operating officer and chief financial officer. Brunswick may make a
recommendation as to such persons. Any person hired for either position must be
reasonably acceptable to Brunswick. Once hired, such persons shall serve at the
pleasure of the Board of Directors of the Company.

 

10.6 No Share Purchases. RMF shall not purchase Capital Stock from other
shareholders of FPII, without the prior written consent of Brunswick.

 

10.7 Engine Purchases. Each of FPII, the Company and RMF and each of their
respective Affiliates shall purchase marine engines only through the Engine
Supply Agreement unless otherwise permitted thereunder.

 

ARTICLE 11

 

INDEMNIFICATION

 

11.1 Agreement to Indemnify by FPII, the Company and RMF. Subject to the terms
and conditions of this Article 11, each of FPII, the Company and RMF hereby
agrees, jointly and severally, to indemnify, defend and hold harmless Brunswick,
its Affiliates and their respective directors, officers, employees and agents
collectively, “Brunswick Indemnified Parties”) from and against all Losses
incurred by a Brunswick Indemnified Party (to the extent that such Losses do not
result from the acts or omissions of any Brunswick Indemnified Party) by reason
of or resulting from: (i) any material breach or material inaccuracy of any of
the representations or warranties of FPII, the Company or RMF contained in this
Agreement or any other Transaction Document; and (ii) any breach of any covenant
or agreement of FPII, the Company or RMF contained in this Agreement or any
other Transaction Document.

 

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11.2 Brunswick’s Agreement to Indemnify. Subject to the terms and conditions of
this Article 11, Brunswick hereby agrees to indemnify, defend and hold harmless
FPII and its Affiliates and their respective directors, officers, employees and
agents and RMF (“Company Indemnified Parties”) from and against all Losses
incurred by the Company Indemnified Parties (to the extent that such Losses do
not result from the acts or omissions of any Company Indemnified Party) by
reason of or resulting from: (i) any breach or inaccuracy of any of the
representations or warranties of Brunswick contained in this Agreement or any
other Transaction Document; and (ii) any breach of any covenant or agreement by
Brunswick contained in or made pursuant to this Agreement or any other
Transaction Document.

 

11.3 Conditions of Indemnification. The obligations and liabilities of FPII, the
Company and RMF under Section 11.1 and of Brunswick under Section 11.2 with
respect to Claims (as hereinafter defined) shall be subject to the following
terms and conditions:

 

11.3.1 Defense Rights. In case any Claim is made or brought against a Brunswick
Indemnified Party or a Company Indemnified Party (each an “Indemnified Party”)
in respect of which payment may be sought from FPII, the Company and RMF or
Brunswick (“Indemnifying Party”) pursuant to this Agreement, the Indemnified
Party shall promptly give notice thereof to the Indemnifying Party. Such notice
shall include copies of all relevant information relating to such Claim. Within
sixty (60) days after such notice, the Indemnifying Party shall be entitled to
assume the defense thereof at its own expense, with counsel reasonably
satisfactory to the Indemnified Party. After notice from the Indemnifying Party
to the Indemnified Party of an election so to assume the defense of any such
Claim, the Indemnifying Party shall not be liable to the Indemnified Party for
any legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof, other than as provided in Section 11.3.3.

 

11.3.2 Settlements. Any settlement or compromise made or caused to be made by
the Indemnified Party of any Claim, the defense of which shall not have been
assumed by the Indemnifying Party, shall be binding upon the Indemnifying Party
in the same manner as if a final judgment or decree had been entered by a court
of competent jurisdiction in the amount of such settlement or compromise. The
Indemnifying Party shall not have the right to settle or compromise any Claim if
such settlement or compromise would subject the Indemnified Party to any Loss,
restriction or obligation. The Indemnified Party will give the Indemnifying
Party, and the Indemnifying Party will give the Indemnified Party, twenty (20)
days’ notice of any proposed settlement or compromise.

 

11.3.3 Cooperation in Defense. In case of any Claim, the Indemnified Party will,
upon written request of the Indemnifying Party, cooperate reasonably in the
defense thereof, including affording to the Indemnifying Party the right of
access, during normal business hours, to pertinent books and records for
purposes of inspection and making copies, but all reasonable expenses incurred
by the Indemnified Party in connection with the foregoing shall be reimbursed by
the Indemnifying Party.

 

11.3.4 Failure to Defend. In the event the Indemnifying Party does not elect to
assume the defense of any Claim, then any failure of the Indemnified Party to
defend or to

 

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participate in the defense of such Claim, or to cause the same to be done, shall
not relieve the Indemnifying Party of its obligations hereunder.

 

11.3.5 Remedies Cumulative. The remedies provided herein shall be cumulative and
shall not preclude the assertion by any party hereto of any other right or the
seeking of any other remedy against the other parties hereto.

 

ARTICLE 12

MISCELLANEOUS

 

12.1 Survival of Representations and Warranties. Except as provided in the
following sentence, the representations and warranties of FPII, the Company and
RMF contained in Article 3 and the representations and warranties of Brunswick
contained in Article 4 shall survive the Closing for a period of three years.
The representations and warranties made by FPII, the Company and RMF in Section
3.6 shall survive until 90 days after the expiration of the applicable statute
of limitations and any representations and warranties which are remade or deemed
remade at the Closing shall be subject to the survival periods described above.
If no written claim shall be made to the applicable Indemnifying Party within
the specified survival period, there shall be no further right to assert such
claim and it shall be deemed waived and released. Notwithstanding the preceding
sentence, the expiration of the survival period with respect to any
representation or warranty shall not affect or be deemed a waiver or release of
any claim made in writing to the applicable Indemnifying Party prior to the
expiration of such survival period. No due diligence review, audit or other
investigation or inquiry undertaken or performed by or on behalf of any party
hereto shall limit, qualify, modify or amend the representations, warranties and
covenants of, and indemnities by, any other party made or undertaken pursuant to
this Agreement, irrespective of the knowledge and information received (or which
should have been received) therefrom by the Indemnified Party or serve as a
defense to any Claim that a representation or warranty was breached.

 

12.2 Confidentiality. Each party hereto shall take all reasonable precautions to
maintain the confidentiality of any nonpublic information concerning any other
party or any Affiliate of any other party provided to or discovered by it or its
representatives pursuant to this Agreement, and shall not (except as may
otherwise be required by Law or Governmental Authority) disclose such
information to anyone other than (a) those people directly involved in the
investigation and negotiations pertaining to the transactions contemplated
hereby including attorneys, accountants and similar agents, and (b) such Persons
whose consent may be necessary to permit consummation of the transactions
contemplated hereby. Each party further agrees that in the event that the
transactions contemplated by this Agreement shall not be consummated, it will
return or destroy all documents and records obtained by it, its representatives
or agents from the other party during the course of its investigation or
negotiations pertaining to the transactions contemplated hereby, and all copies
thereof (other than one record copy to be kept by counsel to such party), and
will use its best efforts to cause all information with respect to such other
party and its businesses which it obtained pursuant to this Agreement or
preliminarily hereto to be kept confidential (unless and until the information
is in the public domain (other than as the result of a breach of this Section
12.2) or available from a third party under no confidentiality restriction which
would be breached).

 

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12.3 Public Announcements. Unless mutually agreed upon by the parties to this
Agreement, no party hereto shall, without the approval of the other parties,
make or cause to be made any press release or other public announcement that
directly or indirectly discloses the existence of this Agreement or the
transactions contemplated hereby, except as and to the extent that each party
hereto is so obligated by generally accepted accounting principles, by Law or by
the rules of any applicable securities exchange. Each party, shall cooperate in
reviewing and approving all press releases and required public announcements
made in accordance with this Section 12.3.

 

12.4 Expenses. Each party hereto shall bear its own expenses with respect to
this transaction.

 

12.5 Amendment. This Agreement may be amended, modified or supplemented but only
in writing signed by each party hereto.

 

12.6 Notices. All notices or other communications to be given hereunder by a
party hereto shall be deemed validly given, made or served if in writing and
delivered personally (as of such delivery) or sent by certified mail (as of four
business days after deposit in a United States post office), postage prepaid, or
by air freight delivery or facsimile, charges prepaid (as of the date of
confirmation of receipt):

 

12.6.1 If to FPII, the Company or RMF addressed as follows:

 

 Fountain Powerboat Industries, Inc.

 PO Drawer 457

 Wichard’s Beach Road

 Washington, NC 27889

 Attention: Reginald M. Fountain, Jr.

 Facsimile: (919) 975-6793

 

with a copy to:

 

 David L. Ward, Jr.

 Ward and Smith, P.A.

 1001 College Court

 New Bern, NC 28563-0867

 Facsimile: (252) 672-5477

 

12.6.2 If to Brunswick, addressed as follows:

 

 Brunswick Corporation

 1 North Field Court

 Lake Forest, Illinois 60045-4811

 Attention: General Counsel

 Facsimile: (847) 735-4050

 

 with a copy to:

 

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 Mercury Marine

 W6250 Pioneer Road

 Fond du Lac, WI 54936-1939

 Attention: General Counsel

 Facsimile: (920) 929-5253

 

or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.

