Document:

exv10w21xcy

Exhibit 10.21(c)

NOTE: PORTIONS OF THIS EXHIBIT INDICATED BY “[****]” ARE SUBJECT TO A CONFIDENTIAL TREATMENT REQUEST, AND HAVE BEEN OMITTED FROM THIS EXHIBIT. COMPLETE, UNREDACTED COPIES OF THIS EXHIBIT HAVE BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AS PART OF THIS COMPANY’S CONFIDENTIAL TREATMENT REQUEST.

FOURTH AMENDMENT

TO SECOND AMENDED AND RESTATED

CREDIT AND SECURITY AGREEMENT

     This FOURTH AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT (this
“Fourth Amendment”) is entered into as of December 15, 2008 (the “Effective Date”),
by and among MARINEMAX, INC., a Delaware corporation (the “Company”) and each of the six
(6) other Borrowers set forth on Schedule I attached hereto and by the reference incorporated
herein (each of the Company and each of such six (6) Persons other than the Company, singularly, a
“Borrower,” and the Company and all of such Persons other than the Company, collectively,
the “Borrowers”), KEYBANK NATIONAL ASSOCIATION, a national banking association, both
individually (in such capacity, “KeyBank”) and as administrative agent (in such capacity,
the “Administrative Agent”) for the Lenders (as hereinafter defined), BANK OF AMERICA,
N.A., a national banking association, individually (in such capacity, “BOA”), as collateral
agent (in such capacity, the “Collateral Agent”) and as documentation agent (in such
capacity, the “Documentation Agent”) and the various other financial institutions as are or
may become parties hereto, including, as of the date hereof, GE COMMERCIAL DISTRIBUTION FINANCE
CORPORATION, a Nevada corporation (“GE Commercial”), WACHOVIA BANK, NATIONAL ASSOCIATION, a
national banking association (“Wachovia”), WELLS FARGO BANK, N.A., a national banking
association (“Wells Fargo”), U.S. BANK NATIONAL ASSOCIATION, a national banking association
(“US Bank”), BRANCH BANKING & TRUST COMPANY, a North Carolina corporation (“BB&T”),
and BANK OF THE WEST, a California corporation (“Bank of the West”) (KeyBank, BOA, GE
Commercial, Wachovia, Wells Fargo, US Bank, BB&T, Bank of the West, and such other financial
institutions, collectively, the “Lenders”), amending that Second Amended and Restated
Credit and Security Agreement dated as of June 19, 2006, by and among Borrowers and Lenders as
heretofore amended by the First Amendment to Second Amended and Restated Credit and Security
Agreement dated as of May 31, 2007, the Second Amendment to Second Amended and Restated Credit and
Security Agreement dated as of October 1, 2007, and the Third Amendment to Second Amended and
Restated Credit and Security Agreement dated as of March 7, 2008 (the “Agreement”).
Unless otherwise defined in this Fourth Amendment, all defined terms used in this Fourth Amendment
shall have the meanings ascribed to such terms in the Agreement. This Fourth Amendment is entered
into in consideration of, and upon, the terms, conditions and agreements set forth herein.

     1.
Background. Borrowers and Lenders desire to amend certain provisions of the Agreement
effective as of the date of this Fourth Amendment.

     2.
Definitions. Section 1.01 of the Agreement is hereby amended as follows:

          (a)
Added Definitions. The following new defined terms are hereby added to Section 1.01
of the Agreement:

 

 

[****] — CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

     “Additional Real Estate Collateral” shall mean all Real Property
Interests with respect to owned real estate, wherever situated, that is now owned or
hereafter acquired by the Borrowers, or any of them, save and except for (a) the
Pledged Real Estate Collateral, and (b) the Gulfport Property.

     “[****]” shall mean boats, vessels, and yachts manufactured by [****].

     “EBITDA” shall mean, for any period, the earnings before interest,
Taxes, Statement of Financial Accounting Standards No. 123R stock-based
compensation, depreciation, amortization, and any intangible asset impairment charge
deducted in determining the earnings of the Borrowers on a consolidated basis for
such period; provided, however, that for each of the four quarterly periods
of the Borrowers ending on December 31, 2008, March 31, 2009, June 30, 2009 and
September 30, 2009, EBITDA shall be calculated by adding back nonrecurring
restructuring charges associated with business location closings, leasehold
improvement impairment charges, lease termination charges, Lender closing costs
associated with the Fourth Amendment to this Agreement, and actual [****] inventory
repurchase settlement writedowns up to a maximum of [****].

     “EBITDA/Interest Coverage Ratio” shall mean, for any period, the ratio
of the Borrowers’ EBITDA to the Borrowers’ total interest expense determined on a
consolidated basis for such period.

     “EDR” shall have the meaning set forth in Section 4.07.

     “ESA” shall have the meaning set forth in Section 4.07.

     “Gulfport Property” shall mean the Real Property Interests in the real
estate at Gulfport Marina (Florida) owned by a joint venture in which the Borrowers
have only an approximate 36% interest.

     “Inspection Increase Event 1” shall mean the event that shall have
occurred if, as reflected on each of the relevant monthly Borrowing Base
Certificates submitted during any period of two consecutive calendar months, the
unpaid principal balance of Advances under this Agreement plus accrued but unpaid
interest minus the Pledged Real Estate Loan Value shall equal or exceed eighty
percent (80%) but shall not be greater than ninety (90%) of the portion of the
Borrowing Base consisting of Eligible New Inventory and Eligible Used Inventory. An
Inspection Increase Event 1 shall be deemed to have occurred if following an
Inspection Increase Event 2 there shall be an Inspection Reinstatement Event but the
unpaid principal balance of Advances under this Agreement plus accrued but unpaid
interest thereon minus the Pledged Real Estate Loan Value nevertheless shall equal
or exceed eighty percent (80%) but shall not be greater than ninety (90%) of the
portion of the Borrowing Base consisting of Eligible New Inventory and Eligible Used
Inventory, all as reflected

 

 

each of the relevant monthly Borrowing Base Certificates submitted during any
period of two consecutive calendar months.

     “Inspection Increase Event 2” shall mean the event that shall have
occurred if, as reflected on each of the relevant monthly Borrowing Base
Certificates submitted during any period of two consecutive calendar months, the
unpaid principal balance of Advances under this Agreement plus accrued but unpaid
interest minus the Pledged Real Estate Loan Value shall exceed ninety percent (90%)
of the portion of the Borrowing Base consisting of Eligible New Inventory and
Eligible Used Inventory.

     “Interest Rate Swap” shall mean a financial derivative contract between
parties in which each agrees to exchange payments tied to two different interest
rates or indices for a specified period of time, generally based on a notional
principal amount.

     “Issuing Bank” shall mean BOA, in its capacity as an issuer of Letters
of Credit pursuant to Section 2.01(a) and Section 2.13.

     “LC Commitment” shall mean that portion of the Commitment Amount that
may be used by the Borrowers for the issuance of Letters of Credit in an aggregate
face amount not to exceed seven million dollars ($7,000,000).

     “LC Disbursement” shall mean a payment made by the Issuing Bank
pursuant to a Letter of Credit.

     “LC Documents” shall mean the Letters of Credit and all applications,
agreements and instruments relating to the Letters of Credit.

     “LC Exposure” shall mean, at any time, the sum of (a) the aggregate
undrawn amount of all outstanding Letters of Credit at such time, plus (b) the
aggregate amount of all LC Disbursements that have not been reimbursed by or on
behalf of the Borrowers at such time. The LC Exposure of any Lender shall be its
Pro Rata Percentage of the total LC Exposure at such time.

     “Letter of Credit” shall mean any stand-by letter of credit issued
pursuant to Section 2.01 by the Issuing Bank for the account of the Borrower
pursuant to the LC Commitment.

     “Letter of Credit Fee” shall have the meaning set forth in Section
2.01(a)(3).

     “Mortgage” shall have the meaning set forth in Section 4.07.

     “Pledged Real Estate Collateral” shall mean all of the Real Property
Interests in respect of the particular owned real estate of the Borrowers identified
in Exhibit 4.07 to this Agreement, together with such additional or
substitute Real

3

 

Property Interests, if any, as hereafter may be designated as Pledged Real
Estate Collateral by written amendment to this Agreement.

     “Pledged Real Estate Loan Value” shall mean, at any date of
calculation, the maximum amount that the Borrowers shall be entitled to borrow or
retain under Section 4.07 in respect of the Pledged Real Estate Collateral, with
such amount to be the lesser of (a) fifty percent (50%) of the appraised value
(determined in accordance with Section 4.07) of the Pledged Real Estate Collateral
with respect to which all steps have been taken to include such property in the
Borrowing Base, and (b) twenty million dollars ($20,000,000).

     “Title Commitment” shall mean a commitment for title insurance provided
to the Collateral Agent with respect to each parcel of Additional Real Estate
Collateral.

     “Title Policy” shall mean an ALTA mortgagee’s title insurance policy
written by a title insurance company acceptable to the Collateral Agent in an amount
equal to the value of Pledged Real Estate Collateral and containing no exceptions
other than with respect to Permitted Liens.

          (b)
Changed Definitions. The definitions of the following terms heretofore defined in the
Agreement are hereby amended to read in their entirety as follows:

     “Borrowing Base” shall mean the greatest amount that may be borrowed or
retained by the Borrowers in respect of the Commitment, which at any date of
calculation, shall be determined by applying the then applicable Availability
Reserve, if any, to the sum of the following determined on a consolidated basis for
all of the Borrowers:

     (a) the sum of (1) ninety percent (90%) of the original invoice price (including freight charges,
but excluding, to the extent that the same are included in the Borrowing Base as Accounts, any
earned volume purchase rebates, earned advertising rebates, verifiable price protection, and earned
incentives, credits, or similar items) of Eligible New Inventory that is aged not more than three
hundred sixty-five (365) days from date of delivery to the Borrowers, (2) eighty percent (80%) of
the original invoice price (including freight charges, but excluding, to the extent that the same
are included in the Borrowing Base as Accounts, any earned volume purchase rebates, earned
advertising rebates, verifiable price protection, and earned incentives, credits, or similar items)
of Eligible New Inventory that is aged more than three hundred sixty-five (365) days, but not more
than seven hundred thirty (730) days, from date of delivery to the Borrowers, and (3) sixty-five
percent (65%) of the original invoice price (including freight charges, but excluding, to the
extent that the same are included in the Borrowing Base as Accounts, any earned volume purchase
rebates, earned advertising

4

 

[****] — CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

rebates, verifiable price protection, and earned incentives, credits, or similar
items) of Eligible New Inventory that is aged more than seven hundred thirty (730)
days, but not more than one thousand ninety-five (1,095) days, from date of delivery
to the Borrowers; provided, however, that (A) the amount includable in the
Borrowing Base on account of Loose Outboard Motors in the Eligible New Inventory
shall never exceed one million, five hundred thousand dollars ($1,500,000), it being
agreed that all Loose Outboard Motors over such amount shall be included in the
Borrowing Base only as Eligible Parts Inventory; (B) prior to May 1, 2009 the amount
includable in the Borrowing Base on account of both the Eligible New Inventory of
[****] and the Eligible Used Inventory of [****] shall not exceed in the aggregate
[****], and after May 1, 2009 the amount includable in the Borrowing Base on account
of both the Eligible New Inventory of [****] and the Eligible Used Inventory of
[****] shall not exceed in the aggregate [****]; (C) prior to May 1, 2009, the
amount includable in the Borrowing Base on account of both the Eligible New
Inventory of [****] and the Eligible Used Inventory of [****] shall not exceed in
the aggregate [****], and after May 1, 2009 the amount includable in the Borrowing
Base on account of both the Eligible New Inventory of [****] and the Eligible Used
Inventory of [****] shall not exceed in the aggregate [****]; (D) prior to May 1,
2009, the amount includable in the Borrowing Base on account of (i) the Eligible New
Inventory of [****] and (ii) the Eligible Used Inventory of [****] shall not exceed
in the aggregate [****], and after May 1, 2009, the amount includable in the
Borrowing Base on account of (x) the Eligible New Inventory of [****] and (y) the
Eligible Used Inventory of [****] shall not exceed in the aggregate [****]; and
provided further, that if Lenders receive, with respect to particular
Eligible New Inventory aged not more than three hundred sixty-five (365) days
either, (i) a five percent (5.0%) manufacturer’s guaranty, satisfactory to Required
Lenders in their reasonable discretion, with respect to such Eligible New Inventory,
or (ii) a manufacturer’s repurchase agreement, that is reasonably satisfactory to
Required Lenders, at a purchase price of ninety-five percent (95%) of the Eligible
New Inventory value, the advance with respect to the Eligible New Inventory covered
by such guaranty or repurchase agreement will be increased by five percent (5.0%) to
ninety-five percent (95%), notwithstanding anything to the contrary in this clause
(a).

     (b) the sum of (1) eighty percent (80%) of NADA Wholesale Value of Eligible
Used Inventory that has been held by the Borrowers for not more than one hundred
eighty (180) days from the date of receipt, plus (2) seventy-two percent (72%) of
the NADA Wholesale Value of Eligible Used Inventory that has been held by the
Borrowers for more than one hundred eighty (180) days from the date of receipt, but
not more than three hundred sixty-five (365) days; provided, however, that
(A) the amount includable in the Borrowing Base on account of Eligible Used
Inventory shall never exceed twenty-five percent (25%) of the aggregate of (i)
Eligible New Inventory, and (ii) Eligible Used Inventory; (B) the amount includable
in the Borrowing Base on account of both the Eligible New

5

 

[****] — CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

Inventory of [****] and the Eligible Used Inventory of [****] shall not exceed in
the aggregate [****]; (C) the amount includable in the Borrowing Base on account of
both the Eligible New Inventory of [****] and the Eligible Used Inventory of [****]
shall not exceed in the aggregate [****]; (D) the amount includable in the Borrowing
Base on account of (i) the Eligible New Inventory of [****] and (ii) the Eligible
Used Inventory of [****] shall not exceed in the aggregate [****] and after May 1,
2009, the amount includable in the Borrowing Base on account of (x) the Eligible New
Inventory of [****] and (y) the Eligible Used Inventory of [****] shall not exceed
in the aggregate [****];

     (c) eighty percent (80%) of the net book value of Eligible Accounts;
provided, however, that the amount includable in the Borrowing Base on
account of Eligible Accounts shall never exceed thirty million dollars
($30,000,000);

     (d) the lesser of (1) twelve million dollars ($12,000,000), or (2) sixty
percent (60%) of the cost (excluding freight charges) of Eligible Parts Inventory
net of any reserve required by GAAP for damaged, obsolete, or slow-moving items in
such inventory; and

     (e) the Pledged Real Estate Loan Value of the Pledged Real Estate Collateral
with respect to which all of the steps contemplated by Section 4.07 of the Agreement
have been completed to the satisfaction of the Collateral Agent.

No Property of the Borrowers shall be included in the Borrowing Base if (1) the
Collateral Agent, for the benefit of the Lenders, does not have a first priority
security interest under the Uniform Commercial Code, to the extent applicable,
subject only to Permitted Liens, in such Property, (2) any other Person has a
Preferred Ship’s Mortgage on a Documented Vessel included in the Borrowing Base that
has not been extinguished by payment in full and delivery of a written satisfaction
of such Preferred Ship’s Mortgage, irrespective of whether such satisfaction has
been filed with the Coast Guard or whether such Preferred Ship’s Mortgage is a
Permitted Lien, or (3) any other Person has a perfected purchase money security
interest in such Property, irrespective of whether such purchase money security
interest is a Permitted Lien.

     “Borrowing Base Certificate” shall mean a certificate in the form of
Exhibit B to the Fourth Amendment to this Agreement (as the form may be modified
with the consent of the Required Lenders from time to time), in form and detail
satisfactory to the Required Lenders setting forth the calculation of the Borrowing
Base as of the date of such certificate.

