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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

Form 10-K

 

 

☑

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2021

Commission File Number 1-14173

 

 

MarineMax, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Florida

 

59-3496957

(State of Incorporation)

 

(I.R.S. Employer Identification No.)

 

2600 McCormick Drive

Suite 200

Clearwater, Florida 33759

(727) 531-1700

(Address, including zip code, and telephone number, including area code, of principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common Stock, par value $.001 per share

HZO

New York Stock Exchange

 

Securities registered pursuant to Section 12(g) of the Act:

None

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes  ☐   No  ☑

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.   Yes  ☐   No  ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  ☑   No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes  ☑  No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

☑

 

Accelerated filer

☐

Non-accelerated filer

☐

 

Smaller reporting company

☐

 

 

 

Emerging growth company

☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of

the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.

7262(b)) by the registered public accounting firm that prepared or issued its audit report.☑

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes  ☐     No  ☑

The aggregate market value of common stock held by non-affiliates of the registrant (21,629,303 shares) based on the closing price of the registrant’s common stock as reported on the New York Stock Exchange on March 31, 2021, which was the last business day of the registrant’s most recently completed second fiscal quarter, was $1,067,622,396. For purposes of this computation, all officers and directors of the registrant are deemed to be affiliates. Such determination should not be deemed to be an admission that such officers and directors are, in fact, affiliates of the registrant.

As of November 15, 2021, there were outstanding 21,864,914 shares of the registrant’s common stock, par value $.001 per share.

Documents Incorporated by Reference

Portions of the registrant’s definitive proxy statement for the 2022 Annual Meeting of Shareholders are incorporated by reference into Part III of this report.

 

 

 

 

MARINEMAX, INC.

ANNUAL REPORT ON FORM 10-K

Fiscal Year Ended September 30, 2021

TABLE OF CONTENTS

 

PART I

 

 

 

 

Item 1

 

Business

1

Item 1A

 

Risk Factors

16

Item 1B

 

Unresolved Staff Comments

28

Item 2

 

Properties

29

Item 3

 

Legal Proceedings

33

Item 4

 

Mine Safety Disclosures

33

 

 

 

 

PART II

 

 

 

 

Item 5

 

Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

33

Item 6

 

Selected Financial Data

35

Item 7

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

36

Item 7A

 

Quantitative and Qualitative Disclosures about Market Risk

43

Item 8

 

Financial Statements and Supplementary Data

43

Item 9

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

43

Item 9A

 

Controls and Procedures

43

Item 9B

 

Other Information

47

 

 

 

 

PART III

 

 

 

 

Item 10

 

Directors, Executive Officers and Corporate Governance

47

Item 11

 

Executive Compensation

47

Item 12

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

47

Item 13

 

Certain Relationships and Related Transactions, and Director Independence

47

Item 14

 

Principal Accountant Fees and Services

47

 

 

 

 

PART IV

 

 

 

 

Item 15

 

Exhibits, Financial Statement Schedules

47

 

 

Statement Regarding Forward-Looking Information

The statements contained in this report on Form 10-K that are not purely historical are forward-looking statements within the meaning of applicable securities laws. Forward-looking statements include statements regarding our “expectations,” “anticipations,” “intentions,” “plans,” “beliefs,” or “strategies” regarding the future. Forward-looking statements also include statements regarding revenue, margins, expenses, and earnings for fiscal 2022 and thereafter; our belief that our practices enhance our ability to attract more customers, foster an overall enjoyable boating experience, and offer boat manufacturers stable and professional retail distribution and a broad geographic presence; our assessment of our competitive advantages, including our hassle-free sales approach, prime retail locations, premium product offerings, extensive facilities, strong management and team members, and emphasis on customer service and satisfaction before and after a boat sale; our belief that our core values of customer service and satisfaction and our strategies for growth and enhancing our business, including without limitation, our acquisition strategies and pursuit of contract manufacturing and vertical integration, will enable us to achieve success and long-term growth as economic conditions continue to recover; our belief that our retailing strategies are aligned with the desires of consumers; and the scope and duration of the COVID-19 pandemic and its impact on global economic systems, our employees, sites, operations, customers, suppliers and supply chain, managing growth effectively. All forward-looking statements included in this report are based on information available to us as of the filing date of this report, and we assume no obligation to update any such forward-looking statements. Our actual results could differ materially from the forward-looking statements. Among the factors that could cause actual results to differ materially are the factors discussed under Item 1A, “Risk Factors.”

 

Unless expressly indicated or the context requires otherwise, the terms “MarineMax,” “Company,” “we,” “us,” and “our” in this document refer to MarineMax, Inc. and its subsidiaries.

 

 

 

 

PART I

Item 1.

Business

Introduction

Our Company

We believe we are the largest recreational boat and yacht retailer and superyacht services company in the world. Through our current 79 retail locations in 21 states, we sell new and used recreational boats and related marine products, including engines, trailers, parts, and accessories. We also arrange related boat financing, insurance, and extended service contracts; provide boat repair and maintenance services; offer yacht and boat brokerage sales; and, where available, offer slip and storage accommodations. In the British Virgin Islands we offer the charter of power catamarans, through MarineMax Vacations. We also own Fraser Yachts Group and Northrop & Johnson, leading superyacht brokerage and luxury yacht services companies, with operations in multiple countries. We also own Cruisers Yachts, a manufacturer of sport yacht and yachts with sales through our select retail dealership locations and through independent dealers, and is recognized as one of the world’s premier manufacturers of premium sport yacht and yachts.

Effective May 2, 2021, our reportable segments changed as a result of the Company’s acquisition of Cruisers Yachts, which changed management’s reporting structure and operating activities. We now report our operations through two new reportable segments: Retail Operations and Product Manufacturing.

As of September 30, 2021, the Retail Operations segment includes the activity of 77 retail locations in Alabama, California, Connecticut, Florida, Georgia, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma, Rhode Island, South Carolina, Texas, Washington and Wisconsin, where we sell new and used recreational boats, including pleasure and fishing boats, with a focus on premium brands in each segment. We also sell related marine products, including engines, trailers, parts, and accessories. In addition, we provide repair, maintenance, and slip and storage services; we arrange related boat financing, insurance, and extended service contracts; we offer boat and yacht brokerage sales; yacht charter services. In the British Virgin Islands we offer the charter of power catamarans, through MarineMax Vacations. Fraser Yachts Group and Northrop & Johnson, leading superyacht brokerage and luxury yacht services companies with operations in multiple countries, are also included in this segment.

As of September 30, 2021, the Product Manufacturing segment includes activity of Cruisers Yachts, a wholly-owned MarineMax subsidiary, manufacturing sport yacht and yachts with sales through our select retail dealership locations and through independent dealers. Cruisers Yachts is recognized as one of the world’s premier manufacturers of premium sport yacht and yachts, producing models from 33’ to 60’ feet.

In November 2021, we acquired Intrepid Powerboats (“Intrepid”), a premier manufacturer of powerboats, and Texas MasterCraft, a premier watersports dealer in Northern Texas. Intrepid is recognized as a world class producer of customized boats, carefully reflecting the unique desires of each individual owner. Texas Mastercraft specializes in ski and wakeboard boats. The activity of Intrepid will be included in our Product Manufacturing segment. The activity of Texas MasterCraft will be included in our Retail Operations segment.

We are the largest retailer of Sea Ray and Boston Whaler recreational boats which are manufactured by Brunswick Corporation (“Brunswick”). Sales of new Brunswick boats accounted for approximately 27% of our revenue in fiscal 2021. Sales of new Sea Ray and Boston Whaler boats, both divisions of Brunswick, accounted for approximately 11% and 13%, respectively, of our revenue in fiscal 2021. Brunswick is a world leading manufacturer of marine products and marine engines. We have agreements with Brunswick covering Sea Ray products and Boston Whaler products and are the exclusive dealer of Sea Ray and Boston Whaler boats in almost all of our geographic markets. Additionally, we are the exclusive dealer for Harris aluminum boats, a division of Brunswick, in many of our geographic markets. We also are the exclusive dealer for Italy-based Azimut-Benetti Group, or Azimut, for Azimut and Benetti mega-yachts, yachts, and other recreational boats for the United States. Sales of new Azimut boats and yachts accounted for approximately 10% of our revenue in fiscal 2021. Additionally, we are the exclusive dealer for certain other premium brands that serve certain industry segments in our markets as shown by the table on page three.

We also are involved in other boating-related activities. We sell used boats at our retail locations, online, and at various third-party marinas and other offsite locations; we sell marine engines and propellers, primarily to our retail customers as replacements for their existing engines and propellers; we sell a broad variety of parts and accessories at our retail locations and at various offsite locations, and through our print catalog; we offer maintenance, repair, and slip and storage services at most of our retail locations; we offer finance and insurance products at most of our retail locations and at various offsite locations and to our customers and independent boat dealers and brokers; we offer boat and yacht brokerage sales at most of our retail locations and at various offsite locations; and we conduct a charter business, which is based in the British Virgin Islands, in which we offer customers the opportunity to charter third-party and Company owned power catamarans.

1

From March 2020 through June 2020, we temporarily closed certain departments or locations based on guidance from local government or health officials as a result of the COVID-19 pandemic. We are following guidelines to ensure we are safely operating as recommended. As the COVID-19 pandemic is complex and evolving rapidly with many unknowns, the Company will continue to monitor ongoing developments and respond accordingly. Management expects its business, across all of its geographies, will be impacted to some degree, but the significance of the impact of the COVID-19 pandemic on the Company’s business and the duration for which it may have an impact cannot be determined at this time.

MarineMax commenced operations as a result of the March 1, 1998 acquisition of five previously independent recreational boat dealers. Since that time, we have acquired 32 additional previously independent recreational boat dealers, multiple marinas, four boat brokerage operations, two superyacht service companies, two full-service yacht repair operations, and two boat and yacht manufacturers. We attempt to capitalize on the experience and success of the acquired companies in order to establish a high standard of customer service and responsiveness in the highly fragmented retail boating industry. As a result of our emphasis on premium brand boats, our average selling price for a new boat in fiscal 2021 was approximately $227,000, a slight increase from approximately $215,000 in fiscal 2020, compared with the industry average selling price for calendar 2020 of approximately $60,000 based on industry data published by the National Marine Manufacturers Association. We consider a store to be one or more retail locations that are adjacent or operate as one entity or a superyacht services region. Our same-store sales increased 1% in fiscal 2019, increased 25% in fiscal 2020 and increased 13% in fiscal 2021.

The U.S. recreational boating industry generated approximately $49.4 billion in retail sales in calendar 2020, which is above the former peak of $43.1 billion in calendar 2019. Total powerboats sold in calendar 2020 were approximately 230,450 units as compared to 201,400 units sold in calendar 2019. The retail sales include sales of new and used boats; marine products, such as engines, trailers, equipment, and accessories; and related expenditures, such as fuel, insurance, docking, storage, and repairs. Retail sales of new and used boats, engines, trailers, and accessories accounted for approximately $40.0 billion of these sales in 2020 based on industry data from the National Marine Manufacturers Association. The highly-fragmented retail boating industry generally consists of small dealers that operate in a single market and provide varying degrees of merchandising, professional management, and customer service. We believe that many small dealers find it increasingly difficult to make the managerial and capital commitments necessary to achieve higher customer service levels and upgrade systems and facilities as required by boat manufacturers and often demanded by customers. We also believe that many dealers lack an exit strategy for their owners. We believe these factors contribute to our opportunity to gain a competitive advantage in current and future markets, through market expansions and acquisitions.

Material Updates to Our Strategy

Since the last discussion of our strategy in our Form 10-K for our fiscal year ended September 30, 2020, our primary goal remains to enhance our position as the leading recreational boat and yacht retailer. In addition, we have broadened our strategy, including through our recent acquisitions of Fraser Yachts Group, Northrop & Johnson, Skipper Marine Holdings, Inc. and certain affiliates (collectively, "SkipperBud’s"), KCS International Holdings, Inc. and certain affiliates ("Cruisers Yachts"), Intrepid, and Texas MasterCraft. Our acquisition of Fraser Yachts Group, Northrop & Johnson and SkipperBud’s, increases our superyacht brokerage and luxury yacht services and marina/storage services. Our acquisition of Cruisers Yachts provides us a premium, American built sport yacht and yachts for our product portfolio. Prior to the acquisition, we were a dealer for Cruiser Yachts. Cruisers Yachts also operates through independent dealers and is recognized as one of the world’s premier manufacturers of premium sport yacht and yachts. Our goal is that this broadening of our strategy will potentially increase our margins while providing better services to our customers.

In addition, we continue to broaden and strengthen our digital initiatives. Our digital services are always available and offer our full selection of boats, yachts and charters, as well as our expert team to answer customers’ questions and help them find a boat virtually. Additionally, our Boatyard digital platform allows marine businesses effective and customized digital solutions delivering great customer experiences by enabling customers to interact through a personalized experience tailored to their needs.

Development of the Company; Expansion of Business

Since our initial acquisitions in March 1998, we have acquired 32 additional previously independent recreational boat dealers, multiple marinas, four boat brokerage operations, two superyacht service companies, two full-service yacht repair operations, and two boat and yacht manufacturers. Acquired dealers operate under the MarineMax name.

We continually attempt to enhance our business by providing a full range of services, offering extensive and high-quality product lines, maintaining prime retail locations, pursuing the MarineMax One Price hassle-free sales approach, and emphasizing a high level of customer service and satisfaction.

We also from time to time evaluate opportunities to expand our operations by potentially acquiring recreational boat dealers to expand our geographic scope, expanding our product lines, opening new retail locations within or outside our existing territories, and offering new products and services for our customers and by potentially acquiring companies to pursue contract manufacturing or vertical integration strategies.

2

Apart from acquisitions and our superyacht service locations, we have opened 35 new retail locations in existing territories, excluding those opened on a temporary basis for a specific purpose. We also monitor the performance of our retail locations and close retail locations that do not meet our expectations. Based on these factors and previous depressed economic conditions, we have closed 75 retail locations since March 1998 which includes the 2008 financial crisis, excluding those opened on a temporary basis for a specific purpose and including 10 during the last three fiscal years.

 

The following table sets forth information regarding the businesses that we have acquired and their geographic regions since fiscal year 2011.

 

Acquired Companies

 

Acquisition Date

 

Geographic Region

Treasure Island Marina, LLC

 

February 2011

 

Florida Panhandle

Bassett Marine, LLC

 

September 2012

 

Connecticut, Rhode Island and Western Massachusetts

Parker Boat Company

 

March 2013

 

Central Florida

Ocean Alexander Yachts

 

April 2014

 

Eastern United States

Bahia Mar Marina

 

January 2016

 

Florida Panhandle

Russo Marine

 

April 2016

 

Eastern Massachusetts and Rhode Island

Hall Marine Group

 

January 2017

 

North Carolina, South Carolina and Georgia

Island Marine Center

 

January 2018

 

New Jersey

Tera Miranda

 

April 2018

 

Oklahoma

Bay Pointe Marina

 

September 2018

 

Massachusetts

Sail & Ski Center

 

April 2019

 

Texas

Fraser Yachts Group

 

July 2019

 

Worldwide

Boatyard, Inc.

 

February 2020

 

Worldwide

Northrop & Johnson

 

July 2020

 

Worldwide

Private Insurance Services

 

July 2020

 

Worldwide

SkipperBud’s & Silver Seas Yachts

 

October 2020

 

Great Lakes region and West Coast United States

Cruisers Yachts

 

May 2021

 

Worldwide

Nisswa Marine

 

July 2021

 

Minnesota

Intrepid

 

November 2021

 

Worldwide

Texas MasterCraft

 

November 2021

 

Texas

 


3

 

In addition to acquiring recreational boat dealers, superyacht service companies, boat manufacturers, and opening new retail locations, we also add new product lines to expand our operations. The following table sets forth certain of our current product lines that we have added to our existing locations during the years indicated.

Product Line

 

Fiscal Year

 

Current Geographic Regions

Boston Whaler

 

1998

 

West Central Florida, Stuart, Florida, and Dallas, Texas

Grady-White

 

2002

 

Houston, Texas

Boston Whaler

 

2004-2005

 

North and South Carolina (2004), Houston, Texas (2005)

Azimut

 

2006

 

Northeast United States from Maryland to Maine

Grady-White

 

2006-2010

 

Pensacola, Florida (2006), Jacksonville, Florida (2010)

Azimut

 

2008

 

Florida

Boston Whaler

 

2009-2012

 

Southwest Florida (2009), Pompano Beach, Florida (2012)

Harris

 

2010

 

Missouri, Minnesota, and New Jersey

Nautique by Correct Craft

 

2010

 

West Central Florida and Minnesota

Harris

 

2011-2012

 

West Central Florida (2011), Alabama (2012), North and Southwest Florida (2012), and Texas (2012)

Crest

 

2011-2018

 

Georgia (2011), Oklahoma (2012), North Carolina and South Carolina (2012), New Jersey (2015), Florida (2018)

Azimut

 

2012

 

United States other than where previously held

Scout

 

2012

 

Southeast Florida, Maryland, and New Jersey

Sailfish

 

2013

 

Connecticut, New Jersey, North Carolina, Ohio, and Rhode Island

Ocean Alexander Yachts

 

2014

 

Eastern United States

Scout

 

2014

 

Texas, New York

Aquila

 

2014

 

Worldwide, excluding China

Galeon

 

2015

 

North America, Central America, and South America

Grady-White

 

2016

 

Miami, Florida

Yamaha Jet Boats

 

2017

 

Georgia, North Carolina, and South Carolina

Bennington

 

2017

 

South Carolina

Mastercraft

 

2018-2021

 

South Carolina (2018), Wisconsin and Illinois (2021)

NauticStar

 

2018

 

Panama City, Florida, Oklahoma, Missouri, Minnesota, North Carolina and South Carolina

Tigé

 

2018-2019

 

Orlando, Florida, Oklahoma, Georgia, and North Carolina

Benetti

 

2019

 

United States and Canada

Aviara

 

2019

 

United States

MJM Yachts

 

2019

 

Florida

ATX Surf Boats

 

2020

 

Orlando, Florida, Oklahoma, Georgia, and North Carolina

Barletta

 

2021

 

Wisconsin, Illinois, Detroit, and Michigan

Four Winns

 

2021

 

Wisconsin, Illinois, Ohio and Detroit, Michigan

Harris

 

2021

 

Wisconsin, Illinois, Grand Rapids, Michigan and Ohio

Sea Ray

 

2021

 

Wisconsin, Illinois, Michigan, and Ohio

Starcraft

 

2021

 

Wisconsin, Illinois & Michigan

Sylvan

 

2021

 

Wisconsin, Illinois, & Eastern Michigan

Tiara

 

2021

 

Wisconsin, Illinois, Michigan, California & Ohio

Princess

 

2021

 

California and Seattle, Washington

Cruisers Yachts (1)

 

2021

 

Worldwide

Intrepid (1)

 

2022

 

Worldwide

Mastercraft

 

2022

 

North Texas

 

 

(1)

Product line owned by MarineMax

 

We add brands with the intent to either offer a migration path for our existing customer base or fill a gap in our product offerings. As a result, we believe that new brands we offer are generally complementary and do not negatively impact the business generated from our other prominent brands. We also discontinue offering product lines from time to time, primarily based upon customer preferences.

We strive to maintain our core values of high customer service and satisfaction and plan to continue to pursue strategies that we believe will enable us to achieve long-term success and growth. We believe our expanded product offerings have strengthened our

4

same-store sales growth. We plan to further expand our business through both acquisitions in new territories and new store openings in existing territories. In addition, we plan to continue to expand our other traditional services, including conducting used boat sales at our retail locations, at offsite locations, and digitally; selling related marine products, including engines, trailers, parts, and accessories at our retail locations and at various offsite locations; providing maintenance, repair, and storage services at most of our retail locations; offering our customers the ability to finance new or used boat purchases and to purchase extended service contracts and arrange insurance coverage, including boat property, disability, undercoating, gel sealant, fabric protection, and casualty insurance coverage; offering boat and yacht brokerage sales at most of our retail locations and at various offsite locations; offering boat storage; conducting our yacht charter business; and manufacturing sport yacht and yachts. Our expansion plans will depend, in large part, upon economic and industry conditions.

U.S. Recreational Boating Industry

The U.S. recreational boating industry generated approximately $49.4 billion in retail sales in calendar 2020, which is above the former peak of $43.1 billion in calendar 2019. The retail sales include sales of new and used recreational boats; marine products, such as engines, trailers, parts, and accessories; and related boating expenditures, such as fuel, insurance, docking, storage, and repairs. Retail sales of new and used boats, engines, trailers, equipment, and accessories accounted for approximately $40.0 billion of such sales in calendar 2020. Total powerboats sold in calendar 2020 were approximately 230,450 units as compared to 201,400 units sold in calendar 2019. To provide historical perspective, annual retail recreational boating sales were $17.9 billion in 1988, but declined to a low of $10.3 billion in 1992 based on industry data published by the National Marine Manufacturers Association. We believe this decline was attributable to several factors, including a recession, the Gulf War, and the imposition throughout 1991 and 1992 of a luxury tax on boats sold at prices in excess of $100,000. The luxury tax was repealed in 1993, and retail boating sales increased each year thereafter except for 1998, 2003, and 2007 through 2010. We believe recreational boating has a natural appeal to consumers, along with other outdoor activities, and will continue to grow in favorable economic conditions absent any unusual industry headwinds (see Risk Factors).

The recreational boat retail market remains highly fragmented with little consolidation having occurred to date and consists of numerous boat retailers, most of which are small companies owned by individuals that operate in a single market and provide varying degrees of merchandising, professional management, and customer service. We believe that many boat retailers are encountering increased pressure from boat manufacturers to improve their levels of service and systems, increased competition from larger national retailers in certain product lines, and, in certain cases, business succession issues.

Products and Services

We offer new and used recreational boats and related marine products, including engines, trailers, parts, and accessories. While we sell a broad range of new and used boats, we focus on premium brand products. In addition, we assist in arranging related boat financing, insurance, and extended service contracts; provide boat maintenance and repair services; offer slip and storage accommodations; provide boat and yacht brokerage sales; and conduct a yacht charter business.

New Boat Sales

We primarily sell recreational boats, including pleasure boats and fishing boats. A number of the products we offer are manufactured by Brunswick, a leading worldwide manufacturer of recreational boats and yachts, including Sea Ray pleasure boats, Boston Whaler fishing boats, and Harris aluminum boats. Sales of new Brunswick boats accounted for approximately 27% of our revenue in fiscal 2021. Sales of new Sea Ray and Boston Whaler boats accounted for approximately 11% and 13%, respectively, of our revenue in fiscal 2021. Certain of our dealerships also sell luxury yachts, fishing boats, and pontoon boats provided by other manufacturers, including Italy-based Azimut. Sales of new Azimut boats and yachts accounted for approximately 10% of our revenue in fiscal 2021. Cruisers Yachts, a wholly-owned MarineMax subsidiary, manufactures sport yacht and yachts with sales through our select retail dealership locations and through independent dealers. During fiscal 2021, new boat sales including sales of Cruisers Yachts accounted for approximately 70.5% or $1.455 billion of our revenue.

We offer recreational boats in most market segments, but have a particular focus on premium quality pleasure boats and yachts as reflected by our fiscal 2021 average new boat sales price of approximately $227,000 a slight increase from approximately $215,000 in fiscal 2020, compared with an estimated industry average selling price for calendar 2020 of approximately $60,000 based on industry data published by the National Marine Manufacturers Association. Given our locations in some of the more affluent, offshore-oriented boating areas in the United States and emphasis on high levels of customer service, we sell a relatively higher percentage of large recreational boats, such as mega-yachts, yachts, and sport cruisers. We believe that the product lines we offer are among the highest quality within their respective market segments, with well-established trade-name recognition and reputations for quality, performance, and style.

5

The following table is illustrative of the range and approximate manufacturer suggested retail price range of new boats that we currently offer, but is not all inclusive.

 

Product Line and Trade Name

 

Overall Length

 

Manufacturer Suggested

Retail Price Range

Motor Yachts

 

 

 

 

Azimut

 

40’ to 120’+

 

$800,000 to $16,000,000+

Ocean Alexander Yachts

 

45’ to 155’+

 

1,500,000 to 35,000,000+

Benetti

 

30M to 145M

 

12,000,000 to 24,000,000+

Princess

 

35' to 95'

 

700,000 to 10,000,000

Pleasure Boats

 

 

 

 

Sea Ray

 

19’ to 40’

 

30,000 to 800,000+

Aquila

 

32’ to 48’

 

400,000 to 1,200,000

Galeon

 

40’ to 80’

 

750,000 to 6,000,000+

NauticStar

 

19’ to 32’

 

30,000 to 300,000

MJM Yachts

 

35’ to 50’+

 

800,000 to 2,000,000+

Aviara

 

32’ to 40’

 

400,000 to 800,000+

Cruisers Yachts (1)

 

33’ to 60’

 

300,000 to 2,500,000+

Tiara

 

34' to 53'

 

400,000 to 2,500,000

Four Winns

 

19' to 35'

 

45,000 to 550,000

Intrepid (1)

 

25' to 48'

 

200,000 to 1,500,000

Pontoon Boats

 

 

 

 

Harris

 

18’ to 27’

 

25,000 to 250,000

Crest

 

20’ to 27’

 

40,000 to 175,000

Bennington

 

17’ to 25’

 

20,000 to 250,000

Barletta

 

20' to 28'

 

60,000 to 250,000

Starcraft

 

18' to 25'

 

25,000 to 100,000

Sylvan

 

18' to 25'

 

25,000 to 100,000

Fishing Boats

 

 

 

 

Boston Whaler

 

11’ to 42’

 

12,000 to 1,200,000

Grady White

 

18’ to 45’

 

40,000 to 1,200,000

Scout

 

17’ to 53’

 

20,000 to 2,700,000

Sailfish

 

19’ to 36’

 

35,000 to 500,000

Ski Boats

 

 

 

 

Nautique by Correct Craft

 

20’ to 25’

 

80,000 to 325,000

Tigé

 

20’ to 25’

 

80,000 to 180,000

ATX Surf Boats

 

20’ to 24’

 

70,000 to 150,000

Mastercraft

 

20’ to 26’

 

70,000 to 250,000

Jet Boats

 

 

 

 

Yamaha Jet Boats

 

19’ to 24’

 

30,000 to 80,000

 

 

(1)

Product line owned by MarineMax

 

Motor Yachts.  Ocean Alexander Yachts, Azimut, Benetti, and Princess are four of the world’s premier yacht builders. The motor yacht product lines typically include state-of-the-art designs with live-aboard luxuries. Azimut yachts are known for their Americanized open layout with Italian design and powerful performance. The luxurious interiors of Azimut yachts are accented by windows and multiple accommodations that have been designed for comfort. Ocean Alexander Yachts are known for their excellent engineering, performance, and functionality combined with luxuries typically found on larger mega yachts. Benetti yachts and mega yachts are known for maintaining the highest quality standards with excellent aesthetic and functional results as well as combining the finest Italian tradition and craftsmanship with the latest technology. Princess yachts are a leading British luxury yacht manufacturer with meticulous attention to detail, design, and exhilarating performance.

Pleasure Boats.  Sea Ray pleasure boats target both the luxury and the family recreational boating markets and come in a variety of configurations to suit each customer’s particular recreational boating style. Sea Ray pleasure boats feature custom instrumentation that may include an electronics package; various hull, deck, and cockpit designs that can include a swim platform; bow pulpit and raised bridge; and various amenities, such as swivel bucket helm seats, lounge seats, sun pads, wet bars, built-in ice chests, and refreshment centers. Most Sea Ray pleasure boats feature Mercury or MerCruiser engines. Galeon specializes in luxury yacht and

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motorboats with over thirty years of experience. Galeon is one of Europe’s leading and premier boat manufacturers. We believe Galeon yachts combine the latest technology, hand crafted excellence, excellent attention to detail, superb performance, and great innovative designs with modern styling and convenience. Aquila power catamarans provide form, function, and offer practicality and comfort with trend setting innovation. We believe NauticStar provides sport deck boats that combine comfort, features, economy, and versatility that make NauticStar a popular choice among experienced boaters. MJM Yachts combine speed, performance, greater stability, innovative designs and layouts, along with comforts and space for entertaining in addition to a patent protected MJM signature look. Aviara is the newest brand manufactured by MasterCraft focused on the production of vessels 30-feet and over with the goal of creating an elevated open water experience by fusing progressive style, effortless comfort, and modern luxury. Cruisers Yachts is owned by MarineMax and is continuously building world-class, innovative, quality, hand-crafted, American made sport yacht and yachts with the stylish and luxurious Cantius series of boats as well as sleek and powerful outboard models. Tiara Yachts manufactures handcrafted, American-made luxury yachts designed for performance and comfort. Four Winns manufactures quality runabouts, bowriders, yachts and tow sport boats. Intrepid uses advanced composite construction to make each boat unique to its owner as well as stronger, faster and more fuel-efficient to deliver a safe, smooth, dry ride on the water.

Pontoon Boats. Harris is a pontoon industry leader and offers a variety of some of the most innovative, luxurious, and premium pontoon models to fit boaters’ needs. Harris is known for exceptional performance combined with a stable and safe platform. Crest provides a variety of pontoon models that are designed to provide extreme levels of quality, safety, style and comfort to meet family recreational needs. Bennington offers what we believe to be industry leading design, meticulous craftsmanship, and a quiet, smooth, ride. Barletta offers quality construction, simple yet refined models, and customer focused amenities. Starcraft is a leading boat manufacturer with a long history of continuous improvements to fiberglass hull design and a dedication to providing exciting pontoon, runabouts, and deck boat models for families and watersport enthusiasts. Sylvan builds quality, innovative, high performance pontoon boats. With a variety of designs and options, the pontoon boats we offer appeal to a broad audience of pontoon boat enthusiasts and existing customers.

Fishing Boats.  The fishing boats we offer, such as Boston Whaler, Grady-White, Scout, and Sailfish, range from entry level models to advanced models designed for fishing and water sports in lakes, bays, and off-shore waters, with cabins with limited live-aboard capability. The fishing boats typically feature livewells, in-deck fishboxes, rodholders, rigging stations, cockpit coaming pads, and fresh and saltwater washdowns.

Ski Boats.  The ski boats we offer are Nautique by Correct Craft, Tigé, ATX Surf Boats, and Mastercraft, which range from entry level models to advanced models and all of which are designed to achieve an ultimate wake for increased skiing, surfing, and wakeboarding performance and safety. With a variety of designs and options, Nautique, Tigé, ATX Surf Boats, and Mastercraft ski boats appeal to the competitive and recreational user alike.

Jet Boats.  Yamaha jet boats are designed to offer a reliable, high performing, internal propulsion system with superior handling. Yamaha is a worldwide leader in jet boats. With a variety of designs and options, the jet boats we offer appeal to a broad audience of jet boat enthusiasts and existing customers.

Used Boat Sales

We sell used versions of the new makes and models we offer and, to a lesser extent, used boats of other makes and models generally taken as trade-ins. During fiscal 2021, used boat sales accounted for 10.9% or approximately $224.9 million of our revenue, and 29.0% of the used boats we sold were Brunswick models.

Our used boat sales depend on our ability to source a supply of high-quality used boats at attractive prices. We acquire substantially all of our used boat inventory through customer trade-ins. We strive to increase our used boat business through the availability of quality used boat trade-ins generated from our new boat sales efforts, which are well-maintained through our service initiatives. Additionally, substantially all of our used boat inventory is posted on our digital properties, which expands the awareness and availability of our products to a large audience of boating enthusiasts. We also sell used boats at various marinas and other offsite locations throughout the country.

To further enhance our used boat sales, we offer extended warranty plans generally available for used boats less than nine years old. The extended warranty plans apply to each qualifying used boat, which has passed a 48-point inspection, and provides protection against failure of most mechanical parts for up to three years. We believe this type of program enhances our sales of used boats by motivating purchasers of used boats to complete their purchases through our dealerships.

Marine Engines, Related Marine Equipment, and Boating Parts and Accessories

We offer marine engines and equipment, predominantly manufactured by Mercury Marine, a division of Brunswick, and Yamaha. We sell marine engines and propellers primarily to retail customers as replacements for their existing engines or propellers. Mercury Marine and Yamaha have introduced various new engine models that are designed to reduce engine emissions to comply with current United States Environmental Protection Agency (“EPA”) requirements. See “Business — Governmental Regulations, including Environmental Regulations.” Industry leaders, Mercury Marine and Yamaha, specialize in state-of-the-art marine propulsion

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systems and accessories. Many of our dealerships have been recognized by Mercury Marine as “Premier Service Dealers”. This designation is generally awarded based on meeting certain standards and qualifications.

We also sell a broad variety of marine parts and accessories at our retail locations, at various offsite locations, and through our print catalog. These marine parts and accessories include marine electronics; dock and anchoring products, such as boat fenders, lines, and anchors; boat covers; trailer parts; water sport accessories, such as tubes, lines, wakeboards, and skis; engine parts; oils; lubricants; steering and control systems; corrosion control products and service products; high-performance accessories, such as propellers and instruments; and a complete line of boating accessories, including life jackets, inflatables, and water sports equipment. We also offer novelty items, such as shirts, caps, and license plates bearing the manufacturer’s or dealer’s logos. In all of our parts and accessories business, we utilize our industry knowledge and experience to offer boating enthusiasts high-quality products with which we have experience.

The sale of marine engines, related marine equipment, and boating parts and accessories, which are all tangible products, accounted for approximately 3.2% or $66.8 million of our fiscal 2021 revenue.

Maintenance, Repair, and Storage Services

Providing customers with professional, prompt maintenance and repair services is critical to our sales efforts and contributes to our success. We provide maintenance and repair services at most of our retail locations, with extended service hours at certain of our locations. In addition, in many of our markets, we provide mobile maintenance and repair services at the location of the customer’s boat. We believe that this service commitment is a competitive advantage in the markets in which we compete and is critical to our efforts to provide a trouble-free boating experience. To further this commitment, in certain of our markets, we have opened stand-alone maintenance and repair facilities in locations that are more convenient for our customers and that increase the availability of such services. We also believe that our maintenance and repair services contribute to strong customer relationships and that our emphasis on preventative maintenance and quality service increases the potential supply of well-maintained boats for our used boat sales.

We perform both warranty and non-warranty repair services, with the cost of warranty work reimbursed by the manufacturer in accordance with the manufacturer’s warranty reimbursement program. For warranty work, most manufacturers, including Brunswick, reimburse a percentage of the dealer’s posted service labor rates, with the percentage varying depending on the dealer’s customer satisfaction index rating and attendance at service training courses. We derive the majority of our warranty revenue from Brunswick products, as Brunswick products comprise the largest percentage of our products sold. Certain other manufacturers reimburse warranty work at a fixed amount per repair. Because boat manufacturers permit warranty work to be performed only at authorized dealerships, we receive substantially all of the warranted maintenance and repair work required for the new boats we sell. The third-party extended warranty contracts we offer also result in an ongoing demand for our maintenance and repair services for the duration of the term of the extended warranty contract.

Our maintenance and repair services are performed by manufacturer-trained and certified service technicians. In charging for our mechanics’ labor, many of our dealerships use a variable rate structure designed to reflect the difficulty and sophistication of different types of repairs. The percentage markups on parts are similarly based on manufacturer suggested prices and market conditions for different parts.

At many of our locations, we offer boat storage services, including in-water slip storage and inside and outside land storage. These storage services are offered at competitive market rates and include both in-season and out-of-season storage.

Maintenance, repair, and storage services accounted for approximately 5.6% or $114.6 million of our revenue during fiscal 2021 of which, approximately 3.3% or $67.5 million related to repair services, approximately 0.8% or $15.5 million related to parts and accessories for repairs, and approximately 1.5% or $31.6 million related to income from storage service rentals. This includes warranty and non-warranty services.

F&I Products

At each of our retail locations and at various offsite locations where applicable, we offer our customers the ability to finance new or used boat purchases and to purchase extended service contracts and arrange insurance coverage, including boat property, disability, undercoating, gel sealant, fabric protection, and casualty insurance coverage (collectively, “F&I”). We have relationships with various national marine product lenders under which the lenders purchase retail installment contracts evidencing retail sales of boats and other marine products that are originated by us in accordance with existing pre-sale agreements between us and the lenders. These arrangements permit us to receive a portion of the finance charges expected to be earned on the retail installment contract based on a variety of factors, including the credit standing of the buyer, the annual percentage rate of the contract charged to the buyer, and the lender’s then current minimum required annual percentage rate charged to the buyer on the contract. This participation is subject to repayment by us if the buyer prepays the contract or defaults within a designated time period, usually 0 to 180 days. To the extent required by applicable state law, our dealerships are licensed to originate and sell retail installment contracts financing the sale of boats and other marine products.

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We also offer third-party extended service contracts under which, for a predetermined price, we provide all designated services pursuant to the service contract guidelines during the contract term at no additional charge to the customer above a deductible. While we sell all new boats with the boat manufacturer’s standard hull and engine warranty, extended service contracts provide additional coverage beyond the time frame or scope of the manufacturer’s warranty. Purchasers of used boats generally are able to purchase an extended service contract, even if the selected boat is no longer covered by the manufacturer’s warranty. Generally, we receive a fee for arranging an extended service contract. Most required services under the contracts are provided by us and paid for by the third-party contract holder. Beginning in fiscal 2021, we have partnered with a third-party F&I product provider to offer prepaid maintenance plans for select, new models.

We also are able to assist our customers with obtaining property and casualty insurance which covers loss or damage to the vessel. Our specialty yacht insurance agency, Private Insurance Services, provides worldwide yacht insurance programs for brokerage houses, yacht management groups, and maritime attorneys. Private Insurance Services utilizes expertise in complex underwriting, including understanding the exposure of an owner, captain, crew, guests, tenders and navigation to provide clients with uniquely designed protection so customers can cruise confidently.

During fiscal 2021, fee income generated from F&I products accounted for approximately 2.7% or $55.6 million of our revenue. We believe that our customers’ ability to obtain competitive financing quickly and easily at our dealerships complements our ability to sell new and used boats. We also believe our ability to provide customer-tailored financing on a “same-day” basis gives us an advantage over many of our competitors, particularly smaller competitors that lack the resources to arrange boat financing at their dealerships or that do not generate sufficient volume to attract the diversity of financing sources that are available to us.

Brokerage Sales

Through employees or subcontractors that are licensed boat or yacht brokers where applicable, we offer boat or yacht brokerage sales at most of our retail locations. For a commission, we offer for sale brokered boats or yachts, listing them digitally on various sites, advising our other retail locations of their availability through our integrated computer system, and posting them on our website, www.MarineMax.com. Often sales are co-brokered, with the commission split between the buying and selling brokers. We believe that our access to potential used boat customers and methods of listing and advertising customers’ brokered boats or yachts is more extensive than is typical among brokers. In addition to generating revenue from brokerage commissions, our brokerage sales also enable us to offer a broad array of used boats or yachts without increasing related inventory costs. Also, through Fraser Yachts Group and Northrop & Johnson we offer yacht and superyacht brokerage. During fiscal 2021, brokerage sales commissions accounted for approximately 5.6% or $116.6 million of our revenue.

Our brokerage customers generally receive the same high level of customer service as our new and used boat customers. Our waterfront retail locations enable in-water demonstrations of an on-site brokered boat. Our maintenance and repair services, including mobile service, also are generally available to our brokerage customers. Generally, the purchaser of a boat brokered through us also can take advantage of MarineMax Getaways!® weekend and day trips and other rendezvous gatherings and in-water events, as well as boat operation and safety seminars. We believe that the array of services we offer are unique in the brokerage business.

Yacht Charter

In 2011 we launched a yacht charter business in which we offer customers the opportunity to charter catamarans in exotic destinations, starting with our initial location in the British Virgin Islands. In this business, we sell specifically designed yachts to third parties for inclusion in our yacht charter fleet; enter into yacht management agreements under which yacht owners enable us to put their yachts in our yacht charter program for a period of several years for a fixed monthly fee payable by us; provide our services in storing, insuring, and maintaining their yachts; and charter these yachts to vacation customers at agreed fees payable to us. The yacht owners will be able to utilize the yachts for personal use for a designated number of weeks during the terms of the management agreement and take possession of their yachts following the expiration of the yacht management agreements.

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In addition to the specific business we launched in the British Virgin Islands, we also offer yacht charter services. For a fee, we assist yacht owners in the charter of their vessel by third-parties. Additionally, through Fraser Yachts Group and Northrop & Johnson we offer yacht and superyacht chartering, charter management, yacht management, crew placement, new boat build oversight services and other luxury yacht services. During fiscal 2021, the income from rentals of chartering power yachts, yacht charter fees, and other charter services accounted for approximately 1.5% or $29.7 million of our revenue. Our facilities in the British Virgin Islands and yacht charter fleet suffered damage from Hurricane Irma in September of 2017. We maintain insurance for inventory damage, subject to deductibles. The yacht charter fleet resumed charters during fiscal 2019 on a limited basis as damage was repaired and returned to full operations in 2020. Beginning in March 2020, we temporarily closed our facilities in the British Virgin Islands and yacht charters based on guidance from local government and health officials as a result of the COVID-19 pandemic. Yacht charters resumed during fiscal 2021, but the impact of the COVID-19 pandemic and the duration for which it may have an impact cannot be determined at this time.

Offsite Sales

We sell used boats, offer F&I products, and sell parts and accessories at various third-party offsite locations, including marinas.

Product Manufacturing

Cruisers Yachts, a wholly-owned MarineMax subsidiary, manufactures sport yacht and yachts with sales through our select retail dealership locations and through independent dealers. Cruisers Yachts is recognized as one of the world’s premier manufacturers of premium sport yacht and yachts, producing models from 33’ to 60’ feet. In November 2021, we acquired Intrepid, a premier manufacturer of powerboats. Intrepid is recognized as a world class producer of customized boats, carefully reflecting the unique desires of each individual owner.

Retail Locations

We sell our recreational boats and other marine products and offer our related boat services through 79 retail locations in Alabama, California, Connecticut, Florida, Georgia, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma, Rhode Island, South Carolina, Texas, Washington and Wisconsin. Each retail location generally includes an indoor showroom (including some of the industry’s largest indoor boat showrooms) and an outside area for displaying boat inventories, a business office to assist customers in arranging financing and insurance, maintenance and repair facilities, and at certain retail locations boat storage services, including in-water slip storage and inside and outside land storage.

Many of our retail locations are waterfront properties on some of the nation’s most popular boating locations, including the Norwalk Harbor and Westbrook Harbor in Connecticut; multiple locations on the Intracoastal Waterway, the Atlantic Ocean, Boca Ciega Bay, Caloosahatchee River, Naples Bay, Tampa Bay, Pensacola Bay, and the Saint Andrews Bay in Florida; Lake Lanier and Wilmington River in Georgia; Chesapeake Bay in Maryland; Lake Minnetonka and the St. Croix River in Minnesota; Lake of the Ozarks in Missouri; Barnegat Bay, Lake Hopatcong, Little Egg Harbor Bay, and the Manasquan River in New Jersey; Huntington Harbor in New York; Town River in Massachusetts; Masonboro Inlet in North Carolina; Lake Wylie in South Carolina; Lake Erie in Ohio; Grand Lake in Oklahoma; Newport Bay, San Diego Bay, and Richardson Bay in California; Saginaw River, Lake St. Clair, Cass Lake, Spring Lake, and Lake Fenton in Michigan; Lake Union in Washington; Sturgeon Bay, Lake Mendota, Kinnickinnic River, and Lake Butte Des Mortes in Wisconsin; Lake Michigan and Lake Marie in Illinois; Newport Harbor in Rhode Island; and Clear Lake and Lake Lewisville in Texas. Our waterfront retail locations, most of which include marina-type facilities and docks at which we display our yachts and boats, are easily accessible to the boating populace, serve as in-water showrooms, and enable the sales force to give customers immediate in-water demonstrations of various boat models. Most of our other locations are in close proximity to water.

Operations

Dealership Operations and Management

We have adopted a generally decentralized approach to the operational management of our dealerships. While certain administrative functions are centralized at the corporate level, local management is primarily responsible for the day-to-day operations of the retail locations. Each retail location is managed by a general manager, who oversees the day-to-day operations, personnel, and financial performance of the individual store, subject to the direction of a regional president or district president, who generally has responsibility for the retail locations within a specified geographic region. Typically, each retail location also has a staff consisting of an F&I manager, a parts manager, a service manager, sales representatives, maintenance and repair technicians, and various support personnel.

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Sales and Marketing

Our sales philosophy focuses on selling the pleasures of the boating lifestyle and creating memories of a lifetime with family and friends. We believe that the critical elements of our sales philosophy include our appealing retail locations, no-hassle sales approach, highly trained sales representatives, high level of customer service, emphasis on educating the customer and the customer’s family on boating, and providing our customers with opportunities for boating through our MarineMax Getaways!®. We strive to provide exceptional customer experiences through the best services, products, and technology before, during, and after the sale. Our team and customers are United by Water®.

Each retail location offers the customer the opportunity to evaluate a variety of new and used boats in a comfortable and convenient setting. Our full-service retail locations facilitate a turn-key purchasing process that includes attractive lender financing packages, extended service agreements, and insurance. Many of our retail locations are located on waterfronts and marinas, which attract boating enthusiasts and enable customers to operate various boats prior to making a purchase decision.

The brands we offer are diverse in size and use and are spread across our customer activities of leisure, fishing, watersports, luxury, and vacations. We believe the transformative qualities of the water should be shared by everyone, so we created our boat lineup accordingly. Our promise gives our brands meaning and reason to exist next to one another on our showroom floor.

We sell our boats at posted MarineMax “One Price” that generally represent a discount from the manufacturer’s suggested retail price. Our sales approach focuses on the customer experience by minimizing customer anxiety associated with price negotiation.

As a part of our sales and marketing efforts, our digital marketing capabilities are a competitive advantage, with the majority of leads originating through our digital properties, including MarineMax.com. Social media is a growing venue for customer engagement and communication and has become a strong medium for connecting with new customers. Additionally, we hold online experience events including immersive boat tours that allow participants to explore boats and yachts from multiple manufactures, segments, and models from nearly any electronic device including their phone, tablet, or computer.

We participate in boat shows and in-the-water sales events at area boating locations, typically held in January, February, March, and toward the end of the boating season, in each of our markets. Boat shows and other offsite promotions are an important venue for generating customer engagement. The boat shows also generate a significant amount of interest in our products resulting in boat sales after the show. Online we are always available and can offer our full selection of boats, yachts and charters, as well as our expert team to answer customers’ questions and help them find a boat virtually.

We emphasize customer education through one-on-one education by our sales representatives and, at some locations, our delivery captains, before and after a sale, and through in-house seminars for the entire family on boating safety, the use and operation of boats, and product demonstrations. Typically, one of our delivery captains or the sales representative delivers the customer’s boat to an area boating location and thoroughly instructs the customer about the operation of the boat, including hands-on instructions for docking and trailering the boat. To enhance our customer relationships after the sale, we lead and sponsor MarineMax Getaways!® group boating trips to various destinations, rendezvous gatherings, and on-the-water organized events that promote the boating lifestyle and memories of a lifetime. Each Company-sponsored event, planned and led by a Company employee, also provides a favorable medium for acclimating new customers to boating, sharing exciting boating destinations, creating friendships with other boaters, and enabling us to promote new product offerings to boating enthusiasts.

As a result of our relative size, we believe we have a competitive advantage within the industry by being able to conduct an organized and systematic advertising and marketing effort. Part of our marketing capabilities include a customer relationship management system that tracks all customer engagements, evaluates the customers propensity to buy, automatically generates follow-up activities, and facilitates Company-wide availability of a particular boat or other marine products and services desired by a customer.

Suppliers and Inventory Management

We purchase a substantial portion of our new boat inventory directly from manufacturers, which allocate new boats to dealerships based on the amount of boats sold by the dealership and their market share. We manufacture a portion of our new boat inventory from our Product Manufacturing segment. We also exchange new boats with other dealers to accommodate customer demand and to balance inventory.

In fiscal 2021, sales of new Brunswick and Azimut boats and yachts accounted for approximately 27% and 10% of our revenue, respectively. Sales of new Sea Ray and Boston Whaler boats accounted for approximately 11% and 13%, respectively, of our revenue in fiscal 2021. No purchases of new boats and other marine related products from any other manufacturer accounted for more than 10% of our revenue in fiscal 2021.

We have entered into multi-year agreements with Brunswick covering Sea Ray and Boston Whaler. We also have a multi-year agreement with Azimut-Benetti Group for its Azimut product line. We typically deal with each of our manufacturers, other than Brunswick and Azimut-Benetti Group, under an annually renewable, non-exclusive dealer agreement.

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The dealer agreements do not restrict our right to sell any product lines or competing products provided that we are in compliance with the material obligations of our dealer agreements. The terms of each dealer agreement appoints a designated geographical territory for the dealer, which is exclusive to the dealer provided that the dealer is able to meet the material obligations of its dealer agreement.

Manufacturers generally establish prices on an annual basis, but may change prices at their sole discretion. Manufacturers typically discount the cost of inventory and offer inventory financing assistance during the manufacturers’ slow seasons, generally October through March. To obtain lower cost of inventory, we strive to capitalize on these manufacturer incentives to take product delivery during the manufacturers’ slow seasons. This permits us to gain pricing advantages and better product availability during the selling season. Arrangements with certain other manufacturers may restrict our right to offer some product lines in certain markets.

We transfer individual boats among our retail locations to fill customer orders that otherwise might take substantially longer to fill from the manufacturer. This reduces delays in delivery, helps us maximize inventory turnover, and assists in minimizing potential overstock or out-of-stock situations. We actively monitor our inventory levels to maintain levels appropriate to meet current anticipated market demands. We are not bound by contractual agreements governing the amount of inventory that we must purchase in any year from any manufacturer, but the failure to purchase at agreed upon levels may result in the loss of certain manufacturer incentives or dealership rights.

Inventory Financing

Marine manufacturers customarily provide interest assistance programs to retailers. The interest assistance varies by manufacturer and may include periods of free financing or reduced interest rate programs. The interest assistance may be paid directly to the retailer or the financial institution depending on the arrangements the manufacturer has established. We believe that our financing arrangements with manufacturers are standard within the industry.

We account for consideration received from our vendors in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers” (“ASC 606”). ASC 606 requires us to classify interest assistance received from manufacturers as a reduction of inventory cost and related cost of sales as opposed to netting the assistance against our interest expense incurred with our lenders. Pursuant to ASC 606, amounts received by us under our co-op assistance programs from our manufacturers are netted against related advertising expenses.

We are party to an Amended and Restated Loan and Security Agreement (the “Credit Facility”), with Wells Fargo Commercial Distribution Finance LLC, M&T Bank, Bank of the West, and Truist Bank. The Credit Facility provides the Company a line of credit with asset based borrowing availability of up to $500.0 million for working capital and inventory financing, with the amount permissible pursuant to a borrowing base formula. The Credit Facility has a three-year term and expires in July 2024, subject to extension for two one-year periods, with lender approval. The Credit Facility is further discussed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this Annual Report on Form 10-K.

Technology Platform

We believe that our technology platform, which is utilized by each of our dealerships and has been developed over a number of years through cooperative efforts with strategic partners, enhances our ability to integrate successfully the operations of our dealerships and future acquisitions, facilitates the interchange of information, and enhances cross-selling opportunities throughout our company. The platform integrates each level of operations on a Company-wide basis, including but not limited to inventory, financial reporting, budgeting, and sales management. The platform enables us to monitor each dealership’s operations in order to identify quickly areas requiring additional focus and to manage inventory. The platform also provides sales representatives with prospect and customer information that aids them in tracking engagements insights, automatically generates follow-up activities, facilitates the availability of a particular boat Company-wide, locates boats needed to satisfy a particular customer request, and monitors the maintenance and service needs of customers’ boats. Company representatives also utilize the platform to assist in arranging financing and insurance packages. We mitigate cybersecurity risks by employing extensive measures, including employee training, systems, monitoring and testing, and maintenance of protective systems and contingency plans.

Human Capital Resources

As of September 30, 2021, we had 2,666 employees, 2,067 (77%) of whom were in store-level operations, 467 (18%) of whom were in the yacht manufacturing operations, and 132 (5%) of whom were in corporate administration and management. We are not a party to any collective bargaining agreements. We consider our relations with our employees to be excellent.

In managing the business, we devote substantial efforts to recruit employees that we believe to be exceptionally well qualified for their position. We also train our employees to understand our core retail philosophies, which focus on making the purchase of a boat and its subsequent use as hassle-free and enjoyable as possible. Through our MarineMax University, or MMU, we teach our retail philosophies to existing and new employees at various locations and online, through MMU-online. MMU is a modularized and

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instructor-led educational program that focuses on our retailing philosophies and provides instruction on such matters as the sales process, customer service, F&I, accounting, leadership, and human resources. We also have a specialized service training center and program in Clearwater, Florida where we train our service technicians in best practices.

Sales representatives receive compensation primarily on a commission basis. Each general manager is a salaried employee with incentive bonuses based on the performance of the managed dealership. Maintenance and repair service managers receive compensation on a salary basis with bonuses based on the performance of their departments. Our technology platform provides each store and department manager with daily financial and operational information, enabling them to monitor the performance of their personnel on a daily, weekly, and monthly basis. We have a uniform, fully integrated technology platform serving each of our dealerships.

Our philosophy is to pay competitive base salaries to team members at levels that help us to attract, motivate, and retain highly qualified team members and reduce turnover. Cash incentive bonuses are designed to reward individuals based on our Company’s financial results as well as the achievement of personal and corporate objectives designed to contribute to our long-term success in building shareholder value. Grants of stock-based awards under our 2011 Stock-Based Compensation Plan are intended to align compensation with the price performance of our common stock. Total compensation levels reflect corporate positions, responsibilities, and achievement of goals. As a result of our performance-based compensation philosophy, pay levels may vary significantly from year to year and among our various team members. Performance metrics utilized by our cash compensation plans include pretax income performance bonus, aged inventory, district and regional financial performance targets, and net promoter score (customer satisfaction).

Intellectual Property

We have registered tradenames and trademarks, including among other marks, “MarineMax” and “United by Water” in over 20 countries and territories. Pursuant to agreements with manufacturers and subject to restrictions in those agreements, we have the right to use and display the trademarks and logos of our manufacturer’s brands at our retail stores as well as in our advertising and promotional materials. The current registrations of our tradenames and trademarks are effective for varying periods of time, which we may renew periodically, provided that we comply with all statutory maintenance requirements, including continued use of each trademark in each country.

Seasonality and Weather Conditions

Our business, as well as the entire recreational boating industry, is highly seasonal, with seasonality varying in different geographic markets. Over the three-year period ended September 30, 2021, the average revenue for the quarters ended December 31, March 31, June 30 and September 30 represented approximately 20%, 24%, 32%, and 24%, respectively, of our average annual revenues. With the exception of Florida, we generally realize significantly lower sales and higher levels of inventories and related short-term borrowings, in the quarterly periods ending December 31 and March 31. The onset of the public boat and recreation shows in January generally stimulates boat sales and typically allows us to reduce our inventory levels and related short-term borrowings throughout the remainder of the fiscal year. Our expansion into boat storage may act to reduce our seasonality and cyclicality.

Our business is also subject to weather patterns, which may adversely affect our results of operations. For example, prolonged winter conditions, drought conditions (or merely reduced rainfall levels) or excessive rain, may limit access to area boating locations or render boating dangerous or inconvenient, thereby curtailing customer demand for our products. In addition, unseasonably cool weather and prolonged winter conditions may lead to a shorter selling season in certain locations. Hurricanes and other storms could result in disruptions of our operations or damage to our boat inventories and facilities, as has been the case when Florida and other markets were affected by hurricanes, such as Hurricanes Harvey and Irma in 2017. Although our geographic diversity is likely to reduce the overall impact to us of adverse weather conditions in any one market area, these conditions will continue to represent potential, material adverse risks to us and our future financial performance.

Governmental Regulations, including Environmental Regulations

Our operations are subject to extensive regulation, supervision, and licensing under various foreign, federal, state, and local statutes, ordinances, and regulations. While we believe that we maintain all requisite licenses and permits and are in compliance with all applicable federal, state, and local regulations, there can be no assurance that we will be able to maintain all requisite licenses and permits. The failure to satisfy those and other regulatory requirements could have a material adverse effect on our business, financial condition, and results of operations. The adoption of additional laws, rules, and regulations could also have a material adverse effect on our business. Various foreign, federal, state, and local regulatory agencies, including the Occupational Safety and Health Administration (“OSHA”), the EPA, and similar foreign, federal, state, and local agencies, have jurisdiction over the operation of our dealerships, repair facilities, and other operations with respect to matters such as consumer protection and privacy, workers’ safety, and laws regarding protection of the environment, including air, water, and soil.

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The EPA has various air emissions regulations for outboard marine engines that impose more strict emissions standards for two-cycle, gasoline outboard marine engines. The majority of the outboard marine engines we sell are manufactured by Mercury Marine. Mercury Marine’s product line of low-emission engines, including the Verado, SeaPro, Pro XS, and other four-stroke outboards, have achieved the EPA’s mandated 2006 emission levels. While we remain committed to supporting sustainable manufacturing and a sustainable environment for all boaters, any increased costs of producing engines resulting from EPA standards, or the inability of our manufacturers to comply with EPA requirements, could have a material adverse effect on our business.

Certain of our facilities own and operate underground storage tanks (“USTs”) and above ground storage tanks (“ASTs”) for the storage of various petroleum products. The USTs and ASTs are generally subject to federal, state, and local laws and regulations that require testing and upgrading of tanks and remediation of contaminated soils and groundwater resulting from leaking tanks. In addition, if leakage from Company-owned or operated tanks migrates onto the property of others, we may be subject to civil liability to third parties for remediation costs or other damages. Based on historical experience, we believe that our liabilities associated with tank testing, upgrades, and remediation are unlikely to have a material adverse effect on our financial condition or operating results.

As with boat dealerships generally, and parts and service operations in particular, our business involves the use, handling, storage, and contracting for recycling or disposal of hazardous or toxic substances or wastes, including environmentally sensitive materials, such as motor oil, waste motor oil and filters, transmission fluid, antifreeze, freon, waste paint and lacquer thinner, batteries, solvents, lubricants, degreasing agents, gasoline, and diesel fuels. Accordingly, we are subject to regulation by federal, state, and local authorities establishing requirements for the use, management, handling, and disposal of these materials and health and environmental quality standards, and liability related thereto, and providing penalties for violations of those standards. We are also subject to laws, ordinances, and regulations governing investigation and remediation of contamination at facilities we operate to which we send hazardous or toxic substances or wastes for treatment, recycling, or disposal.

We do not believe we have any material environmental liabilities or that compliance with environmental laws, ordinances, and regulations will, individually or in the aggregate, have a material adverse effect on our business, financial condition, or results of operations. However, soil and groundwater contamination has been known to exist at certain properties owned or leased by us. We have also been required and may in the future be required to remove USTs and ASTs containing hazardous substances or wastes. As to certain of our properties, specific releases of petroleum have been or are in the process of being remedied in accordance with state and federal guidelines. We are monitoring the soil and groundwater as required by applicable state and federal guidelines. In addition, the shareholders of certain of the acquired dealers have indemnified us (and such indemnification is continuing) for specific environmental issues identified on environmental site assessments performed by us as part of the acquisitions. We maintain insurance for pollutant cleanup and removal. The coverage pays for the expenses to extract pollutants from land or water at the insured property, if the discharge, dispersal, seepage, migration, release, or escape of the pollutants is caused by or results from a covered cause of loss. We also have additional storage tank liability insurance and Superfund coverage where applicable. In addition, certain of our retail locations are located on waterways that are subject to federal or state laws regulating navigable waters (including oil pollution prevention), fish and wildlife, and other matters.

Three of the properties we own were historically used as gasoline service stations. Remedial action with respect to prior historical site activities on these properties has been completed in accordance with federal and state law. We do not believe that any of these environmental issues will result in any material liabilities to us.

Additionally, certain states have required or are considering requiring a license in order to operate a recreational boat. While such licensing requirements are not expected to be unduly restrictive, regulations may discourage potential first-time buyers, thereby limiting future sales, which could adversely affect our business, financial condition, and results of operations.