 

12.7 Entire Understanding. This Agreement and the other Transaction Documents
set forth the entire agreement and understanding of the parties hereto and
thereto with respect to the transactions contemplated hereby and thereby,
superseding all prior oral and written agreements, instruments, arrangements,
and understandings relating to the subject matter hereof and thereof. No
modification, amendment, renewal, extension or waiver of this Agreement or any
provision hereof shall be binding upon any party hereto unless made in writing
and signed by all parties hereto. Each party agrees that there have been no
material statements, assertions, representations, understandings or
negotiations, whether oral or in writing, made by another party hereto which
have been relied upon by the party signing this Agreement in determining whether
to enter into the Agreement, which have not been subsumed, reduced to writing,
or memorialized herein or in the Transaction Documents.

 

12.8 Waivers. The failure of a party hereto at any time or times to require
performance of any provision hereof shall in no manner affect its rights at a
later time to enforce the same. No waiver by a party of any condition or of any
breach of any term, covenant, representation or warranty contained in this
Agreement shall be effective unless in writing, and no waiver in any one or more
instances shall be deemed to be a further or continuing waiver of any such
condition or breach in other instances or a waiver of any other condition or
breach of any other term, covenant, representation or warranty.

 

12.9 Applicable Law; Choice of Forum. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
North Carolina. The parties agree that any suit, action or proceeding brought in
connection with or arising out of this Agreement shall be brought solely in the
Federal Courts of the Northern District of Illinois or, if such court lacks
jurisdiction, in the State Court located in Lake County, Illinois. Any party may
plead this Section 12.9 as a waiver of jurisdiction in any other court in which
an action, suit or proceeding is brought.

 

12.10 Assignment. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns and is not
intended to benefit any other party (other than the Indemnified Parties). No
assignment of any rights or obligations hereunder shall be made by any party
without the consent of the other parties hereto except that Brunswick may assign
its rights hereunder to a Subsidiary or an Affiliate, but no such assignment by
Brunswick shall relieve Brunswick of its obligations hereunder.

 

12.11 Severability. If any provision of this Agreement shall be held invalid,
illegal or unenforceable, such provision shall not affect or impair the
validity, legality or enforceability of this Agreement or any of the other
provisions hereof, and there shall be substituted for the

 

22

--------------------------------------------------------------------------------

provision at issue a valid and enforceable provision as similar as possible to
the provision at issue.

 

12.12 Further Assurances. Brunswick, FPII, the Company and RMF will, at the
reasonable request of any other party, execute and deliver to such other party
all such further instruments, assignments, assurances and other documents, and
take all such actions as such other party may reasonably request, in connection
with the carrying out of this Agreement.

 

12.13 Execution in Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and shall become a
binding agreement when each of the parties hereto shall have executed and
delivered a counterpart of this Agreement to each other party.

 

*  *  *  *  *  *

 

23

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IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be
entered into and signed, effective and delivered as of the date and year first
above written.

 

BRUNSWICK CORPORATION

By:

 

/s/ Patrick C. Mackey

--------------------------------------------------------------------------------

Name:

 

Patrick C. Mackey

--------------------------------------------------------------------------------

Title:

 

Vice President

--------------------------------------------------------------------------------

FOUNTAIN POWERBOAT INDUSTRIES, INC.

By:

 

/s/ Reginald M. Fountain, Jr.

--------------------------------------------------------------------------------

Name:

 

Reginald M. Fountain, Jr.

--------------------------------------------------------------------------------

Title:

 

Chairman, CEO and President

--------------------------------------------------------------------------------

       

/s/ Reginald M. Fountain, Jr.

--------------------------------------------------------------------------------

       

Reginald M. Fountain, Jr.

FOUNTAIN POWERBOATS, INC.

By:

 

/s/ Reginald M. Fountain, Jr.

--------------------------------------------------------------------------------

Name:

 

Reginald M. Fountain, Jr.

--------------------------------------------------------------------------------

Title:

 

Chairman, CEO and President

--------------------------------------------------------------------------------

 

 

24

--------------------------------------------------------------------------------

SCHEDULES

 

Schedules have been omitted.

--------------------------------------------------------------------------------

Exhibit A

 

GUARANTY

 

THIS GUARANTY dated as of July 17, 2003 is executed by the undersigned in favor
of BANK OF AMERICA, N.A. (the “Bank”).

 

W I T N E S S E T H:

 

WHEREAS, pursuant to a Loan Agreement dated as of July 17, 2003 (as amended or
otherwise modified from time to time, the “Credit Agreement”) between the Bank
and Fountain Powerboats, Inc. (the “Company”), the Bank has made an extension of
credit to the Company; and

 

WHEREAS, the undersigned will derive direct and/or indirect benefits from the
extensions of credit pursuant to the Credit Agreement and is willing to guaranty
the Liabilities (as defined below) as hereinafter set forth;

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the undersigned agrees as follows:

 

1. Guaranty. The undersigned hereby, unconditionally and irrevocably, as primary
obligor and not merely as surety, guarantees the full and prompt payment when
due, whether by acceleration or otherwise, and at all times thereafter, of (a)
all obligations of the Company, howsoever created, arising or evidenced, whether
direct or indirect, absolute or contingent, now or hereafter existing, or due or
to become due, which arise out of or in connection with the Credit Agreement, in
an amount not to exceed Eighteen Million Dollars ($18,000,000.00), and (b) all
reasonable costs and expenses, including but not limited to reasonable
attorneys’ fees, paid or incurred by the Bank in enforcing this Guaranty against
the undersigned (all such obligations, collectively, the “Liabilities”).

 

2. Liabilities Immediately Due Under Certain Circumstances. (a) The undersigned
agrees that, in the event of the commencement of any insolvency, bankruptcy or
similar proceeding (whether voluntary or involuntary) with respect to the
Company, and if such event shall occur at a time when any of the Liabilities may
not then be due and payable, the undersigned will pay to the Bank forthwith the
full amount which would be payable hereunder by the undersigned if all
Liabilities were then due and payable.

 

(b) If any Event of Default (as defined below) shall occur and be continuing
under the Primary Credit Agreement (as defined below), and such Event of Default
shall continue for 10 days without being cured or waived, then the Bank may
demand immediate payment by the undersigned hereunder of all Liabilities. For
purposes of the foregoing, (a) “Primary Credit

 

A-1

--------------------------------------------------------------------------------

Agreement” means (i) the Credit Agreement dated as of November 15, 2002 among
the undersigned, various subsidiaries of the undersigned, various financial
institutions and JPMorgan Chase Bank, as Administrative Agent, as amended,
amended and restated, supplemented or otherwise modified from time to time (the
“Existing Credit Agreement”), or (ii) if the Existing Credit Agreement ceases to
exist, the largest (in terms of dollar amount) syndicated revolving credit
facility to which the undersigned is a party as in effect from time to time (or,
if no such syndicated revolving credit facility is in effect, as in effect on
the last date on which the undersigned was a party to a syndicated revolving
credit facility); and (b) “Event of Default” means (i) an “Event of Default” as
defined in the Existing Credit Agreement or (ii) a comparable event as defined
in any other Primary Credit Agreement.

 

3. Guaranty Continuing and Irrevocable, etc. This Guaranty shall in all respects
be a continuing, irrevocable, absolute and unconditional guaranty of payment and
performance and not only of collection, and shall remain in full force and
effect (notwithstanding, without limitation, the dissolution of the undersigned)
until all commitments of the Bank under the Credit Agreement have terminated and
all Liabilities have been paid in full.

 

4. Reinstatement in Certain Circumstances. The undersigned agrees that if at any
time all or any part of any payment theretofore applied by the Bank to any of
the Liabilities is or must be rescinded or returned by the Bank for any reason
whatsoever (including, without limitation, the insolvency, bankruptcy or
reorganization of the Company or the undersigned), such Liabilities shall, for
the purposes of this Guaranty, to the extent that such payment is or must be
rescinded or returned, be deemed to have continued in existence, notwithstanding
such application by the Bank, and this Guaranty shall continue to be effective
or be reinstated, as the case may be, as to such Liabilities, all as though such
application by the Bank had not been made.

 

5. Permitted Actions by Bank. The Bank may, from time to time, at its sole
discretion and without notice to, or further consent from, the undersigned, take
any or all of the following actions without affecting the liability of the
undersigned hereunder: (a) retain or obtain a security interest in any property
to secure any of the Liabilities, (b) retain or obtain the primary or secondary
obligation of any obligor or obligors, in addition to the undersigned, with
respect to any of the Liabilities, and (c) resort to the undersigned for payment
of any of the Liabilities when due, whether or not the Bank shall have resorted
to any property securing any of the Liabilities or any obligation hereunder. For
the avoidance of doubt, nothing in this Section 5 or elsewhere in this Guaranty
shall prohibit any change in the interest rate on any Liabilities in accordance
with, or any scheduled or mandatory prepayment required by, the express terms of
the promissory note evidencing the Liabilities as in effect on the date hereof.

 

6. Delay of Subrogation. Notwithstanding any payment made by or for the account
of the undersigned pursuant to this Guaranty, the undersigned shall not be
subrogated to any rights of the Bank until such time as the Bank shall have
received payment of the full amount of all Liabilities.