     “Commitment Amount” shall mean (a) effective as of the date of the
Fourth Amendment to this Agreement, four hundred twenty-five million dollars
($425,000,000), (b) effective as of the earlier of the date when [****] (but in no
event later than April 30, 2009), four hundred million dollars ($400,000,000), (c)

6

 

[****] — CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

effective as of May 1, 2009, three hundred seventy-five million dollars
($375,000,000), (d) effective as of September 30, 2009, three hundred fifty million
dollars ($350,000,000), and (e) effective as of May 31, 2010, three hundred million
dollars ($300,000,000). All such reductions in the Commitment Amount shall reduce
the Commitments of the Lenders in accordance with their Pro Rata Percentages, as
follows:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Pro Rata	 	Amend No. 4	 	 	 	 	 	 	 	 	 	September 30,	 	 
	Lenders	 	Percentage	 	Date	 	[****]	 	May 1, 2009	 	2009	 	May 31, 2010
	BOA
	 	 	27.0000	%	 	$	114,750,000	 	 	$	108,000,000	 	 	$	101,250,000	 	 	$	94,500,000	 	 	$	81,000,000	 
	KeyBank
	 	 	20.0000	%	 	$	85,000,000	 	 	$	80,000,000	 	 	$	75,000,000	 	 	$	70,000,000	 	 	$	60,000,000	 
	GE Commercial
	 	 	18.0000	%	 	$	76,500,000	 	 	$	72,000,000	 	 	$	67,500,000	 	 	$	63,000,000	 	 	$	54,000,000	 
	Wachovia
	 	 	10.0000	%	 	$	42,500,000	 	 	$	40,000,000	 	 	$	37,500,000	 	 	$	35,000,000	 	 	$	30,000,000	 
	Wells Fargo
	 	 	7.0000	%	 	$	29,750,000	 	 	$	28,000,000	 	 	$	26,250,000	 	 	$	24,500,000	 	 	$	21,000,000	 
	US Bank
	 	 	6.0000	%	 	$	25,500,000	 	 	$	24,000,000	 	 	$	22,500,000	 	 	$	21,000,000	 	 	$	18,000,000	 
	BB&T
	 	 	6.0000	%	 	$	25,500,000	 	 	$	24,000,000	 	 	$	22,500,000	 	 	$	21,000,000	 	 	$	18,000,000	 
	Bank of the West
	 	 	6.0000	%	 	$	25,500,000	 	 	$	24,000,000	 	 	$	22,500,000	 	 	$	21,000,000	 	 	$	18,000,000	 
	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	100.0000	%	 	$	425,000,000	 	 	$	400,000,000	 	 	$	375,000,000	 	 	$	350,000,000	 	 	$	300,000,000	 
	 	 	 

Notwithstanding the foregoing, the Commitment Amount may be increased by virtue of
any exercise of the accordion feature set forth in Section 2.01(a)(2) of the
Agreement as amended by the Fourth Amendment to this Agreement.

     “Default Rate” shall mean the rate of interest or the Letter of Credit
Fees applicable during the continuance of an Event of Default, which (a) until
September 30, 2010, shall be based on a LIBOR Margin and a Letter of Credit Fee of
six hundred twenty-five (625) basis points (i.e. 6.25%), and (b) commencing October
1, 2010, shall be two hundred (200) basis points (i.e. 2%) in excess of the Pricing
Tier V LIBOR Margin and Letter of Credit Fee as shown in Section 2.05.

     “Inspection Increase Event” shall mean either Inspection Increase Event
1 or Inspection Increase Event 2.

     “Inspection Reinstatement Event” shall mean the event that shall have
occurred if (a) at any time after the occurrence of an Inspection Increase Event 2
as reflected on each of the relevant monthly Borrowing Base Certificates submitted
during any period of three consecutive calendar months, the unpaid principal balance
of Advances under this Agreement plus accrued but unpaid interest minus the Pledged
Real Estate Loan Value shall be less than ninety percent (90%) of the portion of the
Borrowing Base consisting of Eligible New Inventory and Eligible Used Inventory, (b)
at any time after the occurrence of an Inspection Increase Event 1 as reflected on
each of the relevant monthly Borrowing Base Certificates submitted during any period
of three consecutive

7

 

calendar months, the unpaid principal balance of Advances under this Agreement
plus accrued but unpaid interest thereon minus the Pledged Real Estate Loan Value
shall be less than eighty percent (80%) of the portion of the Borrowing Base
consisting of Eligible New Inventory and Eligible Used Inventory, and (c) in the
case of either (a) or (b) above, the Required Lenders, in their reasonable
discretion, shall have agreed in writing to cancel a corresponding Inspection
Increase Event.

     “Loan Documents” shall mean this Agreement and all Promissory Notes,
financing statements, Preferred Ship’s Mortgages, LC Documents, Interest Rate Swaps,
certificates, instruments and agreements (a) delivered by any Borrower hereunder,
(b) heretofore delivered by any Borrower pursuant to the Credit and Security
Agreement dated as of December 18, 2001, or (c) heretofore delivered by any Borrower
pursuant to the Amended and Restated Credit and Security Agreement dated as of
February 3, 2005, as heretofore amended, and not expressly superseded by the
documents delivered pursuant to this Agreement, in each case as the same shall be
modified or extended in accordance with its terms.

     “Obligations” shall mean all obligations (monetary or otherwise) of the
Borrowers arising under or in connection with this Agreement, the Promissory Notes,
the Letters of Credit, any Interest Rate Swap with any Lender or group of Lenders,
and each other Loan Document.

     “Permitted Liens” shall mean:

     (a) Liens securing payment of the Obligations, granted pursuant to any Loan
Document;

     (b) the existing Liens identified in Exhibit D, to the extent that they secure
the indebtedness (and only the indebtedness) identified in such Exhibit;

     (c) Liens effected by or relating to Approved Vendor Financings, Capital Leases
and other Debt permitted under Section 6.02(c) and (d) hereof, to the extent such
Liens encumber only the Property of the Borrowers leased thereunder or acquired with
the proceeds thereof;

     (d) Liens on Seller Collateral securing Seller Notes;

     (e) Liens for taxes, assessments or other governmental charges or levies not at
the time delinquent or thereafter payable without penalty or being diligently
contested in good faith by appropriate proceedings and for which adequate reserves
in accordance with GAAP shall have been set aside on the Borrowers’ books;

     (f) Liens of carriers, warehousemen, mechanics, materialmen, and landlords
incurred in the ordinary course of business for sums not materially overdue or being
diligently contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set

8

 

aside on the Borrowers’ books; provided, however, that Liens of landlords are
permitted only to the extent that (1) the same are subordinate to the Collateral
Agent’s Lien on the Collateral for the benefit of the Lenders, or (2) the Required
Lenders shall have agreed in writing to waive subordination of such landlord’s Lien
to the Collateral Agent’s Lien on the Collateral for the benefit of the Lenders;

     (g) Liens incurred in the ordinary course of business in connection with
workers’ compensation, unemployment insurance or other forms of governmental
insurance or benefits or to secure performance of tenders, statutory obligations,
leases and contracts (other than for borrowed money) entered into in the ordinary
course of business or to secure obligations on surety or appeal bonds;

     (h) judgment Liens in existence less than thirty (30) days after the entry
thereof or with respect to which execution has been stayed or the payment of which
is covered in full (subject to the applicable deductible) by insurance maintained
with responsible insurance companies;

     (i) solely with respect to the Pledged Real Estate Collateral, such minor
imperfections in title and other encumbrances as shall be shown as exceptions
acceptable to the Collateral Agent on the Title Policy for such Pledged Real Estate
Collateral;

     (j) solely with respect to the Additional Real Estate Collateral, (1) such
minor imperfections in title and other encumbrances as shall be shown as exceptions
acceptable to the Collateral Agent on the Title Commitment for such Additional Real
Estate Collateral, and (2) any Lien securing financing of Additional Real Estate
Collateral in connection with a transaction complying in all respects with Section
4.08(g) of this Agreement;

     (k) with respect to Real Property Interests other than Pledged Real Estate
Collateral and Additional Real Estate Collateral, Liens on Real Property Interests
not created at the time when there is any Event of Default under this Agreement;

     (l) Liens inferior to the Lien of the Collateral Agent (for the benefit of the
Lenders) granted to parties providing financial derivative products to the Borrowers
(e.g., interest rate swaps or foreign exchange forward contracts); and

     (m) any other Lien which all of the Lenders may approve in their reasonable
discretion.

     “Pricing Tier” shall mean the agreed pricing tiers for the calculation
of LIBOR Margin and Undrawn Commitment Fees which are based on the EBITDA/Interest
Coverage Ratio applicable to the Borrowers for the preceding fiscal quarter, with
such pricing tier to be applicable from the first day of the calendar month
following the public release of the Borrowers’ financial reports for the immediately
preceding fiscal quarter through the last day of the calendar

9

 

month during which the Borrowers shall publicly release their financial reports
for the immediately succeeding fiscal quarter, as follows:

	 	 	 
	Pricing Tier	 	EBITDA/Interest Coverage Ratio
	 
|
	Tier I
	 	 > = 3.50
	Tier II
	 	> = 3.00, but < 3.50
	Tier III
	 	> = 2.25, but < 3.00
	Tier IV
	 	> = 1.25, but < 2.25
	Tier V
	 	> = 1.00, but< 1.25

     By way of example and not limitation, (a) if the Borrowers publicly release
their financial reports for the fiscal quarter ended March 31 on April 25 and
publicly release their financial reports for the fiscal quarter ended June 30 on
August 5, then from May 1 until August 31 the Pricing Tier in effect shall be the
Pricing Tier determined in accordance with the financial reports released on April
25, and (b) if the EBITDA/Interest Coverage Ratio for the fiscal quarter ended
March 31 is greater than or equal to 3.00 but less than 3.50, then during the period
specified in (a) above the Borrowers would be in Pricing Tier II. If for any
reason the Borrowers fail to provide the financial statements necessary to calculate
the EBITDA/Interest Coverage Ratio within thirty (30) days after written notice from
the Administrative Agent, the Default Rate shall apply retroactively from the date
when such necessary financial statements originally were due (without reference to
such written notice from the Administrative Agent or such thirty-day period) until
such necessary financial statements are provided by Borrowers.

     “Required Lenders” shall mean, at any time, any Lenders holding at
least sixty-six and two thirds percent (66-2/3%) of the sum of the Commitments, or
if the Commitments have been terminated, the then aggregate outstanding principal
amount of the Advances and shall also represent a majority of the number of Lenders;
provided, however, that “Required Lenders” shall be one hundred percent
(100%) of the Lenders with respect to any action taken or proposed to be taken by
the Lenders: (a) to increase the Commitment of the Lenders or the Commitment Amount;
(b) to reduce or waive payment of any principal, interest, or fees payable to the
Lenders (it being agreed, however, that the Administrative Agent or the Collateral
Agent, as applicable, without the consent of any other Lender, may reduce or waive
fees payable to the Administrative Agent or the Collateral Agent, as applicable);
(c) to modify or waive compliance with any of the Borrowers’ financial covenants, or
to change the manner in which such financial covenants are calculated; (d) to make
any material extension of scheduled maturities or times for payment; (e) to
establish or revise any Availability Reserve, to make changes in the Borrowing Base,
to increase advance rates with respect to the Borrowing Base or to make changes in
the types of Collateral eligible for inclusion in the Borrowing Base; (f) to release
any Collateral or any Borrower, other than as specifically required by the terms of
the

10

 

Loan Documents; (g) to sell, transfer, encumber, or release any assets needing
the consent of the Required Lenders under Section 6.07; (h) to change the structure
of the financing contemplated by this Agreement; (i) to change the definition of
“Required Lenders”; or (j) to change the composition of the Lenders in a manner
which would dilute the voting rights of any Lender, except as otherwise provided in
Article IX of this Agreement.

     “Termination Date” shall mean May 31, 2011; provided, however,
that upon the Company’s request such date may be extended for two successive periods
of one year each with the prior written consent of all of the Lenders for each such
annual extension.

     “Used Inventory” shall mean Inventory of the Borrowers that has been
(a) previously sold at retail, (b) registered or titled in any state or
jurisdiction, or registered as a Documented Vessel, or (c) purchased or acquired by
the Borrowers from a source other than the manufacturer.

          (c) Deleted Definitions. The definitions of “Fixed Charges Coverage Ratio,”
“Maintenance Capital Expenditures” (which is used solely within the definition of “Fixed
Charges Coverage Ratio”), “Total Funded Debt,” and “Funded Debt Ratio” are hereby
deleted from the Agreement.

     3. Changes to Section 2.01(a) Relating to the Revolving Loans and Letters of Credit.
Section 2.01(a) is hereby revised to read in its entirety as follows:

     2.01 Advances.

          (a)
Commitment for Revolving Credit. The Lenders severally agree, subject to the
terms and conditions set forth herein, to make Advances to the Borrowers in respect of the
Commitment from time to time until the Termination Date. The following rules shall govern
the amount of the Advances:

               (1) The aggregate outstanding amount of such Advances may equal but shall never
exceed the lesser of (A) the Commitment Amount, and (B) the Borrowing Base. For
purpose of this test, any Letter of Credit outstanding under paragraph (3) below
shall be deemed an Advance.

               (2) Borrowers and Lenders agree to add an accordion feature to the Commitment.
Consequently, if (A) no Default or Event of Default exists or would result
therefrom, (B) Borrowers obtain commitments from Lenders and/or other persons who
would qualify as assignees for such increased amounts, (C) any new Lender suggested
by Borrowers is approved by the Required Lenders, and (D) appropriate definitive
loan documentation is executed and delivered by the parties, at Borrowers’ election
the aggregate maximum principal amount of the Commitments may be increased from time
to time after the Effective Date, provided, however, that (i) the aggregate amount
of the Commitment Amount does not exceed five hundred million dollars
($500,000,000), (ii) each such increase shall be in a minimum amount of thirty
million dollars ($30,000,000),

11

 

and with each new Lender to have a minimum commitment of at least eighteen
million dollars ($18,000,000), and (iii) Borrowers shall first offer to the existing
Lenders the right to commit to the increased amount, but no existing Lender shall be
required to commit to any such increased amount. No such increase shall increase
any sub-limit set forth in this Agreement, and no Lender shall be obligated to
participate in any such increase.

               (3) There is hereby established a sub-limit for Letters of Credit in the
aggregate amount not exceeding the LC Commitment of seven million dollars
($7,000,0000). The issuance of any Letter of Credit pursuant to the LC Commitment
shall be subject to the further terms specified in Section 2.13 of this Agreement.
In connection with any outstanding Letter of Credit, Borrowers will accrue an annual
letter of credit fee (the “Letter of Credit Fee”) equal to the higher of (A) five
hundred dollars ($500), or (B) the amount determined in accordance with Section 2.05
of this Agreement on an Advance equal to the maximum amount available to be drawn
under such Letter of Credit. The minimum Letter of Credit Fee for any Letter of
Credit (irrespective of the amount or duration of such Letter of Credit) shall be
five hundred dollars ($500). The accrued Letter of Credit Fee for each Letter of
Credit shall be payable quarterly in arrears, commencing on the effective date of
the Letter of Credit. In addition to the Letter of Credit Fee, at the time of
issuance of each Letter of Credit Borrowers and the Issuing Bank shall negotiate an
issuance fee for such Letter of Credit to be paid at the time of issuance and to be
retained by the Issuing Bank.

               (4) No Lender shall be permitted or required to make any Advance in respect of
the Commitment if, after giving effect thereto, the principal amount of such
Lender’s total outstanding Advances would exceed such Lender’s Pro Rata Percentage
of the Commitment Amount.

Because the Commitment creates a revolving credit facility, the Borrowers may borrow under the
Commitment, repay such Advances without premium or penalty, and reborrow prior to the Termination
Date in accordance with this Agreement.

     4. Changes to Section 2.05 Relating to the Loan Rate and Letter of Credit Fee. Section
2.05 of the Agreement is hereby amended to read in its entirety as follows:

          2.05. Interest on Advances; Letter of Credit Fees.

               (a) All Advances shall bear interest at the applicable Loan Rate in effect from
time to time, with the Loan Rate to be determined based upon the LIBOR Margin
applicable at the date of determination.

               (b) From the date of the Fourth Amendment to this Agreement until the first day
of the calendar month following the public release of the Borrowers’ financial
reports for the fiscal year ending September 30, 2010, the Loan Rate will be the sum
of (1) the LIBOR, and (2) an agreed LIBOR Margin of 4.25%, and the applicable Letter
of Credit Fee shall be 4.25%. Commencing

12

 

October 1, 2010, the Loan Rate applicable at any time shall equal the sum of
(A) the LIBOR, and (B) the LIBOR Margin determined on the basis of the Borrowers’
Pricing Tier. During the periods referred to in the preceding sentence, the
applicable LIBOR Margin and Letter of Credit Fee for each Pricing Tier shall be as
follows:

	 	 	 	 	 
	Borrowers’ Pricing Tier	 	LIBOR Margin and Letter of Credit Fee
	Pricing Tier I
	 	 	1.50	%
	Pricing Tier II
	 	 	1.75	%
	Pricing Tier III
	 	 	2.25	%
	Pricing Tier IV
	 	 	3.00	%
	Pricing Tier V
	 	 	4.00	%

               (c) Interest will be calculated on a simple interest basis for a year of three
hundred sixty (360) days, based on actual days elapsed.

               (d) Notwithstanding any other provisions of this Section, during the
continuance of any Event of Default the Borrowers shall pay interest at the Default
Rate on (1) the unpaid principal balance of the Advances, and (2) to the fullest
extent permitted by Law, any interest, fee, or other amount payable hereunder that
is not paid when due. In addition, during any such period the Letter of Credit Fee
on any outstanding Letter of Credit shall be increased to the Default Rate.