Environmental Responsibility

We operate many retail locations near or on bodies of water that are acutely susceptible to the risks associated with climate change. Such risks include those related to the physical impacts of climate change, such as possibly more frequent and severe weather events, rising sea levels, and/or long term shifts in climate patterns, and risks related to the transition to a lower-carbon economy, such as reputational, market and/or regulatory risks. Our commitment to environmental responsibility and initiatives to reduce our environmental footprint are outlined in our “Environmental Policy.” Our Environmental Policy can be found on the Investor Relations section of our website at www.MarineMax.com under Governance Documents. Our Environmental Policy and associated climate related risks and opportunities are reviewed by our Board of Directors on an annual basis or more frequently as needed.

We have engaged in many efforts to mitigate and adapt to climate change. For example, we seek out, to the extent feasible, manufacturers committed to the highest levels of sustainability, environmental stewardship, and low-emissions as demonstrated by Mercury Marine. Mercury Marine’s commitment to sustainability and successes are detailed in its 2020 Sustainability Report. Mercury Marine’s accomplishments include winning the 2019 Sustainable Process Award from the Wisconsin Sustainable Business Council for its sustainable use of aluminum, winning the 2018 Sustainable Product of the Year from the Wisconsin Sustainable Business Council for its Active Trim technology, and winning the 2018 Business Friend of the Environment Award for their new V6 and V8 outboard engines. For the 10th consecutive year, the Wisconsin Sustainable Business Council awarded Mercury Marine a “Green Masters” designation, a program measuring a broad range of sustainability issues including energy and water conservation,

14

waste management, community outreach, and education. Additionally, Azimut Yachts was awarded ISO 14001 certification, for its consistent and effective management system aimed at reducing the environmental impact of its operations. Also, to maximize the eco-compatible standards of their yachts, Azimut Yachts adopted RINA (an organization specializing in classification, certification, testing, and inspection) principles to achieve RINA Green Plus notation.

Further, while not our primary focus, as opportunities arise we have made targeted investments to support new technology, innovations, and research in the marine industry to reduce emissions, provide environmental stewardship, and support a sustainable environment for all boaters. The Fraser Yachts Group has become the first yacht company to sign the Pact for Energy Transition with the Monaco Government. The energy transition pact was created by the Monaco government to improve energy efficiency and promote renewable energy sources, with the target to reducing greenhouse gas emissions, by allowing residents, workers, businesses, institutions and associations to contribute to the energy transition effort.

We take pride in maintaining our retail locations and marinas for the benefit of the local communities and boaters we serve. We strive to execute a proactive strategy related to environmental, health, and safety laws and regulations, and environmental stewardship, which includes investing significant resources in maintaining and developing our retail locations and marinas for the long term. Additionally, several of our Florida locations have been designated Clean Marinas through the Florida Department of Environmental Protection Clean Marina Program. The Clean Marina Program recognizes facilities engaging in environmental best practices and exceeding regulatory requirements in and around Florida’s waterways.

Corporate Social Responsibility

Our commitment to social responsibility is outlined in our “Human Rights Policy.” Our Human Rights Policy can be found on the Investor Relations section of our website at www.MarineMax.com under Governance Documents. Our Human Rights Policy is reviewed by our Board of Directors on an annual basis or more frequently as needed. We strive to conduct our business in an ethical and socially responsible way, and are sensitive to the needs of the environment, our customers, our shareholders, our team members and our communities. Our ethical and social responsibility is guided by our MarineMax culture and values which are honesty, trust, loyalty, professionalism, consistency, always do what is right, treat others as we want to be treated, and always consider the long term. Our culture, values, and mission are shared and reinforced with our team members through daily stand up meetings, team events, and online communications. We pride ourselves in supporting our local communities both on and off the water. One way in which our presence is felt within the local community is by providing our team members time to volunteer and assist with Habitat for Humanity housing projects in addition to making charitable donations to Habitat for Humanity. Additionally, we are proud to support the ocean cleanup company 4ocean and its mission to end the world’s plastic pollution crises. 4ocean is a global company that actively removes trash from the ocean and coastlines, helps create sustainable economies around the world and inspires individuals to work together for a cleaner ocean.

Product Liability

The products we sell or service may expose us to potential liabilities for personal injury or property damage claims relating to the use of those products. Historically, the resolution of product liability claims has not materially affected our business. Manufacturers of the products we sell generally maintain product liability insurance. We also maintain third-party product liability insurance that we believe to be adequate. We may experience claims that are not covered by, or that are in excess of, our insurance coverage. The institution of any significant claims against us could subject us to damages, result in higher insurance costs, and harm our business reputation with potential customers.

Executive Officers

The following table sets forth information concerning each of our executive officers as of November 15, 2021:

 

Name

 

Age

 

Position

William H. McGill Jr.

 

77

 

Executive Chairman of the Board and Director

William Brett McGill

 

53

 

Chief Executive Officer, President and Director

Michael H. McLamb

 

56

 

Executive Vice President, Chief Financial Officer,

   Secretary, and Director

Charles A. Cashman

 

58

 

Executive Vice President and Chief Revenue Officer

Anthony E. Cassella, Jr

 

52

 

Vice President and Chief Accounting Officer

 

15

 

William H. McGill Jr. has served as the Executive Chairman of the Board since October 2018. Mr. McGill served as Chief Executive Officer of MarineMax from January 23, 1998 to September 30, 2018 and as the Chairman of the Board and as a Director of the Company since March 6, 1998. Mr. McGill served as the President of the Company from January 23, 1988 until September 8, 2000 and re-assumed the position from July 1, 2002 to October 1, 2017. Mr. McGill was the principal owner and president of Gulfwind USA, Inc., one of our operating subsidiaries, from 1973 until its merger with us in 1998.

William Brett McGill has served as Chief Executive Officer since October 2018, as President since October 2017, and as a Director since February 21, 2019. Mr. McGill served as President and Chief Operating Officer of MarineMax from October 2017 to October 2018. Mr. McGill served as Executive Vice President and Chief Operating Officer from October 2016 to October 2017, Executive Vice President Operations of the Company from October 2015 to September 2016, as Vice President of West Operations of the Company from May 2012 to September 2015, and was appointed as an executive officer by our Board of Directors in November 2012. Mr. McGill served as one of our Regional Presidents from March 2006 to May 2012, as Vice President of Information Technology, Service and Parts of the Company from October 2004 to March 2006, and as Director of Information Services from March 1998. Mr. McGill began his professional career with a software development firm, Integrated Dealer Systems, prior to joining MarineMax in 1996. William Brett McGill is the son of William H. McGill, Jr.

Michael H. McLamb has served as Executive Vice President of MarineMax since October 2002, as Chief Financial Officer since January 23, 1998, as Secretary since April 5, 1998, and as a Director since November 1, 2003. Mr. McLamb served as Vice President and Treasurer of the Company from January 23, 1998 until October 22, 2002. Mr. McLamb, a certified public accountant, was employed by Arthur Andersen LLP from December 1987 to December 1997, serving most recently as a Senior Manager.

Charles A. Cashman has served as Executive Vice President and Chief Revenue Officer of MarineMax since October 2016. Mr. Cashman served as Executive Vice President Sales, Marketing, and Manufacturer Relations of the Company from October 2015 to September 2016, served as Vice President of East Operations from May 2012 to September 2015, and was appointed as an executive officer by our Board of Directors in November 2012. Mr. Cashman served as Regional President of East Florida from October 2008 to May 2012, and as District Manager of the East Coast of Florida from March 2007 to October 2008. Mr. Cashman served several other positions of increasing responsibility, including Sales Consultant, Sales Manager, and General Manager, since joining MarineMax in 1992.

Anthony E. Cassella, Jr. has served as Vice President of MarineMax since February 2016, Chief Accounting Officer since October 2014, and Vice President of Accounting and Shared Services since February 2011. Mr. Cassella served as Director of Shared Services from October 2007 until February 2011 and Regional Controller from March 1999 until October 2007. Mr. Cassella was the Controller of Merit Marine which the Company acquired in March 1999. Mr. Cassella, a certified public accountant, worked in public accounting from June 1991 to February 1998, serving most recently as Manager.

Item 1A.

Risk Factors

Risks Related to Competition, Economic, and Industry Conditions

Our success depends to a significant extent on the well-being, as well as the continued popularity and reputation for quality of the boating products, of our manufacturers, particularly Brunswick’s Sea Ray and Boston Whaler boat lines and Azimut-Benetti Group’s Azimut products. The failure to obtain a high quality and desirable mix of competitively priced products that our customers demand could have a material adverse effect on our business, financial condition, and results of operations.

Approximately 27% of our revenue in fiscal 2021 resulted from sales of new boats manufactured by Brunswick, including approximately 11% from Brunswick’s Sea Ray division, 13% from Brunswick’s Boston Whaler division, and approximately 3% from Brunswick’s other divisions. Additionally, approximately 10% of our revenue in fiscal 2021 resulted from sales of new boats manufactured by Azimut-Benetti Group. The remainder of our fiscal 2021 revenue from new boat sales resulted from sales of products from a limited number of other manufacturers, none of which accounted for more than 10% of our revenue.

We depend on our manufacturers to provide us with products that compare favorably with competing products in terms of quality, performance, safety, and advanced features, including the latest advances in propulsion and navigation systems. Any adverse change in the production efficiency, product development efforts, technological advancement, expansion of manufacturing footprint, supply chain and third-party suppliers, marketplace acceptance, marketing capabilities, ability to secure adequate access to capital, and financial condition of our manufacturers, particularly Brunswick (including Mercury Marine, a division of Brunswick) and Azimut-Benetti Group, given our reliance on Sea Ray, Boston Whaler, Mercury Marine engines, and Azimut, would have a substantial adverse impact on our business. Any difficulties encountered by any of our manufacturers, particularly Brunswick and Azimut-Benetti Group, resulting from economic, financial, supply chain, or other factors, such as the COVID-19 pandemic, could adversely affect the quality and amount of products that they are able to supply to us and the services and support they provide to us.

Any interruption or discontinuance of the operations of Brunswick, Azimut-Benetti Group or other manufacturers could cause us to experience shortfalls, disruptions or delays with respect to needed inventory. Although we believe in our brand, our product

16

diversification and that adequate alternate sources would be available that could replace any manufacturer other than Brunswick and Azimut-Benetti Group as a product source, those alternate sources may not be available at the time of any interruption, and alternative products may not be available at comparable quality and price.

Boat manufacturers exercise substantial control over our business.

We depend on our dealer agreements. We have dealer agreements with Brunswick covering Sea Ray and Boston Whaler products. Most of our retail locations have a multi-year dealer agreement which provides for the lowest product prices charged by the Sea Ray division of Brunswick or Boston Whaler, as applicable, from time to time to other domestic Sea Ray or Boston Whaler dealers, as applicable. These terms are subject to:

 

•

the dealer meeting all the requirements and conditions of the manufacturer’s applicable programs; and

 

•

the right of Brunswick in good faith to charge lesser prices to other dealers

 

•

to meet existing competitive circumstances;

 

•

for unusual and non-ordinary business circumstances; or

 

•

for limited duration promotional programs.

Each dealer agreement designates a specific geographical territory for the dealer, which is exclusive to the dealer provided that the dealer is able to meet the material obligations of its dealer agreement.

We are the exclusive dealer for Azimut-Benetti Group’s Azimut product line for the United States. The Azimut dealer agreement provides a geographic territory to promote the product line and to network with the appropriate clientele through various independent locations designated for Azimut retail sales. Our dealer agreement is a multi-year term but requires us to be in compliance with its terms and conditions.

As is typical in the industry, we generally deal with manufacturers, other than Sea Ray, Boston Whaler, and Azimut, under renewable annual dealer agreements. These agreements do not contain any contractual provisions concerning product pricing or required purchasing levels. Pricing is generally established on a model year basis, but is subject to change in the manufacturer’s sole discretion. Any change or termination of these arrangements for any reason could adversely affect product availability and cost and our financial performance.

Through these dealer agreements, boat manufacturers (particularly Brunswick and Azimut) exercise significant control over their dealers, restrict them to specified locations, and retain approval rights over changes in management and ownership, among other things. Failure to meet the customer satisfaction, market share goals, and other conditions set forth in any dealer agreement could have various consequences, including the following:

 

•

the termination of the dealer agreement;

 

•

the imposition of additional conditions in subsequent dealer agreements;

 

•

limitations on boat inventory allocations;

 

•

reductions in reimbursement rates for warranty work performed by the dealer;

 

•

loss of certain manufacturer to dealer incentives;

 

•

denial of approval of future acquisitions; or

 

•

the loss of exclusive rights to sell in the geographic territory.

These events could have a material adverse effect on our competitive position and financial performance.

Our business, as well as the entire recreational boating industry, is highly seasonal, with seasonality varying in different geographic markets.

Over the three-year period ended September 30, 2021, the average revenue for the quarterly periods ended December 31, March 31, June 30 and September 30 represented approximately 20%, 24%, 32%, and 24%, respectively, of our average annual revenue. With the exception of Florida, we generally realize significantly lower sales and higher levels of inventories and related short-term borrowings in the quarterly periods ending December 31 and March 31. The onset of the public boat and recreation shows in January typically stimulates boat sales and allows us to reduce our inventory levels and related short-term borrowings throughout the remainder of the fiscal year. Our business could become substantially more seasonal if we acquire dealers that operate in colder regions of the United States, which are generally closed or experience lower volume in the winter months.

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The failure to receive rebates and other dealer incentives on inventory purchases or retail sales could substantially reduce our margins.

We rely on manufacturers’ programs that provide incentives for dealers to purchase and sell particular boat makes and models or for consumers to buy particular boat makes or models. Any eliminations, reductions, limitations, or other changes relating to rebate or incentive programs that have the effect of reducing the benefits we receive, whether relating to the ability of manufacturers to pay or our ability to qualify for such incentive programs, could increase the effective cost of our boat purchases, reduce our margins and competitive position, and have a material adverse effect on our financial performance.

Other recreational activities, poor industry perception, and potential health risks from environmental conditions can adversely affect the levels of boat purchases.

Demand for our products can be adversely affected by competition from other activities that occupy consumers’ time, including other forms of recreation as well as religious, cultural and community activities. In addition, real or perceived health risks from engaging in outdoor activities and local environmental conditions in the areas in which we operate dealerships could adversely affect the levels of boat purchases. Further, as a seller of high-end consumer products, we must compete for discretionary spending with a wide variety of other recreational activities and consumer purchases. In addition, perceived hassles of boat ownership and customer service and lack of customer education throughout the retail boat industry, which has traditionally been perceived to be relatively poor, represent impediments to boat purchases.

We face intense competition.

We operate in a highly competitive environment. In addition to facing competition generally from recreation businesses seeking to attract consumers’ leisure time and discretionary spending dollars, the recreational boat industry itself is highly fragmented, resulting in intense competition for customers, quality products, boat show space, and suitable retail locations. We rely to a certain extent on boat shows to generate sales.

We compete primarily with single-location boat dealers and, with respect to sales of marine parts, accessories, and equipment, with national specialty marine parts and accessories stores, online catalog retailers, sporting goods stores, and mass merchants. Competition among boat dealers is based on the quality of available products, the price and value of the products, and attention to customer service. There is significant competition both within markets we currently serve and in new markets that we may enter. We compete in each of our markets with retailers of brands of boats and engines we do not sell in that market. In addition, several of our competitors, especially those selling marine equipment and accessories, are large national or regional chains that have substantial financial, marketing and other resources. Private sales of used boats represent an additional source of competition.

Due to various matters, including environmental concerns, permitting and zoning requirements, and competition for waterfront real estate, some markets in the United States have experienced an increased waiting list for marina and storage availability. In general, the markets in which we currently operate are not experiencing any unusual difficulties. However, marine retail activity could be adversely affected in markets that do not have sufficient marine and storage availability to satisfy demand.

Timing of large boat and yacht sales and failure to adequately anticipate consumer preference and demand may have an adverse impact on our business.

Forecasting optimal inventory levels is difficult to predict based on, among other things, changes in economic conditions, consumer preferences, delivery of new models from manufacturers, and timing of large boat and yacht sales. Failure to adequately anticipate consumer demand and preferences could negatively impact our inventory management strategies, inventory carrying costs, and our operating margins.

Economic conditions and consumer spending patterns can have a material adverse effect on our business, financial condition, and results of operations.

General economic conditions and consumer spending patterns can negatively impact our operating results. Unfavorable local, regional, national, or global economic developments or uncertainties regarding future economic prospects could reduce consumer spending in the markets we serve and adversely affect our business. Economic conditions in areas in which we operate dealerships, such as corporate downsizing, military base closings, and inclement weather such as hurricanes or other storms, environmental conditions, and specific events, such as the BP oil spill in the Gulf of Mexico in 2010, or Hurricanes Harvey and Irma in 2017, also could adversely affect, and in certain instances have adversely affected, our operations in certain markets.

In an economic downturn, consumer discretionary spending levels generally decline, at times resulting in disproportionately large reductions in the sale of luxury goods. Consumer spending on luxury goods also may decline as a result of lower consumer confidence levels, even if prevailing economic conditions are favorable. As a result, an economic downturn could impact us more than certain of our competitors due to our strategic focus on a higher end of our market.

18

Unfavorable economic conditions can cause us to reduce our acquisition program, delay new store openings, reduce our inventory purchases, engage in inventory reduction efforts, close a number of our retail locations, reduce our headcount, and amend and replace our credit facility, and could also interfere with our supply of certain brands by manufacturers, reduce marketing and other support by manufacturers, decrease revenue, put additional pressures on margins, and result in our failure to satisfy covenants under our credit agreement.

More recently, inflation has increased in the United States and throughout the world. This has begun to affect the prices at which manufacturers charge us, as well as the prices that we charge our customers. To the extent such inflation continues, increases, or both, it may reduce our margins and have a material adverse effect on our financial performance.

 

COVID-19 pandemic may adversely affect our revenues, results of operations and financial condition.

Our business could be materially adversely affected by the widespread outbreak of contagious disease, including the recent COVID-19 pandemic. COVID-19 has spread in many of the geographic areas in which we operate. International, national, state and local governments in affected regions have implemented and will continue to implement safety precautions, including quarantines, travel restrictions, business closures, cancellations of public gatherings and other measures, for an indefinite time period. Other organizations and individuals are taking additional steps to avoid or reduce infection, including limiting travel and staying home from work. These measures are disrupting normal business operations both in and outside of affected areas and have had significant negative impacts on businesses and financial markets worldwide.

We continue to monitor our operations and government recommendations and have made modifications to our normal operations, including taking proactive steps to enhance financial flexibility including working to extract capital from our debt-free sizable real estate holdings, taking action to monetize our unlevered inventory, and implementing operating cost savings plans. The onset of the COVID-19 pandemic caused a number of adverse impacts, including reductions in demand for our products, inefficiencies caused by team members working remotely, and certain closed departments or locations based on guidance from each local government or health officials. Disruptions in the capital markets as a result of the COVID-19 outbreak may also adversely affect us if these impacts continue for a prolonged period and we need additional liquidity. Disruptions in our supply chain as a result of the COVID-19 outbreak has adversely affected, and could have an increased adverse effect on, our business, financial condition, and results of operations. While it is not possible at this time to estimate the entirety of the impact that COVID-19 will have on our business, customers, suppliers or other business partners, depending on the severity of the COVID-19 pandemic the length of time of its impact and the applicable government actions in response to it, the effect of the adverse impacts identified in this paragraph may increase and additional adverse impacts may arise.

Our sales may be adversely impacted by a material increase in interest rates and adverse changes in fiscal policy or credit market conditions.

Over the past several years, our economy has been positively impacted by historically unprecedented low interest rates. Such interest rates, driven by the policies of the Federal Reserve, can be a political issue in the United States. Any change by the Federal Reserve to raise its benchmark interest rate in the future or market expectations of such change may result in significantly higher long-term interest rates, which may negatively impact our customers’ willingness or desire to purchase our products.

Risks Related to Our Strategies

Failure to implement strategies to enhance our performance or our strategies could have a material adverse effect on our business and financial condition.

We are increasing our efforts to grow our financing and insurance, parts and accessories, service, yacht charter, brokerage, and boat storage businesses to better serve our customers and thereby increase revenue and improve profitability as a result of these higher margin businesses. In addition, we have implemented programs to increase the lead capture and digital sales of used boats, parts, accessories, and a wide range of boating supplies and products. These efforts and programs are designed to increase our revenue and reduce our dependence on the sale of new boats. We are also pursuing certain acquisitions as discussed in the immediately following Risk Factors. These business initiatives have required, and will continue to require, us to add personnel, invest capital, enter businesses in which we do not have extensive experience, and encounter substantial competition. As a result, our strategies to enhance our performance may not be successful and we may increase our expenses or write off such investments if not successful.

19

Our success depends, in part, on our ability to continue to make successful acquisitions at attractive or fair prices and to integrate the operations of acquired dealers and each dealer we acquire in the future.

Since March 1, 1998, we have acquired 32 additional previously independent recreational boat dealers, multiple marinas, four boat brokerage operations, two superyacht service companies, two full-service yacht repair operations, and two boat and yacht manufacturers. Each acquired dealer and entity operated independently prior to its acquisition by us. Our success depends, in part, on our ability to continue to make successful acquisitions at attractive or fair prices that align with our culture and focus on customer service and to integrate the operations of acquired dealers, including centralizing certain functions to achieve cost savings and pursuing programs and processes that promote cooperation and the sharing of opportunities and resources among our dealerships. We may not be able to oversee the combined entity efficiently, realize anticipated synergies, or implement effectively our growth and operating strategies. To the extent that we successfully pursue our acquisition strategy, our resulting growth will place significant additional demands on our management and infrastructure. Our failure to pursue successfully our acquisition strategies or operate effectively the combined entity could have a material adverse effect on our rate of growth and operating performance.

We may pursue acquisition strategies in new lines of business.

We have historically pursued strategic acquisitions to capitalize upon the consolidation opportunities in the highly fragmented recreational boat dealer industry by acquiring additional dealers and related operations and improving their performance and profitability through the implementation of our operating strategies. We have also recently pursued, and may continue to pursue, potential contract manufacturing, vertical integration strategies, yacht charter and brokerage, marinas, boat storage, or other acquisitions as opportunities arise. To the extent we are successful in pursuing one or more of these strategies, we will face certain risks in addition to those that exist with acquisitions more closely related to our historical business, including potential inexperience in a line of business that is either new to us or that has become materially more significant to us as a result of a transaction, the potential difficulty of presenting a unified corporate image, greater uncertainties in the financial benefits and potential liabilities associated with this expanded base of acquisitions, different types of legal and operational risks, and different types of applicable financial metrics and goals. Our failure to pursue successfully our acquisition strategies in new lines of business, operate effectively the combined entity, and/or mitigate any potential new risks, could have a material adverse effect on our rate of growth and operating performance.

Unforeseen expenses, difficulties, and delays frequently encountered in connection with expansion through acquisitions could inhibit our growth and negatively impact our profitability.

The acquisition of additional recreational boat dealers, boat storage facilities, yacht brokerage operations, and marinas, which is one of our growth strategies, and vertical integration strategies, all involve significant risks. This strategy entails reviewing and potentially reorganizing acquired business operations, corporate infrastructure and systems, and financial controls. Unforeseen expenses, difficulties and delays frequently encountered in connection with expansion through acquisitions could inhibit our growth and negatively impact our profitability. We may be unable to identify suitable acquisition candidates or to complete the acquisitions of candidates that we identify. Increased competition for acquisition candidates or increased asking prices by acquisition candidates may increase purchase prices for acquisitions to levels beyond our financial capability or to levels that would not result in expected returns required by our acquisition criteria to be in the best interest of shareholders. Acquisitions also may become more difficult or less attractive in the future as we acquire more of the most attractive dealers that best align with our culture and focus on customer service. In addition, we may encounter difficulties in integrating the operations of acquired dealers with our own operations, difficulties in retaining employees, potential risks of losing customers, suppliers, or other business relationships, and difficulties in managing acquired dealers profitably without substantial costs, delays, or other operational or financial problems.

Our ability to continue to grow through acquisitions depends upon various factors, including the following:

 

•

the availability of suitable acquisition candidates at attractive purchase prices;

 

•

the ability to compete effectively for available acquisition opportunities;

 

•

the availability of cash on hand, borrowed funds or stock with a sufficient value to complete the acquisitions;

 

•

the ability to obtain any requisite manufacturer or governmental approvals;

 

•

the ability to obtain approval of our lenders under our current credit agreement; and

 

•

the absence of one or more manufacturers attempting to impose unsatisfactory restrictions on us in connection with their approval of acquisitions.

If we finance future acquisitions in whole or in part through the issuance of common stock or securities convertible into or exercisable for common stock, existing shareholders will experience dilution in the voting power of their common stock and earnings per share could be negatively impacted. Any borrowings made to finance future acquisitions or for operations could make us more vulnerable to a downturn in our operating results, a downturn in economic conditions, or increases in interest rates on borrowings that are subject to interest rate fluctuations.

20

We may be required to obtain the consent of Brunswick and various other manufacturers prior to the acquisition of other dealers.

In determining whether to approve acquisitions, manufacturers may consider many factors, including our financial condition and ownership structure. Manufacturers also may impose conditions on granting their approvals for acquisitions, including a limitation on the number of their dealers that we may acquire. Our ability to meet manufacturers’ requirements for approving future acquisitions will have a direct bearing on our ability to complete acquisitions and effect our growth strategy. There can be no assurance that a manufacturer will not terminate its dealer agreement, refuse to renew its dealer agreement, refuse to approve future acquisitions, or take other action that could have a material adverse effect on our acquisition program.

Our internal growth and operating strategies of opening new locations and offering new products involve risk.

In addition to pursuing growth by acquiring boat dealers, we intend to continue to pursue a strategy of growth through opening new retail locations and offering new products in our existing and new territories. This strategy may entail obtaining additional distribution rights from our existing and new manufacturers. We may not be able to secure additional distribution rights or obtain suitable alternative sources of supply if we are unable to obtain such distribution rights. The inability to expand our product lines and geographic scope by obtaining additional distribution rights could have a material adverse effect on the growth and profitability of our business.

Accomplishing these goals for expansion will depend upon a number of factors, including the following:

 

•

our ability to identify new markets in which we can obtain distribution rights to sell our existing or additional product lines;

 

•

our ability to lease or construct suitable facilities at a reasonable cost in existing or new markets;

 

•

our ability to hire, train, and retain qualified personnel;

 

•

the timely and effective integration of new retail locations into existing operations;

 

•

our ability to achieve adequate market penetration at favorable operating margins without the acquisition of existing dealers; and

 

•

our financial resources.

Our dealer agreements with Brunswick require Brunswick’s consent to open, close, or change retail locations that sell Sea Ray or Boston Whaler products as applicable, and other dealer agreements generally contain similar provisions. We may not be able to open and operate new retail locations or introduce new product lines on a timely or profitable basis. Moreover, the costs associated with opening new retail locations or introducing new product lines may adversely affect our profitability.

As a result of these growth strategies, we expect to continue to expend significant time and effort in opening and acquiring new retail locations, improving existing retail locations in our current markets, and introducing new products. Our systems, procedures, controls, financial resources, and management and staffing levels may not be adequate to support expanding operations. The inability to manage our growth effectively could have a material adverse effect on our business, financial condition, and results of operations.

In addition to our traditional repeat and referral business in our physical locations, digital channels are increasingly significant in serving our existing customer base and reaching new customers. Our continued expansion and success will be negatively impacted if we are not able to fully exploit these channels.

Our digital channels are subject to a number of risks and uncertainties that are beyond our control, including the following:

 

•

changes in technology;

 

•

cybersecurity risk;

 

•

changes in consumer willingness to conduct business electronically, including increasing concerns with consumer privacy and risk and changing laws, rules, and regulations, such as the imposition of or increase in taxes;

 

•

technology or security impediments that may inhibit our ability to electronically market our products and services;

 

•

changes in applicable international, federal, state and commercial regulation;

 

•

failure of our service providers, suppliers or service partners to perform their services properly and in a timely and efficient manner;

 

•

failure to adequately respond to customers, process orders or deliver services;

21

 

 

•

our failure to assess and evaluate our digital product and service offerings to ensure that our products and services are desired by boating enthusiasts; and

 

•

the potential exposure to liability with respect to third-party information, including but not limited to copyright, trademark infringement, or other wrongful acts of third parties; false or erroneous information provided by third parties; or illegal activities by third parties, such as the sale of stolen boats or other goods.

Further, we may also be vulnerable to competitive pressures from the growing electronic commerce activity in our market, both as they may impact our own on-line business, and as they may impact the operating results and investment values of our existing physical locations.

Various operations in multiple countries around the world expose us to international political, economic, foreign currency, and other risks.

Our operations involve certain international activities, including our sales of yachts produced by the Azimut-Benetti Group in Italy, yachts produced by Galeon in Poland, and power catamarans for our charter fleet produced by Sino Eagle in China, as well as our Fraser Yachts Group and Northrop & Johnson operations. These activities in multiple countries around the world expose us to international political, economic, foreign currency, and other risks. Some of our sales and purchases of inventory are denominated in a currency other than the U.S. dollar. Consequently, a strong or weak U.S. dollar may adversely affect reported revenues and our profitability. We may hedge certain foreign currency exposures to lessen and delay, but not to completely eliminate, the effects of foreign currency fluctuations on our financial results. Our future financial results could be significantly affected by the value of the U.S. dollar in relation to the foreign currencies in which we conduct business. The degree to which our financial results are affected for any given time period will depend in part upon the success and extent of our hedging activities.

Additionally, protectionist trade legislation in the United States, the European Union, Poland, or China, such as a change in current tariff structures, export or import compliance laws, or other trade policies could adversely affect our ability to import yachts from these foreign suppliers under economically favorable terms and conditions. There have been recent changes and additional changes may occur in the future, to United States and foreign trade and tax policies, including heightened import restrictions, import and export licenses, new tariffs, trade embargoes, government sanctions, and trade barriers. Any of these restrictions could prevent or make it difficult or more costly for us to import yachts from foreign suppliers under economically favorable terms and conditions. Increased tariffs could require us to increase our prices which likely could decrease demand for our products. In addition, other countries may limit their trade with the United States or retaliate through their own restrictions and/or increased tariffs which would affect our ability to export products and therefore adversely affect our sales. Many of these challenges, particularly tariffs, are present in commerce with China, a market from which we purchase products. While such tariffs may be delayed or cancelled before coming into effect and we believe we have taken steps to mitigate their potential effects, such tariffs would likely increase our costs for our Chinese suppliers.

Our international operations create a number of logistical and communications challenges. The economic, political and other risks we face resulting from these operations include the following:

•        compliance with U.S. and local laws and regulatory requirements, including labor, tax, and environmental, health and safety, as well as changes in those laws and requirements;

•        transportation delays or interruptions and other effects of less developed infrastructures;

•        effects from the voter-approved exit of the United Kingdom from the European Union (often referred to as Brexit), including any resulting deterioration in economic conditions, volatility in currency exchange rates, or adverse regulatory changes;

•        limitations on imports and exports;

•        adverse foreign exchange rate fluctuations;

•        imposition of restrictions on currency conversion or the transfer of funds;

•        withdrawal from or revision to international trade agreements;

•        national and international conflicts, including foreign policy changes, political or economic instability, or terrorist acts;

•        the effects of issued or threatened government sanctions, tariffs and duties, trade barriers or economic restrictions;

•        maintenance of quality standards; and/or

•        possible employee turnover or labor unrest.

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Risks Related to Our Operations

The availability and costs of borrowed funds can adversely affect our ability to obtain adequate boat inventory and the ability and willingness of our customers to finance boat purchases.

The availability and costs of borrowed funds can adversely affect our ability to obtain and maintain adequate boat inventory and the holding costs of that inventory as well as the ability and willingness of our customers to finance boat purchases. We rely on the Credit Facility led by Wells Fargo Commercial Distribution Finance LLC to purchase and maintain our inventory of boats. The Credit Facility provides a floor plan financing commitment of up to $500.0 million. The collateral for the Credit Facility is all of our personal property with certain limited exceptions. None of our real estate has been pledged for collateral for the Credit Facility. As of September 30, 2021, we were in compliance with all of the covenants under the Credit Facility and our additional available borrowings under the Credit Facility was approximately $79.0 million based upon the outstanding borrowing base availability.

Our ability to borrow under the Credit Facility depends on our ability to continue to satisfy our covenants and other obligations under the Credit Facility and the ability for our manufacturers to be approved vendors under our Credit Facility. The variable interest rate under our Credit Facility will fluctuate with changing market conditions and, accordingly, our interest expense will increase as interest rates rise. A significant increase in interest rates could have a material adverse effect on our operating results. The aging of our inventory limits our borrowing capacity as defined provisions in the Credit Facility reduce the allowable advance rate as our inventory ages. Depressed economic conditions, weak consumer spending, turmoil in the credit markets, and lender difficulties, among other potential reasons, could interfere with our ability to maintain compliance with our debt covenants and to utilize the Credit Facility to fund our operations. Any inability to utilize the Credit Facility or the acceleration of amounts owed, resulting from a covenant violation, insufficient collateral, or lender difficulties, could require us to seek other sources of funding to repay amounts outstanding under the Credit Facility or replace or supplement the Credit Facility, which may not be possible at all or under commercially reasonable terms.

Similarly, decreases in the availability of credit and increases in the cost of credit adversely affect the ability of our customers to purchase boats from us and thereby adversely affect our ability to sell our products and impact the profitability of our finance and insurance activities.

Higher energy, costs and availability of raw materials, parts, components, and fuel costs along with adequate supply may adversely affect our business.

All of the recreational boats we sell are powered by diesel or gasoline engines. Consequently, an interruption in the supply, or a significant increase in the price or tax on the sale of fuel on a regional or national basis could have a material adverse effect on our sales and operating results. Increases in fuel prices negatively impact boat sales. The supply of fuels may be interrupted, rationing may be imposed, or the price of or tax on fuels may significantly increase in the future, adversely impacting our business. Also, increases in energy costs can adversely affect the pricing and availability of petroleum-based raw materials such as resins and foam that are used in many of the marine products produced by boat manufacturers, including Cruisers Yachts and Intrepid, increasing our cost of inventory. Additionally, higher fuel prices may also have an adverse effect on demand for our parts and accessories business because higher fuel prices increase the cost of boat ownership and possibly affect product use.

Boat manufacturers, including Cruisers Yachts and Intrepid, rely on third parties to supply raw materials used in the manufacturing process, including oil, aluminum, copper, steel, and resins, as well as product parts and components. The prices for these raw materials, parts, and components fluctuate depending on market conditions and, in some instances, commodity prices or trade policies, including tariffs. Substantial increases in the prices of raw materials, parts, and components would increase our product and operating costs, and could reduce our profitability if we are unable to recoup the increased costs through higher product prices or improved operating efficiencies. Similarly, if a critical supplier were to close its operations, cease manufacturing, or otherwise fail to deliver an essential component necessary to our manufacturing operations, that could detrimentally affect our ability to purchase or manufacture and sell products, resulting in an interruption in business operations and/or a loss of sales.

In addition, some components used in the boat manufacturing processes, including certain engine components, furniture, upholstery, and boat windshields, are available from a sole supplier or a limited number of suppliers. Operational and financial difficulties that these or other suppliers may face in the future could adversely affect their ability to supply us with the parts and components we and our boat manufacturers need, which could significantly disrupt our operations. It may be difficult to find a replacement supplier for a limited or sole source raw material, part, or component without significant delay or on commercially reasonable terms. In addition, an uncorrected defect or supplier's variation in a raw material, part, or component, either unknown to us or incompatible with our manufacturing process, could jeopardize our ability to manufacture products.

Some additional supply risks that could disrupt our operations, impair our ability to deliver products to customers, and negatively affect our financial results include:

•        an outbreak of disease or facility closures due to the COVID-19 pandemic, or similar public health threat;

23

•        a deterioration of our relationships with suppliers;

•        events such as natural disasters, power outages, or labor strikes;

•        financial pressures on our suppliers due to a weakening economy or unfavorable conditions in other end markets;

•        supplier manufacturing constraints and investment requirements; or

•        disruption at major global ports and shipping hubs.

These risks are exacerbated in the case of single-source suppliers, and the exclusive supplier of a key component could potentially exert significant bargaining power over price, quality, warranty claims, or other terms.

Substantially all of our products are powered with outboard engines from Mercury Marine, Yamaha, and inboard engines from Volvo, which makes us reliant on these companies for the supply of engines.

The availability and cost of engines for our boats and yachts is critical. If we are required to replace Mercury Marine, Yamaha, or Volvo as our engine suppliers for any reason, it could cause a decrease in products available for sale or an increase in our cost of sales, either of which could adversely affect our business, financial condition and results of operations. If we experience an interruption to our engine supply, then this could cause a decrease in products available for sale or an increase in our cost of sales, either of which could adversely affect our business, financial condition and results of operations.

The availability of boat insurance is critical to our success.

The ability of our customers to secure reasonably affordable boat insurance that is satisfactory to lenders that finance our customers’ purchases is critical to our success. Any difficulty of customers to obtain affordable boat insurance could impede boat sales and adversely affect our business.

Elements of our yacht charter and charter brokerage businesses expose us to certain risks.

Our yacht charter business entails the sale of specifically designed yachts to third parties for inclusion in our yacht charter fleet; a yacht management agreement under which yacht owners enable us to put their yachts in our yacht charter program for a period of several years for a fixed monthly fee payable by us; our services in storing, insuring, and maintaining their yachts; and the charter by us of these yachts to vacation customers at agreed fees payable to us. Our failure to find purchasers for yachts intended for our charter fleet will increase our boat inventory and related operating costs; lack of sales into our charter fleet may result in increased losses due to market adjustments of our yacht charter inventory; and our failure to generate a sufficient number of vacation charter customers will require us to absorb all the costs of the monthly fees to the yacht owners as well as other operating costs.

Customers consider safety and reliability a primary concern in selecting a yacht charter provider. The yacht charter business may present a number of safety risks including, but not limited to, catastrophic disaster, adverse weather and marine conditions, such as Hurricane Irma in 2017, mechanical failure and collision, and health issues such as the COVID-19 pandemic. If we are unable to maintain acceptable records for safety and reliability, our ability to retain current customers and attract new customers may be adversely affected. Additionally, any safety issue encountered during a yacht charter may result in claims against us as well as negative publicity. Beginning in March 2020, we temporarily closed our facilities in the British Virgin Islands and yacht charters based on guidance from local government and health officials as a result of the COVID-19 pandemic. Additionally, our yacht charter brokerage business in Europe has slowed as a result of the COVID-19 pandemic. Yacht charters resumed during fiscal 2021, but the impact of the COVID-19 pandemic and the duration for which it may have an impact cannot be determined at this time. These events could have a material adverse effect on the competitive position and financial performance of both our yacht charter business and our core retail sales business.

The yacht charter business is also highly fragmented, consisting primarily of local operators and franchisees. Competition among charter operators is based on location, the type and size of yachts offered, charter rates, destinations serviced, and attention to customer service. Yacht charters also face competition from other travel and leisure options, including, but not limited to, cruises, hotels, resorts, theme parks, organized tours, land-based casino operators, and vacation ownership properties. We therefore risk losing business not only to other charter operators, but also to vacation operators that provide such alternatives.

We depend on income from financing, insurance and extended service contracts.

A portion of our income results from referral fees derived from the placement or marketing of various finance and insurance products, consisting of customer financing, insurance products, and extended service contracts, the most significant component of which is the participation and other fees resulting from our sale of customer financing contracts.

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The availability of financing for our boat purchasers and the level of participation and other fees we receive in connection with such financing depend on the particular agreement between us and the lender and the current rate environment. Lenders may impose terms in their boat financing arrangements with us that may be unfavorable to us or our customers. Laws or regulations may be enacted nationally or locally which could result in fees from lenders being eliminated or reduced, materially impacting our operating results. If customer financing becomes more difficult to secure, it may adversely impact our business.

Changes, including the lengthening of manufacturer warranties, may reduce our ability to offer and sell extended service contracts which may have a material adverse impact on our ability to sell F&I products.

The reduction of profit margins on sales of F&I products or the lack of demand for or the unavailability of these products could have a material adverse effect on our operating margins.

Our continued success is dependent on positive perceptions of our MarineMax brand which, if impaired, could adversely affect our sales.

We believe that our MarineMax brand is one of the reasons our customers choose to come to us for their boating needs. To be successful, we must preserve our reputation. Reputational value is based in large part on perceptions, and broad access to social media makes it easy for anyone to provide public feedback that can influence perceptions of us. It may be difficult to control negative publicity, regardless of whether it is accurate. While reputations may take decades to build, any negative incidents can quickly erode trust and confidence, particularly if they result in significant negative mainstream and/or social media publicity, governmental investigations, or litigation. Additionally, an isolated business incident at a single retail location could materially adversely affect our other stores, retail brands, reputation and sales channels, particularly if such incident results in significant adverse publicity, governmental investigations or litigation. Negative incidents, such as quality and safety concerns or incidents related to our manufacturers’ products, could lead to tangible adverse effects on our business, including lost sales or team member retention and recruiting difficulties. In addition, vendors and others with whom we choose to do business may affect our reputation.

Our operations are dependent upon key personnel and team members.

Our success depends, in large part, upon our ability to attract, train and retain, qualified team members and executive officers, as well as the continuing efforts and abilities of team members and executive officers. Although we have employment agreements with certain of our executive officers and management succession plans, we cannot ensure that these or other executive personnel and team members will remain with us, or that our succession planning will adequately mitigate the risk associated with key personnel transitions. As a result of our decentralized operating strategy, we also rely on the management teams of our dealerships. In addition, we likely will depend on the senior management of any significant businesses we acquire in the future.

The products we sell, or services we provide, may expose us to potential liabilities for personal injury or property damage claims relating to the use of those products.

Manufacturers of the products we sell generally maintain product liability insurance. We also maintain third-party product liability insurance that we believe to be adequate. We may experience claims that are not covered by, or that are in excess of, our insurance coverage. The institution of any significant claims against us could subject us to damages, result in higher insurance costs, and harm our business reputation with potential customers.

We manufacture and sell products that create exposure to potential claims and litigation.

Our manufacturing operations and the products we produce could result in product quality, warranty, personal injury, property damage, and other issues, thereby increasing the risk of litigation and potential liability, as well as regulatory fines. Historically, the resolution of such claims has not had a materially adverse effect on our business, and we maintain what we believe to be adequate insurance coverage to mitigate a portion of these risks. However, we may experience material losses in the future, incur significant costs to defend claims or issue product recalls, experience claims in excess of our insurance coverage or that are not covered by insurance, or be subjected to fines or penalties. Our reputation may be adversely affected by such claims, whether or not successful, including potential negative publicity about our products. We record accruals for known potential liabilities, but there is the possibility that actual losses may exceed these accruals and therefore negatively impact earnings.

We have a fixed cost base that can affect our profitability if demand decreases.

The fixed cost levels of operating a boat and yacht manufacturer can put pressure on profit margins when sales and production decline. Our profitability depends, in part, on our ability to spread fixed costs over a sufficiently large number of products sold and shipped, and if we make a decision to reduce our rate of production, gross or net margins could be negatively affected. Consequently, decreased demand or the need to reduce production can lower our ability to absorb fixed costs and materially impact our financial condition or results of operations.

25

Adverse federal or state tax policies can have a negative effect on us.

Changes in federal and state tax laws, such as an imposition of luxury taxes on new boat purchases, increases in prevailing federal or state tax rates, and removal of certain interest deductions, also influence consumers’ decisions to purchase products we offer and could have a negative effect on our sales. For example, during 1991 and 1992, the federal government imposed a luxury tax on new recreational boats with sales prices in excess of $100,000, which coincided with a sharp decline in boating industry sales from a high of more than $17.9 billion in 1988 to a low of $10.3 billion in 1992.

In addition, increases in the United States corporate income tax rates (as currently being contemplated by the legislative and federal branches) would have an adverse effect on our financial performance and financial condition. Further, related increases in capital gains rates, personal income tax rates or both could have an adverse effect on the buying power of potential customers and therefore an adverse effect on our financial performance and financial condition.

Risks Related to the Environment and Geography

Weather and environmental conditions may adversely impact our business.

Weather and environmental conditions may adversely impact our operating results. For example, drought conditions, reduced rainfall levels, excessive rain and environmental conditions, and hurricanes may force boating areas to close or render boating dangerous or inconvenient, thereby curtailing customer demand for our products. While we traditionally maintain a full range of insurance coverage for any such events, there can be no assurance that such insurance coverage is adequate to cover losses that we sustain as a result of such disasters. In addition, unseasonably cool weather and prolonged winter conditions may lead to shorter selling seasons in certain locations. Many of our dealerships sell boats to customers for use on reservoirs, thereby subjecting our business to the continued viability of these reservoirs for boating use. Although our geographic diversity and any future geographic expansion should reduce the overall impact on us of adverse weather and environmental conditions in any one market area, weather and environmental conditions will continue to represent potential material adverse risks to us and our future operating performance. Additionally, to the extent unfavorable weather conditions are exacerbated by global climate change, regardless of the cause, resulting in environmental changes including, but not limited to, severe weather, changing sea levels, poor water conditions, or reduced access to water, which could disrupt or negatively affect our business.

Environmental and climate changes could affect our business.

We operate many retail locations near or on bodies of water that are acutely susceptible to the risks associated with climate change. Such risks include those related to the physical impacts of climate change, such as more frequent and severe weather events, rising sea levels, and/or long term shifts in climate patterns, and risks related to the transition to a lower-carbon economy, such as reputational, market and/or regulatory risks. Climate change and climate events could result in social, cultural and economic disruptions in these areas, including supply chain disruptions, the disruption of local infrastructure and transportation systems that could limit the ability of our team members and our customers to access our retail locations. These events could also compound adverse economic conditions and impact consumer confidence and discretionary spending.

A significant amount of our boat sales are from the State of Florida.

Economic conditions, weather and environmental conditions, competition, market conditions, and any other adverse conditions impacting the State of Florida in which we generated approximately 54%, 54% and 50% of our revenue during fiscal 2019, 2020, and 2021, respectively, could have a major impact on our operations.

Environmental and other regulatory issues may impact our operations.

Our operations are subject to extensive regulation, supervision, and licensing under various federal, state and local statutes, ordinances and regulations, such as those relating to finance and insurance, consumer protection, consumer privacy, escheatment, anti-money laundering, environmental, emissions, health or safety, U.S. trade sanctions, the U.S. Foreign Corrupt Practices Act and employment practices. With respect to employment practices, we are subject to various laws and regulations, including complex federal, state and local wage and hour and anti-discrimination laws. The failure to satisfy those and other regulatory requirements could have a material adverse effect on our business, financial condition, and results of operations, as well as potentially the assessment of damages, the imposition of penalties, changes to our processes, or a cessation of our operations, and/or damage to our image and reputation.

Various federal, state, and local regulatory agencies, including OSHA, EPA, and similar federal and local agencies, have jurisdiction over the operation of our dealerships, repair facilities, and other operations, with respect to matters such as consumer protection, workers’ safety, and laws regarding protection of the environment, including air, water, and soil. The EPA promulgated emissions regulations for outboard marine engines that impose stricter emissions standards for two-cycle, gasoline outboard marine

26

engines. It is possible that environmental regulatory bodies (including state regulatory bodies) may impose higher emissions standards in the future for these and other marine engines. Any increased costs of producing engines resulting from current or potentially higher EPA or state standards in the future could be passed on to our company, or could result in the inability or potential unforeseen delays of our manufacturers to comply with current and future EPA or state requirements, and these potential consequences could have a material adverse effect on our business.

Certain of our facilities own and operate USTs, and ASTs for the storage of various petroleum products. USTs and ASTs are generally subject to federal, state and local laws and regulations that require testing and upgrading of tanks and remediation of contaminated soils and groundwater resulting from leaking tanks. In addition, we may be subject to civil liability to third parties for remediation costs or other damages if leakage from our owned or operated tanks migrates onto the property of others.

Our business involves the use, handling, storage, and contracting for recycling or disposal of hazardous or toxic substances or wastes, including environmentally sensitive materials, such as motor oil, waste motor oil and filters, transmission fluid, antifreeze, freon, waste paint and lacquer thinner, batteries, solvents, lubricants, degreasing agents, gasoline and diesel fuels. Accordingly, we are subject to regulation by federal, state and local authorities establishing investigation and health and environmental quality standards, and liability related thereto, and providing penalties for violations of those standards.

Our Product Manufacturing segment is regulated by federal, state and local environmental laws governing our use, transport and disposal of substances and control of emissions. While we are unaware of any failure to comply with these laws or any contamination at our facilities, the costs of compliance, including remediations of any discovered issues and any changes to our operations mandated by new or amended laws, may be significant, and any failures to comply could result in material expenses, delays or fines.

We also are subject to laws, ordinances, and regulations governing investigation and remediation of contamination at facilities we operate or to which we send hazardous or toxic substances or wastes for treatment, recycling or disposal. In particular, the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or “Superfund”) imposes joint, strict, and several liability on:

 

•

owners or operators of facilities at, from, or to which a release of hazardous substances has occurred;

 

•

parties that generated hazardous substances that were released at such facilities; and

 

•

parties that transported or arranged for the transportation of hazardous substances to such facilities.

A majority of states have adopted Superfund statutes comparable to and, in some cases, more stringent than CERCLA. If we were to be found to be a responsible party under CERCLA or a similar state statute, we could be held liable for all investigative and remedial costs associated with addressing such contamination. In addition, claims alleging personal injury or property damage may be brought against us as a result of alleged exposure to hazardous substances resulting from our operations. In addition, certain of our retail locations are located on waterways that are subject to federal or state laws regulating navigable waters (including oil pollution prevention), fish and wildlife, and other matters.

Soil and groundwater contamination has been known to exist at certain properties owned or leased by us. We have also been required and may in the future be required to remove USTs and ASTs containing hazardous substances or wastes. As to certain of our properties, specific releases of petroleum have been or are in the process of being remediated in accordance with state and federal guidelines. We are monitoring the soil and groundwater as required by applicable state and federal guidelines. We also may have additional storage tank liability insurance and Superfund coverage where applicable. Environmental laws and regulations are complex and subject to frequent change. Compliance with amended, new or more stringent laws or regulations, more strict interpretations of existing laws, or the future discovery of environmental conditions may require additional expenditures by us, and such expenditures may be material.

Additionally, certain states have required or are considering requiring a license in order to operate a recreational boat. These regulations could discourage potential buyers, thereby limiting future sales and adversely affecting our business, financial condition, and results of operations.

Risks Related to Cybersecurity

Increased cybersecurity requirements, vulnerabilities, threats and more sophisticated and targeted computer crime could pose a risk to our systems, networks, data and our third-party service providers. Our business operations could be negatively impacted by an outage or breach of our informational technology systems or a cybersecurity event.

Our business is dependent upon the efficient operation of our technology platform. The platform facilitates the interchange of information and enhances cross-selling opportunities throughout our company. The platform integrates each level of operations on a Company-wide basis, including but not limited to inventory, financial reporting, budgeting, marketing, sales management, as well as to prepare our consolidated financial and operating data. The failure of our technology platform to perform as designed or the failure to maintain and enhance or protect the integrity of our technology platform and those of our third-party service providers, could

27

disrupt our business operations, impact sales and the results of operations, expose us to customer or third-party claims, or result in adverse publicity.

Increased global cybersecurity vulnerabilities, threats and more sophisticated and targeted cyber-related attacks (including ransomware) pose a risk to the security of our and our customers’, suppliers’ and third-party service providers’ products, systems and networks and the confidentiality, availability and integrity of our data. Unauthorized parties may also attempt to gain access to our systems or facilities, or those of third parties with whom we do business, through fraud, trickery or other forms of deceiving our team members, contractors, vendors, and temporary staff. While we attempt to mitigate these risks by employing extensive measures, including employee training, systems, monitoring and testing, and maintenance of protective systems and contingency plans, we remain potentially vulnerable to additional known or unknown threats.

We may also have access to sensitive, confidential or personal data or information that is subject to privacy, security laws, and regulations. Despite our efforts to protect sensitive, confidential or personal data or information, we and our third-party service providers may be vulnerable to security breaches, theft, misplaced or lost data, programming errors, employee errors and/or malfeasance that could potentially lead to the compromising of sensitive, confidential or personal data or information, improper use of our systems, unauthorized access, use, disclosure, modification or destruction of information, and operational disruptions.

It is possible that we or our third-party service providers might not be aware of a successful cyber-related attack on our systems until well after the incident. In addition, a cyber-related attack could result in other negative consequences, including damage to our reputation or competitiveness, remediation or increased protection costs, litigation or regulatory action, and could adversely affect our business, financial condition, and results of operations. Depending on the nature of the information compromised, we may have obligations to notify customers and/or employees about the incident, and we may need to provide some form of remedy, such as a subscription to a credit monitoring service, for the individuals affected by the incident, which could result in material reputational damage to us. While we traditionally maintain a full range of insurance coverage for any such events, there can be no assurance that such insurance coverage is adequate to cover losses that we sustain as a result of an outage or breach of our informational technology systems or a cybersecurity event.

We are also subject to laws and regulations in the United States and other countries concerning the handling of personal information, including laws that require us to notify governmental authorities and/or affected individuals of data breaches involving certain personal information. These laws and regulations include, for example, the European General Data Protection Regulation, effective May 2018, and the California Consumer Privacy Act, effective January 2020. Regulatory actions or litigation seeking to impose significant penalties could be brought against us in the event of a data breach or alleged non-compliance with such laws and regulations.

Risks Related to Our Common Stock

The timing and amount of our share repurchases are subject to a number of uncertainties.

In March 2020, the Board of Directors approved a new stock repurchase plan authorizing the Company to purchase up to 10 million shares of its commons stock through March 2022. There is no guarantee that our stock repurchase plans will be able to successfully mitigate the dilutive effect of stock options and stock-based grants. The success of our stock repurchase plans is based upon a number of factors, including the price and availability of the Company’s stock, general market conditions, the nature of other investment opportunities available to us from time to time, and the availability of cash.

We do not pay cash dividends.

We have never paid cash dividends on our common stock and we have no current intention to do so for the foreseeable future.

If securities analysts do not publish research or reports about our company, or if they issue unfavorable commentary about us or our industry or downgrade our common stock, the price of our common stock could decline.

The trading market for our common stock depends in part on the research and reports that third-party securities analysts publish about our company and our industry. We may be unable or slow to attract research coverage and if one or more analysts cease coverage of our company, we could lose visibility in the market. In addition, one or more of these analysts could downgrade our common stock or issue other negative commentary about our company or our industry. As a result of one or more of these factors, the trading price of our common stock could decline.

Item 1B.

Unresolved Staff Comments

None.

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Item 2.

Properties

The Retail Operations segment includes our leased corporate offices in Clearwater, Florida. We also lease 50 properties under leases in the United States and British Virgin Islands, many of which contain multi-year renewal options and some of which grant us right of first refusal to purchase the property at fair value. In most cases, we pay a fixed rent at negotiated rates. In substantially all of the leased locations, we are responsible for taxes, utilities, insurance, and routine repairs and maintenance. We own 34 properties associated with the retail locations we operate. Additionally, we own three retail locations that are currently closed as noted below. A store is considered one or more retail locations that are adjacent or operate as one entity. Fraser Yachts Group and Northrop & Johnson lease offices in the United States and Europe.

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The following table reflects the status, approximate size, and facilities of the various retail locations in the United States and British Virgin Islands we operate as of the date of this report.