 

7. Representations and Warranties. The undersigned represents and warrants to
the Bank that (a) the undersigned is a corporation validly existing and in good
standing under the laws of the State of Delaware; (b) the undersigned has the
power and authority to execute and

 

A-2

--------------------------------------------------------------------------------

deliver this Guaranty and to perform its obligations hereunder; (c) this
Guaranty has been duly authorized, executed and delivered by the undersigned and
constitutes the legal, valid and binding obligation of the undersigned,
enforceable against the undersigned in accordance with its terms, subject to
bankruptcy, insolvency and similar laws applicable to the enforcement of
creditors’ rights generally and to general principles of equity; and (d) the
execution and delivery by the undersigned of this Guaranty and the performance
by the undersigned of its obligations hereunder will not render the undersigned
insolvent or violate or conflict with the charter or by-laws of the undersigned
or any instrument, judgment, decree or order, or any statute, rule or
governmental regulation, applicable to the undersigned or any term or provision
of any material agreement to which the undersigned is a party or by which it is
bound, or constitute a default under any such agreement, or result in the
creation of any security interest or other lien on any of its properties or
assets pursuant to any of the foregoing.

 

8. Certain Waivers by the Undersigned. The undersigned expressly waives: (a)
notice of the acceptance by the Bank of this Guaranty, (b) notice of the
existence or creation of any of the Liabilities (so long as the aggregate
principal amount of all Liabilities does not exceed $18,000,000), (c)
presentment, (d) all diligence in collection of or realization upon any
Liabilities, and (e) the benefits of any provision of law requiring that the
Bank exhaust any right or remedy, or take any action against Company, any other
person and/or any property, including but not limited to the provisions of N.C.
Gen. Stat. Sections 26-7 through 26-9, inclusive, as amended.

 

9. Delay by Bank not a Waiver, etc. No delay on the part of the Bank in the
exercise of any right or remedy shall operate as a waiver thereof, and no single
or partial exercise by the Bank of any right or remedy shall preclude other or
further exercise thereof or the exercise of any other right or remedy; nor shall
any modification or waiver of any provision of this Guaranty be binding upon the
Bank except as expressly set forth in a writing duly signed and delivered on
behalf of the Bank. No action of the Bank permitted hereunder shall in any way
affect or impair the rights of the Bank or the obligations of the undersigned
under this Guaranty.

 

10. Successors and Assigns. This Guaranty shall be binding upon the undersigned
and the successors and assigns of the undersigned and shall inure to the benefit
of the Bank and the successors and assigns of the Bank. All references herein to
the Company and to the undersigned, respectively, shall be deemed to include all
of its respective successors, whether immediate or remote.

 

11. Governing Law; Severability. This Guaranty shall be construed in accordance
with and governed by the internal laws of the State of North Carolina. Wherever
possible each provision of this Guaranty shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Guaranty shall be prohibited by or invalid under such law, such provision shall
be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Guaranty.

 

12. Arbitration and Jury Trial Waiver.

 

(a) This Section 12 concerns the resolution of any controversy or claim, whether
arising in contract or tort or by statute, that arises out of or relates to: (i)
this Guaranty (including

 

A-3

--------------------------------------------------------------------------------

all renewals, extensions or modifications hereof); or (ii) any document related
to this Guaranty (any of the foregoing a “Claim”). For the purposes of this
arbitration provision only, the term “Bank” shall include any parent
corporation, subsidiary or affiliate of the Bank involved in the servicing,
management or administration of any obligation described in or evidenced by this
Guaranty.

 

(b) At the request of the undersigned or the Bank, any Claim shall be resolved
by binding arbitration in accordance with the Federal Arbitration Act (Title 9,
U. S. Code) (the “Act”). The Act will apply even though this Guaranty provides
that it is governed by the law of a specified state.

 

(c) Arbitration proceedings will be determined in accordance with the Act, the
applicable rules and procedures for the arbitration of disputes of JAMS or any
successor thereof (“JAMS”) and the terms of this Section 12. In the event of any
inconsistency, the terms of this Section 12 shall control.

 

(d) The arbitration shall be administered by JAMS and conducted, unless
otherwise required by law, in Lake County, Illinois. All Claims shall be
determined by one arbitrator; provided that if one or more Claims exceed
$5,000,000, upon the request of either the undersigned or the Bank, such Claims
shall be decided by three arbitrators. All arbitration hearings shall commence
within 90 days of the demand for arbitration and close within 90 days of
commencement and the award of the arbitrator(s) shall be issued within 30 days
of the close of the hearing. However, the arbitrator(s), upon a showing of good
cause, may extend the commencement of the hearing for up to an additional 60
days. The arbitrator(s) shall provide a concise written statement of reasons for
the award. The arbitration award may be submitted to any court having
jurisdiction to be confirmed and enforced.

 

(e) The arbitrator(s) will have the authority to decide whether any Claim is
barred by the statute of limitations and, if so, to dismiss the arbitration on
that basis. For purposes of the application of the statute of limitations, the
service on JAMS under applicable JAMS rules of a notice of Claim is the
equivalent of the filing of a lawsuit. Any dispute concerning this arbitration
provision or whether a Claim is arbitrable shall be determined by the
arbitrator(s). The arbitrator(s) shall have the power to award legal fees if
appropriate.

 

(f) This Section 12 does not limit the right of the undersigned or the Bank, as
applicable, to: (i) exercise self-help remedies, including but not limited to
setoff; (ii) initiate judicial or nonjudicial foreclosure against any real or
personal property collateral; (iii) exercise any judicial or power of sale
rights; or (iv) act in a court of law to obtain an interim remedy, including but
not limited to injunctive relief, writ of possession, appointment of a receiver
or additional or supplementary remedies.

 

(g) The filing of a court action is not intended to constitute a waiver of the
right of the undersigned or the Bank thereafter to require submittal of the
Claim to arbitration.

 

(h) BY AGREEING TO BINDING ARBITRATION, EACH OF THE UNDERSIGNED AND THE BANK
IRREVOCABLY AND VOLUNTARILY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY CLAIM.

 

A-4

--------------------------------------------------------------------------------

FURTHERMORE, WITHOUT INTENDING IN ANY WAY TO LIMIT THIS AGREEMENT TO ARBITRATE,
TO THE EXTENT ANY CLAIM IS NOT ARBITRATED, EACH OF THE UNDERSIGNED AND THE BANK
IRREVOCABLY AND VOLUNTARILY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF SUCH CLAIM. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
UNDERSIGNED ISSUING, AND THE BANK ACCEPTING, THIS GUARANTY.

 

13. Effect of Exercise of Purchase Option. Notwithstanding any other provision
of this Guaranty, if the undersigned exercises the Purchase Option under and as
defined in the Contingent Purchase Agreement dated as of July 17, 2003 between
the undersigned and the Bank (as amended or otherwise modified from time to
time, the “Purchase Agreement”), then this Guaranty shall be deemed to be
terminated (and any demand hereunder shall be revoked) immediately without any
further action by the undersigned or the Bank (but subject to immediate
reinstatement if for any reason the undersigned fails to pay the Purchase Price
(as defined in the Purchase Agreement) on the scheduled Purchase Date (as
defined in the Purchase Agreement)).

 

A-5

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, this Guaranty has been duly executed and delivered as of the
day and year first above written.

 

BRUNSWICK CORPORATION

By:

 

 

--------------------------------------------------------------------------------

Name Printed:

--------------------------------------------------------------------------------

Title:

 

 

--------------------------------------------------------------------------------

1 N. Field Court

Lake Forest, IL 60045

 

The Bank hereby accepts this

Guaranty and agrees to the

provisions of Section 12 hereof.

BANK OF AMERICA, N.A.

By:

 

 

--------------------------------------------------------------------------------

Name Printed:

--------------------------------------------------------------------------------

Title:

 

 

--------------------------------------------------------------------------------

 

 

A-6

--------------------------------------------------------------------------------

Exhibit B

 

ENGINE SUPPLY AGREEMENT

 

This Agreement, dated as of July 17, 2003, is entered into among Reginald M.
Fountain, Jr. (hereinafter “RMF”), Fountain Powerboat Industries, Inc., a Nevada
corporation (hereinafter “FPII”), Fountain Powerboats, Inc., a North Carolina
corporation (“Company”), and the Mercury Marine division (hereinafter “Mercury”)
of Brunswick Corporation, a Delaware corporation (hereinafter “Brunswick”).

 

WHEREAS, Mercury manufactures and sells Mercury and MerCruiser marine engine
products;

 

WHEREAS, Company is a wholly-owned subsidiary of FPII;

 

WHEREAS, Company is a boat builder and installs Mercury and MerCruiser products
in its boats for resale to the high-performance offshore boat market;

 

WHEREAS, RMF is a boat builder, competitive driver and motor sports celebrity in
saltwater fishing and national and world championship offshore powerboat racing,
and has name recognition associated with high-performance boating and powerboat
racing;

 

WHEREAS, RMF also is President and Chief Executive Officer and a major
stockholder of FPII and Company desires to have RMF provide certain services to
Mercury in exchange for Mercury entering into this Agreement; and

 

WHEREAS, Brunswick is guaranteeing (the “Guaranty”) a loan (the “Loan”) made to
Company, as contemplating by that certain Master Agreement, dated July 17, 2003,
by and between Brunswick, RMF, Company and FPII.