     5. Change to Section 2.08 Relating to Undrawn Commitment Fee. Section 2.08 of the
Agreement is hereby amended to read in its entirety as follows:

          2.08 Undrawn Commitment Fee. Effective as of the date of the Fourth
Amendment to this Agreement, the Borrowers shall pay to the Administrative Agent for
the account of the Lenders an Undrawn Commitment Fee calculated as follows:

               (a) The Undrawn Commitment Fee shall be payable on the amount by which the
Commitment Amount shall exceed the average principal amount of Advances outstanding
(including LC Exposure) under the Commitment during such calendar month.

               (b) From the date of the Fourth Amendment to this Agreement until the first day
of the calendar month following the public release of the Borrowers’ financial
reports for the fiscal year ending September 30, 2010, the Undrawn Commitment Fee
will be 0.25%. Commencing with the first day of the calendar month following the
public release of the Borrowers’ financial reports for the fiscal year ending
September 30, 2010, the Undrawn Commitment Fee will be determined on the basis of
the Borrowers’ Pricing Tier, as follows.

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	Borrowers’ Pricing Tier	 	Undrawn Commitment Fee
	Pricing Tier I
	 	 	0.15	%
	Pricing Tier II
	 	 	0.20	%
	Pricing Tier III
	 	 	0.25	%
	Pricing Tier IV
	 	 	0.25	%
	Pricing Tier V
	 	 	0.35	%

               (c) The Undrawn Commitment Fee shall be calculated on a monthly basis but shall
be payable quarterly in arrears on the Interest Payment Dates in February, May,
August, and November.

     6. Addition of New Section 2.13 Relating to Letters of Credit. A new Section 2.13 is
hereby added to the Agreement, reading in its entirety as follows:

          2.13. Procedures Relating to Letters of Credit. The rules governing
the issuance of Letters of Credit shall be as follows:

               (a) Between the date of the Fourth Amendment to this Agreement and the date
that is one year prior to the Termination Date, the Issuing Bank, in reliance upon
the agreements of the other Lenders pursuant to this Section 2.13(d), agrees to
issue, at the request of the Borrowers, Letters of Credit for the account of the
Borrowers on the terms and conditions hereinafter set forth; provided, that (i) each
Letter of Credit shall expire on the earlier of (A) the date one year after the date
of issuance of such Letter of Credit (or in the case of any renewal or extension
thereof, one year after such renewal or extension) and (B) the date that is five (5)
Business Days prior to the Termination Date, (ii) each Letter of Credit shall be in
a stated amount of at least $100,000; and (iii) the Borrowers may not request any
Letter of Credit, if, after giving effect to such issuance (A) the aggregate LC
Exposure would exceed the LC Commitment, or (B) the aggregate LC Exposure plus the
amount of other outstanding Advances would exceed the Commitment Amount. Upon the
issuance of each Letter of Credit each Lender shall be deemed to, and hereby
irrevocably and unconditionally agrees to, purchase from the Issuing Bank without
recourse a participation in such Letter of Credit equal to such Lender’s Pro Rata
Percentage of the aggregate amount available to be drawn under such Letter of
Credit. Each issuance of a Letter of Credit shall be deemed to utilize the
Commitment of each Lender by an amount equal to the amount of such participation.
If at any time prior to the Termination Date this Agreement should be terminated by
virtue of the Borrowers’ refinancing the indebtedness contemplated hereby, the
Borrowers’ shall arrange to replace and secure the return of each of the outstanding
Letters of Credit prior to the termination of this Agreement.

               (b) To request the issuance of a Letter of Credit (or any amendment, renewal or
extension of an outstanding Letter of Credit), the Borrowers shall give the Issuing
Bank and the Administrative Agent irrevocable written notice at least five (5)
Business Days prior to the requested date of such issuance specifying the date
(which shall be a Business Day) such Letter of Credit

14

 

is to be issued (or amended, extended or renewed, as the case may be), the
expiration date of such Letter of Credit, the amount of such Letter of Credit , the
name and address of the beneficiary thereof and such other information as shall be
necessary to prepare, amend, renew or extend such Letter of Credit. In addition to
the satisfaction of the conditions in Section 2.02, the issuance of such Letter of
Credit (or any amendment which increases the amount of such Letter of Credit) will
be subject to the further conditions that such Letter of Credit shall be in such
form and contain such terms as the Issuing Bank shall approve and that the Borrowers
shall have executed and delivered any additional applications, agreements and
instruments relating to such Letter of Credit as the Issuing Bank shall reasonably
require; provided, however, that in the event of any conflict between such
applications, agreements or instruments and this Agreement, the terms of this
Agreement shall control.

               (c) At least two (2) Business Days prior to the issuance of any Letter of
Credit, the Issuing Bank will confirm with the Administrative Agent (by telephone or
in writing) that the Administrative Agent has received such notice and if not, the
Issuing Bank will provide the Administrative Agent with a copy thereof. Unless the
Issuing Bank has received notice from the Administrative Agent on or before the
Business Day immediately preceding the date the Issuing Bank is to issue the
requested Letter of Credit (1) directing the Issuing Bank not to issue the Letter of
Credit because such issuance is not then permitted hereunder because of the
limitations set forth in Section 2.13(a), or (2) that one or more conditions
specified in Section 2.02 are not then satisfied, then, subject to the terms and
conditions hereof, the Issuing Bank shall, on the requested date, issue such Letter
of Credit in accordance with the Issuing Bank’s usual and customary business
practices.

               (d) The Issuing Bank shall examine all documents purporting to represent a
demand for payment under a Letter of Credit promptly following its receipt thereof.
The Issuing Bank shall notify the Borrowers and the Administrative Agent of such
demand for payment and whether the Issuing Bank has made or will make a LC
Disbursement thereunder; provided, however, that any failure to give or
delay in giving such notice shall not relieve the Borrowers of their obligation to
reimburse the Issuing Bank and the Lenders with respect to such LC Disbursement. The
Borrowers shall be irrevocably and unconditionally obligated to reimburse the
Issuing Bank for any LC Disbursements paid by the Issuing Bank in respect of such
drawing, without presentment, demand or other formalities of any kind. Unless the
Borrowers shall have notified the Issuing Bank and the Administrative Agent prior to
11:00 a.m. (Atlanta, Georgia time) on the Business Day immediately prior to the date
on which such drawing is honored that the Borrowers intend to reimburse the Issuing
Bank for the amount of such drawing in funds other than from the proceeds of
Advances, the Borrowers shall be deemed to have timely given an Advance Request to
the Administrative Agent requesting the Lenders to make an Advance Request on the
date on which such drawing is honored in an exact amount due to the Issuing Bank.
The Administrative Agent shall notify the Lenders of such Advance, and each Lender

15

 

shall make the proceeds of its portion of the Advance available to the
Administrative Agent for the account of the Issuing Bank. The proceeds of such
Borrowing shall be applied directly by the Administrative Agent to reimburse the
Issuing Bank for such LC Disbursement.

               (e) If for any reason an Advance may not be (as determined in the sole
discretion of the Administrative Agent), or is not, made in accordance with the
foregoing provisions, then each Lender (other than the Issuing Bank) shall be
obligated to fund the participation that such Lender purchased pursuant to
Subsection 2.13(a) in an amount equal to its Pro Rata Percentage of such LC
Disbursement on and as of the date which such Advance should have occurred. Each
Lender’s obligation to fund its participation shall be absolute and unconditional
and shall not be affected by any circumstance, including without limitation (i) any
setoff, counterclaim, recoupment, defense or other right that such Lender or any
other Person may have against the Issuing Bank or any other Person for any reason
whatsoever, (ii) the existence of a Default or an Event of Default or the
termination of the Commitment, (iii) any adverse change in the condition (financial
or otherwise) of the Borrowers, (iv) any breach of this Agreement by the Borrowers
or any other Lender, (v) any amendment, renewal or extension of any Letter of Credit
or (vi) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing. On the date that such participation is required to
be funded, each Lender shall promptly transfer, in immediately available funds, the
amount of its participation to the Administrative Agent for the account of the
Issuing Bank. Whenever, at any time after the Issuing Bank has received from any
such Lender the funds for its participation in a LC Disbursement, the Issuing Bank
(or the Administrative Agent on its behalf) receives any payment on account thereof,
the Administrative Agent or the Issuing Bank, as the case may be, will distribute to
such Lender its Pro Rata Percentage of such payment; provided, however, that
if such payment is required to be returned for any reason to the Borrowers or to a
trustee, receiver, liquidator, custodian or similar official in any bankruptcy
proceeding, such Lender will return to the Administrative Agent or the Issuing Bank
any portion thereof previously distributed by the Administrative Agent or the
Issuing Bank to it.

               (f) To the extent that any Lender shall fail to pay any amount required to be
paid pursuant to paragraph (e) of this Section 2.13 on the due date therefor, such
Lender shall pay interest to the Issuing Bank (through the Administrative Agent) on
such amount from such due date to the date such payment is made at a rate per annum
equal to the Default Rate.

               (g) Promptly following the end of each fiscal quarter of the Borrowers, the
Issuing Bank shall deliver (through the Administrative Agent) to each Lender and the
Borrowers a report describing the aggregate Letters of Credit outstanding at the end
of such fiscal quarter. Upon the request of any Lender from time to time, the
Issuing Bank shall deliver to such Lender any other information reasonably requested
by such Lender with respect to each Letter of Credit then outstanding.

16

 

               (h) The Borrower’s obligation to reimburse LC Disbursements hereunder shall be
absolute, unconditional and irrevocable and shall be performed strictly in
accordance with the terms of this Agreement under all circumstances whatsoever and
irrespective of any of the following circumstances:

                    (i) Any lack of validity or enforceability of any Letter of Credit or this
Agreement;

                    (ii) The existence of any claim, set-off, defense or other right which the
Borrowers may have at any time against a beneficiary or any transferee of any Letter
of Credit (or any Persons or entities for whom any such beneficiary or transferee
may be acting), any Lender (including the Issuing Bank) or any other Person, whether
in connection with this Agreement or the Letter of Credit or any document related
hereto or thereto or any unrelated transaction;

                    (iii) Any draft or other document presented under a Letter of Credit proving to
be forged, fraudulent or invalid in any respect or any statement therein being
untrue or inaccurate in any respect;

                    (iv) Payment by the Issuing Bank under a Letter of Credit against presentation
of a draft or other document to the Issuing Bank that does not comply with the terms
of such Letter of Credit;

                    (v) Any other event or circumstance whatsoever, whether or not similar to any
of the foregoing, that might, but for the provisions of this Section, constitute a
legal or equitable discharge of, or provide a right of setoff against, the
Borrowers’ obligations hereunder; or

                    (vi) The existence of a Default or an Event of Default.

Neither the Administrative Agent, the Issuing Bank, the Lenders nor any Related
Party of any of the foregoing shall have any liability or responsibility by reason
of or in connection with the issuance or transfer of any Letter of Credit or any
payment or failure to make any payment thereunder (irrespective of any of the
circumstances referred to above), or any error, omission, interruption, loss or
delay in transmission or delivery of any draft, notice or other communication under
or relating to any Letter of Credit (including any document required to make a
drawing thereunder), any error in interpretation of technical terms or any
consequence arising from causes beyond the control of the Issuing Bank;
provided, however, that the foregoing shall not be construed to excuse the
Issuing Bank from liability to the Borrowers to the extent of any actual direct
damages (as opposed to special, indirect (including claims for lost profits or other
consequential damages), or punitive damages, claims in respect of which are hereby
waived by the Borrowers to the extent permitted by applicable law) suffered by the
Borrowers that are caused by the Issuing Bank’s failure to exercise care when
determining whether drafts or other documents presented under a Letter of Credit
comply with the terms thereof. The parties hereto

17

 

expressly agree, that in the absence of gross negligence or willful misconduct on
the part of the Issuing Bank (as finally determined by a court of competent
jurisdiction), the Issuing Bank shall be deemed to have exercised care in each such
determination. In furtherance of the foregoing and without limiting the generality
thereof, the parties agree that, with respect to documents presented that appear on
their face to be in substantial compliance with the terms of a Letter of Credit, the
Issuing Bank may, in its sole discretion, either accept and make payment upon such
documents without responsibility for further investigation, regardless of any notice
or information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.

     (i) Each Letter of Credit shall be subject to the Uniform Customs and Practices
for Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, as the same may be amended from time to time, and, to the
extent not inconsistent therewith, the laws of the State of Georgia governing this
Agreement.

     7. Change to Section 4.01. Section 4.01 of the Agreement is hereby amended to read in
its entirety as follows:

     4.01. Security Interests in Collateral. As security for the
Obligations, the Borrowers hereby grant to the Collateral Agent for the benefit of
the Lenders a continuing security interest in and Lien on all of the Borrowers’
Accounts, Chattel Paper, Inventory, Equipment, General Intangibles, Investment
Property, Instruments, Deposit Accounts, Documents, Pledged Real Estate Collateral,
and Additional Real Estate Collateral, in each case whether now owned or existing or
hereafter acquired or arising, wherever located, all insurance policies, insurance
proceeds, books and records relating to the foregoing, and all cash and non-cash
proceeds and products thereof, all exclusive of the Excluded Property (collectively,
the “Collateral”). Notwithstanding the foregoing, the security interest and Lien
granted hereby with respect to any Obligation consisting of an Interest Rate Swap
shall be junior, subordinate, and inferior to the security interest and Lien granted
hereby for every other Obligation.

     8. Changes to Section 4.02. Section 4.02 of the Agreement is hereby amended to read in
its entirety as follows:

     4.02. Excluded Property. The Collateral shall not include, however,
any of the following property of the Borrowers (collectively, the “Excluded
Property”):

          (a) any Accounts, Chattel Paper, General Intangibles, Investment Property, or
Instruments that by its terms can not be assigned or transferred by a Borrower or
can be assigned or transferred only with the consent of another Person and such
consent has not been obtained;

18

 

          (b) all ownership interests in Subsidiaries, including any Investment Property,
membership interest, or partnership interests evidencing such ownership interests in
Subsidiaries, all Rights with respect to such ownership interests, and all Rights in
Subsidiaries; and

          (c) Property of customers, including boats, motors and, trailers, in Borrowers’
possession (1) for repair, or (2) on consignment for sale, but only to the extent
that the same are not included (as Eligible Used Inventory or otherwise) in the
Borrowing Base, it being specifically agreed that such Property is not to be
included in the Borrowing Base.

     9. Addition of New Sections 4.07, 4.08, and 409. New Sections 4.07, 4.08, and 4.09 are
hereby added to the Agreement, reading in their entirety as follows:

     4.07 Concerning the Pledged Real Estate Collateral. Subject to the
terms of this Agreement including this Section 4.07, the Borrowers will be able to
obtain or retain in respect of the Commitment a maximum of twenty million dollars
($20,000,000) of Advances secured by first priority mortgages, in form and substance
acceptable to the Lenders and subject only to Permitted Liens (“Mortgages”), on the
Pledged Real Estate Collateral and the Additional Real Estate Collateral. The
Mortgages shall run in favor of the Collateral Agent for the benefit of the
Lenders. The actual amount at any time advanced under this Section 4.07 in respect
of the Pledged Real Estate Collateral shall never exceed the then applicable Pledged
Real Estate Loan Value. Advances under this Section 4.07 will be subject to the
following terms and conditions:

          (a) Irrespective of the amount advanced by the Lenders under this Section 4.07,
the Mortgages shall encumber for a total of one hundred million dollars
($100,000,000) plus interest and costs and expenses of collection (including
reasonable attorneys’ and paralegals’ fees incurred in negotiations, in lower
courts, and in appellate, administrative, and bankruptcy proceedings) (1) all of the
Pledged Real Estate Collateral, and (2) all of the Additional Real Estate
Collateral. In order to limit the documentary stamps, non-recurring intangible
taxes, and similar costs payable on particular parcels of Pledged Real Estate
Collateral or Additional Real Estate Collateral, the Collateral Agent may agree to
limit the recovery under the Mortgages for such parcels.

          (b) As a condition to including in the Borrowing Base any individual parcel of
Pledged Real Estate Collateral, the Borrowers will be required to provide the
Collateral Agent for the benefit of Lenders with an MAI appraisal of such property
satisfactory to the Collateral Agent in all respects. Without limiting the
generality of the foregoing, such MAI appraisal would be required to show that the
individual property has a fair market value of at least twice the amount included in
the Borrowing Base in respect of such individual property. MAI appraisals will be
ordered by the Collateral Agent at the expense of the Borrowers.