 

Location

 

Location Type

 

Square

Footage(1)

 

 

Facilities at Property

 

Operated

Since(2)

 

 

Waterfront

 

Alabama

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gulf Shores

 

Company owned

 

 

4,000

 

 

Retail and service

 

1998

 

 

 

—

 

California

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Newport Beach

 

Third-party lease

 

 

1,000

 

 

Retail only, 4 wet slips

 

2020

 

 

Newport Bay

 

San Diego

 

Third-party lease

 

 

1,400

 

 

Retail only, 12 wet slips

 

2020

 

 

San Diego Bay

 

Sausalito

 

Third-party lease

 

 

2,000

 

 

Retail and service; 6 wet slips

 

2020

 

 

Richardson Bay

 

Connecticut

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Norwalk

 

Third-party lease

 

 

9,000

 

 

Retail and service; 56 wet slips

 

1994

 

 

Norwalk Harbor

 

Westbrook

 

Third-party lease

 

 

4,200

 

 

Retail and service

 

1998

 

 

Westbrook Harbor

 

Florida

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cape Haze

 

Company owned

 

 

18,000

 

 

Retail only, 8 wet slips

 

 

—

 

 

Intracoastal Waterway

 

Clearwater

 

Company owned

 

 

42,000

 

 

Retail and service; 20 wet slips

 

1973

 

 

Tampa Bay

 

Cocoa

 

Company owned

 

 

15,000

 

 

Retail and service

 

1968

 

 

 

—

 

Dania

 

Company owned

 

 

32,000

 

 

Repair and service; 16 wet slips

 

1991

 

 

Port Everglades

 

Fort Walton Beach

 

Third-party lease

 

 

3,000

 

 

Repair and service; 83 wet slips

 

2019

 

 

Choctawhatchee Bay

 

Fort Myers

 

Company owned

 

 

60,000

 

 

Retail, service, and storage; 64 wet slips

 

1983

 

 

Caloosahatchee River

 

Jacksonville

 

Third-party lease

 

 

9,000

 

 

Retail and service

 

2016

 

 

Intracoastal Waterway

 

Key Largo

 

Third-party lease

 

 

8,900

 

 

Retail and service; 6 wet slips

 

2002

 

 

Card Sound

 

Miami

 

Company owned

 

 

7,200

 

 

Retail and service; 15 wet slips

 

1980

 

 

Little River

 

Miami

 

Company owned

 

 

5,000

 

 

Service only; 11 wet slips

 

2005

 

 

Little River

 

Naples

 

Company owned

 

 

19,600

 

 

Retail and service; 14 wet slips

 

1997

 

 

Naples Bay

 

North Palm Beach

 

Third-party lease

 

 

1,000

 

 

Retail only

 

2016

 

 

Intracoastal Waterway

 

Orlando

 

Third-party lease

 

 

18,400

 

 

Retail and service

 

1984

 

 

 

—

 

Panama City

 

Third-party lease

 

 

10,500

 

 

Retail only; 8 wet slips

 

2011

 

 

Saint Andrews Bay

 

Pensacola

 

Company owned

 

 

52,800

 

 

Retail, service, and storage; 60 wet slips

 

2016

 

 

Pensacola Bay

 

Pompano Beach

 

Company owned

 

 

23,000

 

 

Retail and service; 16 wet slips

 

1990

 

 

Intracoastal Waterway

 

Pompano Beach

 

Company owned

 

 

5,400

 

 

Retail and service; 24 wet slips

 

2005

 

 

Intracoastal Waterway

 

Sarasota

 

Third-party lease

 

 

26,500

 

 

Retail, service, and storage; 15 wet slips

 

1972

 

 

Sarasota Bay

 

St. Petersburg

 

Company owned

 

 

15,000

 

 

Retail and service; 20 wet slips

 

2006

 

 

Boca Ciega Bay

 

Stuart

 

Company owned

 

 

29,100

 

 

Retail and service; 66 wet slips

 

2002

 

 

Intracoastal Waterway

 

Venice

 

Company owned

 

 

62,000

 

 

Retail, service, and storage; 90 wet slips

 

1972

 

 

Intracoastal Waterway

 

Georgia

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Buford (Atlanta) (3)

 

Company owned

 

 

13,500

 

 

Retail and service

 

2001

 

 

 

—

 

Cumming (Atlanta)

 

Third-party lease

 

 

13,000

 

 

Retail and service; 50 wet slips

 

1981

 

 

Lake Lanier

 

Savannah

 

Third-party lease

 

 

50,600

 

 

Retail, marina, service and storage; 36 wet slips

 

2017

 

 

Wilmington River

 

Illinois

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Praire Harbor

 

Third-party lease

 

 

3,500

 

 

Marina, 140 wet slips

 

2020

 

 

Lake Michigan

 

30

Sequoit Harbor Antioch

 

Third-party lease

 

 

85,300

 

 

Retail, marina, service and storage; 208 wet slips

 

2020

 

 

Lake Marie

 

Winthrop Harbor

 

Third-party lease

 

 

319,100

 

 

Retail, marina, service and storage; 53 wet slips

 

2020

 

 

Lake Michigan

 

Maryland

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Baltimore

 

Third-party lease

 

 

7,600

 

 

Retail and service; 17 wet slips

 

2005

 

 

Baltimore Inner Harbor

 

Kent Island

 

Third-party lease

 

 

30,500

 

 

Retail, service, and storage

 

2021

 

 

Kent Narrows

 

Joppa (3)

 

Company owned

 

 

28,400

 

 

Retail, service, and storage; 294 wet slips

 

1966

 

 

Gunpowder River

 

Massachusetts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Danvers

 

Third-party lease

 

 

32,000

 

 

Retail and service

 

2016

 

 

 

—

 

Quincy

 

Company owned

 

 

14,700

 

 

Retail, service, and storage; 247 wet slips

 

2018

 

 

Town River

 

Michigan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bay City

 

Third-party lease

 

 

195,800

 

 

Retail, marina, service and storage; 59 wet slips

 

2020

 

 

Saginaw River

 

Bele Mear Harbor

 

Third-party lease

 

 

8,500

 

 

Retail and service, 4 wet slips

 

2020

 

 

Lake St. Clair

 

Cass Lake

 

Third-party lease

 

 

31,600

 

 

Retail, marina, service and storage; 124 wet slips

 

2020

 

 

Cass Lake

 

Grand Haven

 

Third-party lease

 

 

32,000

 

 

Retail, service, and storage; 6 wet slips

 

2020

 

 

Spring Lake

 

Lake Fenton

 

Third-party lease

 

 

57,900

 

 

Retail, marina, service and storage; 123 wet slips

 

2020

 

 

Lake Fenton

 

Mac Ray Harbor

 

Third-party lease

 

 

300

 

 

Retail only, 4 wet slips

 

2020

 

 

Lake St. Clair

 

Minnesota

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bayport

 

Third-party lease

 

 

500

 

 

Retail only; 10 wet slips

 

1996

 

 

St. Croix River

 

Excelsior

 

Third-party lease

 

 

2,500

 

 

Retail only; 14 wet slips

 

2013

 

 

Lake Minnetonka

 

Rogers

 

Company owned

 

 

70,000

 

 

Retail, service, and storage

 

1991

 

 

 

—

 

Nisswa

 

Company owned

 

 

108,400

 

 

Retail, service, and storage

 

2021

 

 

Nisswa Lake

 

Missouri

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lake Ozark

 

Company owned

 

 

60,300

 

 

Retail, service, and storage; 300 wet slips

 

1987

 

 

Lake of the Ozarks

 

Laurie (3)

 

Company owned

 

 

700

 

 

Retail and service

 

 

—

 

 

 

—

 

Osage Beach

 

Company owned

 

 

2,000

 

 

Retail and service

 

1987

 

 

 

—

 

New Jersey

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brant Beach

 

Company owned

 

 

3,800

 

 

Retail, service, and storage; 36 wet slips

 

1965

 

 

Barnegat Bay

 

Brick

 

Company owned

 

 

20,000

 

 

Retail, service, and storage; 225 wet slips

 

1977

 

 

Manasquan River

 

Lake Hopatcong

 

Company owned

 

 

4,600

 

 

Retail and service; 80 wet slips

 

1998

 

 

Lake Hopatcong

 

Ship Bottom

 

Company owned

 

 

19,300

 

 

Retail and service

 

1972

 

 

 

—

 

Somers Point

 

Company owned

 

 

31,000

 

 

Retail, service, and storage; 33 wet slips

 

1987

 

 

Little Egg Harbor Bay

 

Ocean View

 

Third-party lease

 

 

13,800

 

 

Retail, service, and storage

 

2018

 

 

 

—

 

New York

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Huntington

 

Third-party lease

 

 

1,200

 

 

Retail and service

 

1995

 

 

Huntington Harbor and Long Island Sound

 

North Carolina

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lake Norman

 

Third-party lease

 

 

10,300

 

 

Retail only

 

2017

 

 

 

—

 

Southport

 

Third-party lease

 

 

1,600

 

 

Retail only

 

2008

 

 

Cape Fear River

 

Wrightsville Beach

 

Third-party lease

 

 

34,500

 

 

Retail, service, and storage

 

1996

 

 

Masonboro Inlet

 

Ohio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marina Del Isle

 

Third-party lease

 

 

163,800

 

 

Retail, marina, service and storage; 189 wet slips

 

2020

 

 

Lake Erie

 

31

Port Clinton

 

Company owned

 

 

80,000

 

 

Retail, service and storage; 8 wet slips

 

1997

 

 

Lake Erie

 

Oklahoma

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grand Lake

 

Company owned

 

 

3,500

 

 

Retail and service; 23 wet slips

 

2019

 

 

Grand Lake

 

Rhode Island

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Newport

 

Third-party lease

 

 

700

 

 

Retail only

 

2011

 

 

Newport Harbor

 

South Carolina

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charleston

 

Third-party lease

 

 

14,800

 

 

Retail, service, and storage

 

2017

 

 

 

—

 

Greenville

 

Third-party lease

 

 

24,500

 

 

Retail, service, and storage

 

2017

 

 

 

—

 

Lake Wylie

 

Third-party lease

 

 

76,400

 

 

Retail, marina, service and storage; 82 wet slips

 

2017

 

 

Lake Wylie

 

Texas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Austin

 

Third-party lease

 

 

26,000

 

 

Retail and service

 

2019

 

 

 

—

 

San Antonio

 

Third-party lease

 

 

14,100

 

 

Retail and service

 

2019

 

 

 

—

 

Lakeway

 

Third-party lease

 

 

10,000

 

 

Retail only

 

2019

 

 

 

—

 

Lewisville (Dallas)

 

Company owned

 

 

22,000

 

 

Retail and service

 

2002

 

 

 

—

 

Seabrook

 

Company owned

 

 

32,000

 

 

Retail and service; 30 wet slips

 

2002

 

 

Clear Lake

 

Aubrey

 

Company owned

 

 

15,000

 

 

Retail and service

 

2021

 

 

 

—

 

Fort Worth

 

Company owned

 

 

30,000

 

 

Retail and service

 

2021

 

 

 

—

 

Washington

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Seattle

 

Third-party lease

 

 

400

 

 

Retail only, 6 wet slips

 

2020

 

 

Lake Union

 

Wisconsin

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Harbor Club Marina

 

Third-party lease

 

 

1,000

 

 

Marina, 140 wet slips

 

2020

 

 

Sturgeon Bay

 

Lake Geneva

 

Third-party lease

 

 

114,900

 

 

Retail, service and storage; 2 wet slips

 

2020

 

 

 

—

 

Madison

 

Third-party lease

 

 

138,300

 

 

Retail, marina, service and storage; 135 wet slips

 

2020

 

 

Lake Mendota

 

Milwaukee

 

Third-party lease

 

 

68,100

 

 

Retail, service and storage; 11 wet slips

 

2020

 

 

Kinnickinnic River

 

Oshkosh

 

Third-party lease

 

 

98,300

 

 

Retail, marina, service and storage; 98 wet slips

 

2020

 

 

Lake Butte Des Mortes

 

Pewaukee

 

Third-party lease

 

 

157,200

 

 

Retail, service and storage;

 

2020

 

 

 

—

 

Sturgeon Bay

 

Third-party lease

 

 

222,200

 

 

Retail, marina, service and storage; 260 wet slips

 

2020

 

 

Sturgeon Bay

 

British Virgin

Islands

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tortola

 

Third-party lease

 

 

2,600

 

 

Vacation charters; 45 wet slips

 

2011

 

 

Caribbean Sea

 

 

 

(1)

Square footage is approximate and does not include outside sales space or dock or marina facilities.

(2)

Operated since date is the date the facility was opened by us or opened prior to its acquisition by us.

(3)

Owned location that is currently closed.

 

We have leased offices in the United States through the Fraser Yachts Group and Northrop & Johnson in Ft. Lauderdale, Florida and San Diego, California as well as leased offices outside the United States in Monaco, France, Italy, Spain, and the United Kingdom.

The Product Manufacturing segment operates out of three owned manufacturing properties, two in in the Green Bay, Wisconsin metropolitan area, and one in Largo, Florida. Additionally, we have one office that we own in the Green Bay, Wisconsin metropolitan area, and one leased office in Dania, Florida.

We believe that our properties are suitable and adequate for our current needs. We believe that our manufacturing facilities have adequate capacity to meet our current and anticipated demand. We believe that our properties are well maintained and in good operating condition.

32

Item 3.

We are party to various legal actions arising in the ordinary course of business. While it is not feasible to determine the actual outcome of these actions as of September 30, 2021, we do not believe that these matters will have a material adverse effect on our consolidated financial condition, results of operations or cash flows.

Item 4.

Mine Safety Disclosures

Not applicable.

PART II

Item 5.

Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information, Holders

Our common stock is listed on the New York Stock Exchange under the symbol “HZO”. The following table sets forth high and low sale prices of the common stock for each calendar quarter indicated as reported on the New York Stock Exchange.

 

 

 

High

 

 

Low

 

2019

 

 

 

 

 

 

 

 

Fourth quarter

 

$

18.76

 

 

$

14.56

 

2020

 

 

 

 

 

 

 

 

First quarter

 

$

23.15

 

 

$

7.25

 

Second quarter

 

$

23.00

 

 

$

7.80

 

Third quarter

 

$

34.06

 

 

$

21.93

 

Fourth quarter

 

$

39.96

 

 

$

25.54

 

2021

 

 

 

 

 

 

 

 

First quarter

 

$

63.99

 

 

$

34.14

 

Second quarter

 

$

70.89

 

 

$

44.06

 

Third quarter

 

$

56.00

 

 

$

43.75

 

Fourth quarter (through November 15, 2021)

 

$

57.20

 

 

$

46.10

 

 

On November 15, 2021, the closing sale price of our common stock was $56.85 per share. On November 15, 2021, there were approximately 50 record holders and approximately 23,000 beneficial owners of our common stock.

Dividends

We have never declared or paid cash dividends on our common stock. We currently plan to retain any earnings to finance the growth of our business rather than to pay cash dividends. Payments of any cash dividends in the future will depend on our financial condition, results of operations, statutory restrictions, loan covenants and capital requirements as well as other factors deemed relevant by our Board of Directors (such as market expectations).

33

Purchases of Equity Securities by the Issuer

The following table presents information with respect to our repurchases of our common stock during the three months ended September 30, 2021.

 

Period

 

Total

Number

of Shares

Purchased (1)(2)

 

 

Average

Price Paid

per Share

 

 

Total Number

of Shares

Purchased

as Part of

Publicly

Announced

Plans or

Programs

 

 

Maximum Number of Shares that may be Purchased Under the Plans or Programs

 

July 1, 2021 to July 31, 2021

 

 

163,673

 

 

$

47.56

 

 

 

163,673

 

 

 

9,466,268

 

August 1, 2021 to August 31, 2021

 

 

46,504

 

 

 

49.12

 

 

 

46,504

 

 

 

9,419,764

 

September 1, 2021 to September 30, 2021

 

 

59,075

 

 

 

48.52

 

 

 

—

 

 

 

9,419,764

 

Total

 

 

269,252

 

 

$

48.04

 

 

 

210,177

 

 

 

9,419,764

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Under the terms of the new share repurchase program announced on March 16, 2020, the Company is authorized to purchase up to 10 million shares of its common stock through March 31, 2022.

(2)

59,075 shares reported in September 2021 are attributable to shares tendered by employees for the payment of applicable withholding taxes in connection with the vesting of restricted stock or restricted stock unit awards.

Performance Graph

The following line graph compares cumulative total shareholder returns for the five years ended September 30, 2021 for (i) our common stock, (ii) the Russell 2000 Index, and (iii) the Nasdaq Retail Trade Index. The graph assumes an investment of $100 on September 30, 2016. The calculations of cumulative shareholder return on the Russell 2000 Index and the Nasdaq Retail Trade Index include reinvestment of dividends. The calculation of cumulative shareholder return on our common stock does not include reinvestment of dividends because we did not pay any dividends during the measurement period. The historical performance shown is not necessarily indicative of future performance.

 

 

The performance graph above shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or Exchange Act, or otherwise subject to the liability of that section. The performance graph above will not be deemed incorporated by reference into any filing of our company under the Exchange Act or the Securities Act of 1933, as amended.

 

34

 

Item 6.

Selected Financial Data

Not applicable.

 

35

 

Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following should be read in conjunction with Part I, including the matters set forth in the “Risk Factors” section of this report, and our consolidated financial statements and notes thereto included elsewhere in this report. This section of this Form 10-K generally discusses fiscal 2021 and 2020 items and year-to-year comparisons between fiscal 2021 and 2020. Discussions of fiscal 2019 items and year-to-year comparisons between fiscal 2020 and 2019 that are not included in this Form 10-K can be found in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2020.

Overview

In March 2020, the outbreak of COVID-19 caused by a novel strain of the coronavirus was recognized as a pandemic by the World Health Organization, and the outbreak is widespread throughout the United States (including Florida in which we generated approximately 54%, 54%, and 50% of our revenue during fiscal 2019, 2020, and 2021, respectively), and in other countries in which we operate. As a result, from March 2020 through June 2020, we temporarily closed certain departments or locations based on guidance from local government or health officials. Currently, all of our stores are fully operational, but the effects of COVID-19 (including the related international, federal, state, and local governmental actions and regulations) remain unpredictable. We are following guidelines to ensure we are safely operating as recommended. Where possible, we are offering private personal showings as well as virtual appointments. Our digital platform is serving as an effective solution in this environment with robust online activity. Our experienced teams continue to engage with customers virtually and in our stores to help customers select their boats and obtain appropriate services.

We believe we are the largest recreational boat and yacht retailer and superyacht services company in the world. Through our current 79 retail locations in 21 states (as of the filing of this Annual Report on Form 10-K), we sell new and used recreational boats and related marine products, including engines, trailers, parts, and accessories. We also arrange related boat financing, insurance, and extended service contracts; provide boat repair and maintenance services; offer yacht and boat brokerage sales; and, where available, offer slip and storage accommodations. In the British Virgin Islands we offer the charter of catamarans, through MarineMax Vacations. We also own Fraser Yachts Group, a leading superyacht brokerage and luxury yacht services company with operations in multiple countries. In July 2020, we acquired Northrop & Johnson, another leading superyacht brokerage and services company with operations in multiple countries. In October 2020, we purchased all of the outstanding equity of SkipperBud’s. SkipperBud’s is one of the largest boat sales, brokerage, service and marina/storage groups in the United States. In May 2021, we purchased all of the outstanding equity of Cruisers Yachts. Cruisers Yachts, a wholly-owned MarineMax subsidiary, manufactures sport yacht and yachts with sales through our select retail dealership locations and through independent dealers, and is recognized as one of the world’s premier manufacturers of premium sport yacht and yachts. In July 2021, we acquired Nisswa Marine, a full-service dealer located in Minnesota. In November 2021, we acquired Intrepid, a premier manufacturer of powerboats, and Texas MasterCraft, a premier watersports dealer in Northern Texas.

MarineMax was incorporated in January 1998 (and reincorporated in Florida in March 2015). We commenced operations with the acquisition of five independent recreational boat dealers on March 1, 1998. Since the initial acquisitions in March 1998, we have, as of the filing of this Annual Report on Form 10-K, acquired 32 recreational boat dealers, four boat brokerage operations, two full-service yacht repair operations, and two boat and yacht manufacturers. As a part of our acquisition strategy, we frequently engage in discussions with various recreational boat dealers regarding their potential acquisition by us. Potential acquisition discussions frequently take place over a long period of time and involve difficult business integration and other issues, including, in some cases, management succession and related matters. As a result of these and other factors, a number of potential acquisitions that from time to time appear likely to occur do not result in binding legal agreements and are not consummated. We completed two acquisitions in the fiscal year ended September 30, 2019, two acquisitions in the fiscal year ended September 30, 2020, and three acquisitions in the fiscal year ending September 30, 2021.

General economic conditions and consumer spending patterns can negatively impact our operating results. Unfavorable local, regional, national or global economic developments or uncertainties regarding future economic prospects could reduce consumer spending in the markets we serve and adversely affect our business. Economic conditions in areas in which we operate dealerships, particularly Florida in which we generated approximately 54%, 54%, and 50% of our revenue during fiscal 2019, 2020, and 2021, respectively, can have a major impact on our operations. Local influences, such as corporate downsizing, military base closings, and inclement weather such as hurricanes and other storms, environmental conditions, and specific events, such as the BP oil spill in the Gulf of Mexico in 2010, also could adversely affect, and in certain instances have adversely affected, our operations in certain markets.

In an economic downturn, consumer discretionary spending levels generally decline, at times resulting in disproportionately large reductions in the sale of luxury goods. Consumer spending on luxury goods also may decline as a result of lower consumer confidence levels, even if prevailing economic conditions are favorable. As a result, an economic downturn could impact us more than certain of our competitors due to our strategic focus on a higher end of our market. Although we have expanded our operations during

36

periods of stagnant or modestly declining industry trends, the cyclical nature of the recreational boating industry or the lack of industry growth may adversely affect our business, financial condition, and results of operations. Any period of adverse economic conditions or low consumer confidence is likely to have a negative effect on our business.

Historically, in periods of lower consumer spending and depressed economic conditions, we have, among other things, substantially reduced our acquisition program, delayed new store openings, reduced our inventory purchases, engaged in inventory reduction efforts, closed a number of our retail locations, reduced our headcount, and amended and replaced our credit facility.

Although past economic conditions have adversely affected our operating results, we believe during and after such conditions we have capitalized on our core strengths to substantially outperform the industry, resulting in market share gains. Our ability to capture such market share supports the alignment of our retailing strategies with the desires of consumers. We believe the steps we have taken to address weak market conditions in the past have yielded, and we believe will yield in the future, an increase in revenue. Acquisitions remain an important strategy for us, and, subject to a number of conditions, including macro-economic conditions and finding attractive acquisition targets, we plan to explore opportunities through this strategy. We expect our core strengths and retailing strategies including our digital platform, will position us to capitalize on growth opportunities as they occur and will allow us to emerge with greater earnings potential.

Effective May 2, 2021, our reportable segments changed as a result of the Company’s acquisition of Cruisers Yachts, which changed management’s reporting structure and operating activities. We now report our operations through two new reportable segments: Retail Operations and Product Manufacturing. See Note 21 of the Notes to Consolidated Financial Statements.

As of September 30, 2021, the Retail Operations segment includes the activity of 77 retail locations in Alabama, California, Connecticut, Florida, Georgia, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma, Rhode Island, South Carolina, Texas, Washington and Wisconsin, where we sell new and used recreational boats, including pleasure and fishing boats, with a focus on premium brands in each segment. We also sell related marine products, including engines, trailers, parts, and accessories. In addition, we provide repair, maintenance, and slip and storage services; we arrange related boat financing, insurance, and extended service contracts; we offer boat and yacht brokerage sales; yacht charter services. In the British Virgin Islands we offer the charter of catamarans, through MarineMax Vacations. Fraser Yachts Group and Northrop & Johnson, leading superyacht brokerage and luxury yacht services companies with operations in multiple countries, are also included in this segment.

As of September 30, 2021, the Product Manufacturing segment includes activity of Cruisers Yachts, a wholly-owned MarineMax subsidiary, manufacturing sport yacht and yachts with sales through our select retail dealership locations and through independent dealers. Cruisers Yachts is recognized as one of the world’s premier manufacturers of premium sport yacht and yachts, producing models from 33’ to 60’ feet.

Application of Critical Accounting Policies

We have identified the policies below as critical to our business operations and the understanding of our results of operations. The impact and risks related to these policies on our business operations are discussed throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations” when such policies affect our reported and expected financial results.

In the ordinary course of business, we make a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States. We base our estimates on historical experiences and on various other assumptions (including future earnings) that we believe are reasonable under the circumstances. The results of these assumptions form the basis for making judgments about the carrying values of assets and liabilities, including contingent assets and liabilities such as contingent consideration liabilities from acquisitions, which are not readily apparent from other sources. Actual results could differ significantly from those estimates under different assumptions and conditions. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require our most difficult, subjective, and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

37

Revenue Recognition

The majority of our revenue is from contracts with customers for the sale of boats, motors, and trailers. We recognize revenue from boat, motor, and trailer sales upon transfer of control of the boat, motor, or trailer to the customer, which is generally upon acceptance of the boat, motor, and trailer by the customer and the satisfaction of our performance obligations. The transaction price is determined with the customer at the time of sale. Customers may trade in a used boat to apply toward the purchase of a new or used boat. The trade-in is a type of noncash consideration measured at fair value, based on external and internal observable and unobservable market data and applied as payment to the contract price for the purchased boat. At the time of acceptance, the customer is able to direct the use of, and obtain substantially all of the benefits of the boat, motor, or trailer. We recognize commissions earned from a brokerage sale when the related brokerage transaction closes upon transfer of control of the boat, motor, or trailer to the customer, which is generally upon acceptance by the customer.

We do not directly finance our customers’ boat, motor, or trailer purchases. In many cases, we assist with third-party financing for boat, motor, and trailer sales. We recognize commissions earned by us for placing notes with financial institutions in connection with customer boat financing when we recognize the related boat sales. Pursuant to negotiated agreements with financial institutions, we are charged back for a portion of these fees should the customer terminate or default on the related finance contract before it is outstanding for a stipulated minimum period of time. We base the chargeback allowance, which was not material to the consolidated financial statements taken as a whole as of September 30, 2020 and 2021, on our experience with repayments or defaults on the related finance contracts. We recognize variable consideration from commissions earned on extended warranty service contracts sold on behalf of third-party insurance companies at generally the later of customer acceptance of the service contract terms as evidenced by contract execution or recognition of the related boat sale. We also recognize variable consideration from marketing fees earned on insurance products sold by third-party insurance companies at the later of customer acceptance of the insurance product as evidenced by contract execution or when the related boat sale is recognized.

We recognize revenue from parts and service operations (boat maintenance and repairs) over time as services are performed. Each boat maintenance and repair service is a single performance obligation that includes both the parts and labor associated with the service. Payment for boat maintenance and repairs is typically due upon the completion of the service, which is generally completed within a short period of time from contract inception. We satisfy our performance obligations, transfer control, and recognize revenue over time for parts and service operations because we are creating a contract asset with no alternative use and we have an enforceable right to payment for performance completed to date. Contract assets primarily relate to our right to consideration for work in process not yet billed at the reporting date associated with maintenance and repair services. We use an input method to recognize revenue and measure progress based on labor hours expended to satisfy the performance obligation at average labor rates. We have determined labor hours expended to be the relevant measure of work performed to complete the maintenance and repair service for the customer. As a practical expedient, because repair and maintenance service contracts have an original duration of one year or less, we do not consider the time value of money, and we do not disclose estimated revenue expected to be recognized in the future for performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period or when we expect to recognize such revenue. Contract assets, recorded in prepaid expenses and other current assets, totaled approximately $2.6 million and $5.7 million as of September 30, 2020 and September 30, 2021, respectively.

We recognize revenue from the sale of our manufactured yachts when control of the yacht is transferred to the dealer, which is generally upon acceptance by the dealer. At the time of acceptance, the dealer is able to direct the use of, and obtain substantially all of the benefits of the yacht. We have elected to record shipping and handling activities that occur after the dealer has obtained control of the yacht as a fulfillment activity.

Intersegment revenue represents yachts that were manufactured in our Product Manufacturing segment and were sold to our Retail Operations segment. The Product Manufacturing segment supplies our Retail Operations segment along with various independent dealers.

Contract liabilities primarily consist of customer deposits. We recognize contract liabilities (customer deposits) as revenue at the time of acceptance and the transfer of control to the customers. Total contract liabilities of approximately $24.3 million recorded as of September 30, 2019 were recognized in revenue during the fiscal year ended September 30, 2020. Total contract liabilities of approximately $31.8 million recorded as of September 30, 2020 were recognized in revenue during the fiscal year ended September 30, 2021.

We recognize deferred revenue from service operations and slip and storage services over time on a straight-line basis over the term of the contract as our performance obligations are met. We recognize income from the rentals of chartering power yachts over time on a straight-line basis over the term of the contract as our performance obligations are met.

38

Inventories

Inventories are stated at the lower of cost or net realizable value. The cost of inventories purchased from our vendors consist of the amount paid to acquire the inventory, net of vendor consideration and purchase discounts, the cost of equipment added, reconditioning costs, and transportation costs relating to acquiring inventory for sale. Trade-in used boats are initially recorded at fair value and adjusted for reconditioning and other costs. The cost of inventories that are manufactured by the Company consist of material, labor, and manufacturing overhead. Unallocated overhead and abnormal costs are expensed as incurred. New and used boats, motors, and trailers inventories are accounted for on a specific identification basis. Raw materials and parts, accessories, and other inventories are accounted for on an average cost basis. We utilize our historical experience, the aging of the inventories, and our consideration of current market trends as the basis for determining a lower of cost or net realizable value. Our valuation allowance contains uncertainties because the calculation requires management to make assumptions and to apply judgment regarding the amount at which the inventory will ultimately be sold which considers forecasted market trends, model changes, and new product introductions. We do not believe there is a reasonable likelihood that there will be a change in the future estimates or assumptions we use to calculate our valuation allowance which would result in a material effect on our operating results. As of September 30, 2020 and 2021, our valuation allowance for new and used boat, motor and trailer inventories was $2.4 million and $0.4 million, respectively. If events occur and market conditions change, causing the fair value to fall below carrying value, the valuation allowance could increase.

Goodwill

We account for acquisitions in accordance with FASB ASC 805, “Business Combinations” (“ASC 805”), and goodwill in accordance with ASC 350, “Intangibles — Goodwill and Other” (“ASC 350”). For business combinations, the excess of the purchase price over the estimated fair value of net assets acquired in a business combination is recorded as goodwill. In accordance with ASC 350, we test goodwill for impairment at least annually and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Our annual impairment test is performed during the third fiscal quarter. If the carrying amount of a reporting unit’s goodwill exceeds its fair value we recognize an impairment loss in accordance with ASC 350. Based upon our most recent analysis, we determined through our qualitative assessment that it is not “more likely than not” that the fair values of our reporting units are less than their carrying values. As a result, we were not required to perform a quantitative goodwill impairment test. The qualitative assessment requires us to make judgments and assumptions regarding macroeconomic and industry conditions, our financial performance, and other factors. We do not believe there is a reasonable likelihood that there will be a change in the judgments and assumptions used in our qualitative assessment which would result in a material effect on our operating results.

Impairment of Long-Lived Assets

FASB ASC 360-10-40, “Property, Plant, and Equipment - Impairment or Disposal of Long-Lived Assets” (“ASC 360-10-40”), requires that long-lived assets, such as property and equipment and purchased intangibles subject to amortization, be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the asset (or asset group) is measured by comparison of its carrying amount to undiscounted future net cash flows the asset (or asset group) is expected to generate over the remaining life of the asset (or asset group). If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset (or asset group) exceeds its fair market value. Estimates of expected future cash flows represent our best estimate based on currently available information and reasonable and supportable assumptions. Our impairment loss calculations contain uncertainties because they require us to make assumptions and to apply judgment in order to estimate expected future cash flows. Any impairment recognized in accordance with ASC 360-10-40 is permanent and may not be restored. Based upon our most recent analysis, we believe no impairment of long-lived assets existed as of September 30, 2021. We do not believe there is a reasonable likelihood that there will be a change in the future estimates or assumptions used to test for recoverability which would result in a material effect on our operating results.

Recent Accounting Pronouncements

See Note 3 of the Notes to Consolidated Financial Statements.

39

Results of Operations

The following table sets forth certain financial data as a percentage of revenue for the periods indicated:

 

 

 

Fiscal Year Ended September 30,

 

 

 

2019

 

 

2020

 

 

2021

 

 

 

(Amounts in thousands)

 

Revenue

 

$

1,237,153

 

 

 

100.0

%

 

$

1,509,713

 

 

 

100.0

%

 

$

2,063,257

 

 

 

100.0

%

Cost of sales

 

 

914,321

 

 

 

73.9

%

 

 

1,111,000

 

 

 

73.6

%

 

 

1,403,824

 

 

 

68.0

%

Gross profit

 

 

322,832

 

 

 

26.1

%

 

 

398,713

 

 

 

26.4

%

 

 

659,433

 

 

 

32.0

%

Selling, general and administrative expenses

 

 

262,300

 

 

 

21.2

%

 

 

291,998

 

 

 

19.3

%

 

 

449,974

 

 

 

21.8

%

Income from operations

 

 

60,532

 

 

 

4.9

%

 

 

106,715

 

 

 

7.1

%

 

 

209,459

 

 

 

10.2

%

Interest expense

 

 

11,579

 

 

 

0.9

%

 

 

9,275

 

 

 

0.6

%

 

 

3,665

 

 

 

0.2

%

Income before income taxes

 

 

48,953

 

 

 

4.0

%

 

 

97,440

 

 

 

6.5

%

 

 

205,794

 

 

 

10.0

%

Income tax provision

 

 

12,968

 

 

 

1.0

%

 

 

22,806

 

 

 

1.5

%

 

 

50,815

 

 

 

2.5

%

Net income

 

$

35,985

 

 

 

3.0

%

 

$

74,634

 

 

 

5.0

%

 

$

154,979

 

 

 

7.5

%

 

Fiscal Year Ended September 30, 2021, Compared with Fiscal Year Ended September 30, 2020

Revenue. Revenue increased $553.5 million, or 36.7%, to approximately $2.063 billion for the fiscal year ended September 30, 2021 from $1.510 billion for the fiscal year ended September 30, 2020. Of this increase, $202.9 million was attributable to a 13.4% increase in comparable-store sales and an approximate $350.6 million net increase was related to stores opened, including acquired, or closed that were not eligible for inclusion in the comparable-store base. The increase in our comparable-store sales was primarily due to demand driven increases in new and used boat revenue and our higher margin finance and insurance products, brokerage, parts, service, and storage services.

Gross Profit. Gross profit increased $260.7 million, or 65.4%, to $659.4 million for the fiscal year ended September 30, 2021 from $398.7 million for the fiscal year ended September 30, 2020. Gross profit as a percentage of revenue increased to 32.0% for the fiscal year ended September 30, 2021 from 26.4% for the fiscal year ended September 30, 2020. The increase in gross profit as a percentage of revenue was primarily the result of demand driven price increases resulting in greater new and used boat margins and increases in our higher margin businesses, including our superyacht-services companies, as a percentage of sales. The increase in gross profit dollars was primarily attributable to increased new and used boat sales.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $158.0 million, or 54.1%, to $450.0 million for the fiscal year ended September 30, 2021 from $292.0 million for the fiscal year ended September 30, 2020. Selling, general and administrative expenses increased as a percentage of revenue to 21.8% for the fiscal year ended September 30, 2021 from 19.3% for the fiscal year ended September 30, 2020. The increase in selling, general, and administrative expenses was driven by an increase in mix to our higher margin businesses which typically carry a higher expense structure and acquisitions.

Interest Expense. Interest expense decreased $5.6 million, or 60.2%, to $3.7 million for the fiscal year ended September 30, 2021, from $9.3 million for the fiscal year ended September 30, 2020. Interest expense as a percentage of revenue decreased to 0.2% for the fiscal year ended September 30, 2021, from 0.6% for the fiscal year ended September 30, 2020. The decrease in interest expense was primarily the result of decreased borrowings.

Income Taxes. Income tax expense increased $28.0 million, or 122.8%, to $50.8 million for the fiscal year ended September 30, 2021 from $22.8 million for the fiscal year ended September 30, 2020. Our effective income tax rate increased to 24.7% for fiscal year ended September 30, 2021, from 23.4% for fiscal year ended September 30, 2020. The increase in the effective income tax rate was primarily attributed to prior fiscal year state tax benefits and prior fiscal year tax benefits from stock-based compensation that did not occur for the fiscal year ended September 30, 2021.

Quarterly Data and Seasonality

Our business, as well as the entire recreational boating industry, is highly seasonal, with seasonality varying in different geographic markets. With the exception of Florida, we generally realize significantly lower sales and higher levels of inventories, and related short-term borrowings, in the quarterly periods ending December 31 and March 31. The onset of the public boat and recreation shows in January generally stimulates boat sales and typically allows us to reduce our inventory levels and related short-term borrowings throughout the remainder of the fiscal year. Our business could become substantially more seasonal if we acquire additional dealers that operate in colder regions of the United States or close retail locations in warm climates.

Our business is also subject to weather patterns, which may adversely affect our results of operations. For example, prolonged winter conditions, drought conditions (or merely reduced rainfall levels) or excessive rain, may limit access to area boating locations

40

or render boating dangerous or inconvenient, thereby curtailing customer demand for our products. In addition, unseasonably cool weather and prolonged winter conditions may lead to a shorter selling season in certain locations. Hurricanes and other storms could result in disruptions of our operations or damage to our boat inventories and facilities, as has been the case when Florida and other markets were affected by hurricanes, such as Hurricanes Harvey and Irma in 2017. Although we believe our geographic diversity is likely to reduce the overall impact to us of adverse weather conditions in any one market area, these conditions will continue to represent potential, material adverse risks to us and our future financial performance.

Liquidity and Capital Resources

Our cash needs are primarily for working capital to support operations, including new and used boat and related parts inventories, off-season liquidity, and growth through acquisitions. Acquisitions remain an important strategy for us, and we plan to continue our growth through this strategy in appropriate circumstances. However, we cannot predict the length of favorable economic or financial conditions. We regularly monitor the aging of our inventories and current market trends to evaluate our current and future inventory needs. We also use this evaluation in conjunction with our review of our current and expected operating performance and expected business levels to determine the adequacy of our financing needs.

These cash needs historically have been financed with cash generated from operations and borrowings under the Credit Facility (described below). Our ability to utilize the Credit Facility to fund operations depends upon the collateral levels and compliance with the covenants of the Credit Facility. Any turmoil in the credit markets and weakness in the retail markets may interfere with our ability to remain in compliance with the covenants of the Credit Facility and therefore our ability to utilize the Credit Facility to fund operations. As of September 30, 2021, we were in compliance with all covenants under the Credit Facility. We currently depend upon dividends and other payments from our dealerships and the Credit Facility to fund our current operations and meet our cash needs. As 100% owner of each of our dealerships, we determine the amounts of such distributions subject to applicable law, and currently, no agreements exist that restrict this flow of funds from our dealerships.

For the fiscal years ended September 30, 2021 and 2020, cash provided by operating activities was approximately $373.9 million and $304.7 million, respectively. For the fiscal year ended September 30, 2019, cash used in operating activities was approximately $12.4 million. For the fiscal year ended September 30, 2021, cash provided by operating activities was primarily related to decreases in inventory, increases in contract liabilities (customer deposits), accrued expenses and other liabilities, and our net income adjusted for non-cash expenses and gains such as depreciation and amortization expense, deferred income tax provision, and stock-based compensation expense. For the fiscal year ended September 30, 2020, cash provided by operating activities was primarily related to decreases in inventory, accounts receivable, increases in accrued expenses and other liabilities, increases in accounts payable, and our net income adjusted for non-cash expenses and gains such as depreciation and amortization expense, deferred income tax provision, stock-based compensation expense, and insurance proceeds received. For the fiscal year ended September 30, 2019, cash used in operating activities was primarily related to increases in inventory, accounts receivable, and prepaid expenses and other assets, partially offset by our net income adjusted for non-cash expenses and gains such as depreciation and amortization expense, deferred income tax provision, stock-based compensation expense, insurance proceeds received, and increases in accounts payable, contract liabilities, and accrued expenses and other long-term liabilities.

For the fiscal years ended September 30, 2021, 2020, and 2019, cash used in investing activities was approximately $161.1 million, $30.1 million, and $56.3 million, respectively. For the fiscal year ended September 30, 2021, cash used in investing activities was primarily used for acquisitions, to purchase property and equipment associated with improving existing retail facilities, and to purchase investments, partially offset by proceeds from insurance settlements. For the fiscal year ended September 30, 2020, cash used in investing activities was primarily used to purchase property and equipment associated with improving existing retail facilities and purchase property and equipment and other assets associated with business acquisitions. For the fiscal year ended September 30, 2019, cash used in investing activities was primarily used to purchase property and equipment associated with improving existing retail facilities and purchase property and equipment and other assets associated with business acquisitions.

For the fiscal years ended September 30, 2021 and 2020, cash used in financing activities was approximately $145.7 million and $158.1 million, respectively. For the fiscal year ended September 30, 2019, cash provided by financing activities was approximately $58.6 million. For the fiscal year ended September 30, 2021, cash used in financing activities was primarily attributable to net payments for short-term borrowings, purchase of treasury stock, payments on tax withholdings for equity awards, payments for long-term debt, and contingent acquisition consideration payments, partially offset by proceeds from long-term debt and net proceeds from issuance of common stock under incentive compensation and employee purchase plans. For the fiscal year ended September 30, 2020, cash used in financing activities was primarily attributable to a decrease in net short-term borrowings as a result of decreased inventory levels, repurchase of common stock under the share repurchase program, payments on tax withholdings for equity awards, partially offset by proceeds from the issuance of common stock from our stock-based compensation plans and proceeds from long- term debt. For the fiscal year ended September 30, 2019, cash provided by financing activities was primarily attributable to net short-term borrowings as a result of increased inventory levels and proceeds from the issuance of common stock from our stock-based compensation plans, partially offset by the repurchase of common stock under the share repurchase program and payments on tax withholdings for equity awards.

41

In July 2021, we entered into an Amended and Restated Loan and Security Agreement, with Wells Fargo Commercial Distribution Finance LLC, M&T Bank, Bank of the West, and Truist Bank. The Credit Facility provides the Company a line of credit with asset based borrowing availability of up to $500.0 million for working capital and inventory financing, with the amount permissible pursuant to a borrowing base formula. The Credit Facility has a three-year term and expires in July 2024, subject to extension for two one-year periods, with lender approval.

The Credit Facility has certain financial covenants as specified in the agreement. The covenants include provisions that our leverage ratio must not exceed 2.75 to 1.0 and that our current ratio must be greater than 1.2 to 1.0. The interest rate for amounts outstanding under the Credit Facility is 345 basis points plus the greater of 75 basis points or the one-month LIBOR. There is an unused line fee of ten basis points on the unused portion of the Credit Facility. In October 2021, we amended the Credit Facility to allow for the transition of the benchmark interest rate used from LIBOR to the Secured Overnight Finance Rate (SOFR).

Advances under the Credit Facility are initiated by the acquisition of eligible new and used inventory or are re-advances against eligible new and used inventory that have been partially paid-off. Advances on new inventory will generally mature 1,080 days from the original invoice date. Advances on used inventory will mature 361 days from the date we acquire the used inventory. Each advance is subject to a curtailment schedule, which requires that we pay down the balance of each advance on a periodic basis starting after six months. The curtailment schedule varies based on the type and value of the inventory. The collateral for the Credit Facility is primarily the Company’s inventory that is financed through the Credit Facility and related accounts receivable. None of our real estate has been pledged for collateral for the Credit Facility.

As of September 30, 2021, our indebtedness associated with our short-term borrowings and our long-term debt totaled approximately $24.1 million and $51.7 million, respectively. As of September 30, 2021, short-term borrowings and long-term debt recorded on the Consolidated Balance Sheets included unamortized debt issuance costs of approximately $0.2 million and $0.6 million, respectively. Refer to Note 11 of the Notes to Consolidated Financial Statements for disclosure of borrowing availability, interest rates, and terms of our short-term borrowings and long-term debt.

Except as specified in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in the attached consolidated financial statements, we have no material commitments for capital for the next 12 months. Based on the information currently available to us, the COVID-19 pandemic’s impact on consumer demand is uncertain, however, we believe that the cash generated from sales and our existing capital resources will be adequate to meet our liquidity and capital requirements for at least the next 12 months, except for possible significant acquisitions.

Commitments and Commercial Commitments

The following table sets forth a summary of our material contractual obligations and commercial commitments as of September 30, 2021:

 

 

 

Payments Due by Period Ending September 30,

 

 

 

Total

 

 

Less Than 1 Year (2022)

 

 

1-3 Years (2023 and 2024)

 

 

3-5 Years (2025 and 2026)

 

 

More Than 5 Years (2027 and thereafter)

 

 

 

(Amounts in thousands)

 

Short-term borrowings (1)

 

$

24,136

 

 

$

24,136

 

 

$

—

 

 

$

—

 

 

$

—

 

Long-term debt (2)

 

 

51,680

 

 

 

3,587

 

 

 

7,174

 

 

 

7,174

 

 

 

33,745

 

Other liabilities (3)

 

 

13,618

 

 

 

6,015

 

 

 

7,603

 

 

 

—

 

 

 

—

 

Operating leases (4)

 

 

152,159

 

 

 

16,080

 

 

 

27,627

 

 

 

20,262

 

 

 

88,190

 

Total

 

$

241,593

 

 

$

49,818

 

 

$

42,404

 

 

$

27,436

 

 

$

121,935

 

 

 

(1)

Estimates of future interest payments for short-term borrowings have been excluded in the tabular presentation. Amounts due are contingent upon the outstanding balances and the variable interest rates. Refer to Note 11 of the Notes to Consolidated Financial Statements for disclosure of borrowing availability, interest rates, and terms of our short-term borrowings.

(2)

The amounts included in long-term debt refers to future cash principal payments. Refer to Note 11 of the Notes to Consolidated Financial Statements for disclosure of borrowing availability, interest rates, and terms of our long-term debt.

(3)

The amounts included in other liabilities consist primarily of our estimated liability for claims on certain workers’ compensation insurance policies and estimated future contingent consideration payments.

(4)

Amounts for operating lease commitments do not include certain operating expenses such as maintenance, insurance, and real estate taxes. These amounts are not a material component of operating expenses.

42

Item 7A.

Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

We are exposed to risk from changes in interest rates on our outstanding indebtedness. Changes in the underlying interest rates on our variable interest rate short-term borrowings and long-term debt could affect our earnings. For example, a hypothetical 100 basis point increase in the interest rate would result in an increase of approximately $0.6 million in annual pre-tax interest expense. This estimated increase is based upon the outstanding balance of our short-term borrowings and long-term debt as of September 30, 2021 and assumes no mitigating changes by us to reduce the outstanding balances and no additional interest assistance that could be received from vendors due to the interest rate increase.

Foreign Currency Exchange Rate Risk

Products purchased from European-based and Chinese-based manufacturers are transacted in U.S. dollars. Fluctuations in the U.S. dollar exchange rate may impact the retail price at which we can sell foreign products. Accordingly, fluctuations in the value of other currencies compared with the U.S. dollar may impact the price points at which we can profitably sell such foreign products, and such price points may not be competitive with other products in the United States. Thus, such fluctuations in exchange rates ultimately may impact the amount of revenue, cost of goods sold, cash flows and earnings we recognize for such foreign products. We cannot predict the effects of exchange rate fluctuations on our operating results. In certain cases, we may enter into foreign currency cash flow hedges to reduce the variability of cash flows associated with forecasted purchases of boats and yachts from European-based and Chinese-based manufacturers. We are not currently engaged in foreign currency exchange hedging transactions to manage our foreign currency exposure. If and when we do engage in foreign currency exchange hedging transactions, there can be no assurance that our strategies will adequately protect our operating results from the effects of exchange rate fluctuations.

Additionally, the Fraser Yachts Group and Northrop & Johnson have transactions and balances denominated in currencies other than the U.S dollar. Most of the transactions or balances for Fraser Yachts Group are denominated in euros. Net revenues recognized whose functional currency was not the U.S. dollar were less than 2% of our total revenues in fiscal 2021.

Item 8.

Financial Statements and Supplementary Data

Reference is made to the financial statements, the notes thereto, and the report thereon, commencing on page F-1 of this report, which financial statements, notes, and report are incorporated herein by reference.

 

 

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed by us in Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on such evaluation, such officers have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Controls

During the quarter ended September 30, 2021, there were no changes in our internal control over financial reporting that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting, except as described in the following sentence. On October 1, 2020 and May 2, 2021, we acquired SkipperBud’s and Cruisers Yachts, respectively. As we proceed with integration, we are implementing various accounting processes and internal controls over financial reporting for these reporting subsidiaries.

43

Limitations on the Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures and internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Although our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, a control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

CEO and CFO Certifications

Exhibits 31.1 and 31.2 are the Certifications of the Chief Executive Officer and Chief Financial Officer, respectively. The Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the “Section 302 Certifications”). This Item of this report, which you are currently reading is the information concerning the Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Securities Exchange Act of 1934. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of September 30, 2021 as required by the Securities Exchange Act of 1934 Rule 13a-15(c). In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework (2013). Based on its evaluation, our management concluded that its internal control over financial reporting was effective as of September 30, 2021. The Company acquired Skipper Marine Holdings, Inc., and certain affiliates (SkipperBud’s) and KCS International Holdings, Inc., and certain affiliates (Cruisers Yachts), during fiscal 2021. Management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of September 30, 2021 SkipperBud’s and Cruisers Yachts internal control over financial reporting, which together represent approximately 12% of total assets and 16% of total revenues included in the Company’s consolidated financial statements as of and for the year ended September 30, 2021.

Our internal control over financial reporting as of September 30, 2021, has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which appears herein.


44

 

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors
MarineMax, Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited MarineMax, Inc. and subsidiaries' (the Company) internal control over financial reporting as of September 30, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of September 30, 2021 and 2020, and the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended September 30, 2021, and the related notes (collectively, the consolidated financial statements), and our report dated November 19, 2021 expressed an unqualified opinion on those consolidated financial statements.

The Company acquired Skipper Marine Holdings, Inc., and certain affiliates (SkipperBud’s) and KCS International Holdings, Inc., and certain affiliates (Cruisers Yachts) during 2021.  Management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of September 30, 2021, SkipperBud’s and Cruisers Yachts’ internal control over financial reporting associated with 12% of total assets and 16% of total revenues included in the consolidated financial statements of the Company as of and for the year ended September 30, 2021. Our audit of internal control over financial reporting also excluded an evaluation of the internal control over financial reporting of SkipperBud’s and Cruisers Yachts.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.


45

 

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

Tampa, Florida
November 19, 2021

46

Item 9B.

Other Information

None.

PART III

Item 10.

Directors, Executive Officers and Corporate Governance

The information required by this Item relating to our directors and corporate governance is incorporated herein by reference to the definitive Proxy Statement (particularly under the caption “Corporate Governance”) to be filed pursuant to Regulation 14A of the Exchange Act for our 2021 Annual Meeting of Shareholders (the “2022 Proxy Statement”). The information required by this Item relating to our executive officers is included in “Business — Executive Officers.”

We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, and other senior accounting personnel. The “Code of Ethics for the CEO and Senior Financial Officers” is located on our website at www.MarineMax.com in the Investor Relations section under Corporate Governance.

We intend to satisfy the disclosure requirement under Item 5.05(c) of Form 8-K regarding any amendment to, or waiver from, a provision of this code of ethics by posting such information on our website, at the address and location specified above.

Item 11.

Executive Compensation

The information required by this Item is incorporated herein by reference to the 2022 Proxy Statement (particularly under the caption “Executive Compensation”).

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item is incorporated herein by reference to the 2022 Proxy Statement (particularly under the caption “Security Ownership of Principal Shareholders, Directors, and Officers”).

Item 13.

The information required by this Item is incorporated herein by reference to the 2022 Proxy Statement (particularly under the caption “Certain Relationships and Related Transactions”).

Item 14.

Principal Accountant Fees and Services

The information required by this Item is incorporated herein by reference to the 2022 Proxy Statement (particularly under the caption “Ratification of Appointment of Independent Auditor”).

PART IV

Item 15.

Exhibits, Financial Statement Schedules

(a)

Financial Statements and Financial Statement Schedules

(1)

Financial Statements. Financial Statements are listed in the Index to Consolidated Financial Statements on page F-1 of this report.

(2)

Financial Statement Schedules. No financial statement schedules are included because such schedules are not applicable, are not required, or because required information is included in the consolidated financial statements or notes thereto.

(3)

Exhibits. See Item 15(b) below.

(b)

Exhibits

 

Exhibit
Number

 

Exhibit

2.1

 

Agreement and Plan of Merger, dated February 25, 2015, by and between MarineMax, Inc. and MarineMax Reincorporation, Inc. (1)

3.1

 

Articles of Incorporation of the Registrant. (2)

3.2

 

Bylaws of the Registrant. (2)

4.1

 

Specimen of Common Stock Certificate. (2)

47

Exhibit
Number

 

Exhibit

4.2

 

Description of Securities.

10.1*

 

Employment Agreement, dated November 29, 2018, between Registrant and William H.  McGill Jr., as amended. (3)

10.1(b)*

 

Employment Agreement, dated November 29, 2018, between Registrant and Michael H.  McLamb, as amended. (3)

10.1(c)*

 

Employment Agreement, dated November 29, 2018, between Registrant and William Brett McGill. (3)

10.1(d)*

 

Key Executive Retention Agreement, dated February 25, 2021, by and between MarineMax, Inc. and Anthony Cassella. (4)

10.1(e)*

 

Key Executive Retention Agreement, dated February 25, 2021, by and between MarineMax, Inc. and Charles Cashman. (4)

10.2*

 

Amended 2008 Employee Stock Purchase Plan. (5)

10.3*

 

2011 Stock-Based Compensation Plan. (6)

10.3(a)*

 

Form Stock Option Agreement for 2011 Stock-Based Compensation Plan. (7)

10.3(b)*

 

Form Restricted Stock Unit Award Agreement for 2011 Stock-Based Compensation Plan. (8)

10.4

 

Sales and Service Agreement, dated October 30, 2020, between Registrant and Boston Whaler, Inc. (15)

10.5

 

Sales and Service Agreement, dated October 30, 2020, between Registrant and Sea Ray Division of Brunswick Corporation. (15)

10.6

 

Agreement Relating to Acquisitions between Registrant and Brunswick Corporation, dated December 7, 2005. (9)  

10.6(a)

 

Amendment, executed October 17, 2014, to Agreement Relating to Acquisitions between Registrant and Brunswick Corporation, dated December 7, 2005. (10)

10.6(b)

 

Sea Ray Sales and Service Agreement. (8)

10.6(c)†

 

Sea Ray Sales and Service Agreement, executed October 17, 2014, by and between MarineMax East, Inc. and Sea Ray, a Division of Brunswick Corporation. (9)

10.6(d)†

 

Sea Ray Sales and Service Agreement, executed October 17, 2014, by and between MarineMax Northeast, LLC, and Sea Ray, a Division of Brunswick Corporation. (9)

10.6(e)†

 

Sea Ray Sales and Service Agreement, executed October 17, 2014, by and between MarineMax, Inc. and Sea Ray, a Division of Brunswick Corporation. (9)

10.6(f)†

 

Boston Whaler Sales and Service Agreement, executed December 5, 2014, by and between MarineMax East, Inc. and Boston Whaler, a Division of Brunswick Corporation. (10)

10.6(g)†

 

Boston Whaler Sales and Service Agreement, executed December 5, 2014, by and between MarineMax Northeast, LLC, and Boston Whaler, a Division of Brunswick Corporation. (10)

10.6(h)†

 

Boston Whaler Sales and Service Agreement, executed December 5, 2014, by and between MarineMax, Inc. and Boston Whaler, a Division of Brunswick Corporation. (10)

10.7 †

 

Loan and Security Agreement, dated May 20, 2020, by and among MarineMax, Inc. and its subsidiaries, Wells Fargo Commercial Distribution Finance, LLC, M&T Bank, Bank of the West, and Truist Bank. (11)

10.7(a) †

 

Amended and Restated Loan and Security Agreement, dated July 9, 2021, by and among MarineMax, Inc. and its subsidiaries, Wells Fargo Commercial Distribution Finance, LLC, M&T Bank, Bank of the West, and Truist Bank.

10.7(b) †

 

Sixth Amended and Restated Program Terms Letter, dated May 20, 2020, by and among MarineMax, Inc. and its subsidiaries, as Borrowers, and Wells Fargo Commercial Distribution Finance, LLC. (11)

10.7(c) †

 

Seventh Amended and Restated Program Terms Letter, dated July 9, 2021, by and among MarineMax, Inc. and its subsidiaries, as Borrowers, and Wells Fargo Commercial Distribution Finance, LLC.

10.8

 

Director Fee Share Purchase Program. (12)

10.9*

 

Severance Policy for Key Executives. (13)

10.10†

 

Dealership Agreement dated September 1, 2008 by and between MarineMax Northeast, LLC and Azimut Benetti S.p.A. (14)

10.10(a)

 

First Amendment dated June 22, 2010 to Dealership Agreement dated September 1, 2008, by and between MarineMax Northeast, LLC and Azimut Benetti S.p.A. (14)

10.10(b)

 

Second Amendment dated February 29, 2012 to Dealership Agreement dated September 1, 2008, by and between MarineMax Northeast, LLC and Azimut Benetti S.p.A. (14)

10.10(c)

 

Third Amendment dated July 21, 2012 to Dealership Agreement dated September 1, 2008, by and between MarineMax Northeast, LLC and Azimut Benetti S.p.A. (14)

10.11†

 

Dealership Agreement dated September 1, 2008 by and between MarineMax East, LLC and Azimut Benetti S.p.A. (14)

10.11(a)

 

First Amendment dated June 22, 2010 to Dealership Agreement dated September 1, 2008, by and between MarineMax East, Inc. and Azimut Benetti S.p.A. (14)

10.11(b)

 

Second Amendment dated February 29, 2012 to Dealership Agreement dated September 1, 2008, by and between MarineMax East, Inc. and Azimut Benetti S.p.A. (14)

10.11(c)

 

Third Amendment dated July 21, 2012 to Dealership Agreement dated September 1, 2008, by and between MarineMax East, Inc. and Azimut Benetti S.p.A. (14)

10.11(d)

 

Fourth Amendment dated August 21, 2013 to Dealership Agreement dated September 1, 2008, by and between MarineMax East, Inc. and Azimut Benetti S.p.A. (14)

48

Exhibit
Number

 

Exhibit

10.12 †

 

Equity Purchase Agreement dated October 1, 2020, by and among Skipper Marine Holdings, Inc., SSY Holdings, Inc., Michael J. Pretasky, Sr., Michael John Pretasky, Jr. 2014 Trust, Mark Ellerbrock, and Robert Ross Tefft, Jr., Michael J. Pretasky, Jr., and MarineMax, Inc. (15)

10.13 †

 

Stock Purchase Agreement, dated May 2, 2021, by and between Kenneth C. Stock, Georgia Stock and the Kenneth C. Stock and Georgia Stock 2020 Trust; Kenneth C. Stock, as the representative of the Sellers; and MarineMax Products, Inc. (16)

21

 

List of Subsidiaries.

23.1

 

Consent of KPMG LLP.

31.1

 

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.

31.2

 

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.

32.1

 

Certification pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

 

Certification pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

 

Inline XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104

 

Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

 

†

Certain information in this exhibit has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions where applicable.

*

Management contract or compensatory plan or arrangement.

(1)

Incorporated by reference to Registrant’s Form 8-K as filed February 26, 2015.

(2)

Incorporated by reference to Registrant’s Form 8-K as filed March 20, 2015.

(3)

Incorporated by reference to Registrant’s Form 10-K for the year ended September 30, 2019, as filed on November 29, 2018.

(4)

Incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended March 31, 2021, as filed on April 27, 2021.

(5)

Incorporated by reference to Registrant’s Form S-8 (File No. 333-236618) as filed February 25, 2020.

(6)

Incorporated by reference to Registrant’s Form S-8 (File No. 333-236617) as filed February 25, 2020.

(7)

Incorporated by reference to Registrant’s Form 8-K as filed on January 25, 2011.

(8)     Incorporated by reference to Registrant’s Form 8-K as filed on December 9, 2005.

(9)

Incorporated by reference to Registrant’s Form 10-K for the year ended September 30, 2014, as filed on December 11, 2014.

(10)

Incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended December 31, 2014, as filed on February 5, 2015.

(11)

Incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended June 30, 2020, as filed on July 28, 2020.

(12)

Incorporated by reference to Registrant’s Form S-8 (File No. 333-141657) as filed March 29, 2007.

(13)

Incorporated by reference to Registrant’s Form 8-K as filed on November 27, 2012.

(14)

Incorporated by reference to Registrant’s Form 10-K for the year ended September 30, 2013, as filed on December 6, 2013.

(15)

Incorporated by reference to Registrant’s Form 10-K for the year ended September 30, 2020, as filed on December 2, 2020.

(16)

Incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended June 30, 2021, as filed on July 27, 2021.

 

(c)Financial Statements Schedules

(1)

See Item 15(a) above.

 

 

49

 

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

MARINEMAX, INC.

 

 

 

/s/  W. Brett McGill

 

W. Brett McGill

 

Chief Executive Officer and President

Date: November 19, 2021

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature

 

Capacity

 

Date

/s/  W. Brett McGill

 

Chief Executive Officer and President
(Principal Executive Officer)

 

November 19, 2021

W. Brett McGill

 

 

 

 

 

 

 

/s/  Michael H. McLamb

 

Executive Vice President, Chief Financial Officer, Secretary and Director
(Principal Accounting and
Financial Officer)

 

November 19, 2021

Michael H. McLamb

 

 

 

 

 

 

 

 

 

 

 

 

/s/  William H. McGill Jr.

 

Executive Chairman of the Board,

 

November 19, 2021

William H. McGill Jr.

 

Director

 

 

 

 

 

 

 

/s/ Clint Moore

 

 

Lead Independent Director

 

 

Clint Moore

 

 

November 19, 2021

 

 

 

 

 

/s/ George E. Borst

 

 

Director

 

 

November 19, 2021

George E. Borst

 

 

 

 

 

 

 

/s/ Hilliard M. Eure III

 

 

 

 

Hilliard M. Eure III

 

Director

 

November 19, 2021

 

 

 

 

 

/s/  Evelyn Follit

 

 

Director

 

 

November 19, 2021

Evelyn Follit

 

 

 

 

 

 

 

/s/  Adam M. Johnson

 

 

Director

 

 

November 19, 2021

Adam M. Johnson

 

 

 

 

 

 

 

/s/  Charles R. Oglesby

 

 

Director

 

 

November 19, 2021

Charles R. Oglesby

 

 

 

 

 

 

 

/s/  Joseph A. Watters

 

 

Director

 

 

November 19, 2021

Joseph A. Watters

 

 

 

 

 

 

 

/s/  Rebecca White

 

 

 

 

Rebecca White

 

Director

 

November 19, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

50

 

MARINEMAX, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

Page

CONSOLIDATED FINANCIAL STATEMENTS

 

 

Report of Independent Registered Public Accounting Firm

 

F-2

Consolidated Balance Sheets

 

F-4

Consolidated Statements of Operations

 

F-5

Consolidated Statements of Comprehensive Income

 

F-6

Consolidated Statements of Shareholders’ Equity

 

F-7

Consolidated Statements of Cash Flows

 

F-8

Notes to Consolidated Financial Statements

 

F-9

 

 

 

 

 

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors
MarineMax, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of MarineMax, Inc. and subsidiaries (the Company) as of September 30, 2021 and 2020, the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended September 30, 2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended September 30, 2021, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of September 30, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated November 19, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 3 to the consolidated financial statements, the Company has changed its method of accounting for Leases as of October 1, 2019 due to the adoption of Accounting Standards Update (ASU) 2016-02, Leases, and several related amendments, as issued by the Financial Accounting Standards Board (FASB).

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.


F-2

 

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Fair Value of Trade-in Used Boats

As discussed in Note 2 to the consolidated financial statements, trade-in used boat inventory is initially measured at fair value and represents a form of noncash consideration applied to the contract price of a purchased boat.  At period-end, trade-in used boats that remain in inventory are presented at the lower of cost or net realizable value. Net realizable value is equal to the initial estimated fair value at trade-in less a valuation allowance. Management estimates the initial fair value of the trade-in used boat considering publicly available and internal transactional and market participant data for comparable boats.

We identified the assessment of the fair value of the trade-in used boats as a critical audit matter because a high degree of subjective auditor judgment was required to evaluate the significant inputs used in the estimation of the fair value. The significant inputs are based on limited publicly available and internal transactional and market participant data.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s measurement of the fair value of trade-in used boats, including controls over the determination of the appropriate external and internal market data for comparable used boat sales. We involved valuation professionals with specialized skills and knowledge, who assisted us in assessing management’s fair value estimation process, including our evaluation of the relevance and reliability of the publicly available and internal transactional and market participant data.  We also performed an analysis of subsequent sales proceeds and margins from the third-party sale of the trade-in used boats.

