Document:

Exhibit

Exhibit 10.2
SECOND AMENDED AND RESTATED
SECURITY AGREEMENT

THIS SECOND AMENDED AND RESTATED SECURITY AGREEMENT (the “Security Agreement”) dated as of June 28, 2017 among MALIBU BOATS, LLC, a Delaware limited liability company (the “Borrower”), the other Debtors listed on the signature pages hereto (collectively, the “Debtors”), and SUNTRUST BANK, a Georgia state banking corporation, in its capacity as Administrative Agent for the holders of the Indebtedness (defined below) (“Secured Party”).
W I T N E S S E T H
WHEREAS, the Debtors, the Lenders party thereto and the Secured Party are party to that certain Amended and Restated Credit Agreement dated as of April 2, 2015 (as amended by the First Amendment to Credit Agreement, dated as of February 3, 2016, the Second Amendment to Credit Agreement, dated as of August 15, 2016, and the Third Amendment to Credit Agreement, dated as of December 28, 2016, the “Existing Credit Agreement”), 
WHEREAS, the Debtors and the Secured Party are party to that certain Amended and Restated Security Agreement dated as of April 2, 2015 (as amended, supplemented, amended and restated or otherwise modified from time to time, the “Existing Security Agreement”);
WHEREAS, the Debtors, the Secured Party and the Lenders party thereto have agreed to amend and restate the Existing Credit Agreement in its entirety upon and subject to the terms and conditions set forth in that certain Second Amended and Restated Credit Agreement among the Debtors, the Secured Party and the Lenders party thereto, dated as of the date hereof (as may be amended, supplemented, amended and restated or otherwise modified from time to time, the “Credit Agreement”; capitalized terms used herein and not otherwise defined herein shall have the meaning set forth in the Credit Agreement);
WHEREAS, as a condition precedent to the agreement of the Lenders to extend credit under the Credit Agreement, the Debtors are required to amend and restate the Existing Security Agreement pursuant to the terms hereof; and
WHEREAS, the Debtors have duly authorized the execution, delivery and performance of this Security Agreement and will receive direct and indirect benefits by reason of the credit extended under the Credit Agreement.
NOW, THEREFORE, in order to induce the Lenders to extend credit to the Borrower under the Credit Agreement, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Debtors and the Secured Party, hereby agree as follows:
Security Interest.  As security for the repayment of the Indebtedness (as defined in Section 2), each Debtor hereby assigns and grants to Secured Party, a security interest in and to all of the Debtor’s presently existing and hereafter acquired rights in and to the property described on Exhibit A attached hereto and incorporated herein by this reference, including, without limitation all such property or type of property presently existing and hereafter acquired or arising and all proceeds (including insurance proceeds) or products attributable to or arising from any of such property (collectively, the “Collateral”).
1.Indebtedness.  The security interest granted herein by the Debtors secures and shall secure (a) all Obligations and (b) all documented and reasonable costs and expenses incurred in connection with enforcement and collection of the Obligations, including the documented and reasonable fees, charges and 

disbursements of counsel. For purposes of this Security Agreement, all such obligations secured by the Collateral shall be referred to as “Indebtedness.”  
2.Debtor’s Representations and Warranties to Secured Party.  Each Debtor hereby represents and warrants to Secured Party, for the benefit of the holders of the Indebtedness, that the following facts are true and correct in all material respects as of the date hereof:
(a)each Debtor is the true and lawful owner of its Collateral in all material respects;
(b)each Debtor has a legal right to grant a security interest in its Collateral;
(c)Except for liens in favor of Secured Party, for the benefit of the holders of the Indebtedness and Permitted Encumbrances, there are no Liens against the Collateral; and
(d)each Debtor has obtained all necessary consents required to execute and deliver this Security Agreement and to accomplish the transactions evidenced hereby, including, without limitation, any requirements contained in any partnership agreement, bylaws, or operating agreement that governs any partnership interests, stock, membership interests, or other ownership interests owned by such Debtor and pledged to secure the Indebtedness pursuant to this Security Agreement (collectively, “Organizational Documentation for Pledged Interests”).
3.Debtor’s Covenants to Secured Party.  Each Debtor hereby covenants and agrees that until the Indebtedness shall have been paid in full (other than contingent indemnification obligations or expense reimbursement obligations to the extent no claim giving rise thereto has been asserted) or unless such Debtor shall have received the prior written consent of Secured Party:
(a)Protection and Use of Collateral.  (i) each Debtor will keep the Collateral free from any adverse lien, security interest, or encumbrance (other than the security interest granted herein and Permitted Encumbrances); and (ii) each Debtor will not waste or destroy the Collateral or any part thereof and such Debtor will not use the Collateral in violation of any regulations, statute or ordinance or of any judgments, citations, decrees or orders of any judicial or administrative authority, except to the extent that could not reasonably be expected to have a Material Adverse Effect.
(b)Sale, Assignment or Impairment of Collateral.  Except for Permitted Encumbrances and otherwise as permitted under the Loan Documents, no Debtor will sell, assign or otherwise transfer, dispose of or encumber the Collateral, or any interest therein outside the ordinary course of business.
(c)Maintain Insurance.  Each Debtor will maintain insurance, in form, amounts, and with companies reasonably satisfactory to Secured Party, insuring all material Collateral against loss from fire, theft, and the kinds customarily insured against by companies in the same or similar businesses operating in the same or similar locations.  Secured Party, as Administrative Agent for the holders of the Indebtedness, shall be designated as an additional insured under the terms of the policies evidencing such insurance and shall receive a minimum of thirty (30) days’ written cancellation notice from the company or insurer issuing such policy or policies.   If the Debtors fail to furnish said insurance or fails to pay the premiums therefor, Secured Party may do so or may obtain insurance of its interest only, adding the amount of any such premium thereof to the other amounts secured hereby; provided, however, Secured Party is under no obligation or duty to pay such premiums or obtain or maintain such insurance.  Each Debtor hereby grants to Secured Party a security interest in any return or unearned premiums which may be due upon cancellation of any of said policies for any reason whatsoever.  After the occurrence and during the continuation of an Event of Default, at the request of Secured Party, each Debtor shall direct all insurors to pay Secured Party the amount of any insurance proceeds or payments arising out of or in connection with the insurance policies referenced herein and any balance of insurance proceeds remaining after payment in full of all amounts owing to Secured 

Party shall be paid to such Debtor.  After the occurrence and during the continuation of an Event of Default, the Secured Party acting through any officer, agent or employee is hereby appointed as each Debtor’s attorney-in-fact to endorse any draft or check which may be payable to such Debtor and, without obligation, to make claim with any insurer for payment under any insurance policy.
(d)Indemnification.  Each Debtor will and does hereby agree to indemnify and hold Secured Party harmless against all claims arising out of or in connection with such Debtor’s ownership or use of the Collateral.
(e)Removal of Collateral.  Each Debtor warrants and represents to and covenants with Secured Party that: (a) after the filing of certain uniform commercial code financing statements, the delivery of possessory Collateral to Secured Party and the entry into Control Agreements, as contemplated by the Loan Documents, Secured Party’s security interest in the Collateral is now and at all times hereafter shall be perfected and have a first priority to the extent that such security interests can be perfected by the filing of uniform commercial code financing statements, delivery of Collateral or entry into Control Agreements, subject to Permitted Encumbrances; (b) as of the date hereof, the offices and/or locations where each Debtor keeps the Collateral in excess of $1,000,000 and such Debtor’s books and records concerning the Collateral are at the locations set forth beside the signature of such Debtor or as otherwise disclosed by such Debtor to Secured Party in writing, and such Debtor shall not remove such books and records therefrom and shall not keep any of such books and records and/or the Collateral in excess of $1,000,000 at any other office or location unless such Debtor gives Secured Party written notice thereof at least ten (10) days prior thereto (or such later date acceptable to Secured Party) and the same is within either the continental United States of America, Canada or Australia; provided, that no such notice should be required as a result of sales and other dispositions of property in the ordinary course of business that are permitted under the Credit Agreement; and (c) as of the date hereof, such addresses include and designate each Debtor’s chief executive office, chief place of business and other offices and places of business and are each Debtor’s sole offices and places of business.  Promptly thereafter, the Borrower, by written notice delivered to Secured Party, shall advise Secured Party of each Debtor’s opening of any material new office or place of business or its closing of any material existing office or place of business.
(f)Inspect Collateral.  Secured Party shall have the right, at any time or times during any Debtor’s usual business hours without material disruption to normal business activities, to inspect the Collateral and all related records (and the premises upon which it is located) and all financial records and to verify the amount and condition of the Collateral.  After an Event of Default has occurred and is continuing, all reasonable costs, fees and expenses incurred by Secured Party, or for which Secured Party has become obligated, in connection with such inspection and/or verification shall be payable by the Debtors to Secured Party.
(g)Discharge Liens.  Secured Party, for the benefit of the holders of the Indebtedness, in its sole and absolute discretion, without waiving or releasing any obligation, liability or duty of any Debtor under this Security Agreement or otherwise, may at any time or times hereafter after the occurrence and during the continuation of an Event of Default, but shall be under no obligation to pay, acquire and/or accept an assignment of any security interest, lien, encumbrance or claim asserted by a person against the Collateral.  All sums paid by Secured Party in respect thereof and all reasonable costs, fees and expenses, including reasonable attorneys’ fees, court costs, expenses and other charges relating thereto incurred by Secured Party on account thereof shall be payable by the Debtors to Secured Party.
(h)Execute Additional Documents.  Each Debtor will sign and execute alone or with Secured Party any financing statement or other document and pay all necessary costs to reasonably protect the security interest under this Security Agreement against the interest of third persons (other than Permitted Encumbrances).  After the occurrence and during the continuation of an Event of Default, Secured Party is 