 

NOW, THEREFORE, the parties have agreed as follows:

 

ARTICLE I

TERM; CONFIDENTIALITY

 

1.1   The term (the “Term”) of this Agreement shall be from the date of this
Agreement to the date that is the longer of (a) seven (7) years or (b) the end
of the second model year after the year in which the complete repayment of the
Loan (other than through extension or refinancing) and the extinguishment of the
Guaranty occurs.

 

1.2   The specific terms and conditions of this Agreement are confidential and
shall not be disclosed to third parties by either party except with approval of
both parties, as required by law or the rules of any applicable securities
exchange, court or governmental authority. Any and all Mercury, FPII or Company
confidential information or material acquired by Mercury, Company or FPII and
RMF during the period of this agreement is the sole property of the company of
origin, and shall not be disclosed to anyone without

 

B-1

--------------------------------------------------------------------------------

 

specific written permission from the company of origin. These obligations of
confidentiality shall continue beyond the termination of this Agreement.

 

ARTICLE II

PURCHASE REQUIREMENTS OF COMPANY; PRODUCT MODIFICATION

 

2.1   During the Term of this Agreement, (a) FPII shall cause Company to, and
Company shall, purchase from Mercury, and Mercury shall sell to Company, subject
to availability, all of Company’s requirements of outboard motors, stern drive
or inboard engines, remote controls, throttle and shift cables, propellers,
K-planes, and other accessories related to the foregoing (“Products”) except
that (i) Company may purchase from other parties products in categories which
Mercury does not manufacture, (ii) Company may purchase from other parties
Products which are unavailable from Mercury due to production shortages, (iii)
Company shall not be required to purchase from Mercury Products that Company
also manufactures as of the date hereof, other than engines and drives and (iv)
Company shall not be required to purchase from Mercury remote controls, throttle
and shift cables, propellers and other accessories to the extent technically
infeasible or qualitatively inadequate for the boat for which they are intended.
For purposes of this Agreement, Products will be considered “unavailable” if
Mercury is unable to provide such properly forecasted Products within 30 days of
scheduled delivery thereof. If Mercury becomes aware that it will be unable to
meet a scheduled delivery of Products, Mercury shall notify Company as soon as
reasonably practicable that it will not be able to make such delivery. (Mercury
reserves the right to allocate Products among Company and Mercury’s other
customers on a pro rata basis in accordance with Mercury’s stated policies
regarding such matters.)

 

2.2   FPII shall cause Company to, and Company shall use commercially reasonable
efforts to purchase Cummins MerCruiser (“CMD”) diesel engines where such engines
are competitive as to price, weight and performance with other available diesel
products except that (i) Company may purchase from other parties diesel engines
in categories not manufactured by CMD and (ii) Company may purchase diesel
engines when CMD diesel engines are unavailable due to production shortages.

 

2.3   Mercury reserves the right to change the design, discontinue or limit the
manufacture of Products at any time without notice or obligation to modify
earlier manufactured Products. Mercury also from time to time announces products
in development or anticipated for the Product line. Company recognizes that such
products can remain in development for extended periods due to unanticipated
difficulties beyond Mercury’s control. Mercury shall not be responsible for
failures to introduce anticipated Products, the introduction of which may be
delayed due to developmental difficulties or events beyond Mercury’s control, or
which Mercury may, in the exercise of its discretion, decide not to introduce
for any reason. The announcement of any anticipated Product shall not be
regarded as a promise or guarantee of any kind that the product will ultimately
reach the market in the same configuration as announced, or at all. Mercury
agrees to keep Company informed of any such proposed changes at the same time
that Mercury notifies its other customers of such changes. Company may treat any
Products as they existed before such change as “unavailable” for purposes of
this Agreement at such time as

 

B-2

--------------------------------------------------------------------------------

 

Mercury cannot meet forecasted demand for such Products, consistent with Section
2.1 of this Agreement.

 

ARTICLE III

PROMOTIONAL ACTIVITIES

 

3.1   Company shall include on all boats which it manufactures and which contain
a Mercury produced engine or engines a decal supplied by Mercury reasonably
acceptable to Company stating that the boats are “Powered by Mercury.”

 

3.2     (a)   Company shall retain the right to RMF’s image and likeness for all
literature, advertising and promotional programs. Mercury may use RMF and his
endorsement of its products in any and all areas deemed prudent by Mercury with
the consent of Company, which consent will not be unreasonably withheld.

 

  (b)   RMF, at Mercury’s expense for all related out-of-pocket costs, shall
provide such endorsements for Mercury products as Mercury shall reasonably
request.

 

  (c)   RMF, at Mercury’s expense for all related out-of-pocket costs, shall
participate as an advisor to the management of Mercury on technical issues
related to offshore fishing boats, offshore performance boats and offshore
powerboat racing.

 

  (d)   RMF, at Mercury’s expense for all related out-of-pocket costs, shall
cooperate with and drive for Mercury in the event Mercury elects to conduct boat
driving seminars or demonstrations with the consent of Company, which consent
shall not be unreasonably withheld.

 

  (e)   RMF, at Mercury’s expense for all related out-of-pocket costs, shall
conduct autograph sessions and personal appearances at race sites, trade shows
and dealer meetings as reasonably requested by Mercury.

 

  (f)   RMF, at Mercury’s expense for all related out-of-pocket costs, shall
cooperate with Mercury in the event Mercury elects to produce a
RMF/Company/Mercury racing poster.

 

  (g)   RMF shall not promote or publicly reference any third party equipment or
service providers which by direct or indirect reference could be construed to
reflect negatively on Mercury products or services.

 

  (h)   RMF shall always present Mercury’s products and services in a positive
light. Any RMF behavior or comments that reflect negatively in any material
respect on Mercury or on Brunswick’s boat companies and products will be deemed
a breach of this Agreement.

 

3.3   RMF, FPII and Company shall display the following Mercury Outboard or
MerCruiser sterndrive identification at all race or tournament fishing events
during the term of this Agreement, all to be supplied by Mercury at its expense
and in reasonable quantities.

 

B-3

--------------------------------------------------------------------------------

  (a)   A 2.5 inch by 5 inch or larger Mercury Outboard or MerCruiser Sterndrive
patch shall be affixed to the exposed collar and uppermost left chest of RMF’s
driving uniform.

 

  (b)   A 5 inch by 12 inch or larger Mercury Outboard or MerCruiser Sterndrive
patch shall be affixed to the upper back of RMF’s driving uniform.

 

  (c)   A MerCruiser decal, not less than 3 inches in length, shall be affixed
to the front of RMF’s race helmet.

 

  (d)   A 12 inch by 37 inch or larger Mercury Outboard or MerCruiser decal
shall be affixed to each side of the boat near the driver cockpit.

 

  (e)   A minimum of two (2) 12 inch by 37 inch or larger Mercury Outboard or
MerCruiser decals shall be placed on each FPII or Company race support vehicle,
i.e., truck, trailers, etc.

 

  (f)   Two (2) Mercury Outboard or MerCruiser decals shall be placed and
prominently displayed in FPII’s and Company’s pit area at each race or fishing
event.

 

  (g)   Cowlings on Mercury Outboards used by FPII or Company shall be kept
graphically and structurally intact.

 

  (h)   FPII and Company shall display all Mercury Outboard or MerCruiser
identifications in a readable upright position.

 

  (i)   FPII and Company shall mention Mercury Outboards or MerCruiser in, and
print logos on, all FPII or Company press releases, newsletters, or other
materials that are distributed.

 

  (j)   FPII and Company shall retain all above stated Mercury Outboard or
MerCruiser identification when participating in programs for any and all
additional sponsors, such as print and electronic media advertising,
point-of-purchase materials and personal appearances. Furthermore, Mercury
Outboard or MerCruiser identification shall be greater than or equal to the
identification of the most prominent additional sponsor.

 

3.4   FPII, Company and RMF, with the consent of Company, which consent shall
not be unreasonably withheld, will provide technical consulting to Mercury as
reasonably requested by Mercury in the development and refining of
high-performance offshore powerboat propulsion.

 

3.5   FPII, Company and RMF will endeavor to promote Mercury Outboards,
MerCruiser sterndrives and Mercury Racing Products as the high quality
propulsion leaders in the saltwater fishing boat builder, dealer and retail
marketplaces.

 

3.6   FPII, Company and RMF agree to use their best efforts to promote and
maximize penetrations of Mercury and MerCruiser products in the offshore
high-performance

 

 

B-4

--------------------------------------------------------------------------------

 

market. Company and RMF will include Mercury or MerCruiser power in or on all
Fountain Powerboats.