19

 

          (c) As a condition to including in the Borrowing Base any individual parcel of
Pledged Real Estate Collateral with a value of one million dollars ($1,000,000) or
more, the Borrowers will be required to provide the Collateral Agent for the benefit
of Lenders with a Phase I Environmental Site Assessment (“ESA”) of such
property showing that such property is free from risk, in the Collateral Agent’s
sole judgment, from all hazardous substances, toxic substances or hazardous waste,
as defined by any federal, state or local law or regulation, and free from all other
contamination, which even if not so regulated, is known to pose a health hazard to
any person.

          (d) As a condition to including in the Borrowing Base any individual parcel of
Pledged Real Estate Collateral with a value of less than one million dollars
($1,000,000), Borrower shall complete an Environmental Questionnaire provided by the
Collateral Agent; the Lenders will check (at the Borrowers’ expense) the
Environmental Data Resource (“EDR”) environmental Loan Check database unless
the Required Lenders otherwise require with respect to any particular property or
properties. Any such EDR Loan Check must show, consistent with the limitations of
the medium, that such property is free from risk, in the Collateral Agent’s sole
judgment, from all hazardous substances, toxic substances or hazardous waste, as
defined by any federal, state or local law or regulation, and free from all other
contamination, which even if not so regulated, is known to pose a health hazard to
any person. Irrespective of the value of the property Borrowers will in any event
provide to Lenders within fifteen (15) days following the Effective Date of the
Fourth Amendment to this Agreement copies of any ESAs they may have with respect to
any of the Pledged Real Estate.

          (e) As a condition to including in the Borrowing Base any individual parcel of
Pledged Real Estate Collateral located in a flood zone, Borrowers must obtain at
their expense federal flood insurance on such property on terms satisfactory to the
Collateral Agent.

          (f) As a condition to including in the Borrowing Base any individual parcel of
Pledged Real Estate Collateral, the Collateral Agent shall receive at the Borrowers’
expense an acceptable Title Policy in favor of the Collateral Agent showing that the
Mortgage on such property is a first mortgage subject to no encumbrances other than
Permitted Liens. In addition, the Title Policy shall show that all real estate
taxes and other governmental charges which are due in respect of such property shall
have been paid current. Except for an exception for taxes for the current year
which are not due and payable, all ALTA standard exceptions (i.e. defects first
appearing between the date of the commitment and the date of the mortgage, taxes,
matters that would be disclosed by an accurate survey, rights or claims of parties
in possession not shown by the pubic records, easements or claims of easements not
shown by the public records, and liens for services labor or material imposed by law
and not shown by the public records) shall be deleted from the Title Policy. Each
Title Policy shall contain such endorsements as may be required by Lenders.
Surveys will be provided as necessary to obtain such exception-free Title Policy.
The cost of the

20

 

Title Policy will be charged to the Borrowers at settlement, and the closing
agent will be selected by Collateral Agent.

          (g) As a condition to including in the Borrowing Base any parcel of Pledged
Real Estate Collateral, Borrowers shall provide the Collateral Agent with evidence
of property, casualty, and liability insurance coverage (i) insuring such Pledged
Real Estate Collateral against fire and other casualty for its full insurable value
(net of a deductible not to exceed 5% of the insurable value of any individual
insured property) and naming the Collateral Agent as loss payee, and (ii) insuring
the Borrowers and the Collateral Agent (as an additional insured) from premises
liability related to such Pledged Real Estate Collateral (net of a deductible
approved by the Collateral Agent). All of such insurance shall be provided by
insurers and on terms satisfactory to the Collateral Agent. The Mortgages for the
Pledged Real Estate Collateral will require the Borrowers to continue to maintain
such insurance for so long as the Mortgages have not been satisfied.

          (h) Borrowers will be responsible for all costs associated with the Pledged
Real Estate Collateral, including appraisals, evaluations, environmental site
assessments, EDR Loan Check, title insurance, flood insurance premiums, insurance
premiums, surveys, documentary stamps, non-recurring intangible taxes, recording
charges, and other costs.

          (i) Recording of the Mortgages on the Pledged Real Estate Collateral will take
place within ninety (90) days following the Effective Date of the Fourth Amendment
to this Agreement. No collateral value for the Pledged Real Estate shall be
included in the Borrowing Base until all of the foregoing documentation has been
completed to the satisfaction of the Collateral Agent

     4.08 Additional Real Estate Collateral. In addition to the Pledged
Real Estate Collateral, the Borrowers will provide the Collateral Agent with a first
priority Mortgage on all of the Additional Real Estate Collateral. The Mortgages
shall encumber for a total of one hundred million dollars ($100,000,000) plus
interest and costs and expenses of collection (including reasonable attorneys’ and
paralegals’ fees incurred in negotiations, in lower courts, and in appellate,
administrative, and bankruptcy proceedings) (1) all of the Pledged Real Estate
Collateral, and (2) all of the Additional Real Estate Collateral. In order to
limit the documentary stamps, non-recurring intangible taxes, and similar costs
payable on particular parcels of Pledged Real Estate Collateral or Additional Real
Estate Collateral, the Collateral Agent may agree to limit the recovery under the
Mortgages for such parcels. The following additional terms shall apply to the
Additional Real Estate Collateral:

     (a) Borrowers will receive no credit to the Borrowing Base as a consequence of
the Mortgages on the Additional Real Estate Collateral.

21

 

     (b) MAI appraisals will not be required on Additional Real Estate Collateral.

     (c) ESAs normally will not be required on Additional Real Estate Collateral.
Borrowers will in any event provide to Collateral Agent for the benefit of Lenders
copies of any ESAs they may have with respect to any of the Additional Real Estate
Collateral for additional action as directed by Collateral Agent. Collateral Agent
for the benefit of Lenders may perform EDR Loan Checks with respect to Additional
Real Estate Collateral.

     (d) Borrowers shall provide to Collateral Agent for the benefit of Lenders in
respect of each parcel of Additional Real Estate Collateral (i) a Title Commitment,
except that (A) no survey shall be required except at the direction of the
Collateral Agent, and (B) no policy shall be issued in respect of such title
insurance commitment, and (ii) within fifteen (15) days following the Effective Date
of the Fourth Amendment to this Agreement, copies of any existing title insurance
policies and surveys with respect to such property that the Borrowers have in their
possession.

     (e) Borrowers shall purchase at their own expense federal flood insurance for
any parcel of Additional Real Estate Collateral located in a flood zone.

     (f) Recording of Mortgages for Additional Real Estate Collateral will occur
within sixty (60) days after the Effective Date of the Fourth Amendment to this
Agreement.

     (g) With the consent of all of the Lenders, Borrowers may sell to an
unaffiliated party or finance with an unaffiliated party any Additional Real Estate
Collateral as long as the entire net proceeds of such sale or financing are used to
pay down the Advances. In connection with any such sale or financing approved by
all of the Lenders, the Collateral Agent shall be authorized to execute any
documents releasing the affected Additional Real Estate Collateral for purposes of
closing the transaction.

     (h) Borrowers will be responsible for all costs associated with the Additional
Real Estate Collateral, including appraisals (if any), evaluations, EDR Loan Check,
Title Commitments (but not Title Policies), flood insurance premiums, surveys (if
any), documentary stamps, non-recurring intangible taxes, recording charges, and
other costs.

     4.09. Negative Pledge as to Gulfport Property. Borrowers agree that
neither Borrowers nor the entity owning the Gulfport Property shall encumber such
property or the Borrowers’ interest therein (including any Borrowers’ interest in
the related entity) for so long as this Agreement has not been satisfied in full.

22

 

     7. Changes to Section 6.01 Relating to Financial Covenants. Section 6.01 of the
Agreement relating to financial covenants is hereby amended to read in its entirety as follows:

     6.01. Financial Covenants.

          (a) The Borrowers shall maintain, on a consolidated basis, a Current Ratio of
at least: (1) 1.25 to 1 for the calendar months ending May 31, June 30, July 31,
August 31, September 30, and October 31 of each year, and (2) 1.20 to 1 for the
calendar months ending November 30, December 31, January 31, February 28 or 29, as
applicable, March 31, and April 30 of each year.

          (b) The Borrowers shall maintain, on a consolidated basis, a Leverage Ratio of
not more than (1) 4.00 to 1 for the calendar months ending May 31, June 30, July 31,
August 31, September 30, and October 31 of each year, and (2) 5.0 to 1 for the
calendar months ending November 30, December 31, January 31, February 28 or 29, as
applicable, March 31, and April 30 of each year.

          (c) For the four fiscal quarters starting with the fiscal quarter ending
December 31, 2008 and ending with the fiscal quarter ending September 30, 2009, the
cumulative EBITDA of the Borrowers, on a consolidated basis, shall not be less than
(1) for the fiscal quarter ending December 31, 2008, a negative EBITDA of
$15,000,000 (i.e. -$15,000,000), (2) for the fiscal quarter ending March 31, 2009,
a negative EBITDA of $20,000,000 (i.e. -$20,000,000), (3) for the fiscal quarter
ending June 30, 2009, a negative EBITDA of $15,000,000 (i.e. -$15,000,000), and (4)
for the fiscal quarter ending September 30, 2009, a negative EBITDA of $10,000,000
(i.e. -$10,000,000). For the three fiscal quarters starting with the fiscal quarter
ending December 31, 2009 and ending with the fiscal quarter ending June 30, 2010,
the cumulative EBITDA of the Borrowers, on a consolidated basis, shall not be less
than (A) for the fiscal quarter ending December 31, 2009, a negative EBITDA of
$10,000,000 (i.e. -$10,000,000), (B) for the fiscal quarter ending March 31, 2010, a
negative EBITDA of $10,000,000 (i.e. -$10,000,000), and (C) for the fiscal quarter
ending June 30, 2010, a positive EBITDA of $5,000,000.

          (d) Commencing as of September 30, 2010 the Borrowers shall maintain, on a
consolidated basis, an EBITDA/Interest Coverage Ratio as follows:

          (1) For the periods of four fiscal quarters ending on September 30,
2010 and December 31, 2010, a minimum EBITDA/Interest Coverage Ratio of
1.00:1.00; and

          (2) For the period of four fiscal quarters ending on March 31, 2011, a
minimum EBITDA/Interest Coverage Ratio of 1.10:1.00.

The EBITDA/Interest Coverage Ratio will be measured as of the end of each such
fiscal quarter of the Borrowers for a rolling period of four fiscal quarters. The
EBITDA/Interest Coverage Ratio is in lieu of the former minimum “Fixed

23

 

Charges Coverage Ratio,” which has been deleted from this Agreement as of the
Effective Date of the Fourth Amendment to this Agreement.

     8. Changes to Section 6.07 Relating to Disposition of Assets. Section 6.07 of the
Agreement relating to disposition of assets is hereby amended to read in its entirety as follows:

     6.07. Disposition of Assets. No Borrower shall sell, transfer,
encumber or lease any of its assets without the consent of the Required Lenders,
which consent shall not be unreasonably withheld, except the following shall be
allowed without such consent (a) sales or leases of Inventory in the ordinary course
of business, (b) dispositions of obsolete or useless assets, (c) transfers of assets
between Borrowers not violating Section 6.16, (d) dispositions of Retail Paper in
the ordinary course of business, (e) transfers or other dispositions of Additional
Real Estate Collateral in strict compliance with Section 4.08(g), and (f) Permitted
Liens. Upon any sale of Retail Paper by any of the Borrowers in the ordinary course
of business, the Collateral Agent’s Liens in such Retail Paper for the benefit of
the Lenders shall be automatically released, without any further action by the
Lenders or the Collateral Agent.

     9. Changes to Section 6.08 Relating to Mergers, Acquisitions, and Investments.
Section 6.08 of the Agreement relating to mergers, Acquisitions, and Investments is hereby amended
to read in its entirety as follows:

          (a) The Company shall not merge into, or consolidate with any other Person, or
permit any other Person to merge into or consolidate with it, without the Required
Lenders’ prior written consent (which consent shall not be unreasonably withheld),
except for mergers or consolidations of a wholly-owned Subsidiary of Company with or
into Company. The Borrowers shall not make any Investment in excess of one hundred
thousand dollars ($100,000) in the aggregate at any time outstanding in any Person
(other than in the Borrowers), without the Required Lenders’ prior written consent
(which consent shall not be unreasonably withheld).

          (b) The Borrowers shall not consummate or obligate themselves to consummate any
Acquisition without the prior written consent of the Required Lenders. The
Borrowers shall notify the Lenders in writing of any pending Acquisition at least
thirty (30) days prior to consummating or becoming obligated to consummate any
Acquisition. In connection with such notice, the Borrowers shall provide the
Lenders the information necessary to cause the newly acquired company(ies) to become
obligated to the Lenders as additional Borrower(s) under the terms of this Agreement
and the Loan Documents at the closing of such Acquisition by delivering to the
Administrative Agent a Joinder Agreement in the form of Exhibit G to this
Agreement. Such notice shall be accompanied by a certificate of the Company’s chief
financial officer to the effect that, assuming that the Required Lenders approve the
Acquisition, upon closing, as illustrated by applicable pro forma financial
statements, the Borrowers will be in compliance with all terms and conditions of
this Agreement and the Loan

24

 

Documents and such further certifications as the Required Lenders reasonably
may require.

          (c) If any Borrower shall form any new Subsidiary, the Borrowers shall cause
each such new Subsidiary to become obligated as a Borrower under this Agreement by
delivering to the Administrative Agent a Joinder Agreement in the form of
Exhibit G to this Agreement. Such new Borrower shall grant a first priority
security interest in its Property constituting Collateral to the Collateral Agent
for the benefit of the Lenders.

     10. Changes to Section 6.12(c) Relating to Reporting Requirements. Section 6.12(c) of the
Agreement relating to reporting requirements is hereby amended to read in its entirety as follows:

     (1) As soon as available and in any event within thirty (30) days after the end
of each calendar month of January, February, April, May, July, August, October, and
November, a balance sheet and statement of income of Borrowers for such completed
calendar month prepared on a consolidated basis in accordance with GAAP in
reasonable detail, and certified by an officer of Company (in a manner satisfactory
to the Required Lenders) as fairly presenting the financial condition and results of
operations of the Borrowers, together with a Compliance Certificate;

     (2) As soon as available and in any event within thirty (30) days after the end
of each fiscal quarter, a balance sheet and statement of income of Borrowers for
such fiscal quarter and for the portion of the fiscal year ending with such fiscal
quarter, prepared on a consolidated basis in accordance with GAAP in reasonable
detail, and certified by an officer of Company (in a manner satisfactory to the
Required Lenders) as fairly presenting the financial condition and results of
operations of the Borrowers, together with a Compliance Certificate;

     11. Changes to Section 6.13 Relating to Restricted Payments. Section 6.13 of the
Agreement relating to Restricted Payments is hereby amended to read in its entirety as follows:

     6.13 Restricted Payments. Without the prior written consent of the
Required Lenders, the Borrowers shall not declare or pay any dividends or make any
other payments on their capital stock or purchase, redeem, or otherwise retire any
equity securities or any warrant, option, or other right to acquire such equity
securities, or make any other payment or distribution (other than a dividend payable
solely in the Company’s common shares), either direct or indirect, to its
shareholders (whether in respect of stock or in respect of indebtedness)
(“Restricted Payments”) except for:

          (a) payments between the Borrowers, except for any such payment that would be a
violation of Section 6.16 of this Agreement; or

25

 

          (b) payments by any Subsidiary of any dividend or other distribution to the
Company or to another Subsidiary as long as the Company does not distribute to
shareholders any such dividend or other distribution, except as otherwise permitted
by this Section.

     12. Changes to Section 6.14 Relating to Capital Expenditures. Section 6.14 relating to
Capital Expenditures is hereby amended to read in its entirety as follows:

     6.14. Limitations on Capital Expenditures. The Borrowers shall not
without the prior written consent of the Required Lenders, which consent shall not
be unreasonably withheld, make:

          (a) capital expenditures for leasehold improvements of more than four million
five hundred thousand dollars ($4,500,000) in any year; and

          (b) other capital expenditures exceeding five million dollars ($5,000,000) per
year, exclusive of monies spent on acquiring assets as part of an acquisition that
has been approved by the Lenders.

     13. Changes to Section 7.01(c) Relating to Events of Default. Section 7.01(c) relating to
Events of Default shall be amended to read in its entirety as follows:

          (c) Borrowers shall fail to perform or observe any other term or covenant
contained in any of their respective Loan Documents, and such Default shall not be
cured within thirty (30) days after the earlier of knowledge thereof by an officer
of Borrowers, or after written notice of the Default is delivered by the
Administrative Agent to the Company.

     14. Changes to Section 8.01(b)(3)(B) Relating to Inspections. Section 8.01(b)(3)(B)
relating to inspections by the Collateral Agent shall be amended to read in its entirety as
follows:

               (B) (i) After the occurrence of an Inspection Increase Event 1 and prior to the
occurrence of a corresponding Inspection Reinstatement Event or an Inspection Increase Event
2:

               (x) The Collateral Agent will complete an inspection of the Eligible New
Inventory and the Eligible Used Inventory every two (2) months.