hereby appointed the attorney-in-fact of each Debtor to do all acts and things which Secured Party may deem reasonably necessary to perfect and/or continue the perfection of the security interest created by this Security Agreement and to protect the Collateral.  The Debtors agree to pay all documented costs and fees for filing any termination statements.  Each Debtor authorizes and empowers the Secured Party to file any UCC financing statement or UCC amendments without the necessity of such Debtor’s signature in order to perfect the security interest of Secured Party, for the benefit of the holders of the Indebtedness, against the Collateral, as such term is defined in this Security Agreement.
(i)Obligations Under Organizational Documentation for Pledged Interests.  Each Debtor will perform all of its duties and obligations under the Organizational Documentation for Pledged Interests, and such Debtor shall take all actions necessary (including the payment of all amounts due and owing and/or arising under the Organizational Documentation for Pledged Interests) to preserve its ownership interest(s) in such entity unless otherwise permitted by the terms of the Credit Agreement.
4.Special Representations, Warranties and Agreements with respect to Accounts.  With respect to Accounts, each Debtor represents, warrants and agrees with Secured Party, for the benefit of the holders of the Indebtedness, as follows:
(a)As of the time any Account becomes subject to Secured Party’s security interest hereunder, including, without limitation, as of each time any specific assignment or transfer or identification is made to Secured Party of any Account, each Debtor shall be deemed to have warranted that the Accounts are in all material respects genuine and in all material respects what they purport to be; that each Account is valid and subsisting and arises out of a bona fide sale of goods sold and delivered, or in the process of being delivered, or out of and for services theretofore actually rendered, to the account debtor named in the Account (each an “Account Debtor”); that the amount of the Account represented as owing is the correct amount owing except for normal cash discounts and except for any setoffs, credits, deductions or counter-charges in the ordinary course of business, including, without limitation, warranty claims and subject to any non-intentional discrepancies that are not material.
(b)Each Debtor will hold in such Debtor’s principal place of business, or other location within the fifty (50) states comprising the United States of America or the District of Columbia disclosed to Secured Party, and make available to Secured Party as reasonably requested, so long as any Indebtedness remains unpaid (other than contingent indemnification obligations or expense reimbursement obligations to the extent no claim giving rise thereto has been asserted), all of such Debtor’s records containing any entries as to Accounts, including details of sale, shipment, delivery, payment and other material information; and, at Secured Party’s reasonable request, such records will be segregated and marked by such Debtor in a manner reasonably satisfactory to Secured Party; and Secured Party shall at any time or times during such Debtor’s usual business hours without material disruption to normal business activities, have full access to and the right to examine and audit such Debtor’s books and records, and to make copies of pertinent portions thereof; provided, if no Event of Default has occurred and is continuing, such Debtor shall only be responsible for reimbursing costs and expenses incurred pursuant to this Section 5(b) no more than (1) time per Fiscal Year.
(c)Following the occurrence and during the continuation of an Event of Default, at the request of the Secured Party, all checks and other forms of remittances received by each Debtor on Accounts shall not be commingled with such Debtor’s other property but shall be segregated, held by such Debtor in trust for Secured Party, for the benefit of the holders of the Indebtedness, and immediately delivered by Debtor to Secured Party in the form as that in which received with proper endorsements.  Each Debtor will accompany each such transmission of proceeds to Secured Party with a report in such form as Secured Party may reasonably require to identify the Accounts to which such proceeds apply.  In the event any Account Debtor shall also be indebted to any such Debtor in any other respect and such Account Debtor shall make payment without designating the particular indebtedness against which it is to apply, such payment shall be presumed 

to be payment on the Account of such Account Debtor unless the Account Debtor subsequently provides evidence that the payment was not intended to be applied to the payment on the account of such Account Debtor.  In administering the collection of proceeds as herein provided, Secured Party or the bank designated by it may accept checks or drafts in any amount and bearing any notation without incurring liability to Debtor for so doing.
(d)Returned or repossessed goods arising from or relating to any Accounts, will be subject to the security interest of Secured Party, for the benefit of the holders of the Indebtedness, hereunder.
5.Special Representations, Warranties and Agreements with Respect to Inventory.  With respect to Inventory, Debtor represents, warrants and agrees with Secured Party, for the benefit of the holders of the Indebtedness, as follows:
(a)Each Debtor will continue to maintain books and records pertaining to the Inventory in the detail, form and scope as such Debtor is maintaining such books and records at the execution of this Security Agreement in all material respects and agrees that Secured Party or its agents may enter upon such Debtor’s premises at any time or times during such Debtor’s usual business hours without material disruption to normal business activities, for the purpose of inspecting Inventory and any and all records pertaining thereto; provided, if no Event of Default has occurred and is continuing, Debtors shall only be responsible for reimbursing costs and expenses incurred pursuant to this Section 6 no more than (1) time per Fiscal Year; and each Debtor will notify Secured Party promptly of: (x) any change in such Debtor’s name, mailing address or principal place of business, or (y) any new location of Inventory in excess of $1,000,000; and each Debtor will promptly advise Secured Party in sufficient detail of any event that could reasonably be expected to have a material adverse effect on the value of the Inventory or on the lien and security interest granted to Secured Party, for the benefit of the holders of the Indebtedness, herein.
(b)Secured Party may require each Debtor from time to time to deliver to Secured Party such lists, descriptions and designations of Inventory as Secured Party may reasonably request to identify the quantities, nature, extent, location and value of the Inventory, subject to the security interest of Secured Party, for the benefit of the holders of the Indebtedness.  Each Debtor warrants that all Inventory at any time and from time to time included in any such lists, descriptions or designations will be in fact existing and in the condition and amount represented to Secured Party in all material respects.
(c)After the occurrence and during the continuation of an Event of Default, at the request of Secured Party, each Debtor shall not make further dispositions of its Inventory without Secured Party’s prior written approval.
(d)Upon the sale, exchange or other disposition of the Inventory, the security interest and lien created and provided for herein shall, without break in continuity and without further formality or act, continue in and attach to the instruments for the payment of money, accounts receivable, documents of title, shipping documents, chattel paper and all other cash and non-cash proceeds of such sale, exchange or disposition, including Inventory returned or rejected by customers or repossessed by a Debtor or Secured Party.  To the extent permitted by applicable law, as to any such sale, exchange or disposition, Secured Party shall have all of the rights of an unpaid seller, including stoppage in transit, replevin and reclamation.
(e)All invoices covering sales of Inventory are hereby assigned to Secured Party as security and after the occurrence and during the continuation of an Event of Default, at the request of Secured Party, the proceeds thereof, if collected by a Debtor, are to be turned over to Secured Party, for the benefit of the holders of the Indebtedness.  After the occurrence and during the continuation of an Event of Default, at the request of Secured Party, cash sales of Inventory or sales in which a lien upon or security interest in the Inventory is retained shall only be made by any Debtor with Secured Party’s prior written approval and the proceeds 