 

3.7   None of FPII, Company or RMF will promote products competitive to the
Products in any form.

 

3.8   RMF agrees that he, and all other parties competing for FPII or Company,
shall use Mercury Outboard or MerCruiser and Quicksilver products exclusively in
all racing events for the term of this Agreement; provided that such use has
received the prior written approval of Mercury. None of FPII, Company nor RMF
shall assist directly or indirectly in design, construction, testing, or racing
of boats utilizing any power, except their own, not built or supplied by Mercury
(so long as Mercury has available reasonably competitive power) for the term of
this Agreement unless Mercury has not approved the use of Mercury products in
which case FPII, Company and RMF shall be able to use other products in racing.

 

3.9   Mercury reserves the right, in its sole discretion, to change any of its
trademarks, tradenames, service marks, corporate names and similar rights,
including without limitation, “Mercury,” “MerCruiser” and “Powered by Mercury”
(collectively “Proprietary Names”) at any time without notice to FPII, Company
or RMF. If Mercury changes any Proprietary Name that is referred to in this
Agreement, the parties agree to substitute the new Proprietary Name in place of
the former Proprietary Name in this Agreement.

 

3.10   From time to time, Mercury may request that the promotional activities
described in this Article III be modified. RMF, FPII and Company agree to make
such reasonable modifications as are reasonably requested by Mercury.

 

3.11   Except as expressly provided in this Agreement or as approved in writing
by Mercury, none of FPII, Company nor RMF may use any Proprietary Name, whether
or not such Proprietary Name has been registered.

 

ARTICLE IV

PRICES; PAYMENT TERMS, WARRANTY

 

4.1   Company shall be entitled to participate in Mercury’s standard OEM
programs (“Programs”) and shall be entitled to the best market price charged by
Mercury under such Programs to similarly situated purchasers purchasing
comparable quantities of specific Products. Mercury reserves the right to change
its Programs from time-to-time. Notwithstanding credit terms that may be a part
of the Programs, Company will pay Mercury in cash and will not be entitled to
credit terms. Mercury reserves the right to change its payment terms from
time-to-time and will provide the notice of such changes on the same basis that
Mercury provides notice to its other customers of such changes.

 

4.2   Sole Warranty. Mercury will warrant any Product purchased hereunder in
accordance with, and only to the extent expressly provided in, Mercury’s
standard warranty provisions applicable to Products at the time that the Product
in question was purchased

 

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by Company (the “Warranty”). Such Warranty shall be for the exclusive benefit of
Company’s distributors and customers thereof. THE APPLICABLE WARRANTY
CONSTITUTES MERCURY’S SOLE AND EXCLUSIVE WARRANTY WITH RESPECT TO ANY PRODUCT
PURCHASED HEREUNDER. EXCEPT TO THE EXTENT EXPRESSLY STATED OTHERWISE IN THE
APPLICABLE WARRANTY, MERCURY HEREBY DISCLAIMS ALL EXPRESS WARRANTIES (WHETHER
ORAL OR WRITTEN) AND ALL IMPLIED WARRANTIES, INCLUDING, WITHOUT LIMITATION,
WARRANTIES OF NON-INFRINGEMENT, MERCHANTABILITY AND FITNESS FOR ANY PARTICULAR
PURCHASE, AND ALL WARRANTIES ARISING BY CUSTOM OR TRADE USAGE.

 

4.3   Sole Remedy; Disclaimer of Damages. The sole obligation of Mercury, and
the exclusive remedy of any Company distributor or any customer thereof for
breach of any warranty, shall be as stated in the applicable Warranty. The
foregoing constitute the exclusive remedies, expressly in lieu of all others,
whether available at law or in equity, for any breach of warranty. EXCEPT TO THE
EXTENT EXPRESSLY SET FORTH IN THE APPLICABLE WARRANTY, MERCURY SHALL NOT BE
LIABLE TO ANY PERSON OR ENTITY UNDER OR WITH RESPECT TO PRODUCTS SOLD UNDER THIS
AGREEMENT FOR ANY DAMAGES OF ANY NATURE OR KIND WHATSOEVER, INCLUDING, WITHOUT
LIMITATION, DIRECT, INDIRECT, SPECIAL INCIDENTAL, CONSEQUENTIAL OR PUNITIVE
DAMAGES, LOSS OF PROFITS, PRODUCTION, GOODWILL OR CUSTOM, DOWN TIME COSTS,
WRONGFUL DEATH, PERSONAL INJURY OR PROPERTY DAMAGE OR LOSS, REGARDLESS OF
WHETHER ANY SUCH LIABILITY MAY ARISE OUT OF THE BREACH OF THIS AGREEMENT,
WARRANTY, TORT, STRICT LIABILITY, INDEMNITY, CONTRIBUTION OR OTHERWISE.

 

4.4   Notification. FPII shall cause Company to, and Company shall, ensure that
all Company distributors and customers of Company distributors purchasing any
Company boat equipped with any Product are notified of the foregoing exclusive
warranty, warranty disclaimer, remedy limitation and disclaimer of damages
before such distributors or customers of such distributors purchase such Company
boat.

 

ARTICLE V

EVENTS OF DEFAULT

 

5.1   FPII and Company will immediately notify Mercury of the occurrence of any
of the following Events of Default. The occurrence of an Event of Default during
the Term of this Agreement shall, at the option of Mercury, terminate this
Agreement. “Events of Default” are:

 

(a)(i) FPII or Company becomes insolvent or takes or fails to take any action
which constitutes an admission of inability to pay its debts as they mature;
(ii) FPII or Company makes a general assignment for the benefit of creditors or
to an agent authorized to liquidate any substantial amount of its assets; (iii)
FPII or Company

 

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becomes the subject of an “order of relief” within the meaning of the United
States Bankruptcy Code, whether voluntarily or involuntarily; (iv) bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings are
instituted by or against FPII or Company; or (v) FPII or Company applies for or
consents to the appointment of a receiver trustee or liquidation for any of its
assets or properties;

 

(b) FPII or Company ceases to exist; or

 

(c) FPII or Company or RMF fails to perform any material obligation owed to
Mercury under this Agreement, any applicable Program, or under any other supply
or purchase agreement; provided that such failure to perform continues for a
period of 30 days following receipt of written notice from Mercury which notice
identifies such failure.

 

5.2   FPII or Company may, at its option, immediately terminate this Agreement
upon the occurrence of a Mercury Event of Default during the Term of this
Agreement. “Mercury Events of Default” are:

 

(a)(i) Mercury becomes insolvent or takes or fails to take any action which
constitutes an admission of inability to pay its debts as they mature; (ii)
Mercury makes a general assignment for the benefit of creditors or to an agent
authorized to liquidate any substantial amount of its assets; (iii) Mercury
becomes the subject of an “order of relief” within the meaning of the United
States Bankruptcy Code, whether voluntarily or involuntarily; (iv) bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings are
instituted by or against Mercury; or (v) Mercury applies for or consents to the
appointment of a receiver trustee or liquidation for any of its assets or
properties;

 

(b) Mercury ceases to exist; or

 

(c) Mercury fails to perform any material obligation owed to FPII or Company
under this Agreement; provided that such failure to perform continues for a
period of 30 days following receipt of written notice from FPII or Company, as
the case may be, which notice identifies such failure.

 

ARTICLE VI

MISCELLANEOUS PROVISIONS

 

6.1   Preamble; Recitals. The preamble and recitals set forth at the beginning
of this Agreement are incorporated into and form a part of this Agreement.

 

6.2   Force Majeure. Mercury shall not be liable for any failure, inability or
delay in performing under this Agreement or any purchase order or other document
submitted pursuant to this Agreement to the extent that such failure, inability
or delay is due to an act of God, war, strike, act of the public enemy,
accident, casualty, government law, regulation or order, or failure or delay in
usual sources of supply or any cause beyond the reasonable control of Mercury
(collectively, a “Force Majeure Event”). Mercury shall promptly notify FPII and
Company of any Force Majeure Event. Mercury shall exercise

 

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reasonable commercial efforts to cure any Force Majeure Event and resume
performance. In the event of a Force Majeure Event that does not completely
preclude production and shipment of Products, Mercury may allocate its
production among its customers as in its judgment it deems to be reasonable.
During such event and for the shortest commercially reasonable period
thereafter, Products not being supplied shall be deemed “unavailable” for
purposes of this Agreement.

 

6.3   Notices. All communications, notices and consents provided for in this
Agreement shall be in writing and be deemed given (a) on delivery if given in
person, (b) on the date of transmission if sent by telex, facsimile or other
means of wire transmission (receipt confirmed), (c) one (1) day after being
delivered to a nationally recognized overnight courier or (d) four (4) business
days after being deposited in the United States mails, with proper postage and
documentation, for first-class registered or certified mail, prepaid.

 

Notices shall be addressed as follows:

 

If to Mercury, to:

 

Mercury Marine

W6250 West Pioneer Road

P.O. Box 1939

Fond du Lac, Wisconsin 54935

Facsimile: 920-929-5060

Attention: General Counsel

 

If to FPII, Company or RMF, to:

 

Reginald M. Fountain, Jr.

Fountain Powerboats Inc.

1653 Whichard’s Beach Road

P.O. Drawer 457

Washington, North Carolina 27889

Attn: Corporate Secretary

Facsimile Number: 919-975-6793

 

provided, that if any party shall have designated a different address by notice
to the others, then to the last address so designated.

