Document:

exv10w4

 

Exhibit 10.4

FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT

     This Amendment, dated as of September 26, 2006, is made by and among GLOBAL EMPLOYMENT
SOLUTIONS, INC., a Colorado corporation (“Global”), EXCELL PERSONNEL SERVICES CORPORATION, an
Illinois corporation (“Excell”), FRIENDLY ADVANCED SOFTWARE TECHNOLOGY, INC., a New York
corporation (“Friendly”), TEMPORARY PLACEMENT SERVICE, INC., f/k/a Michael & Associates, Inc. and
successor by merger to Temporary Placement Service, Inc., a Georgia corporation (“TPS”),
SOUTHEASTERN STAFFING, INC., a Florida corporation (“Southeastern”), SOUTHEASTERN PERSONNEL
MANAGEMENT, INC., a Florida corporation (“SPM”), MAIN LINE PERSONNEL SERVICES, INC., a Pennsylvania
corporation (“Main Line”), BAY HR, Inc., a Florida corporation (“BHR”) and SOUTHEASTERN GEORGIA HR,
INC., a Georgia corporation (“SGHR”), SOUTHEASTERN STAFFING II, INC., a Florida corporation
(“SEII”), SOUTHEASTERN STAFFING III, INC., a Florida corporation (“SEIII”), SOUTHEASTERN STAFFING
IV, INC., a Florida corporation (“SEIV”), SOUTHEASTERN STAFFING V, INC., a Florida corporation
(“SEV”), and SOUTHEASTERN STAFFING VI, INC., a Florida corporation (“SEVI”) (Global, Excell,
Friendly, TPS, Southeastern, SPM, Main Line, BHR, SGHR, SEII, SEIII, SEIV, SEV and SEVI are each
referred to herein as a “Borrower” and collectively as the “Borrowers”), and WELLS FARGO BANK,
NATIONAL ASSOCIATION (“Lender”), acting through its Wells Fargo Business Credit operating division.

Recitals

     The Borrowers and the Lender are parties to an Amended and Restated Credit and Security
Agreement dated as of July 24, 2006 (the “Credit Agreement”). Capitalized terms used in these
recitals have the meanings given to them in the Credit Agreement unless otherwise specified.

     The Borrowers have requested that certain amendments be made to the Credit Agreement, which
the Lender is willing to make pursuant to the terms and conditions set forth herein.

     NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements
herein contained, it is agreed as follows:

     1. Defined Terms. Capitalized terms used in this Amendment which are defined in the
Credit Agreement shall have the same meanings as defined therein, unless otherwise defined herein.
In addition, subsection (i) of the definition of “Eligible Accounts” set forth in Section 1.1 of
the Credit Agreement is hereby amended and restated to read in its entirety as follows:

     ”(i) (A) That portion of Accounts, other than (I) during the period from September 26,
2006 to and including November 13, 2006, Accounts owed by Total Logistics and (II) Accounts
owed to Southeastern, unpaid 90 days or more after the invoice date, (B) that portion of
Accounts owed to Southeastern unpaid 14 days or more after the invoice date and (C) during
the period from September 26, 2006 to and

 

 

including November 13, 2006, that portion of Accounts owed by Total Logistics, unpaid
120 days or more after the invoice date;”

     2. Section 6.2(d) of the Credit Agreement is hereby amended and restated to read in its
entirety as follows:

     ”(d) Minimum Availability. At all times after March 31, 2007, the average monthly
Availability, with respect to all Borrowers on a consolidated basis, measured on the last
day of each month, shall exceed $2,000,000.”

     3. No Other Changes. Except as explicitly amended by this Amendment, all of the terms
and conditions of the Credit Agreement shall remain in full force and effect and shall apply to any
advance or letter of credit thereunder.

     4. Consent. The Lender hereby consents to (a) the repayment of certain Subordinated
Debt by the Borrowers or the Public Parent in an aggregate amount of up to $5,000,000, subject to
the terms and conditions previously provided to the Lender by the Borrowers, and (b) any
distribution prohibited under Section 6.7 of the Credit Agreement required to repay such
Subordinated Debt. The Borrowers each represent and warrant to the Lender that the repayment of
such Subordinated Debt will not cause a default or an event of default under any agreement,
instrument or document evidencing or related to (i) any securities issued by the Public Parent or
(ii) any Subordinated Debt. This consent shall be effective only in this specific instance and for
the specific purpose for which it is given, and this consent shall not entitle any Borrower to any
other or further consents in any similar or other circumstances.