of such sales, whether cash, documents or instruments, shall not be commingled with such Debtor’s other property, but shall be segregated, held by such Debtor in trust for Secured Party as Secured Party’s exclusive property, for the benefit of the holders of the Indebtedness, and shall be delivered immediately by such Debtor to Secured Party in the identical form as that in which received.
6.Debtors’ Use of the Collateral.  Each Debtor may use the Collateral in the ordinary course of such Debtor’s business and as permitted by the Loan Documents; provided, that, upon the occurrence and during the continuation of an Event of Default, such Debtor’s right to so use the Collateral shall terminate until further written notice from Secured Party, at the Secured Party’s request.
7.Events of Default.  The term “Event of Default”, whenever used in this Security Agreement, shall mean an “Event of Default” as defined in the Credit Agreement.
8.Remedies.
(a)Upon the happening of any Event of Default, and at any time thereafter when such Event of Default is continuing, at the option of Secured Party, any and all Indebtedness shall become immediately due and payable without presentment or demand or any notice to Debtors or any other person obligated thereon, and Secured Party shall have and may exercise any or all of the rights and remedies of a Secured Party under the Uniform Commercial Code as adopted in the State of New York or any other applicable jurisdiction in which any Debtor maintains its principal place of business (the “Code”), and as otherwise contractually granted herein or under any other applicable law or under any other agreement executed by any Debtor in favor of Secured Party, including, without limitation, the right and power to sell, at public or private sale or sales, or otherwise dispose of or utilize such portion of the Collateral and any part or parts thereof in any manner authorized or permitted under the Code after the occurrence and during the continuation of an Event of Default, and to apply the proceeds thereof in accordance with Section 8.2 of the Credit Agreement.  Additionally, and as an essential part of the bargained-for consideration running to Secured Party and to the extent allowed by law, each Debtor hereby expressly grants to Secured Party the contractual right to purchase any or all of the Collateral at public or private sale any time after ten (10) days’ notice of such sale shall have been sent to such Debtor by Secured Party.
(b)Additionally, upon the occurrence and during the continuation of an Event of Default, the Secured Party may give written notice to the entities in which any Debtor owns an interest and/or such entities’ members, partners, officers, shareholders, or stockholders requiring such parties to pay over and deliver to Secured Party from time to time any and all payments and distributions otherwise to be delivered to such Debtor arising under, out of, or in respect of such Debtor’s interest in said entity.  Each Debtor hereby irrevocably authorizes the entities in which it holds a membership interest, partnership interest, stockholder interest, or shareholder interest and/or its members, partners, officers, shareholders, or stockholders to comply (without further inquiry or notice) with such notice given by Secured Party and to deliver all such payments and distributions described herein to Secured Party.
(c)Each Debtor agrees, to the extent permitted by applicable law, that if such notice of the occurrence and continuation of an Event of Default is mailed, postage prepaid, or sent by overnight mail, charges prepaid, to such Debtor at the address shown in Section 11.1(a) of the Credit Agreement at least ten (10) days before the time of the proposed sale or disposition, such notice shall be deemed reasonable and shall fully satisfy any requirement of giving of notice, and the proposed sale may take place any time after such ten (10) day period without the necessity of sending another notice to such Debtor.  To the extent permitted by applicable law, Secured Party may postpone and reschedule any proposed sale at its option without the necessity of giving Debtors further notice of such fact as long as the rescheduled sale occurs within sixty (60) days of the originally scheduled sale.

(d)To the extent permitted by applicable law, all recitals in any instrument of assignment or any other document or paper executed by Secured Party incident to sale, transfer, assignment or other disposition or utilization of the Collateral or any part thereof hereunder shall be sufficient to establish full legal propriety of the sale or other action taken by Secured Party or of any fact, condition or thing incident thereto, and all prerequisites of such sale or other action shall be presumed conclusively to have been performed or to have occurred.
(e)In addition to the foregoing provisions, following the occurrence and during the continuation of an Event of Default, and upon Secured Party’s demand, each Debtor agrees to assemble the Collateral at its usual place of business and promptly make the same available to Secured Party.
9.Secured Party’s Powers and Duties with Respect to the Collateral.
(a)Secured Party shall be under no duty to collect any amount that may be or become due on any of the Collateral now or hereafter pledged hereunder, to realize on Collateral, to collect principal, interest or dividends, to keep the same insured, to make any presentments, demands or notices of protest, in connection with any of the Collateral, or to do anything for the enforcement and collection of Collateral or the protection thereof.
(b)Not limiting the generality of any of the foregoing but in amplification of the same, Secured Party shall be in no way liable to or responsible for any diminution in the value of the Collateral from any cause whatsoever, except to the extent required by applicable law.
(c)The Debtors agree to pay all material taxes, charges, transfer fees and assessments against the Collateral, and on the failure of the Debtors to so do that has resulted in an Event of Default, Secured Party may, after giving the Debtors written notice of its intention to do so, make such payments and advance such sums on account thereof as Secured Party, in Secured Party’s discretion, deems desirable.  Each Debtor agrees to reimburse Secured Party promptly upon demand for all such payments and advances plus interest thereon at the maximum rate allowed by applicable law, repayment of all of which is secured by this Security Agreement and the Collateral.
10.General Authority.  Effective immediately but exercisable by Secured Party (or by any person designated by Secured Party) only upon the occurrence and during the continuation of an Event of Default, each Debtor hereby IRREVOCABLY appoints Secured Party (or any person designated by Secured Party) as such Debtor’s true and lawful attorney-in-fact, which appointment is hereby coupled with an interest, with full power of substitution, in Secured Party’s name or such Debtor’s name or otherwise, for Secured Party’s sole use and benefit, but at such Debtor’s cost and expense, to exercise at any time and from time to time all or any of the following powers with respect to all or any of the Collateral:
(a)To receive, take, endorse, assign and/or deliver in Secured Party’s name or such Debtor’s name any and all checks, notes, drafts and other instruments relating to the Collateral;
(b)To transmit to Account Debtors, entities in which such Debtor owns an interest, and such entities’ members, partners, officers, shareholders, or stockholders, notice of Secured Party’s interest in the Collateral and to request from Account Debtors, entities in which such Debtor owns an interest, and such entities’ members, partners, officers, shareholders, or stockholders, at any time, in such Debtor’s name or in Secured Party’s name or the name of Secured Party’s designee, information concerning the Collateral and the amounts owing thereon;
(c)To receive and open all mail addressed to such Debtor and to retain all mail pertaining to the Collateral;

(d)To notify Account Debtors, entities in which such Debtor owns an interest, and such entities’ members, partners, officers, shareholders, or stockholders to make payment directly to Secured Party or to any bank designated by Secured Party;
(e)To take or bring, in such Debtor’s name or Secured Party’s name, all steps, actions, suits or proceedings deemed by Secured Party necessary or desirable to effect collection of the Accounts, to compromise with any Account Debtor and give acquittance for any and all Accounts;
(f)To sign such Debtor’s name on any invoice or bill of lading relating to any Collateral, drafts against such Debtor’s customers, notices of assignment, financing statements, other public records and notices to such Debtor’s customers; and
(g)In general, to do all things necessary to perform the terms of this Security Agreement, including, without limitation, to take any action or proceedings that Secured Party deems necessary or appropriate to protect and preserve the security interest of Secured Party, for the benefit of the holders of the Indebtedness, in the Collateral; provided, however, the exercise by Secured Party of or failure to so exercise any such authority shall in no manner affect any Debtor’s liability to Secured Party hereunder or in connection with the Indebtedness; and provided further, that Secured Party shall be under no obligation or duty to exercise any of the powers hereby conferred upon Secured Party and Secured Party shall have no liability for any act or failure to act in connection with any of the Collateral.  Secured Party shall not be bound to take any steps necessary to preserve rights in any instrument, contract or lease against third parties.  Not limiting the generality of any of the foregoing but in amplification of the same, Secured Party shall be in no way liable to or responsible for any diminution in the value of, or reduction in the proceeds realized from, the Collateral from any cause whatsoever as required by applicable law.
11.Power to Execute.  The board of directors, board of managers, or other appropriate governing body of each Debtor has authorized the transactions contemplated by and referred to in this Security Agreement and the consummation of such transactions.  Each Debtor represents and warrants that it has full corporate, partnership or limited liability company power in accordance with applicable law to execute this Security Agreement and perform any obligations described in, contemplated by or referred to in this Security Agreement and such execution and performance by it will not conflict with its charter or bylaws, or any other document or instrument to which it is a party or to which it is subject, bound or affected.
12.Execution of Security Agreement.  Each Debtor stipulates that it has read this Security Agreement, fully understands the content and consequences of entering into this Security Agreement, intends to be bound by the terms of this Security Agreement and is not under any duress, economic or otherwise, to execute this Security Agreement.
13.Invalid Provisions.  If any one or more of the provisions of this Security Agreement, or the applicability of any such provision to a specific situation, shall be held invalid, illegal or unenforceable in any respect, such provision shall be modified to the minimum extent necessary to make it or its application valid and enforceable, and the validity and enforceability of all other provisions of this Security Agreement and all other applications of any such provision shall not be affected thereby.
14.Dealings With Debtor.  It is expressly understood and agreed that, notwithstanding anything else contained in this Security Agreement, Secured Party may, for all purposes hereof deal solely with Debtors in connection therewith, and nothing herein or in any other loan document executed in connection herewith shall be construed so as to require dealings with, consent of or notice to any other parties or persons.
15.Construction.  The parties acknowledge that in the event the provisions of this Security Agreement require judicial interpretation, it is agreed that the court interpreting or construing this Security Agreement shall not apply a presumption that the terms hereof shall be more strictly construed against one 