 

6.4   Assignment. Neither party may assign any of its right or obligations under
this Agreement without the prior written consent of the other party; provided
that Mercury may assign its rights to a wholly owned subsidiary of Brunswick
Corporation.

 

6.5   Entire Instrument. This Agreement, the Master Agreement dated the date
hereof and the Transaction Documents (as defined in the Master Agreement) set
forth the entire agreement and understanding of the parties hereto and thereto
with respect to the transactions contemplated hereby and thereby, superseding
all prior oral and written agreements, instruments, arrangements, and
understandings relating to the subject matter hereof and thereof. No
modification, amendment, renewal, extension or waiver of this

 

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Agreement or any provision hereof shall be binding upon any party hereto unless
made in writing and signed by all parties hereto. Each party agrees that there
have been no material statements, assertions, representations, understandings or
negotiations, whether oral or in writing, made by another party hereto which
have been relied upon by the party signing this Agreement in determining whether
to enter into the Agreement, which have not been subsumed, reduced to writing,
or memorialized herein or in the Transaction Documents.

 

       The terms and conditions of this Agreement and the Transaction Documents
supersede, replace and take precedence over any terms or conditions contained in
any purchase order, proposal, request for quotation, confirmation,
acknowledgement or other form or instrument that may be delivered or signed by
either party in connection with any of the transactions contemplated by this
Agreement or the Transaction Documents, including those occurring in the
ordinary course of business. No such purchase order, proposal, request for
quotation, confirmation, acknowledgement or other form or instrument shall
affect, modify, limit or negate the terms and conditions of this Agreement or
the other Transaction Documents.

 

6.6   No Waiver. The failure of either party to enforce at any time or for any
period of time any provision of this Agreement shall not be construed as a
waiver of such provision or of the right of such party thereafter to enforce
such provision.

 

6.7   Governing Law; Choice of Forum. This Agreement shall be subject to and
governed by the internal laws (including, without limitation, the Uniform
Commercial Code) of the State of North Carolina, without regard to the conflicts
of law principles thereof. The parties agree that any suit, action or proceeding
brought in connection with or arising out of this Agreement shall be brought
solely in the Federal Courts of the Northern District of Illinois or, if such
court lacks jurisdiction, in the State Court located in Lake County, Illinois.
Any party may plead this Section 6.7 as a waiver of jurisdiction in any other
court in which an action, suit or proceeding is brought.

 

6.8   Enforceability. The invalidity or unenforceability of any provision of
this Agreement, or a part thereof, shall not affect the other provisions, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision or part were omitted.

 

6.9   No Right of Set-Off. Any amounts due from FPII or Company to Mercury under
this Agreement shall not be subject to any set-off, counterclaim or similar
right of FPII or Company against Mercury, however arising.

 

6.10   Limitation. MERCURY’S LIABILITY TO FPII AND COMPANY UNDER OR WITH RESPECT
TO THIS AGREEMENT SHALL NOT EXCEED THE AMOUNT PAID BY FPII OR COMPANY TO MERCURY
UNDER THIS AGREEMENT. Any action or proceeding pertaining to this Agreement,
however asserted, must be commenced within one year from the date that the cause
of action accrues, provided, however, that any action for non-payment may be
commenced at any time within three years from the date such cause of action
accrues.

 

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6.11   Authority. Each party represents and warrants to the other that (a) such
party has full power and authority to execute and deliver this Agreement, (b)
this Agreement constitutes the legal and binding obligation of such party, (c)
the execution, delivery and performance of this Agreement does not violate,
conflict with or constitute a breach of such party’s charter documents, or any
agreement by which such party or any of its assets are bound or any law,
regulation or court or administrative order applicable to such party, (d) such
party has obtained all governmental consents or approvals, and has filed all
necessary notices, required for such party to execute, deliver and perform its
obligations under this Agreement, and (e) there is no litigation, proceeding,
arbitration or investigation pending or, to the best knowledge of such party,
threatened that would interfere with such party’s ability to perform its
obligations hereunder.

 

6.12   Future Agreements. No party shall be under obligation, either express or
implied, to enter into a new agreement with the other party upon expiration of
this Agreement or in the event of termination prior to expiration.

 

6.13   No Agency. Under no circumstances are FPII, Company, RMF or Mercury
deemed to be the agents, employees or representatives of the others (other than
RMF with respect to FPII and Company).

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate in the manner appropriate to each the day and year first written
above.

 

FOUNTAIN POWERBOAT INDUSTRIES, INC.

By:

 

 

--------------------------------------------------------------------------------

Its:

 

 

--------------------------------------------------------------------------------

FOUNTAIN POWERBOATS, INC.

By:

 

 

--------------------------------------------------------------------------------

Its:

 

 

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Reginald M. Fountain, Jr.

MERCURY MARINE DIVISION

OF BRUNSWICK CORPORATION

By:

 

 

--------------------------------------------------------------------------------

Its:

 

 

--------------------------------------------------------------------------------

 

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Exhibit C

 

CONTINGENT PURCHASE AGREEMENT

 

THIS CONTINGENT PURCHASE AGREEMENT dated as of July 17, 2003 is between
Brunswick Corporation (“Brunswick”) and Bank of America, N.A. (the “Bank”).

 

WITNESSETH:

 

WHEREAS, the Bank has entered into a Loan Agreement dated as of July 17, 2003
(as amended or otherwise modified from time to time, the “Loan Agreement”) with
Fountain Powerboats, Inc. (the “Borrower”) pursuant to which the Bank has agreed
to make a term loan to the Borrower; and

 

WHEREAS, Brunswick desires to obtain an irrevocable and unconditional right to
purchase, at par, the outstanding principal amount of the term loan under the
Loan Agreement upon the occurrence of certain events; and

 

WHEREAS, the Bank is willing to extend such right to Brunswick on the terms set
forth herein;

 

NOW, THEREFORE, the parties hereto agree as follows:

 

SECTION 1 DEFINITIONS. As used herein, the following terms have the following
meanings:

 

Assignment Agreement means an Assignment Agreement substantially in the form of
Exhibit A, with appropriate insertions.

 

Assigned Rights and Obligations means all rights and obligations of the Bank
under or in connection with the Loan Agreement, the Note and any other Loan
Document, including, without limitation, all amounts owing by the Borrower
thereunder, all guarantees supporting and all collateral securing payment of
such amounts, and all rights and remedies of the Bank upon the occurrence of an
Event of Default; provided that the Assigned Rights and Obligations shall not
include any claim of any person or entity (including, without limitation, the
Borrower or any affiliate thereof) against the Bank arising out of any act, or
omission to act, on the part of the Bank on or prior to the date Brunswick
exercises the Purchase Option.

 

Brunswick Guaranty means the guaranty issued by Brunswick of the obligations of
the Borrower under the Loan Agreement.

 

Business Day means any day on which commercial banks are open in Chicago,
Illinois and Charlotte, North Carolina.

 

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Default has the meaning specified in the Loan Agreement.

 

Event of Default has the meaning specified in the Loan Agreement.

 

Loan has the meaning specified in the Loan Agreement.

 

Loan Document has the meaning specified in the Note.

 

Note has the meaning specified in the Loan Agreement.

 

Purchase Event means the occurrence of any of the following: (a) a Default under
Section 10(g) of the Note; (b) an Event of Default; or (c) the Bank shall have
given notice to Brunswick of a proposed amendment or modification of, or consent
to any material waiver to or material departure by the Borrower from, any
provision of the Loan Agreement pursuant to Section 4 below, and Brunswick shall
have notified the Bank within three Business Days after receipt of such notice
of Brunswick’s intent to purchase the Assigned Rights and Obligations pursuant
to this Agreement.

 

Purchase Option—see Section 2.1

 

Purchase Price means the sum of (a) the unpaid principal amount of the Loans,
(b) all accrued and unpaid interest on the Loans and (c) all fees and other
amounts payable to the Bank under the Loan Agreement, the Note or any other Loan
Document, excluding any “Make Whole Amount” referred to in Section 8 of the
Note, determined in each case as of the date of the exercise of the Purchase
Option.

 

SECTION 2 PURCHASE OPTION.

 

2.1 Right of Brunswick to Purchase. Subject to the terms and conditions of this
Agreement, Brunswick shall have the right (the “Purchase Option”), on any
Business Day on which a Purchase Event has occurred and is continuing, to
purchase from the Bank the aggregate outstanding principal amount of the Loans
and all other Assigned Rights and Obligations.

 

2.2 Notice of Purchase Price. Brunswick may from time to time request that the
Bank provide Brunswick with a calculation of the Purchase Price. Promptly (and
in any event within three Business Days) after any such request, the Bank shall
deliver to Brunswick a certificate of an authorized officer of the Bank setting
forth a calculation of the Purchase Price.