     5. Subordination Agreement. The Borrowers agree that their failure to deliver to the
Lender on or before October 10, 2006, each in form and substance acceptable to the Lender in its
sole discretion, (i) a joinder agreement to the Subordination Agreement dated as of March 31, 2006,
by Amatis Limited, for itself and in its capacity as collateral agent, Radcliffe SPC, Ltd., for and
on behalf of Class A Convertible Crossover Segregated Portfolio, Magnetar Capital Master Fund,
Ltd., Whitebox Convertible Arbitrage Partners, LP, Guggenheim Portfolio XXXI, LLC, Pandora Select
Partners, LP, Whitebox Intermarket Partners, LP, Context Convertible Arbitrage Fund, LP, Context
Convertible Arbitrage Offshore, Ltd., Context Opportunistic Master Fund, L.P., for the benefit of
Wells Fargo Bank, National Association (the “Subordination Agreement”), pursuant to which the
replacement collateral agent becomes a party to the Subordination Agreement and (ii) a joinder
agreement to the Subordination Agreement, pursuant to which any assignee, transferee or pledgee of
Subordinated Debt subject to the Subordination Agreement becomes a party to the Subordination
Agreement, pursuant to Section 8 of the Subordination Agreement, will constitute an Event of
Default under the Credit Agreement.

     6. Previous Certificate. Each Borrower acknowledges and agrees, retroactive to July
24, 2006, that, although the Certificate of Authority for Amended and Restated Credit Agreement
(Global Employment Solutions, Inc. and Subsidiaries) and the Certificate of Authority of Guarantor
for Amendment, each dated as of July 24, 2006, refer to “Southeastern Staffing III, a Florida
corporation” and “Southeastern Staffing V, a Florida corporation”, the corporations referred to
therein are Southeastern Staffing III, Inc., a Florida corporation, and Southeastern Staffing V,
Inc., a Florida corporation.

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     7. Accommodation Fees. The Borrowers shall pay the Lender as of the date hereof a
fully earned, non-refundable fee in the amount of $170,000 in consideration of the Lender’s
execution and delivery of this Amendment.

     8. Conditions Precedent. This Amendment shall be effective when the Lender shall have
received an executed original hereof, together with each of the following, each in substance and
form acceptable to the Lender in its sole discretion:

          (a) The Acknowledgment and Agreement of Guarantor set forth at the end of this Amendment, duly
executed by each Guarantor.

          (b) A Certificate of an Officer of each Borrower certifying as to (i) the resolutions of the
board of directors of such Borrower approving the execution and delivery of this Amendment, (ii)
the fact that the articles of incorporation and bylaws of such Borrower, which were previously
certified and delivered to the Lender pursuant to a Certificate of Authority of an authorized
Officer of such Borrower continue in full force and effect and have not been amended or otherwise
modified except as set forth in the Certificate to be delivered, and (iii) certifying that the
officers and agents of such Borrower who have been previously certified to the Lender, pursuant to
a Certificate of Authority of an authorized Officer of such Borrower, as being authorized to sign
and to act on behalf of such Borrower continue to be so authorized or setting forth the sample
signatures of each of the officers and agents of such Borrower authorized to execute and deliver
this Amendment and all other documents, agreements and certificates on behalf of such Borrower.

          (c) An Affidavit Regarding Out-of-State Execution of Credit and Security Agreement and Notes
(for Florida Borrowers);

          (d) Evidence of the repayment of Subordinated Debt by the Borrowers or the Public Parent in an
aggregate amount of up to $5,000,000 on the terms and conditions previously provided to the Lender
by the Borrowers;

          (e) Payment of the fee described in Paragraph 6; and

          (f) Such other matters as the Lender may require.

     9. Representations and Warranties. Each Borrower hereby represents and warrants to
the Lender as follows:

          (a) Each Borrower has all requisite power and authority to execute this Amendment and all
other agreements, instruments and documents related hereto and to perform all of its obligations
hereunder and thereunder, and this Amendment and all other agreements, instruments and documents
related hereto have been duly executed and delivered by it and constitutes the legal, valid and
binding obligation of it, enforceable in accordance with its terms.

          (b) The execution, delivery and performance by each Borrower of this Amendment and all other
agreements, instruments and documents related hereto to which such Borrower is a party have been
duly authorized by all necessary corporate action and do not

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(i) require any authorization, consent or approval by any governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, (ii) violate any provision of any
law, rule or regulation or of any order, writ, injunction or decree presently in effect, having
applicability to such Borrower, or the articles of incorporation or by-laws of such Borrower, or
(iii) result in a breach of or constitute a default under any indenture or loan or credit agreement
or any other agreement, lease or instrument to which such Borrower is a party or by which it or its
properties may be bound or affected.