               (y) During each two-month period, the Collateral Agent will inspect Units
having an aggregate value on the Borrowers’ books at least equal to twenty-five
percent (25%) of the portion of the Borrowing Base consisting of Eligible New
Inventory and Eligible Used Inventory described in the most recent Borrowing Base
Certificate.

               (z) At least once during each rolling eight-month period, the Collateral Agent
will inspect all Eligible New Inventory and Eligible

26

 

[****] — CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

Used Inventory at each location at which Eligible New Inventory and Eligible Used
Inventory are located.

               (ii) After the occurrence of an Inspection Increase Event 2 and prior to the occurrence
of a corresponding Inspection Reinstatement Event or an Inspection Increase Event 1:

               (x) The Collateral Agent will complete an inspection of the Eligible New
Inventory and the Eligible Used Inventory every month.

               (y) During each monthly period, the Collateral Agent will inspect Units having
an aggregate value on the Borrowers’ books at least equal to fifty percent (50%) of
the portion of the Borrowing Base consisting of Eligible New Inventory and Eligible
Used Inventory described in the most recent Borrowing Base Certificate.

               (z) At least once during each rolling three-month period, the Collateral Agent
will inspect all Eligible New Inventory and Eligible Used Inventory at each location
at which Eligible New Inventory and Eligible Used Inventory are located.

     15.
Changes to Section 8.07(b) Relating to Inspection Fees. Section 8.07(b) relating to
inspections by the Collateral Agent shall be amended to read in its entirety as follows:

          (b) For every month that the Collateral Agent conducts an inspection Borrowers
will pay the Collateral Agent a fee of five hundred dollars ($500) plus seventy-five
dollars ($75) per location inspected (except that now such $75 fee shall be paid in
respect of the Company’s headquarters location), and three dollars ($3) for each
Unit inspected in the manner contemplated by Section 8.01(b). On a monthly basis
the Collateral Agent will submit an invoice for its inspection fees to the
Administrative Agent and Borrowers, and the Administrative Agent will include such
inspection fees in its monthly invoice to Borrowers. If Borrowers fail to pay such
inspection fees, Lenders shall pay them in accordance with their Pro Rata
Percentages.

     16.
Changes to Section 9.02 Relating to Notices. Section 9.02(c) relating to notices to
BOA is hereby amended to read in its entirety as follows:

	 	(c)	 	If to BOA as the Collateral Agent or as a Lender:

[****]

          with a copy to:

[****]

27

 

     17. Changes to Section 9.06 Relating to Replacement or Addition of Lenders. Section 9.06
relating to the replacement or addition of Lenders is hereby amended to read in its entirety as
follows:

          9.06 Replacement or Addition of Lenders.

     (a) If any Lender defaults in the performance of its obligations under this
Agreement, the Borrowers, with the consent of all of the Lenders other than the
defaulting Lender, shall have the right to replace the defaulting Lender.

     (b) If the Borrowers (if not in material Default) and the Required Lenders
shall desire to replace any Lender, they may, upon thirty (30) days prior written
notice to the Lender and with or without cause, replace such Lender with another
Lender selected and approved by the Borrowers (if not in material Default) and the
Required Lenders and named in such notice to the Lender being replaced. The
Borrowers, if they shall have supported such replacement, or the other Lenders
(based on their respective Pro Rata Percentages, but calculated as hereinafter
provided), if the Borrowers shall not have supported such replacement (by virtue of
the fact that the Borrowers were in material Default) shall pay to the replaced
Lender all costs, expenses, and reasonable attorneys’ fees that the replaced Lender
incurs in connection with assigning to the replacement Lender without recourse its
interests as a Lender under the Loan Documents. Any payments required to be made
by the other Lenders to the replaced Lender shall be apportioned among the other
Lenders based on their respective Pro Rata Percentages, so that each other Lender’s
share of the amounts payable by the Lenders under this Section shall equal that
fraction of the total of which (1) the numerator is such other Lender’s Pro Rata
Percentage, and (2) the denominator is the total Pro Rata Percentages of all such
other Lenders.

     (c) If any Lender replaced under this Section shall have been an Agent (other
than the Documentation Agent, which has no duties after the date of this Agreement),
then such Agent shall be deemed removed at the effective date of such Lender’s
replacement, and the procedure for selection of a successor Agent shall be as set
forth in Section 8.08 of this Agreement.

     (d) If the Borrowers (if not in material Default) and the Required Lenders
shall desire to add any Lender (other than in replacement of a Lender under (b)
above), they may, upon thirty (30) days prior written notice to each Lender and with
or without cause add another Lender selected and approved by the Borrowers (if not
in material Default) and the Required Lenders and named in such notice to the
Lenders. Upon such addition of a Lender, the added Lender shall purchase a share of
the Commitment as approved by Borrowers and the Required Lenders and thereupon shall
effect a reduction (based on the Pro Rata Percentages of the Lenders) in each of the
existing Lender’s Pro Rata Percentages of the Commitment.

28

 

     18. Amendment Fees. At the time of closing on this Fourth Amendment, Borrowers shall pay
the Lenders an amendment fee of two hundred fifty thousand dollars ($250,000), with such amendment
fee to be divided among the Lenders based on their respective Pro Rata Percentages. Borrowers also
shall reimburse the Administrative Agent and the Collateral Agent for their legal fees and expenses
in connection with the execution and delivery of this Fourth Amendment.

     19.
Representations and Warranties of the Borrowers. The Borrowers represent and warrant
to the Agent, the Collateral Agent, and the Lenders as follows:

          (a) Authorization. This Fourth Amendment and each related Loan Document has been duly
authorized by all necessary action on the part of each of the Borrowers, has been duly executed and
delivered by each of the Borrowers, and constitutes a valid and binding agreement of each of the
Borrowers enforceable against such Borrower in accordance with its terms.

          (b)
Security Documents. The Mortgages and other related documents to be executed and
delivered by Borrowers as contemplated hereby shall be adequate to perfect the Collateral Agent’s
Lien on the Pledged Real Estate Collateral or the Additional Real Estate Collateral described
therein, as applicable.

     20. 
Opinion of Counsel. This Fourth Amendment shall not become effective until the Agent,
the Collateral Agent, and the Lenders shall have received an opinion of counsel to the Company and
the other Borrowers reasonably satisfactory to the Agent, the Collateral Agent, and the Lenders to
the effect set for in Sections 19(a) and 19(b) of this Fourth Amendment; provided, however,
that such opinion of counsel may be subject to customary qualifications; and provided
further that no opinion with respect to Section 19(b) of this Fourth Amendment shall be
required until such time as the related Mortgages shall have been executed and delivered by the
Borrowers in the manner contemplated by Section 4.07 or Section 4.08, as applicable.

     21. Filing of New or Amended Financing Statements. The Borrowers hereby authorize the
Collateral Agent to file new or amended financing statements in order to conform the description of
the Collateral to this Fourth Amendment.

     22.
Effect on Agreement. Except as specifically amended and modified by this Fourth
Amendment, all terms, conditions, covenants and agreements set forth in the Agreement shall remain
in full force and effect. The miscellaneous provisions of Article IX of the Agreement shall apply
with equal force to this Fourth Amendment.

     23.
Counterparts. This Fourth Amendment may be executed in two or more counterparts, each
of which shall constitute an original but all of which when taken together shall constitute one
agreement.

[SIGNATURES FOLLOW]

29

 

     IN WITNESS WHEREOF, this Fourth Amendment to the Second Amended and Restated Credit and
Security Agreement has been executed and delivered by the parties (including 100% of the Lenders)
as of the day and year first above written.

	 	 	 	 	 
	 	“BORROWERS”

MARINEMAX, INC., a Delaware corporation

 	 
	 	By:  	/s/ Kurt M. Frahn
 	 
	 	 	Kurt M. Frahn, Vice President 	 
	 	 	 	 
	 
	 	MARINEMAX EAST, INC., a Delaware corporation

 	 
	 	By:  	/s/ Kurt M. Frahn
 	 
	 	 	Kurt M. Frahn, Assistant Secretary 	 
	 	 	 	 
	 
	 	MARINEMAX SERVICES, INC., a Delaware corporation

 
	 	By:  	/s/ Kurt M. Frahn
 	 
	 	 	Kurt M. Frahn, Assistant Secretary 	 
	 	 	 	 
	 
	 	MARINEMAX REALTY, LLC, a Delaware 

limited liability company

NEWCOAST FINANCIAL SERVICES, LLC, a Delaware limited liability company

 	 
	 	By: MARINEMAX, INC., sole member

 	 

	 	 	 	 	 
	 	By:  	                                               /s/ Kurt M. Frahn
 	 
	 	 	Kurt M. Frahn, Vice President 	 

	 	 	 	 	 
	 	MARINEMAX NORTHEAST, LLC, a Delaware limited liability company

BOATING GEAR CENTER, LLC, a Delaware limited liability company

 	 
	 	 	 
	 	By:  	                                              MARINEMAX EAST, INC., sole member
 	 

	 	 	 	 	 
	 	By:  	                                                   /s/ Kurt M. Frahn
 	 
	 	 	Kurt M. Frahn, Assistant Secretary 	 
	 	 	 	 
	 

Signature Page

 

 

	 	 	 	 	 
	 	“LENDERS”

KEYBANK NATIONAL ASSOCIATION, a 

national banking association

 	 
	 	By:  	

/s/ Brian T. McDevitt
 	 
	 	 	Name:  	Brian T. McDevitt 	 
	 	 	Title:  	Vice President 	 
	 
	 	BANK OF AMERICA, N.A., successor by merger

to Banc of America Specialty Finance, Inc.

 	 
	 	By:  	

/s/ L. Ransom Burts
 	 
	 	 	Name:  	L. Ransom Burts 	 
	 	 	Title:  	Senior Vice President 	 
	 
	 	GE COMMERCIAL DISTRIBUTION 

FINANCE CORPORATION, a Nevada 

corporation

 	 
	 	By:  	

/s/ Bruce Van Wagoner
 	 
	 	 	Name:  	Bruce Van Wagoner 	 
	 	 	Title:  	GE CDF Marine Group President 	 
	 
	 	WACHOVIA BANK, NATIONAL

ASSOCIATION, a national banking association

 	 
	 	By:  	/s/ Leslie Fredericks
 	 
	 	 	Name:  	Leslie Fredericks 	 
	 	 	Title:  	Vice President 	 
	 
	 	WELLS FARGO BANK, N.A., a national banking

association

 	 
	 	By:  	/s/ Ronald P. Christensen
 	 
	 	 	Name:  	Ronald P. Christensen 	 
	 	 	Title:  	Vice President 	 
	 

Signature Page

 

 

	 	 	 	 	 
	 	U.S. BANK NATIONAL ASSOCIATION, a

national banking association

 	 
	 	By:  	/s/ Silvia K. Boulger
 	 
	 	 	Name:  	Silvia K. Boulger 	 
	 	 	Title:  	Vice President 	 
	 
	 	BRANCH BANKING & TRUST COMPANY,

a North Carolina corporation

 	 
	 	By:  	/s/ Brigitta Lawton
 	 
	 	 	Name:  	Brigitta Lawton 	 
	 	 	Title:  	Senior Vice President 	 
	 
	 	BANK OF THE WEST, a California corporation

 	 
	 	By:  	/s/ James Chesser
 	 
	 	 	Name:  	James Chesser 	 
	 	 	Title:  	Vice President 	 
	 
	 	“ADMINISTRATIVE AGENT”

KEYBANK NATIONAL ASSOCIATION, a 

national banking association

 	 
	 	By:  	/s/ Brian T. McDevitt
 	 
	 	 	Name:  	Brian T. McDevitt 	 
	 	 	Title:  	Vice President 	 
	 
	 	“COLLATERAL AGENT” and 

“DOCUMENTATION AGENT”

BANK OF AMERICA, N.A., successor by merger

to Banc of America Specialty Finance, Inc. 

 	 
	 	By:  	/s/ L. Ransom Burts
 	 
	 	 	Name:  	L. Ransom Burts 	 
	 	 	Title:  	Senior Vice President 	 
	 

Signature Page

 

 

Schedule I

1. MARINEMAX EAST, INC., a Delaware corporation

2 MARINEMAX SERVICES, INC., a Delaware corporation

3. MARINEMAX REALTY, LLC, a Delaware limited liability company

4. NEWCOAST FINANCIAL SERVICES, LLC, a Delaware limited liability company

5. MARINEMAX NORTHEAST, LLC, a Delaware limited liability company

6. BOATING GEAR CENTER, LLC, a Delaware limited liability company

Schedule 1

 

 

Exhibit B

BORROWING BASE CERTIFICATE

Exhibit BSecurities Purchase Agreement

Exhibit 10.4

SECURITIES PURCHASE AGREEMENT

 

Empire Water Corporation 

500-666 Burrard Street 

Suite 500 

Vancouver, British Columbia 

Canada V6C 3P6

The undersigned (the "Investor") hereby confirms its agreement with you as follows:

1.      This Securities Purchase Agreement is made as of the date set forth below between Empire Water Corporation, a Nevada corporation formerly known as Cascade Coaching Corp. (the "Company"), and the Investor.

2.      The Company has authorized the sale and issuance of up to 3,200,000 shares (the "Shares") of the Common Stock of the Company, par value $0.00001 per share (the "Common Stock"), to certain investors in a private placement, along with warrants (the "Warrants") to purchase up to 3,200,000 shares (the "Warrant Shares") of Common Stock at an exercise price of $1.25 per share (the "Offering"). The purchase price for each unit consisting of one Share and a Warrant to purchase one additional share shall be $125, subject to adjustment as provided herein.

3.      The Company and the Investor agree that the Investor will purchase from the Company and the Company will issue and sell to the Investor ___________ Shares, along with Warrants to purchase [__________] [100% coverage] Shares for an aggregate purchase price of $___________ (the "Purchase Price"), subject to the Terms and Conditions for Purchase of Shares attached hereto as Annex I and incorporated herein by reference as if fully set forth herein. Unless otherwise requested by the Investor in Exhibit A, certificates representing the Shares and Warrants purchased by the Investor will be registered in the Investor's name and address as set forth below. The Warrants will be evidenced by a warrant agreement (a "Warrant Agreement" and collectively with the Warrant Agreements with other investors, the "Warrant Agreements") in the form of Exhibit B. The Company and the Investor will also enter into a registration rights agreement (the "Registration Rights Agreement") in the form of Exhibit C concurrently with the execution of this Securities Purchase Agreement.

4.      The Investor represents that, except as set forth below, (a) it has had no position, office or other material relationship within the past three years with the Company or its affiliates, (b) neither it, nor any group of which it is a member or to which it is related, beneficially owns (including the right to acquire or vote) any securities of the Company, and (c) it has no direct or indirect affiliation or association with any member of the Financial Industry Regulatory Authority ("FINRA"). Exceptions: 

  

(If no exceptions, write "none." If left blank, response will be deemed to be "none.")

 

Please confirm that the foregoing correctly sets forth the agreement between us by signing in the space provided below for that purpose.

		Dated as of:  December __, 2007  
		 
		 
		[Investor Name]
		 
		 
		By:  ___________________________________
		          Name:  
		          Title:  
		 
		 
		Address:  _______________________________
		 
		 

AGREED AND ACCEPTED:

EMPIRE WATER CORPORATION

 

	By:  	  
	  	  Name:  
	  	  Title:  

 

[SECURITIES PURCHASE AGREEMENT SIGNATURE PAGE]

 

 

 

-2-

ANNEX I

TERMS AND CONDITIONS FOR PURCHASE OF SECURITIES

      1.         Agreement to Sell and Purchase the Securities; Subscription Dale.

     1.1      Purchase and Sale. At the Closing (as defined in Section 2), the Company will sell to the Investor, and the Investor will purchase from the Company, upon the terms and subject to the conditions set forth herein, and at the Purchase Price, the number of Shares and Warrants described in paragraph 3 of the Securities Purchase Agreement attached hereto (collectively with this Annex I and the other exhibits attached hereto, this "Agreement").