party by reason of the rule of construction that a document is to be construed more strictly against the party who itself or through its agent prepared the same, it being agreed that all parties to this Security Agreement participated in the preparation of this Security Agreement.
16.Counterparts.  This Security Agreement may be executed in multiple counterparts, and all such executed counterparts shall constitute the same agreement.  It shall not be necessary that the signatures of all parties be contained on any one counterpart.  It shall be necessary to account for only one such counterpart in proving the existence or terms of this Security Agreement.
17.Number and Gender.  As used in this Security Agreement, the singular number shall include the plural and the plural shall include the singular, and the use of any gender shall be applicable to all genders, unless the context would clearly not admit such construction.  The words “herein,” “hereof,” “hereunder” and other similar compounds of the word “here” when used in this Security Agreement shall refer to the entire Security Agreement and not to any particular provision or section.
18.Governing Law; Submission to Jurisdiction; Venue; WAIVER OF JURY TRIAL.  The terms of Sections 11.5 and 11.6 of the Credit Agreement with respect to governing law, submission to jurisdiction, venue and waiver of jury trial are incorporated herein by reference, mutatis mutandis, and the parties hereto agree to such terms.
19.Successors and Assigns.  No Debtor shall assign its rights or delegate its duties under this Security Agreement.  All terms and provisions of this Security Agreement applicable to each Debtor shall bind such Debtor and such Debtor’s permitted successors and assigns and shall inure to the benefit of Secured Party, for the benefit of the holders of the Indebtedness, and its successors and assigns.
20.Entire Security Agreement.  This Security Agreement, including Exhibits and the other documents and agreements referred to herein, constitutes the entire agreement between the parties hereto with respect to the matters addressed herein and supersedes all prior agreements and understandings relating to the subject matter hereof, either written or oral, that may have existed between them with respect to the matters addressed herein.  No representation, promise, condition, warranty or understanding, either express or implied, other than as set forth herein, shall be binding upon any of the parties to this Security Agreement.
21.Notices.  All communications and notices hereunder shall be in writing and given as provided in Section 11.1 of the Credit Agreement.
22.Renewal, Extension or Rearrangement.  All provisions of this Security Agreement relating to Indebtedness shall apply with equal force and effect to each and every promissory note executed hereafter that in whole or in part represents a renewal, extension for any period, increase or rearrangement of any part of the Indebtedness originally represented by any part of such other Indebtedness.
23.Election of Remedies.  Secured Party shall have all of the rights and remedies now or hereafter existing, by contract, at law or in equity and pursuant to any other body of law, statutory or otherwise, and these same rights and remedies shall be cumulative and may be pursued separately, successively or concurrently against the Debtors at the sole discretion of Secured Party.  The exercise or failure to exercise any of the same shall not constitute a waiver or release thereof or of any other right or remedy and the same shall be nonexclusive.  If Secured Party has security in addition to the Collateral, Secured Party may resort to such other security for the payment of the Indebtedness.
24.Titles of Sections and Subsections.  All titles or headings to sections, subsections or other divisions of this Security Agreement or the exhibits to this Security Agreement are only for the convenience of the parties and shall not be construed to have any effect or meaning with respect to the other content of 

such sections, subsections or other divisions, such other content being controlling with respect to the agreement between the parties.
25.Joinder.  At any time after the date of this Agreement, one or more additional Persons may become party hereto by executing and delivering to the Secured Party a Joinder Agreement.  Immediately upon such execution and delivery of such Joinder Agreement (and without any further action), each such additional Person will become a party to this Agreement as a “Debtor” and have all of the rights and obligations of a Debtor hereunder and this Agreement and the schedules hereto shall be deemed amended by such Joinder Agreement.
26.Joint and Several Obligations of Debtors.
(a)    Subject to subsection (c) of this Section 28, each of the Debtors is accepting joint and several liability hereunder, in consideration of the financial accommodation to be provided by the holders of the Indebtedness, of each of the Debtors and in consideration of the undertakings of each of the Debtors to accept joint and several liability for the obligations of each of them.
(b)    Subject to subsection (c) of this Section 28, each of the Debtors jointly and severally hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other Debtors with respect to the payment and performance of all of the Indebtedness arising under Loan Documents and any other documents relating to the Indebtedness, it being the intention of the parties hereto that all the Indebtedness shall be the joint and several obligations of each of the Debtors without preferences or distinction among them.
(c)    Notwithstanding any provision to the contrary contained herein, in any other of the Loan Documents or in any other documents relating to the Indebtedness, the obligations of each Debtor under the Credit Agreement, the other Loan Documents and the other documents relating to the Indebtedness shall be limited to an aggregate amount equal to the largest amount that would not render such obligations subject to avoidance under Section 548 of the United States Bankruptcy Code or any comparable provisions of any other applicable Law.
27.Modification.  This Agreement and the provisions hereof may not be amended, waived, modified, changed, discharged or terminated except as set forth in Section 11.2 of the Credit Agreement.
28.Further Assurances.  Each Debtor agrees that it will without further consideration execute and deliver such other documents and take such other action, as may be reasonably requested by Secured Party to consummate more effectively the transactions contemplated hereby.
29.Severability.  The invalidity or unenforceability of any of the rights or remedies herein provided in any jurisdiction shall not in any way affect the right to the enforcement in such jurisdiction or elsewhere of any of the other rights or remedies herein provided.
IN WITNESS WHEREOF, this Security Agreement has been executed and delivered on the date first written above.
DEBTORS:
MALIBU BOATS, LLC,
a Delaware limited liability company
By: /s/ Wayne Wilson    
Name: Wayne Wilson    

Title: Chief Financial Officer    
MALIBU BOATS HOLDINGS, LLC
By: /s/ Wayne Wilson    
Name: Wayne Wilson    
Title: Chief Financial Officer    
MALIBU AUSTRALIAN ACQUISITION CORP.
By: /s/ Wayne Wilson    
Name: Wayne Wilson    
Title: Secretary and Treasurer    
SECURED PARTY:
SUNTRUST BANK
By: /s/ Tesha Winslow    
Name: Tesha Winslow    
Title: Director    

EXHIBIT A
The Collateral includes, and each Debtor hereby grants to Secured Party, for the benefit of the holders of the Indebtedness, a security interest in and to, all of such Debtor’s right, title and interest in the following described property (and types of property) both presently existing and hereafter acquired or arising:
1.All of such Debtor’s assets, including without limitation, all Accounts, Accounts receivable, Inventory, Equipment, General Intangibles, Goods, Documents, contract rights, distributions, payments, capital accounts, profits, furniture, choses in action, Chattel Paper, leases, rentals, machinery, Investment Property, cash, cash equivalents, Deposit Accounts, tort claims, intellectual property rights, trademarks, patents, copyrights, intercompany obligations, stock, marketable securities, brokerage accounts, Instruments, notes and Supporting Obligations, including, without limitation, those U.S. federally registered intellectual property, patents, and trademarks described on the Closing Certificate. Capitalized terms used herein and not defined herein shall have the meanings given to such terms in the Code (as such term is defined in this Security Agreement).
2.All of the foregoing as such may arise under any Organizational Documentation for Pledged Interests (as such term is defined in this Security Agreement).
3.All of such Debtor’s membership interests, partnership interests, stockholder interests, shareholder interests, financial rights, and governance rights arising under any Organizational Documentation for Pledged Interests, together with any payments and distributions arising in connection therewith, and including, without limitation, those interests described on the Closing Certificate.
4.All ledgers, books of account and records of such Debtor relating to any and all of the property described on this Exhibit A.
5.All payments, monies, interest, distributions, and dividends arising from any of the property described on this Exhibit A.
6.The proceeds (including insurance proceeds) of any and all of the Collateral.
7.All deposit and checking accounts maintained by such Debtor with Secured Party, excluding any Excluded Account (as such term is defined in the Credit Agreement) provided, that this Security Agreement shall not constitute a grant of a security interest in any property to the extent that and for as long as such grant of a security interest (A) is prohibited by any Requirement of Law, as such term is defined in the Credit Agreement, (B) constitutes a breach or default under or results in the termination of, or requires any consent not obtained under, any lease, license, or agreement except to the extent that such Requirement of Law or provisions of any such lease , license, or agreement is ineffective under applicable law or would be ineffective under Sections 9-406, 9-407, 9-408 or 9-409 of the Code (as defined in this Security Agreement) to prevent the attachment of the security interest granted hereunder, (C) is in any United States trademark applications filed on the basis of a Debtor’s intent-to-use such mark, in each case, unless and until evidence of the use of such trademark in interstate commerce is submitted to the United States Patent and Trademark Office, but only if and to the extent that the granting of a security interest in such application would result in the invalidation of such application, provided, that to the extent such application is excluded from the Collateral, upon the submission of evidence of use of such trademark to the United States Patent and Trademark Office, such trademark application shall automatically be included in the Collateral, without further action on any party’s part, (D) is any membership interests, partnership interests, stockholder interests, shareholder interests, financial rights, and governance rights arising under any Organizational Documentation for Pledged Interests, together with any payments and distributions arising in connection therewith, to the extent not required by the terms of the Loan Documents (as such term is defined in the Credit Agreement) to constitute Collateral hereunder, (E) is in motor vehicles or other assets in which a security interest may 

be perfected only through compliance with a certificate of title or similar statute, (F) constitutes the “Properties” (as such term is defined in the Existing Master Lease), (G) is any property that is subject to a purchase money agreement, capital lease or similar arrangement to the extent other Liens are prohibited thereby or otherwise requiring consent of any Person (other than the Borrower or its Affiliates), (H) is a circumstance where the Borrower and the Administrative Agent have determined in their reasonable discretion that the cost, burden or consequences (including adverse tax consequences) of obtaining or perfecting the security interest in such assets is excessive in relation to the practical benefit afforded thereby, or (I) requires any Debtor to take any action outside the United States to perfect such security interest (the Collateral described in the foregoing proviso being collectively referred to as the “Excluded Collateral”).Exhibit