          (c) This Amendment and all other agreements, instruments and documents related hereto were
signed, executed, and delivered by the Borrowers in Colorado.

          (d) All of the representations and warranties contained in Article V of the Credit Agreement
are correct on and as of the date hereof as though made on and as of such date, except to the
extent that such representations and warranties relate solely to an earlier date.

          (e) The Borrowers have delivered to each Subordinated Creditor a copy of this Amendment and
all other agreements, instruments and documents requested by such Persons.

     10. References. All references in the Credit Agreement to “this Agreement” shall be
deemed to refer to the Credit Agreement as amended hereby; and any and all references in the
Security Documents to the Credit Agreement shall be deemed to refer to the Credit Agreement as
amended hereby. All references to the “Borrowers” or any variation thereof in any guaranty of the
Obligations executed by any of the undersigned shall be deemed to refer to each Borrower (as
defined in the Credit Agreement), other than such Guarantor.

     11. No Waiver. The execution of this Amendment and acceptance of any other documents
related hereto shall not be deemed to be a waiver of any Default or Event of Default under the
Credit Agreement or breach, default or event of default under any Security Document or other
document held by the Lender, whether or not known to the Lender and whether or not existing on the
date of this Amendment.

     12. Release. Each Borrower, in its capacity as both borrower and guarantor, hereby
absolutely and unconditionally releases and forever discharges the Lender, and any and all
participants, parent corporations, subsidiary corporations, affiliated corporations, insurers,
indemnitors, successors and assigns thereof, together with all of the present and former directors,
officers, agents and employees of any of the foregoing, from any and all claims, demands or causes
of action of any kind, nature or description, whether arising in law or equity or upon contract or
tort or under any state or federal law or otherwise, which any Borrower has had, now has or has
made claim to have against any such person for or by reason of any act, omission, matter, cause or
thing whatsoever arising from the beginning of time to and including the date of this Amendment,
whether such claims, demands and causes of action are matured or unmatured or known or unknown.

     13. Costs and Expenses. Each Borrower hereby reaffirms its agreement under the Credit
Agreement to pay or reimburse the Lender on demand for all costs and expenses incurred by the
Lender in connection with the Loan Documents, including without limitation all

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reasonable fees and disbursements of legal counsel. Without limiting the generality of the
foregoing, each Borrower specifically agrees to pay all fees and disbursements of counsel to the
Lender for the services performed by such counsel in connection with the preparation of this
Amendment and the documents and instruments incidental hereto. Each Borrower hereby agrees that
the Lender may, at any time or from time to time in its sole discretion and without further
authorization by such Borrower, make a loan to such Borrower under the Credit Agreement, or apply
the proceeds of any loan, for the purpose of paying any such fees, disbursements, costs and
expenses and the fee required under Paragraph 6 hereof.

     14. Joint and Several Liability. All obligations of each Borrower under this
Amendment shall be joint and several. Each Borrower shall be bound both severally and jointly with
the other. Each Borrower is responsible for each other Borrower’s obligations under this
Amendment. Notices from the Lender to any Borrower shall constitute notice to all Borrowers.
Directions, instructions, representations, warranties or covenants made by any Borrower to the
Lender shall be binding on all Borrowers.

     15. Miscellaneous. This Amendment and the Acknowledgment and Agreement of Guarantor
may be executed in any number of counterparts, each of which when so executed and delivered shall
be deemed an original and all of which counterparts, taken together, shall constitute one and the
same instrument.

[The remainder of this page intentionally left blank.]

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     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of
the date first written above.

	 	 	 	 	 	 	 
	WELLS FARGO BANK, N.A., acting through its WELLS FARGO BUSINESS CREDIT operating division.	 	GLOBAL EMPLOYMENT SOLUTIONS, INC.
	 
	 	 	 	 	 	 
	By:

	 	/s/ Martin E. Tracy	 	By:	 	/s/ Howard Brill
	 

	 	 
	 	 	 	 
	Name:

	 	Martin E. Tracy
	 	Name:
	 	Howard Brill
	Its:

	 	Vice President
	 	Its:
	 	Chief Executive Officer and President
	 
	 	 	 	 	 	 
	SOUTHEASTERN STAFFING, INC.	 	EXCELL PERSONNEL SERVICES CORPORATION
	 
	 	 	 	 	 	 
	By:

	 	/s/ Howard Brill	 	By:	 	/s/ Howard Brill
	 

	 	 
	 	 	 	 
	Name:

	 	Howard Brill
	 	Name:
	 	Howard Brill
	Its:

	 	Executive Vice President
	 	Its:
	 	Executive Vice President
	 
	 	 	 	 	 	 
	MAIN LINE PERSONNEL SERVICES, INC.	 	FRIENDLY ADVANCED SOFTWARE TECHNOLOGY, INC.
	 