     1.2      Other Investors. As part of the Offering, the Company proposes to enter into Securities Purchase Agreements in the same form as this Agreement with certain other investors (the "Other Investors"), and the Company expects to complete sales of Shares and Warrants to them. The Investor and the Other Investors are sometimes collectively referred to herein as the "Investors," and this Agreement, the Warrant Agreement, the Registration Rights Agreement and the Securities Purchase Agreements and Warrant Agreements executed by the Other Investors are sometimes collectively referred to herein as the "Agreements." The Company may accept executed Agreements from investors for the purchase of Shares and Warrants commencing upon the date on which the Company provides the Investors with the proposed purchase price per Share and concluding upon the date (the "Subscription Date") on which the Company has notified Canaccord Adams, Inc. (in its capacity as placement agent for the Shares, the "Placement Agent') in writing that it will no longer accept Agreements for the purchase of Shares in the Offering, but in no event shall the Subscription Date be later than December 31, 2007. The parties acknowledge that following the Closing of the Offering, the Company intends to sell up to an additional 8,000,000 shares of its Common Stock (the "Second Offering"). The Second Offering is expected to be consummated prior to June 30, 2008. Each Investor must execute and deliver a Securities Purchase Agreement and a Registration Rights Agreement and must complete a Stock Certificate Questionnaire (in the form attached as Exhibit A hereto) and an Investor Questionnaire (in the form attached as Exhibit D hereto) in order to purchase Shares and Warrants in the Offering.

     1.3      Placement Agent Fee. The Investor acknowledges that the Company intends to pay to the Placement Agent a fee, plus certain expenses, in respect of the sale of Shares and Warrants to the Investor.

     1.4      Escrow. Upon execution of this Agreement, the Investor will execute an Escrow Letter in substantially the form attached hereto as Exhibit E and wire funds for the Purchase Price as provided therein.

       2.        Delivery of the Shares at Closing.

     2.1      Closing Date. The completion of the purchase and sale of the Shares and Warrants (the "Closing") shall occur on a date specified by the Company and the Placement Agent (the "Closing Date"), which date shall not be later than December 31, 2007 (the "Outside Date"), and of which the Investors will be notified in advance by the Placement Agent. At the Closing, the Company shall deliver to the Investor one or more stock certificates representing the number of Shares set forth in paragraph 3 of the Securities Purchase Agreement, each such certificate to be registered in the name of the Investor or, if so indicated on the Stock Certificate Questionnaire attached hereto as Exhibit A, in the name of a nominee designated by the Investor, along with a Warrant registered in the same name. In exchange for the delivery of the stock certificates representing such Shares and the Warrant, the Investor

 

shall deliver the Purchase Price to the Company by wire transfer of immediately available funds pursuant to the Company's written instructions. On the Closing Date, the Company shall cause counsel to the Company to deliver to the Investors and the Placement Agent a legal opinion, dated the Closing Date, substantially in the form attached hereto as Exhibit F (the "Legal Opinion").

     2.2      Conditions to Company's Obligation to Close. The Company's obligation to issue and sell the Shares and Warrants to the Investor shall be subject to the following conditions, any one or more of which may be waived by the Company:

       (a)      prior receipt by the Company of a copy of this Agreement executed by the Investor;

     (b)      completion of purchases and sales of Shares and Warrants under the Agreements with the Other Investors;

     (c)      the accuracy of the representations and warranties made by the Investor in this Agreement and the fulfillment of the obligations of the Investor to be fulfilled by it under this Agreement on or prior to the Closing; and

     (d)      the absence of any order, writ, injunction, judgment or decree that questions the validity of the Agreements or the right of the Company or the Investor to enter into such Agreements or to consummate the transactions contemplated hereby and thereby.

     2.3      Conditions to the Investor's Obligation to Close. The Investor's obligation to purchase the Shares and Warrants shall be subject to the following conditions, any one or more of which may be waived by the Investor:

     (a)      the completion of purchases and sales under the Agreements with the Other Investors for an aggregate purchase price for all Investors of not less than 4 Million Dollars ($4,000,000);

       (b)      the delivery of the Legal Opinion to the Investor by counsel to the Company;

     (c)      the accuracy of the representations and warranties made by the Company in this Agreement on the date hereof and, if different, on the Closing Date;

     (d)      the execution and delivery by the Company of the Registration Rights Agreement and a Warrant Agreement.

     (e)      the fulfillment of the obligations of the Company to be fulfilled by it under this Agreement on or prior to the Closing;

     (f)      the absence of any order, writ, injunction. judgment or decree that questions the validity of the Agreements or the right of the Company or the Investor to enter into such Agreements or to consummate the transactions contemplated hereby and thereby;

     (g)      the delivery to the Investor by the Secretary or Assistant Secretary of the Company of a certificate stating that the conditions specified in this paragraph have been fulfilled;

     (h)      the sale of shares pursuant to the stock purchase agreement (the "BWRI Stock Purchase Agreement") between Basin Water Resources, Inc., Cascade Coaching Corp., Michael Jack and

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Alfred Nutt dated as of December 21, 2007 shall have been closed, and the recipients of shares thereunder shall have agreed, to the reasonable satisfaction of the Investors, that they will not directly or indirectly sell any of the shares purchased under such agreement for a period of at least one year following the closing of the Second Offering;

     (i)      the Assignment and Amendment Agreement by and among Basin Water Resources, Inc., Cascade Coaching Corporation, Indian Hills Water Conservation Corporation, West Riverside Canal Company, West Riverside 350 Inch Water Company, Henry C. Cox II and John L. West, dated as of December 21, 2007 shall have been consummated;

     (j)      the Company shall have exercised its rights under the Asset Purchase Election (the "Option") set forth in the Purchase Agreement referred to in the Assignment and Amendment Agreement, and the closing of such exercise shall occur simultaneously with the closing hereunder;

     (k)      the Agreement for Purchase and Operation of Water Treatment Unit and Operation of Water Distribution System by and between the Company and Basin Water, Inc. shall be effective:

     (l)      the Company shall have received an unqualified audit report for its fiscal year ended June 30, 2007; and

     (m)      the Company shall have completed an initial draft of the private placement memorandum to be distributed to potential investors in connection with the Second Offering and the Company shall have delivered such draft document to the Investors.

In the event that the Closing does not occur on or before the Outside Date as a result of the Company's failure to satisfy any of the conditions set forth above (and such condition has not been waived by the Investor), the Company shall return any and all funds paid hereunder to the Investor no later than one Business Day following the Outside Date and the Investors shall have no further obligations hereunder. For purposes of this Agreement, "Business Day' shall mean any day other than a Saturday, Sunday or other day on which the New York Stock Exchange or commercial banks located in New York, New York are permitted or required by law to close.

     3.        Representations, Warranties and Covenants of the Company. Except as otherwise disclosed in the disclosure schedule to this Agreement (the "Disclosure Schedule") or as specifically described in the Company's Annual Report on Form 10-KSB for the year ended June 30, 2007 filed on September 23 2007 (and any amendments thereto filed at least two (2) Business Days prior to the date hereof), the Company's Quarterly Report on Form 10-QSB filed on November 9, 2007, or any of the Company's Current Reports on Form 8-K filed since June 19, 2007 and at least two (2) Business Days prior to the date hereof (collectively, the "SEC Reports"), the Company hereby represents and warrants to, and covenants with, the Investor as of the date hereof and the Closing Date, as follows:

     3.1      Organization. The Company is duly incorporated and validly existing in good standing under the laws of the State of Nevada. The Company has full power and authority to own, operate and occupy its properties and to conduct its business as presently conducted and is registered or qualified to do business and in good standing in each jurisdiction in which it owns or leases property or transacts business and where the failure to be so qualified would have a material adverse effect upon the Company and its subsidiaries as a whole or the business, financial condition, properties, operations or assets of the Company and its subsidiaries as a whole or the Company's ability to perform its obligations under the Agreements in all material respects ("Material Adverse Effect"), and no proceeding has been

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instituted in any such jurisdiction revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such power and authority or qualification. The Company has no "subsidiaries" (as defined in Rule 405 under the Securities Act of 1933, as amended (the "Securities Act")), other than as set forth in its most recent Form 10-KSB.

     3.2      Due Authorization. The Company has all requisite power and authority to execute, deliver and perform its obligations under the Agreements. The execution and delivery of the Agreements, and the consummation by the Company of the transactions contemplated hereby, have been duly authorized by all necessary corporate action and no further action on the part of the Company, its Board of Directors or stockholders is required. The Agreements have been validly executed and delivered by the Company and constitute legal, valid and binding agreements of the Company enforceable against the Company in accordance with their terms, except to the extent (i) rights to indemnity and contribution may be limited by state or federal securities laws or the public policy underlying such laws, (ii) such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' and contracting parties' rights generally and (iii) such enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

     3.3      Non-Contravention. The execution and delivery of the Agreements, the issuance and sale of the Shares and Warrants to be sold by the Company under the Agreements, the fulfillment of the terms of the Agreements and the consummation of the transactions contemplated thereby, including the issuance of the Warrant Shares in accordance with the terms of the Warrants, will not (A) result in a conflict with or constitute a violation of, or default (with the passage of time or otherwise) under, (i) any bond, debenture, note or other evidence of indebtedness, or any material lease, contract, indenture, mortgage, deed of trust, loan agreement, joint venture or other agreement or instrument to which the Company or any subsidiary (each, a "Subsidiary" and collectively, the "Subsidiaries") is a party or by which the Company or the Subsidiaries or their respective properties are bound, (ii) the Certificate of Incorporation, Bylaws, or other organizational documents of the Company, as amended, or (iii) any law, administrative regulation, ordinance or order of any court or governmental agency, arbitration panel or authority binding upon the Company or any Subsidiary or their respective properties, which conflict, violation or default, individually or in the aggregate, is reasonably likely to have a Material Adverse Effect, or (B) result in the creation or imposition of any lien, encumbrance, claim, security interest or restriction whatsoever upon any of the material properties or assets of the Company or the Subsidiaries or an acceleration of indebtedness pursuant to any obligation, agreement or condition contained in any material bond, debenture, note or any other evidence of indebtedness or any material indenture, mortgage, deed of trust or any other agreement or instrument to which the Company or any Subsidiary is a party or by which it is bound or to which any of the property or assets of the Company is subject. No consent, approval, authorization or other order of, or registration, qualification or filing with, any regulatory body, administrative agency, or other governmental body is required for the execution and delivery of the Agreements by the Company and the valid issuance or sale of the Shares by the Company pursuant to the Agreements, other than such as have been made or obtained, and except for any filings required to be made under federal or state securities laws.

     3.4      Capitalization. The authorized capital stock of the Company as of December 21, 2007 consists of 100,000,000 shares of Common Stock and 100,000,000 shares of preferred stock. Immediately prior to the Closing 6,043,700 shares of Common Stock will be outstanding and none of the preferred stock will be outstanding. Immediately following the Closing and the closing of the BWRI Stock Purchase Agreement, the only shares outstanding will be 18,593,300 shares of Common Stock. The Shares, Warrants and Warrant Shares to be sold pursuant to the Agreements have been duly authorized, and when issued and paid for in accordance with the terms of the Agreements and the Warrants, will be duly and validly issued, fully paid and nonassessable, subject to no lien, claim or

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encumbrance (except for any such lien, claim or encumbrance created, directly or indirectly, by the Investor). All of the outstanding shares of capital stock of the Company have been duly and validly issued and are fully paid and nonassessable, have been issued in compliance with the registration requirements of federal and state securities laws, and were not issued in violation of any laws or any preemptive rights or similar rights to subscribe for or purchase securities. There are no outstanding rights (including, without limitation, preemptive rights), warrants or options to acquire, or instruments convertible into or exchangeable for, any unissued shares of capital stock or other equity interest in the Company or any Subsidiary, or any contract, commitment, agreement, understanding or arrangement of any kind to which the Company or any Subsidiary is a party and providing for the issuance or sale of any capital stock of the Company or of any Subsidiary, any such convertible or exchangeable securities or any such rights, warrants or options. Without limiting the foregoing, no preemptive right, co-sale right, registration right, right of first refusal or other similar right exists with respect to the issuance and sale of the Shares, the Warrants or the Warrant Shares, except as provided in the Agreements. There are no shareholders agreements, voting agreements or other similar agreements with respect to the Common Stock to which the Company is a party.

     3.5      Legal Proceedings. There is no material legal or governmental proceeding pending, or to the knowledge of the Company, threatened, to which the Company or any Subsidiary is a party or of which the business or property of the Company or any Subsidiary is subject that is required to be disclosed and that is not so disclosed in the SEC Reports. Neither the Company nor any Subsidiary is subject to any injunction, judgment, decree or order of any court, regulatory body, administrative agency or other government body.

     3.6      No Violations. Neither the Company nor any Subsidiary is in violation of its Certificate of Incorporation, Bylaws or other organizational documents, as amended, or in violation of any law, administrative regulation, ordinance or order of any court or governmental agency, arbitration panel or authority applicable to the Company, which violation, individually or in the aggregate, is reasonably likely to have a Material Adverse Effect, and neither the Company nor any Subsidiary is in default (and there exists no condition which, with the passage of time or otherwise, would constitute a default) in the performance of any bond, debenture, note or any other evidence of indebtedness or any indenture, mortgage, deed of trust or any other material agreement or instrument to which the Company or any Subsidiary is a party or by which the Company or such Subsidiary or their respective properties are bound, which default is reasonably likely to have a Material Adverse Effect.

     3.7      Governmental Permits, Etc. Each of the Company and the Subsidiaries has all necessary franchises, licenses, certificates and other authorizations from any foreign, federal, state or local government or governmental agency, department or body that are currently necessary for the operation of the business of the Company and the Subsidiaries as currently conducted, except where the failure to currently possess such franchises, licenses, certificates and other authorizations is not reasonably likely to have a Material Adverse Effect.

       3.8      Intellectual Property.

          (a)      Except for matters which are not reasonably likely to have a Material Adverse Effect, (i) each of the Company and the Subsidiaries has ownership of, or a license or other legal right to use, all patents, copyrights, trade secrets, trademarks, customer lists, designs, manufacturing or other processes, computer software, systems, data compilation, research results or other proprietary rights used in the business of the Company (collectively, "Intellectual Property") and (ii) all of the Intellectual Property owned by the Company or by the Subsidiaries consisting of patents, registered trademarks and registered copyrights have been duly registered in, filed in or issued by the United States Patent and Trademark Office, the United States Register of Copyrights or the corresponding offices of other

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jurisdictions and have been maintained and renewed in accordance with all applicable provisions of law and administrative regulations in the United States and/or such other jurisdictions.

          (b)      Except for matters which are not reasonably likely to have a Material Adverse Effect, all material licenses or other material agreements under which (i) the Company or any Subsidiary employs rights in Intellectual Property, or (ii) the Company or any Subsidiary has granted rights to others in Intellectual Property owned or licensed by the Company or any Subsidiary are in full force and effect, and there is no default by the Company with respect thereto.

          (c)      The Company believes that it has taken all steps reasonably required in accordance with sound business practice and business judgment to establish and preserve the ownership of all material Intellectual Property owned by the Company or any Subsidiary.

          (d)      Except for matters which are not reasonably likely to have a Material Adverse Effect, to the knowledge of the Company, (i) the present business, activities and products of the Company or any Subsidiary do not infringe any intellectual property of any other person: (ii) neither the Company nor any Subsidiary is making unauthorized use of any confidential information or trade secrets of any person; and (iii) the activities of any of the employees of the Company or any Subsidiary, acting on behalf of the Company or such Subsidiary do not violate any agreements or arrangements related to confidential information or trade secrets of third parties.

          (e)      No proceedings are pending, or to the knowledge of the Company, threatened, which challenge the rights of the Company or any Subsidiary to the use of Intellectual Property, except for matters which are not reasonably likely to have a Material Adverse Effect.

     3.9      Financial Statements. The financial statements of the Company and the related notes contained in the SEC Reports present fairly and accurately in all material respects the financial position of the Company as of the dates therein indicated, and the results of its operations, cash flows and the changes in shareholders' equity for the periods therein specified, subject, in the case of unaudited financial statements for interim periods, to normal year-end audit adjustments. Such financial statements (including the related notes) have been prepared in accordance with generally accepted accounting principles applied on a consistent basis at the times and throughout the periods therein specified, except that unaudited financial statements may not contain all footnotes required by generally accepted accounting principles.

     3.10     No Material Adverse Change. Except as disclosed in the SEC Reports or in any press releases issued by the Company at least two (2) Business Days prior to the date of this Agreement, since June 30, 2007, there has not been (i) an event, circumstance or change that has had or is reasonably likely to have a Material Adverse Effect, (ii) any obligation incurred by the Company or any Subsidiary direct or contingent, that is material to the Company or that is required to be disclosed by the Company under applicable securities laws, (iii) any dividend or distribution of any kind declared, paid or made on the capital stock of the Company, or (iv) any loss or damage (whether or not insured) to the physical property of the Company or any Subsidiary which has had a Material Adverse Effect.

     3.11     Reporting Status. The Company has timely made all filings required under the Exchange Act during the twelve (12) months preceding the date of this Agreement, and all of those documents complied in all material respects with the SEC's requirements as of their respective filing dates, and the information contained therein as of the respective dates thereof did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances under which they were made not misleading.

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     3.12      No Manipulation; Disclosure of Information. The Company has not taken and will not take any action designed to or that might reasonably be expected to cause or result in an unlawful manipulation of the price of the Common Stock to facilitate the sale or resale of the Shares. The Company has not disclosed any material non-public information to the Investors.