/s/ KPMG LLP

We have served as the Company’s auditor since 2013.

Tampa, Florida

November 19, 2021

 

 

F-3

 

MARINEMAX, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands except share and per share data)

 

 

 

September 30, 2020

 

 

September 30, 2021

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

155,493

 

 

$

222,192

 

Accounts receivable, net

 

 

40,195

 

 

 

47,651

 

Inventories, net

 

 

298,002

 

 

 

230,984

 

Prepaid expenses and other current assets

 

 

9,637

 

 

 

16,692

 

Total current assets

 

 

503,327

 

 

 

517,519

 

Property and equipment, net

 

 

141,934

 

 

 

175,463

 

Operating lease right-of-use assets, net

 

 

37,991

 

 

 

104,901

 

Goodwill and other intangible assets, net

 

 

84,293

 

 

 

201,122

 

Other long-term assets

 

 

7,774

 

 

 

8,818

 

Total assets

 

$

775,319

 

 

$

1,007,823

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Accounts payable

 

$

37,343

 

 

$

25,739

 

Contract liabilities (customer deposits)

 

 

31,821

 

 

 

100,660

 

Accrued expenses

 

 

51,616

 

 

 

86,594

 

Short-term borrowings

 

 

144,393

 

 

 

23,943

 

Current maturities on long-term debt

 

 

507

 

 

 

3,587

 

Current operating lease liabilities

 

 

6,854

 

 

 

10,570

 

Total current liabilities

 

 

272,534

 

 

 

251,093

 

Long-term debt, net of current maturities

 

 

7,343

 

 

 

47,498

 

Noncurrent operating lease liabilities

 

 

33,473

 

 

 

96,956

 

Deferred tax liabilities, net

 

 

4,509

 

 

 

9,268

 

Other long-term liabilities

 

 

2,063

 

 

 

8,116

 

Total liabilities

 

 

319,922

 

 

 

412,931

 

COMMITMENTS AND CONTINGENCIES (Note 19)

 

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY:

 

 

 

 

 

 

 

 

Preferred stock, $.001 par value, 1,000,000 shares authorized,

   none issued or outstanding as of September 30, 2020 and 2021

 

 

—

 

 

 

—

 

Common stock, $.001 par value; 40,000,000 shares authorized, 28,130,312

   and 28,588,863 shares issued and 21,863,291 and 21,821,842 shares

   outstanding as of September 30, 2020 and 2021, respectively

 

 

28

 

 

 

29

 

Additional paid-in capital

 

 

280,436

 

 

 

288,901

 

Accumulated other comprehensive income

 

 

829

 

 

 

648

 

Retained earnings

 

 

277,699

 

 

 

432,678

 

Treasury stock, at cost, 6,267,021 and 6,767,021 shares held as of

   September 30, 2020 and 2021, respectively

 

 

(103,595

)

 

 

(127,364

)

Total shareholders’ equity

 

 

455,397

 

 

 

594,892

 

Total liabilities and shareholders’ equity

 

$

775,319

 

 

$

1,007,823

 

 

See accompanying notes to consolidated financial statements.

 

F-4

 

MARINEMAX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands except share and per share data)

 

 

 

For the Year Ended September 30,

 

 

 

2019

 

 

2020

 

 

2021

 

Revenue

 

$

1,237,153

 

 

$

1,509,713

 

 

$

2,063,257

 

Cost of sales

 

 

914,321

 

 

 

1,111,000

 

 

 

1,403,824

 

Gross profit

 

 

322,832

 

 

 

398,713

 

 

 

659,433

 

Selling, general and administrative expenses

 

 

262,300

 

 

 

291,998

 

 

 

449,974

 

Income from operations

 

 

60,532

 

 

 

106,715

 

 

 

209,459

 

Interest expense

 

 

11,579

 

 

 

9,275

 

 

 

3,665

 

Income before income tax provision

 

 

48,953

 

 

 

97,440

 

 

 

205,794

 

Income tax provision

 

 

12,968

 

 

 

22,806

 

 

 

50,815

 

Net income

 

$

35,985

 

 

$

74,634

 

 

$

154,979

 

Basic net income per common share

 

$

1.61

 

 

$

3.46

 

 

$

7.04

 

Diluted net income per common share

 

$

1.57

 

 

$

3.37

 

 

$

6.78

 

Weighted average number of common shares used

   in computing net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

22,294,114

 

 

 

21,547,665

 

 

 

22,010,130

 

Diluted

 

 

22,881,147

 

 

 

22,125,338

 

 

 

22,859,498

 

 

See accompanying notes to consolidated financial statements.

 

 

 

F-5

 

MARINEMAX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

 

 

 

For the Year Ended September 30,

 

 

 

2019

 

 

2020

 

 

2021

 

Net income

 

$

35,985

 

 

$

74,634

 

 

$

154,979

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(669

)

 

 

1,498

 

 

 

(300

)

Interest rate swap contract

 

 

—

 

 

 

—

 

 

 

119

 

Total other comprehensive (loss) income, net of tax

 

 

(669

)

 

 

1,498

 

 

 

(181

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

$

35,316

 

 

$

76,132

 

 

$

154,798

 

 

See accompanying notes to consolidated financial statements.

F-6

MARINEMAX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Amounts in thousands except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock Issued

 

 

Paid-in

 

 

Comprehensive

 

 

Retained

 

 

Treasury

 

 

Shareholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

(Loss) Income

 

 

Earnings

 

 

Stock

 

 

Equity

 

BALANCE, September 30, 2018

 

 

27,141,267

 

 

$

27

 

 

$

262,250

 

 

$

—

 

 

$

166,071

 

 

$

(75,256

)

 

$

353,092

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

35,985

 

 

 

—

 

 

 

35,985

 

Purchase of treasury stock

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(27,708

)

 

 

(27,708

)

Shares issued pursuant to employee stock

   purchase plan

 

 

62,287

 

 

 

—

 

 

 

1,022

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,022

 

Shares issued upon vesting of equity awards,

   net of minimum tax withholding

 

 

174,606

 

 

 

—

 

 

 

(1,216

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,216

)

Shares issued upon exercise of stock options

 

 

119,275

 

 

 

1

 

 

 

1,389

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,390

 

Stock-based compensation

 

 

11,038

 

 

 

—

 

 

 

6,524

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

6,524

 

Other comprehensive loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(669

)

 

 

—

 

 

 

—

 

 

 

(669

)

Cumulative effect of change in accounting

   principle - revenue recognition, net of tax

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

399

 

 

 

—

 

 

 

399

 

BALANCE, September 30, 2019

 

 

27,508,473

 

 

$

28

 

 

$

269,969

 

 

$

(669

)

 

$

202,455

 

 

$

(102,964

)

 

$

368,819

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

74,634

 

 

 

—

 

 

 

74,634

 

Purchase of treasury stock

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(631

)

 

 

(631

)

Shares issued pursuant to employee stock

   purchase plan

 

 

94,741

 

 

 

—

 

 

 

1,004

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,004

 

Shares issued upon vesting of equity awards,

   net of minimum tax withholding

 

 

228,304

 

 

 

—

 

 

 

(1,659

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,659

)

Shares issued upon exercise of stock options

 

 

286,702

 

 

 

—

 

 

 

3,625

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

3,625

 

Stock-based compensation

 

 

12,092

 

 

 

—

 

 

 

7,497

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

7,497

 

Other comprehensive income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,498

 

 

 

—

 

 

 

—

 

 

 

1,498

 

Cumulative effect of change in accounting

   principle - leases, net of tax

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

610

 

 

 

—

 

 

 

610

 

BALANCE, September 30, 2020

 

 

28,130,312

 

 

$

28

 

 

$

280,436

 

 

$

829

 

 

$

277,699

 

 

$

(103,595

)

 

$

455,397

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

154,979

 

 

 

—

 

 

 

154,979

 

Purchase of treasury stock

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(23,769

)

 

 

(23,769

)

Shares issued pursuant to employee stock

   purchase plan

 

 

121,984

 

 

 

—

 

 

 

1,578

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,578

 

Shares issued upon vesting of equity awards,

   net of minimum tax withholding

 

 

254,521

 

 

 

1

 

 

 

(3,910

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(3,909

)

Shares issued upon exercise of stock options

 

 

77,079

 

 

 

—

 

 

 

1,048

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,048

 

Stock-based compensation

 

 

4,967

 

 

 

—

 

 

 

9,749

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

9,749

 

Other comprehensive income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(181

)

 

 

—

 

 

 

—

 

 

 

(181

)

BALANCE, September 30, 2021

 

 

28,588,863

 

 

$

29

 

 

$

288,901

 

 

$

648

 

 

$

432,678

 

 

$

(127,364

)

 

$

594,892

 

 

See accompanying notes to consolidated financial statements.

 

F-7

 

MARINEMAX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands) 

 

 

 

For the Year Ended September 30,

 

 

 

2019

 

 

2020

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

35,985

 

 

$

74,634

 

 

$

154,979

 

Adjustments to reconcile net income to net cash (used in) provided by

   operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

11,597

 

 

 

12,772

 

 

 

15,606

 

Deferred income tax provision

 

 

4,384

 

 

 

3,157

 

 

 

4,759

 

Loss on sale of property and equipment

 

 

956

 

 

 

366

 

 

 

—

 

Proceeds from insurance settlements

 

 

475

 

 

 

703

 

 

 

941

 

Stock-based compensation expense

 

 

6,524

 

 

 

7,497

 

 

 

9,749

 

(Increase) decrease in, net of effects of acquisitions —

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

(5,071

)

 

 

2,584

 

 

 

(627

)

Inventories, net

 

 

(84,330

)

 

 

179,466

 

 

 

139,833

 

Prepaid expenses and other assets

 

 

(3,182

)

 

 

101

 

 

 

(1,862

)

(Decrease) increase in, net of effects of acquisitions —

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

 

8,701

 

 

 

2,887

 

 

 

(16,128

)

Contract liabilities (customer deposits)

 

 

6,804

 

 

 

7,411

 

 

 

60,960

 

Accrued expenses and other liabilities

 

 

4,731

 

 

 

13,097

 

 

 

5,671

 

Net cash (used in) provided by operating activities

 

 

(12,426

)

 

 

304,675

 

 

 

373,881

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(17,061

)

 

 

(12,807

)

 

 

(26,125

)

Proceeds from insurance settlements

 

 

461

 

 

 

—

 

 

 

1,099

 

Cash used in acquisition of businesses, net of cash acquired

 

 

(40,713

)

 

 

(19,766

)

 

 

(134,205

)

Purchases of investments

 

 

—

 

 

 

—

 

 

 

(2,250

)

Proceeds from sale of property and equipment

 

 

979

 

 

 

2,464

 

 

 

350

 

Net cash used in investing activities

 

 

(56,334

)

 

 

(30,109

)

 

 

(161,131

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

Net borrowings (payments) on short-term borrowings

 

 

85,580

 

 

 

(167,672

)

 

 

(162,655

)

Proceeds from long-term debt

 

 

—

 

 

 

7,437

 

 

 

46,375

 

Payments for long-term debt

 

 

—

 

 

 

(41

)

 

 

(2,404

)

Payments for debt issuance costs

 

 

—

 

 

 

—

 

 

 

(1,081

)

Net proceeds from issuance of common stock under incentive

   compensation, and employee purchase plans

 

 

2,412

 

 

 

4,629

 

 

 

2,626

 

Contingent acquisition consideration payments

 

 

(129

)

 

 

(148

)

 

 

(2,640

)

Payments on tax withholdings for equity awards

 

 

(1,525

)

 

 

(1,703

)

 

 

(2,196

)

Purchase of treasury stock

 

 

(27,708

)

 

 

(631

)

 

 

(23,769

)

Net cash provided by (used in) financing activities

 

 

58,630

 

 

 

(158,129

)

 

 

(145,744

)

Effect of exchange rate changes on cash

 

 

(181

)

 

 

545

 

 

 

(307

)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS:

 

 

(10,311

)

 

 

116,982

 

 

 

66,699

 

CASH AND CASH EQUIVALENTS, beginning of year

 

 

48,822

 

 

 

38,511

 

 

 

155,493

 

CASH AND CASH EQUIVALENTS, end of year

 

$

38,511

 

 

$

155,493

 

 

$

222,192

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for:

 

 

 

 

 

 

 

 

 

 

 

 

Interest

 

$

13,669

 

 

$

13,082

 

 

$

4,452

 

Income taxes

 

 

9,152

 

 

 

18,930

 

 

 

53,356

 

Non-cash items:

 

 

 

 

 

 

 

 

 

 

 

 

Initial operating lease right-of-use assets for adoption of ASU 2016-02

 

 

—

 

 

 

42,070

 

 

 

—

 

Initial current and noncurrent operating lease liabilities for adoption of

   ASU 2016-02

 

 

—

 

 

 

43,953

 

 

 

—

 

Accrued tax withholdings upon vesting of equity awards

 

 

1,198

 

 

 

1,153

 

 

 

2,866

 

Contingent consideration liabilities from acquisitions

 

 

640

 

 

 

2,270

 

 

 

10,640

 

Accrued acquisition of property and equipment

 

 

995

 

 

 

491

 

 

 

—

 

See accompanying notes to consolidated financial statements

 

F-8

 

MARINEMAX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

1.  COMPANY BACKGROUND AND BASIS OF PRESENTATION:

We believe we are the largest recreational boat and yacht retailer and superyacht services company in the world. We engage primarily in the retail sale, brokerage, and service of new and used boats, motors, trailers, marine parts and accessories and offer slip and storage accommodations in certain locations. In addition, we arrange related boat financing, insurance, and extended service contracts. We also offer the charter of power yachts in the British Virgin Islands. As of September 30, 2021, we operated through 77 retail locations in 21 states, consisting of Alabama, California, Connecticut, Florida, Georgia, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma, Rhode Island, South Carolina, Texas, Washington, and Wisconsin. Our MarineMax Vacations operation maintains a facility in Tortola, British Virgin Islands. We also own Fraser Yachts Group and Northrop & Johnson, leading superyacht brokerage and luxury yacht services companies with operations in multiple countries. Cruisers Yachts, a wholly-owned MarineMax subsidiary, manufactures sport yacht and yachts with sales through our select retail dealership locations and through independent dealers.

We are the largest retailer of Sea Ray and Boston Whaler recreational boats which are manufactured by Brunswick Corporation (“Brunswick”). Sales of new Brunswick boats accounted for approximately 27% of our revenue in fiscal 2021. Sales of new Sea Ray and Boston Whaler boats, both divisions of Brunswick, accounted for approximately 11% and 13%, respectively, of our revenue in fiscal 2021. Brunswick is a world leading manufacturer of marine products and marine engines.

We have dealership agreements with Sea Ray, Boston Whaler, Harris, and Mercury Marine, all subsidiaries or divisions of Brunswick. We also have dealer agreements with Italy-based Azimut-Benetti Group’s product line for Azimut and Benetti yachts and mega yachts. These agreements allow us to purchase, stock, sell, and service these manufacturers’ boats and products. These agreements also allow us to use these manufacturers’ names, trade symbols, and intellectual properties in our operations. The agreements for Sea Ray and Boston Whaler products, respectively, appoint us as the exclusive dealer of Sea Ray and Boston Whaler boats, respectively, in our geographic markets. In addition, we are the exclusive dealer for Azimut Yachts for the entire United States. Sales of new Azimut yachts accounted for approximately 10% of our revenue in fiscal 2021. We believe non-Brunswick brands offer a migration for our existing customer base or fill a void in our product offerings, and accordingly, do not compete with the business generated from our other prominent brands.

From March 2020 through June 2020, we temporarily closed certain departments or locations based on guidance from local government or health officials as a result of the COVID-19 pandemic. We are following guidelines to ensure we are safely operating as recommended. As the COVID-19 pandemic is complex and evolving rapidly with many unknowns, the Company will continue to monitor ongoing developments and respond accordingly. Management expects its business, across all of its geographies, will be impacted to some degree, but the significance of the impact of the COVID-19 pandemic on the Company’s business and the duration for which it may have an impact cannot be determined at this time.

As is typical in the industry, we deal with most of our manufacturers, other than Sea Ray, Boston Whaler, and Azimut Yachts, under renewable annual dealer agreements, each of which gives us the right to sell various makes and models of boats within a given geographic region. Any change or termination of these agreements, or the agreements discussed above, for any reason, or changes in competitive, regulatory or marketing practices, including rebate or incentive programs, could adversely affect our results of operations. Although there are a limited number of manufacturers of the type of boats and products that we sell, we believe that adequate alternative sources would be available to replace any manufacturer other than Sea Ray, Boston Whaler, and Azimut as a product source. These alternative sources may not be available at the time of any interruption, and alternative products may not be available at comparable terms, which could affect operating results adversely.

General economic conditions and consumer spending patterns can negatively impact our operating results. Unfavorable local, regional, national, or global economic developments or uncertainties regarding future economic prospects could reduce consumer spending in the markets we serve and adversely affect our business. Economic conditions in areas in which we operate dealerships, particularly Florida in which we generated approximately 54%, 54% and 50% of our revenue during fiscal 2019, 2020, and 2021, respectively, can have a major impact on our operations. Local influences, such as corporate downsizing, military base closings, inclement weather such as Hurricane Sandy in 2012 or Hurricanes Harvey and Irma in 2017, environmental conditions, and specific events, such as the BP oil spill in the Gulf of Mexico in 2010, also could adversely affect, and in certain instances have adversely affected, our operations in certain markets.

In an economic downturn, consumer discretionary spending levels generally decline, at times resulting in disproportionately large reductions in the sale of luxury goods. Consumer spending on luxury goods also may decline as a result of lower consumer confidence levels, even if prevailing economic conditions are favorable. As a result, an economic downturn would likely impact us more than certain of our competitors due to our strategic focus on a higher end of our market. Although we have expanded our operations during periods of stagnant or modestly declining industry trends, the cyclical nature of the recreational boating industry or the lack of industry growth may adversely affect our business, financial condition, and results of operations. Any period of adverse economic conditions or low consumer confidence is likely to have a negative effect on our business.

F-9

MARINEMAX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Historically, in periods of lower consumer spending and depressed economic conditions, we have, among other things, substantially reduced our acquisition program, delayed new store openings, reduced our inventory purchases, engaged in inventory reduction efforts, closed a number of our retail locations, reduced our headcount, and amended and replaced our credit facility. Acquisitions remain an important strategy for us, and, subject to a number of conditions, including macro-economic conditions and finding attractive acquisition targets, we plan to continue to explore opportunities through this strategy.

In order to provide comparability between periods presented, certain amounts have been reclassified from the previously reported consolidated financial statements to conform to the consolidated financial statement presentation of the current period.

 

 

2.  SIGNIFICANT ACCOUNTING POLICIES:

Cash and Cash Equivalents

We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Vendor Consideration Received

We classify interest assistance received from manufacturers as a reduction of inventory cost and related cost of sales. Amounts received by us under our co-op assistance programs from our manufacturers are netted against related advertising expenses. Our consideration received from our vendors contains uncertainties because the calculation requires management to make assumptions and to apply judgment regarding a number of factors, including our ability to collect amounts due from vendors and the ability to meet certain criteria stipulated by our vendors. We do not believe there is a reasonable likelihood that there will be a change in the future estimates or assumptions we use to calculate our vendor considerations which would result in a material effect on our operating results.

Inventories

Inventories are stated at the lower of cost or net realizable value. The cost of inventories purchased from our vendors consist of the amount paid to acquire the inventory, net of vendor consideration and purchase discounts, the cost of equipment added, reconditioning costs, and transportation costs relating to acquiring inventory for sale. Trade-in used boats are initially recorded at fair value and adjusted for reconditioning and other costs. The cost of inventories that are manufactured by the Company consist of material, labor, and manufacturing overhead. Unallocated overhead and abnormal costs are expensed as incurred. New and used boats, motors, and trailers inventories are accounted for on a specific identification basis. Raw materials and parts, accessories, and other inventories are accounted for on an average cost basis. We utilize our historical experience, the aging of the inventories, and our consideration of current market trends as the basis for determining a lower of cost or net realizable value. We do not believe there is a reasonable likelihood that there will be a change in the future estimates or assumptions we use to calculate our valuation allowance which would result in a material effect on our operating results. As of September 30, 2020 and 2021, our valuation allowance for new and used boat, motor and trailer inventories was $2.4 million and $0.4 million, respectively. If events occur and market conditions change, causing the fair value to fall below carrying value, the valuation allowance could increase.

Property and Equipment

We record property and equipment at cost, net of accumulated depreciation, and depreciate property and equipment over their estimated useful lives using the straight-line method. We capitalize and amortize leasehold improvements over the lesser of the life of the lease or the estimated useful life of the asset. Useful lives for purposes of computing depreciation are as follows:

 

 

 

Years

Buildings and improvements

 

5-40

Machinery and equipment

 

3-10

Furniture and fixtures

 

5-10

Vehicles

 

3-5

 

We remove the cost of property and equipment sold or retired and the related accumulated depreciation from the accounts at the time of disposition and include any resulting gain or loss in the accompanying Consolidated Statements of Operations. We charge maintenance, repairs, and minor replacements to operations as incurred, and we capitalize and amortize major replacements and improvements over their useful lives.

F-10

MARINEMAX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Goodwill

We account for acquisitions in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, “Business Combinations” (“ASC 805”), and goodwill in accordance with ASC 350, “Intangibles — Goodwill and Other” (“ASC 350”). For business combinations, the excess of the purchase price over the estimated fair value of net assets acquired in a business combination is recorded as goodwill. In accordance with ASC 350, we test goodwill for impairment at least annually and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Our annual impairment test is performed during the third fiscal quarter. If the carrying amount of a reporting unit’s goodwill exceeds its fair value we recognize an impairment loss in accordance with ASC 350. Based upon our most recent analysis, we determined through our qualitative assessment that it is not “more likely than not” that the fair values of our reporting units are less than their carrying values. As a result, we were not required to perform a quantitative goodwill impairment test.

Impairment of Long-Lived Assets

FASB ASC 360-10-40, “Property, Plant, and Equipment — Impairment or Disposal of Long-Lived Assets” (“ASC 360-10-40”), requires that long-lived assets, such as property and equipment and purchased intangibles subject to amortization, be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the asset (or asset group) is measured by comparison of its carrying amount to undiscounted future net cash flows the asset (or asset group) is expected to generate over the remaining life of the asset (or asset group). If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset (or asset group) exceeds its fair market value. Estimates of expected future cash flows represent our best estimate based on currently available information and reasonable and supportable assumptions. Our impairment loss calculations contain uncertainties because they require us to make assumptions and to apply judgment in order to estimate expected future cash flows. Any impairment recognized in accordance with ASC 360-10-40 is permanent and may not be restored. Based upon our most recent analysis, we believe no impairment of long-lived assets existed as of September 30, 2021.

Insurance

We retain varying levels of risk relating to the insurance policies we maintain, most significantly, workers’ compensation insurance and employee medical benefits. We are responsible for the claims and losses incurred under these programs, limited by per occurrence deductibles and paid claims or losses up to pre-determined maximum exposure limits. Our third-party insurance carriers pay any losses above the pre-determined exposure limits. We estimate our liability for incurred but not reported losses using our historical loss experience, our judgment, and industry information.

Revenue Recognition

The majority of our revenue is from contracts with customers for the sale of boats, motors, and trailers. We recognize revenue from boat, motor, and trailer sales upon transfer of control of the boat, motor, or trailer to the customer, which is generally upon acceptance of the boat, motor, and trailer by the customer and the satisfaction of our performance obligations. The transaction price is determined with the customer at the time of sale. Customers may trade in a used boat to apply toward the purchase of a new or used boat. The trade-in is a type of noncash consideration measured at fair value, based on external and internal observable and unobservable market data and applied as payment to the contract price for the purchased boat. At the time of acceptance, the customer is able to direct the use of, and obtain substantially all of the benefits of the boat, motor, or trailer. We recognize commissions earned from a brokerage sale when the related brokerage transaction closes upon transfer of control of the boat, motor, or trailer to the customer, which is generally upon acceptance by the customer.

We do not directly finance our customers’ boat, motor, or trailer purchases. In many cases, we assist with third-party financing for boat, motor, and trailer sales. We recognize commissions earned by us for placing notes with financial institutions in connection with customer boat financing when we recognize the related boat sales. Pursuant to negotiated agreements with financial institutions, we are charged back for a portion of these fees should the customer terminate or default on the related finance contract before it is outstanding for a stipulated minimum period of time. We base the chargeback allowance, which was not material to the consolidated financial statements taken as a whole as of September 30, 2020 and 2021, on our experience with repayments or defaults on the related finance contracts. We recognize variable consideration from commissions earned on extended warranty service contracts sold on behalf of third-party insurance companies at generally the later of customer acceptance of the service contract terms as evidenced by contract execution or recognition of the related boat sale. We also recognize variable consideration from marketing fees earned on insurance products sold by third-party insurance companies at the later of customer acceptance of the insurance product as evidenced by contract execution or when the related boat sale is recognized.

F-11

MARINEMAX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

We recognize revenue from parts and service operations (boat maintenance and repairs) over time as services are performed. Each boat maintenance and repair service is a single performance obligation that includes both the parts and labor associated with the service. Payment for boat maintenance and repairs is typically due upon the completion of the service, which is generally completed within a short period of time from contract inception. We satisfy our performance obligations, transfer control, and recognize revenue over time for parts and service operations because we are creating a contract asset with no alternative use and we have an enforceable right to payment for performance completed to date. Contract assets primarily relate to our right to consideration for work in process not yet billed at the reporting date associated with maintenance and repair services. We use an input method to recognize revenue and measure progress based on labor hours expended to satisfy the performance obligation at average labor rates. We have determined labor hours expended to be the relevant measure of work performed to complete the maintenance and repair service for the customer. As a practical expedient, because repair and maintenance service contracts have an original duration of one year or less, we do not consider the time value of money, and we do not disclose estimated revenue expected to be recognized in the future for performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period or when we expect to recognize such revenue. Contract assets, recorded in prepaid expenses and other current assets, totaled approximately $2.6 million and $5.7 million as of September 30, 2020 and September 30, 2021, respectively.

We recognize revenue from the sale of our manufactured yachts when control of the yacht is transferred to the dealer, which is generally upon acceptance by the dealer. At the time of acceptance, the dealer is able to direct the use of, and obtain substantially all of the benefits of the yacht. We have elected to record shipping and handling activities that occur after the dealer has obtained control of the yacht as a fulfillment activity.

Contract liabilities primarily consist of customer deposits. We recognize contract liabilities (customer deposits) as revenue at the time of acceptance and the transfer of control to the customers. Total contract liabilities of approximately $24.3 million recorded as of September 30, 2019 were recognized in revenue during the fiscal year ended September 30, 2020. Total contract liabilities of approximately $31.8 million recorded as of September 30, 2020 were recognized in revenue during the fiscal year ended September 30, 2021.

We recognize deferred revenue from service operations and slip and storage services over time on a straight-line basis over the term of the contract as our performance obligations are met. We recognize income from the rentals of chartering power yachts over time on a straight-line basis over the term of the contract as our performance obligations are met.

The following table sets forth percentages on the timing of revenue recognition by reportable segment for the fiscal years ended September 30,

 

Retail Operations

 

 

Product Manufacturing

 

 

2019

 

 

2020

 

 

2021

 

 

2019

 

 

2020

 

 

2021

 

Goods and services transferred at a point in time

 

90.8

%

 

 

92.7

%

 

 

91.6

%

 

 

—

 

 

 

—

 

 

 

100.0

%

Goods and services transferred over time

 

9.2

%

 

 

7.3

%

 

 

8.4

%

 

 

—

 

 

 

—

 

 

 

—

 

Revenue

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

—

 

 

 

—

 

 

 

100.0

%

The following tables set forth our revenue disaggregated into categories that depict the nature, amount, timing, and uncertainty of revenue and cash flows affected by economic factors for the fiscal years ended September 30,

 

 

 

2021

 

 

 

Retail Operations

 

 

Product Manufacturing

 

 

Total

 

New boat sales

 

 

70.3

%

 

 

100.0

%

 

 

70.5

%

Used boat sales

 

 

11.0

%

 

 

—

 

 

 

10.9

%

Maintenance, repair, storage, and charter services

 

 

7.1

%

 

 

—

 

 

 

7.1

%

Finance and insurance products

 

 

2.7

%

 

 

—

 

 

 

2.7

%

Parts and accessories

 

 

3.2

%

 

 

—

 

 

 

3.2

%

Brokerage sales

 

 

5.7

%

 

 

—

 

 

 

5.6

%

Revenue

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

F-12

MARINEMAX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

 

2020

 

 

 

Retail Operations

 

 

Product Manufacturing

 

 

Total

 

New boat sales

 

 

70.2

%

 

 

—

 

 

 

70.2

%

Used boat sales

 

 

15.1

%

 

 

—

 

 

 

15.1

%

Maintenance, repair, storage, and charter services

 

 

6.4

%

 

 

—

 

 

 

6.4

%

Finance and insurance products

 

 

2.7

%

 

 

—

 

 

 

2.7

%

Parts and accessories

 

 

3.0

%

 

 

—

 

 

 

3.0

%

Brokerage sales

 

 

2.6

%

 

 

—

 

 

 

2.6

%

Revenue

 

 

100.0

%

 

 

—

 

 

 

100.0

%

 

 

 

 

2019

 

 

 

Retail Operations

 

 

Product Manufacturing

 

 

Total

 

New boat sales

 

 

70.1

%

 

 

—

 

 

 

70.1

%

Used boat sales

 

 

14.9

%

 

 

—

 

 

 

14.9

%

Maintenance, repair, storage, and charter services

 

 

6.9

%

 

 

—

 

 

 

6.9

%

Finance and insurance products

 

 

2.6

%

 

 

—

 

 

 

2.6

%

Parts and accessories

 

 

3.6

%

 

 

—

 

 

 

3.6

%

Brokerage sales

 

 

1.9

%

 

 

—

 

 

 

1.9

%

Revenue

 

 

100.0

%

 

 

—

 

 

 

100.0

%

 

 

Stock-Based Compensation

We account for our stock-based compensation plans following the provisions of FASB ASC 718, “Compensation — Stock Compensation” (“ASC 718”). In accordance with ASC 718, we use the Black-Scholes valuation model for estimating the fair value of stock option grants and shares purchased under our Employee Stock Purchase Plan. We measure compensation for restricted stock awards and restricted stock units at fair value on the grant date based on the number of shares expected to vest and the quoted market price of our common stock on the grant date. We recognize compensation cost for all awards in operations, net of estimated forfeitures, on a straight-line basis over the requisite service period for each separately vesting portion of the award.

Foreign Currency Transactions

For the Company’s foreign subsidiaries that use a currency other than the U.S. dollar as their functional currency, the assets and liabilities are translated at exchange rates in effect at the balance sheet date, and revenues and expenses are translated at the weighted average exchange rate for the period. The effects of these translation adjustments are reported in accumulated other comprehensive income. Gains and losses arising from transactions denominated in a currency other than the functional currency of the entity involved are included in operating income. No amounts were reclassified out of accumulated other comprehensive income in fiscal 2021.

Advertising and Promotional Cost

We expense advertising and promotional costs as incurred and include them in selling, general and administrative expenses in the accompanying Consolidated Statements of Operations. We net amounts received by us under our co-op assistance programs from our manufacturers against the related advertising expenses. Total advertising and promotional expenses approximated $18.8 million, $14.0 million and $14.8 million, net of related co-op assistance, which was not material to the consolidated financial statements, for the fiscal years ended September 30, 2019, 2020, and 2021, respectively.

Income Taxes

We account for income taxes in accordance with FASB ASC 740, “Income Taxes” (“ASC 740”). Under ASC 740, we recognize deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which we expect those temporary differences to be recovered or

F-13

MARINEMAX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

settled. We record valuation allowances to reduce our deferred tax assets to the amount expected to be realized by considering all available positive and negative evidence.

Concentrations of Credit Risk

Financial instruments, which potentially subject us to concentrations of credit risk, consist principally of cash and cash equivalents and accounts receivable. Concentrations of credit risk with respect to our cash and cash equivalents are limited primarily to amounts held with financial institutions. Concentrations of credit risk arising from our receivables are limited primarily to amounts due from manufacturers and financial institutions.

Use of Estimates and Assumptions

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates made by us in the accompanying consolidated financial statements include valuation allowances, valuation of goodwill and intangible assets, valuation of long-lived assets, valuation of contingent consideration liabilities, and valuation of accruals. Actual results could differ materially from those estimates.

Segment Reporting

Effective May 2, 2021, our reportable segments changed as a result of the Company’s acquisition of Cruisers Yachts, which changed management’s reporting structure and operating activities. We now report our operations through two new reportable segments: Retail Operations and Product Manufacturing. The change in reportable segments had no impact on the Company’s previously reported historical consolidated financial statements. Where applicable, all prior periods presented have been revised to conform to the change in reportable segments. See Note 21.

 

 

3.  NEW ACCOUNTING PRONOUNCEMENTS:

Accounting for Leases

We adopted Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) effective October 1, 2019 the first day of fiscal 2020. We elected the package of practical expedients available under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification of our existing leases. Consequently, on adoption, we recognized additional operating lease liabilities of $44.0 million and right-of-use (“ROU”) assets of $42.1 million. The new standard also provides practical expedients for an entity’s ongoing accounting. We elected the short-term lease recognition exemption for all leases that qualify. As a result, for those leases that qualify, we will not recognize ROU assets or lease liabilities, and we did not recognize ROU assets or lease liabilities for existing short-term leases of those assets in transition. We also elected the practical expedient to not separate lease and non-lease components. We recognized a net after-tax cumulative effect adjustment to retained earnings of $0.6 million as of the date of adoption. See Note 8 for additional information on our leases.

Other New Pronouncements

In August 2018, the FASB issued ASU 2018-15, “Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract” (“ASU 2018-15”), which aligns the accounting for implementation costs incurred in a cloud computing arrangement that is a service contract with the guidance on capitalizing costs associated with developing or obtaining internal-use software. The guidance amends ASC 350 to include in its scope implementation costs of a cloud computing arrangement that is a service contract and clarifies that a customer should apply ASC 350 to determine which implementation costs should be capitalized in such a cloud computing arrangement. This guidance is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019. We adopted ASU 2018-05 effective October 1, 2020 the first day of fiscal 2021. The adoption of this standard had no impact on our consolidated financial statements.

F-14

MARINEMAX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 requires entities to report “expected” credit losses on financial instruments and other commitments to extend credit rather than the current “incurred loss” model. These expected credit losses for financial assets held at the reporting date are to be based on historical experience, current conditions, and reasonable and supportable forecasts. This ASU will also require enhanced disclosures relating to significant estimates and judgments used in estimating credit losses, as well as the credit quality. This guidance is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019. We adopted ASU 2016-13 effective October 1, 2020 the first day of fiscal 2021. The adoption of this standard had no impact on our consolidated financial statements.

 

 

4.  FAIR VALUE MEASUREMENTS:

The Company uses valuation approaches that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

Level 2 - Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 - Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

The following tables summarize the Company’s financial assets and liabilities measured at fair value in the accompanying Consolidated Balance Sheets as of September 30,

 

 

2021

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

(Amounts in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swap contract

 

$

—

 

 

$

150

 

 

$

—

 

 

$

150

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration liabilities

 

$

—

 

 

$

—

 

 

$

12,364

 

 

$

12,364

 

 

 

 

2020

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

(Amounts in thousands)

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration liabilities

 

$

—

 

 

$

—

 

 

$

2,960

 

 

$

2,960

 

 

There were no transfers between the valuation hierarchy Levels 1, 2, and 3 for the fiscal years ended September 30, 2020, and 2021.

The fair value of the Company’s interest rate swap contract is calculated as the present value of expected future cash flows, determined on the basis of forward interest rates and present value factors. The inputs to the fair value measurements reflect Level 2 inputs. The interest rate swap contract balance is included in other long-term assets in the accompanying Consolidated Balance Sheets. The interest rate swap contract is designated as a cash flow hedge with changes in fair value reported in other comprehensive income in the accompanying Consolidated Statements of Comprehensive Income.

We estimate the fair value of our contingent consideration liabilities using a probability-weighted discounted cash flow model. The contingent consideration liabilities are estimated based on forecasted pre-tax earnings as a base scenario (among other assumptions) subject to a Monte Carlo simulation. The fair value of the contingent consideration liabilities, which reflect Level 3 inputs, is reassessed on a quarterly basis. The contingent consideration liabilities balance is included in accrued expenses and other long-term liabilities in the accompanying Consolidated Balance Sheets. Changes in fair value and net present value of the contingent consideration liabilities are included in selling, general and administrative expenses in the accompanying Consolidated Statements of Operations.

F-15

MARINEMAX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

The following table sets forth the changes in fair value of our contingent consideration liabilities, which reflect Level 3 inputs, for the fiscal the years ended September 30, 2020 and 2021:

 

 

Contingent Consideration Liabilities

 

 

 

(Amounts in thousands)

 

Balance as of September 30, 2019

 

$

845

 

Additions from business acquisitions

 

 

2,270

 

Settlement of contingent consideration liabilities

 

 

(148

)

Change in fair value and net present value of contingency

 

 

(7

)

Balance as of September 30, 2020

 

$

2,960

 

Additions from business acquisitions

 

 

10,640

 

Settlement of contingent consideration liabilities

 

 

(3,000

)

Change in fair value and net present value of contingency

 

 

1,764

 

Balance as of September 30, 2021

 

$

12,364

 

 

We determined the carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, short-term borrowings, and the revolving mortgage facility approximate their fair values because of the nature of their terms and current market rates of these instruments. The fair value of our mortgage facilities, which are not carried at fair value in the accompanying Consolidated Balance Sheets, was determined using Level 2 inputs based on the discounted cash flow method. We estimate the fair value of our mortgage facilities using a present value technique based on current market interest rates for similar types of financial instruments that reflect Level 2 inputs. The following table summarizes the carrying value and fair value of our mortgage facilities as of September 30,

 

 

2020

 

 

2021

 

 

 

Fair Value

 

 

Carrying Value

 

 

Fair Value

 

 

Carrying Value

 

 

 

(Amounts in thousands)

 

Mortgage facility payable to Flagship Bank

 

$

7,396

 

 

$

7,396

 

 

$

6,872

 

 

$

6,899

 

Mortgage facility payable to Seacoast National Bank

 

 

—

 

 

 

—

 

 

 

17,529

 

 

 

17,675

 

Mortgage facility payable to Hancock Whitney Bank

 

 

—

 

 

 

—

 

 

 

27,089

 

 

 

27,106

 

 

 

 

5.  ACCOUNTS RECEIVABLE:

Trade receivables consist primarily of receivables from financial institutions, which provide funding for customer boat financing and amounts due from financial institutions earned from arranging financing with our customers. We normally collect these receivables within 30 days of the sale. Trade receivables also include amounts due from customers on the sale of boats, parts, service, and storage. Amounts due from manufacturers represent receivables for various manufacturer programs and parts and service work performed pursuant to the manufacturers’ warranties.

Accounts receivable are presented net of an allowance for expected credit losses. The allowance for expected credit losses, which was not material to the consolidated financial statements as of September 30, 2020 or 2021, was based on our consideration of past collection experience, current information, and reasonable and supportable forecasts.

Accounts receivable, net consisted of the following as of September 30,

 

 

 

2020

 

 

2021

 

 

 

(Amounts in thousands)

 

Trade receivables, net

 

$

31,289

 

 

$

38,953

 

Amounts due from manufacturers

 

 

7,575

 

 

 

7,344

 

Other receivables

 

 

1,331

 

 

 

1,354

 

Accounts receivable, net

 

$

40,195

 

 

$

47,651

 

 

 

F-16

MARINEMAX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

6.  INVENTORIES:

Inventories, net consisted of the following as of September 30,

 

 

 

2020

 

 

2021

 

 

 

(Amounts in thousands)

 

New and used boats, motors, and trailers

 

$

289,291

 

 

$

193,888

 

Parts, accessories, and other

 

 

8,711

 

 

 

13,779

 

Work-in-process

 

 

—

 

 

 

11,358

 

Raw materials

 

 

—

 

 

 

11,959

 

Inventories, net

 

$

298,002

 

 

$

230,984

 

 

 

 

7.  PROPERTY AND EQUIPMENT:

Property and equipment, net consisted of the following as of September 30,

 

 

 

2020

 

 

2021

 

 

 

(Amounts in thousands)

 

Land

 

$

55,549

 

 

$

57,330

 

Buildings and improvements

 

 

115,394

 

 

 

137,271

 

Machinery and equipment

 

 

39,416

 

 

 

54,510

 

Furniture and fixtures

 

 

5,233

 

 

 

5,897

 

Vehicles

 

 

12,612

 

 

 

18,269

 

Gross property and equipment

 

 

228,204

 

 

 

273,277

 

Less: accumulated depreciation and amortization

 

 

(86,270

)

 

 

(97,814

)

Property and equipment, net

 

$

141,934

 

 

$

175,463

 

 

Depreciation and amortization expense on property and equipment totaled approximately $11.6 million, $12.8 million, and $13.9 million, for the fiscal years ended September 30, 2019, 2020, and 2021, respectively.

 

 

 

8.  LEASES:

Substantially all of the leases that we enter into are real estate leases. We lease numerous facilities relating to our operations, including showrooms, display lots, marinas, service facilities, slips, offices, equipment and our corporate headquarters. Leases for real property have terms, including renewal options, ranging from one to in excess of twenty-five years. In addition, we lease certain charter boats for our yacht charter business. As of September 30, 2021, the weighted-average remaining lease term for our leases was approximately 12 years. All of our leases are classified as operating leases, which are included as ROU assets and operating lease liabilities in the accompanying Consolidated Balance Sheets. For the fiscal years ended September 30, 2019, 2020, and 2021, operating lease expenses recorded in selling, general, and administrative expenses were approximately $12.8 million, $13.9 million, and $24.1 million, of which approximately $0.4 million, $0.5 million, and $0.7 million, related to variable lease expenses, respectively. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We do not have any significant leases that have not yet commenced but that create significant rights and obligations for us. We have elected the practical expedient under ASC 842 to not separate lease and nonlease components.

Our real estate and equipment leases often require that we pay maintenance in addition to rent. Additionally, our real estate leases generally require payment of real estate taxes and insurance. Maintenance, real estate taxes, and insurance payments are generally variable and based on actual costs incurred by the lessor. Therefore, these amounts are not included in the consideration of the contract when determining the ROU asset and lease liability, but are reflected as variable lease expenses.

Substantially all of our lease agreements include fixed rental payments. Certain of our lease agreements include fixed rental payments that are adjusted periodically by a fixed rate or changes in an index. The fixed payments, including the effects of changes in the fixed rate or amount, and renewal options reasonably certain to be exercised, are included in the measurement of the related lease liability. Most of our real estate leases include one or more options to renew, with renewal terms that can extend the lease term from

F-17

MARINEMAX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

one to five years or more. The exercise of lease renewal options is at our sole discretion. If it is reasonably certain that we will exercise such options, the periods covered by such options are included in the lease term and are recognized as part of our right of use assets and lease liabilities. The depreciable life of assets and leasehold improvements are limited by the expected lease term, which includes renewal options reasonably certain to be exercised.

For our incremental borrowing rate, we generally use a portfolio approach to determine the discount rate for leases with similar characteristics. We determine discount rates based upon our hypothetical credit rating, taking into consideration our short-term borrowing rates, and then adjusting as necessary for the appropriate lease term. As of September 30, 2021, the weighted-average discount rate used was approximately 5.6%.

As of September 30, 2021, maturities of lease liabilities by fiscal year are summarized as follows:

 

 

 

(Amounts in thousands)

 

2022

 

$

16,080

 

2023

 

 

14,913

 

2024

 

 

12,714

 

2025

 

 

10,315

 

2026

 

 

9,947

 

Thereafter

 

 

88,190

 

Total lease payments

 

 

152,159

 

Less: interest

 

 

(44,633

)

Present value of lease liabilities

 

$

107,526

 

 

The following table sets forth supplemental cash flow information related to leases for the fiscal years ended September 30,

 

 

2019

 

 

2020

 

 

2021

 

 

(Amounts in thousands)

 

Cash paid for amounts included in the measurement of

   lease liabilities:

 

 

 

 

 

 

 

 

 

 

 

Operating cash flows from operating leases

$

—

 

 

$

10,209

 

 

$

16,917

 

Right-of-use assets obtained in exchange for lease

   obligations:

 

 

 

 

 

 

 

 

 

 

 

Operating leases

$

—

 

 

$

3,811

 

 

$

74,097

 

 

The Company reports the amortization of ROU assets and the change in operating lease liabilities on a net basis in accrued expenses and other liabilities in the accompanying Consolidated Statements of Cash Flows.

 

 

9.  GOODWILL, INTANGIBLE ASSETS, AND OTHER LONG-TERM ASSETS:

In July 2021 we purchased Nisswa Marine, Inc. a full-service dealer located in Nisswa, Minnesota. Goodwill and other intangible assets associated with the Nisswa Marine acquisition was approximately $15.3 million.

In May 2021, we purchased all of the outstanding equity of KCS International Holdings, Inc., and certain affiliates (“Cruisers Yachts”) for an aggregate purchase price of $62.7 million, subject to certain customary closing and post-closing adjustments, and net working capital adjustments including certain holdbacks. The former owners of Cruisers Yachts are subject to certain customary post-closing covenants and indemnities.

The following table summarizes the consideration paid for Cruisers Yachts and the allocation of the purchase consideration to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date.

F-18

MARINEMAX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

(Amounts in thousands)

 

Consideration:

 

 

 

 

Fair value of total consideration transferred

 

$

61,448

 

 

 

 

 

 

Recognized amounts of identifiable assets acquired and liabilities assumed:

 

 

 

 

Current assets, net of cash acquired of $5,993

 

$

29,869

 

Property and equipment

 

 

12,126

 

Intangible assets

 

 

4,602

 

Current liabilities

 

 

(25,283

)

Total identifiable net assets acquired:

 

 

21,314

 

Goodwill

 

$

40,134

 

Total

 

$

61,448

 

 

The fair value of current assets acquired includes accounts receivable and inventory of approximately $3.1 million and $26.2 million, respectively. The fair value of current liabilities assumed includes short-term borrowings of approximately $11.7 million, accrued expenses of approximately $10.3 million, and accounts payable of approximately $3.0 million. The intangible assets acquired include the trade name and customer relationships. The goodwill represents the assembled workforce, acquired capabilities, and future economic benefits resulting from the acquisition. The majority of the goodwill is expected to be deductible for tax purposes. The customer relationships have a weighted average useful life of approximately 2.0 years. The tradename has an indefinite life. Our results for fiscal 2021 include results from Cruisers Yachts between May 2, 2021 and September 30, 2021. Refer to Note 21 for disclosure of the revenues and income from operations. We have not disclosed the pro forma effect of Cruisers Yachts’ financial information for fiscal 2020 and prior to acquisition on May 2, 2021, because it is not practical to obtain for comparative purposes and as such is not presented because Cruisers Yachts’ historical monthly internal accounting and reporting processes and practices would not provide complete information sufficient for the purposes of this pro forma disclosure.

In October 2020, we purchased all of the outstanding equity of Skipper Marine Holdings, Inc., and certain affiliates (“SkipperBud’s”) for an aggregate purchase price of $55.0 million, subject to certain customary closing and post-closing adjustments, and net working capital adjustments including certain holdbacks. In addition, the former equity owners of SkipperBud’s (“Skippers Sellers”), have the opportunity to earn additional consideration as part of an contingent consideration liability subject to the achievement of certain pre-tax earnings levels. The maximum amount of consideration that can be paid under the contingent consideration liability is approximately $9.3 million. The fair value of $8.2 million of the contingent consideration liability arrangement was estimated by a third party valuation expert by applying an income valuation approach. The contingent consideration liability was estimated based on forecasted pre-tax earnings as a base scenario (among other assumptions) subject to a Monte Carlo simulation. The Skippers Sellers are subject to certain customary post-closing covenants and indemnities. The acquisition of SkipperBud’s enhances our sales, brokerage, service and marina/storage presence in the Great Lakes region and West Coast of the Unites States.

The following table summarizes the consideration paid for SkipperBud’s and the allocation of the purchase consideration to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date.

 

 

(Amounts in thousands)

 

Consideration:

 

 

 

 

Cash purchase price and net working capital adjustments, net of cash acquired of $30,615

 

$

50,261

 

Contingent consideration liability

 

 

8,200

 

Fair value of total consideration transferred

 

$

58,461

 

 

 

 

 

 

Recognized amounts of identifiable assets acquired and liabilities assumed:

 

 

 

 

Current assets, net of cash acquired of $30,615

 

$

50,688

 

Property and equipment

 

 

4,859

 

Intangible assets

 

 

1,978

 

Current liabilities

 

 

(55,427

)

Total identifiable net assets acquired:

 

 

2,098

 

Goodwill

 

$

56,363

 

Total

 

$

58,461

 

F-19

MARINEMAX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

The fair value of current assets acquired includes accounts receivable and inventory of approximately $5.4 million and $42.3 million, respectively. The fair value of current liabilities assumed includes short-term borrowings of approximately $30.5 million, accrued expenses of approximately $14.6 million, and customer deposits of approximately $7.5 million. We recorded approximately $56.4 million in goodwill and approximately $2.0 million of other identifiable intangibles (trade name and customer relationships) in connection with the SkipperBud’s acquisition. The goodwill represents our enhanced geographic reach and brand infrastructure in the Great Lakes region and West Coast of the Unites States. The majority of the goodwill is expected to be deductible for tax purposes. The intangible assets have a weighted average useful life of approximately 3.3 years. For fiscal 2021, SkipperBud’s revenue was approximately $302.6 million and income before taxes was approximately $31.3 million. We have not disclosed the pro forma effect of SkipperBud’s financial information for fiscal 2020 because it is not practical to obtain for comparative purposes and as such is not presented because SkipperBud’s historical monthly internal accounting and reporting processes and practices would not provide complete information sufficient for the purposes of this pro forma disclosure.

In July 2020, we purchased Northrop & Johnson, a leading superyacht brokerage and services company. In March 2020, we purchased Boatyard, a digital platform with an expansive range of on-demand services to streamline the boating experience by qualified service providers from a smartphone.

Goodwill and other intangible assets increased, primarily due to acquisitions, by $20.2 million and $116.8 million, for the fiscal years ended September 30, 2020 and 2021, respectively. These acquisitions have resulted in the recording of goodwill for tax purposes of $16.8 million and $110.8 million, for the fiscal years ended September 30, 2020 and 2021, respectively. In total, current and previous acquisitions have resulted in the recording of $84.3 million and $201.1 million in goodwill and other intangible assets as of September 30, 2020 and 2021, respectively.

Effective May 2, 2021, our reportable segments changed as a result of the Company’s acquisition of Cruisers Yachts, which changed management’s reporting structure and operating activities. We now report our operations through two new reportable segments: Retail Operations and Product Manufacturing. As a result, the Company allocated goodwill to its reporting units within the Company’s two reportable segments.

The following table sets forth the changes in carrying amount of goodwill by reportable segment for the fiscal years ended September 30, 2020 and 2021:

 

 

Retail Operations

 

 

Product Manufacturing

 

 

Total

 

 

 

(Amounts in thousands)

 

Balance as of September 30, 2019

 

$

64,006

 

 

$

—

 

 

$

64,006

 

Goodwill acquired

 

 

19,614

 

 

 

—

 

 

 

19,614

 

Foreign currency translation

 

 

620

 

 

 

—

 

 

 

620

 

Balance as of September 30, 2020

 

$

84,240

 

 

$

—

 

 

$

84,240

 

Goodwill acquired

 

 

71,306

 

 

 

40,134

 

 

 

111,440

 

Foreign currency translation

 

 

(117

)

 

 

—

 

 

 

(117

)

Balance as of September 30, 2021

 

$

155,429

 

 

$

40,134

 

 

$

195,563

 

Other long-term assets as of September 30, 2020 and 2021 of $7.8 million and $8.8 million, respectively, are primarily long-term deposits and other long-term investments.

 

 

10.  ACCRUED EXPENSES:

Accrued expenses consisted of the following as of September 30,

 

 

 

2020

 

 

2021

 

 

 

(Amounts in thousands)

 

Payroll accruals

 

$

23,142

 

 

$

42,138

 

Customer and storage accruals

 

 

11,381

 

 

 

17,390

 

Sales and other taxes payable

 

 

5,829

 

 

 

8,462

 

Other accruals

 

 

11,264

 

 

 

18,604

 

Accrued expenses

 

$

51,616

 

 

$

86,594

 

F-20

MARINEMAX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

 

 

 

11.  SHORT-TERM BORROWINGS AND LONG-TERM DEBT:

Short-term Borrowings

In May 2020, we entered into a Loan and Security Agreement (the “Credit Facility”), with Wells Fargo Commercial Distribution Finance LLC, M&T Bank, Bank of the West, and Truist Bank. In July 2021, the Company amended its Credit Facility to increase the borrowing availability to $500.0 million, extend the term to expire by one year to July 2024, with two one-year options to renew, subject to lender approval, and modify certain provisions to provide additional liquidity to the Company. The Credit Facility provides the Company a line of credit with asset based borrowing availability of up to $500.0 million for working capital and inventory financing, with the amount permissible pursuant to a borrowing base formula. The Credit Facility expires in July 2024, subject to extension for two one-year periods, with lender approval.

The Credit Facility has certain financial covenants as specified in the agreement. The covenants include provisions that our leverage ratio must not exceed 2.75 to 1.0 and that our current ratio must be greater than 1.2 to 1.0. The interest rate for amounts outstanding under the Credit Facility is 345 basis points plus the greater of 75 basis points or the one-month LIBOR. There is an unused line fee of ten basis points on the unused portion of the Credit Facility. In October 2021, we amended the Credit Facility to allow for the transition of the benchmark interest rate used from LIBOR to the Secured Overnight Finance Rate (SOFR).

As of September 30, 2021, we were in compliance with all covenants under the Credit Facility.

New inventory borrowing eligibility will generally mature 1,080 days from the original invoice date. Used inventory borrowing eligibility will generally mature 361 days from the date we acquire the used inventory. The collateral for the Credit Facility is all of our personal property with certain limited exceptions. None of our real estate has been pledged for collateral for the Credit Facility.

As of September 30, 2021, our indebtedness associated with financing our inventory and working capital needs totaled approximately $24.1 million, and included unamortized debt issuance costs of approximately $0.2 million. As of September 30, 2020 and 2021, the interest rate on the outstanding short-term borrowings was approximately 4.20%. As of September 30, 2021, our additional available borrowings under our Credit Facility were approximately $79.0 million based upon the outstanding borrowing base availability.

As is common in our industry, we receive interest assistance directly from boat manufacturers, including Brunswick. The interest assistance programs vary by manufacturer, but generally include periods of free financing or reduced interest rate programs. The interest assistance may be paid directly to us or our lender depending on the arrangements the manufacturer has established. We classify interest assistance received from manufacturers as a reduction of inventory cost and related cost of sales.

The availability and costs of borrowed funds can adversely affect our ability to obtain adequate boat inventory and the holding costs of that inventory as well as the ability and willingness of our customers to finance boat purchases. However, we rely on our Credit Facility to purchase our inventory of boats. The aging of our inventory limits our borrowing capacity as defined curtailments reduce the allowable advance rate as our inventory ages. Our access to funds under our Credit Facility also depends upon the ability of our lenders to meet their funding commitments, particularly if they experience shortages of capital or experience excessive volumes of borrowing requests from others during a short period of time. Unfavorable economic conditions, weak consumer spending, turmoil in the credit markets, and lender difficulties, among other potential reasons, could interfere with our ability to utilize our Credit Facility to fund our operations. Any inability to utilize our Credit Facility could require us to seek other sources of funding to repay amounts outstanding under the credit agreements or replace or supplement our credit agreements, which may not be possible at all or under commercially reasonable terms.

Similarly, decreases in the availability of credit and increases in the cost of credit adversely affect the ability of our customers to purchase boats from us and thereby adversely affect our ability to sell our products and impact the profitability of our finance and insurance activities.

F-21

MARINEMAX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Long-term Debt

The below table summarizes the Company's long-term debt.

 

 

 

September 30, 2021

 

 

 

(Amounts in thousands)

 

Mortgage facility payable to Flagship Bank bearing interest at 2.25% (prime minus 100 basis points with a

   floor of 2.00%). Requires monthly principal and interest payments with a balloon payment of

   approximately $4.0 million due August 2027.

 

$

6,899

 

Mortgage facility payable to Seacoast National Bank bearing interest at 3.00% (greater of 3.00% or prime

   minus 62.5 basis points). Requires monthly interest payments for the first year and then monthly principal

   and interest payments with a balloon payment of approximately $6.0 million due September 2031.

 

 

17,675

 

Mortgage facility payable to Hancock Whitney Bank bearing interest at 2.63% (prime minus 62.5 basis

   points with a floor of 2.25%). Requires monthly principal and interest payments with a balloon

   payment of approximately $15.5 million due November 2027. 50% of the outstanding borrowings

   are hedged with an interest rate swap contract with a fixed rate of 3.20%.

 

 

27,106

 

Revolving mortgage facility with FineMark National Bank & Trust bearing interest at 3.00% (prime minus

   25 basis points with a floor of 3.00%). Facility matures in October 2027. Current available borrowings

   under the facility were approximately $26.1 million at September 30, 2021.

 

 

—

 

Total long-term debt

 

 

51,680

 

Less: current portion

 

 

(3,587

)

Less: unamortized portion of debt issuance costs

 

 

(595

)

Long-term debt, net current portion and unamortized debt issuance costs

 

$

47,498

 

 

As of September 30, 2020, we had approximately $7.4 million under the mortgage facility payable to Flagship Bank.

As of September 30, 2021, the aggregate maturities of long-term debt by fiscal year are summarized as follows:

 

 

 

(Amounts in thousands)

 

2022

 

$

3,587

 

2023

 

 

3,587

 

2024

 

 

3,587

 

2025

 

 

3,587

 

2026

 

 

3,587

 

Thereafter

 

 

33,745

 

Total long-term debt

 

$

51,680

 

 

 

12.  INCOME TAXES:

Income before income tax provision consisted of the following components for the fiscal years ended September 30,

 

 

 

2019

 

 

2020

 

 

2021

 

 

 

(Amounts in thousands)

 

Income before income tax provision:

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

46,986

 

 

$

94,854

 

 

$

202,643

 

Other

 

 

1,967

 

 

 

2,586

 

 

 

3,151

 

Total

 

$

48,953

 

 

$

97,440

 

 

$

205,794

 

F-22

MARINEMAX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

The components of our provision from income taxes consisted of the following for the fiscal years ended September 30,

 

 

 

2019

 

 

2020

 

 

2021

 

 

 

(Amounts in thousands)

 

Current provision:

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

7,933

 

 

$

17,654

 

 

$

38,028

 

Foreign

 

 

516

 

 

 

654

 

 

 

1,516

 

State

 

 

135

 

 

 

1,365

 

 

 

6,527

 

Total current provision

 

$

8,584

 

 

$

19,673

 

 

$

46,071

 

Deferred provision:

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

2,285

 

 

$

2,262

 

 

$

4,201

 

Foreign

 

 

—

 

 

 

—

 

 

 

—

 

State

 

 

2,099

 

 

 

871

 

 

 

543

 

Total deferred provision

 

 

4,384

 

 

 

3,133

 

 

 

4,744

 

Total income tax provision

 

$

12,968

 

 

$

22,806

 

 

$

50,815

 

 

Below is a reconciliation of the statutory federal income tax rate to our effective tax rate for the fiscal years ended September 30,

 

 

 

2019

 

 

2020

 

 

2021

 

Federal tax provision

 

 

21.0

%

 

 

21.0

%

 

 

21.0

%

State taxes, net of federal benefit

 

 

4.1

%

 

 

3.1

%

 

 

3.7

%

Stock-based compensation

 

 

—

 

 

 

(0.5

)%

 

 

(0.7

)%

Valuation allowance

 

 

(0.1

)%

 

 

(0.2

)%

 

 

—

 

Foreign rate differential

 

 

0.2

%

 

 

0.1

%

 

 

0.1

%

Other

 

 

1.3

%

 

 

(0.1

)%

 

 

0.6

%

Effective tax rate

 

 

26.5

%

 

 

23.4

%

 

 

24.7

%

 

Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax purposes. The tax effects of these temporary differences representing the components of deferred tax assets as of September 30,

 

 

 

2020

 

 

2021

 

 

 

(Amounts in thousands)

 

Deferred tax assets:

 

 

 

 

 

 

 

 

Inventories

 

$

808

 

 

$

771

 

Operating lease liabilities

 

 

9,926

 

 

 

25,924

 

Accrued expenses

 

 

640

 

 

 

1,225

 

Stock-based compensation

 

 

2,170

 

 

 

2,810

 

Tax loss carryforwards

 

 

810

 

 

 

667

 

Other

 

 

268

 

 

 

852

 

Total long-term deferred tax assets

 

$

14,622

 

 

$

32,249

 

Deferred tax liabilities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

(9,095

)

 

 

(16,226

)

Operating lease right-of-use assets

 

 

(10,036

)

 

 

(25,291

)

Total long-term deferred tax liabilities

 

$

(19,131

)

 

$

(41,517

)

Net deferred tax liabilities

 

$

(4,509

)

 

$

(9,268

)

 

Pursuant to ASC 740, we must consider all positive and negative evidence regarding the realization of deferred tax assets. ASC 740 provides four possible sources of taxable income to realize deferred tax assets: 1) taxable income in prior carryback years, 2) reversals of existing deferred tax liabilities, 3) tax planning strategies and 4) projected future taxable income. As of September 30, 2021, we have no available taxable income in prior carryback years, limited reversals of existing deferred tax liabilities or prudent and

F-23

MARINEMAX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

feasible tax planning strategies. Therefore, the recoverability of our deferred tax assets is dependent upon generating future taxable income.