	 	 	 	 	 	 
	By:

	 	/s/ Howard Brill	 	By:	 	/s/ Howard Brill
	 

	 	 
	 	 	 	 
	Name:

Its:

	 	Howard Brill

Executive Vice President
	 	Name:
Its:
	 	Howard Brill

Executive Vice President
	 
	 	 	 	 	 	 
	BAY HR, INC.	 	TEMPORARY PLACEMENT SERVICE, INC., f/k/a Michael & Associates, Inc. and successor by merger to Temporary Placement Service, Inc.
	 
	 	 	 	 	 	 
	By:

	 	/s/ Howard Brill	 	By:	 	/s/ Howard Brill
	 

	 	 
	 	 	 	 
	Name:

Its:

	 	Howard Brill

Executive Vice President
	 	Name:

Its:
	 	Howard Brill

Executive Vice President
	 
	 	 	 	 	 	 
	SOUTHEASTERN GEORGIA HR, INC.	 	SOUTHEASTERN PERSONNEL MANAGEMENT, INC.
	 
	 	 	 	 	 	 
	By:

	 	/s/ Howard Brill	 	By:	 	/s/ Howard Brill
	 

	 	 
	 	 	 	 
	Name:

Its:

	 	Howard Brill

Executive Vice President
	 	Name:

Its:
	 	Howard Brill

Executive Vice President

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	SOUTHEASTERN STAFFING II, INC.	 	SOUTHEASTERN STAFFING III, INC.
	 
	 	 	 	 	 	 
	By:

	 	/s/ Howard Brill	 	By:	 	/s/ Howard Brill
	 

	 	 
	 	 	 	 
	Name:

Its:

	 	Howard Brill

Executive Vice President
	 	Name:

Its:
	 	Howard Brill

Executive Vice President
	 
	 	 	 	 	 	 
	SOUTHEASTERN STAFFING IV, INC.	 	SOUTHEASTERN STAFFING V, INC.
	 
	 	 	 	 	 	 
	By:

	 	/s/ Howard Brill	 	By:	 	/s/ Howard Brill
	 

	 	 
	 	 	 	 
	Name:

Its:

	 	Howard Brill

Executive Vice President
	 	Name:

Its:
	 	Howard Brill

Executive Vice President
	 
	 	 	 	 	 	 
	SOUTHEASTERN STAFFING VI, INC.	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	/s/ Howard Brill	 	 	 	 
	 

	 	 	 	 	 	 
	Name:

Its:

	 	Howard Brill

Executive Vice President	 	 	 	 

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ACKNOWLEDGMENT AND AGREEMENT OF GUARANTOR

     The undersigned, a guarantor of the indebtedness of GLOBAL EMPLOYMENT SOLUTIONS, INC.,
a Colorado corporation (“Global”), EXCELL PERSONNEL SERVICES CORPORATION, an Illinois
corporation (“Excell”), FRIENDLY ADVANCED SOFTWARE TECHNOLOGY, INC., a New York corporation
(“Friendly”), TEMPORARY PLACEMENT SERVICE, INC., f/k/a Michael & Associates, Inc. and
successor by merger to Temporary Placement Service, Inc., a Georgia corporation (“TPS”),
SOUTHEASTERN STAFFING, INC., a Florida corporation (“Southeastern”), SOUTHEASTERN PERSONNEL
MANAGEMENT, INC., a Florida corporation (“SPM”), MAIN LINE PERSONNEL SERVICES, INC., a
Pennsylvania corporation (“Main Line”), BAY HR, Inc., a Florida corporation (“BHR”) and
SOUTHEASTERN GEORGIA HR, INC., a Georgia corporation (“SGHR”), SOUTHEASTERN STAFFING II,
INC., a Florida corporation (“SEII”), SOUTHEASTERN STAFFING III, INC., a Florida corporation
(“SEIII”), SOUTHEASTERN STAFFING IV, INC., a Florida corporation (“SEIV”), SOUTHEASTERN
STAFFING V, INC., a Florida corporation (“SEV”), and SOUTHEASTERN STAFFING VI, INC., a
Florida corporation (“SEVI”) (Global, Excell, Friendly, TPS, Southeastern, SPM, Main Line,
BHR, SGHR, SEII, SEIII, SEIV, SEV and SEVI are each referred to herein as a “Borrower” and
collectively as the “Borrowers”), to WELLS FARGO BANK, NATIONAL ASSOCIATION (the “Lender”),
acting through its Wells Fargo Business Credit operating division pursuant to a Guaranty
dated as of March 31, 2006 (as amended, the “Guaranty”), hereby (i) acknowledges receipt of
the foregoing Amendment; (ii) consents to the terms (including without limitation the
release set forth in Paragraph 12 of the Amendment) and execution thereof; (iii) reaffirms
all obligations to the Lender pursuant to the terms of the Guaranty; and (iv) acknowledges
that the Lender may amend, restate, extend, renew or otherwise modify the Credit Agreement
and any indebtedness or agreement of any Borrower, or enter into any agreement or extend
additional or other credit accommodations, without notifying or obtaining the consent of the
undersigned and without impairing the liability of the undersigned under the Guaranty for
all of the Borrowers’ present and future indebtedness to the Lender.