Exhibit 10.3
 
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of June 28, 2017, by and between Cobalt Boats, LLC, a Delaware limited liability company (the “Company”), and William Paxson St. Clair, Jr., an individual (“Executive”).
RECITALS: 
A.  The Company, Malibu Boats, LLC, a Delaware limited liability company (“Malibu Boats”), and certain other parties thereto have entered into a Unit Purchase Agreement dated as of the date hereof (the “Unit Purchase Agreement”) that provides for the acquisition of the Company by Malibu Boats. 
B.  Subject to and effective upon the closing of the transactions contemplated by the Unit Purchase Agreement (the “Closing”), the Company desires that Executive be employed by the Company to carry out the duties and responsibilities described below, all on the terms and conditions hereinafter set forth.
C.  Subject to and effective upon the Closing, Executive desires to accept such employment on such terms and conditions.
D.  This  Agreement shall govern the employment relationship between Executive and the Company from and after the Closing, and supersedes and negates all previous negotiations and agreements with respect to such relationship. 
E.   If the transactions contemplated by the Unit Purchase Agreement fail to close for any reason, or if the Unit Purchase Agreement terminates for any reason without the transactions contemplated thereby closing, this Agreement shall automatically terminate and be of no force and effect.
NOW, THEREFORE, in consideration of the above recitals incorporated herein and the mutual covenants and promises contained herein and other valuable consideration, the receipt and sufficiency of which is hereby expressly acknowledged, the parties agree as follows:
		
	1.
	EMPLOYMENT.  The Company hereby agrees to employ Executive as President of the Company for the Period of Employment (as such term is defined in Section 2) according to the terms and conditions set forth herein.  Executive shall report directly to the Chief Executive Officer of Malibu Boats.  Executive shall perform such duties and have such level of authority and responsibility as is usual and customary for such position, plus any additional duties as may reasonably be assigned from time to time, including but not limited to providing services as an officer or director to one or more of the Company’s subsidiaries or affiliates (and the compensation for such services shall be covered exclusively by Sections 3 through 5 of this Agreement).  Executive hereby accepts such employment and agrees to devote Executive’s full business time, energy and best efforts to the performance of  Executive’s duties for the Company.  Executive shall be subject to and comply with the Company’s policies, procedures and approval practices, as generally in effect from time-to-time.

2.EMPLOYMENT RELATIONSHIP.  The “Period of Employment” under this Agreement shall be the period of two years commencing on the date of the Closing and ending on the second anniversary of the date of the Closing.  Subject to the terms of Section 5 of this Agreement, Executive shall be 

employed on an at-will basis and Executive’s employment with the Company may be terminated by Executive or the Company at any time, with or without Cause, and with or without advance notice.
3.COMPENSATION.
a.Base Salary.  During the Period of Employment, the Company agrees to pay Executive a base salary of Four Hundred Thousand dollars ($400,000) per annum, less standard deductions and authorized withholdings (the “Salary”).  The Salary shall be paid in accordance with the Company’s standard payroll practices.
b.Bonus.  During the Period of Employment, Executive shall be entitled to earn an annual performance-based bonus (“Annual Bonus”).  In addition to Salary, during each fiscal year of the Period of Employment, Executive will be eligible to earn a target annual cash bonus based on the Bonus Program in effect for that model year, if and only if Executive, the Company and its subsidiaries and affiliates achieve the performance criteria specified by the Board or the Compensation Committee (if there is one) of Malibu Boats, Inc. for such year, as determined by the Board or such Compensation Committee (if there is one) in its sole discretion.  To earn any Annual Bonus, Executive must be continuously and actively employed through the end of the applicable fiscal year and the date that bonuses are normally paid to the Company’s executives and key employees.  Each Annual Bonus earned by Executive, if any, will be due and payable following the Company’s receipt of its audited financial statements for the fiscal year with respect to which such bonus has been earned (and in any event, by the end of the calendar year in which such fiscal year ends).  Any Annual Bonus paid to Executive shall be subject to applicable deductions and withholdings.
4.BENEFITS.
a.Benefits.  In addition to (but without duplication of) Salary and any bonuses payable to Executive pursuant to Section 3, Executive shall be entitled to participate at his sole discretion in all of the Company’s employee benefit programs for which employees of the Company are generally eligible, subject to the terms, conditions and eligibility requirements of such plans and benefits.
b.Vacation.  Executive will be entitled to accrue vacation time, in an amount and subject to accrual limits, in accordance with the Company’s policies and practices for employees of the Company.  Executive shall schedule and take vacation at the mutual convenience of the Executive and the Company.
c.Business Expenses.  During the Period of Employment, the Company shall reimburse Executive in the calendar year in which they are incurred for all reasonable out-of-pocket business expenses incurred by him in the course of performing his duties and responsibilities under this Agreement which are consistent with the Company’s policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company’s requirements with respect to reporting and documentation of such expenses.
d.Boat.  During the Period of Employment, the Company at its cost shall provide Executive a boat of a quality consistent with the Company’s practices and made available to other executives of the Company by the CEO and/or CFO of Malibu Boats, that will be owned by the Company.  Insurance will be maintained and paid by the Company.  Executive shall be entitled to reimbursement for the cost of all maintenance costs associated with Executive’s use of the boat.  Executive will be responsible for all fuel costs associated with Executive’s use of the boat.  Executive may use such boat for business and personal purposes.  Executive may not exchange 

such boat for a different boat owned by the Company until the second anniversary of the date of the Closing. 
e.Auto. During the Period of Employment, the Company will pay or reimburse expenses associated with the Executive’s use of an automobile. Expenses included will be all fuel, maintenance and repair costs.
		
	1.
	TERMINATION.  Notwithstanding anything in this Agreement to the contrary, Executive’s employment may be terminated as follows:

a.Death.  Upon the death of Executive, Executive’s employment with the Company shall terminate and the Company shall not be obligated to make any further payments to Executive hereunder, except amounts due as Salary, any unpaid Annual Bonus earned pursuant to Section 3(b) and accrued but unused vacation earned at the time of Executive’s termination of employment, and reimbursement for any documented expenses incurred prior to Executive’s termination of employment in accordance with Section 5 hereof (collectively, the “Accrued Obligations”).
b.Disability.  In the event that the Company reasonably determines in good faith that Executive is unable to perform the essential functions of his employment with the Company, even with reasonable accommodation that does not impose an undue hardship on the Company, for more than ninety (90) days in any rolling one-year period (“Disability”), unless a longer period is required by applicable federal or state law, in which case that longer period would apply, the Company shall have the right to terminate Executive’s employment, and the Company shall not be obligated to make any further payments to Executive hereunder, except for the Accrued Obligations.  Executive expressly agrees that the Company shall have the right to permanently replace Executive in the event he is terminated due to a Disability.
c.Termination for Cause.  The Company may terminate Executive’s employment at any time immediately upon written notice to Executive for Cause.
(1)  For purposes of this Agreement, “Cause” shall mean any of the following occurring during Executive’s employment hereunder: (a) a knowing, intentional or reckless act or omission that constitutes theft, forgery, fraud, material dishonesty, misappropriation, breach of fiduciary duty or duty of loyalty, or embezzlement by Executive against the Company or any of its parent, subsidiary or affiliated entities; (b) Executive’s conviction, or plea of guilty or nolo contendere, of a felony or any other crime involving moral turpitude; (c) Executive knowingly or intentionally causing the Company’s financial statements to fail to materially comply with generally accepted accounting principles, or Executive’s unlawful use (including being under the influence) or possession of any illegal drug or narcotic while on Company premises or while performing Executive’s duties and responsibilities hereunder; (d) Executive’s willful refusal to comply with the lawful requests made of Executive by the Company, which (if reasonably susceptible of cure), is not fully cured within five (5) days after Executive receives written notice from the Company detailing Executive’s willful refusal; (e) gross negligence of Executive in the performance of his job duties, which (if reasonably susceptible of cure), is not fully cured within 30 days after Executive receives written notice from the Company detailing Executive’s gross negligence; (f) a material violation by Executive of one or more Company policies, which (if reasonably susceptible of cure), is not fully cured within 30 days after Executive receives written notice from the Company detailing Executive’s violation(s) of Company policy; and/or (g) a material breach by Executive of this Agreement or any other agreement with the Company, which (if reasonably susceptible of cure), is not fully cured within 30 days after Executive receives written notice from the 

Company detailing Executive’s breach of this Agreement and/or any other agreement with the Company.
(2)  In the event that the Company terminates Executive’s employment for Cause, the Company shall not be obligated to make any further payments to Executive hereunder, except for the Accrued Obligations.
		
	a.
	Termination Without Cause.