As of September 30, 2017, we no longer had federal NOL carryforwards for federal income tax purposes. As of September 30, 2021, the Company has state NOL carryforwards of approximately $11.4 million for state income tax purposes, which resulted in a deferred tax asset of $0.7 million, and expire at various dates from 2029 through 2032.

Significant judgment is required in evaluating our uncertain tax positions. Although we believe our tax return positions are sustainable, we recognize tax benefits from uncertain tax positions in the consolidated financial statements only when it is more likely than not that the positions will not be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits and a consideration of the relevant taxing authority’s administrative practices and precedents. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate, as well as the related net interest and penalties.

We are subject to tax by federal, state, and foreign taxing authorities. Until the respective statutes of limitations expire, we are subject to income tax audits in the jurisdictions in which we operate. We are no longer subject to U.S. federal tax assessments for fiscal years prior to 2018, we are not subject to assessments prior to the 2015 fiscal year for the majority of the State jurisdictions and we are not subject to assessments prior to the 2016 calendar year for the majority of the foreign jurisdictions.

 

 

13.  SHAREHOLDERS’ EQUITY:

In March 2020, our Board of Directors approved a new share repurchase plan allowing the Company to repurchase up to 10 million shares of our common stock through March 2022. Under the plan, we may buy back common stock from time to time in the open market or in privately negotiated blocks, dependent upon various factors, including price and availability of the shares, and general market conditions. Through September 30, 2021 we had purchased an aggregate of 6,767,021 shares of common stock under the current and historical share repurchase plans for an aggregate purchase price of approximately $127.4 million. As of September 30, 2021, approximately 9.4 million shares remained available for future purchases under the share repurchase program.

 

 

14.  STOCK-BASED COMPENSATION:

We account for our stock-based compensation plans following the provisions of FASB ASC 718, “Compensation — Stock Compensation” (“ASC 718”). In accordance with ASC 718, we use the Black-Scholes valuation model for valuing all options granted (Note 16) and shares purchased under our Amended 2008 Employee Stock Purchase Plan (“Stock Purchase Plan”). We measure compensation for restricted stock awards and restricted stock units (Note 17) at fair value on the grant date based on the number of shares expected to vest and the quoted market price of our common stock. We recognize compensation cost for all awards in operations on a straight-line basis over the requisite service period for each separately vesting portion of the award.

Stock-based compensation expense recorded in selling, general, and administrative expenses was approximately $6.5 million, $7.5 million, and $9.7 million, for the fiscal years ended September 30, 2019, 2020, and 2021, respectively.

Cash received from option exercises under all share-based compensation arrangements for the fiscal years ended September 30, 2019, 2020 and 2021 was approximately $2.4 million, $4.6 million, and $2.6 million, respectively. We currently expect to satisfy share-based awards with registered shares available to be issued from the Stock Purchase Plan.

 

 

15. THE INCENTIVE STOCK PLANS:

In February 2020, our shareholders approved a proposal to amend the 2011 Stock-Based Compensation Plan (“2011 Plan”) to increase the 3,200,456 share threshold by 1,000,000 shares to 4,200,456 shares. In January 2011, our shareholders approved a proposal to authorize our 2011 Plan, which replaced our 2007 Incentive Compensation Plan (“2007 Plan”). Our 2011 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, stock units, bonus stock, dividend equivalents, other stock related awards, and performance awards (collectively “awards”), that may be settled in cash, stock, or other property. Our 2011 Plan is designed to attract, motivate, retain, and reward our executives, employees, officers, directors, and independent contractors by providing such persons with annual and long-term performance incentives to expend their maximum efforts in the creation of shareholder value. Subsequent to the February 2020 amendment described above, the total number of shares of our common stock that may be subject to awards under the 2011 Plan is equal to 4,000,000 shares, plus: (i) any shares available for issuance and not subject to an award under the 2007 Plan, which was 200,456 shares at the time of approval of the 2011 Plan; (ii) the number of shares with respect to which awards granted under the 2011 Plan and the 2007 Plan terminate without the issuance of the shares or where the

F-24

MARINEMAX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

shares are forfeited or repurchased; (iii) with respect to awards granted under the 2011 Plan and the 2007 Plan, the number of shares that are not issued as a result of the award being settled for cash or otherwise not issued in connection with the exercise or payment of the award; and (iv) the number of shares that are surrendered or withheld in payment of the exercise price of any award or any tax withholding requirements in connection with any award granted under the 2011 Plan or the 2007 Plan. The 2011 Plan terminates in February 2030, and awards may be granted at any time during the life of the 2011 Plan. The dates on which awards vest are determined by the Board of Directors or the Plan Administrator. The Board of Directors has appointed the Compensation Committee as the Plan Administrator. The exercise prices of options are determined by the Board of Directors or the Plan Administrator and are at least equal to the fair market value of shares of common stock on the date of grant. The term of options under the 2011 Plan may not exceed ten years. The options granted have varying vesting periods. To date, we have not settled or been under any obligation to settle any awards in cash.

The following table summarizes activity from our incentive stock plans from September 30, 2020 through September 30, 2021:

 

 

 

Shares

Available

for Grant

 

 

Options

Outstanding

 

 

Aggregate

Intrinsic

Value

(Amounts in thousands)

 

 

Weighted

Average

Exercise

Price

 

 

Weighted

Average

Remaining

Contractual

Life

 

Balance as of September 30, 2020

 

 

1,275,415

 

 

 

196,329

 

 

$

2,636

 

 

$

12.12

 

 

 

2.5

 

Options granted

 

 

(5,000

)

 

 

5,000

 

 

 

 

 

 

 

48.52

 

 

 

 

 

Options cancelled/forfeited/expired

 

 

10,000

 

 

 

(10,000

)

 

 

 

 

 

 

7.54

 

 

 

 

 

Options exercised

 

 

—

 

 

 

(76,079

)

 

 

 

 

 

 

13.68

 

 

 

 

 

Restricted stock awards granted

 

 

(344,616

)

 

 

—

 

 

 

 

 

 

 

—

 

 

 

 

 

Restricted stock awards forfeited

 

 

6,325

 

 

 

—

 

 

 

 

 

 

 

—

 

 

 

 

 

Additional shares of stock issued

 

 

(24,063

)

 

 

—

 

 

 

 

 

 

 

—

 

 

 

 

 

Balance as of September 30, 2021

 

 

918,061

 

 

 

115,250

 

 

$

4,085

 

 

$

13.08

 

 

 

1.9

 

Exercisable as of September 30, 2021

 

 

 

 

 

 

110,916

 

 

$

4,044

 

 

$

12.06

 

 

 

2.0

 

 

No options were granted during the fiscal years ended September 30, 2019, and 2020. The weighted-average grant date fair value of options granted during the fiscal year ended September 30, 2021 was $25.29. The total intrinsic value of options exercised during the fiscal years ended September 30, 2019, 2020 and 2021 was approximately $1.4 million, $3.8 million, and $1.8 million, respectively.

As of September 30, 2021, there was approximately $0.1 million of unrecognized compensation costs related to non-vested options that are expected to be recognized over a weighted average period of 2.0 years.

We used the Black-Scholes model to estimate the fair value of options granted. The expected term of options granted is estimated based on historical experience. Volatility is based on the historical volatility of our common stock. The risk-free rate for periods within the contractual term of the options is based on the U.S. Treasury yield curve in effect at the time of grant.

 

 

16.  EMPLOYEE STOCK PURCHASE PLAN:

In February 2019, our shareholders approved a proposal to amend our Stock Purchase Plan to increase the number of shares available under that plan by 500,000 shares. The Stock Purchase Plan as amended provides for up to 1,500,000 shares of common stock to be available for purchase by our regular employees who have completed at least one year of continuous service. In addition, there were 52,837 shares of common stock available under our 1998 Employee Stock Purchase Plan, which have been made available for issuance under our Stock Purchase Plan. The Stock Purchase Plan provides for implementation of annual offerings beginning on the first day of October in each of the years 2008 through 2027, with each offering terminating on September 30 of the following year. Each annual offering may be divided into two six-month offerings. For each offering, the purchase price per share will be the lower of: (i) 85% of the closing price of the common stock on the first day of the offering or (ii) 85% of the closing price of the common stock on the last day of the offering. The purchase price is paid through periodic payroll deductions not to exceed 10% of the participant’s earnings during each offering period. However, no participant may purchase more than $25,000 worth of common stock annually.

We used the Black-Scholes model to estimate the fair value of options granted to purchase shares issued pursuant to the Stock Purchase Plan. Volatility is based on the historical volatility of our common stock. The risk-free rate for periods within the contractual term of the options is based on the U.S. Treasury yield curve in effect at the time of grant.

F-25

MARINEMAX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

The following are the weighted-average assumptions used for the fiscal years ended September 30,

 

 

 

2019

 

 

2020

 

 

2021

 

Dividend yield

 

0.0%

 

 

0.0%

 

 

0.0%

 

Risk-free interest rate

 

2.4%

 

 

0.8%

 

 

0.1%

 

Volatility

 

48.3%

 

 

69.7%

 

 

69.6%

 

Expected life

 

Six months

 

 

Six months

 

 

Six months

 

 

As of September 30, 2021, we had issued 1,139,547 shares of common stock under our Stock Purchase Plan.

 

 

17.  RESTRICTED STOCK AWARDS:

We have granted non-vested (restricted) stock awards (“restricted stock”) and restricted stock units (“RSUs”) to employees, directors, and officers pursuant to the 2011 Plan and the 2007 Plan. The restricted stock awards and RSUs have varying vesting periods, but generally become fully vested between two and four years after the grant date, depending on the specific award, performance targets met for performance-based awards granted to officers, and vesting period for time-based awards. Officer performance-based awards are granted at the target amount of shares that may be earned and the actual amount of the award earned generally could range from 0% to 175% of the target number of shares based on the actual specified performance target met. We accounted for the restricted stock awards granted using the measurement and recognition provisions of ASC 718. Accordingly, the fair value of the restricted stock awards, including performance-based awards, is measured on the grant date and recognized in earnings over the requisite service period for each separately vesting portion of the award.

The following table summarizes restricted stock award activity from September 30, 2020 through September 30, 2021:

 

 

 

Shares/

Units

 

 

Weighted

Average

Grant Date

Fair Value

 

Non-vested balance as of September 30, 2020

 

 

902,631

 

 

$

18.08

 

Changes during the period:

 

 

 

 

 

 

 

 

Awards granted

 

 

344,616

 

 

$

30.54

 

Awards vested

 

 

(329,493

)

 

$

19.32

 

Awards forfeited

 

 

(6,325

)

 

$

19.82

 

Non-vested balance as of September 30, 2021

 

 

911,429

 

 

$

22.33

 

 

As of September 30, 2021, we had approximately $11.1 million of total unrecognized compensation cost, assuming applicable performance conditions are met, related to non-vested restricted stock awards. We expect to recognize that cost over a weighted-average period of 2.1 years.

 

 

18.  NET INCOME PER SHARE:

The following table presents shares used in the calculation of basic and diluted net income per share for the fiscal years ended September 30,

 

 

 

2019

 

 

2020

 

 

2021

 

Weighted average common shares outstanding used in

   calculating basic net income per share

 

 

22,294,114

 

 

 

21,547,665

 

 

 

22,010,130

 

Effect of dilutive options and non-vested restricted

   stock awards

 

 

587,033

 

 

 

577,673

 

 

 

849,368

 

Weighted average common and common equivalent

   shares used in calculating diluted net income per share

 

 

22,881,147

 

 

 

22,125,338

 

 

 

22,859,498

 

 

F-26

MARINEMAX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

For the fiscal years ended September 30, 2019, 2020, and 2021 there were 10,988, 9,650, and 1,619 weighted average shares of options outstanding, respectively, that were not included in the computation of diluted net income per share because the options’ exercise prices were greater than the average market price of our common stock, and therefore, their effect would be anti-dilutive.

 

 

19.  COMMITMENTS AND CONTINGENCIES:

We are party to various legal actions arising in the ordinary course of business. While it is not feasible to determine the actual outcome of these actions as of September 30, 2021, we believe that these matters should not have a material adverse effect on our consolidated financial condition, results of operations or cash flows.

During the fiscal years ended September 30, 2019, and 2020, we incurred costs associated with store closings and lease terminations of approximately $3.1 million and $1.7 million, respectively. During the fiscal year ended September 30, 2021, we incurred no costs associated with store closings and lease terminations. The store closing costs have been included in selling, general, and administrative expenses in the accompanying Consolidated Statements of Operations.

In connection with certain of our workers’ compensation insurance policies, we maintain standby letters of credit for our insurance carriers in the amount of $1.6 million relating primarily to retained risk on our workers compensation claims.

We are subject to federal and state environmental regulations, including rules relating to air and water pollution and the storage and disposal of gasoline, oil, other chemicals and waste. We believe that we are in compliance with such regulations.

 

 

20.  EMPLOYEE 401(k) PROFIT SHARING PLANS:

Employees are eligible to participate in our 401(k) Profit Sharing Plan (the “Plan”) following their 90-day introductory period starting either April 1 or October 1, provided that they are 21 years of age. Under the Plan, we matched 50% of participants’ contributions, up to a maximum of 5% of each participant’s compensation. We contributed, under the Plan, or pursuant to previous similar plans, approximately $2.3 million, $2.7 million, and $5.0 million for the fiscal years ended September 30, 2019, 2020 and 2021, respectively.

 

 

 

21.  SEGMENT INFORMATION:

Change in Reportable Segments

Effective May 2, 2021, our reportable segments changed as a result of the Company’s acquisition of Cruisers Yachts, which changed management’s reporting structure and operating activities. We now report our operations through two new reportable segments: Retail Operations and Product Manufacturing.

Reportable Segments

The Company’s segments are defined by management’s reporting structure and operating activities. Our chief operating decision maker (“CODM”) is our Chief Executive Officer. Our CODM reviews operational income statement information by segment for purposes of making operating decisions, assessing financial performance, and allocating resources. The CODM is not provided asset information by segment. The Company’s reportable segments are the following:

Retail Operations. As of September 30, 2021, the Retail Operations segment includes the sale of new and used recreational boats, including pleasure and fishing boats, with a focus on premium brands in each segment. We also sell related marine products, including engines, trailers, parts, and accessories. In addition, we provide repair, maintenance, and slip and storage services; we arrange related boat financing, insurance, and extended service contracts; we offer boat and yacht brokerage sales; yacht charter services. In the British Virgin Islands we offer the charter of catamarans, through MarineMax Vacations. Fraser Yachts Group and Northrop & Johnson, leading superyacht brokerage and luxury yacht services companies with operations in multiple countries, are also included in this segment. The Retail Operations segment includes the majority of all corporate costs.

Product Manufacturing. As of September 30, 2021, the Product Manufacturing segment includes activity of Cruisers Yachts, a wholly-owned MarineMax subsidiary, manufacturing sport yacht and yachts with sales through our select retail dealership locations and through independent dealers. Cruisers Yachts is recognized as one of the world’s premier manufacturers of premium sport yacht and yachts, producing models from 33’ to 60’ feet.

F-27

MARINEMAX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Intersegment revenue represents yachts that were manufactured in our Product Manufacturing segment and were sold to our Retail Operations segment. The Product Manufacturing segment supplies our Retail Operations segment along with various independent dealers.

The following table sets forth depreciation and amortization for each of the Company’s reportable segments for the fiscal years ended September 30,

 

 

 

2019

 

 

2020

 

 

2021

 

 

 

(Amounts in thousands)

 

Depreciation:

 

 

 

 

 

 

 

 

 

 

 

 

Retail Operations

 

$

11,583

 

 

$

12,756

 

 

$

13,821

 

Product Manufacturing

 

 

—

 

 

 

—

 

 

 

32

 

Depreciation

 

$

11,583

 

 

$

12,756

 

 

$

13,853

 

Amortization:

 

 

 

 

 

 

 

 

 

 

 

 

Retail Operations

 

$

14

 

 

$

16

 

 

$

1,429

 

Product Manufacturing

 

 

—

 

 

 

—

 

 

 

324

 

Amortization

 

$

14

 

 

$

16

 

 

$

1,753

 

 

The following table sets forth revenue and income from operations for each of the Company’s reportable segments for the fiscal years ended September 30,

 

 

 

2019

 

 

2020

 

 

2021

 

 

 

(Amounts in thousands)

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Retail Operations

 

$

1,237,153

 

 

$

1,509,713

 

 

$

2,043,613

 

Product Manufacturing

 

 

—

 

 

 

—

 

 

 

44,000

 

Elimination of intersegment revenue

 

 

—

 

 

 

—

 

 

 

(24,356

)

Revenue

 

$

1,237,153

 

 

$

1,509,713

 

 

$

2,063,257

 

Income from operations:

 

 

 

 

 

 

 

 

 

 

 

 

Retail Operations

 

$

60,532

 

 

$

106,715

 

 

$

207,034

 

Product Manufacturing

 

 

—

 

 

 

—

 

 

 

6,940

 

Elimination of intersegment income from operations

 

 

—

 

 

 

—

 

 

 

(4,515

)

Income from operations

 

$

60,532

 

 

$

106,715

 

 

$

209,459

 

 

 

F-28

 

EXHIBIT 4.2

DESCRIPTION OF THE COMPANY’S SECURITIES

REGISTERED PURSUANT TO SECTION 12 OF THE

SECURITIES EXCHANGE ACT OF 1934

 

The following is a brief description of the common stock, par value $0.001 per share (the “Common Stock”) of MarineMax, Inc. (the “Company”), which is the only security of the Company registered pursuant to Section 12 of the Securities Exchange Act of 1934.

Description of Common Stock

The following description of the Common Stock, related provisions of the Company’s Articles of Incorporation (the “Articles”) and Bylaws (the “Bylaws”) and applicable Florida law is qualified in its entirety by, and should be read in conjunction with, the Articles, the Bylaws, and applicable Florida law.

Authorized Capital Stock

The authorized capital stock of the Company consists of 40,000,000 shares of Common Stock and 1,000,000 shares of preferred stock, par value $0.001 per share (the “Preferred Stock”).  There are no shares of Preferred Stock currently outstanding.

Common Stock

Fully Paid and Nonassessable

All of the outstanding shares of the Company’s Common Stock are fully paid and non-assessable.

Voting Rights

Holders of Common Stock are entitled to one vote per share on all matters to be voted upon by the shareholders.  Holders of Common Stock are not entitled to cumulate votes for the election of directors.

Dividends

Subject to preferences that may be applicable to any outstanding Preferred Stock, the holders of Common Stock are entitled to receive such dividends, if any, as may be declared from time to time by the members of the board of directors of the Company (the “Board”) out of funds legally available therefor.

Right to Receive Distributions Upon Liquidation, Dissolution or Winding Up of the Company

In the event of the liquidation, dissolution or winding up of the Company, the holders of Common Stock are entitled to share ratably in all assets remaining after payment of liabilities,

 

 

subject to prior distribution rights of any Preferred Stock then outstanding.

No Preemptive or Similar Rights

The Common Stock has no preemptive or conversion rights or other subscription rights.  There are no redemption or sinking fund provisions applicable to the Common Stock.

Certain Anti-Takeover Effects

General

Provisions of the Company’s Articles and Bylaws are intended to enhance continuity and stability in our Board and in our policies, but may have the effect of delaying or preventing a change in control or making it more difficult to remove incumbent management, even if such transactions could be beneficial to the interests of shareholders.  A summary description of these provisions follows:

Classified Board

Pursuant to the Company’s Articles, the Company has a staggered Board.  The Company’s Articles provide that our Board is divided into three classes.  The term of our Class II directors expires at our 2021 annual meeting of shareholders, the term of our Class III directors expires at our 2022 annual meeting of shareholders, and the term of our Class I directors expires at our 2023 annual meeting of shareholders.  At each of our annual meetings of shareholders, the successors of the class of directors whose term expires at the meeting of shareholders will be elected for a three-year term, one class being elected each year by our shareholders. We believe that the three-year terms help to ensure the continuity and stability of our management and policies, which we believe are beneficial to shareholders.

Authority to Issue Preferred Stock

Our Board may issue, without shareholder approval, up to 1,000,000 shares of Preferred Stock, and fix the rights and preferences thereof, without a further vote of the shareholders, which may prevent a takeover. The purpose of authorizing the Board to issue preferred stock and determine its powers, rights, privileges and preferences is to eliminate delays associated with a shareholder vote on specific issuances. The issuance of preferred stock provides flexibility in connection with possible acquisitions and other corporate purposes.

 

Other Provisions of Our Articles and Bylaws

The Articles also provide that directors may only be removed for cause and upon the affirmative vote of 66 2/3% or more of the voting interest of shareholders entitled to vote.  The Articles also contain advance notice requirements by shareholders for director nominations and other actions to be taken at annual meetings. The Articles and Bylaws

 

 

also grant our Board, or the affirmative vote of at least 66 2/3% of the voting interest of shareholders, the power to adopt, amend or repeal the Bylaws.  The Articles also contain a higher vote threshold for affiliated and control-share acquisitions.  Subject to certain limitations stated in the Articles, the affirmative vote of not less than 66 2/3% of the voting shares, excluding those beneficially owned by a Related Person (as defined in the Articles) who is party to the Business Combination (as defined in the Articles), shall be required for the approval or authorization of any Business Combination. In addition, certain of our officers and managers have employment agreements containing certain provisions that call for substantial payments to be made to such employees in certain circumstances upon a change in control.

These provisions of the Articles and the Bylaws could discourage potential acquisition proposals and could delay or prevent a change in control of the Company.  These provisions are intended, however, to: (i) enhance the likelihood of continuity and stability in the composition of the Board and in the policies formulated by the Board and to discourage certain types of transactions that may involve an actual or threatened change of control of the Company that may negatively impact shareholder value; (ii) reduce the Company’s vulnerability to an unsolicited acquisition proposal and encourage persons seeking to acquire control of us to first negotiate with our Board; and (iii) discourage certain tactics that may be used in proxy fights.  However, such provisions could have the effect of discouraging others from making tender offers for our shares and, as a consequence, they also may inhibit fluctuations in the market price of our shares that could result from actual or rumored takeover attempts.  Such provisions also may have the effect of preventing changes in our management. We believe that the benefits of increased protection against an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging such proposals. Among other things, enhanced ability to negotiate such proposals could result in an improvement of their terms.

Transfer Agent

The transfer agent for the Common Stock is American Stock Transfer & Trust Company, LLC.

Listing

The Company’s Common Stock is listed on NYSE under the trading symbol “HZO.”

 

NOTE: PORTIONS OF THIS EXHIBIT INDICATED BY “[****]” HAVE BEEN OMITTED FROM THIS EXHIBIT AS THESE PORTIONS ARE NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM IF PUBLICLY DISCLOSED.  

Exhibit 10.7(a)

 

SEVENTH AMENDED AND RESTATED

PROGRAM TERMS LETTER

 

July 9, 2021

 

MarineMax, Inc.

MarineMax East, Inc.

MarineMax Services, Inc.

MarineMax Northeast LLC

Boating Gear Center, LLC

US Liquidators, LLC

Newcoast Financial Services, LLC

My Web Services, LLC

MarineMax Charter Services, LLC

[****]

Gulfport Marina, LLC

FWW, LLC

Fraser Yachts Florida, Inc.

Fraser Yachts California

BY Holdings, LLC

MarineMax KW, LLC

Northrop and Johnson Yachts-Ships LLC

Northrop & Johnson California, Inc.

Perfect Yacht Charter LLC

N & J Media LLC

Northrop & Johnson Holding LLC.

N & J Group, LLC

Private Insurance Services LLC

Skipper Marine, LLC

Skipper Bud’s of Illinois, LLC

Skipper Marine of Madison, LLC

Skipper Marine of Fox Valley, LLC

Skipper Marine of Chicago-Land, LLC

Skipper Marine of Michigan, LLC

Skipper Marine of Ohio, LLC

Silver Seas Yachts, LLC

Silver Seas California, Inc.

MarineMax Products, Inc.

KCS International, Inc.

Nisswa Marine, Inc.

 

2600 McCormick Drive

Clearwater, FL  33759

Attn: Mike McLamb

 

 

RE:  Wholesale Marine Products Finance Program

 

Dear Mike:

 

This Program Terms Letter outlines the terms of your marine financing program with Wells Fargo Commercial Distribution Finance, LLC (in its individual capacity, “CDF”) as Agent (CDF, in such capacity as agent, is herein referred to as “Agent”) for the several financial institutions that are parties to the Loan and Security Agreement (as defined below) or may from time to time become party thereto (collectively, the “Lenders” and individually each a “Lender”) and for itself as a Lender.  This program will apply to all outstanding invoices financed by any one or more Lenders pursuant to that certain Sixth Amended and Restated Program Terms Letter dated May 20, 2020, among CDF and Dealers (as amended from time to time, the “Existing PTL”) and to all invoices financed on or after the date hereof. This Program Terms Letter amends and restates the Existing PTL in its entirety.

 

This Program Terms Letter supplements that certain Amended and Restated Loan and Security Agreement, dated as of the date hereof, among Agent, Lenders and Dealers (the “Loan and Security Agreement”).  Capitalized terms used but not defined herein shall have the meanings assigned to them in the Loan and Security Agreement.

 

The following sets forth the terms of your financing program:

 

A. Rates and Terms

 

 

 

Effective Program Dates:

Applies to all outstanding invoices and advances financed by any one or more Lenders pursuant to the Existing PTL and all invoices financed by any one or more Lenders on or after the date hereof.    

 

Seventh Amended and Restated Program Terms Letter

 

 

 

 

Subsidy Period:

As determined by manufacturer program (if applicable).

 

 

Eligible Inventory Collateral:

All marine product inventory of the Dealers (other than spare parts), subject to the eligibility requirements set forth below.

 

 

Ineligible Inventory

Collateral:

The following inventory shall not be eligible for inclusion in the Borrowing Base:

 

Inventory which is subject to or encumbered by any Lien or security interest other than a Lien permitted pursuant to Section 6(a) of the Loan and Security Agreement

 

Inventory which is stored on a bailment, consignment, warehouse or similar third party arrangement, unless you comply with Agent’s documentation requirements with respect thereto and Agent otherwise agrees in writing

 

Offshore inventory

 

Inventory that has not cleared United Stated Customs

 

Inventory not located in a Permitted Location, subject to Section 6(b)(xiii) of the Loan and Security Agreement

 

Inventory held at a location leased by you if you have not delivered to Agent a landlord lien waiver or subordination in form acceptable to Agent. As an alternative, such inventory can be treated as eligible to the extent Agent has established a Rent Reserve with respect to such location.

 

Pre-owned inventory if low wholesale values cannot be determined via NADA, Yachtworld.com, survey, or other source acceptable to Agent, unless Agent and Dealers agree on a value

 

Inventory held by KCS International Inc. or MarineMax Products, Inc.

 

Inventory manufactured by or branded under KCS International Inc. that is greater than 72ft. in length.

 

 

Dealer Rate:

 

 

 

 

 

The effective dealer interest rate for any month (after the manufacturer subsidy period expires, if applicable) shall be LIBOR plus 3.45%.  

 

The Dealer Rate will be recalculated monthly based on changes in LIBOR.

 

Performance Rebate:

 

 

 

So long as Dealer remains in compliance with all the terms and conditions of the Loan and Security Agreement, this Program Terms Letter and all other agreements or instruments by and between Dealer, Agent and any one or more Lenders, beginning the date hereof through the calendar quarter ending June 30, 2021, and for each calendar quarter thereafter, Agent, on behalf of Lenders, will pay you a rebate to be paid quarterly in an amount equal to 1.25% of the average daily balance of outstanding Obligations owed to Lenders for the prior quarter (the “Performance Rebate”).  Such rebate will be subject to the following:

 

1. Such rebates will be paid within 30 days following the end of the applicable quarter.

 

2. The average daily balance of outstanding Obligations will be calculated as the sum of the daily balance of outstanding Obligations for each day in the applicable quarter divided by the number of days in the applicable quarter.

 

Seventh Amended and Restated Program Terms Letter

 

 

 

Unused Line Fee:

Dealer will be charged a monthly Unused Line Fee in an amount equal to 0.10% multiplied by the Unused Line, calculated based on the actual number of days in the calendar month in a year of 360 days.  Unused Line is the Maximum Aggregate Credit Amount, minus the average daily balance of outstanding Obligations owed to Agent and Lenders.  Billed monthly.

 

Maturity Period:

Invoices financed for new inventory by any one or more Lenders are considered due in full at 1080 days from original invoice date, except that invoices financed by any one or more Lenders related to all Azimut-Benetti S.p.A., Galeon, LLP., Alexander Marine Company, Ltd., and Sino Eagle Yacht Co., Ltd. are considered due in full at 1080 days from the original funding date.

 

Invoices financed for pre-owned (trade in or used) inventory by any one or more Lenders are considered due in full at 361 days from the date Dealer acquires such unit (“Acquisition Date”).

 

 

Advance Request:

Each advance shall be made pursuant to a completed written advance request in the form attached hereto as Exhibit A (together with all attachments required thereby, an “Advance Request Form”) or such other form as Agent and Dealers may agree.

 

 

 

Inventory Advance Rate:

Other than with respect to inventory manufactured by or branded under KCS International Inc., new inventory that is 72ft or less in length will be subject to the following advance rates applied to the original invoice amount beginning from the original invoice date (or, with respect to Azimut-Benetti S.p.A, Ocean Alexander, Galeon, and Aquila Inventory, from the original funding date):

 

0-180 days – 100%

181-360 days – 90%

361-540 days – 80%

541-720 days – 70%

721-900 days – 60%

901-1079 days – 50%

1080+ days – 0%

 

With respect to inventory manufactured by or branded under KCS International Inc., new inventory that is 72ft or less in length will be subject to the following advance rates applied to the original invoice amount beginning from the original invoice date:

 

0-180 days – 62%

181-360 days – 52%

361-540 days – 42%

541-720 days – 32%

721-900 days – 22%

901-1079 days – 12%

1080+ days – 0%

 

 

New inventory that is greater than 72ft in length (other than such inventory manufactured by or branded under KCS International Inc.)  will be subject to the following advance rates applied to the original invoice amount beginning from the original invoice date (or, with respect to Azimut-Benetti S.p.A, Ocean Alexander, Galeon, and Aquila Inventory, from the original funding date):

 

0-180 days – 80%

181-360 days – 70%

361-540 days – 60%

541-720 days – 50%

721-900 days – 40%

901-1079 days – 30%

1080+ days – 0%

 

Pre-owned (trade in or used) inventory will be subject to the following advance rates from the Acquisition Date on the acquisition cost:

 

0-180 days: 85%

181-360 days: 75%

361+ days: 0%

 

The Advance Rate with respect to pre-owned inventory may be subject to a Pre-Owned Inventory Reserve implemented from time to time in Agent’s discretion.  “Pre-Owned Inventory Reserve” is defined and calculated as the low wholesale value determined via NADA, Yachtworld.com, survey or other source acceptable to Agent minus the MarineMax Pre-owned Inventory Cost, divided by the low wholesale value determined via NADA, Yachtworld.com, survey or other source acceptable to Agent, as a percentage.  “MarineMax Pre-owned Inventory Cost” is defined as Dealer’s internal valuation for pre-owned inventory (as set forth on the monthly inventory certificate and Borrowing Base Certificate).

Seventh Amended and Restated Program Terms Letter

 

 

 

 

Total Eligible Inventory Sublimits:

 

 

Aggregate of all units with a valuation > $750,000$250,000,000

Aggregate of all units > 72 feet     $75,000,000

Inventory purchased from a Foreign OEM

(excluding Azimut and Galeon brands)$125,000,000

Pre-owned units  $75,000,000

 

 

 

 

B. General Terms

 

 

 

Audit/Inspection Fees:

 

Pre-closing and annual audit costs will be paid by Dealers.  Actual floorcheck expenses for inventory inspections will be paid by Agent, provided that if results of the inspections are not satisfactory to Agent, in its reasonable discretion, then additional inspection expenses will be paid by Dealers.

 

 

MSO’s/Titles:

All pre-owned titles and documentation must show all prior liens released.

 

 

Insurance Certificates:

On or before the date hereof, Dealer shall deliver to Agent certificates of insurance satisfying the requirements set forth in Section 6 of the Loan and Security Agreement.

 

 

Audit/Inspection Frequency:

6 x per year

 

All locations will be inspected annually at a minimum

 

During each inspection, Agent will inspect multiple locations wherein at least 45% of Total Eligible Inventory is located.  

 

MSO and Preowned Title audits to be conducted every 180 days and additional audits/inspections at any other time at Agent’s discretion. The audit/inspection schedule set forth in this section is approximate and Agent may audit on a different schedule at Agent’s discretion, without any requirement to modify this Program Terms Letter.

Seventh Amended and Restated Program Terms Letter

 

 

 

 

COMS Non-Usage Fee:

Dealers will be charged $1,000 in the aggregate per month for any month during which Dealers do not use the CDF COMS on-line payment system for Dealers’ primary method of payment to Agent.

 

 

Late Payment Fee:

Under the terms of your financing agreement with Agent and Lenders, you are to remit payment to Agent on behalf of Lenders immediately upon the earlier of (i) your receipt of the proceeds of any sale or other disposition of any unit of collateral financed by any one or more Lenders, and (ii) 7 calendar days after such sale or other disposition.  If it is discovered that a unit of collateral is sold or otherwise disposed of without payment remitted to Agent on behalf of Lenders (Sold out of Trust “SOT”), whether as the result of an inventory collateral inspection or otherwise, Agent may, in its sole discretion, charge you the following late payment fee on a monthly basis for each SOT item:

 

 

Day 1- 7 after the retail sale of the unit

 

On the 8th day after the retail sale of the unit

$0.00

 

.25% of the outstanding invoice amount per unit per month

 

 

NSF Fee:

You will be charged a fee of $25 for each check or other item that is returned unpaid.

 

Please note that the fees and charges referred to above such as the Late Payment Fee and NSF Fee are not intended to be Agent’s or any Lender’s sole remedies for those events, and if you fail to meet any of your obligations under your agreements with or Agent and/or any one or more Lenders, Agent and each Lender specifically reserves all other rights and remedies legally available to it.

 

Seventh Amended and Restated Program Terms Letter

 

 

 

 

Customer Online Management System (COMS):

Agent encourages use of COMS, our Internet payment/floorplan system.  Agent will assist you in the installation of the system and provide you with training, free of charge.  Internet payments are processed via an ACH transaction and at no cost to you.  You can view the system’s capabilities at https://sec2.cdfconnect.com/coms.

 

Application of Terms:  

•

The terms set forth in this Program Terms Letter shall apply only to loans by Lenders under the Loan and Security Agreement (defined above), and will not apply to any other Wells Fargo Commercial Distribution Finance, LLC platform or joint venture (i.e. RV, Suzuki, Polaris Acceptance, Brunswick Acceptance Company, LLC, etc.) or any loans with any Lender Affiliate.

 

Confidentiality Agreement:

The rates and terms set forth in this letter are for your benefit and shall be held in the strictest confidence by you; provided that you may disclose the terms hereof to the extent required by applicable laws or regulations if you provide Agent with prior written notice of such disclosure, work with Agent in good faith to redact any information herein requested by Agent, and provide Agent with an opportunity to seek a protective order with respect to such information.  Subject to the foregoing, you will take all reasonable precautions to assure the confidentiality of this information is not released to any third party.  

 

Please ACKNOWLEDGE YOUR ACCEPTANCE OF YOUR FINANCING TERMS AND RETURN TO AGENT.

 

tHANK YOU FOR THE OPPORTUNITY TO FINANCE YOUR INVENTORY NEEDS.

 

WELLS FARGO COMMERCIAL DISTRIBUTION FINANCE, LLC,

as Agent for Lenders

 

By: ______________________________________________

Name:

Title: Duly Authorized Signatory

 

[Note to MarineMax: Please fill in the signature box with the name and conformed signature of the signatory.]

Seventh Amended and Restated Program Terms Letter

 

 

ACCEPTED AS OF THE DATE FIRST ABOVE WRITTEN:

 

 

MARINEMAX, INC.,

a Florida corporation

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

 

MARINEMAX EAST, INC.,

a Delaware corporation

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

President, Secretary, Treasurer

 

 

MARINEMAX SERVICES, INC.,

a Delaware corporation

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

Vice President, Secretary, Treasurer


 

MARINEMAX NORTHEAST, LLC,

a Delaware limited liability company

By:  MARINEMAX EAST, INC.

the sole member of MarineMax Northeast, LLC

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

President, Secretary, Treasurer

 

 

BOATING GEAR CENTER, LLC,

a Delaware limited liability company

By:  MARINEMAX EAST, INC.,

the sole member of Boating Gear Center, LLC

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

President, Secretary, Treasurer

 

 

US LIQUIDATORS, LLC,

a Delaware limited liability company

By:  MARINEMAX, INC.

the sole member of US Liquidators, LLC

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

[Signature Page to Seventh Amended and Restated PTL]

 

 

 

MY WEB SERVICES, LLC,

a Delaware limited liability company

By:  MARINEMAX EAST, INC.,

the sole member of My Web Services, LLC

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

President, Secretary and Treasurer

 

 

 

MARINEMAX CHARTER SERVICES, LLC,

a Delaware limited liability company

By:  MARINEMAX EAST, INC.,

the sole member of MarineMax Charter Services, LLC

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

President, Secretary, Treasurer

 

 

NEWCOAST FINANCIAL SERVICES, LLC,

a Delaware limited liability company

By:  MARINEMAX EAST, INC.

the sole member of Newcoast Financial Services, LLC

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

President, Secretary, Treasurer

 

 

 

[****]

a Florida limited liability company

By:  MY WEB SERVICES, LLC,

the sole member of [****]

By:  MARINEMAX EAST, INC.,

the sole member of My Web Services, LLC

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

President, Secretary and Treasurer

 

 

 

GULFPORT MARINA, LLC,

a Delaware limited liability company

By:  MARINEMAX EAST, INC.,

the sole member of Gulfport Marina, LLC

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

President, Secretary and Treasurer

 

 

[Signature Page to Seventh Amended and Restated PTL]

 

 

 

FWW, LLC,

a Florida limited liability company

By:  MARINEMAX EAST, INC.

the sole member of FWW, LLC

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

President, Secretary, Treasurer

 

 

 

FRASER YACHTS FLORIDA, INC.,

a Florida corporation

By:

/s/ Jeanne Bruss

Print Name:

Jeanne Bruss

Title:

Secretary

 

 

 

FRASER YACHTS CALIFORNIA

a California corporation

By:

/s/ Jeanne Bruss

Print Name:

Jeanne Bruss

Title:

Secretary

 

 

 

MARINEMAX KW, LLC,

a Florida limited liability company

By:  MARINEMAX, INC.

the sole member of MarineMax KW, LLC

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

BY HOLDINGS, LLC,

a Florida limited liability company

By:  MARINEMAX, INC.

the sole member of BY Holdings, LLC

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

 

 

 

 

 

 

 

 

 

 

NORTHROP & JOHNSON YACHTS-SHIPS LLC,

a Florida limited liability company

By:  FRASER YACHTS FLORIDA, INC.

the sole member of Northrop & Johnson Yachts-Ships LLC

[Signature Page to Seventh Amended and Restated PTL]

 

 

By:

/s/ Jeanne Bruss

Print Name:

Jeanne Bruss

Title:

Secretary

 

 

NORTHROP & JOHNSON CALIFORNIA INC.,

a California corporation

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

President, Secretary, Chief Financial Officer

 

 

PERFECT YACHT CHARTER, LLC,

a Delaware limited liability company

By:  MARINEMAX , INC.

the sole member of Perfect Yacht Charter, LLC

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

 

N & J MEDIA, LLC,

a Florida limited liability company

By:  MARINEMAX , INC.

the sole member of N & J Media, LLC

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

 

NORTHROP & JOHNSON HOLDING LLC,

a Florida limited liability company

By:  MARINEMAX , INC.

the sole member of Northrop & Johnson Holding LLC

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

 

 

 

 

 

 

 

 

N & J GROUP, LLC,

a Florida limited liability company

By:  NORTHROP & JOHNSON HOLDING LLC.

the sole member of N & J Group, LLC

By:  MARINEMAX, INC.

the sole member of Northrop & Johnson Holding LLC

[Signature Page to Seventh Amended and Restated PTL]

 

 

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

 

PRIVATE INSURANCE SERVICES, LLC,

a Florida limited liability company

By:  MARINEMAX , INC.

the sole member of Private Insurance Services, LLC

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

 

SKIPPER MARINE, LLC,

a Wisconsin limited liability company

By:  MARINEMAX , INC.

the sole member of Skipper Marine, LLC

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

 

SKIPPER BUD’S OF ILLINOIS,LLC.,

An Illinois corporation

By:  MARINEMAX , INC.

the sole member of Skipper Bud’s of Illinois, LLC

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

 

SKIPPER MARINE OF MADISON, LLC,

a Wisconsin limited liability company

By:  MARINEMAX , INC.

the sole member of Skipper Marine of Madison, LLC

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

 

 

 

 

 

SKIPPER MARINE OF FOX VALLEY, LLC,

a Wisconsin limited liability company

By:  MARINEMAX , INC.

the sole member of Skipper Marine of Fox Valley, LLC

[Signature Page to Seventh Amended and Restated PTL]

 

 

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

 

SKIPPER MARINE OF CHICAGO-LAND, LLC,

An Illinois limited liability company

By:  MARINEMAX , INC.

the sole member of Skipper Marine of Chicago-Land, LLC

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

Executive Vice President, Chief Financial Officer, Secretary

SKIPPER MARINE OF MICHIGAN, LLC,

a Michigan limited liability company

By:  MARINEMAX , INC.

the sole member of Skipper Marine of Michigan, LLC

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

 

SKIPPER MARINE OF OHIO, LLC,

An Ohio limited liability company

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

Director, and as such, collectively with the other Director, Manager

By:

/s/ W. Brett McGill

Print Name:

W. Brett McGill

Title:

Director, and as such, collectively with the other Director, Manager

 

 

SILVER SEAS YACHTS, LLC,

An Arizona limited liability company

By:  MARINEMAX , INC.

the sole member of Silver Seas Yachts, LLC

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

 

 

 

 

SILVER SEAS CALIFORNIA, INC.,

a Florida corporation

[Signature Page to Seventh Amended and Restated PTL]

 

 

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

President, Secretary, Treasurer

 

 

MARINEMAX PRODUCTS, INC.,

a Florida corporation

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

President, Secretary, Treasurer

 

 

KCS INTERNATIONAL INC.,

A Wisconsin corporation

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

President, Secretary, Treasurer

 

 

NISSWA MARINE, INC.,

A Minnesota corporation

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

President, Secretary, Treasurer

 

 

[Signature Page to Seventh Amended and Restated PTL]

 

 

 

 

 

Exhibit A

Advance Request Form

 

Wells Fargo Commercial Distribution Finance, LLC

10 S. Wacker Dr., 20th Floor

Chicago, IL 60606

 

Re:

Loan and Security Agreement, dated May 20, 2020, among MarineMax, Inc. (“Dealer Agent”), the other Dealers party thereto (collectively, together with Dealer Agent, “Dealers”) Wells Fargo Commercial Distribution Finance, LLC (in its individual capacity, “CDF”) as Agent (CDF, in such capacity as agent, is herein referred to as “Agent”) for the several financial institutions that are parties thereto or that may from time to time become party to thereto  (collectively, the “Lenders” and individually each a “Lender”) and for itself as a Lender, and such Lenders, as amended, modified, restated or replaced from time to time (the “Agreement”)

Ladies and Gentlemen:

The undersigned is agent for Dealers under the Agreement and as such is authorized to make and deliver this advance request (this “Request”) on behalf of Dealers pursuant to Section 1 of the Agreement.  All capitalized terms used, but not defined, herein have the meanings provided in the Agreement.

Dealers hereby request that Lenders make an advance on ________________, 20____ of $______________________ to Dealers under the terms of the Agreement.

The undersigned hereby represents, warrants and certifies that, as of the date hereof,

(a)each representation and warranty made to Agent and Lenders by or on behalf of any Dealer is true and correct as of the date hereof, except to the extent that such representation or warranty expressly relates to an earlier date, in which event such representation or warranty was true and correct as of such earlier date;

 

(b)neither a Default nor any event which with the giving of notice, the passage of time or both would result in a Default has occurred and is continuing or would reasonably be expected to result after giving effect to the advance requested hereby [except _______ ______________________];

 

(c)after giving effect to the advance requested hereby, the aggregate outstanding amount of the Obligations will not exceed the lesser of (i) the Maximum Aggregate Credit Amount minus the outstanding amount of Approvals and (ii) the Borrowing Base minus the outstanding amount of Approvals and any Reserves;

 

(d)The terms and conditions of the Agreement apply to this Request.

Executed this ____ day of _______________, _____.

MarineMax, Inc.,

a Florida corporation

 

By:

Its:

Typed Name:

 

 

NOTE: PORTIONS OF THIS EXHIBIT INDICATED BY “[****]” HAVE BEEN OMITTED FROM THIS EXHIBIT AS THESE PORTIONS ARE NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM IF PUBLICLY DISCLOSED.  

Exhibit 10.7c

 

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

This Amended and Restated Loan and Security Agreement (as from time to time amended, restated, amended and restated, supplemented or otherwise modified from time to time and together with any Transaction Statements, as hereinafter defined, this “Agreement”) is entered into as of July 9, 2021, by and between the persons listed in the section of this Agreement entitled “List of Dealers” (each, individually, a “Dealer” and, collectively, “Dealers”), Wells Fargo Commercial Distribution Finance, LLC (in its individual capacity, “CDF”) as Agent (CDF, in such capacity as agent, is herein referred to as “Agent”) for the several financial institutions that are parties to this Agreement or may from time to time become party to this Agreement (collectively, the “Lenders” and individually each a “Lender”) and for itself as a Lender, and such Lenders.

 

RECITALS

 

(a)Dealers do business together or are related entities.

 

(b)Dealers, Agent and Lenders are currently parties to that certain Loan and Security Agreement dated as of May 20, 2020 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Existing Financing Agreement”).  

 

(c)Dealers have requested that Agent and Lenders agree to certain revisions to the credit facility under the Existing Financing Agreement and Agent and Lenders are willing to do so upon the terms and conditions set forth in this Agreement.  

 

(d)This Agreement amends and restates the Existing Financing Agreement in its entirety.   Any references in this Agreement or any other Loan Document (as defined below) to the Existing Financing Agreement shall be deemed to be references to this Agreement.

 

1.Definitions. Capitalized terms not otherwise defined in this Agreement shall have the following meanings:

“AAA” has the meaning set forth in Section 30(b) of this Agreement.

“Account Debtor” shall mean each Person who is or who may become obligated to any Dealer under, with respect to, or on account of an Account or other Collateral.

“Accounts” shall mean collectively any and all accounts (as such term is defined in the UCC) of each Dealer and each and every right of said Dealer, whether such right now exists or hereafter arises, to (i) the payment of money or (ii) the receipt or disbursement of products, goods, services or other valuable consideration, in each case arising out of (a) a sale, lease or other disposition of Inventory, (b) a rendering of services, or (c) a policy of insurance issued or to be issued covering such Inventory, together with all other rights and interests (including all liens and security interests) which said Dealer may at any time have by law or agreement against any Account Debtor or other Person obligated to make any such payment or against any property of such Account Debtor or other Person.

“Acquired Assets” has the meaning set forth in Section 6(d)(iv) of this Agreement.

“Acquired Person” has the meaning set forth in Section 6(d)(iv) of this Agreement.

“Advance Date” has the meaning set forth in Section 2(a)(iv) of this Agreement.

“Advance Rate” with respect to Eligible Inventory Collateral is determined for each category of inventory as set forth in the section entitled “Inventory Advance Rate” in the Program Terms Letter.

“Affiliate” means any Person that (i) directly or indirectly controls, is controlled by or is under common control of any other Person, (ii) directly or indirectly owns 25% or more of any other Person, (iii) is a director, partner, manager, or officer of any other Person or an affiliate of any other Person, or (iv) any natural person related to any such Person or an affiliate of such Person.

“Agent” has the meaning set forth in the Preamble of this Agreement.

1

 

 

 

“Agent Companies” has the meaning set forth in Section 30(a) of this Agreement.

“Agent-Related Persons” means Agent, together with its Affiliates, officers, directors, employees, attorneys, and agents.

“Agent Report” has the meaning set forth in Section 21(e)(iii) of this Agreement.

“Aggregate Excess Funding Amount” of a Non-Funding Lender shall be the aggregate amount of all unpaid obligations owing by such Lender to Agent and other Lenders under the Loan Documents, including such Lender’s Ratable Share of Loans.

“Agreement” has the meaning set forth in the Preamble of this Agreement.

“Allocation” means, with respect to each Lender, the amount set forth opposite such Lender’s name on Exhibit D hereto, under the heading “Allocation”, as such amount may be reduced or increased from time to time in accordance with this Agreement.

“Approval” means Agent’s indication to a Vendor that the Lenders will provide financing to Dealers with respect to a particular invoice or invoices for which CDF has not financed an Invoice for the inventory subject thereto.

“Approval Date” has the meaning set forth in Section 2(a)(iv) of this Agreement.

“Assignment” means an assignment agreement entered into by a Lender, as assignor, and any Person, as assignee, pursuant to the terms and provisions of Section 20 (with the consent of any party whose consent is required by Section 20), accepted by Agent.

“Automatic Default” has the meaning set forth in Section 12(h) of this Agreement.

“Availability” means

(i)the lesser of (a) the Borrowing Base and (b) the Maximum Aggregate Credit Amount minus the outstanding amount of Approvals, minus

(ii)the aggregate outstanding principal amount of Obligations, minus

(iii)the amount of any Reserves.

“Borrowing Base” means the sum of the following:

(i)the applicable Advance Rate multiplied by the invoice amount of the applicable Eligible Inventory Collateral, subject to the following;

(a) if the Fixed Charge Coverage ratio is equal to or greater than 1.2x and TTM EBITDA is equal to or greater than twenty five million dollars ($25,000,000.00), in each case as shown on the most recent Trigger Compliance Certificate delivered pursuant to Section 8(i) hereof, 100% of the applicable Advance Rate multiplied by the invoice amount of the applicable Eligible Inventory Collateral shown on the most recent inventory certificate (“Total Eligible Inventory”), or

(b) if the Fixed Charge Coverage ratio is less than 1.2x or TTM EBITDA is less than twenty five million dollars ($25,000,000.00), in each case as shown on the most recent Trigger Compliance Certificate delivered pursuant to Section 8(i) hereof, 100% of the applicable Advance Rate multiplied by the invoice amount of the applicable Total Eligible Inventory shown on the most recent inventory certificate, less the lesser of (x) twenty million dollars ($20,000,000.00) or (y) 10% of Total Eligible Inventory shown on such inventory certificate (such lesser amount, the “Collateral Block”) ((a) or (b), as applicable, the “Net Eligible Inventory Amount”),

2

 

 

 

plus

(ii)80% of the net amount of Eligible Accounts; plus

(iii)50% of the invoice amount of Eligible Parts.

“Borrowing Base Certificate” means a complete certificate, executed by an officer of Dealer Representative in the form set forth on Exhibit G indicating the Borrowing Base and the calculations used to determine such amounts.

“Business Day” means any day the Federal Reserve Bank of Chicago is open for the transaction of business.

“Capital Expenditures” means with respect to any Person, all expenditures (by the expenditure of cash or the incurrence of Debt) by such Person during any measuring period for any fixed assets or improvements or for replacements, substitutions or additions thereto that have a useful life of more than one year and that are required to be capitalized under GAAP, but excluding from such calculation expenditures made with the cash proceeds received by Dealer from any insurance claim payable by reason of theft, loss, physical damage or similar event with respect to any of Dealer’s respective property or assets.

“CDF” has the meaning set forth in the Preamble of this Agreement.

“Charges” has the meaning set forth in Section 10(a) of this Agreement.

“Closing Date” means the date of this Agreement.

“Closing Date Guaranty Agreement” means that certain Guaranty executed by KCS RE and Wave Aviation in favor of Agent for the benefit of Lenders as of the date hereof.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Collateral” means all personal property of each Dealer, whether such property or such Dealer’s right, title or interest therein or thereto is now owned or existing or hereafter acquired or arising, and wherever located, including without limitation, all Accounts, Inventory, Equipment, other Goods, General Intangibles (including without limitation, Payment Intangibles), Chattel Paper (whether tangible or electronic), Instruments (including without limitation, Promissory Notes), Deposit Accounts, Investment Property and Documents, any cash collateral such Dealer may have paid to Agent, and all Products and Proceeds of the foregoing; provided that “Collateral” shall exclude (a) all Fixtures (other than Goods affixed to Inventory) and (b) all equipment leases and agreements between Dealers and vendors, but only to the extent such leases and agreements prohibit or restrict such Dealers from granting a security interest therein and such prohibition or restriction is not ineffective under Article 9 of the Illinois Uniform Commercial Code or any other applicable law, rule or regulation; provided, further, that “Collateral” shall include (x) all Accounts and General Intangibles arising under such equipment leases and agreements between Dealers and vendors and (y) all payments and other property received or receivable in connection with any sale or other disposition of such leases and agreements.  Without limiting the foregoing, the Collateral includes each Dealer’s right to all Vendor Credits.  Similarly, the Collateral includes, without limitation, all books and records, electronic or otherwise, which evidence or otherwise relate to any of the foregoing property, and all computers, disks, tapes, media and other devices in which such records are stored.  For purposes of this definition only, capitalized terms used in this definition, which are not otherwise defined, shall have the meanings given to them in Article 9 of the Illinois Uniform Commercial Code.

“Collateral Block” has the meaning set forth in the definition of Borrowing Base.

“Collections” mean all monies that Agent receives from a Dealer or other sources (other than Lenders) on account of the Obligations.

“Contingent Liabilities” means any obligation, contingent or otherwise, of any Dealer guaranteeing or having the economic effect of guaranteeing any Debt or obligation of another in any manner, whether directly or indirectly, including without limitation any obligation of such Dealer, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or any security for the payment thereof, (b) to purchase property or services for the purpose of assuring the owner of such Debt of its payment, or (c) to maintain the solvency, working capital, equity, cash flow, fixed charge or other coverage ratio, or any other financial condition of the primary obligor so as to enable the primary obligor to pay any Debt or to comply with any agreement relating to any Debt or obligation.

3

 

 

 

“Current Ratio” means the ratio, calculated for Dealers on a consolidated basis and in accordance with GAAP, of (a) current assets determined in accordance with GAAP to (b) current liabilities determined in accordance with GAAP less balloon payments due on real estate loans which Agent in its reasonable discretion expects to be refinanced. For the avoidance of doubt, all outstanding Obligations shall be deemed current liabilities regardless of their treatment under GAAP.

“Daily Interest” means, with respect to a Lender, for each calendar day of each calendar month, the product of: (a) the outstanding principal amount of Outstandings that are actually funded by Lender pursuant to this Agreement, multiplied by (b) the applicable interest rate set forth in Section 2(a)(vi) of this Agreement.

“Dealer Affiliate” means any Affiliate of a Dealer.

“Dealer Materials” has the meaning set forth in Section 33 of this Agreement.

“Dealer Representative” has the meaning set forth in Section 31(b) of this Agreement.

“Dealers” has the meaning set forth in the Preamble of this Agreement.

“Debt” means all obligations, contingent or otherwise of Dealers which, in accordance with GAAP, should be classified on the balance sheet as liabilities, and in any event including capital leases, Contingent Liabilities that are required to be disclosed and quantified in notes to financial statements in accordance with GAAP, and liabilities secured by any Lien on any property regardless of whether such secured liability is with or without recourse.

“Default” has the meaning set forth in Section 12 of this Agreement.

“Default Notice” means written notice from a Dealer received by Agent’s account manager for Dealer or any officer of Agent, specifically advising Agent of the existence of a Default.

“Default Rate” means the lesser of 3% per annum above the rate in effect immediately prior to the Default or the highest lawful contract rate of interest permitted under applicable law.

“Disputes” has the meaning set forth in Section 30(a) of this Agreement.

“Disqualified Person” has the meaning set forth in Section 20(b) of this Agreement.

“Eligible Accounts” has the meaning set forth in Section 2(e) of this Agreement.

“Eligible Inventory Collateral” means all marine product inventory of the Dealers (other than (i) spare parts, (ii) inventory held by KCS, and (iii) inventory held by MarineMax Products, Inc.) that is eligible for inclusion in the Borrowing Base pursuant to the requirements of this Agreement and the Program Terms Letter.

“Eligible Parts” means spare parts inventory of the Dealers that (a) is new, (b) is not subject to or encumbered by any Lien or security interest other than a Lien permitted pursuant to Section 6(a), and (c) has been held in inventory for no more than 12 months.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time

“ERISA Affiliate” shall mean any trade or business (whether or not incorporated) under common control with any Dealer within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code) or Section 4001 of ERISA.

“ERISA Event” shall mean (a) any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived, with respect to a pension plan; (b) a withdrawal by any Dealer or any ERISA Affiliate from a pension plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by any Dealer or any ERISA Affiliate from a multi-employer plan or notification that a multi-employer plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the Pension Benefit Guaranty Corporation to terminate a pension plan or multi-

4

 

 

 

employer plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any pension plan or multi-employer plan; or (f) the imposition of any liability under Title IV of ERISA, other than for Pension Benefit Guaranty Corporation premiums due but not delinquent under Section 4007 of ERISA, upon any Dealer or any ERISA Affiliate.

“Erroneous Payment” has the meaning set forth in Section 3(c) of this Agreement.

“Erroneous Payment Deficiency Assignment” has the meaning set forth in Section 3(c) of this Agreement.  

“Erroneous Payment Return Deficiency” has the meaning set forth in Section 3(c) of this Agreement.

“Existing Financing Agreement” has the meaning set forth in the Recitals of this Agreement.

“FAA” has the meaning set forth in Section 30(f) of this Agreement.

“FCPA” means the United States Foreign Corrupt Practices Act of 1977.

“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that if such rate is not so published for any day which is a Business Day, the Federal Funds Rate for such day shall be the average of the quotation for such day on such transactions received by Wells Fargo Bank, National Association from three federal funds brokers of recognized standing selected by Wells Fargo Bank, National Association. Notwithstanding the foregoing, if the Federal Funds Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

“Fixed Charge Coverage Ratio” means the ratio of (a) TTM EBITDA less Capital Expenditures for the trailing twelve month period (to the extent not financed) to (b) Fixed Charges for the trailing twelve month period.

“Fixed Charges” means cash interest plus scheduled principal payments plus income taxes paid in cash plus dividends and distributions.