	 	 	 	 	 
	 	GLOBAL EMPLOYMENT HOLDINGS, INC.

 	 
	 	By:  	/s/ Howard Brill	 
	 	 	Name:  	Howard Brill 	 
	 	 	Its:   Chief Executive Officer and President 	 
	 

8exv10w14

 

Exhibit 10.14

WATER LEASE AGREEMENT

(INCLUDING A CONTRACT TO PURCHASE)

     This Water Lease Agreement (“Agreement”) is between Denver Wells, LLC, a Colorado limited
liability company (“Lessor”), and Eldorado Artesian Springs, Inc. a Colorado corporation
(“Lessee”). Lessor and Lessee may sometimes be referred to individually as a “Party” or
collectively as the “Parties.” Lessor agrees to lease to the Lessee and Lessee agrees to lease
from Lessor certain water under the terms and conditions as described below.

1. Term.

     Unless earlier terminated as provided herein, this Agreement shall be for an initial term of
two (2) years commencing as of the Effective Date as defined herein (“Term”). The Agreement may be
extended upon mutual written agreement of the Parties executed at least three (3) months prior to
the then expiring term.

2. Water to be Leased.

     Lessee leases and shall take delivery at Lessor’s Webber Well No. 1 as described on Exhibit A
attached hereto and incorporated herein, of 100 acre feet annually of nontributary ground water
(“Annual Delivery”), which water is leased to Lessee (the “Leased Water”). Lessor may, provided no
additional cost is incurred by Lessee, substitute the place of delivery to Webber Well No. 3 or
other nearby well site. The Leased Water will be derived from and by means of the exercise of
rights to withdraw and use nontributary ground water owned or controlled by Lessor and are a
portion of the water rights decreed in Case No. W-8780-77 (the “Water Rights”). Lessor agrees to
lease water derived from the exercise of a certain limited portion of the referenced Water Rights
to Lessee. Subject to Lessee’s right of termination set forth in this Agreement, and the future
judicial approvals set forth herein, Lessee agrees that the Leased Water is suitable, both legally
and physically, for Lessee’s intended use.

     The Leased Water shall be produced under and by means of the referenced Water Rights from
certain deep wells constructed or to be constructed by Lessor. Lessor shall, prior to the scheduled
delivery of the Leased Water, complete such well and/or additional wells and infrastructure needed
to perform its obligations hereunder. Lessee shall pay for any costs for materials and
installation of equipment necessary to transfer water from the well to Lessee’s trucks. Such
improvements include, but are not limited to, spigots and a road base for truck parking and a
separate water meter. Lessor shall begin delivery of Lessee’s full water demand on October 21,
2006 (“Delivery Date”).

     Lessee agrees to provide Lessor a monthly and annual accounting of all water extracted form
Lessor’s well, it being expressly acknowledged that Lessee shall not withdraw more than 100 acre
fee of water per year. Lessee shall pay rent based on 100 acre feet regardless of whether Lessee’s
actual withdrawal of water is 100 acre feet per year or less. Lessor agrees to lease to Lessee
between 101 and 300 acre feet of water if needed by Lessee. Payment shall be $600 per additional
acre foot per year in Year 1 and $650 per acre foot in Year 2, paid each month in arrears of use
above 100 acre feet of water each lease year.