(1)  By Executive.  Except as set forth in this Agreement, Executive may voluntarily resign from his employment with the Company at any time, and for any reason or no reason, with or without cause, after giving thirty (30) days’ prior written notice to the Company.  In the event of a voluntary resignation, the Company may elect at its sole discretion to make the resignation of employment effective at any time prior to the expiration of the 30-day notice period and, upon the effective date of such resignation, the Company shall not be obligated to make any further payments to Executive hereunder, except for the Accrued Obligations.
(2)  By Company.  Notwithstanding any other provision in this Agreement, the Company shall have the right to terminate Executive’s employment at any time, for any reason or no reason, immediately upon written notice to Executive.  If the Company terminates Executive’s employment pursuant to this Section 5(d)(2) without Cause, the Company shall pay to Executive the Accrued Obligations.  In addition, if the Company terminates Executive’s employment without Cause, subject to Executive signing (and not revoking) a complete and general release of any and all claims in favor of the Company and its affiliates in a form and substance satisfactory to the Company (the “Release”) within twenty-one (21) days (or such longer period as may be required by applicable law to obtain a complete and general release of claims) (the “Release Execution Deadline”) after the Company provides the form of Release to the Executive, upon a termination of Executive’s employment by the Company without Cause, Executive shall continue to receive his Salary through the end of the Period of Employment (the “Severance Payments”).  Such Release shall be in substantially the same form as attached as Exhibit A hereto, which shall be subject to necessary changes to comply with changes in applicable law to obtain a valid and complete general release of claims.  Executive’s right to receive and retain any of the Severance Payments is contingent upon Executive’s compliance with his continuing obligations to the Company under the terms of this Agreement and the Release.  The Company shall pay the Severance Payments to Executive in substantially equal installments through the end of the Period of Employment in accordance with the Company’s standard payroll policies then in effect, provided that the first installment shall be payable on (or within ten (10) days following) the sixtieth (60th) day following the date of Executive’s termination of employment with the Company and shall include all amounts that would have otherwise been paid in accordance with the Company’s standard payroll policies from the date of Executive’s termination of employment through such payment date.
b.Resignation.  Upon any termination of Executive’s employment with the Company, Executive agrees to resign, on the date of Executive’s termination of employment, as an officer and director of the Company and any affiliate of the Company, and as a fiduciary of any benefit plan of the Company or any affiliate of the Company, and to promptly execute and provide to the Company any further documentation, as requested by the Company or any affiliate, to confirm such resignation.

		
	1.
	NONSOLICITATION/NONDISPARAGEMENT.  During the Period of Employment and for a period thereafter of three (3) years, the Participant shall not, directly or indirectly:

a.solicit, induce or encourage any employee of the Company or any of its affiliates or subsidiaries to terminate their employment with the Company or any of its affiliates or subsidiaries;
b.make any defamatory public statement concerning the financial performance, products, services, the Board or management personnel of the Company or any of its affiliates or subsidiaries, or Executive’s employment. 
2.INVENTIONS ASSIGNMENT AND CONFIDENTIAL INFORMATION.
a.Inventions.  The Company shall own all right, title, and interest to all ideas, concepts, know-how, techniques, processes, methods, inventions, discoveries, developments, innovations, and improvements developed or created by Executive, either solely or jointly with others, both prior to and during the Period of Employment that: (i) are reasonably related to the Company’s or any of its affiliates’ or subsidiaries’ business; (ii) involve the Company’s or any of its affiliates’ or subsidiaries’ actual or demonstrably anticipated research or development; (iii) result from any work performed by Executive for the Company or any of its affiliates or subsidiaries, whether during or prior to the commencement of the Period of Employment; or (iv) incorporate any of the Confidential Information (as defined below) (collectively, “Inventions”).  Executive shall immediately and confidentially communicate a description of any Inventions to the Company and to no other party at any time, and if the Company so desires, Executive shall execute all documents and instruments and do all things as may be requested by the Company in order to forever vest all right, title and interest in such Inventions solely in the Company and to obtain such letters of patent, copyrights, registrations or other protections as the Company may, from time to time, desire.  In addition, Executive hereby assigns to the Company all right, title and interest of Executive in and to any present Inventions made, devised, created, invented or discovered, in whole or in part, by Executive.
b.Confidential Information.  During the term of this Agreement and at all times thereafter, Executive shall hold inviolate and keep secret all non-public documents, materials, knowledge or other confidential business or technical information of any nature whatsoever that the Company or any of its affiliates or subsidiaries  has maintained as confidential and that has been disclosed to or developed by him or to which he had access as a result of his employment with the Company or any of its affiliates or subsidiaries, whether during or prior to the commencement of the Period of Employment (hereinafter referred to as “Confidential Information”).  Such Confidential Information shall include non-public technical and business information, including, but not limited to, inventions, research and development, engineering, products, designs, manufacture, methods, systems, improvements, trade secrets, formulas, processes, marketing, merchandising, selling, licensing, servicing, pricing, investors, personnel information (including skills, compensation, experience and performance), customer lists and preferences, records, financial information, manuals and/or business plans and strategies.  Executive agrees that all Confidential Information shall remain the sole and absolute property of the Company, unless such information is or becomes publicly available or disclosed by lawful means.  During the term of this Agreement, Executive shall not use, disclose, disseminate, publish, reproduce or otherwise make available such Confidential Information to any person, firm, corporation or other entity, except for the purpose of performing services on behalf of the Company.  Upon the termination of Executive’s employment with the Company for any reason, Executive shall (i) not use, disclose, disseminate, publish, reproduce or otherwise make available such Confidential Information to any person, firm, 

corporation or other entity, unless such information is or becomes publicly available or disclosed by lawful means; (ii) return to the Company all property that belongs to or is owned by the Company (including any computer, cell phone, personal digital assistant, keys, security cards, etc.); and (iii) return to the Company all documents, records, compositions, articles, devices, equipment, electronic storage devices and other items that disclose or embody Confidential Information, including all copies or specimens thereof (including electronic copies), whether prepared by him or by others, unless such information is or becomes publicly available or disclosed by lawful means.  
c.Whistleblower Protections.  Notwithstanding Section 7(b) and Section 6(b) or any other provision of this Agreement, (1) Executive may truthfully respond to a lawful and valid subpoena or other legal process, but, subject to clauses (2)-(5) below, shall give the Company the earliest possible notice thereof, shall, as much in advance of the return date as possible, make available to the Company and its counsel the documents and other information sought, and shall assist the Company and such counsel in resisting or otherwise responding to such process, (2) nothing in this Agreement or otherwise limits Executive’s ability to communicate directly with and provide information, including documents, not otherwise protected from disclosure by any applicable law or privilege to the Securities and Exchange Commission (the “SEC”) or any other federal, state or local governmental agency or commission (“Government Agency”) regarding possible legal violations, without disclosure to the Company, (3) the Company may not retaliate against Executive for any of these foregoing activities, (4) nothing in this Agreement or otherwise requires Executive to waive any monetary award or other payment that Executive might become entitled to from the SEC or any other Government Agency, or (5) nothing in this Agreement precludes Executive from filing a charge of discrimination with the Equal Employment Opportunity Commission or a like charge or complaint with a state or local fair employment practice agency; provided, however, the Executive shall not be entitled to receive a monetary award or any other form of personal relief from the Company in connection with any such charge or complaint that Executive files or that is filed on Executive’s behalf (clauses (1)-(5) collectively, the “Whistleblower Protections”).
 