“Foreign OEM” means an original manufacturer whose primary headquarters or primary operations are located outside of the United States, including without limitation Alexander Marine Company, Ltd., Galeon, LLP, Azimut-Benetti S.p.A, and Sino Eagle Yacht Co., Ltd.

“Free Floor Period” means a period equal to the number of days during which a Vendor agrees to assume the cost of financing Collateral purchased by a Dealer by granting Agent a Vendor Credit.

“Funded Debt” of any Person means without duplication, (a) all indebtedness of such Person for borrowed money, (b) all indebtedness evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person as lessee under capital leases which have been or should be recorded as liabilities on a balance sheet of such Person in accordance with GAAP, (d) all obligations of such Person to pay the deferred purchase price of property or services (excluding (i) trade accounts payable in the ordinary course of business and compensation or bonus arrangements with persons who are employees or independent contractors of a person, and (ii) any obligation under this Agreement or any other inventory financing agreement among Dealers and CDF), (e) all indebtedness secured by a Lien on the property of such Person, whether or not such indebtedness shall have been assumed by such Person; provided that if such Person has not assumed or otherwise become liable for such indebtedness, such indebtedness shall be measured at the fair market value of such property securing such indebtedness at the time of determination, (f) all obligations, contingent or otherwise, with respect to the face amount of all letters of credit (whether or not drawn), bankers’ acceptances and similar obligations issued for the account of such Person, (g) all hedging obligations of such Person, (h) all Contingent Liabilities of such Person, (i) all debt of any partnership of which such Person is a general partner, (j) all non-compete payment obligations, earn-outs and similar obligations and (k) any Stock or other equity instrument, whether or not mandatorily redeemable, that under GAAP is characterized as debt, whether pursuant to financial accounting standards board issuance No. 150 or otherwise.

“Future Advances” means any amount that CDF is obligated to pay to a Vendor pursuant to this Agreement within a certain period after an Approval is issued by CDF.

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“GAAP” means generally accepted accounting principles as of the Closing Date.  Notwithstanding anything to the contrary, leases shall continue to be classified and accounted for on a basis consistent with that reflected in the financial statements delivered pursuant to Section 8(a) for the fiscal year ending September 30, 2018, including without limitation for purposes of calculating TTM EBITDA and the Fixed Charge Coverage Ratio, without giving effect to any change in accounting treatment of “operating” and “capital” leases scheduled to become effective for fiscal years beginning after December 15, 2018 as set forth in the Accounting Standards Update No. 2016-02, Leases (Topic 842), issued by the Financial Accounting Standards Board in February 2016, 0r any similar publication issued by the Financial Accounting Standards Board in connection therewith, in each case if such change would require treating any lease (or similar arrangement conveying the right to use) as a capital lease where such lease (or similar arrangement) was not required to be so treated under GAAP as in effect prior to December 15, 2018..

“Governmental Authority” means any nation, sovereign or government, any state or other political subdivision thereof, any agency, authority or instrumentality thereof and any entity or authority exercising executive, legislative, taxing, judicial, regulatory or administrative functions of or pertaining to government, including any central bank, stock exchange, regulatory body, arbitrator, public sector entity, and supra-national entity.

“Guarantor” means (a) each Person that guaranties all or a portion of the Obligations, including KCS RE and Wave Aviation under the Closing Date Guaranty Agreement, and (b) each other Person that becomes a guarantor after the Closing Date pursuant to Section 6(d)(iv) of this Agreement or otherwise.

“Intervening Default” has the meaning set forth in Section 2(a)(iv) of this Agreement.

“Inventory Sublimit” means the specific sublimits set forth in the section entitled “Total Eligible Inventory Sublimits” in the Program Terms Letter.

“Investment” means any direct or indirect investment in any Person, including contributions of capital or assets to any Person, investments in or the acquisition of debt securities or equity interests of any Person, or any loans, advances or other extensions of credit to any Person, including any guarantee of obligations of another Person.

“Invoice” means any invoice issued by a Vendor related to an Approval.

“Kawasaki” means Kawasaki Motors Finance Corporation.

“Kawasaki Intercreditor” means that certain Intercreditor Agreement by and among Agent and Kawasaki to be entered into by and between Agent and Kawasaki following the Closing Date, as it may be amended, restated, amended and restated, supplemented or otherwise modified from time to time as permitted therein.

“Kawasaki Reserve” means a reserve in an amount equal to five hundred thousand dollars ($500,000.00).

“KCS” means KCS International Inc., a Wisconsin corporation.

“KCS RE” means KCS RE Acquisition Company, LLC, a Wisconsin limited liability company.

“KCS Vendor Agreement” means, collectively, that certain (i) Amended and Restated Vendor Agreement dated as of August 6, 2020 between CDF and KCS, and (ii) Amended and Restated Vendor Agreement  dated as of August 4, 2020 between Wells Fargo Capital Finance Corporation Canada and KCS, as each may be amended, restated, amended and restated, supplemented or otherwise modified from time to time.

“Lender Affiliate” means the Affiliate of a Lender.

“Lender Credit” has the meaning set forth in Section 3(a) of this Agreement.

“Lender Rate” means the Dealer Rate as set forth in the Program Terms Letter less any applicable Performance Rebate as set forth in the Program Terms Letter.

“Lenders” has the meaning set forth in the Preamble of this Agreement.

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“LIBOR” means the greater of (a) the London Interbank Offered Rate (in U.S. dollar deposits) for a term of one month as published in the Money Rates column of The Wall Street Journal on the first Business Day of each calendar month, plus required regulatory reserves, if applicable (or any Benchmark Replacement as determined pursuant to Section 3(c) of this Agreement) or (b) 0.75%.

“Liens” has the meaning set forth in Section 6(a) of this Agreement.

“Loan Document” means this Agreement, any Program Terms Letter or Transaction Statement entered into pursuant to this Agreement, the Closing Date Guaranty Agreement, and all documents delivered to Agent and/or any Lender in connection with any of the foregoing.

“Loans” has the meaning set forth in Section 2(a)(i) of this Agreement.

“Material Adverse Effect” means a material adverse effect in (a) Dealers’ business, operations or financial condition, taken as a whole, (b) the performance and enforceability of this Agreement, (c) any portion of the Collateral in excess of one million dollars ($1,000,000.00), or (d) the perfection and priority of Agent’s Liens in the Collateral.

“Maximum Aggregate Credit Amount” means an aggregate total of five hundred million dollars ($500,000,000.00).

“Monthly Interest” means, with respect to each Lender, for each calendar month, the sum of the Daily Interest for each calendar day of such calendar month.

“MM Vendor Guaranty” means, collectively, that certain (i) Guaranty executed by MarineMax, Inc. in favor of Wells Fargo Commercial Distribution Finance, LLC dated on or about the date of the Third Omnibus Amendment Closing Date, as it may be amended, restated, amended and restated, supplemented or otherwise modified from time to time and (ii) Guarantee executed by MarineMax, Inc. in favor of Wells Fargo Capital Finance Corporation Canada dated on or about the date of the Third Omnibus Amendment Closing Date, as it may be amended, restated, amended and restated, supplemented or otherwise modified from time to time.

“Net Eligible Inventory Amount” has the meaning set forth in the definition of Borrowing Base.

“Non-Funding Lender” means any Lender that has (a) failed to fund any payments required to be made by it under the Loan Documents within two (2) Business Days after any such payment is due (excluding expense and similar reimbursements that are subject to good faith disputes), (b) given written notice (and Agent has not received a revocation in writing), to Agent, any Lender, or Dealer, or has otherwise publicly announced (and Agent has not received notice of a public retraction) that such Lender believes it will fail to fund payments required to be funded by it under the Loan Documents or (c) (or any Person that directly or indirectly controls such Lender has), (i) become subject to a voluntary or involuntary case under the Federal Bankruptcy Reform Act of 1978, or any similar bankruptcy laws, (ii) a custodian, conservator, receiver or similar official appointed for it or any substantial part of such Person’s assets, or (iii) made a general assignment for the benefit of creditors, been liquidated, or otherwise been adjudicated as, or determined by any Governmental Authority having regulatory authority over such Person or its assets to be, insolvent or bankrupt, and for this clause (c), Agent has determined that such Lender is reasonably likely to fail to fund any payments required to be made by it under the Loan Documents.  

“Obligations” means all indebtedness and other obligations of any nature whatsoever of each Dealer to Agent, Lenders and/or a Lender Affiliate, arising under this Agreement or any other Loan Document, and whether for principal, interest, fees, expenses, indemnification obligations or otherwise, and whether such indebtedness or other obligations are existing, future, direct, indirect, acquired, contractual, noncontractual, joint and/or several, fixed, contingent or otherwise.

“OFAC” shall mean the U.S. Department of the Treasury’s Office of Foreign Assets Control.

“Other Lender” has the meaning set forth in Section 22(a)(i) of this Agreement.

“Outstandings” means, at any time, an amount equal to the aggregate unpaid principal amount of all Loans.

“Participant Register” has the meaning set forth in Section 20(h) of this Agreement.

“Payment Default” means any failure by Dealers to make any payment with respect to the Obligations by the date due and after any applicable grace period under the applicable Loan Document (such date being the “Final Payment

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Date”).  Payment Default shall not mean, and shall exclude, any deductions, offsets or other disputes made or asserted by a Dealer which are accepted by or under negotiation with Agent.

“Payment Recipient” has the meaning set forth in Section 3(c) of this Agreement.

“Performance Rebate” has the meaning set forth in the Program Terms Letter.

“Permitted Discretion” means a determination made in good faith and in the exercise of reasonable (from the perspective of a secured asset-based lender) business judgment.

“Permitted Locations” has the meaning set forth in Section 6(b)(xiii) of this Agreement.

“Person” means any individual, partnership, corporation (including a business trust and a public benefit corporation), joint stock company, estate, association, firm, enterprise, trust, limited liability company, unincorporated association, joint venture and any other entity or Governmental Authority.

“Platform” has the meaning set forth in Section33 of this Agreement.

“Post-Close Period” has the meaning set forth in Section 6(b)(xvii) of this Agreement.

“Public Lender” has the meaning set forth in Section 33 of this Agreement.

“Pre-Owned Inventory Reserve” has the meaning set forth in the section entitled “Inventory Advance Rate” in the Program Terms Letter.

“Prime Rate” means, for any calendar month, an interest rate (calculated on a 360-day year basis as set forth herein) equal to the highest “prime rate” as published in the “Money Rates” column of The Wall Street Journal on the first Business Day of such month; if for any reason such rate is no longer published in The Wall Street Journal, Lender shall select such replacement index as Lender in its sole discretion determines most closely approximates such rate.

“Principal” has the meaning set forth in Section 31(b) of this Agreement.

“Program Terms Letter” means the Seventh Amended and Restated Program Terms Letter, dated as of the Closing Date, between the Dealers and Agent (as further amended, restated, amended and restated, supplemented or otherwise modified from time to time).

“Ratable Share” means, with respect to each Lender, the percentage equal to such Lender’s Allocation divided by the Maximum Aggregate Credit Amount, as such percentage is set forth opposite such Lender’s name on Exhibit D hereto, under the heading “Ratable Share”, and as such percentage may be reduced or increased from time to time in accordance with this Agreement.

“Related Persons” means, with respect to any Person, each Affiliate of such Person and each director, officer, employee, agent, trustee, representative, attorney, accountant and each insurance, environmental, legal, financial and other advisor (including those retained in connection with the satisfaction or attempted satisfaction of any condition precedent to the execution of this Agreement) and other consultants and agents of or to such Person or any of its Affiliates.

“Rent Reserve” means reserves instituted by Agent in its Permitted Discretion in an amount not to exceed the aggregate of three months’ rent with respect to each leased Collateral location for which the applicable landlord has not executed and delivered to Agent an agreement, in form and substance acceptable to Agent, subordinating such landlord’s lien in the Collateral and providing Agent reasonable access to such Collateral.

“Replacement Lender” has the meaning set forth in Section 22(b) of this Agreement.

“Reporting Date” means (a) each Tuesday that this Agreement is in effect or, if such Tuesday is not a Business Day, the next succeeding Business Day, or (b) any other Business Day selected by Agent in its reasonable discretion. Agent and Lenders hereby acknowledge and agree that the Ratable Shares set forth in Exhibit D attached hereto

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shall not take effect until the first Reporting Date after the date hereof. Until such Reporting Date, the Ratable Shares of Lenders immediately prior to the date of this Agreement shall continue to be in effect.

“Required Lenders” means Lenders whose aggregate Ratable Share exceeds 50%; provided, however, if there are two or more Lenders, Required Lenders shall mean no less than two unaffiliated Lenders.

“Reserves” means, as of any date of determination, any Kawasaki Reserves, Pre-Owned Inventory Reserves and Rent Reserves.

“Sale” has the meaning set forth in Section 20(b) of this Agreement.

“SPV” means any Person established by Agent, a Lender or a Lender Affiliate, as a bankruptcy-remote special purpose vehicle and identified as such in a writing by any Lender to Agent.

“Start Date” has the meaning set forth in Section 10(a) of this Agreement.

“Stock” means all shares of capital stock (whether denominated as common stock or preferred stock), equity interests, beneficial, partnership or membership interests, joint venture interests, participations or other ownership or profit interests in or equivalents (regardless of how designated) of or in a Person (other than an individual), whether voting or non-voting.

“Tangible Net Worth” means the shareholders’ equity of Dealers on a consolidated basis, determined in accordance with GAAP, minus items treated as intangible assets under GAAP, amounts owing by any employee, officer or other Dealer Affiliate, other than draws to commissioned and seasonally compensated employees and advances made for customary travel expenses incurred in the conduct of Dealers’ business, and any other assets that cannot be identified as tangible assets to Agent’s reasonable satisfaction.

“Third Omnibus Amendment Closing Date” means May 2, 2021.

“Total Eligible Inventory” has the meaning set forth in the definition of Borrowing Base.

“Transaction Statement” has the meaning set forth in Section 3(a) of this Agreement.

“TTM EBITDA” shall mean consolidated net income plus the sum of taxes, interest, depreciation and amortization, and one-time costs related to acquisitions plus non-cash stock-based compensation less non-recurring gains or non-cash items increasing net income and tax credits to the extent they increased net income for the trailing twelve month period.  

“UCC” means the Uniform Commercial Code as enacted and amended in the State of Illinois, and as may be further amended from time to time, or any other Uniform Commercial Code which governs the creation or perfection of the Liens granted hereunder.

“USA&M” has the meaning set forth in Section 30(b) of this Agreement.

“USA PATRIOT Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Title III of Pub. L. No. 107- 56 (signed into law October 26, 2001)).

“Vehicle Certification” means the (1) California Vehicle Dealer, Vehicle Rental Company or Affiliate Certification, (2) New York Vehicle Dealer, Rental Vehicle Company or Affiliate Certificate, and (3) such other vehicle certifications which may be required to be delivered to Agent from time to time, each in form and substance satisfactory to Agent.

“Vendor Credits” means all of each Dealer’s rights to any price protection payments, rebates, discounts, credits, factory holdbacks, incentive payments and other amounts which at any time are due a Dealer from a Vendor.

“Vendors” means all manufacturers and vendors from which Dealers purchase inventory.

“Wave Aviation” means Wave Aviation LLC, a Florida limited liability company.

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2.Extensions of Credit.

 

(a)Advances.  

 

(i)Subject to the terms and conditions of this Agreement (including, without limitation, Sections 2(a)(iv) and (v) below), the Lenders severally and not jointly agree to make available to Dealers extensions of credit (“Loans”) in an amount equal to each such Lender’s Ratable Share of such Loan to any one or more Dealers on a revolving basis in such amounts as Dealers may from time to time request up to the amount of Availability to purchase inventory, which will be subject to a purchase money security interest in favor of Agent, as collateral agent for Lenders, and for other general corporate purposes not in violation of law.  With respect to each request by Dealers for a Loan, Agent will calculate the components of Availability as of the date of issuance of an Approval by Agent with respect to such request based upon (A) with respect to Borrowing Base, the most recent Borrowing Base Certificate delivered in accordance with Section 8(f) of this Agreement acceptable to Agent in its reasonable discretion and (B) with respect to the outstanding amount of Approvals, the outstanding principal amount of Obligations and the amount of any Reserves, the applicable amount of each as of such date.  For the avoidance of doubt, the principal amount outstanding under the Existing Financing Agreement as of the close of business on the date hereof shall be deemed a Loan outstanding under this Agreement, and shall be subject to the funding procedure set forth in Section 2(a)(v) below on the first Reporting Date following the Closing Date.

 

(ii)(A) Repayments from time to time of the outstanding balance of the indebtedness hereunder shall be available to be re-borrowed pursuant to the terms and conditions of this Agreement; (B) no Loan will be made to the extent such Loan would cause any Lender to have outstanding Loans in a principal amount in excess of such Lender’s Allocation; (C) if the Obligations hereunder outstanding at any time or from time to time exceed the lesser of (I) the Maximum Aggregate Credit Amount minus the outstanding amount of Approvals and any Reserves and (II) the Borrowing Base minus any Reserves, Dealers shall immediately (but in any event within two (2) Business Days) pay the amount of such excess to Agent for the benefit of Lenders; provided that, in its reasonable discretion, Agent may cause the Lenders to immediately cease to make Loans and/or Agent may immediately cease to issue Approvals until such repayment occurs; (D) if the Obligations outstanding at any time or from time to time with respect to any specific category of inventory exceed any applicable Inventory Sublimit, Dealers shall immediately (but in any event within two (2) Business Days) pay the amount of such excess to Agent for the benefit of Lenders; and (E) notwithstanding anything else contained in this Agreement, (I) in its reasonable discretion, Agent may cause the Lenders to immediately cease to make any Loans and/or  Agent may immediately cease to issue Approvals (x) upon the occurrence and during the continuance of any Default or upon the occurrence and during the continuance of any event which, with the giving of notice, the passage of time, or both would result in a Default, or (y) if any remittance for any Obligations is dishonored when first presented for payment, until such payment is honored, and (II) upon termination of this Agreement, Dealers shall repay to Agent on behalf of Lenders all Obligations hereunder, plus interest accrued to the date of payment.

 

(iii)In addition to all other requirements of this Agreement, but subject to Section 2(a)(iv), below, each Lender’s obligation to make each Loan is subject to the fulfillment or waiver of each and every of the following conditions prior to or contemporaneously with the making of each and every such Loan:

 

(A)each representation and warranty made to Agent and Lenders by or on behalf of any Dealer is true and correct as of the date hereof, except to the extent that such representation or warranty expressly relates to an earlier date, in which event such representation or warranty was true and correct as of such earlier date; and

(B)neither a Default nor any event which with the giving of notice, the passage of time or both would result in a Default has occurred and is continuing or would reasonably be expected to result after giving effect to the Loan requested.

 

(iv)Each Lender shall have the obligation to fund its Ratable Share of a Loan upon issuance by CDF of an Approval. Lenders acknowledge and agree that:  (A) CDF typically issues Approvals on a date (each, an “Approval Date”) prior to the date CDF is required actually to fund the Loan (each, an “Advance Date”) that is based on such Approval, (B) once an Approval has been issued, and the Vendor receiving such Approval shall have shipped its product based thereon, CDF may deem itself obligated to fund the related Loan on the Advance Date, notwithstanding any Automatic Default, Payment Default, Default Notice or other Default that may arise on or prior to an Approval Date (each, an “Intervening Default”), and (C) each Lender shall be obligated to fully fund in cash such Lender’s Ratable Share in any Loans which derive from all Approvals issued by CDF in good faith, as well as any Approvals and Future Advances based thereon, notwithstanding any Intervening Default.

 

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(v)On each Reporting Date on or before 2:00 p.m. central time, Agent shall deliver notice to each Lender of the amount of Loans Lender has funded and such Lender’s Ratable Share multiplied by Outstandings, and: (A) if the amount of Loans Lender has funded is less than Lender’s Ratable Share multiplied by the Outstandings calculated as of such Reporting Date, then Lender shall remit such deficiency to Agent (on behalf of CDF) by 5:00 p.m. central time on the Business Day immediately following such Reporting Date, and (B) if the amount of Loans Lender has funded is more than Lender’s Ratable Share multiplied by the Outstandings calculated as of such Reporting Date, then Agent (on behalf of CDF) will remit such excess to such Lender by 5:00 p.m. central time on the Business Day immediately following such Reporting Date. Each payment due to Agent or Lenders will be paid in immediately available funds according to the electronic transfer instructions set forth on Exhibit E attached hereto, and, if not timely paid in accordance with this Agreement, will bear interest until paid at a rate per annum equal to the Lender Rate.  If CDF is acting as Agent, it shall be deemed to have paid its deficiency or received its excess as set forth above on each Reporting Date.  Each Lender hereby waives any right it may now or in the future have to set-off its obligation to make any payment to CDF or Agent under this Agreement against any obligation of CDF or Agent to such Lender, whether under this Agreement or any other agreement between CDF and such Lender or Agent and such Lender.

 

(vi)The amount of Loans each Lender has funded shall bear interest at the Lender Rate, as such rate may change pursuant to the terms of the applicable Program Terms Letter. Interest will be computed on the basis of a 360-day year and assess for the actual number of days elapsed.  Provided Lender is not a Non-Funding Lender, then the amount of Monthly Interest, if any, payable to Lender, less any Administrative Fee due to Agent pursuant to a Fee Letter between Agent and Lender, shall be distributed by Agent to Lender monthly in arrears on the latter of: (A) the fifteenth (15th) day of the applicable month, or if the fifteenth (15th) is not a Business Day, the next succeeding Business Day, or (B) within five (5) Business Days after Agent’s receipt thereof from all Dealers.  To the extent that Lender is entitled to receive interest income in excess of the Monthly Interest, if such additional interest has not previously been distributed to Lender, then Lender shall be entitled to receive an additional payment from Agent equivalent to Lender’s Ratable Share of such interest income.  Any amounts due to Lender for income in excess of the Monthly Interest shall be reflected and paid with Monthly Interest as set forth above.  Lenders acknowledge and agree that the rate of return paid on any Loan is dependent on numerous factors, including discounts and subsidies offered by Vendors.  Application of any Collections received by Agent as interest in cash or good collected funds representing payment of interest on the Loans may result in the payment of interest to Lender in excess of the rate set forth in this subsection.

 

(vii)Provided a Lender is not a Non-Funding Lender, any Collections received by Agent in good collected funds representing payment of any part of the Unused Line Fee (as described in the Program Terms Letter) shall be paid by Agent to each Lender in an amount equal to such Lender’s Ratable Share monthly in arrears, with Monthly Interest as set forth in Section 2(a)(vi).

 

(viii)Lenders acknowledge that Dealers may be entitled to receive a Performance Rebate on a calendar quarter basis pursuant to the terms of the Program Terms Letter.  Notwithstanding anything contained herein to the contrary, if the Performance Rebate is not earned by or otherwise paid to Dealers during any calendar quarter, each Lender may be entitled to receive an additional payment from Agent equivalent to such Lender’s share of such portion of the Performance Rebate not earned by or otherwise paid to Dealers.  Any amounts due to Lenders under this Section 2(a)(viii) shall be reflected in a notice to be delivered in the manner set forth in Section 2(a)(v) of this Agreement within forty-five (45) days following the end of the applicable calendar quarter.

 

(ix)As of the Closing Date, all outstanding advances under the Existing Financing Agreement shall be deemed Loans under this Agreement.

 

(b)Advance Rates. The advance rates with respect to inventory as well as additional details of the financing program are set forth in the Program Terms Letter, the terms of which are incorporated herein by this reference. This Agreement concerns the extension of credit, and not the provision of goods or services.  

 

(c)Erroneous Payments.

 

(i)Each Lender, each other secured party, and any other party hereto hereby severally agrees that if (A) the Agent notifies (which such notice shall be conclusive absent manifest error) such Lender or any other secured party (or the Lender Affiliate of a secured party) or any other Person that has received funds from the Agent or any of its Affiliates, either for its own account or on behalf of a Lender, or other secured party (each such recipient, a “Payment Recipient”), that the Agent has determined in its sole

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discretion that any funds received by such Payment Recipient were erroneously transmitted to, or otherwise erroneously or mistakenly received by, such Payment Recipient (whether or not known to such Payment Recipient) or (B) any Payment Recipient receives any payment from the Agent (or any of its Affiliates) (1) that is in a different amount than, or on a different date from, that specified in a notice of payment, prepayment or repayment sent by the Agent (or any of its Affiliates) with respect to such payment, prepayment or repayment, as applicable, (2) that was not preceded or accompanied by a notice of payment, prepayment or repayment sent by the Agent (or any of its Affiliates) with respect to such payment, prepayment or repayment, as applicable, or (3) that such Payment Recipient otherwise becomes aware was transmitted or received in error or by mistake (in whole or in part) then, in each case, an error in payment shall be presumed to have been made (any such amounts specified in clauses (A) or (B) of this Section 2(c)(i), whether received as a payment, prepayment or repayment of principal, interest, fees, distribution or otherwise; individually and collectively, an “Erroneous Payment”), then, in each case, such Payment Recipient is deemed to have knowledge of such error at the time of its receipt of such Erroneous Payment; provided that nothing in this Section 2(c) shall require the Agent to provide any of the notices specified in clauses (A) or (B) above. Each Payment Recipient agrees that it shall not assert any right or claim to any Erroneous Payment, and hereby waives any claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Agent for the return of any Erroneous Payments, including without limitation waiver of any defense based on “discharge for value” or any similar doctrine.

 

(ii)Without limiting the immediately preceding clause (i), each Payment Recipient agrees that, in the case of clause (i)(B) above, it shall promptly notify the Agent in writing of such occurrence.

 

(iii)In the case of either clause (i)(A) or (i)(B) above, such Erroneous Payment shall at all times remain the property of the Agent and shall be segregated by the Payment Recipient and held in trust for the benefit of the Agent, and upon demand from the Agent such Payment Recipient shall (or, shall cause any Person who received any portion of an Erroneous Payment on its behalf to), promptly, but in all events no later than one Business Day thereafter, return to the Agent the amount of any such Erroneous Payment (or portion thereof) as to which such a demand was made in same day funds and in the currency so received, together with interest thereon in respect of each day from and including the date such Erroneous Payment (or portion thereof) was received by such Payment Recipient to the date such amount is repaid to the Agent at the greater of the Federal Funds Rate and a rate determined by the Agent in accordance with banking industry rules on interbank compensation from time to time in effect.

 

(iv)In the event that an Erroneous Payment (or portion thereof) is not recovered by the Agent for any reason, after demand therefor by the Agent in accordance with the immediately preceding clause (iii), from any Lender that is a Payment Recipient or an Affiliate of a Payment Recipient (such unrecovered amount as to such Lender, an “Erroneous Payment Return Deficiency”), then at the sole discretion of the Agent and upon the Agent’s written notice to such Lender, such Lender shall be deemed to have made a cashless assignment of the full face amount of the portion of its Loans (but not its Allocation commitment) with respect to which such Erroneous Payment was made to the Agent or, at the option of the Agent, the Agent’s applicable lending affiliate in an amount that is equal to the Erroneous Payment Return Deficiency (or such lesser amount as the Agent may specify) (such assignment of the Loans (but not Allocation commitment), the “Erroneous Payment Deficiency Assignment”) plus any accrued and unpaid interest on such assigned amount, without further consent or approval of any party hereto and without any payment by the Agent or its applicable lending affiliate as the assignee of such Erroneous Payment Deficiency Assignment.  Without limitation of its rights hereunder, the Agent may cancel any Erroneous Payment Deficiency Assignment at any time by written notice to the applicable assigning Lender and upon such revocation all of the Loans assigned pursuant to such Erroneous Payment Deficiency Assignment shall be reassigned to such Lender without any requirement for payment or other consideration.  The parties hereto acknowledge and agree that (A) any assignment contemplated in this clause (iv) shall be made without any requirement for any payment or other consideration paid by the applicable assignee or received by the assignor, (B) the provisions of this clause (iv) shall govern in the event of any conflict with the terms and conditions of Section 20 and (C) the Agent may reflect such assignments in any register maintained by Agent without further consent or action by any other Person.

 

(v)Each party hereto hereby agrees that (A) in the event an Erroneous Payment (or portion thereof) is not recovered from any Payment Recipient that has received such Erroneous Payment (or portion thereof) for any reason, the Agent (1) shall be subrogated to all the rights of such Payment Recipient with respect to such amount and (2) is authorized to set off, net and apply any and all amounts at any time owing to such Payment Recipient under any Loan Document, or otherwise payable or distributable by the Agent to such Payment Recipient from any source, against any amount due to the Agent under this Section 2(c) or

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under the indemnification provisions of this Agreement, (B) the receipt of an Erroneous Payment by a Payment Recipient shall not for the purpose of this Agreement be treated as a payment, prepayment, repayment, discharge or other satisfaction of any Obligations owed by the Borrower or any other loan party, except, in each case, to the extent such Erroneous Payment is, and solely with respect to the amount of such Erroneous Payment that is, comprised of funds received by the Agent from the Borrower or any other loan party for the purpose of making for a payment on the Obligations and (C) to the extent that an Erroneous Payment was in any way or at any time credited as payment or satisfaction of any of the Obligations, the Obligations or any part thereof that were so credited, and all rights of the Payment Recipient, as the case may be, shall be reinstated and continue in full force and effect as if such payment or satisfaction had never been received.

 

(vi)Each party’s obligations under this Section 2(c) shall survive the resignation or replacement of the Agent or any transfer of right or obligations by, or the replacement of, a Lender, the termination of the Allocation commitments or the repayment, satisfaction or discharge of all Obligations (or any portion thereof) under any Loan Document.

 

(vii)Nothing in this Section 2(c) will constitute a waiver or release of any claim of any party hereunder arising from any Payment Recipient’s receipt of an Erroneous Payment.

 

(d)[reserved]

 

(e)Eligible Accounts.  

 

(i)“Eligible Accounts” means all Accounts of the Dealers other than the following:

 

(A)Accounts created from the sale of goods and services on non-standard terms and/or that allow for payment to be made more than sixty (60) days from the date of sale;

(B)Accounts unpaid more than ninety (90) days from date of invoice;

(C)all Accounts of any obligor if fifty percent (50%) or more of the aggregate outstanding balance of such obligor’s Accounts are unpaid for more than ninety (90) days from the date of invoice;

(D)Accounts for which the obligor is an officer, director, shareholder, partner, member, owner, employee, agent, parent, subsidiary, affiliate of, or is related to any Dealer or has common shareholders, officers, directors, owners, partners or members with Dealer;

(E)consignment sales;

(F)Accounts for which the payment is or may be conditional;

(G)Accounts for which the obligor is not a commercial or institutional Person or is not a resident of the United States;

(H)Accounts with respect to which any warranty or representation provided in Subsection 2(e)(ii) is not true and correct;

(I)Accounts which represent goods or services purchased for a personal, family or household purpose;

(J)Accounts which represent goods used for demonstration purposes or loaned by any Dealer to another party;

(K)Accounts which are progress payment, barter, or contra accounts;

(L)Accounts in which CDF does not have a first priority perfect security interest therein;

(M)Accounts arising from the sale of goods other than inventory;

(N)Accounts with respect to which Agent has not completed due diligence reasonably satisfactory to Agent; and

(O)any and all other Accounts which Agent deems to be ineligible.

 

(ii)For each Account that Dealers include in any Borrowing Base Certificate, each Dealer represents and warrants to Agent and Lenders that at all times:

 

(A)such Account is genuine;

(B)such Account is not evidenced by a judgment or promissory note or similar instrument or agreement;

(C)such Account represents an undisputed bona fide transaction completed in accordance with the terms of the invoices and purchase orders relating thereto;

(D)the goods sold or services rendered which resulted in the creation of such Account have been delivered or rendered to and accepted by the obligor;

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(E)the amounts shown on the Borrowing Base Certificate, Dealers’ books and records and all invoices and statements delivered to Agent with respect thereto are owing to a Dealer and are not contingent;

(F)there are no offsets, counterclaims or disputes existing or asserted with respect thereto and no Dealer has made any agreement with any obligor for any deduction or discount of the sum payable thereunder except regular discounts allowed by Dealers in the ordinary course of its business for prompt payment which have been disclosed to Agent;

(G)there are no facts or events which in any way impair the validity or enforceability thereof or reduce the amount payable thereunder from the amount shown on the Borrowing Base Certificate, such Dealer’s books and records and the invoices and statements delivered to Agent with respect thereto;

(H)all persons acting on behalf of obligors thereon have the authority to bind the obligor;

(I)the goods sold or transferred giving rise thereto were not, immediately prior to such sale or transfer, subject to any lien, claim, encumbrance or security interest which is superior to that of Agent for the benefit of Lenders; and

(J)there has been no material adverse change in the obligor’s financial condition since the creation of the Account, and there are no proceedings or actions known to Dealer which are threatened or pending against any obligor thereon which might result in any material adverse change in such obligor’s financial condition.

 

3.Financing Terms.

 

(a)Certain financial terms of any Loan made under this Agreement are set forth in the Program Terms Letter.  In connection with financing an item of inventory for any Dealer, Agent, on behalf of the Lenders, will transmit or otherwise make available to such Dealer and Lenders a “Transaction Statement” which is a record that may be transmitted by Agent to such Dealer from time to time which identifies the Collateral financed and/or the advance made and the terms and conditions of repayment of such advance as provided in this Agreement.  Dealers agree that a Dealer’s failure to notify Agent in writing of any objection to a Transaction Statement within thirty (30) days after a Transaction Statement is transmitted or otherwise sent to such Dealer shall constitute Dealers’ (i) acceptance thereof, (ii) agreement that the Lenders are financing such inventory at Dealers’ request, and (iii) agreement that such Transaction Statement will be incorporated herein by reference to the extent not inconsistent with the terms hereof.  To the extent any Transaction Statement is inconsistent with the terms hereof, this Agreement (including any applicable Program Terms Letter) shall govern and control.  If any Dealer objects to any Transaction Statement, such Dealer and Agent, on behalf of Lenders, will work in good faith to resolve such objection within sixty (60) days after the applicable Transaction Statement is transmitted or otherwise sent to such Dealer.  However, notwithstanding such objection, Dealers will pay Agent on behalf of Lenders for such inventory in accordance with this Agreement.  With respect to any advance made to a Vendor on behalf of a Dealer, Agent, on behalf of any one or more Lenders, may apply against any such amount owed to Vendor any amount such Lender or Lenders is owed from such Vendor with respect to Free Floor Periods (each, a “Lender Credit”) or any other amounts such Lender or Lenders is owed from such Vendor.  Notwithstanding the foregoing, Dealers agree to pay the full amount reflected on any Transaction Statement. Notwithstanding anything to the contrary contained herein, including without limitation the provisions of Section 17 hereof, without the consent of Lenders, CDF may change any aspect or portion of any Transaction Statement at any time, provided that such change is not inconsistent with the terms and conditions of this Agreement.

 

(b)Upon receipt by Agent of a request for a Loan under and pursuant to CDF’s standard advance request procedures and the issuance of a Transaction Statement by Agent as set forth in Section 3(a) above, each Lender shall follow the funding procedures established by Agent, from time to time, and shall, as and when requested by Agent, advance funds to Agent to fund such Loan in amounts equal to such Lender’s Ratable Share of such Loan.

(c)Effect of Benchmark Transition Event.

 

(i)Notwithstanding anything to the contrary herein or in any other Loan Document, upon the occurrence of a Benchmark Transition Event or an Early Opt-in Election, as applicable, the Agent and the Dealers may amend this Agreement to replace LIBOR with a Benchmark Replacement.  Any such amendment with respect to a Benchmark Transition Event will become effective at 5:00 p.m. on the fifth (5th) Business Day after the Agent has posted such proposed amendment to all Lenders and the Dealers so long as the Agent has not received, by such time, written notice of objection to such amendment from Lenders comprising the Required Lenders. Any such amendment with respect to an Early Opt-in Election will become effective on the date that Lenders comprising the Required Lenders have delivered to the Agent written notice that such Required Lenders accept such amendment.  No replacement of LIBOR with a Benchmark Replacement pursuant to this Section titled “Effect of Benchmark Transition Event” will occur prior to the applicable Benchmark Transition Start Date.

(ii)In connection with the implementation of a Benchmark Replacement, the Agent will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such

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Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other party to this Agreement.

(iii)Standards for Decisions and Determinations. The Agent will promptly notify the Dealers and the Lenders of (i) any occurrence of a Benchmark Transition Event or an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date and Benchmark Transition Start Date, (ii) the implementation of any Benchmark Replacement, (iii) the effectiveness of any Benchmark Replacement Conforming Changes and (iv) the commencement or conclusion of any Benchmark Unavailability Period.  Any determination, decision or election that may be made by the Agent or Lenders pursuant to this Section titled “Effect of Benchmark Transition Event,” including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party hereto, except, in each case, as expressly required pursuant to this Section titled “Effect of Benchmark Transition Event.”

(iv)Upon the Dealers’ receipt of notice (which may be via electronic means, including e-mail) of the commencement of a Benchmark Unavailability Period, the Dealers may revoke any request for a LIBOR borrowing of, conversion to or continuation of LIBOR Loans to be made, converted or continued during any Benchmark Unavailability Period and, failing that, the Dealers will be deemed to have converted any such request into a request for a Dealer of or conversion to Prime Rate Loans.  During any Benchmark Unavailability Period, the component of Prime Rate based upon LIBOR, if any, will not be used in any determination of Prime Rate.

(v)As used in this Section 3(c):

(A)“Benchmark Replacement” means the sum of: (a) the alternate benchmark rate (which may include Term SOFR) that has been selected by the Agent and the Dealers giving due consideration to (i) any selection or recommendation of a replacement rate or the mechanism for determining such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a rate of interest as a replacement to LIBOR for U.S. dollar-denominated syndicated credit facilities and (b) the Benchmark Replacement Adjustment; provided that, if the Benchmark Replacement as so determined would be less than zero, the Benchmark Replacement will be deemed to be zero for the purposes of this Agreement.

(B)“Benchmark Replacement Adjustment” means, with respect to any replacement of LIBOR with an Unadjusted Benchmark Replacement for each applicable interest period, the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by the Agent and the Dealers giving due consideration to (i) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of LIBOR with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of LIBOR with the applicable Unadjusted Benchmark Replacement for U.S. dollar-denominated syndicated credit facilities at such time.

(C)“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including timing and frequency of determining rates and making payments of interest and other administrative matters) that the Agent decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Agent in a manner substantially consistent with market practice (or, if the Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Agent determines that no market practice for the administration of the Benchmark Replacement exists, in such other manner of administration as the Agent decides is reasonably necessary in connection with the administration of this Agreement).

(D)“Benchmark Replacement Date” means the earlier to occur of the following events with respect to LIBOR:

(1)in the case of clause (i) or (ii) of the definition of “Benchmark Transition Event,” the later of (a) the date of the public statement or publication of information referenced therein and (b) the date on which the administrator of LIBOR permanently or indefinitely ceases to provide LIBOR; or

(2)in the case of clause (iii) of the definition of “Benchmark Transition Event,” the date of the public statement or publication of information referenced therein.

(E)“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to LIBOR:

(1)a public statement or publication of information by or on behalf of the administrator of LIBOR announcing that such administrator has ceased or will cease to provide LIBOR, permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide LIBOR;

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(2)a public statement or publication of information by the regulatory supervisor for the administrator of LIBOR, the U.S. Federal Reserve System, an insolvency official with jurisdiction over the administrator for LIBOR, a resolution authority with jurisdiction over the administrator for LIBOR or a court or an entity with similar insolvency or resolution authority over the administrator for LIBOR, which states that the administrator of LIBOR has ceased or will cease to provide LIBOR permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide LIBOR; or

(3)a public statement or publication of information by the regulatory supervisor for the administrator of LIBOR announcing that LIBOR is no longer representative.

(F)“Benchmark Transition Start Date” means (i) in the case of a Benchmark Transition Event, the earlier of (a) the applicable Benchmark Replacement Date and (b) if such Benchmark Transition Event is a public statement or publication of information of a prospective event, the 90th  day prior to the expected date of such event as of such public statement or publication of information (or if the expected date of such prospective event is fewer than 90 days after such statement or publication, the date of such statement or publication) and (ii) in the case of an Early Opt-in Election, the date specified by the Agent or the Required Lenders, as applicable, by notice (which may be via electronic means, including e-mail) to the Dealers, the Agent (in the case of such notice by the Required Lenders) and the Lenders.

(G) “Benchmark Unavailability Period” means, if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to LIBOR and solely to the extent that LIBOR has not been replaced with a Benchmark Replacement, the period (i) beginning at the time that such Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced LIBOR for all purposes hereunder in accordance with the Section titled “Effect of Benchmark Transition Event” and (ii) ending at the time that a Benchmark Replacement has replaced LIBOR for all purposes hereunder pursuant to the Section titled “Effect of Benchmark Transition Event.”

(H)“Early Opt-in Election” means the occurrence of:

(1)(a) a determination by the Agent or (b) a notification by the Required Lenders to the Agent (with a copy to the Dealers) that the Required Lenders have determined that U.S. dollar-denominated syndicated credit facilities being executed at such time, or that include language similar to that contained in this Section titled “Effect of Benchmark Transition Event,” are being executed or amended, as applicable, to incorporate or adopt a new benchmark interest rate to replace LIBOR, and

(2)(a) the election by the Agent or (b) the election by the Required Lenders to declare that an Early Opt-in Election has occurred and the provision, as applicable, by the Agent of written notice (which may be via electronic means, including e-mail) of such election to the Dealers and the Lenders or by the Required Lenders of written notice (which may be via electronic means, including e-mail) of such election to the Agent.

(I)“Federal Reserve Bank of New York’s Website” means the website of the Federal Reserve Bank of New York at http://www.newyorkfed.org, or any successor source.

(J)“Relevant Governmental Body” means the Federal Reserve Board and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve Board and/or the Federal Reserve Bank of New York or any successor thereto.

(K)“SOFR” with respect to any day means the secured overnight financing rate published for such day by the Federal Reserve Bank of New York, as the administrator of the benchmark, (or a successor administrator) on the Federal Reserve Bank of New York’s Website.

(L)“Term SOFR” means the forward-looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental Body.

(M)“Unadjusted Benchmark Replacement” means the Benchmark Replacement excluding the Benchmark Replacement Adjustment.

(vi) On March 5, 2021, the ICE Benchmark Administration (the "IBA"), the administrator of the London interbank offered rate, and the Financial Conduct Authority, the regulatory supervisor of the IBA, announced in public statements (the "Announcements") that the final publication or representativeness date for (i) 1-week and 2-month London interbank offered rate tenor settings will be December 31, 2021 and (ii) overnight, 1-month, 3-month, 6-month and 12-month London interbank offered rate tenor settings will be June 30, 2023.  No successor administrator for the IBA was identified in such Announcements.  The parties hereto agree and acknowledge that the Announcements resulted in the occurrence of a Benchmark Transition Event with respect to the London interbank offered rate pursuant to the terms of this Agreement and that any obligation of the Administrative Agent to notify any parties of such Benchmark Transition Event pursuant to clause (c)(iii) of this Section 3 shall be deemed satisfied.

 

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4.Security Interest.

 

(a)Each Dealer hereby grants to Agent, as collateral agent for the Lenders, a security interest in all of the Collateral as security for all Obligations under this Agreement.

 

(b)Agent will not exercise sole dominion and control over any Deposit Account included in the Collateral except as contemplated by Section 13 of this Agreement after a Default.

 

5.Representations and Warranties. Each Dealer represents and warrants that at the time of execution of this Agreement and at the time of each Approval and each advance hereunder:

 

(a)such Dealer is in good standing in its jurisdiction of organization and is qualified to transact business in each other jurisdiction in which the nature of its business or property requires such qualification, unless failure to so qualify could not result, individually or in the aggregate, in a Material Adverse Effect;

 

(b)such Dealer does not conduct business under any trade styles or trade names except as disclosed by such Dealer to Agent in writing and except to the extent that such conduct could not result, individually or in the aggregate, in a Material Adverse Effect;

 

(c)such Dealer has all the necessary authority to enter into and perform this Agreement, and the execution, delivery and performance of this Agreement will not violate (i) such Dealer’s organizational documents, (ii) any agreement binding upon it, unless such violation could not result, individually or in the aggregate, in a Material Adverse Effect, or (iii) any law, rule, regulation, order or decree, unless such violation could not result, individually or in the aggregate, in a Material Adverse Effect;

 

(d)this Agreement and each other Loan Document to which any such Dealer is a party constitute the legal, valid and binding obligations of each such Dealer, enforceable against such Dealer in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability;

 

(e)such Dealer keeps its records respecting accounts and chattel paper at its chief executive office identified below and keeps the Collateral only at locations permitted by Section 6(b)(xiii) of this Agreement;

 

(f)this Agreement correctly sets forth such Dealer’s true legal name, the type of its organization, the jurisdiction in which such Dealer is incorporated or otherwise organized, and such Dealer’s organizational identification number, if any, in each case, as of the date hereof;

 

(g)all information supplied by such Dealer to Agent or any Lender, including any Vehicle Certification, financial, credit or accounting statements or application for credit, in connection with this Agreement is true, correct and complete in all material respects;

 

(h)all advances and other transactions hereunder are for business purposes and not for personal, family, household or any other consumer purposes;

 

(i)such Dealer has good title to all Collateral in which it purports to have any interest;

 

(j)there are no actions or proceedings pending or threatened against Dealers which could reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect; and

 

(k)on the Closing Date, neither a Default nor an event which, with the giving of notice, the passage of time, or both, would result in a Default has occurred and is continuing, and, at the time of each Approval and each advance hereunder, a Default has not occurred and is not continuing.  

 

6.Covenants.

 

(a)Permitted Liens.  Until sold as permitted by this Agreement, each Dealer shall own all of its Collateral free and clear of all liens, security interests, claims and other encumbrances, whether arising by agreement or operation of law (collectively “Liens”), other than:

 

(i)Liens in favor of Agent;

 

(ii)Other than as set forth in Section 6(a)(x) below, purchase money Liens on Dealers’ new inventory manufactured by Vendors for which Agent does fund invoices directly on behalf of Dealers;

 

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(iii)Liens on Dealers’ new, used and pre-owned inventory manufactured by Vendors t for which Agent does fund invoices directly on behalf of Dealers; provided that such Liens are subject to subordination or intercreditor agreements in form and substance acceptable to Agent, in its sole discretion, whereby Agent subordinates its Liens in such inventory;

 

(iv)Liens for taxes, assessments or other governmental charges that are not due or payable or that are due or payable, but are being diligently contested in good faith by appropriate proceedings; provided that such contested taxes, assessments or other governmental charges do not exceed five hundred thousand dollars ($500,000.00) in aggregate at any time;

 

(v)Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in the ordinary course of business for sums not yet due or payable; provided, however, that Liens of landlords are permitted only to the extent that such Liens are subordinate to the Liens in favor of Agent pursuant to an agreement in form and substance acceptable to Agent or if such subordination is not required pursuant to the terms of the Program Terms Letter;

 

(vi)Liens incurred in the ordinary course of business in connection with workers’ compensation, unemployment insurance or other forms of governmental insurance or benefits;

 

(vii)existing Liens identified in Exhibit A to this Agreement, but only to the extent securing the indebtedness identified in such Exhibit; provided that the amount of such indebtedness does not exceed the outstanding amounts thereof on the Closing Date;

 

(viii)Liens for capital leases and equipment financing in a combined aggregate amount not exceeding ten million dollars ($10,000,000.00), but only to the extent encumbering the property leased under such capital leases or acquired with the proceeds of such equipment financing;

 

(ix)Liens on or with respect to cash collateral to secure (a) obligations to depository institutions with respect to deposit and treasury management services provided by such institutions to Dealers of up to one million dollars ($1,000,000.00) in the aggregate, and (b) reimbursement obligations under letters of credit of up to three million five hundred thousand dollars ($3,500,000.00) in the aggregate; provided that the amount of cash collateral securing the obligations described in clauses (a) and (b) of this Section 6(a)(ix) shall not exceed three million five hundred thousand dollars ($3,500,000.00) in the aggregate at any time; and

 

(x)Liens in favor of Kawasaki if (a) the Post-Close Period is in effect, or (b) such Liens are subject to the Kawasaki Intercreditor, and in either case such Liens do not secure an aggregate amount financed by Kawasaki in excess of five hundred thousand dollars ($500,000.00) at any time outstanding.

 

(b)Affirmative Covenants.  Each Dealer will:

 

(i)keep all Collateral at Permitted Locations and keep all tangible Collateral in good order, repair and operating condition and insured as required herein;

 

(ii)promptly file all tax returns required by law and promptly pay all taxes, fees, and other governmental charges for which it is liable, including without limitation all governmental charges against the Collateral or this Agreement;

 

(iii)permit Agent and its designees, without notice, to inspect the Collateral (including, without limitation, each certificate of title or statement of origin issued for Collateral financed by Lenders) during normal business hours and at any other time Agent deems desirable (and such Dealer hereby grants Agent and its designees an irrevocable license to enter such Dealer’s business locations during normal business hours without notice to such Dealer to account for and inspect all Collateral and to examine and copy such Dealer’s books and records related to the Collateral);

 

(iv)keep complete and accurate records of its business, including inventory, accounts and sales; and permit Agent and its designees to inspect and copy such records upon request;

 

(v)furnish Agent and Lenders with such additional information regarding the Collateral and such Dealer’s business and financial condition as Agent or any Lender may from time to time reasonably request (including without limitation financial statements and projections more frequently than set forth below) ), as well as any “Know Your Customer” documentation, including without limitation beneficial ownership certification as requested by Agent or Lenders (including upon addition of any new entity to this Agreement or other Loan Document);

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(vi)immediately notify Agent of any Material Adverse Effect or any reduction in the aggregate value of the Collateral of five hundred thousand dollars ($500,000.00) or more;

 

(vii)execute (or cause any third party in possession of Collateral to execute) all documents Agent requests to perfect and maintain the security interest in the Collateral granted to Agent, on behalf of Lenders, hereunder;

 

(viii)upon Agent’s request, at any time during the continuance of a Default, deliver to Agent immediately upon such request (and Agent may retain) each certificate of title or statement of origin issued for Collateral financed by any one or more Lenders;

 

(ix)at all times be duly organized, existing, in good standing, qualified and licensed to do business in each jurisdiction in which the nature of its business or property so requires;

 

(x)notify Agent of the commencement of any material legal proceedings against such Dealer;

 

(xi)comply with all laws, rules and regulations applicable to such Dealer, including without limitation, the USA PATRIOT Act, OFAC, and FCPA and all  laws, rules and regulations relating to  import or export controls or anti-money laundering;

 

(xii)conduct business only under such trade styles and trade names as such Dealer has disclosed to Agent in writing prior to such conduct;

 

(xiii)permit Eligible Inventory Collateral to be located at, or in-transit domestically to and from, only locations described in Exhibit B to this Agreement (as such Exhibit B may be updated from time to time with the approval of Agent) and at such other locations in the United States disclosed to Agent in writing at least fifteen (15) days prior to such Dealer’s use of such location (but excluding the locations of any consigned inventory), unless Agent otherwise agrees to such location or consignment in writing (collectively, the “Permitted Locations”); provided that such fifteen (15) day notice and Agent approval shall not be required for inventory (including consigned inventory not financed by Agent hereunder) with an aggregate invoice amount of less than five million dollars ($5,000,000.00) located at other locations (including locations outside of the United States, but excluding boat shows) for up to thirty (30) days per unit and, provided, further, that such notice shall be reduced to one (1) day and Agent approval shall not be required for inventory (excluding consigned inventory) with an aggregate invoice amount of less than five million dollars ($5,000,000.00) located at boat shows for up to thirty (30) days;

 

(xiv)provide to Agent or any Lender, when requested by Agent or such Lender, a copy of such Dealer’s organizational documents, and will provide to Agent or any requesting Lender any subsequent amendments thereto bearing indicia of filing from the appropriate Governmental Authority, or such other documents verifying such Dealer’s true and correct legal name as Agent may request from time to time;

 

(xv)permit (i) MarineMax Vacations, Ltd. to hold Eligible Inventory Collateral only with an aggregate invoice amount of not more than two million dollars ($2,000,000.00); provided that such inventory shall at all times be used by MarineMax Vacations, Ltd. in connection with its charter business or businesses directly related thereto, and (ii) MarineMax KW, LLC to finance inventory with Kawasaki only subject to the provisions of Section 6(a)(x); provided, however, that MarineMax KW, LLC shall not finance any inventory with Kawasaki unless (a) the Post-Close Period is in effect, or (b) the Kawasaki Intercreditor shall be in effect;

 

(xvi)immediately notify Agent of any Dealer which has not already executed a Vehicle Certification that is (i) principally directed or managed from the State of California or (ii) organized or incorporated under the laws of the State of New York, has a principal place of business in the State of New York, or does business in the State of New York; and

 

(xvii)within fifteen (15) days following the Closing Date or such later date as Agent may approve in its sole discretion (“Post-Close Period”), cause Kawasaki to execute and deliver to Agent the Kawasaki Intercreditor.

 

(c)Financial Covenants.  Dealers covenant and agree that, so long as any of the Obligations to Agent and any Lenders remain outstanding or this Agreement remains in effect, even if no Obligations to Agent or any Lenders are outstanding, Dealers and their subsidiaries, on a consolidated basis, shall:

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(i)maintain at all times a ratio of Debt to Tangible Net Worth of not more than 2.75 to 1.0 measured as of fiscal quarter end June 30, 2013 and each successive fiscal quarter end thereafter; and

 

(ii)maintain at all times a Current Ratio of not less than 1.2 to 1.0 as of fiscal quarter end June 30, 2013 and each successive fiscal quarter end thereafter.

 

(d)Negative Covenants.  No Dealer will, without Agent’s prior written consent:

 

(i)use (except for demonstration purposes), rent, lease, sell, transfer, consign (except consigned inventory located at Permitted Locations), license, encumber or otherwise dispose of any Collateral except for sales of inventory at retail in the ordinary course of such Dealer’s business and except for (A) Collateral with an aggregate value not exceeding five hundred thousand dollars ($500,000.00) in any one calendar year and (B) transfers of inventory to other dealers of such inventory to the extent consented to by Agent in writing in its Permitted Discretion;

 

(ii)sell or otherwise transfer inventory to a Dealer Affiliate, except in accordance with Section 6(e) of this Agreement;

 

(iii)engage in any other material transaction not in the ordinary course of such Dealer’s business with respect to the Collateral or which would result, individually or in the aggregate, in a Material Adverse Effect;

 

(iv)change the nature of its business in any material manner or its legal structure or be a party to a merger or consolidation (other than a merger or consolidation of a Dealer with or into another Dealer), divide itself pursuant to Section 18-217 of the Delaware Limited Liability Company Act or any similar law or statute or change its type of organization, its jurisdiction of incorporation or organization, or its organizational identification number, if any, or acquire any Person (an “Acquired Person”) or a substantial portion of the assets of any Person (“Acquired Assets”), except that Dealers may acquire an Acquired Person or Acquired Assets (Y) if each of the following conditions are met, without Agent’s prior written consent or (Z) if each of the following conditions are not met, with Agent’s prior written consent (which consent will not be unreasonably withheld if required solely because of a failure to satisfy clause (F) below):

(A)Dealers provide Agent with thirty (30) days’ prior written notice of such acquisition, accompanied by a certificate of Dealers’ chief financial officer that such acquisition complies with the conditions of this Section 6(d)(iv) (including without limitation a certification of the total acquisition cost of all Acquired Persons and Acquired Assets in the applicable rolling twelve-month period as set forth in clause (F), below, and the sum of Dealer’s unrestricted cash plus Availability as set forth in clause (G), below, and copies of pro forma financial statements and projections giving effect to such acquisition,

(B)immediately after any such acquisition of an Acquired Person, such Acquired Person becomes a party to this Agreement as a Dealer or a Guarantor of the Obligations, as determined by Agent in Agent’s Permitted Discretion, by executing and delivering to Agent such documents and agreements as Agent may reasonably require, at Dealers’ cost and expense,

(C)immediately after any such acquisition of Acquired Assets, Agent shall continue to have, on behalf of Lenders a first-priority perfected security interest in such Acquired Assets that constitute “Collateral” (as defined herein) and the other Collateral,

(D)at the time of such acquisition and after giving effect thereto, neither a Default nor an event which, with the giving of notice, the passage of time, or both, would result in a Default, shall have occurred and be continuing,

(E)before and after giving effect to such acquisition, as illustrated by the pro forma financial statements and projections provided to Agent pursuant to clause (A) above, Dealers shall be in compliance with the financial covenants set forth in Section 6(c) as of the most recently ended fiscal quarter and the next four fiscal quarters ending after such acquisition,

(F)the total acquisition cost of such Acquired Person or Acquired Assets (including, without limitation, acquired inventory) shall not exceed fifty million dollars ($50,000,000.00) in the aggregate in any rolling twelve-month period for all such Acquired Persons and Acquired Assets, collectively, and

(G)at the time of such acquisition, the sum of Dealers’ unrestricted cash, plus Availability shall be at least ten million dollars ($10,000,000.00); provided, however, that notwithstanding anything in this Section to the contrary, MarineMax Vacations, Ltd. shall not be required to become a party to this Agreement as a Dealer;

 

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(v)change its name or conduct business under a trade style or trade name other than those disclosed by such Dealer to Agent in writing without giving Agent at least thirty (30) days’ prior written notice thereof;

 

(vi)change its chief executive office or office where it keeps its records with respect to accounts or chattel paper;

 

(vii)change the state in which it is incorporated or otherwise organized (except upon thirty (30) days’ prior written notice to Agent);

 

(viii)finance on a secured basis with any Vendor or any third party the acquisition of inventory of the same brand as any new inventory financed or to be financed by Agent;

 

(ix)store Collateral financed by Lenders with any third party except for Collateral at Permitted Locations;

 

(x)incur additional Funded Debt, other than (A) Funded Debt under the KCS Vendor Agreement and MM Vendor Guaranty, and (B) other Funded Debt in an amount not to exceed one hundred thirty million dollars ($130,000,000.00) at any time outstanding, so long as prior to and immediately after giving effect to the incurrence of such Funded Debt under this Section (6)(d)(x)(B), (1) Dealers shall be in compliance with the financial covenants contained in Section 6(c) of this Agreement on a pro forma basis and (2) no Default shall exist or would result therefrom;

 

(xi)pay cash dividends or make other cash distributions with respect to or repurchase Stock of Dealers, other than such distributions and repurchases in an aggregate amount not to exceed fifty million dollars ($50,000,000.00) in the aggregate in any calendar year, so long as prior to and immediately after giving effect to any such distributions, (A) the sum of Dealers’ unrestricted cash plus Availability shall be at least twenty five million dollars ($25,000,000.00), and (B) no Default shall exist or would result therefrom;

 

(xii)make or cause to be made any Investment in any direct or indirect subsidiary of such Dealer unless such subsidiary is another Dealer who is a signatory to this Agreement; provided, however, that Dealers may make Investments in such subsidiaries that are not Dealers so long as (i) all such Investments do not exceed fifteen million dollars ($15,000,000.00) at any one time, and (ii) before making and after giving effect to any such Investment, there shall not exist or be continuing any Default or event which with the giving of notice, the passage of time, or both, would constitute a Default; or

 

(xiii)(A) cause or permit KCS RE to own or hold any assets other than the real estate owned by KCS RE as of the date hereof or (B) cause or permit Wave Aviation to own or hold any assets other than ownership of all or an interest in a jet or other aircraft and assets directly related thereto.

 

(e)Notwithstanding the provisions of Section 6(d)(ii) of this Agreement, a Dealer may sell or otherwise transfer inventory to another Dealer who is a signatory to this Agreement.  The parties agree that any such inventory that is sold or otherwise transferred at any time by one Dealer to another shall be and remain Collateral and shall continue to secure the Obligations.

 

(f)Each Dealer, within sixty (60) days of the end of each calendar year, will provide a list of all locations where Collateral is or may be kept, including information as to whether the property is owned or leased, any Liens or other encumbrances on such property, and if leased, the name of the lessor, the lease term, and any other information Agent shall request.  If any Collateral location is subject to a mortgage, deed of trust, or other Lien in favor of any Person other than Agent, except any Lien permitted by Section 6(a) of this Agreement, Dealers agree to promptly obtain an agreement from such Person, waiving such Person’s Lien on the Collateral and providing Agent reasonable access thereto, in form and substance acceptable to Agent and duly executed and delivered by such Person.