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     Lessee acknowledges that its access to the well may be limited to 6:00 p.m. through 6:00 a.m.
and further limited during the National Western Stock Show. Lessee will abide by all of Lessor’s
rules and regulations regarding access to and use of the well. Further, Lessee agrees to abide by
the terms of all access and other easements which apply to the well site.

3. Augmentation.

     The parties understand and agree that Lessee shall use the Leased Water for augmentation
purposes. Upon execution of this Lease, Lessor shall instruct its water counsel to commence
appropriate legal proceedings to obtain a change of use water decree specifically allowing for the
Leased Water to be used for augmentation purposes. Also, upon execution of this Lease, Lessee
shall instruct its water counsel to amend the application pending in Case No. 02CW292 to add the
Leased Water as augmentation source and to seek approval of such augmentation plan and a
corresponding substitute water supply plan to allow use of the Leased Water by Lessee pending
judicial approval of the said augmentation plan. In the event the use of the water for augmentation
purposes is denied by a final an appealable order of a court of competent jurisdiction, Lessee may
terminate this Lease and receive a prorata refund of any lease payment paid as of the date of such
termination.

4. Contract to Purchase.

     Lessor hereby agrees to sell to Lessee and Lessee agrees to buy 300 acre feet per year (and
only 300 acre feet per year) of At Closing, Lessor shall convey by Special Warranty Deed, 300 acre
feet of water decreed in Case No. W-8780-77, to be drawn out of Webber Well No. 1, Webber Well No.
3, at Lessor’s option, from an existing and operating well or wells under the terms and conditions
set forth as follows:

     a. Term. The Term of this Contract to Purchaser shall be the term of the Lease.
Lessee shall provide notice to Lessor thirty (30) days’ prior written notice of its intent to Close
and then set a closing date no later than October 29, 2008.

     b. Earnest Money. Contemporaneously with the execution of this Lease, Lessee shall
pay Lessor the sum total of $90,000 representing a nonrefundable earnest money deposit. The
deposit shall be nonrefundable except in the event Lessor is unable to obtain a change in the use
of the water adjudicated in Case No. W-8780-77 to include augmentation. In the event Lessee Closes
hereunder, the earnest money shall be applied to the Purchase Price.

     c. Purchase Price. The Purchase Price shall be $10,000 per acre foot if Closing is on
or before December 31, 2006. The Purchase Price shall increase by .5% per month thereafter.

     d. Closing. At Closing, Lessor shall convey 300 acre feet of water decreed in Case
No. W-8780-77 to Lessee by Special Warranty Deed.

     e. Contract Personal to Lessee. Lessee may not assign the right to purchase, granted
herein, without the prior written consent of Lessor.

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     f. Joint Operating Agreement. The parties shall enter into a joint operating
agreement providing that Denver Wells, LLC shall be the operator of the well until such time as it
no long owns any of the Water Rights.

     g. Easement/License. At Closing, Lessor shall grant Lessee certain easements and/or
licensees to use its wells and associated easements to give Lessor reasonable access and use of the
water being conveyed.

     h. Change of Use. Lessor shall use commercially reasonable efforts to obtain a change
of use to include augmentation of the 300 acre feet of water which is the subject of this Contract.
Lessee shall cooperate with Lessor’s efforts in this regard.

     i. Remedy. Lessor’s exclusive remedy for Lessee’s failure to Close on the Contract to
Purchase shall be to retain the earnest money.

5. Payment Terms.

     All Leased Water shall be paid for in advance of delivery as follows:

Year 1 — $60,000, payable on October 1, 2006.

Year 2 — $65,000, payable on October 1, 2007.

     The annual lease invoice shall include any amounts due Lessor for additional water delivered
at Lessee’s request during the preceding year, as provided for in Section 2.

     Lessee shall not be permitted to cease payments under this Agreement for any reason. Lessor
shall not be obligated to discharge any Leased Water into the spigot until Lessor receives the
annual lease payment for that year. All payments should be remitted in immediately available funds
to Lessor at the notice address provided in Section 15 below.

6. Utilities.

     Lessee shall pay its prorata share for all utility services, including but not limited to
electricity associated with delivery of the Leased Water to the well spigot. Payment shall be done
within ten (10) days of receipt of an invoice from Lessor. Failure to pay for utilities in a
timely fashion shall constitute a material default under this Lease.

7. Due Diligence Period and Effective Date.

     Lessee shall have a period of thirty (30) calendar days (“Due Diligence Period”) from the date
of mutual execution of this Agreement in which to conduct such investigations and inquiries as
deemed necessary to ascertain that the Leased Water is legally and physically suitable for Lessee’s
intended use. Lessor shall undertake commercially-reasonable efforts to cooperate and assist with
Lessee’s due diligence investigations.