     3.13      Accountants. Malone & Bailey, P.C., who expressed their opinion with respect to the consolidated financial statements in the Company's Annual Report on Form 10-KSB for the year ended June 30, 2007, have advised the Company that they are, and to the knowledge of the Company they are, independent accountants as required by the Securities Act and the rules and regulations promulgated thereunder.

     3.14      Contracts. Except for matters which are not reasonably likely to have a Material Adverse Effect and those contracts that are substantially or fully performed or expired by their terms, the contracts listed as exhibits to or described in the SEC Reports that are material to the Company and all amendments thereto, are in full force and effect on the date hereof, and neither the Company nor, to the Company's knowledge, any other party to such contracts is in breach of or default under any of such contracts.

     3.15      Taxes. Except for matters which are not reasonably likely to have a Material Adverse Effect, each of the Company and the Subsidiaries has filed all necessary federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a tax deficiency which has been asserted or threatened against the Company or any Subsidiary.

     3.16      Transfer Taxes. On the Closing Date, all stock transfer or other taxes (other than income taxes) which are required to be paid in connection with the sale and transfer of the Shares hereunder will be, or will have been, fully paid or provided for by the Company and the Company will have complied with all laws imposing such taxes.

     3.17      Investment Company. The Company is not an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for an investment company, within the meaning of the Investment Company Act of 1940, as amended, and will not be deemed an "investment company" as a result of the transactions contemplated by this Agreement.

     3.18      Foreign Corrupt Practices. Neither the Company, nor to the knowledge of the Company, any agent or other person acting on behalf of the Company, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

     3.19      Offering Prohibitions. Neither the Company nor any person acting on its behalf or at its direction has in the past or will in the future take any action to sell, offer for sale or solicit offers to buy any securities of the Company which would bring the offer or sale of the Shares or Warrants as contemplated by this Agreement within the provisions of Section 5 of the Securities Act.

     3.20      Related Party Transactions. No transaction has occurred between or among the Company or any of its affiliates, officers or directors or any affiliate or affiliates of any such officer or

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director that with the passage of time will be required to be disclosed pursuant to Section 13, 14 or 15(d) of the Exchange Act.

     3.21      Books and Records. The books, records and accounts of the Company accurately and fairly reflect, in reasonable detail, the transactions in, and dispositions of, the assets of, and the operations of, the Company. The Company maintains a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

     3.22      Corporate Compliance. Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company, The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.

     3.23      Exercise of Option. The Company has exercised its rights under the Option to acquire the assets from the Seller under the Water Purchase Agreement (as defined below), including, but not limited to, the water rights.

     3.24      Restatement of Representations and Warranties. The Company hereby represents to each of the Investors that the representations and warranties contained in Section 2.1 of that certain Stock and Asset Purchase Agreement, dated May, 2007, as amended by that certain Assignment and Amendment Agreement, dated as of December 21, 2007 by and among Basin Water Resources, Inc., Indian Hills Water Conservation Corporation, West Riverside Canal Company, West Riverside 350 Inch Water Company, Henry C. Cox II, and John L. West (collectively, the "Water Purchase Agreement") are true, correct and complete, except as specified in the schedules attached thereto, as if such statements were set forth herein and made as representations and warranties of the Company to the Investors.

     3.25      Disclosure. Except with respect to the material terms and conditions of the transactions contemplated by the Agreement, the Company confirms that neither it nor any other person acting on its behalf has provided any of the Investors or their agents or counsel with any information that it believes constitutes or might constitute material, non-public information. The Company understands and confirms that the Investors will rely on the foregoing representation in effecting transactions in securities of the Company. All disclosure furnished by or on behalf of the Company to the Investors regarding the Company, its business and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

       4.          Representations, Warranties and Covenants of the Investor.

     4.1        Investor Knowledge and Status. The Investor represents and warrants to, and covenants with, the Company that: (i) the Investor is an "accredited investor" as defined in Regulation D under the Securities Act, is knowledgeable, sophisticated and experienced in making, and is qualified to make decisions with respect to, investments in securities presenting an investment decision similar to that

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involved in the purchase of the Shares and Warrants, and has requested, received, reviewed and considered all information it deemed relevant in making an informed decision to purchase the Shares and Warrants; (ii) the Investor understands that the Shares and Warrants are each "restricted securities" and have not been registered under the Securities Act and is acquiring the number of Shares set forth in paragraph 3 of the Securities Purchase Agreement and the Warrant in the ordinary course of its business and for its own account for investment only, has no present intention of distributing any of such Shares or Warrants and has no arrangement or understanding with any other persons regarding the distribution of such Shares or Warrants (this representation and warranty not limiting the Investor's right to sell Shares pursuant to a Registration Statement filed under the Registration Rights Agreement or otherwise, or other than with respect to any claim arising out of a breach of this representation and warranty, the Investor's right to indemnification under Section 3 of the Registration Rights Agreement); (iii) the Investor will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the Shares or Warrants except in compliance with the Securities Act, applicable state securities laws and the respective rules and regulations promulgated thereunder; (iv) the Investor has answered all questions in paragraph 4 of the Securities Purchase Agreement and the Investor Questionnaire attached hereto as Exhibit D for use in preparation of the Registration Statement and for determining the availability of state "Blue Sky" exemptions and the answers thereto are true and correct as of the date hereof and will be true and correct as of the Closing Date; (v) the Investor will notify the Company promptly of any change in any of such information until such time as the Investor has sold all of its Shares or until the Company is no longer required to keep the Registration Statement effective; and (vi) the Investor has, in connection with its decision to purchase the number of Shares set forth in paragraph 3 of the Securities Purchase Agreement, relied upon the representations and warranties of the Company contained herein and the information contained in the SEC Reports and other information filed by the Company with the SEC and has requested, received, reviewed and considered all information including, but not limited to, (a) the Water Purchase Agreement, (b) the Stock Purchase Agreement by and between the Company and Basin Water Resources, Inc., as further described in Section 2.3(k) of this Annex, and (c) the risk factors set forth in that certain Private Placement Memorandum of the Company for the Offering, it deemed relevant. The Investor understands that the issuance of the Shares and Warrants to the Investor has not been registered under the Securities Act, or registered or qualified under any state securities law, in reliance on specific exemptions therefrom, which exemptions may depend upon, among other things, the representations made by the Investor in this Agreement. No person (including without limitation the Placement Agent) is authorized by the Company to provide any representation that is inconsistent with or in addition to those contained herein or in the SEC Reports, and the Investor acknowledges that it has not received or relied on any such representations.

     4.2      Transfer of Shares. The Investor agrees that it will not make any sale, transfer or other disposition of the Shares, the Warrants or the shares issuable upon exercise of the Warrants (a "Disposition") other than Dispositions that are made pursuant to the Registration Statement in compliance with any applicable prospectus delivery requirements or that are exempt from registration under the Securities Act.

     4.3      Power and Authority. The Investor represents and warrants to the Company that (i) the Investor has full right, power, authority and capacity to enter into this Agreement and to consummate the transactions contemplated hereby and has taken all necessary action to authorize the execution, delivery and performance of this Agreement, and (ii) this Agreement constitutes a valid and binding obligation of the Investor enforceable against the Investor in accordance with its terms, except to the extent (i) rights to indemnity and contribution may be limited by state or federal securities laws or the public policy underlying such laws, (ii) such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' and contracting parties' rights generally and (iii) such enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

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     4.4      Legal and Regulatory Compliance. The Investor represents and warrants to, and covenants with, the Company that the Investor is entitled to purchase Shares and Warrants under the laws of those jurisdictions to which its participation in the Offering is subject and that the Investor has complied with all applicable laws of all relevant territories (including but not limited to the fact that the Investor falls within one or more of the exemptions to applicable securities laws in any relevant jurisdiction), obtained all requisite governmental or other consents and complied with all requisite formalities which may be required in connection with the Investor's participation in the Offering, and that the Investor has not taken any action or omitted to take any action which will or may result in Canaccord Adams, Inc., the Company or any of their respective affiliates acting in breach of the legal or regulatory requirements of any territory in connection with the Offering or the Investor's participation in the Offering.

     4.5      Short Position. From the earlier of (i) thirty (30) days prior to the date hereof and (ii) the date the Investor learned of the Offering, neither the Investor nor any affiliate has directly or indirectly established or agreed to establish any hedge, "put equivalent position" (as defined in Rule 16a-1 under the Exchange Act) or other position in the Common Stock that is outstanding on the Closing Date and that is designed to or could reasonably be expected to lead to or result in a Disposition by the Investor or any other person or entity. For purposes hereof, a "hedge or other position" includes, without limitation, effecting any short sale or having in effect any short position (whether or not such sale or position is against the box and regardless of when such position was entered into) or any purchase, sale or grant of any right (including, without limitation, any put or call option) with respect to the Common Stock or with respect to any security (other than a broad-based market basket or index) that includes, relates to or derives any significant part of its value from the Common Stock. Each Investor acknowledges that this representation is made for the benefit of the Company and the other Investors, any of which may assert claims arising out of the breach of this Section 4.5.

     4.6      No Investment, Tax or Legal Advice. The Investor understands that nothing in the SEC Reports, this Agreement, or any other materials presented to the Investor in connection with the purchase and sale of the Shares or Warrants constitutes legal, tax or investment advice. The Investor has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of Shares and Warrants.

     4.7      Confidential Information. The Investor covenants that from the date hereof it will maintain in confidence all material non-public information regarding the Company received by the Investor from the Company, including the receipt and content of any Suspension Notice (as defined in the Registration Rights Agreement) until such information (a) becomes generally publicly available other than through a violation of this provision by the Investor or its agents or (b) is required to be disclosed in legal proceedings (such as by deposition, interrogatory, request for documents, subpoena, civil investigation demand, filing with any governmental authority or similar process); provided, however, that before making any disclosure in reliance on this Section 4.7, the investor will give the Company at least fifteen (15) days prior written notice (or such shorter period as required by law) specifying the circumstances giving rise thereto and will furnish only that portion of the non-public information which is legally required and will exercise its commercially reasonable efforts to ensure that confidential treatment will be accorded any non-public information so furnished. The parties acknowledge and agree that as of the date hereof and as of the Closing Date, the Company has not disclosed any material non-public information to the Investor.

     4.8      Acknowledgments Regarding Placement Agent. The Investor acknowledges that the Placement Agent has acted solely as placement agent for the Company in connection with the Offering of the Shares and Warrants by the Company, and that the Placement Agent has made no representation or warranty whatsoever with respect to the accuracy or completeness of information, data

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or other related disclosure material that has been provided to the Investor. The Investor further acknowledges that in making its decision to enter into this Agreement and purchase the Shares and Warrants, it has relied on its own examination of the Company and the terms of, and consequences of holding the Shares and the Warrants. The Investor further acknowledges that the provisions of this Section 4.7 are for the benefit of, and may be enforced by, the Placement Agent.

     4.9      Additional Acknowledgement. The Investor acknowledges that it has independently evaluated the merits of the transactions contemplated by this Agreement, that it has independently determined to enter into the transactions contemplated hereby, that it is not relying on any advice from or evaluation by any Other Investor, and that it is not acting in concert with any Other Investor in making its purchase of the Shares and Warrants hereunder. The Investor and, to its knowledge, the Company acknowledge that the Investors have not taken any actions that would deem the Investors to be members of a "group" for purposes of Section 13(d) of the Exchange Act.

       5.        Transfer Restrictions, Covenants.

     5.1      Legends. Certificates evidencing the Shares and the Warrant shall each bear any legend as required by the "blue sky" laws of any state and a restrictive legend in substantially the following form until such time as they are not required:

[NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED] [THESE SECURITIES HAVE NOT BEEN REGISTERED] UNDER THE. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR (B) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS TRANSFER AGENT OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

 

 

 

 

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     The Company acknowledges and agrees that an Investor may from time to time pledge, and/or grant a security interest in, some or all of the legended Shares in connection with applicable securities laws, pursuant to a bona fide margin agreement in compliance with a bona fide margin loan. Such a pledge would not be subject to approval or consent of the Company and no legal opinion of legal counsel to the pledgee, secured party or pledgor shall be required in connection with the pledge, but such legal opinion shall be required in connection with a subsequent transfer or foreclosure following default by the Investor transferee of the pledge. No notice shall be required of such pledge, but the Investor's transferee shall promptly notify the Company of any such subsequent transfer or foreclosure. Each Investor acknowledges that the Company shall not be responsible for any pledges relating to, or the grant of any security interest any of the Shares or for any agreement, understanding or arrangement between any Investor and its pledgee or secured party. At the appropriate Investor's expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Shares may reasonably request in connection with a pledge or transfer of the Shares, including the preparation and filing of any required prospectus supplement under Rule 424(b)(3) of the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of selling stockholders thereunder.

     5.2      Delivery of Certificates. Following effectiveness of a registration statement registering the Shares, if the Company shall fail for any reason or for no reason to issue to an Investor unlegended certificates within five (5) Business Days of receipt of all documents necessary for the removal of the legend set forth above (the "Deadline Date"), then, in addition to all other remedies available to such Investor, if on or after the Business Day immediately following such five (5) Business Day period, such Investor purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the holder of shares of Common Stock that such Investor anticipated receiving from the Company without any restrictive legend (a "Buy-In"), then the Company shall, within three (3) Business Days after such Investor's request and in such Investor's sole discretion, either (i) pay cash to the Investor in an amount equal to such Investor's total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased (the "Buy-In Price"), at which point the Company's obligation to deliver such certificate (and to issue such shares of Common Stock) shall terminate, or (ii) promptly honor its obligation to deliver to such Investor a certificate or certificates representing such shares of Common Stock and pay cash to the Investor in an amount equal to the excess (if any) of the Buy-In Price over the product of (a) such number of shares of Common Stock, times (b) the Closing Bid Price on the Deadline Date.

     5.3      Use of Proceeds. Except as set forth on Schedule 5.3 attached hereto, the Company shall use the net proceeds from the sale of the Securities hereunder for working capital purposes and shall use the proceeds received hereunder for the payment of the exercise price of the Option and shall not use such proceeds for (a) the satisfaction of any portion of the Company's debt (other than payment of trade payables in the ordinary course of the Company's business and prior practices) or (b) the redemption of any Common Stock or any other security,

     5.4      Post-Closing Purchase Price Adjustment. In the event the Company sells any shares of Common Stock in the 180 day period following the Closing at a price per share less than the price per share for Common Stock sold hereunder, the Company shall promptly refund to the Investor the aggregate difference between the price per share paid hereunder for the Common Stock purchased by the Investor and the price per share that would have been paid had such Investor paid such lower price per share.

     5.5      Recession Right Related to Second Offering. In the event the Second Offering is not consummated prior to the June 30, 2008, or does not yield gross proceeds to the Company of at least $10,000,000, the Investor shall have the right, exercisable within five (5) Business Days of June 30,

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2008, to put the Shares purchased by such Investor hereunder to the Company and receive in return his, her or its full Purchase Price, Further, the Investors may exercise this rescission right at any time in the event that Larry Rowe or another person reasonably acceptable to the Investors is not appointed chief executive officer or president of the Company.

     6.      Survival of Representations, Warranties and Agreements. Notwithstanding any investigation made by any party to this Agreement or by the Placement Agent, all covenants, agreements, representations and warranties made by the Company and the Investor herein shall survive the execution of this Agreement, the delivery to the Investor of the Shares being purchased and the payment therefor, and a party's reliance on such representations and warranties shall not be affected by any investigation made by such party or any information developed thereby.

     7.      Registration of Shares; Public Statements.

     7.1      In connection with the purchase and sale of the Shares by the Investors contemplated hereby, the Company has entered into a Registration Rights Agreement with each Investor providing for the filing by the Company of a Registration Statement on Form SB-2 (or, if the Company is ineligible to use From SB-2, another appropriate form) to enable the resale of the Shares by the Investors from time to time.

     7.2      The Company agrees to disclose on a Current Report on Form 8-K the existence of the Offering and the material terms, thereof, including pricing, within two (2) Business Days after the Closing. The Company will not issue any public statement, press release or any other public disclosure listing the Investor as one of the purchasers of the Shares without the Investor's prior written consent, except as may be required by applicable law or rules of any exchange on which the Company's securities are listed.