 

7.Insurance.

 

(a)All risk of loss, damage to or destruction of Collateral shall at all times be on Dealers. Each Dealer shall keep all of its tangible Collateral insured for full value against all insurable risks, under policies delivered to Agent, on terms and with insurers reasonably acceptable to Agent, with loss payable to Agent on behalf of Lenders (with respect to any claim in excess of two hundred fifty thousand dollars ($250,000.00) per occurrence), assignee or additional insured, as appropriate.  Such insurance shall be subject to cancellation or change only (i) upon ten (10) days written notice to Agent for non-payment of premium or (ii) upon thirty (30) days written notice to Agent for all other reasons, and shall provide that Agent’s interests will not be impaired by any failure of Dealers to comply with the terms of such insurance or by any exercise of remedies by Agent with respect to the property insured.  With respect to any claim during the continuance of any Default, Agent is authorized, but not required, to act as attorney‑in‑fact for each Dealer in adjusting and settling any insurance claims under any such policy and in endorsing any checks or drafts drawn by insurers.  To facilitate the exercise of such rights by Agent, each Dealer has executed and delivered to Agent a Power of Attorney, which Agent agrees not to exercise any rights under unless a Default has occurred and is continuing.  In addition, at any time (before and after the occurrence of any Default), (A) each Dealer shall promptly remit to Agent in the form received, with all necessary endorsements, all proceeds of such insurance which such Dealer may receive, and (B) Agent, at its election, shall either apply any proceeds of insurance it may receive toward payment of the Obligations or pay such proceeds to such Dealer or any other Dealer.

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(b)Except as otherwise required by Section 7(a) of this Agreement, Dealers shall (i) keep their insurable property adequately insured at all times by financially sound and reputable insurers to such extent and against such risks, including fire and other risks insured against by extended coverage, as is customary with companies similarly situated and in the same or similar businesses, (ii) maintain in full force and effect public liability and workers compensation insurance, in amounts customary for such similar companies to cover normal risks, by insurers reasonably satisfactory to Agent, and (iii) maintain such other insurance as may be required by law or reasonably requested by Agent.  Dealers shall deliver evidence of renewal of each insurance policy on or before the date of its expiration, and from time to time shall deliver to Agent, on or before the date hereof, and thereafter upon demand, evidence of the maintenance of such insurance.  Dealers shall deliver promptly to Agent copies of all reports provided to insurers by any Dealer.

 

(c)The following notice is given pursuant to Section 180/10 of the Collateral Protection Act set forth in Chapter 815 Section 180/1 of the Illinois Compiled Statutes; nothing contained in such notice shall be deemed to limit or modify the terms of this Agreement:  Unless EACH Dealer provides evidence of THE insurance coverage required by SUCH DEALER’S Agreement WITH Agent and lenders, Agent may purchase insurance at such DEALER’S expense to protect Agent’s and lenders’ interest in SUCH Dealer’s collateral.  This insurance may, but need not, protect SUCH Dealer’s interest.  The coverage that Agent purchases may not pay any claim that SUCH Dealer makes or any claim that is made against SUCH Dealer in connection with the collateral.  SUCH Dealer may later cancel any insurance purchased by Agent, but only after providing Agent evidence that SUCH Dealer has obtained insurance as required under this Agreement.  If Agent purchases insurance for ANY collateral, DealerS will be responsible for the costs of that insurance, including the insurance premium, interest and any other chaRges Agent may impose in connection with the placement of the insurance, until the effective date of the cancellation or expiration of the insurance.  The costs of the insurance may be added to DEALERs’ total outstanding balance or obligation.  The costs of the insurance may be more than the cost of insurance A Dealer may be able to obtain on its own.  

 

8.Financial Statements and Certificates.  Unless waived by Agent, Dealers will deliver to Agent, in a form reasonably satisfactory to Agent:

 

(a)Dealers’ and their subsidiaries’ audited year-end balance sheet and audited annual profit and loss statement for each fiscal year after the date hereof, prepared on a consolidated basis, within twenty (20) days after the same are prepared but in no event later than one hundred and twenty (120) days after the end of each fiscal year, accompanied by an unqualified opinion of independent certified public accountants acceptable to Agent;

 

(b)within sixty (60) days after the end of each of such Dealers’ fiscal quarters, a reasonably detailed balance sheet and income statement as of the last day of such quarter covering Dealers’ and their subsidiaries’ operations on a consolidated basis for such quarter;

 

(c)within thirty (30) days after the end of Dealers’ fiscal months, a reasonably detailed balance sheet and income statement as of the last day of such month covering Dealers’ and their subsidiaries’ operations for such month, on a consolidated basis;

 

(d)within thirty (30) days after Dealers’ year-end, Dealers’ and their subsidiaries’ financial projections for the next fiscal year on a consolidated basis;

 

(e)concurrently with the delivery of the financial statements required to be delivered under clauses (a) and (b), above, a compliance certificate in the form attached hereto as Exhibit C, executed by an officer of Dealers,

 

(f)by the 10th day of each month (or the first Business Day following the 10th day of each month if the 10th day is not a Business Day), or more frequently as requested by Agent, a completed Borrowing Base Certificate;

 

(g)by the 10th day of each month (or the first Business Day following the 10th day of each month if the 10th day is not a Business Day), (i) a schedule of Accounts in form and manner reasonably acceptable to Agent (which shall include current addresses and telephone numbers of account debtors and a detailed aging of the Accounts for such period); (ii) a

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monthly inventory report in the form attached in form and manner reasonably acceptable to Agent, together with supporting documentation requested by Agent; and (iii) a schedule of Parts in form and manner reasonably acceptable to Agent, together with supporting documentation requested by Agent, in each case based on the balances as of the last day of the immediately preceding month.

 

(h)within ten (10) days after Agent’s reasonable request, any other information relating to the Collateral or the financial condition of any Dealer or Dealers or their subsidiaries;

 

(i)concurrently with the delivery of the financial statements required to be delivered under clauses (a) and (b), above, a trigger compliance certificate in the form attached hereto as Exhibit F (the “Trigger Compliance Certificate”), setting forth a calculation of Fixed Charge Coverage Ratio and TTM EBITDA, executed by an officer of Dealers;

 

(j)concurrently with the delivery of financial projections required to be delivered under clause (d) above, a schedule of all of Dealers’ trademarks, patents, applications for trademarks or patents, or any other filing made by or on behalf of Dealers in the United States Patent and Trademark Office within the fiscal year just ending.

 

Each Dealer represents that all financial statements and information which have been or may hereafter be delivered by Dealers are and will be true and correct in all material respects and, with respect to all quarterly and annual financial statements, prepared in accordance with GAAP consistently applied in all material respects, and there has been no material adverse change in the financial or business condition of Dealers, taken as a whole, since the submission to Agent of such financial statements, and Dealers acknowledge Agent’s reliance thereon.

 

9.Payment Terms.  Each Dealer will pay Agent for the benefit of Lenders, the principal amount of the Obligations owed by such Dealer on each item of Collateral financed by Lenders upon the occurrence of any of the following events, subject to the Program Terms Letter: (a) when such Collateral is lost, stolen or materially damaged and such loss or damage is the subject of an insurance claim payable to Agent as loss payee for the benefit of Lenders, (i) a portion of the principal amount of the Obligations with respect to such Collateral equal to such principal amount, minus the insurance claim amount (net of any applicable deductible) immediately after such loss or damage or after the determination of the claim amount or the deductible amount, as applicable, and (ii) the remaining principal amount of the Obligations with respect to such Collateral immediately upon the earlier of (A) receipt of any proceeds of such insurance (including, without limitation, receipt of any proceeds made payable to such Dealer and Agent jointly) or rejection or denial of such claim and (B) thirty (30) days (or such later date as Agent may agree in writing) after such loss or damage; (b) when such Collateral is lost, stolen or materially damaged and such loss or damage is not the subject of an insurance claim payable to Agent as loss payee for the benefit of Lenders, immediately after such loss or damage; and (c) when otherwise required under the terms of this Agreement. In addition, each Dealer will pay Agent the required principal amount of the Obligations owed Lenders on each item of Collateral financed by Lenders in strict accordance with any repayment provisions for such Collateral as described in the Program Terms Letter and the applicable Advance Rate will be reduced in strict accordance with any curtailment schedule or other curtailment. The initial payment terms, curtailment terms and advance rates with respect to Dealers’ financing program hereunder are set forth in the Program Terms Letter.  Subsequent financing program terms, or changes to Dealers’ then current financing program terms, may be set forth in an amended Program Terms Letter executed by the parties thereto.  If a Dealer is required to make immediate payment to Agent of any past due obligation discovered during any Collateral review, or at any other time, Agent’s acceptance of such payment shall not be construed to have waived or amended the terms of its financing program.  Each Dealer will send all payments to Agent as directed.  Agent may apply: (1) payments to reduce finance charges first and then principal, regardless of a Dealer’s instructions; and (2) principal payments to the oldest (earliest) Invoice for Collateral financed by Lenders, but, in any event, all principal payments, may, in Agent’s sole discretion, first be applied to such Collateral which is sold, lost, stolen, damaged, rented, leased, or otherwise disposed of or unaccounted for.  Any Vendor Credit granted to any Dealer for any Collateral will not reduce the Obligations Dealers owe Lenders until Agent has received payment therefor in cash.  Each Dealer will: (A) pay Agent even if any Collateral is defective or fails to conform to any warranties extended by any third party; and (B) indemnify and hold Agent and each Lender harmless against all claims and defenses asserted by any buyer of any Collateral.  Each payment under the Loan Documents shall be paid in U.S. dollars and without setoff, recoupment, counterclaim or deduction of any kind. Each Dealer waives all rights of setoff such Dealer may have against Agent or any Lender.  Any payment hereunder which would otherwise be due on a day which is not a Business Day, shall be due on the next succeeding Business Day, with such extension of time included in any calculation of applicable finance charges.  In addition to the other provisions of this Agreement, in order to adequately secure Dealers’ Obligations to Agent and Lenders, Dealers shall, at Agent’s request, immediately pay Agent the amount necessary to reduce the sum of outstanding advances hereunder to an amount which does not exceed the amount available to be borrowed pursuant to the provisions of the Program Terms Letter.  

 

10.Calculation of Charges.

 

(a)Dealers shall pay fees, charges and interest (collectively, “Charges”) with respect to each advance in accordance with this Agreement and pursuant to the terms of the Program Terms Letter.  Dealers shall pay Agent its customary Charges for any check or other item which is returned unpaid to Agent.  Unless otherwise provided in this Agreement, the following additional provisions shall be applicable to Charges:  (i)  all Charges shall be paid by Dealers monthly pursuant to

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the terms of the billing statement in which such Charges appear; (ii) interest on each advance and principal amount of the Obligations related thereto shall be computed each calendar month on the sum of the daily balances thereof during such month divided by thirty (30) and (A) in the case where a monthly rate of interest is provided for, multiplied by the monthly rate provided for in this Agreement; or (B) in the case where an annual rate of interest is provided for, multiplied by one-twelfth of the annual rate provided for in this Agreement; or (C) in the case where a daily rate of interest is provided for, multiplied by such daily rate and multiplied by thirty (30); (iii) interest on an advance shall begin to accrue on the “Start Date” which shall be defined as the earlier of: (A) the invoice date referred to in the Vendor’s Invoice; or (B) the date any one or more Lenders make such advance; provided, however, if a Vendor fails to fully pay, by honoring or paying any Lender Credit or otherwise, the interest or other cost of financing such inventory during the period between the Start Date and the end of the Free Floor Period, then Dealers shall pay such interest to Agent  on behalf of Lenders on demand as if there were no Free Floor Period with respect to such inventory; (iv) for the purpose of computing Charges, any payment will be credited pursuant to Agent’s payment recognition policy, as in effect from time to time; and (v) advances or any part thereof not paid when due (and Charges not paid when due, at the option of Agent, shall become part of the principal amount of the Obligations and) shall bear interest at the Default Rate.

 

(b)Agent and Lenders intend to strictly conform to the usury laws governing this Agreement. Regardless of any provision contained herein, in any Transaction Statement, or in any other document, neither Agent nor any Lender shall ever be deemed to have contracted for, charged or be entitled to receive, collect or apply as interest, any amount in excess of the maximum amount allowed by applicable law.  If Agent or any Lender ever receives any amount which, if considered to be interest, would exceed the maximum amount permitted by law, Agent or such Lender will apply such excess amount to the reduction of the unpaid principal balance which any Dealer owes, and then will pay any remaining excess to such Dealer.  In determining whether the interest paid or payable exceeds the highest lawful rate, Dealers, Agent and each Lender shall, to the maximum extent permitted under applicable law, (i) characterize any non-principal payment (other than payments which are expressly designated as interest payments hereunder) as an expense or fee rather than as interest, (ii) exclude voluntary pre-payments and the effect thereof, and (iii) spread the total amount of interest throughout the entire term of this Agreement so that the interest rate is uniform throughout such term. Agent will recognize and credit payments made by check, ACH, federal wire, or other acceptable means, according to its payment recognition policies from time to time in effect, or as otherwise agreed.  Information regarding Agent payment recognition policies is available from Dealers’ CDF representative or the Agent website, or will be communicated by Agent to Dealers by mail, courier or electronically in a separate writing or website posting, or set forth in a Transaction Statement and/or a monthly billing statement.  

 

11.Billing Statement/Fees; Right to Modify Charges and Other Terms.

 

(a)Agent will transmit or otherwise send to each Dealer a monthly billing statement identifying all charges due on such Dealer’s account pursuant to this Agreement.  The charges specified on each billing statement will be (1) due and payable no later than the fifteenth (15th) day of the month in which such billing statement is transmitted to or received by Dealer, and (2) an account stated, unless Agent receives a Dealer’s written objection thereto within fifteen (15) days after it is transmitted or otherwise sent to Dealers.  If Agent does not receive, by the 25th day of any given month, payment of all charges accrued to a Dealer’s account with any one or more Lenders during the immediately preceding month, Dealers will (to the extent allowed by law and if requested by Agent) pay Agent a late fee equal to the greater of five dollars ($5.00) or five percent (5%) of the amount of such charges (payment of such fee does not waive the default caused by the late payment).  Agent may adjust the billing statement at any time to conform to applicable law and this Agreement.

 

(b)Agent may charge one or more fees in connection with the servicing and administration of a Dealer’s account, for its own account as set forth herein and in the Program Terms Letter (and for the avoidance of doubt, Lenders other than CDF, in its capacity as Agent, shall have no interest in any such fees).  

 

12.Default.  The occurrence of one or more of the following events shall constitute a default by Dealers (a “Default”):

 

(a)a Dealer shall either (1) fail to pay any principal amount of Obligations owed to Agent when due (without any grace period) or (2) fail to pay any interest or other Obligations owed to Agent within fifteen (15) days after the due date therefore;

 

(b)any representation made to Agent or any Lender by or on behalf of Dealers shall not be true when made;

 

(c)if a Dealer shall breach any covenant (other than any covenant contained in Section 6(c) of this Agreement), warranty or agreement in this Agreement or in any other Loan Document to or with Agent and/or any Lender and such breach shall not be cured within thirty (30) days after the earlier of (i) knowledge thereof by an officer of any Dealer and (ii) written notice of such breach is delivered by Agent to any Dealer; provided that, if such breach is subject to cure and Dealers are diligently pursuing cure by appropriate means at the end of such thirty (30) days, then Dealers shall have an additional thirty (30) days thereafter to complete the cure of such breach;

 

(d)Dealers shall breach any covenant contained in Section 6(c) of this Agreement;

 

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(e)a Dealer (including, if a Dealer is a partnership or limited liability company, any partner or member of a Dealer) shall become insolvent or generally fail to pay its debts as they become due or, if a business, shall cease to do business as a going concern other than mergers or consolidations permitted by Section 6(d)(iv) of this Agreement;

 

(f)any letter of credit provided by a Dealer to Agent with respect to any Obligations or Collateral shall terminate or not be renewed at least sixty (60) days prior to its stated expiration or maturity;

 

(g)a Dealer abandons any Collateral with an aggregate value exceeding five hundred thousand dollars ($500,000.00) in any twelve (12) month period;

 

(h)a Dealer shall make an assignment for the benefit of creditors, or commence a proceeding with respect to itself under any bankruptcy, reorganization, arrangement, insolvency, receivership, dissolution or liquidation statute or similar law of any jurisdiction, or any such proceeding shall be commenced against it or any of its property and such proceeding commenced against it or any of its property shall not be dismissed or otherwise discharged within sixty (60) days thereafter (an “Automatic Default”);

 

(i)an attachment, sale or seizure shall be issued or shall be executed against assets of any Dealer with a value exceeding five hundred thousand dollars ($500,000.00) in the aggregate in any twelve (12) month period;

 

(j)a Dealer shall file or authorize the filing of any correction or termination statement with respect to any UCC financing statement or other filing made by Agent in connection herewith;

 

(k)any third party shall file any correction or termination statement with respect to any UCC filing made by Agent in connection herewith and Dealers shall fail to perfect Agent’s security interest in the Collateral and re-establish the first-priority thereof within thirty (30) days after the filing of such correction or termination statement;

 

(l)a material adverse change shall occur in the business, operations or financial condition of Dealers, taken as a whole;

 

(m)(i) a Dealer fails to make any payment in excess of [****] when due with respect to any Debt owed to any third party (including Lender Affiliates) of [****] or more in the aggregate and such failure shall continue after any applicable notice, grace or cure period therefor; or (ii) a default shall occur, or a Dealer shall give or receive notice of default, with respect to any Debt owed to any third party (including Lender Affiliates) of [****] or more in the aggregate and such default shall entitle such third party to declare such Debt due and payable prior to its stated maturity or to exercise any other right or remedy or take any adverse action with respect thereto; or (iii) a default shall occur, or a Dealer shall give or receive notice of default, with respect to any Debt owed to any third party (including Lender Affiliates) of [****] or more in the aggregate and such third party shall have declared such Debt due and payable prior to its stated maturity or exercised any other right or remedy or taken any adverse action with respect thereto;

 

(n)any final judgment against any Dealer for the payment of [****] or more in excess of insurance, and such judgment shall remain unstayed and unpaid for over thirty (30) days;

 

(o)any events shall occur which, but for the dollar thresholds set forth in this Section 12, would constitute Defaults hereunder and, in the aggregate, such events relate to asset values, Collateral values, or payments in excess of [****] in any twelve (12) month period.

 

(p)any material provision of any Loan Document, at any time after its execution and delivery, for any reason other than as expressly permitted hereunder or thereunder, ceases to be in full force and effect, or any party hereto or any Guarantor contests in any manner the validity or enforceability of any provision of any Loan Document;

 

(q)any ERISA Event occurs with respect to a pension plan or multi-employer plan which has resulted or could reasonably be expected to result in liability of any Dealer under Title IV of ERISA or other applicable law to any pension plan, employee benefit plan or multi-employer plan, the Pension Benefit Guaranty Corporation or any other Person in an aggregate amount equal to or in excess of five million dollars ($5,000,000.00) in any calendar year, or any Dealer or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA or other applicable law under a multi-employer plan in an aggregate amount equal to or in excess of five million dollars ($5,000,000.00); or

 

(r)a Dealer defaults under the terms of any other agreement with any Lender or Lender Affiliate (and such Lender or Lender Affiliate notifies Dealer Representative of same in writing), including, without limitation, the KCS Vendor Agreement, which default is not cured or waived within the applicable grace period, if any.

 

13.Rights and Remedies Upon Default.

 

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(a)Upon the occurrence of a Default, Agent, acting on behalf of Lenders pursuant to Section 21(a), shall have all rights and remedies of a secured party under the UCC as in effect in any applicable jurisdiction and other applicable law and all the rights and remedies set forth in this Agreement.  Upon the occurrence of a Default, Agent may, and at the direction of the Required Lenders shall:

 

(i)terminate any obligations Agent or any Lender has under this Agreement and any outstanding Approvals immediately and/or declare any and all Obligations immediately due and payable without notice or demand;

 

(ii)exercise control over any Deposit Accounts (as defined in Article 9 of the Illinois Uniform Commercial Code) included in the Collateral and apply any balances on deposit therein to the Obligations in such order and amount as Agent may elect;

 

(iii)enter any premises of any one or more of Dealers, with or without process of law, without force, to search for, take possession of, and remove the Collateral, or any part thereof;

 

(iv) take possession of the Collateral or any part thereof on any one or more of Dealers’ premises and cause it to remain there at Dealers’ expense, pending sale or other disposition;  

 

(v)apply the Default Rate, without regard to whether Agent has accelerated any Obligations, and without notice to Dealers.

 

Each Dealer waives notice of intent to accelerate, and of acceleration of any Obligations.  If Agent requests, each Dealer shall cease disposition of and shall assemble the Collateral and make it available to Agent, at Dealers’ expense, at a convenient place or places designated by Agent.  Each Dealer agrees that the sale of inventory by Agent to a Person who is liable to Agent under a guaranty, endorsement, repurchase agreement or the like shall not be deemed to be a transfer subject to UCC §9-618 or any similar provision of any other applicable law, and each Dealer waives any provision of such laws to that effect.  Each Dealer agrees that the repurchase of inventory by a Vendor pursuant to a repurchase agreement with Agent shall be a commercially reasonable method of disposition. Dealers shall be jointly and severally liable to Agent for any deficiency resulting from Agent’s disposition of any Collateral, including without limitation a repurchase by a Vendor, regardless of any subsequent disposition thereof.  No Dealer is a beneficiary of, nor has any right to require Agent to enforce, any repurchase agreement. Any notice of a disposition shall be deemed reasonably and properly given if given to a Dealer at least ten (10) days before such disposition.  If a Dealer fails to perform any of its obligations under this Agreement, Agent may perform the same in any form or manner Agent in its reasonable discretion deems necessary or desirable, and all monies paid by Agent in connection therewith shall be additional Obligations and shall be immediately due and payable without notice together with interest payable on demand at the Default Rate.  All of Agent’s rights and remedies shall be cumulative.  At Agent’s request, or without request in the event of an Automatic Default, each Dealer shall pay all Vendor Credits to Agent as soon as the same are received for application to the Obligations.  Each Dealer authorizes Agent to collect such amounts directly from Vendors and, upon request of Agent, shall instruct Vendors to pay Agent directly.  Each Dealer irrevocably waives any requirement that Agent retain possession and not dispose of any Collateral until after an arbitration hearing, arbitration award, confirmation, trial or final judgment or appeal thereof.  During the continuation of a Default, Agent’s election to make or not make a Loan to a Dealer is solely at Agent’s discretion.    

 

(b)All Collections received by Agent after acceleration, a Default (including, without limitation, a Payment Default or a Specified Default) or demand for payment of all of the Obligations, in connection with any workout of the Obligations including any forbearance arrangement, or after the initiation by or against any Dealer of a bankruptcy or other insolvency proceeding or other proceedings for collection of the Obligations, whether received pursuant to such demand or as a result of legal proceedings against any Dealer or through payment by or action against any other Person in any way liable for the Obligations, shall be applied, so far as the same will reach, in the following order:

 

(i)First, to the costs and expenses, including attorneys’ fees, incurred solely by Agent in effecting such recovery, in enforcing any right or remedy under the Loan Documents, or in any way related to the Loans, the Outstandings, the Loan Documents, this Agreement, the Future Advances, Approvals or Collections;

 

(ii)Second, to accrued interest, ratably in accordance with each Lender’s respective Ratable Share of such interest being calculated at the interests rates set forth in Section 2(a)(vi) hereof; and

 

(iii)Third, to unpaid principal, ratably in accordance with each Lender’s Ratable Share, subject to such Lender’s obligation to fund Loans made by Agent based upon financed Invoices related to Approvals.

 

14.Power of Attorney.  Each Dealer authorizes Agent to: (a) file financing statements describing Agent as “Secured Party,” such Dealer as “Debtor” and indicating the Collateral (including, without limitation, the indication of the Collateral as “all assets”); (b) authenticate, execute or endorse on behalf of such Dealer any instruments, chattel paper,

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certificates of title, manufacturer statements of origin, builder’s certificate, financing statements and amendments thereto, or other notices or records comprising or related to Collateral or evidencing financing under the Agreement or evidencing or maintaining the perfection of the security interest granted hereby, as attorney‑in‑fact for such Dealer; and (c) supply any omitted information and correct errors in any documents between Agent, such Dealer and, if applicable, Lenders.  This power of attorney and the other powers of attorney granted herein are irrevocable and coupled with an interest.  

 

15.Collection and Other Costs.  Dealers shall pay to Agent, on behalf of itself and the other Lenders, on demand all reasonable attorneys’ fees and legal expenses and other costs and expenses incurred by Agent in connection with establishing, perfecting, maintaining perfection of, protecting and enforcing its Lien on the Collateral and collecting any Obligations, or in connection with the negotiation and execution of this Agreement and any modification thereof, any Default or in connection with any action or proceeding under any bankruptcy or insolvency laws or incurred pursuant to an arbitration proceeding involving a Dealer or any Collateral.  All fees, expenses, costs and other amounts described in this Section 15 shall constitute Obligations, shall be secured by the Collateral and interest shall accrue thereon at the Default Rate.

 

16.Information.  Each Dealer irrevocably authorizes Agent and each Lender to investigate and make inquiries in a commercially reasonable manner of former, current, or future creditors or other persons and credit bureaus regarding or relating to Dealers (including, to the extent permitted by law, any equity holders of any Dealer, unless the equity of such Dealer is publicly-traded on a recognized exchange).  Information requested to be provided by Dealer shall be requested through Agent and provided to Agent for distribution to Lenders.  Agent and each Lender may provide to any Lender Affiliate or any third parties any financial, credit or other information regarding Dealers that Agent or such Lender may at any time possess, whether such information was supplied by Dealers or otherwise obtained by such Agent or Lender, and such information shall be provided on a confidential basis to the extent it is otherwise confidential.  Further, each Dealer irrevocably authorizes and instructs any third parties (including without limitation, any Vendors or customers of Dealers) to provide to Agent any credit, financial or other information regarding Dealers that such third parties may at any time possess, whether such information was supplied by any Dealer to such third parties or otherwise obtained by such third parties.

 

17.Amendments and Waivers.

 

(a)Except as specifically set forth herein (including without limitation in Sections 2(a)(x) and 2(c) of this Agreement), no amendment or waiver of any provision of this Agreement or the Program Terms Letter, and no consent with respect to any departure by any Dealer therefrom, shall be effective unless the same shall be in writing and signed by Agent, Required Lenders (or by Agent with the consent of Required Lenders), and the Dealers, and then such waiver shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such waiver, amendment, or consent shall, unless in writing and signed by all the Lenders directly affected thereby (or by Agent with the consent of all the Lenders directly affected thereby), in addition to Agent and Required Lenders (or by Agent with the consent of Required Lenders) and the Dealers, do any of the following:

 

(i)increase or extend the Allocation of any Lender to make a Loan or otherwise finance any Collateral;

(ii)postpone or delay any date fixed for, or reduce or waive, any scheduled installment of principal or any payment of interest, fees or other amounts (other than principal) due to any one or more Lenders hereunder or under any Transaction Statement, or extend the term of this Agreement as set forth in Section 19 below;

(iii)reduce the principal of, or the rate of interest specified herein or the amount of interest payable in cash specified herein or in any Transaction Statement, or of any fees or other amounts payable hereunder or under any Transaction Statement;

(iv)change the definition of Required Lenders;

(v)amend any provision providing for consent or other action by all Lenders;

(vi)discharge any Dealer from its respective payment Obligations, or release all or substantially all of the Collateral, except as otherwise may be provided in this Agreement; or

(vii)change the definition of Eligible Accounts or Eligible Parts if as a result thereof the amount of the Loans permitted to be outstanding would be increased;

it being agreed that all Lenders shall be deemed to be directly affected by an amendment or waiver of the type described in the preceding clauses (iv), (v), (vi) and (vii).

 

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(b)If Agent desires to take any action described in this Section 17 requiring one or all Lender’s consent, Agent will furnish Lender with a written notice specifying the action to be taken.  If Lender declines to give its consent to any such action, it must notify Agent in writing of such fact within ten (10) Business Days thereafter.  If Lender fails to give such notice within such ten (10) Business Day period, its consent to such action shall be deemed to have been not given.  

 

(c)No amendment, waiver or consent shall, unless in writing and signed by Agent, affect the rights or duties of Agent under this Agreement or any Transaction Statement.

 

(d)Notwithstanding the foregoing, Agent, with the consent of the Dealers, may amend, modify or supplement any Loan Document without the consent of any Lender or the Required Lenders in order to correct, amend or cure any inconsistency or defect or correct any typographical error or other manifest error in any Loan Document, and such amendment, modification or supplement shall become effective without any further action or consent of any other party to any Loan Document if the same is not objected to in writing by the Required Lenders within five Business Days following receipt of notice thereof.  Furthermore, notwithstanding anything to the contrary herein, with the consent of Agent at the request of the Dealers (without the need to obtain any consent of any Lender), any Loan Document may be amended to add terms that are favorable to the Lenders (as reasonably determined by Agent).

 

18.Dealers’ Claims Against Vendors.  No Dealer will assert against Agent or any Lender any claim or defense such Dealer may have against any Vendor whether for breach of contract, warranty, misrepresentation, failure to ship, lack of authority, or otherwise, including without limitation claims or defenses based upon charge backs, credit memos, rebates, price protection payments or returns. Any such claims or defenses or other claims or defenses a Dealer may have against a Vendor shall not affect Dealers’ liabilities or obligations to Agent or Lenders.

 

19.Term and Termination.  Unless sooner terminated as provided in this Agreement, the term of this Agreement shall commence on the date hereof and continue until June 30, 2024 and, if Agent provides written notice to Dealers of Agent’s intent to renew the current term at least 90 (ninety) days prior to the end of the then current term, at Agent’s election, subject to Section 17(a)(ii) above, the term of this Agreement shall automatically renew for up to two successive one year periods thereafter.  Upon termination of this Agreement, all Obligations shall become immediately due and payable without notice or demand.  Upon any termination, Dealers shall remain fully and jointly and severally liable to each Lender for all Obligations owed to such Lender, including without limitation all fees, expenses and charges, arising prior to or after termination, and each Lender’s rights and remedies and security interest, if any, shall continue until all Obligations to such Lender hereunder are paid and all obligations of Dealers are performed in full.  All waivers and indemnifications in Agent’s and each Lender’s favor, and the agreement to arbitrate, set forth in this Agreement will survive any termination of this Agreement..

 

20.Assignments and Participations; Binding Effect.

(a)Binding Effect.  This Agreement shall become effective when it shall have been executed by the Dealers, Agent and the Lenders and when Agent shall have been notified by each Lender that such Lender has executed it.  Thereafter, it shall be binding upon and inure to the benefit of, but only to the benefit of Dealers, Agent and each Lender and, in each case, their respective successors and permitted assigns.  Except as expressly provided herein, no Dealer shall have the right to assign any rights or obligations hereunder or any interest herein.

(b)Right to Assign.  Each Lender may sell, transfer, negotiate or assign (a “Sale”) all or a portion of its rights and obligations hereunder (including all or a portion of its Allocation and its rights and obligations with respect to any Loan pursuant to any Loan Document) to (i) any existing Lender, (ii) any Affiliate of any existing Lender or (iii) any other Person (other than a Disqualified Person) approved in writing by Agent and Dealers, which Dealer approval shall not be unreasonably withheld and shall be deemed to have been given if no Dealer provides a response to a request for approval within ten (10) Business Days after such request is sent (provided that no Dealer approval shall be required if any Default has occurred and is continuing); provided, however, that (w) for each Loan pursuant to this Agreement or any Loan Document, the aggregate outstanding principal amount (determined as of the effective date of the applicable assignment) of the Allocation subject to any such Sale shall be in a minimum amount of fifteen million dollars ($15,000,000.00), unless such Sale is made to an existing Lender or an Affiliate of any existing Lender, is of the assignor’s (together with its Affiliates) entire interest in such facility or is made with the prior consent of Agent, (x) such Sales shall be effective only upon the acknowledgement in writing of such Sale by Agent, and (y) interest accrued prior to and through the date of any such Sale may not be assigned.  “Disqualified Person” means any business competitor of any Dealer that is in the same or similar line of business as any Dealer (other than the business of providing financial services) and such competitor has been identified as such in a writing by any Dealer delivered to Agent.  In addition, notwithstanding anything to the contrary contained in this Section 20, any Lender may disclose on a confidential basis any non-public information relating to its Loans to any prospective assignee, SPV or rating agency rating the obligations of such Lender.  Notwithstanding the foregoing, CDF, as Agent and/or a Lender, has the right to complete a Sale of all or any portion of its interest in the Loan and Loan Documents to any Person in connection with a sale or other transfer of all or a material portion of CDF’s business to a third party, without the consent of any Dealer or any Lender.

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(c)Procedure.  The parties to each Sale made in reliance on clause (b) above (other than those described in clause (e) or (f) below) shall execute and deliver to Agent an Assignment via an electronic settlement system designated by Agent (or, if previously agreed with Agent, via a manual execution and delivery of the Assignment) evidencing such Sale, together with any existing Loan Document subject to such Sale, any tax forms required by the assignee to be delivered and payment of an assignment fee in the amount of $3,500 to Agent, unless waived or reduced by Agent; provided, that (i) if a Sale by a Lender is made to an Affiliate of such assigning Lender, then no assignment fee shall be due in connection with such Sale, and (ii) if a Sale by a Lender is made to an assignee that is not an Affiliate of such assignor Lender, and concurrently to one or more Affiliates of such assignee, then only one assignment fee of three thousand five hundred dollar ($3,500.00) shall be due in connection with such Sale (unless waived or reduced by Agent).  Upon receipt of all the foregoing, and conditioned upon such receipt and, if such Assignment is made in accordance with clause (iii) of Section 20(b), upon Agent (and Dealers, if applicable) consenting to such Assignment, from and after the effective date specified in such Assignment, Agent shall record or cause the information contained in such Assignment to be recorded in a record of ownership kept by Agent.

(d)Effectiveness.  Subject to the recording of an Assignment by Agent in a record of ownership, (i) the assignee thereunder shall become a party hereto and, to the extent that rights and obligations under this Agreement and the applicable Transactions Statement have been assigned to such assignee pursuant to such Assignment, shall have the rights and obligations of a Lender and (ii) the assignor thereunder shall, to the extent that rights and obligations under this Agreement have been assigned by it pursuant to such Assignment, relinquish its rights (except for the payment in full of the Obligations) and be released from its obligations under this Agreement and the Transaction Statements, other than those relating to events or circumstances occurring prior to such assignment (and, in the case of an Assignment covering all or the remaining portion of an assigning Lender’s rights and obligations under the Loan Documents, such Lender shall cease to be a party hereto).

(e)Participants and Grant of Option to Fund to SPVs.  In addition to the other rights provided in this Section 20, each Lender may, (i) with notice to Agent, grant to an SPV the option to make all or any part of any Loan that such Lender would otherwise be required to make hereunder (and the exercise of such option by such SPV and the making of Loans pursuant thereto shall satisfy the obligation of such Lender to make such Loans hereunder) and such SPV may assign to such Lender the right to receive payment with respect to any Obligation and (ii) without notice to or consent from Agent or the Dealers, sell participations to one or more Persons in or to all or a portion of its rights and obligations under the Loan Documents; provided, however, that, whether as a result of any term of any Loan Document or of such grant or participation, (A) no such SPV or participant shall have a commitment, or be deemed to have made an offer to commit, to make Loans hereunder, and, except as provided in the applicable option agreement, none shall be liable for any obligation of such Lender hereunder, (B) such Lender’s rights and obligations, and the rights and obligations of the Dealers and other Lenders towards such Lender, under any Loan Document shall remain unchanged and each other party hereto shall continue to deal solely with such Lender, which shall remain the holder of the Obligations in any register maintained by Agent, except that each such SPV may receive other payments that would otherwise be made to such Lender with respect to Loans funded by such SPV to the extent provided in the applicable option agreement and set forth in a notice provided to Agent by such SPV and such Lender, provided, however, that in no case shall an SPV granted an option pursuant to this clause (e) or participant have the right to enforce any of the terms of any Loan Document, and (C) the consent of such SPV or participant shall not be required (either directly, as a restraint on such Lender’s ability to consent hereunder or otherwise) for any amendments, waivers or consents with respect to any Loan Document or to exercise or refrain from exercising any powers or rights such Lender may have under or in respect of the Loan Documents (including the right to enforce or direct enforcement of the Obligations), except for those described in clauses (ii), (iii) and (v) of Section 17(a) with respect to amounts, or dates fixed for payment of amounts, to which such participant would otherwise be entitled.  

(f)Assignments to Affiliate SPVs.  In addition to the other rights provided elsewhere in this Section 20, each Lender that is an Affiliate of the Agent may, with notice to Agent in such form as shall be acceptable to the Agent (but without the consent of any Person and without compliance with any limitation or procedure specified in subsection 20(b) or 20(c)), sell, transfer, negotiate or assign all or any portion of its rights, title or interests hereunder with respect to any Loans or other Obligations (including any interest accrued or to accrue thereon) to an SPV that is an Affiliate of such Lender, and such SPV may thereafter, with notice to Agent, assign such Obligation to any other SPV that is an Affiliate of such Lender or re-assign all or a portion of its interests in any Obligations to the Lender holding the related Allocation.  Upon any assignment pursuant to this clause (f), any assignee SPV shall have all the rights of a Lender hereunder, including the right to receive all payments with respect to the assigned Obligations; provided, however, that, whether as a result of any term of any Loan Document or of such assignment, no such assignee SPV shall have a commitment, or be deemed to have made an offer to commit, to make Loans hereunder, and such Lender (and not such SPV) shall be liable for any obligation of such Lender to continue to make Loans hereunder.    

(g)Agreements with Respect to SPVs. No party hereto shall institute against any SPV that funds or purchases any Obligation pursuant to clauses (e) or (f) any bankruptcy, reorganization, insolvency, liquidation or similar proceeding, prior to the date that is one year and one day after the payment in full of all outstanding indebtedness of such SPV; provided, however, that each Lender having designated an SPV as such agrees to indemnify each Indemnitee against any Liability that may be incurred by, or asserted against, such Indemnitee as a result of failing to institute such proceeding (including a failure to be reimbursed by such SPV for any such Liability).  The agreement in the preceding sentence shall survive the termination

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of the Loans and the payment in full of the Obligations.  In addition, notwithstanding anything to the contrary contained in this Section 20, any SPV may disclose on a confidential basis any non-public information relating to its Loans to any rating agency rating the obligations of such SPV.  For the avoidance of doubt, an SPV that is a securitization trust formed by or at the direction of a Lender or an Affiliate of a Lender, as depositor, shall be deemed to be an Affiliate of such Lender.  

(h)Participant Register. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Dealers, maintain a register on which it enters the name and address of each participant and the principal amounts (and stated interest) of each participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any participant or any information relating to a participant's interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person other than Agent except to the extent that such disclosure is necessary to establish that such commitment, loan, or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations.  The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.  For the avoidance of doubt, Agent shall have no responsibility for maintaining a Participant Register.

21.Agent

(a)Appointment and Duties.  

(i)Each Lender hereby appoints CDF as Agent (together with any successor Agent pursuant to Section 21(i)) as Agent hereunder and authorizes Agent to (A) execute and deliver this Agreement and the other Loan Documents and accept delivery thereof on its behalf from any Dealer, (B) take such action on its behalf and to exercise all rights, powers and remedies and perform the duties as are expressly delegated to Agent under such Loan Documents and (C) exercise such powers as are incidental thereto.

(ii)Without limiting the generality of clause (i) above, Agent shall have the sole and exclusive right and authority (to the exclusion of the Lenders), and is hereby authorized, to (A) act as the disbursing and collecting agent for the Lenders with respect to all payments and collections arising in connection with any Loan Documents (including in bankruptcy, insolvency or similar proceeding), and each Person making any payment in connection with this Agreement or any other Loan Document is hereby authorized to make such payment to Agent, (B) file and prove claims and file other documents necessary or desirable to allow the claims of the Lenders with respect to any Obligation in any bankruptcy, insolvency or similar proceeding (but not to vote, consent or otherwise act on behalf of such Person), (C) act as collateral agent for each Lender for purposes of the perfection of all Liens created by such agreements and all other purposes stated therein, (D) manage, supervise and otherwise deal with the Collateral, (E) take such other action as is necessary or desirable to maintain the perfection and priority of the Liens created or purported to be created by this Agreement or the other Loan Documents, (F) except as may be otherwise specified in any Loan Document, exercise all remedies given to Agent and the other Lenders with respect to the Collateral, whether under the Loan Documents, applicable law or otherwise and (G) execute any amendment, consent or waiver under the Loan Documents on behalf of any Lender that has consented in writing to such amendment, consent or waiver; provided, however, that Agent hereby appoints, authorizes and directs each Lender to act as collateral sub-agent for Agent, the Lenders for purposes of the perfection of Liens with respect to any deposit account maintained by a Dealer with, and cash and cash equivalents held by, such Lender,  and may further authorize and direct the Lenders to take further actions as collateral sub-agents for purposes of enforcing such Liens or otherwise to transfer the Collateral subject thereto to Agent, and each Lender hereby agrees to take such further actions to the extent, and only to the extent, so authorized and directed.

(iii)Under this Agreement and the other Loan Documents, Agent (A) is acting solely on behalf of the Lenders , with duties that are entirely administrative in nature, notwithstanding the use of the defined term “Agent”, the terms “agent”, “Agent” and “collateral agent” and similar terms in any Loan Document to refer to Agent, which terms are used for title purposes only, (B) is not assuming any obligation under any Loan Document other than as expressly set forth therein or any role as agent, fiduciary or trustee of or for any Lender or any other Person and (C) shall have no implied functions, responsibilities, duties, obligations or other liabilities under any Loan Document, and each Lender, by accepting the benefits of the Loan Documents, hereby waives and agrees not to assert any claim against Agent based on the roles, duties and legal relationships expressly disclaimed in clauses (A) through (C) above.

(b)Binding Effect.  Each Lender, by accepting the benefits of this Agreement and the other Loan Documents, agrees that (i) any action taken by Agent in accordance with the provisions of the Loan Documents, (ii) any action taken by

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Agent in reliance upon the instructions of Lenders and (iii) the exercise by Agent or of the powers set forth herein or therein, together with such other powers as are incidental thereto, shall be authorized and binding upon all of the Lenders.

(c)Use of Discretion.

(i)Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that Agent is required to exercise as directed in writing by the Lenders; provided, that Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose Agent to liability or that is contrary to any Loan Document or applicable law.

(ii)Agent shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to any Dealer or Dealer Affiliate that is communicated to or obtained by Agent or any of its Affiliates in any capacity.

(iii)Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against the Lenders or any of them shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, Agent in accordance with the Loan Documents for the benefit of all the Lenders; provided that the foregoing shall not prohibit (A) Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Agent) hereunder and under the other Loan Documents or (B) any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to any Dealer under any bankruptcy or other debtor relief law; and provided further that if at any time there is no Person acting as Agent hereunder and under the other Loan Documents, then the Lenders shall have the rights otherwise ascribed to Agent under Section 13.

(d)Delegation of Rights and Duties. Agent may, upon any term or condition it specifies, delegate or exercise any of its rights, powers and remedies under, and delegate or perform any of its duties or any other action with respect to, any Loan Document by or through any trustee, co-agent, employee, attorney-in-fact and any other Person (including any Lender).  Any such Person shall benefit from this Section 21 to the extent provided by Agent.  For the avoidance of doubt, this provision is not intended to permit Agent to be replaced hereunder.

(e)Reliance and Liability.

(i)Agent may, without incurring any liability hereunder, (A) consult with any of its Related Persons (including advisors to, and accountants and experts engaged by, any Dealer) and (B) rely and act upon any document and information (including those transmitted by electronic transmission) and any telephone message or conversation, in each case believed by it to be genuine and transmitted, signed or otherwise authenticated by the appropriate parties.

(ii)None of Agent and its Affiliates shall be liable for any action taken or omitted to be taken by any of them under or in connection with any Loan Document, and each Lender and each Dealer hereby waive and shall not assert (and each Dealer shall cause each other Dealer to waive and agree not to assert) any right, claim or cause of action based thereon, except to the extent of liabilities resulting primarily from the gross negligence or willful misconduct of Agent or, as the case may be, such Related Person (each as determined in a final, non-appealable judgment by a court of competent jurisdiction) in connection with the duties expressly set forth herein.  Without limiting the foregoing, Agent:

(A)shall not be responsible or otherwise incur liability for any action or omission taken in reliance upon the instructions of the Lenders or for the actions or omissions of any of its Related Persons selected with reasonable care (other than employees, officers and directors of Agent, when acting on behalf of Agent);

 

(B)shall not be responsible to any Lender or other Person for the due execution, legality, validity, enforceability, effectiveness, genuineness, sufficiency or value of, or the attachment, perfection or priority of any Lien created or purported to be created under or in connection with, any Loan Document;

 

(C)makes no warranty or representation, and shall not be responsible, to any Lender or other Person for any statement, document, information, representation or warranty made or furnished by or on behalf of any Dealer or any Related Person of any Dealer in connection with any

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Loan Document or any transaction contemplated therein or any other document or information with respect to any Dealer, whether or not transmitted or (except for documents expressly required under any Loan Document to be transmitted to the Lenders) omitted to be transmitted by Agent, including as to completeness, accuracy, scope or adequacy thereof, or for the scope, nature or results of any due diligence performed by Agent in connection with the Loan Documents;

 

(D)shall not have any duty to ascertain or to inquire as to the performance or observance of any provision of any Loan Document, whether any condition set forth in any Loan Document is satisfied or waived, as to the financial condition of any Dealer or as to the existence or continuation or possible occurrence or continuation of any Default and shall not be deemed to have notice or knowledge of such occurrence or continuation unless it has received a notice from any Dealer, any Lender describing such Default clearly labeled “notice of default” (in which case Agent shall promptly give notice of such receipt to all Lenders);

 

For each of the items set forth in clauses (A) through (D) above, each Lender and each Dealer hereby waives and agrees not to assert (and each Dealer shall cause each other Dealer to waive and agree not to assert) any right, claim or cause of action it might have against Agent based thereon.

 

(iii)Each Lender (A) acknowledges that it has performed and will continue to perform its own diligence and has made and will continue to make its own independent investigation of the operations, financial conditions and affairs of the Dealers and (B) agrees that is shall not rely on any audit or other report provided by Agent or its Related Persons (an “Agent Report”).  Each Lender further acknowledges that any Agent Report (i) is provided to the Lenders solely as a courtesy, without consideration, and based upon the understanding that such Lender will not rely on such Agent Report, (ii) was prepared by Agent or its Related Persons based upon information provided by the Lenders solely for Agent’s own internal use, (iii) may not be complete and may not reflect all information and findings obtained by Agent or its Related Persons regarding the operations and condition of the Lenders.  Neither Agent nor any of its Related Persons makes any representations or warranties of any kind with respect to (i) any existing or proposed financing, (ii) the accuracy or completeness of the information contained in any Agent Report or in any related documentation, (iii) the scope or adequacy of Agent’s and its Related Persons’ due diligence, or the presence or absence of any errors or omissions contained in any Agent Report or in any related documentation, and (iv) any work performed by Agent or Agent’s Related Persons in connection with or using any Agent Report or any related documentation.

(iv)Neither Agent nor any of its Related Persons shall have any duties or obligations in connection with or as a result of any Lender receiving a copy of any Agent Report. Without limiting the generality of the forgoing, neither Agent nor any of its Related Persons shall have any responsibility for the accuracy or completeness of any Agent Report, or the appropriateness of any Agent Report for any Lender’s purposes, and shall have no duty or responsibility to correct or update any Agent Report or disclose to any Lender any other information not embodied in any Agent Report, including any supplemental information obtained after the date of any Agent Report.  Each Lender releases, and agrees that it will not assert, any claim against Agent or its Related Persons that in any way relates to any Agent Report or arises out of any Lender having access to any Agent Report or any discussion of its contents, and agrees to indemnify and hold harmless Agent and its Related Persons from all claims, liabilities and expenses relating to a breach by any Lender arising out of such Lender’s access to any Agent Report or any discussion of its contents.

(f)Agent Individually. Agent and its Affiliates may make loans and other extensions of credit to, acquire Stock of, engage in any kind of business with, any Dealer or Affiliate thereof as though it were not acting as Agent and may receive separate fees and other payments therefor.  To the extent Agent or any of its Affiliates makes any Loan or otherwise becomes a Lender hereunder, it shall have and may exercise the same rights and powers hereunder and shall be subject to the same obligations and liabilities as any other Lender and the term “Lender” and any similar terms shall, except where otherwise expressly provided in any Loan Document, include, without limitation, Agent or such Affiliate, as the case may be, in its individual capacity as Lender.

(g)Lender Credit Decision.  Each Lender acknowledges that it shall, independently and without reliance upon Agent, any Lender or any of their Related Persons or upon any document (including any offering and disclosure materials in connection with the syndication of the Loans) solely or in part because such document was transmitted by Agent or any of its Related Persons, conduct its own independent investigation of the financial condition and affairs of each Dealer and make and continue to make its own credit decisions in connection with entering into, and taking or not taking any action under, any Loan Document or with respect to any transaction contemplated in any Loan Document, in each case based on such documents and information as it shall deem appropriate.  Except for documents expressly required by any Loan Document to be transmitted by Agent to the Lenders, Agent shall not have any duty or responsibility to provide any Lender with any credit or

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other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of any Dealer or any Affiliate of any Dealer that may come in to the possession of Agent or any of its Related Persons.

(h)Expenses; Indemnities; Withholding.  

(i)Each Lender agrees to reimburse Agent and each of its Related Persons (to the extent not reimbursed by any Dealer) promptly upon demand, severally and ratably, for any costs and expenses (including fees, charges and disbursements of financial, legal and other advisors and other expenses paid in the name of, or on behalf of, any Dealer) that may be incurred by Agent or any of its Related Persons in connection with the preparation, syndication, execution, delivery, administration, modification, consent, waiver or enforcement of, or the taking of any other action (whether through negotiations, through any work-out, bankruptcy, restructuring or other legal or other proceeding (including, without limitation, preparation for and/or response to any subpoena or request for document production relating thereto) or otherwise) in respect of, or legal advice with respect to its rights or responsibilities under, any Loan Document.

(ii)Each Lender further agrees to indemnify Agent and each of its Related Persons (to the extent not reimbursed by any Dealer), severally and ratably, from and against Liabilities (including, to the extent not indemnified by Dealer pursuant to this Agreement or any other Loan Document, taxes, interests and penalties imposed for not properly withholding or backup withholding on payments made to or for the account of any Lender) that may be imposed on, incurred by or asserted against Agent or any of its Related Persons in any matter relating to or arising out of, in connection with or as a result of any Loan Document or any other act, event or transaction related, contemplated in or attendant to any such document, or, in each case, any action taken or omitted to be taken by Agent or any of its Related Persons under or with respect to any of the foregoing; provided, however, that no Lender shall be liable to Agent or any of its Related Persons to the extent such liability has resulted primarily from the gross negligence or willful misconduct of Agent or, as the case may be, such Related Person, as determined by a court of competent jurisdiction in a final non-appealable judgment or order.

(iii)To the extent required by any applicable law, Agent may withhold from any payment to any Lender under a Loan Document an amount equal to any applicable withholding tax.  If the IRS or any other Governmental Authority asserts a claim that Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate certification form was not delivered, was not properly executed, or fails to establish an exemption from, or reduction of, withholding tax with respect to a particular type of payment, or because such Lender failed to notify Agent or any other Person of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason), or Agent reasonably determines that it was required to withhold taxes from a prior payment but failed to do so, such Lender shall promptly indemnify Agent fully for all amounts paid, directly or indirectly, by such Agent as tax or otherwise, including penalties and interest, and together with all expenses incurred by Agent, including legal expenses, allocated internal costs and out-of-pocket expenses. Agent may offset against any payment to any Lender under a Loan Document, any applicable withholding tax that was required to be withheld from any prior payment to such Lender but which was not so withheld, as well as any other amounts for which Agent is entitled to indemnification from such Lender pursuant to this Agreement or any other Loan Document.

(i)Release of Collateral or Guarantors.  Each Lender hereby consents to the release and hereby directs Agent to release (or, in the case of clause (ii) below, release or subordinate) any Lien held by Agent for the benefit of the Lenders against (i) any Collateral that is sold, transferred, conveyed or otherwise disposed of by a Dealer in a transaction permitted by the Loan Documents (including pursuant to a waiver or consent), (ii) any property subject to a Lien permitted as a “purchase money security interest” hereunder or under any other Loan Document, and (iii) all of the Collateral and all Lenders and Guarantors, upon (A) termination of this Agreement, (B) payment and satisfaction in full of all Loans and all other Obligations under the Loan Documents that Agent has theretofore been notified in writing by the holder of such Obligation are then due and payable, (C) deposit of cash collateral with respect to all contingent Obligations, in amounts and on terms and conditions and with parties satisfactory to Agent and each Lender that is, or may be, owed such Obligations (excluding contingent Obligations as to which no claim has been asserted) and (D) to the extent requested by Agent, receipt by Agent and the Lenders of liability releases from the Lenders each in form and substance acceptable to Agent.

22.Non-Funding Lenders; Replacement of Lenders.

(a)Non-Funding Lenders.

(i)Responsibility.  The failure of any Non-Funding Lender to make any Loan or any payment required by it under any Loan Document on the date specified therefor shall not relieve any other Lender

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(each such other Lender, an “Other Lender”) of its obligations to make such Loan or make any other such required payment on such date, and neither Agent nor, other than as expressly set forth herein, any Other Lender shall be responsible for the failure of any Non-Funding Lender to make a Loan or make any other required payment under any Loan Document.

(ii)Voting Rights.  Notwithstanding anything set forth herein to the contrary, a Non-Funding Lender shall not have any voting or consent rights under or with respect to any Loan Document or constitute a “Lender” (or be, or have its Loans included in the determination of “Required Lenders”) for any voting or consent rights under or with respect to any Loan Document, provided that (A)  the Allocation of a Non-Funding Lender may not be increased, extended or reinstated, (B) the principal of a Non-Funding Lender’s Loans may not be reduced or forgiven, and (C) the interest rate applicable to Obligations owing to a Non-Funding Lender may not be reduced in such a manner that by its terms affects such Non-Funding Lender more adversely than other Lenders, in each case without the consent of such Non-Funding Lender.  

(iii)Payments to a Non-Funding Lender.  Agent shall be authorized to use all payments received by Agent for the benefit of any Non-Funding Lender pursuant to this Agreement to pay in full the Aggregate Excess Funding Amount to the appropriate Lenders.  Following such payment in full of the Aggregate Excess Funding Amount, Agent shall be entitled to hold such funds as cash collateral in a non-interest bearing account up to an amount equal to such Non-Funding Lender’s unfunded Allocation and to use such amount to pay such Non-Funding Lender’s funding obligations hereunder until the Obligations are paid in full in cash and this Agreement terminated.  Upon any such unfunded obligations owing by a Non-Funding Lender becoming due and payable, Agent shall be authorized to use such cash collateral to make such payment on behalf of such Non-Funding Lender.  With respect to such Non-Funding Lender’s failure to fund Loans, any amounts applied by Agent to satisfy such funding shortfalls shall be deemed to constitute a Loan and, if necessary to effectuate the foregoing, the proceeds of such Loans shall be applied to pay the unpaid principal of the Loans owing to the other Lenders until such time as the aggregate amount of the Loans are held by the Lenders in accordance with their Ratable Shares.  Any amounts owing by a Non-Funding Lender to Agent which are not paid when due shall accrue interest at the interest rate applicable during such period to the Loans. In the event that Agent is holding cash collateral of a Non-Funding Lender that cures pursuant to clause (iv) below or ceases to be a Non-Funding Lender pursuant to the definition of Non-Funding Lender, Agent shall return the unused portion of such cash collateral to such Lender.

(iv)Cure.  A Lender may cure its status as a Non-Funding Lender under clause (a) of the definition of Non-Funding Lender if such Lender (A) fully pays to Agent the Aggregate Excess Funding Amount, plus all interest due thereon and (B) timely funds the next Loan required to be funded by such Lender or makes the next reimbursement required to be made by such Lender.  Any such cure shall not relieve any Lender from liability for breaching its contractual obligations hereunder.

(v)Fees.  A Lender that is a Non-Funding Lender pursuant to clause (a) of the definition of Non-Funding Lender shall not earn and shall not be entitled to receive, and the Dealers shall not be required to pay, such Lender’s portion of the Unused Line Fee (set forth in the Program Terms Letter) during the time such Lender is a Non-Funding Lender pursuant to clause (a) thereof.  

(b)Replacement of Lenders.  Within forty-five (45) days after any failure by any Lender other than Agent or an Affiliate of Agent to consent to a requested amendment, waiver or modification to any Loan Document in which Required Lenders have already consented to such amendment, waiver or modification but the consent of each Lender (or each Lender directly affected thereby, as applicable) is required with respect thereto, Dealers may, at their option, notify Agent and such non-consenting Lender of Dealers’ intention to obtain, at Dealers’ expense, a replacement Lender (“Replacement Lender”) for such non-consenting Lender, which Replacement Lender shall be reasonably satisfactory to Agent.  In the event the Dealers obtain a Replacement Lender within sixty (60) days following notice of its intention to do so, such non-consenting Lender shall sell and assign its Loans and remaining Allocation to such Replacement Lender, at par, provided that the Dealers have reimbursed such non-consenting Lender for its costs for which it is entitled to reimbursement under this Agreement through the date of such sale and assignment.  In the event that a replaced Lender does not execute an Assignment pursuant to Section 20(c) of this Agreement within five (5) Business Days after receipt by such replaced Lender of notice of replacement pursuant to this section and presentation to such replaced Lender of an Assignment evidencing an assignment pursuant to this section, the Dealers shall be entitled (but not obligated) to execute such an Assignment on behalf of such replaced Lender, and any such Assignment so executed by the Dealers, the Replacement Lender and Agent, shall be effective for purposes of this Section 22(b) and Section 20(c).  Upon any such Assignment and payment and compliance with the other provisions of Section 20(c), such replaced Lender shall no longer constitute a “Lender” for purposes hereof; provided, any rights of such replaced Lender to indemnification hereunder shall survive.

23.Notices.  Except as required by law or as otherwise provided herein, all notices or other communications to be given under the Agreement or under the UCC shall be in writing served either personally, by deposit with a reputable

34

 

 

 

overnight courier with charges prepaid, or by deposit in the United States mail, first‑class postage prepaid or provided for, addressed, as applicable, to (a) Dealers at their chief executive offices shown below or to any office to which Agent sends billing statements, (b) to Agent at its address shown beneath its signature hereunder, to the attention of its Credit Department, (c) to any Lender at the address such Lender shall designate on the Loan Document, or (d) at such other address designated by such party by notice to the other.  Any such communication shall be deemed to have been given upon delivery in the case of personal delivery, one Business Day after deposit with an overnight courier or three (3) Business Days after deposit in the United States mail except that any notice of change of address shall not be effective until actually received.  

 

24.Severability.  If any provision of this Agreement or its application is invalid or unenforceable, the remainder of this Agreement will not be impaired or affected and will remain binding and enforceable.

 

25.Receipt of Agreement.  Each Dealer acknowledges that it has received a true and complete copy of this Agreement.  Each Dealer has read and understands this Agreement. Notwithstanding anything herein to the contrary, Agent and each Lender may rely on any facsimile copy, electronic data transmission, or electronic data storage of: this Agreement, any Transaction Statement, billing statement, financing statement, authorization to pre-file financing statements, invoice from a Vendor, financial statements or other reports, which will be deemed an original, and the best evidence thereof for all purposes.

 

26.Acceptance by Agent.  If Agent is the sole Lender, Agent may accept this Agreement by issuance of an Approval to a Vendor for the purchase of inventory by Dealers or by making an advance hereunder.  