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     Lessee in its sole discretion may terminate this Agreement without penalty at any time during
the Due Diligence Period. Such termination must be in writing and provided to Lessor at the notice
address set forth in Section 15 before 5:00 p.m. Mountain Time on the last day of the Due Diligence
Period. This Agreement shall become effective (“Effective Date”) on the first calendar day
following the end of the Due Diligence Period unless earlier terminated as specified in Section 18.

8. Lessor’s Obligation.

     Lessor’s shall supply the Leased Water to Lessee’s designated spigot and provide and allow
Lessee access to the said spigot to fill its tanker trucks as needed to provide replacement water
pursuant to a substitute water supply plan or augmentation plan. Lessor acknowledges that the
timing and volume of Lessee’s water needs may vary from day-to-day. Lessor will make
commercially-reasonable efforts to accommodate Lessee’s day-to-day water delivery requirements,
provided that Lessee informs Lessor of a desired change in delivery flow rates not less than
forty-eight (48) hours in advance of the desired change. Lessee acknowledges that Lessor has
limited flexibility to manage water delivery timetables and, in the event Lessee fails to provide
the required advance notice, Lessee shall bear the full and sole responsibility for any loss or
damage occasioned by Lessor’s inability to make the requested changes. Lessor shall also be
responsible to keep existing easements in place and to protect and defend such easements against
claims of any third parties.

9. No Adverse Legal Position.

     Lessee agrees that, during the term of this Lease, it will not take a legal position adverse
to Lessor in connection with the operation or administration of Lessor’s Water Rights or the water
rights of Lessor’s affiliated entities, including the Water Rights associated herewith, except as
may be necessary to enforce the terms of this Agreement. Lessor agrees that, during the term of
this Lease, it will not take a legal position adverse to Lessee in connection with the Lessee’s
application for approval of an augmentation plan or substitute water supply plan using the Leased
Water.

10. No Assignment.

     Lessee shall not assign or sublet this Agreement or any interest therein without the prior
written consent of the Lessor, which may not be unreasonably withheld, and, absent such consent,
any attempted assignment or sublease shall be null and void.

11. Lessee’s Exclusive Remedy.

     In the event of any default or claimed default by Lessor, Lessee’s sole and exclusive remedy
shall be to terminate this Lease. Lessor shall not be liable or responsible for any consequential,
incidental, punitive or special damages related to the Leased Water or any other matter relating to
this Agreement.

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12. Condemnation.

     In the event the Leased Water or any portion thereof is taken by condemnation or other eminent
domain proceedings, all awards shall be the property of Lessor, and Lessee shall have no interest
therein. Notwithstanding the foregoing, in the event of a governmental taking of the Leased Water
during the term of Agreement, Lessee’s obligation to pay sums due hereunder shall terminate on the
date of such taking and any earnest money and any portion of the lease payments made under Section
5 for water for which delivery has not been taken shall be refunded to by Lessor to Lessee.

13. Compliance with Laws.

     With respect to this Agreement and the Leased Water, Lessee shall (i) comply with any and all
applicable federal, state, local or agency laws, regulations, rules, ordinances or other
directives, and (ii) obtain all releases, licenses, permits or other authorizations required by any
governmental body or authority.

14. No Warranties.

     LESSOR MAKES NO WARRANTY, EXPRESS OR IMPLIED, CONCERNING THE QUALITY OF THE LEASED WATER, AND
EXPRESSLY DISCLAIMS ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OR OTHERWISE.

15. Notices.

     Notices and inquires shall be made as follows:

	 	 	 	 	 
	 

	 	Lessor:
	 	Denver Wells, LLC
	 

	 	 	 	Attn:   Mark D. Campbell
	 

	 	 	 	333 West Hampden Avenue, Suite 810
	 

	 	 	 	Englewood, CO 80110
	 
	 	 	 	 
	 

	 	Lessee:
	 	Eldorado Artesian Springs, Inc.
	 

	 	 	 	Attn:   Douglas A. Larson
	 

	 	 	 	1783 Dogwood Street
	 

	 	 	 	Louisville, CO 80027

16. Force Majeure.

     Each Party shall be excused from performance under this Agreement while and to the extent that
it is unable to perform, for any cause beyond its reasonable control, except that Lessee’s payment
obligations hereunder shall not be delayed or excused by reason of force majeure. Such causes
shall include, but not be restricted to, fire, drought, storm, flood, earthquake, explosion, war,
labor disputes, total or partial failure of transportation or delivery

5

 

facilities, shortage of labor, raw materials or supplies, interruption of utilities or power,
and any act of government or military authority. In the event either Party is rendered unable
wholly or in part by force majeure to carry out its obligations under this Agreement then the Party
affected by force majeure shall have the right to terminate this Agreement upon thirty (30) days’
written notice to the other Party.