     8.      Notices. All notices, requests, consents and other communications hereunder shall be in writing, shall be delivered (A) if within the United States, by first-class registered or certified airmail, or nationally recognized overnight express courier, postage prepaid, or by facsimile, or (B) if from outside the United States, by International Federal Express (or comparable service) or facsimile, and shall be deemed given (i) if delivered by first-class registered or certified mail domestic, upon the Business Day received, (ii) if delivered by nationally recognized overnight carrier, one (1) Business Day after timely delivery to such carrier, (iii) if delivered by International Federal Express (or comparable service), two (2) Business Days after timely delivery to such carrier, (iv) if delivered by facsimile, upon electric confirmation of receipt and shall be addressed as follows, or to such other address or addresses as may have been furnished in writing by a party to another party pursuant to this paragraph:

	                      	(a)      	
if to the Company, to:

		 
		 	
Empire Water Corporation 

500-666 Burrard Street 

Suite 500 

Vancouver, British Columbia 

Canada V6C 3P6

		 
		 	
Attention: President

		 

-13-

                    (b)      if to the Investor, at its address on the signature page to the Securities Purchase Agreement.

     9.      Amendments; Waiver. This Agreement may not be modified or amended except pursuant to an instrument in writing signed by the Company and the Investor. Any waiver of a provision of this Agreement must be in writing and executed by the party against whom enforcement of such waiver is sought.

     10.      Headings. The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be part of this Agreement.

     11.      Entire Agreement; Severability. This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter hereof and supersedes all prior and contemporaneous agreements, negotiations and understandings between the parties, both oral and written relating to the subject matter hereof. If any provision contained in this Agreement is determined to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.

     12.      Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Investor (other than by merger). Any Investor may assign any or all of its rights under this Agreement to any Person to whom such Investor assigns or transfers any securities, provided such transferee agrees in writing to be bound, with respect to the transferred securities, by the. provisions of the Agreements that apply to the "Investors."

     13.      Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Investors and the Company will be entitled to specific performance under the Agreements. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Agreements and hereby agrees to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate. The Company's obligations to pay any partial liquidated damages or other amounts owing under the Agreements is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.

     14.      Expenses. The Company shall pay all of the reasonable fees and expenses (including accounting and legal fees and expenses) of the Investor incurred in connection with (a) the investigation and due diligence of the Company, and (b) the negotiation, preparation and execution of the Agreements, provided, however, that such fees and expenses shall not exceed $30,000.

     15.      Governing Law. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of Nevada. without giving effect to the principles of conflicts of law.

 

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     16.      Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument, and shall become effective when one or more counterparts have been signed by each party hereto and delivered to the other parties.

 

 

 

 

 

 

 

 

 

 

 

 

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EXHIBIT A

EMPIRE WATER CORPORATION

STOCK CERTIFICATE QUESTIONNAIRE

 

       Pursuant to Section 4 of the Agreement, please provide us with the following information:

	1 	.  	The exact name in which your Shares and  	 
			Warrants are to be registered (this is the name	
			that will appear on your stock certificate(s) and 	
	  	  	Warrants), You may use a nominee name if appropriate:  	
	  	
	2 	.  	If a nominee name is listed in response to item  	 
			1 above, the relationship between the Investor 	
	  	  	and such nominee:  	
	  	
	3 	.  	The mailing address of the registered holder  	 
	  	  	listed in response to item 1 above:  	
	  	
	4 	.  	The Social Security Number or Tax  	 
			Identification Number of the registered holder 	
	  	  	listed in the response to item I above:  	

 

 

 

 

 

 

 

A-1

EXHIBIT B

EMPIRE WATER CORPORATION

FORM OF WARRANT AGREEMENT

 

 

 

 

 

 

 

 

 

 

 

 

B-1

EXHIBIT C

EMPIRE WATER CORPORATION

FORM OF REGISTRATION RIGHTS AGREEMENT

 

 

 

 

 

 

 

 

 

 

 

 

C-1

EXHIBIT D

EMPIRE WATER CORPORATION

 

INVESTOR QUESTIONNAIRE

(All information will be treated confidentially)

To: Empire Water Corporation,

       The undersigned hereby acknowledges the following:

     This Investor Questionnaire "Questionnaire") must be completed by each potential investor in connection with the offer and sale of the shares of the Common Stock, par value $0.00001 per share (the "Shares") and Warrants, of Empire Water Corporation (the "Company"). The Shares are being offered and sold by the Company without registration under the Securities Act of 1933, as amended (the "Securities Act"), and the securities laws of certain states, in reliance on the exemptions contained in Section 4 of the Securities Act and on Regulation D promulgated thereunder and in reliance on similar exemptions under applicable stale laws. The Company must determine that a potential investor meets certain suitability requirements before offering or selling Shares and Warrants to such investor. The purpose of this Questionnaire is to assure the Company that each investor will meet the applicable suitability requirements. The information supplied by the undersigned will be used in determining whether the undersigned meets such criteria, and reliance upon the private offering exemption from registration is based in part on the information herein supplied.

     This Questionnaire does not constitute an offer to sell or a solicitation of an offer to buy any security. The undersigned's answers will be kept strictly confidential. However, by signing this Questionnaire the undersigned will be authorizing the Company to provide a completed copy of this Questionnaire to such parties as the Company deems appropriate in order to ensure that the offer and sale of the Shares and Warrants will not result in a violation of the Securities Act or the securities laws of any state and that the undersigned otherwise satisfies the suitability standards applicable to purchasers of the Shares. All potential investors must answer all applicable questions and complete, date and sign this Questionnaire. The undersigned shall print or type its responses and attach additional sheets of paper if necessary to complete its answers to any item.

A.       BACKGROUND INFORMATION

	Name: ______________________________________________________________________________________________________
	  
	Business Address: ____________________________________________________________________________________________
	(Number and Street)
	 
	______________________________________________________________________________________________ 
	(City)  	                (State)	(Zip Code)
	  
	Telephone Number:  (  	) __________________________________________________________________________________
	  
	Residence Address:  	_________________________________________________________________________
	  	                                                           (Number and Street)  
		 
	______________________________________________________________________________________________
	(City)  	             (State)  	(Zip Code)  
	 		
	Telephone Number: (  	) __________________________________________________________________________________
	  
	If an individual:  	  	  
	 		
	Age:_________  	Citizenship:__________  	Where registered to vote:____________  
	 		
	If a corporation, partnership, limited liability company. trust or other entity:  
	 
	Type of entity: _______________________________________________________________________________________________

 

D-1

State of formation: _____________________                              Date of formation: ________________________

Social Security or Taxpayer Identification No.____________________________________________________

Send all correspondence to (check one):  _______Residence Address                                  _____Business Address

B.      STATUS AS ACCREDITED INVESTOR

The undersigned is an "accredited investor" as such term is defined in Regulation D under the Securities Act, because at the time of the sale of the Shares the undersigned falls within one or more of the following categories (Please initial one or more, as applicable):

____ (1)      a bank as defined in Section 3(a)(2) of the Securities Act, or a savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity; a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; an insurance company as defined in Section 2(13) of the Securities Act; an investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that act; a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions for the benefit of its employees, if such plan has total assets in excess of $5,000,000; an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with the investment decisions made solely by persons that are accredited investors; 1

____ (2)      a private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940;

____ (3)      an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the Shares offered, with total assets in excess of $5,000,000;

____ (4)      a natural person whose individual net worth, or joint net worth with that person's spouse, at the time of such person's purchase of the Shares exceeds $1,000,000;

____ (5)      a natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;

____ (6)      a trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Shares offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D; and

____ (7)      an entity in which all of the equity owners are accredited investors (as defined above).

 

_____________________________________

1 As used in this Questionnaire, the term "net worth" means the excess of total assets over total liabilities. In computing net worth for the purpose of subsection (4), the principal residence of the investor must be valued at cost, including costs of improvements, or at recently appraised value by a professional appraiser. In determining income, the investor should add to the investor's adjusted gross income any amounts attributable to tax exempt income received, losses claimed as a limited partner in any limited partnership, deductions claimed for depreciation, contributions to an IRA or KEOGH retirement plan, alimony payments, and any amount by which income from long-term capital gains has been reduced in arming at adjusted gross income.

D-2

C.      REPRESENTATIONS

The undersigned hereby represents and warrants to the Company as follows:

     1.      Any purchase of the Shares and Warrants would be solely for the account of the undersigned and not for the account of any other person or with a view to any resale, fractionalization, division, or distribution thereof.

     2.      The information contained herein is complete and accurate and may be relied upon by the Company, and the undersigned will notify the Company immediately of any material change in any of such information occurring prior to the closing, if any, with respect to the purchase of Shares by the undersigned or any co-purchaser.

     3.      There are no suits, pending litigation, or claims against the undersigned that could materially affect the net worth of the undersigned as reported in this Questionnaire.

     4.      The undersigned acknowledges that there may occasionally be times when the Company, based on the advice of its counsel, determines that it must suspend the use of the Prospectus forming a part of the Registration Statement (as such terms are defined in the Securities Purchase Agreement to which this Questionnaire is attached) until such time as an amendment to the Registration Statement has been filed by the Company and declared effective by the Securities and Exchange Commission or until the Company has amended or supplemented such Prospectus. The undersigned is aware that, in such event, the Shares will not be subject to ready liquidation, and that any Shares purchased by the undersigned would have to be held during such suspension. The overall commitment of the undersigned to investments which are not readily marketable is not excessive in view of the undersigned's net worth and financial circumstances, and any purchase of the Shares will not cause such commitment to become excessive. The undersigned is able to bear the economic risk of an investment in the Shares.

     5.      The undersigned has carefully considered the potential risks relating to the Company and a purchase of the Shares and Warrants and fully understands that the Shares and Warrants are speculative investments which involve a high degree of risk of loss of the undersigned's entire investment. Among others, the undersigned has carefully considered each of the risks described in the Company's Annual Report on Form 10-KSB for the year ended June 30,2007 and in the Company's Confidential Private Placement Memorandum dated December 19, 2007

     6.      The following is a list of all states and other jurisdictions in which blue sky or similar clearance will be required in connection with the undersigned's purchase of the Shares and Warrants:

____________________________________________

____________________________________________

____________________________________________

The undersigned agrees to notify the Company in writing of any additional states or other jurisdictions in which blue sky or similar clearable will be required in connection with the undersigned's purchase of the Shares.

 

 

 

 

D-3

IN WITNESS WHEREOF, the undersigned has executed this _____ day of December, 2007, and declares under oath that it is truthful and correct.

		Print Name  
		  
		By:  _____________________________________
		Signature  
		  
		Title: __________________________________________  
		(required for any purchaser that is a 
		                   corporation, partnership, trust or other entity)  

 

 

 

 

 

 

 

 

 

 

 

D-4

EXHIBIT E

FORM OF ESCROW LETTER

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

E-1

EXHIBIT F

FORM OF LEGAL OPINION

 

 

_______________, 2007

 

To: The Investors in Common Stock and Warrants of Empire Water Corporation and the Placement Agent

Ladies and Gentlemen:

     We have acted as counsel for Empire Water Corporation, a Nevada corporation (the "Company"), in connection with the issuance of 3,200,000 shares (the "Shares") of the Company's common stock, par value $0.00001 per share, and warrants to purchase 3,200,000 shares (the "Warrant Shares") of the Company's common stock pursuant to those certain Securities Purchase Agreements, dated as of December [___], 2007, including the annex and exhibits thereto (collectively, the "Agreement"), between the Company and the Investors named therein. This opinion is being delivered to you pursuant to Section 2 of Annex I of the Agreement. Capitalized terms used herein are as defined in the Agreement unless otherwise specifically provided herein:

     We have examined such documents and have reviewed such questions of law as we have considered necessary or appropriate for the purpose of this opinion:

     In rendering our opinion below, we have assumed the authenticity of all documents submitted to us as originals, the genuineness of all signatures, and the conformity to authentic originals of all documents submitted to us as copies. We have also assumed the legal capacity for all purposes relevant hereto of all natural persons and, with respect to all parties to agreements and instruments relevant hereto other than the Company, that such parties had the requisite power and authority (corporate or otherwise) to execute, deliver and perform such agreement or instruments, that such agreements or instruments have been duly authorized by all requisite action (corporate or otherwise), executed and delivered by such parties and that such agreements or instruments are the valid, binding and enforceable obligations of such parties and that the issuance of the Warrant Shares will be in reliance upon an applicable exemption from the registration requirements of the Securities Act. As to questions of fact material to our opinion, we have relied, without independent verification, on the representations and warranties contained in the Agreement and on certificates of officers of the Company and public officials.

     In rendering such opinions, we have not conducted any independent investigation or consulted with other attorneys in our firm with respect to the matters covered by the Agreement. No inference as to our knowledge with respect to such matters should be drawn from the fact of our representation of the Company.

       Based on the foregoing, we are of the opinion that:

       1.        Company is a corporation incorporated, validly existing and in good standing under the laws of the State of Nevada, with the corporate power to conduct any lawful business activity. The Company has the corporate power to execute, deliver and perform the Agreement and the Warrants including without limitation, the issuance and

 

F-1

sale of the Shares and Warrants under the Agreement and to issue the Warrant Shares upon exercise of the Warrants.

       2.        Each of the Agreement, the Warrants and the Registration Rights Agreement has been duly authorized by all requisite corporate action, executed and delivered by the Company. Each of the Agreement, the Warrants and the Registration Rights Agreement constitutes the valid and binding agreement of the Company enforceable in accordance with its terms.

       3.        The Shares and Warrants have been duly authorized and, upon issuance, delivery and payment therefor as described in the Agreement and the Warrants, will be validly issued, fully paid and nonassessable. The shares issuable upon exercise of the Warrants have been duly and validly reserved for issuance by all proper corporate action.

       4.        The execution, delivery and performance of the Agreement, the Warrants and the Registration Rights Agreement and the issuance and sale of the Shares and Warrants in accordance with the Agreement, and the issuance and sale of the Warrant Shares upon exercise of the Warrants in accordance with the terms of the Warrants, does not (a) violate or conflict with, or result in a breach of or default under, the Certificate of Incorporation or Bylaws of the Company, as amended, or (b) violate or conflict with, or constitute a default under any material agreement or instrument (limited, with your consent, to agreements filed with the Securities and Exchange Commission under the Exchange Act and applicable rules and regulations) to which the Company is a party,

       5.        To our knowledge, no consent, approval, authorization or order of, and no notice to or filing with, any governmental agency or body or any court is required to be obtained or made by the Company for the issue and sale of the Shares and Warrants pursuant to the Agreement and the issuance of the Warrant Shares upon exercise of the Warrants in accordance with the terms of the Warrants, except such as have been obtained or made and such as may be required under the federal securities laws or the Blue Sky laws of the various states.

       6.        Assuming the representations made by the Investors and the Company set forth in the Agreement and the exhibits thereto are true and correct and subject to the Placement Agent's compliance with applicable securities laws and regulations (including, without limitation, the requirements of Regulation D under the Securities Act), the offer, sale, issuance and delivery of the Shares and the Warrants to the Investors, in the manner contemplated by the Agreement, is exempt from the registration requirements of the Securities Act, it being understood that no opinion is expressed as to any subsequent resale of such shares.

       The opinions set forth above am subject to the following qualifications and exceptions:

     (a)        Our opinion in paragraph 1 above, with respect to the good standing of the Company, is based solely on a Certificate of Existence with Status in Good Standing dated _________, 2007 electronically received for the Secretary of State of Nevada.

     (b)        Our opinion in paragraph 2 above is subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws of general application affecting creditors' rights.

F-2

     (c)        Our opinion in paragraph 2 above is subject to the effect of general principles of equity, including (without limitation) concepts of materiality, reasonableness, good faith and fair dealing, and other similar doctrines affecting the enforceability of agreements generally (regardless of whether considered in a proceeding in equity or at law).

     (d)        Our opinion in paragraph 2 above, insofar as it relates to indemnification provisions, is subject to the effect of federal and state securities laws and public policy relating thereto.

     (e)        We express no opinion as to the compliance or the effect of noncompliance by the Investors with any state or federal laws or regulations applicable to the Investors in connection with the transactions described in the Agreement or the payment obligations of the Company under Sections 1(b) and 2(d) of the Registration Rights Agreement if the payment obligations are construed as unreasonable in relation to actual damages or disproportionate to actual damages suffered by the Investor.

     Our opinions expressed above are limited to the laws of the State of Nevada and the federal laws of the United States of America.

     The foregoing opinions are being furnished to you solely for your benefit and may not be relied upon by any other person without our prior written consent. Notwithstanding the foregoing, Canaccord Adams may rely on the opinions herein expressed as if this letter were addressed to it.

                                                                      Very truly yours,

 

 

 

 

 

 

 

 

F-3

Schedule 5.3

 

	Purchase Option from BWR  	$1,500,000 
	Reimbursement of BWR Engineering Expenses  	$75,000 
	Deposit on Water Treatment Unit  	$300,000 
	Canaccord Adams Fees and Expenses  	$280,000 + expenses of approximately $20,000 
	Investor Legal Expenses  	$30,000 
	Empire Legal Expenses  	$[___________] 

 

 

 

 

 

 

 

 

 

 

F-1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00152-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00152-of-00352.parquet"}]]