		
	1.
	ADDITIONAL ACKNOWLEDGMENTS.  Executive acknowledges that the provisions of Sections 6, 7 and this Section 8 are in consideration of Executive’s employment with the Company and other good and valuable consideration as set forth in this Agreement.  In addition, Executive agrees and acknowledges that the restrictions contained in Sections 6, 7 and this Section 8 do not preclude Executive from earning a livelihood, nor do they unreasonably impose limitations on Executive’s ability to earn a living.  In addition, Executive acknowledges (x) that the business of the Company and its affiliates will be conducted throughout the United States and its territories and beyond, (y) notwithstanding the state of organization or principal office of the Company or any of its affiliates or facilities, or any of their respective executives or employees (including Executive), it is expected that the Company and its affiliates will have business activities and have valuable business relationships within its industry throughout the United States and its territories and beyond, and (z) as part of Executive’s responsibilities, Executive will be traveling throughout the United States and other jurisdictions where the Company and its affiliates conduct business during the Period of Employment in furtherance of the Company’s business relationships.  Executive agrees and acknowledges that the potential harm to the Company and its affiliates of the non-enforcement of any provision of Sections 6, 7 and this Section 8 outweighs any potential harm to Executive of its enforcement by injunction or otherwise.  Executive acknowledges that he has carefully read this Agreement and either consulted with legal counsel of Executive’s choosing 

regarding its contents or knowingly and voluntarily waived the opportunity to do so, has given careful consideration to the restraints imposed upon Executive by this Agreement and is in full accord as to their necessity for the reasonable and proper protection of confidential and proprietary information of the Company and its affiliates now existing or to be developed in the future.  Executive expressly acknowledges and agrees that each and every restraint imposed by this Agreement is reasonable with respect to subject matter, duration and geographical area.
2.SPECIFIC PERFORMANCE.  In the event of the breach or a threatened breach by Executive of any of the provisions of Sections 6, 7 or 8, the Company and its affiliates and subsidiaries would suffer irreparable harm and Executive acknowledges that money damages would not be a sufficient remedy and, in addition and supplementary to other rights and remedies existing in its favor whether under this Agreement or under any other agreement, the Company shall be entitled to specific performance and/or injunctive or other equitable relief from a court of competent jurisdiction in order to enforce or prevent any violations of the provisions hereof (without posting a bond or other security).  In addition, in the event of an alleged breach or violation by Executive of Section 6, the nonsolicit period, shall be tolled until such breach or violation has been duly cured.
3.LITIGATION/AUDIT COOPERATION.  Executive agrees that following the termination of his employment for any reason, for a period of twelve (12) months he shall reasonably cooperate at mutually convenient times and locations in connection with the defense of, or prosecution by, the Company or any of its affiliates with respect to any threatened or pending litigation or in any investigation or proceeding by any Government Agency or body that relates to any events or actions which occurred during the term of Executive’s employment with, or service to, the Company or any of its affiliates or subsidiaries, whether during or prior to the commencement of the Period of Employment.  The Company shall reimburse Executive for reasonable expenses incurred by Executive in connection with such cooperation.  Executive shall be compensated for his time at a mutually agreed upon rate for any services other than the provision of information to the Company or its counsel and/or testifying as a witness, which he shall undertake without any compensation up to a maximum obligation of 120 hours.
4.WAIVER OF BREACH.  The waiver of any breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach.  Each and every right, remedy and power hereby granted to any party or allowed it by law shall be cumulative and not exclusive of any other.
5.SEVERABILITY.  If any of the provisions of this Agreement or the application thereof to any party under any circumstances is adjudicated to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision of this Agreement or the application thereof.
6.ENTIRE AGREEMENT.  This Agreement, along with any related documents referenced herein, constitutes the entire agreement between the parties with respect to the subject matter hereof and, subject to the Closing, supersedes and completely and irrevocably terminates any and all other previous or contemporaneous communications, representations, understandings, agreements, negotiations and discussions, either oral or written, between the parties with respect to the subject matter hereof.  The parties acknowledge and agree that there are no written or oral agreements, understandings, or representations, directly or indirectly related to this Agreement or the employment, compensation or benefits of Executive that are not set forth herein.  By executing this Agreement, Executive represents and warrants to the Company that Executive is not subject to any agreement with any current or former employer or consultancy relationship that would prohibit Executive’s acceptance of and performance of his duties and responsibilities under the terms of this Agreement or as contemplated in the future during Executive’s employment with the Company.  Executive agrees that he shall not share any confidential or proprietary information of any prior employer (other than a subsidiary or affiliate of the Company) or consultancy or individual with the Company or the Company’s employees.

7.AMENDMENT OF AGREEMENT.  This Agreement may be altered or amended in any of its provisions only by a written agreement signed by each of the parties hereto.
8.SUCCESSORS.  The Agreement shall inure to the benefit of and be binding on the Company and its successors and assigns, as well as Executive and his estate.  Executive may not assign or delegate, in whole or in part, his duties or obligations under this Agreement.  This Agreement may be transferred and assigned by the Company to any successor of the Company by acquisition, merger, reorganization, amalgamation, asset sale or otherwise.  Upon any assignment of this Agreement by the Company, all obligations of the Company shall terminate, Executive shall become employed by the assignee in accordance with the terms of this Agreement and the term “Company” as used in this Agreement shall include only such assignee.
9.RIGHTS CUMULATIVE.  The Company’s rights under this Agreement are cumulative, and the exercise of one right will not be deemed to preclude the exercise of any other rights.
10.COUNTERPARTS.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  Photographic copies of such signed counterparts may be used in lieu of the originals for any purpose.
11.CONSTRUCTION.  Each party has cooperated in the drafting and preparation of this Agreement, and therefore, the Agreement shall not be construed against either party on the basis that any particular party was the drafter.
12.VOLUNTARY COUNSEL.  Executive agrees and acknowledges that he has read and understood this Agreement prior to signing it, has entered into this Agreement freely and voluntarily and has been advised to seek legal counsel prior to entering into this Agreement and has had ample opportunity to do so.
13.GOVERNING LAW.  This Agreement shall be construed in accordance with, and governed in all respects by, the internal laws of the State of Tennessee (without giving effect to principles of conflicts of laws).
14.SECTION 409A.
a.The intent of the parties is that payments and benefits under this Agreement be exempt from or comply with Internal Revenue Code Section 409A and the regulations and guidance promulgated thereunder (collectively “Code Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith.  In no event whatsoever shall the Company or any of its subsidiaries or affiliates be liable for any additional tax, interest or penalty that may be imposed on Executive by Code Section 409A or damages for failing to comply with Code Section 409A.
b.To the extent necessary to comply with Code Section 409A, a termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment,” “termination of the Employment Period” or like terms shall mean “separation from service.”
c.All expenses or other reimbursements under this Agreement shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by Executive (provided that if any such reimbursements constitute taxable income to Executive, such 

reimbursements shall be paid no later than March 15th of the calendar year following the calendar year in which the expenses to be reimbursed were incurred), and no such reimbursement or expenses eligible for reimbursement in any taxable year shall in any way affect the expenses eligible for reimbursement in any other taxable year.  All expenses or other reimbursements under this Agreement are not subject to liquidation or exchange for another benefit. 
d.For purposes of Code Section 409A, Executive’s right to receive any installment payment pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.
e.Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within fifteen (15) days following the Termination Date”), the actual date of payment within the specified period shall be within the sole discretion of the Company.
15.ARBITRATION.
a.In exchange for the benefits of the speedy, economical and impartial dispute resolution procedure of arbitration, the Company and Executive, with the advice and consent of their selected counsel, choose to forego their right to resolution of their disputes in a court of law by a judge or jury, and instead elect to treat their disputes, if any, pursuant to the Federal Arbitration Act.
b.Executive and the Company agree that any and all claims or controversies whatsoever brought by Executive or the Company, arising out of or relating to this Agreement or Executive’s employment with the Company, will be settled by final and binding arbitration in Knoxville, Tennessee or such other location as may be mutually agreed by parties in accordance with the Employment Arbitration Rules and Procedures of Judicial Arbitration and Mediation Services, Inc. (“JAMS”) then in effect.  This includes all claims whether arising in tort or contract and whether arising under statute or common law.  Such claims may include, but are not limited to, those relating to this Agreement, wrongful termination, retaliation, harassment, or any statutory claims under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act, the Americans with Disabilities Act, or similar Federal or state statutes.  In addition, any claims arising out of the public policy of Tennessee, any claims of wrongful termination, employment discrimination, retaliation, or harassment of any kind, as well as any claim related to the termination or non-renewal of this Agreement shall be arbitrated under the terms of this Agreement.  The obligation to arbitrate such claims will survive the termination of this Agreement.  To the extent permitted by law, the hearing and all filings and other proceedings shall be treated in a private and confidential manner by the arbitrator and all parties and representatives, and shall not be disclosed except as necessary for any related judicial proceedings.
c.The arbitration will be conducted before an arbitrator to be mutually agreed upon by the parties from JAMS’ panel of arbitrators.  In the event that the parties are unable to mutually agree upon the arbitrator, JAMS shall provide a slate of five arbitrators with experience in employment law and each party shall have the opportunity to strike two names and rank the remaining arbitrators in order of preference.  JAMS shall then select the highest ranked arbitrator to preside over the arbitration.  If JAMS is unable to provide an arbitrator who has experience in employment law, the parties may jointly or separately petition the court for appointment of an arbitrator with such experience.  The arbitrator will have jurisdiction to determine the arbitrability of any claim.  The arbitrator shall have the authority to grant all monetary or equitable relief (including, without limitation, injunctive relief, ancillary costs and fees, and punitive damages) available under state and Federal law.  Judgment on any award rendered by the arbitrator may be entered and enforced 

by any court having jurisdiction thereof.  In addition to any other relief awarded, the prevailing party in any arbitration or court action covered by this Agreement, as determined by the arbitrator or court in a final judgment or decree, shall be entitled to recover costs, expenses, and reasonable attorneys’ fees to the extent permitted by law.

 IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written.
	
			
	 
	 
	COBALT BOATS, LLC

	 
	 
	By: /s/ William J. Wallisch

	 
	 
	Name: William Wallisch

	 
	 
	Title: Chief Financial Officer

	 
	 
	 

	 
	 
	EXECUTIVE

	 
	 
	 

	 
	 
	/s/ William Paxson St. Clair, Jr.

	 
	 
	William Paxson St. Clair, Jr.

	 
	 
	 

 

EXHIBIT A
SETTLEMENT AND GENERAL RELEASE AGREEMENT
THIS SETTLEMENT AND GENERAL RELEASE AGREEMENT (this “Agreement”) is entered into effective as of the ___________ day of _____ , 20___ , by and between William Paxson St. Clair, Jr. (“Executive”) and Cobalt Boats, LLC. (the “Company”) (hereinafter sometimes collectively referred to as the “Parties”).  In consideration of the mutual promises and covenants contained in this Agreement, Executive and the Company contract and agree as follows:
		
	1.
	BENEFITS.

a.General.  The Company promises that I will receive the benefits set forth in the employment agreement entered into with the Company effective as of_____, 20___ (the “Employment Agreement”), if any, after I execute and return this Agreement to the Company as provided in Section 4.  I acknowledge that the Company is not otherwise required to provide me such benefits until such conditions have been met.
b.Sufficiency of Consideration.  I acknowledge and agree that the benefits to be provided under the terms of the Agreement are sufficient consideration for Executive’s promises set out herein and are made in confidence and in settlement of any disputed claims for which the Company has asserted factual and affirmative defenses and denies same in the entirety.
c.Payment.  If the requirements of the Employment Agreement and this Agreement are met, in accordance with their terms, the Company will provide payment in an amount equal to $_____, minus any applicable taxes and withholding, payable as provided in Section 5(d)(2) of the Employment Agreement.
d.Taxes.  I acknowledge that I have had the opportunity to receive, and to the extent desired, have received independent professional advice from my own tax advisor with respect to the tax consequences of entering into this Agreement.  I acknowledge and agree that the Company has made no representations regarding the tax consequences of any amounts paid pursuant to this Agreement.  I agree that I will be solely and ultimately responsible for paying any federal, state or other taxes that I may owe as a result of payments made pursuant to this Agreement.  In addition, I agree to hold the Company harmless from, and to indemnify the Company for, any claims, demands, taxes, deficiencies, fines, penalties, levies, assessments, executions, judgments, interest, costs, or any recoveries by any governmental agency against the Company for any amounts claimed due on account of this Agreement as a result of improper allocations or my failure to report and/or pay taxes as legally required.
		
	1.
	COMPLETE RELEASE.

a.General.  In exchange for the Company’s promises contained in this Agreement, I, on behalf of myself and all my heirs, successors, and assigns, agree to irrevocably and unconditionally release any and all Claims I may now have against the Company and other parties as set forth in this Section 2.
b.Released Parties.  The “Released Parties” are the Company, all related companies, partnerships, subsidiaries, predecessors, and assigns, their parents and subsidiaries, or joint ventures, and, with respect to each of them, their predecessors and successors; and, with respect to each such entity, all of its past and present employees, officers, directors, stockholders, owners, representatives, assigns, 

attorneys, agents, insurers, employee benefit programs (and the trustees, administrators, fiduciaries, and insurers of such programs), and any other persons acting by, through, under or in concert with any of the persons or entities listed in this subsection.
c.Claims Released.  I understand and agree that I am releasing all known and unknown claims, promises, causes of action, grievances, or similar rights of any type that I may have against any Released Party related to my employment with the Company under any Tennessee or Kansas law, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Family and Medical Leave Act, the Employee Retirement and Income Security Act of 1974, and all other federal, state, or local laws or regulations prohibiting employment discrimination or retaliation or protecting employee rights as well as claims for other tortious or unlawful conduct (the “Claims”).  I am not, however, releasing any claim that relates to: (i) my right to enforce this Agreement; (ii) my right, if any, to claim government-provided unemployment benefits; or (iii) any rights or claims which may arise or accrue after I sign this Agreement.  
d.Whistleblower Protections.  The Whistleblower Protections (as defined in the Employment Agreement) shall apply equally to this Agreement, and all of the provisions of this Agreement are subject to the Whistleblower Protections.
e.Knowing and Voluntary.  I represent and agree that I have thoroughly considered all aspects of this Agreement, that I have had the opportunity to discuss this matter with my attorney, that I have read carefully and understand fully all of the provisions of this Agreement and that I am entering into this Agreement voluntarily.  I further understand that the Company is relying on this and all other representations that I have made herein.
2.PROMISES.
a.Pursuit of Released Claims.  Except as specifically identified above, I have not filed or caused to be filed any lawsuit, complaint, or charge with respect to any Claim this Agreement purports to waive, and I promise never to file or prosecute a lawsuit or complaint based on such Claims.  
b.Ownership of Claims.  I have not assigned or transferred any Claim I am releasing, nor have I purported to do so.
c.Nonadmission of Liability.  I agree that this Agreement is not an admission of guilt or wrongdoing by any Released Party and I acknowledge that the Released Parties deny that they have engaged in wrongdoing of any kind or nature.
d.No Further Employment or Benefits.  I agree that my employment with the Company has ended, and that I forever waive and relinquish any and all claims, rights, or interests in reinstatement or future employment that I might have in the future with the Company or its successors, predecessors, parents, subsidiaries, and related or affiliated entities.
e.Confidentiality.  I agree that I have not and will not disclose the underlying facts that led up to this Agreement or the terms, amount, or existence of this Agreement to anyone other than a member of my immediate family, attorney, or other professional advisor and, even as to such a person, only if the person agrees to honor this confidentiality requirement.  Such a person’s violation of this confidentiality requirement will be treated as a violation of this Agreement by me.  This subsection does not prohibit my disclosure of the terms, amount, or existence of this Agreement to the extent necessary legally to enforce this Agreement, nor does it prohibit disclosures to the extent otherwise legally required.  I acknowledge that the Company would be irreparably harmed if this subsection were violated.  I agree that if asked 

about the status of my claims against the Company, I will agree to reply, if at all, by saying only that all such claims have been resolved and the underlying action dismissed.
		
	3.
	REVIEW AND REVOCATION.

I acknowledge and understand that I have twenty-one (21) days to review and consider this Agreement before signing it.  No discussions about, or changes to, this Agreement will restart the running of said twenty-one (21) day period.  I understand that I may use as much of this twenty-one (21) day period as I wish prior to signing and that I may revoke this Agreement within seven (7) days of signing it.  Revocation can be made by delivering a written notice of revocation to _______________, Malibu Boats, Inc., 5075 Kimberly Way, Loudon, TN 3774.  For this revocation to be effective, written notice must be received no later than the close of business on the seventh day after I sign this Agreement.  If I revoke this Agreement, it shall not be effective or enforceable and I will not receive the benefits described herein nor shall I or the Company be bound by any representations, releases or agreements made herein.
		
	1.
	MISCELLANEOUS.

a.Entire Agreement.  This, in conjunction with the Employment Agreement, is the entire agreement between the Company and me, and such agreement supersedes and renders void any prior agreements I may have with the Company or its affiliates pertaining to the subject matter hereof.  This Agreement may not be modified or canceled in any manner except by a writing signed by both an authorized Company official and me.  I acknowledge that the Company has made no representations or promises to me, other than those in the Employment Agreement and this Agreement.  If any provision in this Agreement is found to be unenforceable, all other provisions will remain fully enforceable.  I agree to sign any documents and take other action that is necessary in the future to implement this Agreement.
b.Successors.  This Agreement binds my heirs, administrators, representatives, executors, successors, and assigns, and will inure to the benefit of all Released Parties and their respective heirs, administrators, representatives, executors, successors, and assigns.
c.Interpretation.  This Agreement shall be construed as a whole according to its fair meaning.  It shall not be construed strictly for or against any Released Party or me.  Unless the context indicates otherwise, the singular or plural number shall be deemed to include the other Captions are intended solely for convenience of reference and shall not be used in the interpretation of this Agreement.  This Agreement shall be governed by the laws of the State of Tennessee.
d.Counterparts.  This Agreement and any amendments hereto may be executed in multiple counterparts by the parties.  Each counterpart shall be deemed an original, but all counterparts together shall constitute one and the same instrument.  Photographic copies of such signed counterparts may be used in lieu of the originals for any purpose.
PLEASE READ THIS AGREEMENT AND CAREFULLY CONSIDER ALL OF ITS PROVISIONS BEFORE SIGNING: THIS SETTLEMENT AND GENERAL RELEASE INCLUDES A RELEASE OF KNOWN AND UNKNOWN CLAIMS.
Executed this _________ day of__________, 20___.
__________________________________________
            Executive

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