 

2.3 Procedures with Respect to Purchase. Brunswick may exercise the Purchase
Option by giving irrevocable notice to the Bank not later than 10:00 a.m.,
Charlotte time, at least three Business Days (but not more than 10 Business
Days) prior to the proposed date of the purchase of the Assigned Rights and
Obligations, which shall be a Business Day (the “Purchase Date”). If such notice
is given, then the Bank shall be obligated to sell, and Brunswick shall be
obligated to purchase, the Assigned Rights and Obligations. Not later than 9:00
a.m., Charlotte time, on the Purchase Date, the Bank shall deliver to Brunswick
a certificate of an authorized officer of the Bank setting forth a calculation
of the Purchase Price as of the Purchase Date. Promptly upon receipt of such
certificate (and, in any event, not later than 1:00 p.m., Charlotte time, on the
Purchase Date), Brunswick shall pay the Purchase Price in immediately available
funds to the

 

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Bank at its main office in Charlotte.

 

SECTION 3 TERMS OF ASSIGNMENT.

 

3.1 No Recourse or Warranty. Any assignment by the Bank of the Loans and the
other Assigned Rights and Obligations shall be without recourse or warranty of
any kind whatsoever, except that by making such assignment the Bank shall be
deemed to have warranted to Brunswick that the Bank (a) is the sole and absolute
owner of the Loans and the other Assigned Rights and Obligations, (b) is
assigning the foregoing to Brunswick free and clear of all liens, security
interests and other encumbrances and (c) has complied with its obligations under
Section 4 of this Agreement.

 

3.2 No Impairment of Liens, Security Interests or Guarantees. All guarantees
(other than the Brunswick Guaranty) supporting and all liens and security
interests securing the obligations of the Borrower under the Loan Agreement, the
Note and the other Loan Documents shall continue in full force and effect after
the assignment contemplated herein, and the Bank agrees to execute and deliver
such documents and instruments as Brunswick may reasonably request to evidence
the assignment of such guarantees, liens and security interests.

 

SECTION 4 CERTAIN LIMITATIONS ON ADMINISTRATION OF THE LOANS. The Bank agrees
that it will (a) not, without the written consent of Brunswick, (i) extend any
date scheduled for any payment of principal of or interest on the Loans or any
fees payable under the Loan Agreement, the Note or any other Loan Document, (ii)
change the principal amount of the Loans, the rate of interest thereon or any
fees payable under the Loan Agreement, the Note or any other Loan Document
(other than by virtue of the acceptance of payments and prepayments of principal
and changes in the interest rate as contemplated by the express terms of the
Note as in effect on the date hereof), (iii) release any guarantor of the Loans
from its obligations under the applicable guarantee or (iv) reduce any
substantial portion of the collateral securing repayment of the Loans; (b) not
enter into any written amendment, waiver or other modification of, consent in
writing to any departure by the Borrower or any guarantor from, any provision of
the Loan Agreement or any related agreement, or amend, waive or otherwise modify
or consent to any departure by the Borrower or any guarantor from any material
provision of the Loan Agreement or any related agreement in any other manner,
without, in each case, giving Brunswick at least five Business Days’ written
notice of such action; and (c) use reasonable commercial efforts to promptly
notify Brunswick of the occurrence of any Default or Event of Default, it being
understood that failure to give such notice shall not impair the rights of the
Bank under this Agreement or any agreement related hereto (including the
Brunswick Guaranty).

 

SECTION 5 MISCELLANEOUS.

 

5.1 No Waiver; Modifications in Writing. No failure or delay on the part of
Brunswick in exercising any right, power or remedy hereunder shall operate as a
waiver thereof. No amendment or other modification of this Agreement shall be
effective unless the same is in writing and signed by or on behalf of the Bank
and Brunswick.

 

5.2 Notices. All notices and other communications hereunder shall be in writing
and shall be delivered in person with receipt acknowledged, by registered or
certified mail, return

 

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receipt requested, postage prepaid, by overnight courier service or by
facsimile, addressed as follows:

 

  (a)   If to Brunswick, at:

 

Brunswick Corporation

1 North Field Court

Lake Forest, Illinois 60045-4811

Attn: General Counsel

Facsimile: 847-735-4050

 

with a copy to:

 

Mercury Marine

W6250 Pioneer Road

Fond du Lac, Wisconsin 54936-1939

Attn: General Counsel

Facsimile: 920-929-5253

 

  (b)   If to the Bank, at:

 

Bank of America, N.A.

NC7-002-02-01

One Hannover Square, Suite 201

Raleigh, North Carolina 27601

Attn: Ray Vaughn

Facsimile: (919) 829-6604

 

with a copy to:

 

Bank of America, N.A.

Legal Department

101 South Tryon Street

NC1-002-29-01

Charlotte, North Carolina 28255

Attn: Robert J. Roth

Facsimile: (704) 386-1760

 

or at such other address as may be substituted by notice given as provided
herein. Notices shall be deemed to have been given on the date personally
delivered with receipt acknowledged, three Business Days after being deposited
in the United States mail, one Business Day after being deposited with an
overnight courier service or when transmitted by facsimile with electronic
confirmation of receipt, in each case properly addressed and with all charges
paid.

 

5.3 Headings. Section headings used in this Agreement are for convenience only
and shall not affect the construction of this Agreement.

 

5.4 Execution in Counterparts. This Agreement may be executed in any number of

 

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counterparts and by the parties hereto in separate counterparts, and each such
counterpart shall be deemed to be an original but all such counterparts shall
constitute one and the same agreement.

 

5.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina.

 

5.6 Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be in effect up to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.

 

5.7 Successors and Assigns. This Agreement shall be binding upon, and inure to
the benefit of, the respective successors and assigns of Brunswick and the Bank.

 

5.8 Arbitration; Wavier of Jury Trial. (a) This Section 5.8 concerns the
resolution of any controversy or claim, whether arising in contract, tort or by
statute, that arises out of or relates to: (i) this Agreement (including all
renewals, extensions or modifications hereof); or (ii) any document related to
this Agreement (any of the foregoing a “Claim”).

 

(b) At the request of Brunswick or the Bank, any Claim shall be resolved by
binding arbitration in accordance with the Federal Arbitration Act (Title 9, U.
S. Code) (the “Act”). The Act will apply even though this Agreement provides
that it is governed by the law of the State of North Carolina.

 

(c) Arbitration proceedings will be determined in accordance with the Act, the
applicable rules and procedures for the arbitration of disputes of JAMS or any
successor thereof (“JAMS”) and the terms of this Section 5.8. In the event of
any inconsistency, the terms of this Section 5.8 shall control.

 

(d) The arbitration shall be administered by JAMS and conducted, unless
otherwise required by law, in Lake County, Illinois. All Claims shall be
determined by one arbitrator; provided that if one or more Claims exceed
$5,000,000, upon the request of either Brunswick or the Bank, such Claims shall
be decided by three arbitrators. All arbitration hearings shall commence within
90 days of the demand for arbitration and close within 90 days of commencement
and the award of the arbitrator(s) shall be issued within 30 days of the close
of the hearing. However, the arbitrator(s), upon a showing of good cause, may
extend the commencement of the hearing for up to an additional 60 days. The
arbitrator(s) shall provide a concise written statement of reasons for the
award. The arbitration award may be submitted to any court having jurisdiction
to be confirmed and enforced.

 

(e) The arbitrator(s) will have the authority to decide whether any Claim is
barred by the statute of limitations and, if so, to dismiss the arbitration on
that basis. For purposes of the application of the statute of limitations, the
service on JAMS under applicable JAMS rules of a notice of Claim is the
equivalent of the filing of a lawsuit. Any dispute concerning this arbitration
provision or whether a Claim is arbitrable shall be determined by the
arbitrator(s). The arbitrator(s) shall have the power to award legal fees if
appropriate.

 

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(f) This Section 5.8 does not limit the right of Brunswick or the Bank, as
applicable, to: (i) exercise self-help remedies, including but not limited to
setoff; (ii) initiate judicial or nonjudicial foreclosure against any real or
personal property collateral; (iii) exercise any judicial or power of sale
rights; or (iv) act in a court of law to obtain an interim remedy, including but
not limited to injunctive relief, writ of possession, appointment of a receiver
or additional or supplementary remedies.

 

(g) The filing of a court action is not intended to constitute a waiver of the
right of Brunswick or the Bank thereafter to require submittal of the Claim to
arbitration.

 

(h) BY AGREEING TO BINDING ARBITRATION, EACH OF BRUNSWICK AND THE BANK
IRREVOCABLY AND VOLUNTARILY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY CLAIM. FURTHERMORE, WITHOUT INTENDING IN ANY WAY TO LIMIT THIS
AGREEMENT TO ARBITRATE, TO THE EXTENT ANY CLAIM IS NOT ARBITRATED, EACH OF
BRUNSWICK AND THE BANK IRREVOCABLY AND VOLUNTARILY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF SUCH CLAIM. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR BRUNSWICK AND THE BANK ENTERING INTO THIS AGREEMENT.

 

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IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as of
the date first above written.

 

BRUNSWICK CORPORATION

By:

 

 

--------------------------------------------------------------------------------

Title:

 

 

--------------------------------------------------------------------------------

BANK OF AMERICA, N.A.

By:

 

 

--------------------------------------------------------------------------------

Title:

 

 

--------------------------------------------------------------------------------

 

ACKNOWLEDGED AND AGREED:

 

FOUNTAIN POWERBOATS, INC.