17. Default.

     The occurrence of any one or more of the following events shall constitute a default under
this Agreement:

     a. Failure by either party to observe or perform any of its obligations, covenants,
conditions, representations or warranties pursuant to this Agreement, where such failure is not
remedied within ten (10) days after receipt of a written notice thereof from the other Party; or

     b. Except as otherwise provided herein, failure by Lessee to make any payment due as required
by this Agreement and such breach continues for a period of three (3) days after written notice
thereof from Lessor.

18. Termination.

     Except as otherwise provided herein, this Agreement may be terminated by either Party, with
cause (including a breach of this Agreement by the other Party beyond any notice and cure period),
immediately upon written notice to such Party.

19. Governing Law and Venue.

     The laws of the State of Colorado shall govern this Agreement. Any litigation shall be
brought in District Court, City and County of Denver, State of Colorado, and each Party submits to
the exclusive jurisdiction of said courts and waives the right to contest jurisdiction and/or
change venue.

20. No Waiver.

     Either Party’s failure in any one or more instances to insist upon strict performance of any
of the terms and conditions of this Agreement or to exercise any right herein conferred shall not
be construed as a waiver or relinquishment of that right or of that Party’s right to assert or rely
upon the terms and conditions of this Agreement. Any express waiver of a term of this Agreement
shall not be binding and effective unless made in writing and properly executed by the waiving
Party.

21. Amendments.

     This Agreement may not be amended except in writing properly executed by all the Parties
hereto. Except as specifically amended, this Agreement shall remain in full force and effect.

6

 

22. Entire Agreement.

     These terms and conditions constitute the entire Agreement between the Parties. All prior
agreements, discussions and negotiations are deemed merged in this Agreement.

23. No Partnership.

     It is expressly understood and agreed that Lessor and Lessee are not partners, and neither
party is liable for the debts, liabilities and obligations of the other.

24. Estoppel Certificate.

     Lessee further agrees at any time and from time to time, upon not less than ten (10) days’
prior written request by Lessor, to execute, acknowledge, and deliver to Landlord a statement in
writing certifying that this Lease is unmodified and in full force and effect (or if there have
been modifications, that the same is in full force and effect as modified, and stating the
modifications), that there have been no defaults thereunder by Lessor or Lessee (or if there have
been defaults, setting forth the nature thereof), the date to which the rent and other charges have
been paid, in advance, if any, and any other matters relating to this Lease as Lessor may specify,
it being intended that any such statement delivered pursuant to this Section may be relied upon by
any prospective purchaser of all or any portion of Lessor’s interest herein, or a holder of any
mortgage or deed of trust encumbering the Leased Water. Lessee’s failure to deliver such statement
within such time shall be an event of default under this Lease and shall be conclusive upon Lessee
that (i) this Lease is in full force and effect, without modification except as may be represented
by Lessor; (ii) there are no uncured defaults in Lessor’s performance; (iii) no rent has been paid
in advance; and (iv) that such other matters addressed therein are as represented by Lessor.
Further, upon request Lessee will supply Lessor a corporate resolution certifying that the party
signing said statement on behalf of Lessee is properly authorized to do so.

[Signature page follows.]

7

 

Signature page to that certain WATER LEASE AGREEMENT 

(INCLUDING AN CONTRACT TO PURCHASE) between

Denver Wells, LLC, a Colorado limited liability company 

(“Lessor”),
and Eldorado Artesian Springs, Inc. a Colorado

corporation
(“Lessee”).

     IN WITNESS WHEREOF, the Parties have executed this Agreement this 31st day of August 2006.

	 	 	 	 	 	 	 	 	 	 	 
	Lessor:	 	 	 	Lessee:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	DENVER WELLS, LLC,	 	 	 	ELDORADO ARTESIAN SPRINGS,	 	 
	a Colorado limited liability company	 	 	 	INC., a Colorado corporation	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Mark D. Campbell, Manager
 

	 	 	 	By:
	 	/s/ Douglas A. Larson
 

	 	 
	 

	 	Mark D. Campbell, Manager
	 	 	 	 	 	Douglas A. Larson	 	 

8

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