By:

 

 

--------------------------------------------------------------------------------

Title:

 

 

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EXHIBIT A

TO

CONTINGENT PURCHASE AGREEMENT

 

ASSIGNMENT AGREEMENT

 

FOR VALUE RECEIVED, the undersigned hereby assigns to Brunswick Corporation,
without recourse or warranty of any kind whatsoever (except as expressly set
forth in the Purchase Agreement referred to below), the Loan (as defined in the
Purchase Agreement) and all other Assigned Rights and Obligations (as defined in
the Purchase Agreement). This assignment is made pursuant to, and is in all
respects subject to the terms and provisions of, the Contingent Purchase
Agreement dated as of July 17, 2003 (the “Purchase Agreement”) between Brunswick
Corporation and the undersigned. This assignment is governed by the laws of the
State of North Carolina.

 

Dated                     ,         

  

BANK OF AMERICA, N.A.,

    

By:

  

 

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Title:

  

 

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Exhibit D

 

RMF REIMBURSEMENT AGREEMENT

 

THIS RMF REIMBURSEMENT AGREEMENT (this “Agreement”) dated as of July         ,
2003 is between Reginald M. Fountain, Jr. (“RMF”) and Brunswick Corporation
(“Brunswick”).

 

RECITALS

 

A. Brunswick, RMF, Fountain Powerboat Industries, Inc. and Fountain Powerboats,
Inc. are parties to a Master Agreement dated as of July         , 2003 (as
amended or otherwise modified from time to time, the “Master Agreement”).
Capitalized terms used but not defined herein have the respective meanings
ascribed thereto in the Master Agreement.

 

B. As contemplated by the Master Agreement, RMF and Brunswick have guaranteed
all liabilities of the Company under the Loan Agreement.

 

C. RMF will materially benefit from the Loan Agreement and Brunswick’s guaranty
of the Bank Liabilities and has agreed to reimburse Brunswick for certain
payments which may be made by Brunswick under the Brunswick Guaranty or the
Contingent Purchase Agreement.

 

D. RMF acknowledges and agrees that Brunswick would not have issued the
Brunswick Guaranty absent RMF’s agreement to reimburse Brunswick pursuant to
this Agreement.

 

AGREEMENTS

 

In consideration of the foregoing and the mutual covenants, agreements and
warranties herein contained, the parties hereto agree as follows:

 

1. Agreement to Reimburse Payments. RMF unconditionally and irrevocably agrees
that he will, immediately upon demand, reimburse Brunswick for all amounts in
excess of $14,700,000 which Brunswick may pay to the Bank (i) to purchase the
Loan and the other Bank Liabilities pursuant to the Contingent Purchase
Agreement or (ii) pursuant to the Brunswick Guaranty (any such payment made by
Brunswick in excess of such amount, a “Reimbursable Payment”). RMF further
agrees to pay, immediately upon demand, all costs and expenses paid or incurred
by Brunswick in enforcing this Agreement and collecting the amount of any
Reimbursable Payment from RMF (including, without limitation, reasonable
attorneys’ fees and charges).

 

2. Procedure for Reimbursement. Brunswick shall give written notice to RMF of
the making of, and the amount of, any Reimbursable Payment. Immediately (and in
any event within five business days) upon receipt of such notice, RMF shall
reimburse Brunswick for the

 

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amount of such Reimbursable Payment by delivery of immediately available funds
to such bank and account as Brunswick may reasonably specify.

 

3. Interest On Unpaid Amounts. To the extent RMF fails to reimburse Brunswick
for any Reimbursable Payment within one business day after notice thereof
pursuant to Section 2 (and without limiting RMF’s obligation to pay Brunswick
the amount of such payment), RMF shall pay interest on the unreimbursed amount
at a rate per annum equal to the sum of the prime rate (the “Prime Rate”)
announced by the Bank from time to time at its principal office in Charlotte
(changing as and when the Prime Rate changes) plus 3%.

 

4. Obligations Unconditional, etc. The obligations of RMF hereunder are
unconditional, irrevocable and absolute and shall remain in full force and
effect until all commitments of the Bank under the Loan Agreement have
terminated and all Bank Liabilities have been paid in full.

 

5. Reinstatement of Obligations. RMF agrees that if at any time all or any part
of any payment theretofore applied to any of the Bank Liabilities is or must be
rescinded or returned by the Bank or Brunswick for any reason whatsoever
(including, without limitation, the insolvency, bankruptcy or reorganization of
the Company or RMF), such Bank Liabilities shall, for the purposes of this
Agreement, to the extent that such payment is or must be rescinded or returned,
be deemed to have continued in existence, notwithstanding such application by
the Bank or Brunswick, and this Agreement shall continue to be effective or be
reinstated, as the case may be, as to such Bank Liabilities, all as though such
application by the Bank or Brunswick had not been made.

 

6. Delay of Subrogation. Notwithstanding any payment made by or for the account
of RMF pursuant to this Agreement, RMF shall not be subrogated to any right of
the Bank or Brunswick against the Company until such time as all Bank
Liabilities have been paid in full in cash and, if applicable, Brunswick has
received payment in full in cash of all amounts paid by Brunswick under the
Brunswick Guaranty and/or the Contingent Purchase Agreement together with, in
the case of any payment under the Brunswick Guaranty, interest thereon (from and
including the date of payment by Brunswick to but excluding the date Brunswick
is reimbursed therefor) at the same rate per annum as would have been applicable
to the Bank Liabilities paid by Brunswick (or, in the absence of such a rate, at
the Prime Rate plus 3%).

 

7. Amendments, etc. This Agreement may be amended, modified or supplemented, but
only in writing signed by each party hereto.

 

8. Notices. All notices hereunder shall be given in the manner and to the
address, and shall be deemed given at the time, specified in or pursuant to
Section 12.6 of the Master Agreement.

 

9. Delay by Brunswick not a Waiver, etc. No delay on the part of Brunswick in
the exercise of any right or remedy shall operate as a waiver thereof, and no
single or partial exercise by Brunswick of any right or remedy shall preclude
other or further exercise thereof or the exercise of any other right or remedy.
No action of Brunswick permitted hereunder shall in any way affect or impair the
rights of Brunswick or the obligations of RMF under this Agreement.

 

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10. Security. The obligations of RMF hereunder are secured as more fully set
forth in the Master Agreement.

 

11. Successors and Assigns. This Agreement shall be binding upon RMF and the
heirs and legal representatives of RMF and shall inure to the benefit of
Brunswick and the successors and assigns of Brunswick.

 

12. Applicable Law; Choice of Forum. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
North Carolina. The parties agree that any suit, action or proceeding brought in
connection with or arising out of this Agreement shall be brought solely in the
Federal Courts of the Northern District of Illinois or, if such court lacks
jurisdiction, in the State Court located in Lake County, Illinois. Any party may
plead this Section 12 as a waiver of jurisdiction in any other court in which an
action, suit or proceeding is brought.

 

13. Waiver of Jury Trial. THE PARTIES HERETO WAIVE ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT
AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN
THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY FINANCING
RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, AND AGREE THAT
ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A
JURY.

 

14. Relationship to RMF Guaranty. The parties hereto (a) acknowledge that if
Brunswick purchases the Bank Liabilities pursuant to the Contingent Purchase
Agreement for more than $14,700,000, then Brunswick may have claims against RMF
under this Agreement and under the RMF Guaranty (as assignee of the Bank); and
(b) agree that under such circumstances, (i) Brunswick may enforce its rights
under this Agreement and/or the RMF Guaranty concurrently and/or successively in
such order as Brunswick may elect and (ii) the total recovery under both this
Agreement and the RMF Guaranty shall not exceed the amount of the Bank
Liabilities which Brunswick may pay to the Bank in excess of $14,700,000 plus
enforcement and collection costs incurred under this Agreement and/or the RMF
Guaranty. RMF shall not challenge any amounts paid by Brunswick to the Bank as
unreasonable, unnecessary, made in bad faith, voluntarily made or as somehow
being otherwise made in a manner that does not support Brunswick’s request for
reimbursement pursuant to this Agreement.

 

15. Termination. At such time as the Bank Liabilities have been indefeasibly and
irrevocably reduced or paid down to $14,700,000 or less and there is no ability
for the Bank Liabilities to increase to more than $14,700,000, this Agreement
shall terminate and Brunswick shall release all collateral securing RMF’s
obligations hereunder. At such time, Brunswick shall also acknowledge that it
has no further rights under the RMF Guaranty.

 

16. Severability. If any provision of this Agreement shall be held invalid,
illegal or unenforceable, such provision shall not affect or impair the
validity, legality or enforceability of this Agreement or any of the other
provisions hereof, and there shall be substituted for the

 

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provision at issue a valid and enforceable provision as similar as possible to
the provision at issue.

 

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered as of
the day and year first above written.

 

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Reginald M. Fountain, Jr.

BRUNSWICK CORPORATION

By:

 

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Name Printed:

 

 

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Title:

 

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Exhibit E

 

Form of Ward & Smith Opinion

 

Omitted

 

E-1