 

27.Miscellaneous. Time is of the essence regarding each Dealer’s performance of its obligations to Agent and Lenders.  Each Dealer’s liability to Agent and Lenders is direct and unconditional and will not be affected by the release or nonperfection of any security interest granted hereunder. Subject to the consent of each Lender, Agent may refrain from or postpone enforcement of this Agreement or any other agreements between Agent and a Dealer without prejudice, and the failure to strictly enforce these agreements will not create a course of dealing which waives, amends or modifies such agreements. Any waiver by Agent of a Default shall only be effective if approved by Lenders pursuant to Section 17(a) and transmitted to a Dealer in a writing signed by Agent.  The express terms of this Agreement will not be modified by any course of dealing, usage of trade, or custom of trade which may deviate from the terms hereof.  If a Dealer fails to pay any taxes, fees or other obligations which may materially impair Agent’s or any Lender’s interest in the Collateral, or fails to keep any Collateral insured, Agent, on behalf of itself and the other Lenders,  may, but shall not be required to, pay such amounts.  Such paid amounts will be: (a) additional Obligations which Dealers owe under this Agreement, which are subject to finance charges as provided herein and shall be secured by the Collateral; and (b) due and payable immediately in full upon demand to Dealers.  Section titles used herein are for convenience only, and do not define or limit the contents of any Section.  All words used herein shall be understood and construed to be of such number and gender as the circumstances may require.  This Agreement may be validly executed in one or more multiple counterpart signature pages.  This Agreement shall be construed without presumption for or against any party who drafted all or any portion of this Agreement.  No modification of this Agreement shall bind Agent or Lenders unless in a writing signed by Agent and each Lender (or by Agent with the consent of each Lender) and transmitted to Dealers.  Among other symbols, Agent hereby adopts “Wells Fargo Commercial Distribution Finance, LLC,” “Wells Fargo Commercial Distribution Finance,” “WFCDF,” “CDF” or “Agent” as evidence of its intent to authenticate a record in its capacity as Agent.  

 

 

28.List of Dealers.  The following persons are parties to this Agreement as Dealers:

 

DEALER NAME

TYPE OF ENTITY

JURISDICTION

MarineMax, Inc.

 

corporation

 

Florida

MarineMax East, Inc.

 

corporation

 

Delaware

MarineMax Services, Inc.

 

corporation

 

Delaware

MarineMax Northeast, LLC

 

limited liability company

 

Delaware

Boating Gear Center, LLC

 

limited liability company

 

Delaware

US Liquidators, LLC

 

limited liability company

 

Delaware

Newcoast Financial Services, LLC

My Web Services, LLC

MarineMax Charter Services, LLC

[****]

 

limited liability company

limited liability company

limited liability company

limited liability company

 

Delaware

Delaware

Delaware

Florida

Gulfport Marina, LLC

 

limited liability company

 

Delaware

FWW, LLC

 

limited liability company

 

Florida

Fraser Yachts Florida, Inc.

 

corporation

 

Florida

Fraser Yachts California

 

corporation

 

California

35

 

 

MarineMax KW, LLC

 

limited liability company

 

Florida

BY Holdings, LLC

 

limited liability company

 

Florida

Northrop and Johnson Yachts-Ships LLC

 

limited liability company

 

Florida

Northrop & Johnson California, Inc.

 

corporation

 

California

Perfect Yacht Charter LLC

 

limited liability company

 

Delaware

N & J Media LLC

 

limited liability company

 

Florida

Northrop & Johnson Holding LLC.

 

limited liability company

 

Florida

N & J Group, LLC

 

limited liability company

 

Florida

Private Insurance Services LLC

 

limited liability company

 

Florida

Skipper Marine, LLC

 

limited liability company

 

Wisconsin

Skipper Bud’s of Illinois, LLC

 

limited liability company

 

Illinois

Skipper Marine of Madison, LLC

 

limited liability company

 

Wisconsin

Skipper Marine of Fox Valley, LLC

 

limited liability company

 

Wisconsin

Skipper Marine of Chicago-Land, LLC

 

limited liability company  

 

Illinois

Skipper Marine of Michigan, LLC

 

limited liability company

 

Michigan

Skipper Marine of Ohio, LLC

 

limited liability company

 

Ohio

Silver Seas Yachts, LLC

 

limited liability company

 

Arizona

Silver Seas California, Inc.

    

corporation

 

Florida

MarineMax Products, Inc.

    

corporation

 

Florida

KCS International Inc.

 

corporation

 

Wisconsin

Nisswa Marine, LLC

      

limited liability company

 

Minnesota

 

 

29.Limitation of Remedies and Damages.  In the event there is any dispute under this Agreement, the aggrieved party shall not be entitled to exemplary or punitive damages so that the aggrieved party’s remedy in connection with any action arising under or in any way related to this Agreement shall be limited to a breach of contract action and any damages in connection therewith are limited to actual and direct damages, except that Agent may seek equitable relief in connection with any judicial repossession of, or temporary restraining order with respect to, the Collateral.

 

30.BINDING ARBITRATION.

 

(a)Arbitrable Claims. Except as otherwise specified below, all actions, disputes, claims and controversies under common law, statutory law or in equity of any type or nature whatsoever, whether arising before or after the date of this Agreement, and whether directly or indirectly relating to: (i) this Agreement and/or any amendments and addenda hereto, or the breach, invalidity or termination hereof; (ii) any previous or subsequent agreement between Agent and any one or more Lenders and/or any one or more Dealers; (iii) any act committed by Agent or by any parent company, subsidiary or affiliated company of Agent (the “Agent Companies”), or by any employee, agent, officer or director of an Agent Company whether or not arising within the scope and course of employment or other contractual representation of the Agent Companies provided that such act arises under a relationship, transaction or dealing between and any one or more Lenders and/or any one or more Dealers; and/or (iv) any other relationship, transaction or dealing between or among Agent and any one or more Dealers (collectively the “Disputes”), will be subject to and resolved by binding arbitration.  Notwithstanding the foregoing, the parties agree that either party may pursue claims against the other that do not exceed fifteen thousand dollars ($15,000.00) in the aggregate in a court of competent jurisdiction.  Service of arbitration claims shall be acceptable if made by U.S. mail or overnight delivery to the address for the party described herein.

 

(b)Administrative Body.  All arbitration hereunder will be conducted in accordance with the Commercial Arbitration Rules of either: (i) The American Arbitration Association (“AAA”); or (ii) United States Arbitration & Mediation (“USA&M”).  The party first filing an arbitration claim shall designate which arbitration forum and rules are to be applied for all disputes between the parties. The arbitration rules are currently found at www.adr.org for AAA, and at www.usam.com for USA&M. AAA claims may be filed in any AAA office.  Claims filed with USA&M shall be filed in its Midwest office located at 720 Olive Street, Suite 2020, St. Louis, Missouri 63101.  All arbitrator(s) selected will be attorneys with at least five (5) years secured transactions experience.  A panel of three arbitrators shall hear all claims exceeding one million dollars ($1,000,000.00), exclusive of interest, costs and attorneys’ fees.  The arbitrator(s) will decide if any inconsistency exists between the rules of the applicable arbitral forum and the arbitration provisions contained herein.  If such inconsistency exists, the arbitration provisions contained herein will control and supersede such rules.  The arbitrator shall follow the terms of this Agreement and the applicable law, including without limitation, the attorney-client privilege and the attorney work product doctrine.

 

Inventory Financing Agreement36

HB: 4815-0457-9305.12

 

 

(c)Hearings.  Each party hereby consents to a documentary hearing for all arbitration claims by submitting the dispute to the arbitrator(s) by written briefs and affidavits, along with relevant documents. However, arbitration claims will be submitted by way of an oral hearing if any party requests an oral hearing within forty (40) days after service of the claim and that party remits the appropriate deposit for fees and arbitrator compensation within ten (10) days of making the request.  Each party agrees that failure to timely pay all fees and arbitrator compensation billed to the party requesting the oral hearing will be deemed such party’s consent to submitting the Dispute to the arbitrator on documents and such party’s waiver of its request for an oral hearing.  The site of all oral arbitration hearings will be in the Division of the Federal Judicial District in which the designated arbitration association maintains a regional office that is closest to Dealers.

 

(d)Discovery.  Discovery permitted in any arbitration proceeding commenced hereunder is limited as follows. No later than forty (40) days after the filing and service of a claim for arbitration, the parties in contested cases will exchange detailed statements setting forth the facts supporting the claim(s) and all defenses to be raised during the arbitration, and a list of all exhibits and witnesses. No later than twenty-one (21) days prior to the oral arbitration hearing, the parties will exchange a final list of all exhibits and all witnesses, including any designation of any expert witness(es) together with a summary of their testimony; a copy of all documents and a detailed description of any property to be introduced at the hearing. Under no circumstances will the use of interrogatories, requests for admission, requests for the production of documents or the taking of depositions be permitted. However, in the event of the designation of any expert witness(es), the following will occur: (i) all information and documents relied upon by the expert witness(es) will be delivered to the opposing party; (ii) the opposing party will be permitted to depose the expert witness(es); (iii) the opposing party will be permitted to designate rebuttal expert witness(es); and (iv) the arbitration hearing will be continued to the earliest possible date that enables the foregoing limited discovery to be accomplished.

 

(e)Exemplary or Punitive Damages.  The arbitrator(s) will not have the authority to award exemplary or punitive damages.

 

(f)Confidentiality of Awards.  All arbitration proceedings, including testimony or evidence at hearings, will be kept confidential, although any award or order rendered by the arbitrator(s) pursuant to the terms of this Agreement may be confirmed as a judgment or order in any state or federal court of competent jurisdiction within the federal judicial district which includes the residence of the party against whom such award or order was entered. This Agreement concerns transactions involving commerce among the several states. The Federal Arbitration Act, Title 9 U.S.C. Sections 1 et seq., as amended (“FAA”) will govern all arbitration(s) and confirmation proceedings hereunder.

 

(g)Prejudgment and Provisional Remedies.  Nothing herein will be construed to prevent Agent’s or a Dealer’s use of bankruptcy, receivership, injunction, repossession, replevin, claim and delivery, sequestration, seizure, attachment, foreclosure, and/or any other prejudgment or provisional action or remedy relating to any Collateral for any current or future Debt owed by either party to the other. Any such action or remedy will not waive Agent’s or a Dealer’s right to compel arbitration of any Dispute.

 

(h)Attorneys’ Fees.  If either a Dealer or Agent brings any other action for judicial relief with respect to any Dispute (other than those set forth in Sections 30(a) or 30(g) of this Agreement), the party bringing such action will be liable for and immediately pay all of the other party’s costs and expenses (including attorneys’ fees) incurred to stay or dismiss such action and remove or refer such Dispute to arbitration. If either a Dealer or Agent brings or appeals an action to vacate or modify an arbitration award and such party does not prevail, such party will pay all costs and expenses, including attorneys’ fees, incurred by the other party in defending such action.  Additionally, if a Dealer sues Agent or institutes any arbitration claim or counterclaim against Agent in which Agent is the prevailing party, Dealers will pay all costs and expenses (including attorneys’ fees) incurred by Agent in the course of defending such action or proceeding.

 

(i)Limitations.  Any arbitration proceeding must be instituted: (i) with respect to any Dispute for the collection of any Debt owed by either party to the other, within two (2) years after the date the last payment by or on behalf of the payor was received and applied in respect of such Debt by the payee; and (ii) with respect to any other Dispute, within two (2) years after the date the incident giving rise thereto occurred, whether or not any damage was sustained or capable of ascertainment or either party knew of such incident.  Failure to institute an arbitration proceeding within such period will constitute an absolute bar and waiver to the institution of any proceeding, whether arbitration or a court proceeding, with respect to such Dispute.  Notwithstanding the foregoing, this limitations provision will be suspended temporarily as of the date any of the following events occur and will not resume until the date following the date either party is no longer subject to (A) bankruptcy, (B) receivership, (C) any proceeding regarding an assignment for the benefit of creditors, or (D) any legal proceeding, civil or criminal, which prohibits either party from foreclosing any interest it might have in the collateral of the other party.  

 

(j)Survival After Termination.  The agreement to arbitrate will survive the termination of this Agreement.

 

31.Multiple Dealers; Joint and Several Liability; Designation of Authorized Representatives.

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(a)All Loans and advances by Lenders to any Dealer and all other Obligations of any Dealer shall constitute one general obligation of all of the Dealers. Notwithstanding anything herein to the contrary, the Dealers shall be primarily and jointly and severally liable for all Obligations of any Dealer under this Agreement and any other Loan Document. Notwithstanding the foregoing, if and to the extent a Dealer is deemed to be a guarantor of another Dealer hereunder, such Dealer’s liability for any credit extended to or for the benefit of such other Dealer shall be deemed to be a guaranty of payment and performance, and not merely a guaranty of collection. To the fullest extent permitted by law, each Dealer hereby waives promptness, diligence, notice of acceptance, and any other notices of any nature whatsoever with respect to any of the Obligations, and any requirement that Agent protect, secure, perfect or insure any security interest or lien or any property subject thereto or exhaust any right or take any action against any other Dealer, any other Person or any Collateral. Each Dealer agrees that any rights of subrogation, indemnification, reimbursement or any similar rights it may have against any other Dealer with respect to its liability hereunder or otherwise, whether such rights arise under an express or implied contract or by operation of law, shall be subject, junior and subordinate in all respect to all Obligations of such Dealer under this Agreement and any other Loan Document and that the enforcement of such rights shall be stayed until such time as the Dealers shall have indefeasibly paid in full all of the Obligations and neither Agent nor any Lender shall be under any duty to make a Loan to or for the benefit of any Dealer. The liability of each Dealer shall be absolute and unconditional irrespective of (i) any change in the time, manner or place of payment of, or in any other term of, any of the Obligations, or any other amendment or waiver of or any consent to departure from this Agreement or any other agreement between or among Agent, Dealers and, if applicable, Lenders (ii) any exchange, release or non-perfection of any Collateral or any release or amendment or waiver of or consent to departure from any other guaranty or any release of any Guarantor or any other Person liable in whole or in part for all or any of the Obligations, (iii) the disallowance or avoidance of all or any portion the claim(s) of Agent or any Lender for repayment of the Obligations of any Guarantor to Agent or any interest of Agent or any Lender in any security for such Obligations, or (iv) any other circumstance which might otherwise constitute a defense available to, or discharge of, a Dealer or a Guarantor or any other surety.

 

(b)Each Dealer (each, a “Principal”) hereby appoints each other Dealer (each, a “Dealer Representative”) as the Principal’s agent and attorney-in-fact (i) to take any action, (ii) to execute any document or instrument, (iii) to consent or agree to any amendment or other modification of this Agreement and/or any other agreements between or among any one or more of the Dealers and Lender and/or any waiver of or departure from any of the terms hereof or thereof, (iv) to perform any Obligation of the Principal, and (v) to give or receive any notice by or to any Dealer hereunder or thereunder; and in each case without regard to whether any such action is done in the name of a Dealer Representative or a Principal and, if done in the name of a Dealer Representative, without regard to whether such Dealer Representative’s capacity as agent or attorney-in-fact is so designated. Without limiting the generality of the foregoing, an Dealer Representative may request extensions of credit to or on behalf of any one or more of the Dealers and/or incur any other Obligations for the account of any one or more of the Dealers, and in any such event all of the Dealers shall be fully and jointly and severally bound by and liable for the actions of such Dealer Representative. Lender shall be entitled to rely absolutely and without duty of inquiry or investigation upon any agreement, request, communication or other notice given by a Dealer Representative under this Agreement and/or any other agreements between or among any one or more of the Dealers and Lender (including without limitation, any request by a Dealer Representative to make credit extensions to or on behalf of itself and/or any one or more other Dealers) until three (3) Business Days after Lender shall have received written notice from each Principal of the revocation of this agency and power of attorney, which revocation shall constitute a Default.

 

(c)Each Dealer hereby authorizes any officer (and the Director of Treasury in connection with requests for Advances) to act on behalf of such Dealer in connection with this Agreement, the certificates and documents contemplated hereby, and the transactions referenced herein and therein. Agent and each Lender shall be entitled to rely absolutely and without duty of inquiry or investigation upon any agreement, request, communication or other notice given by such authorized persons under this Agreement and/or any other agreements between or among any one or more of the Dealers and Agent (including without limitation, any request by such authorized representative to make credit extensions to or on behalf of such Dealer) until three (3) Business Days after Agent shall have received written notice from such Dealer of the revocation of such Person’s authority and the identity of each additional Person authorized to act on behalf of such Dealer thereafter.

 

32.Governing Law.  This Agreement and all agreements between or among Agent and any one or more Lenders and/or any one or more Dealers have been substantially negotiated and will be substantially performed in the state of Illinois. All Disputes will be governed by, and construed in accordance with, the laws of such state, except to the extent inconsistent with the provisions of the FAA, which will control and govern all arbitration proceedings hereunder.

 

33.Platform.  Each Dealer and each Lender agrees that Agent may make materials or information provided by or on behalf of Dealers hereunder (collectively, “Dealer Materials”) available to the Lenders by posting the communications on IntraLinks, SyndTrak or a substantially similar secure electronic transmission system (the “Platform”).  The Platform is provided “as is” and “as available.”  Agent does not warrant the accuracy or completeness of the Dealer Materials, or the adequacy of the Platform and expressly disclaim liability for errors or omissions in the communications.  No warranty of any kind, express, implied or statutory, including any warranty of merchantability, fitness for a particular purpose, non-infringement

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of third party rights or freedom from viruses or other code defects, is made by Agent in connection with the Dealer Materials or the Platform.  In no event shall Agent or any of the Agent-Related Persons have any liability to the Dealers, any Lender or any other person for damages of any kind, including direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of any Dealer’s or Agent’s transmission of communications through the Internet, except to the extent the liability of such person is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted from such person’s gross negligence or willful misconduct.  Each Dealer further agrees that certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to the Dealers or their securities) (each, a “Public Lender”).  The Dealers shall be deemed to have authorized Agent and its Affiliates and the Lenders to treat Dealer Materials marked “PUBLIC” or otherwise at any time filed with the SEC as not containing any material non-public information with respect to the Dealers or their securities for purposes of United States federal and state securities laws.  All Dealer Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated as “Public Investor” (or another similar term).  Agent and its Affiliates and the Lenders shall be entitled to treat any Dealer Materials that are not marked “PUBLIC” or that are not at any time filed with the SEC as being suitable only for posting on a portion of the Platform not marked as “Public Investor” (or such other similar term).

 

34.Termination of [****] Agreement.  Dealers, Lenders and Agent acknowledge and agree that the [****], dated as of May 20, 2020, between Agent and Dealers (as further amended, restated, amended and restated, supplemented or otherwise modified from time to time) is hereby terminated.  To the extent any funds remain in the account established pursuant to such [****], such funds will be distributed to Dealers as directed by Dealer Representative.

 

35.INVALIDITY/UNENFORCEABILITY OF BINDING ARBITRATION. IF THIS AGREEMENT IS FOUND TO BE NOT SUBJECT TO ARBITRATION, ANY LEGAL PROCEEDING WITH RESPECT TO ANY DISPUTE WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE WITHOUT A JURY.  DEALERS AND AGENT WAIVE ANY RIGHT TO A JURY TRIAL IN ANY SUCH PROCEEDING.  SIMILARLY, IF THIS AGREEMENT OR A PARTICULAR DISPUTE HEREUNDER IS NOT SUBJECT TO ARBITRATION, DEALERS HEREBY CONSENT TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN ILLINOIS AND WAIVE ANY OBJECTION WHICH DEALERS MAY HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY ACTION OR PROCEEDING IN ANY SUCH COURT.

 

36.AMENDMENT AND RESTATEMENT.  This Agreement amends and restates the Existing Financing Agreement in its entirety and all obligations, of every type or nature, of Dealers or any Dealer under the Existing Financing Agreement are ratified and confirmed by Dealers as though all of such obligations arose under this Agreement, and the execution and delivery of this Agreement shall not constitute a novation of any indebtedness or obligations of any Dealer owed to any Lender with respect to the Existing Financing Agreement

 

 

[Remainder of page blank]

 

39

 

 

 

THIS CONTRACT CONTAINS BINDING ARBITRATION,

JURY WAIVER AND PUNITIVE DAMAGE WAIVER PROVISIONS.

 

 

40

 

 

 

 

DATED AS OF THE DATE FIRST ABOVE WRITTEN

 

MARINEMAX, INC.,

a Florida corporation

 

 

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

Tax ID:

[****]

 

Org. ID (if any):   2849981 8100

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

 

 

MARINEMAX EAST, INC.,

a Delaware corporation

 

 

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

President, Secretary, Treasurer

 

Tax ID:

[****]

 

Org. ID (if any):   3332179 8100

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

 

 

 

MARINEMAX SERVICES, INC.,

a Delaware corporation

 

 

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

Vice President, Secretary, Treasurer

 

Tax ID:

[****]

 

Org. ID (if any):   3331764 8100

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

 

 


MARINEMAX NORTHEAST, LLC,

a Delaware limited liability company

By: MARINEMAX EAST, INC.

      the sole member of MarineMax Northeast, LLC

 

 

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

President, Secretary, Treasurer

 

Tax ID:

[****]

 

Org. ID (if any):   4402087 8100

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759


Signature Page to

A&R Loan and Security Agreement

 

 

 


BOATING GEAR CENTER, LLC,

a Delaware limited liability company

 

By: MARINEMAX EAST, INC.,

      the sole member of Boating Gear Center, LLC

 

 

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

President, Secretary, Treasurer

 

Tax ID:

[****]

 

Org. ID (if any):   3908460 8100

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

 

 

US LIQUIDATORS, LLC

 

a Delaware limited liability company

By: MARINEMAX, INC.

      the sole member of US Liquidators, LLC

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

Tax ID:

[****]

 

Org. ID (if any):   4242668 8100

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

 

 

 

MY WEB SERVICES, LLC,

a Delaware limited liability company

By: MARINEMAX EAST, INC.,

       the sole member of My Web Services, LLC

 

 

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

President, Secretary and Treasurer

 

Tax ID:

[****]

 

Org. ID (if any):   4933499

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

MARINEMAX CHARTER SERVICES, LLC,

a Delaware limited liability company

By: MARINEMAX EAST, INC.,

       the sole member of MarineMax Charter Services,

       LLC

 

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

President, Secretary, Treasurer

 

Tax ID:

[****]

 

Org. ID (if any):   5037331

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

 

 

 

NEWCOAST FINANCIAL SERVICES, LLC,

 

Signature Page to

A&R Loan and Security Agreement

 

 

a Delaware limited liability company

By: MARINEMAX EAST, INC.

      the sole member of Newcoast Financial Services, LLC

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

President, Secretary, Treasurer

 

Tax ID:

[****]

 

Org. ID (if any):   2920730 8100

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

 

[****]

a Florida limited liability company

 

By: MY WEB SERVICES, LLC,

       the sole member of [****]

       By: MARINEMAX EAST, INC.,

       the sole member of My Web Services, LLC

 

 

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

President, Secretary and Treasurer

 

Tax ID:

[****]

 

Org. ID (if any):   4933499

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

 

 

GULFPORT MARINA, LLC,

a Delaware limited liability company

By: MARINEMAX EAST, INC.,

       the sole member of Gulfport Marina, LLC

 

 

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

President, Secretary and Treasurer

 

Tax ID:

[****]

 

Org. ID (if any):   4933499

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

 

FWW, LLC,

a Florida limited liability company

By: MARINEMAX EAST, INC.

      the sole member of FWW, LLC

 

By:

/s/ Michael H. McLamb

Print Name:

Michael H. McLamb

Title:

President, Secretary, Treasurer

 

 

 

Signature Page to

A&R Loan and Security Agreement

 

 

FRASER YACHTS FLORIDA, INC.,

a Florida corporation

 

By:

/s/ Jeanne Bruss

Print Name:

Jeanne Bruss

Title:

Secretary

 

FRASER YACHTS CALIFORNIA,

a California corporation

 

 

By:

/s/ Jeanne Bruss

Print Name:

Jeanne Bruss

Title:

Secretary

 

 

 

BY HOLDINGS, LLC,

a Florida limited liability company

By: MARINEMAX, INC.,

the sole member of BY Holdings, LLC

 

 

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

Tax ID:

[****]

 

Org. ID (if any):   L20000015063

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

 

MARINEMAX KW, LLC,

a Florida limited liability company

By: MARINEMAX, INC.,

the sole member of MARINEMAX KW, LLC

 

 

 

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

Tax ID:

[****]

 

Org. ID (if any):   L20000014172

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

 

 

 

 

Signature Page to

A&R Loan and Security Agreement

 

 

 

NORTHROP & JOHNSON YACHTS-SHIPS LLC,

a Florida limited liability company

By: FRASER YACHTS FLORIDA, INC.,

the sole member of Northrop & Johnson Yachts-Ships LLC

 

 

 

 

 

By:

/s/ Jeanne Bruss

 

Print Name:

Jeanne Bruss

 

Title:

Secretary

 

Tax ID:

[****]

 

Org. ID (if any):   L20000178754

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

 

 

 

 

 

 

NORTHROP & JOHNSON CALIFORNIA INC.,

a California corporation

 

 

 

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

Tax ID:

[****]

 

Org. ID (if any):   C4640033

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

 

 

 

PERFECT YACHT CHARTER, LLC,

a Delaware limited liability company

By: MARINEMAX, INC.,

the sole member of Perfect Yacht Charter, LLC

 

 

 

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

Tax ID:

 

 

Org. ID (if any):   7635815

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

 

Signature Page to

A&R Loan and Security Agreement

 

 

 

N & J MEDIA, LLC,

a Florida limited liability company

By: MARINEMAX, INC.,

the sole member of N & J Media, LLC

 

 

 

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

Tax ID:

[****]

 

Org. ID (if any):   L14000127083

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

 

NORTHROP & JOHNSON HOLDING LLC,

a Florida limited liability company

By: MARINEMAX, INC.,

the sole member of Northrop & Johnson Holding LLC

 

 

 

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

Tax ID:

[****]

 

Org. ID (if any):  L20000178843

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

N & J GROUP, LLC,

a Florida limited liability company

By: NORTHROP & JOHNSON HOLDING LLC,

the sole member of N & J Group, LLC

By:  MARINEMAX, INC.

the sole member of Northrop & Johnson Holding LLC

 

 

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

Tax ID:

[****]

 

Org. ID (if any):   L08000085036

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

PRIVATE INSURANCE SERVICES, LLC,

a Florida limited liability company

By: MARINEMAX, INC.,

the sole member of Private Insurance Services, LLC

 

 

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

Tax ID:

[****]

 

Org. ID (if any):  L18000213130

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

Signature Page to

A&R Loan and Security Agreement

 

 

 

SKIPPER MARINE, LLC,

a Wisconsin limited liability company

By: MARINEMAX, INC.,

the sole member of Skipper Marine, LLC

 

 

 

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

Tax ID:

[****]

 

Org. ID (if any):   1A10749

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

SKIPPER BUD’S OF ILLINOIS, LLC,

An Illinois limited liability company

By: MARINEMAX, INC.,

the sole member of Skipper Bud’s of Illinois, LLC

 

 

 

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

Tax ID:

[****]

 

Org. ID (if any):   09490019

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

SKIPPER MARINE OF MADISON, LLC,

a Wisconsin limited liability company

By: MARINEMAX, INC.,

the sole member of Skipper Marine of Madison, LLC

 

 

 

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

Tax ID:

[****]

 

Org. ID (if any):   S036987

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

SKIPPER MARINE OF FOX VALLEY, LLC,

a Wisconsin limited liability company

By: MARINEMAX, INC.,

the sole member of Skipper Marine of Fox Valley, LLC

 

 

 

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

Tax ID:

[****]

 

Org. ID (if any):   S038680

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

 

 

Signature Page to

A&R Loan and Security Agreement

 

 

 

SKIPPER MARINE OF CHICAGO-LAND, LLC,

An Illinois limited liability company

By: MARINEMAX, INC.,

the sole member of Skipper Marine of Chicago-Land, LLC

 

 

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

Tax ID:

[****]

 

Org. ID (if any):   09022031

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

 

SKIPPER MARINE OF MICHIGAN, LLC,

a Michigan limited liability company

By: MARINEMAX, INC.,

the sole member of Skipper Marine of Michigan, LLC

 

 

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

Tax ID:

[****]

 

Org. ID (if any):  800207832

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

 

SKIPPER MARINE OF OHIO, LLC,

An Ohio limited liability company

 

 

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

Director, and as such, collectively with the other Director, Manager

 

 

By:                      

 

/s/ W. Brett McGill

 

Print Name:

W. Brett McGill

 

Title:

Director, and as such, collectively with the other Director, Manager

 

Tax ID:

[****]

 

Org. ID (if any):   1399147

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

 

SILVER SEAS YACHTS, LLC,

An Arizona limited liability company

By:  MARINEMAX , INC.

the sole member of Silver Seas Yachts, LLC

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

Tax ID:

[****]

 

Org. ID (if any):  23138411

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

 

Signature Page to

A&R Loan and Security Agreement

 

 

 

SILVER SEAS CALIFORNIA, INC.,

a Florida corporation

 

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

Executive Vice President, Chief Financial Officer, Secretary

 

Tax ID:

[****]

 

Org. ID (if any):   P20000084568

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

 

 

MARINEMAX PRODUCTS, INC.,

a Florida corporation

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

President, Secretary, Treasurer

 

Tax ID:

[****]

 

Org. ID (if any):   P21000037073

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

 

 

KCS INTERNATIONAL INC.,

A Wisconsin corporation

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

President, Secretary, Treasurer

 

Tax ID:

 

 

Org. ID (if any):   S043833

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

 

 

NISSWA MARINE, INC.,

A Minnesota corporation

 

 

By:

/s/ Michael H. McLamb

 

Print Name:

Michael H. McLamb

 

Title:

President, Secretary, Treasurer

 

Tax ID:

[****]

 

Org. ID (if any):   3K-654

 

Chief Executive Office and Principal Place of Business:

2600 McCormick Drive

 

Clearwater, FL 33759

 

Signature Page to

A&R Loan and Security Agreement

 

 

 

 

 

 

 

AGENT AND LENDER:

 

 

WELLS FARGO COMMERCIAL DISTRIBUTION FINANCE, LLC

 

 

By:

 

Print Name:

 

Title:

Duly Authorized Signatory

 

 

LENDERS:

 

 

BANK OF THE WEST, INC.

 

 

By:

    

Print Name:

    

Title:

    

 

 

M&T BANK

 

 

By:

    

Print Name:

    

Title:

    

 

 

TRUIST BANK

 

By:

    

Print Name:

    

Title:

    

 

 

 

 

[Note to MarineMax: Please completely fill out the signature blocks for each bank.]                                

 

Signature Page to

A&R Loan and Security Agreement

 

 

 

 

 

Exhibit A

Existing Liens

 

Debtor

Secured Party

Lease or Collateral Description

Jurisdiction

Amount of Indebtedness

Filing Date

Financing Statement Number

MarineMax, Inc.

Manhattan Telephone Company

Specified items of equipment

Florida

NA – Precautionary lease filing

07/29/2019

20190925535X

MarineMax, Inc.

Manhattan Telecommunications Corporation

Specified items of equipment

Florida

NA – Precautionary lease filing

08/15/2019

201909411319

MarineMax, Inc.

Manhattan Telecommunications Corporation

Specified items of equipment

Florida

NA – Precautionary lease filing

10/29/2019

201900016409

MarineMax, Inc.

Manhattan Telecommunications Corporation

Specified items of equipment

Florida

NA – Precautionary lease filing

11/13/2019

201900139764

MarineMax, Inc.

MetTel

Specified items of equipment

Florida

NA – Precautionary lease filing

12/16/2019

201900404522

MarineMax East, Inc.

Bank of the West

Hyundi forklift and all related equipment  leased or financed from Bank of the West set forth in Agreement # 2236723.

Delaware

NA – Precautionary lease filing

03/19/2019

20191926174

MarineMax East, Inc./Gulfport Marina, LLC

Hancock Whitney Bank

Mortgage-related filing relating to property in various counties

Delaware

$27,583,888

11/16/2020

20208000962

Exhibit A

 

 

Debtor

Secured Party

Lease or Collateral Description

Jurisdiction

Amount of Indebtedness

Filing Date

Financing Statement Number

Silver Seas Yachts, Inc./Silver Seas Yachts LLC

Skipper Marine Holdings, Inc.; Skipper Marine Corp; Skipper Marine of Fox Valley, Inc.; Skipper Marine of Madison, Inc.; Skipper Marine of Chicago-Land, Inc.; Skipper Bud's of Illinois, Inc.; Skipper Marine of Michigan, Inc.; Skipper Bud's of Chicago, Inc.; Skipper Real Estate Holdings, Inc.; Skipper Marine of Ohio, LLC; P-E Realty II, LLC/ collat asst to Wells Fargo Commercial Distribution Finance, LLC.

Intercompany consignment agreement

subject to (i) a security interest granted by secured party to GE Commercial Distribution Finance Corporation, and (ii) a security interest or consignment interest granted by debtor to secured party

Asst to Wells is a collateral assignment for power to authorize an amendment.

Arizona

NA – Consignment filing

09/07/2018

201800363911

Skipper Marine Corp/Skipper Marine, LLC

Windsor Craft Sales, LLC/assignment of authorizing UCC amendment to  collateral security to GE Commercial Distribution Finance Corporation/Wells Fargo Commercial Distribution Finance, LLC

This financing statement is filed to give notice that (a) secured party has consigned or otherwise delivered, and/or may from time to time in the future consign or otherwise deliver, to debtor inventory and other goods pursuant to a consignment arrangement between secured party and debtor, and (b) the consigned inventory and other goods - and all attachments, exchanges, replacement parts and additions thereto and all instruments, chattel paper, accounts, other payment rights, general intangibles and all cash and non-cash proceeds (including trade-ins and insurance proceeds) of the foregoing are subject to (i) a security interest granted by secured party to GE Commercial Distribution Finance Corporation, and (ii) a security interest or consignment interest granted by debtor to secured party.

Wisconsin

NA – Consignment filing

02/19/2009

090002141311

 

Exhibit A

 

Debtor

Secured Party

Lease or Collateral Description

Jurisdiction

Amount of Indebtedness

Filing Date

Financing Statement Number

Skipper Marine Corp.

Marquis Yachts, LLC / Northpoint Commercial Finance LLC

All of Debtor's inventory, equipment, and fixtures that are consigned by Secured Party, including, without limitation, boats, boat motors, marine accessories, marine parts, and other marine products; and related collateral

Wisconsin

NA – Consignment filing

01/10/2014

140000491317

 

 

 

 

 

 

 

 

Exhibit A

 

 

 

Exhibit B

Permitted Locations

 

Location Name

Lot Code

Address Line 1

City

State

Zip Code

Phone Numbers

CORPORATE HEADQUARTERS

MM

2600 MCCORMICK DR, STE 200

CLEARWATER

FL

33759

727-531-1700

MARINEMAX CUMMING

SM2

1860 BALD RIDGE MARINE ROAD

CUMMING

GA

30041

770-781-9370

MARINEMAX GULF SHORES PARKWAY

OB

3829 GULF SHORES PARKWAY

GULF SHORES

AL

36542

251-981-1113

MARINEMAX LEWISVILLE YACHTS AND SERVICE

LLV

1481 E HILL PARK RD

LEWISVILLE

TX

75056

973-436-9979

MARINEMAX LEWISVILLE/DALLAS

DAL

1490 N STEMMONS FREEWAY

LEWISVILLE

TX

75067

972-436-9979

MARINEMAX SEABROOK

NAS

3001 NASA PARKWAY

SEABROOK

TX

77586

281-326-4224

MARINEMAX SOUTHPORT MARINA

NC6

606 WEST STREET, STE 107

SOUTHPORT

NC

28461

201-515-4122

MARINEMAX WRIGHTSVILLE BEACH

SB

130 SHORT STREET

WRIGHTSVILLE BEACH

NC

28480

910-256-8100

MARINEMAX BREVARD (COCOA)

BVD

1410 KING STREET

COCOA

FL

32922

321-636-3142

MARINEMAX CAPE HAZE (PALM ISLAND)

PMI

7090 PLACIDA ROAD

CAPE HAZE

FL

33946

941-697-2161

MARINEMAX CLEARWATER

CW

18025 US 19 NORTH

CLEARWATER

FL

33764

727-536-2628

MARINEMAX DANIA BEACH

MYSD

490 TAYLOR LANE

DANIA BEACH

FL

33004

954-926-0309

MARINEMAX FT MYERS

FT

14070 MCGREGOR BOULEVARD

FORT MYERS

FL

33919

239-481-8200

MARINEMAX MIAMI

MIA

700 NE 79TH STREET

MIAMI

FL

33138

305-758-5786

MARINEMAX NAPLES RETAIL SALES

NAP

1146 6TH AVENUE SOUTH

NAPLES

FL

34102

239-262-1000

MARINEMAX OCEAN REEF

ORC

2 FISHING VILLAGE DRIVE

KEY LARGO

FL

33037

305-367-3969

MARINEMAX POMPANO BEACH RETAIL SALES

POM

700 SOUTH FEDERAL HIGHWAY

POMPANO BEACH

FL

33062

954-783-9555

MARINEMAX POMPANO YACHT CENTER

PYC

750 SOUTH FEDERAL HIGHWAY

POMPANO BEACH

FL

33062

954-618-0440

MARINEMAX SARASOTA RETAIL SALES

CIT

1601 KEN THOMPSON PARKWAY

SARASOTA

FL

34236

941-388-4411

MARINEMAX ST PETERSBURG YACHT AND SERVICE CENTER

MYSC

6810 GULFPORT BOULEVARD

SOUTH PASADENA

FL

33707

727-343-6520

MARINEMAX STUART SALES AND SERVICE

STU

2370 SW PALM CITY ROAD

STUART

FL

34994

772-287-4495

MARINEMAX VENICE RETAIL SALES

VEN

1485 S TAMIAMI TRAIL

VENICE

FL

34285

941-485-3388

MARINEMAX BAYPORT

CMB

200 FIFTH AVENUE SOUTH

BAYPORT

MN

55003

651-351-9621

MARINEMAX CATAWBA ISLAND

TCM

1991 NE CATAWBA ROAD

PORT CLINTON

OH

43452

419-797-4492

MARINEMAX LAKE OZARK

LOZ

3070 BAGNELL DAM BLVD

LAKE OZARK

MO

65049

573-365-5382

MARINEMAX ROGERS

CMR

20300 COUNTY ROAD 81, PO BOX 250

ROGERS

MN

55374

763-428-4126

MARINEMAX BALTIMORE YACHT SALES AND SERVICE CENTER

MD3

1800 S CLINTON STREET

BALTIMORE

MD

21224

410-732-1260

MARINEMAX KENT ISLAND

MD4

428 KENT NARROWS WAY NORTH

GRASONVILLE

MD

21638

410-732-1260

MARINEMAX BRANT BEACH SERVICE

MBB

20 W 44TH STREET

BRANT BEACH

NJ

08008

609-494-2838

Exhibit B

 

 

Location Name

Lot Code

Address Line 1

City

State

Zip Code

Phone Numbers

MARINEMAX BRICK

BNJ

1500 RIVERSIDE DR (A/K/A 101 RIVERSIDE DR N)

BRICK

NJ

08724

732-840-2100

MARINEMAX HUNTINGTON

NY5

155 WEST SHORE ROAD

HUNTINGTON

NY

11743

631-424-2710

MARINEMAX LAKE HOPATCONG

HOP

134 ESPANONG ROAD

LAKE HOPATCONG

NJ

07849

973-663-2045

MARINEMAX NORWALK

CT1

130 WATER STREET

NORWALK

CT

06854

888-254-1796

MARINEMAX SHIP BOTTOM

MLB

214 WEST 9TH STREET

SHIP BOTTOM

NJ

08008

609-494-2102

MARINEMAX MIAMI SERVICE

MIA

840 NE 78TH STREET

MIAMI

FL

33138

305-758-5786

MARINEMAX SOMERS POINT

MSP

600 BAY AVENUE

SOMERS POINT

NJ

08244

609-926-0600

MARINEMAX MAYS LANDING SERVICE

MML

1201 SOMERS POINT, RT 559

EGG HARBOR

NJ

08234

609-625-1099

MARINEMAX PANAMA CITY

FL7

3605 THOMAS DRIVE

PANAMA CITY BEACH

FL

32408

850-234-6533

MARINEMAX OSAGE BEACH

MCP

4543 OSAGE BEACH PARKWAY

OSAGE BEACH

MO

65065

573-348-1299

MARINEMAX NEWPORT

RI1

10 BOWEN'S WHARF

NEWPORT

RI

02840

401-849-2243

MARINEMAX CONNETICUT

CT2

627 BOSTON POST ROAD

WESTBROOK

CT

06498

860-399-5581

MARINEMAX OF ORLANDO

OLN

455 S LAKE DESTINY RD

ORLANDO

FL

32810

407-660-2628

MARINEMAX FT MYERS

FT

14030 MCGREGOR BLVD

FORT MYERS

FL

33919

239-454-2628

MARINEMAX LAKE TEXOMA

LTX

120 TEXOMA HARBOR DR

POTTSBORO

TX

75076

972-436-9979

MARINEMAX PENSACOLA

KM

1901 CYPRESS STREET

PENSACOLA

FL

32502

850-477-1112

MARINEMAX PALM BEACH

NPB

2385 PGA BOULEVARD

PALM BEACH GARDENS

FL

33410

561-694-5815

MARINEMAX DANVERS

NE2

10 HUTCHINSON DRIVE

DANVERS

MA

01923

781-395-0050

MARINEMAX JACKSONVILLE BEACH

FL3

2079 BEACH BOULEVARD

JACKSONVILLE BEACH

FL

32250

904-338-9970

MARINEMAX WAKEFIELD

NE3

362 POND STREET

WAKEFIELD

RI

02879

781-875-3619

MARINEMAX EXCELSIOR

CMZ

141 MINNETONKA BOULEVARD

EXCELSIOR

MN

55331

952-346-4857

MARINEMAX LAKE WYLIE

HM2

310 BLUCHER CIR

LAKE WYLIE

SC

29710

803-831-2101

MARINEMAX THUNDERBOLT

HM7

3518 OLD TYBEE RD

THUNDERBOLT

GA

31410

912-897-9881

MARINEMAX THUNDERBOLT

HM7

188 OLD TYBEE RD

THUNDERBOLT

GA

31410

912-897-9881

MARINEMAX CORNELIUS

HM1

9209 WESTMORELAND RD

CORNELIUS

NC

28031

704-892-9676

MARINEMAX GREENVILLE

HM3

14 BURTY RD

GREENVILLE

SC

29605

864-236-9005

MARINEMAX CHARLESTON

HM5

142 SPORTSMAN'S ISLAND DRIVE

CHARLESTON

SC

29492

843-747-1889

MARINEMAX ISLAND MARINE CENTER

IM1

2602 SHORE RD (RTE 9)

OCEAN VIEW

NJ

08230

609-624-1117

MARINEMAX NORTH SOMERS POINT

IM1

7 KAPELLA AVE (BLOCK 1008, LOT 3 & BLOCK 1007, LOT 2)

SOMERS POINT

NJ

08244

609-926-0600

MARINEMAX GRAND LAKE

GLC

56300 E 280 RD

MONKEY ISLAND

OK

74331

918-782-3277

MARINEMAX BOSTON

NE1

64 WASHINGTON STREET

QUINCY

MA

02169

617-288-1000

Exhibit B

 

 

Location Name

Lot Code

Address Line 1

City

State

Zip Code

Phone Numbers

MARINEMAX FORT WALTON BEACH

FWB

6-22 MIRACLE STRIP PKWY

FORT WALTON BEACH

FL

32548

850-760-0300

MARINEMAX SAIL AND SKI CENTER

SSA

12971 RESEARCH BLVD

AUSTIN

TX

78750

512-258-0733

MARINEMAX SAIL AND SKI CENTER

SAN

141 BALCONES NORTH

SAN ANTONIO

TX

78201

210-734-8199

 

 

5400 HUDSON BEND RD

AUSTIN

TX

78734

 

 

 

15911 EDWARDS DRIVE

AUSTIN

TX

78734

 

MARINEMAX SAIL AND SKI CENTER

LBJ

15616 STEWART ROAD

LAKEWAY

TX

78734

512-266-1515

SKIPPER BUDS OF ILLINOIS, INC.

NP

215 NORTH POINT DRIVE

WINTHROP HARBOR

IL

60096

847-872-3200

SKIPPER MARINE CORP.

PW

1030 SILVERNAIL ROAD

PEWAUKEE

WI

53072

262544-1200

SKIPPER MARINE CORP.

MW

1919 SOUTH MARINA DRIVE

MILWAUKEE

WI

53704

414-482-0900

SKIPPER MARINE OF FOX VALLEY, INC.

OK

1351 EGG HARBOR LANE

OSHKOSH

WI

54904

920-231-3200

SKIPPER MARINE OF MADISON, INC.

MAD

5381 WESTPORT ROAD

MADISON

WI

53704

608-246-2628

SKIPPER MARINE OF MICHIGAN, INC.

BC

1809 SOUTH WATER STREET

BAY CITY

MI

48708

920-743-6900

SKIPPER MARINE OF MICHIGAN, INC.

BMH

41700 CONGER BAY DRIVE

HARRISON TOWNSHIP

MI

48045

586-954-3100

SKIPPER MARINE OF CHICAGO-LAND, INC.

CSR

31535 N US HIGHWAY 12

LAKEMOOR

IL

60073

 

SKIPPER MARINE OF CHICAGO-LAND, INC.

 

2717 DEBORAH ST

ZION

IL

60099

847-746-4907

SKIPPER MARINE OF MICHIGAN, INC.

LF

14016 FENTON RD

FENTON

MI

48430

810-714-3570

SKIPPER MARINE OF OHIO, INC.

MDI

6801 E HARBOR RD

MARBLEHEAD

OH

43440

419-732-2587

SILVER SEAS CALIFORNIA, INC.

SD

2385 SHELTER ISLAND DR

SAN DIEGO

CA

92106

619-453-0423

SKIPPER MARINE CORP.

QDM

705 QUARTERDECK LANE

STURGEON BAY

WI

54235

920-746-8200

 

 

133 NORTH MADISON AVE.

STURGEON BAY

WI

54235

920-746-8200

SKIPPER MARINE OF MICHIGAN, INC.

GH

11 HARBOR ISLAND DR

GRAND HAVEN

MI

49417

616-997-2628

SILVER SEAS CALIFORNIA, INC.

NB

301 SHIPYARD WAY

NEWPORT BEACH

CA

92663

949-274-9082

SILVER SEAS CALIFORNIA, INC.

SAU

300 HARBOR DR., STE 8

SAUSALITO

CA

94965

415-367-4022

SKIPPER MARINE OF CHICAGO-LAND, INC.

LG

W6799 BRICK CHURCH RD

WALWORTH

WI

53184

262-581-4252

SKIPPER MARINE CORP.

SEA

901 FAIRVIEW AVE NORTH, CTE C155

SEATTLE

WA

98109

206-508-4458

SILVER SEAS CALIFORNIA, INC.

 

2000 WEST COAST HIGHWAY

NEWPORT BEACH

CA

92663

949-238-6019

SKIPPER MARINE OF CHICAGO-LAND, INC.

SEQ

1000 W IL ROUTE 173

ANTIOCH

IL

60002

847-872-0292

SKIPPER MARINE OF MICHIGAN, INC.

 

16880 148TH AVE

SPRING LAKE

MI

49456

847-872-0292

SKIPPER MARINE OF MICHIGAN, INC.

CLM

3981 CASS ELIZABETH RD

WATERFORD

MI

48328

248-683-0200

SILVER SEAS YACHTS, LLC

FLL

1515 SE 17TH ST. SUITE A-111

FORT LAUDERDALE

FL

33316

954-280-2575

SKIPPER MARINE OF MICHIGAN, INC.

 

5233 DIXIE HWY

WATERFORD

MI

48329

248-683-0200

SILVER SEAS YACHTS, LLC

 

2323 W. STATE RD 84

FORT LAUDERDALE

FL

33312

954-280-2575

Exhibit B

 

 

Location Name

Lot Code

Address Line 1

City

State

Zip Code

Phone Numbers

SILVER SEAS YACHTS, LLC

 

2900 T AVE SUITE B

ANACORTES

WA

98221

206-754-4554

SILVER SEAS YACHTS, LLC

 

1019 Q AVE., SUITE C

ANACORTES

WA

98221

206-754-4554

SILVER SEAS CALIFORNIA, INC.

 

700 LIDO PARK DRIVE

NEWPORT BEACH

CA

92663

949-238-6019

BAY HARBOR YACHT CLUB

 

4300 VISTA DRIVE

BAY HARBOR

MI

49770

586-630-5824

GOLDEN MAST INN

 

W349 N5293 LACY LANE

OKAUCHEE

WI

53069

412-482-0900

CRUISERS PLANT

 

804 PECOR ST.

OCONTO

WI

54153

920-835-6400

CRUISERS PLANT

 

700 GLENBROOK DR.

PULASKI

WI

54162

920-835-6400

CRUISERS PLANT

 

850 GLENBROOK DR.

PULASKI

WI

54162

920-835-6400

NISSWA MARINE, LLC

CMO

24238 SMILEY ROAD

NISSWA

MN

56468

800-346-2292

NISSWA MARINE, LLC

CMO

5112 NORTHSTAR LANE

NISSWA

MN

56468

800-346-2292

NISSWA MARINE, LLC

CMO

7568 CROCKER LANE

LAKESHORE

MN

56468 

800-346-2292

NISSWA MARINE, LLC

CMO

1951 LOVE LAKE ROAD

BRAINERD

MN

56401

800-346-2292

NISSWA MARINE, LLC

CMO

30505 OLSON STREET

PEQUOT LAKES

MN

56472

800-346-2292

NISSWA MARINE, LLC

CMO

25284 SMILEY ROAD

NISSWA

MN

56468

800-346-2292

NISSWA MARINE, LLC

CMO

8105 LOST LAKE ROAD

LAKE SHORE

MN

56468

800-346-2292

 

 

 

 

 

Exhibit B

 

 

 

Exhibit C

Form of Compliance Certificate

 

All calculations based on Financial Statement datedMM/DD/YY

Calculation of Tangible Net Worth

 

Calculation of Debt

 


Exhibit C

 

 

Leverage Ratio Covenant – 6(c)(i)

Calculation of Current Ratio

Current Ratio Covenant – 6(c)(ii)

The undersigned hereby certifies that I have no knowledge that a Default has occurred and is continuing.

MarineMax, Inc.

By:____________________________________

Title:__________________________________

 

Exhibit C

 

 

 

Exhibit D

Lender’s Allocations and Ratable Share

Lender

Allocation

Ratable Share

CDF

$275,000,000

55.000000000%

Bank of the West, Inc.

$60,000,000

12.000000000%

M&T Bank

$130,000,000

26.000000000%

Truist Bank

$35,000,000

7.000000000%

TOTAL

$500,000,000

100.000000000%

 

 

Exhibit D

 

 

 

Exhibit E

Agent Wire Instructions

[****]

 

Exhibit E

 

 

 

Exhibit F

Trigger Compliance Certificate

 

 

 

 

[Note to MarineMax: Do you have this image in Word or Excel format? We previously redacted the “(≥$25,000)” after EBITDA and “(>+1.20x) after FCCR.]                                

 

 

 

 

Exhibit F

 

 

 

Exhibit G

Form of Borrowing Base Certificate

 

Agent for Dealers:

MarineMax, Inc.

 

Collateral Report Date:

 

 

 

Maximum Credit Amount:

$              500,000,000.00

 

Certificate Date:

 

 

 

Inventory Report Total:

$                                        -  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New Inventory Collateral <= 72 feet (excluding KCS International)

 

 

 

Age of Collateral

Total Collateral

 

Advance Rate

Eligible Amount

 

 

0 - 180 days

$                                        -  

 

100%

$                                          -  

 

 

181 - 360 days

$                                        -  

 

90%

$                                          -  

 

 

361 - 540 days

$                                        -  

 

80%

$                                          -  

 

 

541 - 720 days

$                                        -  

 

70%

$                                          -  

 

 

721 - 900 days

$                                        -  

 

60%

$                                          -  

 

 

901 - 1079 days

$                                        -  

 

50%

$                                          -  

 

 

1080+ days

$                                        -  

 

0%

$                                          -  

 

 

Ineligibles

$                                        -  

 

0%

$                                          -  

 

 

Total

$                                        -  

 

Total

$                                          -  

 

 

 

 

 

 

 

 

New KCS International Collateral <= 72 feet

 

 

 

 

 

Age of Collateral

Total Collateral

 

Advance Rate

Eligible Amount

 

 

0 - 180 days

$                                        -  

 

62%

$                                          -  

 

 

181 - 360 days

$                                        -  

 

52%

$                                          -  

 

 

361 - 540 days

$                                        -  

 

42%

$                                          -  

 

 

541 - 720 days

$                                        -  

 

32%

$                                          -  

 

 

721 - 900 days

$                                        -  

 

22%

$                                          -  

 

 

901 - 1079 days

$                                        -  

 

12%

$                                          -  

 

 

1080+ days

$                                        -  

 

0%

$                                          -  

 

 

Ineligibles

$                                        -  

 

0%

$                                          -  

 

 

Total

$                                        -  

 

Total

$                                          -  

 

 

 

 

 

 

 

 

New Inventory Collateral > 72 feet

 

 

 

 

 

 

Age of Collateral

Total Collateral

 

Advance Rate

Eligible Amount

 

 

0 - 180 days

$                                        -  

 

80%

$                                          -  

 

 

181 - 360 days

$                                        -  

 

70%

$                                          -  

 

 

361 - 540 days

$                                        -  

 

60%

$                                          -  

 

 

541 - 720 days

$                                        -  

 

50%

$                                          -  

 

 

721 - 900 days

$                                        -  

 

40%

$                                          -  

 

 

901 - 1079 days

$                                        -  

 

30%

$                                          -  

 

 

1080+ days

$                                        -  

 

0%

$                                          -  

 

 

Ineligibles

$                                        -  

 

0%

$                                          -  

 

 

Total

$                                        -  

 

Total

$                                          -  

 

 

 

 

 

 

 

 

Pre-owned Inventory Collateral

 

 

 

 

 

 

Age of Collateral

Total Collateral

 

Advance Rate

Eligible Amount

 

 

0 - 180 days

$                                        -  

 

85%

$                                          -  

 

 

181 - 360 days

$                                        -  

 

75%

$                                          -  

 

 

361+ days

$                                        -  

 

0%

$                                          -  

 

 

Ineligibles

$                                        -  

 

0%

$                                          -  

 

 

Total

$                                        -  

 

Total

$                                          -  

 

 

 

 

 

Pre-owned Inventory Reserve (%)

0%

 

 

 

 

 

Pre-owned Inventory Reserve ($)

$                                          -  

 

 

 

 

 

Eligible Pre-owned Inventory Collateral

$                                          -  

 

 

 

 

 

 

 

 

Exhibit G

 

 

 

Total Inventory Collateral

$                                        -  

 

Total Eligible Inventory

$                                          -  

 

 

 

 

 

 

 

 

 

 

 

 

Compliant with Collateral Block Triggers?

Yes

 

 

 

 

 

 

 

 

 

 

 

 

Less: Collateral Block

$                                          -  

 

 

 

 

 

 

 

 

 

 

 

 

Net Eligible Inventory Amount

$                                          -  

 

 

 

 

 

 

 

 

Accounts

 

 

 

 

 

 

 

Total Collateral

 

Advance Rate

Eligible Amount

 

 

Eligible Accounts

$                                        -  

 

80%

$                                          -  

 

 

Ineligible Accounts

$                                        -  

 

0%

$                                          -  

 

 

Total

$                                        -  

 

Total

$                                          -  

 

 

 

 

 

 

 

 

Parts

 

 

 

 

 

 

 

Total Collateral

 

Advance Rate

Eligible Amount

 

 

Eligible Parts

$                                        -  

 

50%

$                                          -  

 

 

Ineligible Parts

$                                        -  

 

0%

$                                          -  

 

 

Total

$                                        -  

 

Total

$                                          -  

 

 

 

 

 

 

 

 

 

 

 

 

Borrowing Base

$                                          -  

 

 

 

 

 

 

 

 

 

Maximum Credit Amount

$              500,000,000.00

 

Lesser of Borrowing Base or Max Cred Amt less App

$                                          -  

 

 

less: Approvals

$                                        -  

 

Less: Kawasaki Reserve

$                        500,000.00

 

 

Maximum Credit Amount less Approvals

$              500,000,000.00

 

Less: Rent Reserve

$                                          -  

 

 

 

 

 

Less: inventory > $750M in excess of sublimit

$                                          -  

 

 

 

 

 

Less: inventory > 72' in excess of sublimit

$                                          -  

 

 

 

 

 

Less: Foreign OEM inventory in excess of sublimit

$                                          -  

 

 

 

 

 

Less: pre-owned inventory in excess of sublimit

$                                          -  

 

 

 

 

 

Final Eligible Amount

$                      (500,000.00)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans Outstandings as of:

 

 

outstanding principal amount of Obligations

$                                          -  

 

 

 

 

 

 

 

 

 

 

 

 

Less: pmts rec'd by Lender but not applied

 

 

 

 

 

payment #

$                                          -  

 

 

 

 

 

payment #

$                                          -  

 

 

 

 

 

payment #

$                                          -  

 

 

 

 

 

Total Loan Deductions

$                                          -  

 

 

 

 

 

 

 

 

 

 

 

 

Net amount of Obligations

$                                          -  

 

 

 

 

 

 

 

 

 

 

 

 

Availability (Amount Due)

$                      (500,000.00)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Eligible Inventory Sublimits

 

 

 

 

 

 

 

Compliant?

 

Aggregate of all units with a valuation > $750,000

 

$                                                                     -  

$                250,000,000.00

YES

 

Aggregate of all units > 72'

 

$                                                                     -  

$                  75,000,000.00

YES

 

Inventory purchased from a Foreign OEM (excl. Azimut & Galeon)

 

$                                                                     -  

$                125,000,000.00

YES

 

Pre-owned units

 

$                                                                     -  

$                  75,000,000.00

YES

 

 

 

 

 

 

 

Exhibit G

 

 

This Borrowing Base Certificate and supporting documentation (collectively, this "Certificate") is delivered in accordance with that certain Amended Loan and Security Agreement (the "Agreement"; capitalized terms used herein and not otherwise defined shall have the same definition as set forth in the Agreement), dated July 9, 2021, between Wells Fargo Commercial Distribution Finance LLC, as Agent and Lender ("Agent"), the other Lenders party thereto from time to time (along with Agent, the “Lenders”),  MarineMax, Inc. (“MarineMax”) and the other Dealers party thereto (collectively, the "Dealers"), as from time to time amended. By executing this Certificate, MarineMax, individually and on behalf of the other Dealers, (a) represents and warrants to Agent and the Lenders that the information contained in this Certificate is true and correct in all material respects and that no Default has occurred, including, but not limited to, violation of any of the financial covenants contained in the Agreement, and (b) hereby ratifies, confirms and affirms all of the terms, conditions and provisions of the Agreement

 

 

 

 

 

 

 

 

 

Agent:

MarineMax, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

Signature:

 

 

 

 

 

 

 

 

 

 

 

 

 

Date:

 

 

 

 

 

 

 

Exhibit G

 

Exhibit 21

LIST OF SUBSIDIARIES

The following is a list of directly or indirectly wholly-owned subsidiaries of MarineMax, Inc., omitting some subsidiaries which, considered in the aggregate, would not constitute a significant subsidiary.

Name

 

State or Jurisdiction of

Incorporation or Organization

MarineMax East, Inc. (1)

 

Delaware

MarineMax Services, Inc. (2)

 

Delaware

MarineMax Northeast, LLC (2)

 

Delaware

Boating Gear Center, LLC (2)

 

Delaware

US Liquidators, LLC (1)

 

Delaware

Newcoast Financial Services, LLC (2)

 

Delaware

My Web Services, LLC (2)

 

Delaware

MarineMax Charter Services, LLC (2)

 

Delaware

MarineMax Vacations, LTD. (2)

 

British Virgin Islands

Gulfport Marina, LLC (2)

 

Delaware

FWW, LLC (2)

 

Florida

FWW, UK Limited (3)

 

United Kingdom

Fraser Yachts Florida, Inc. (3)

 

Florida

TCN Antibes S.A.R.L. (4)

 

France

Fraser Yachts Limited (4)

 

United Kingdom

Fraser Worldwide S.A.M. (4)

 

Monaco

Fraser Yachts Group S.R.L. (4)

 

Italy

Fraser Yachts Spain SLU (4)

 

Spain

Fraser Yachts California, Inc. (5)

 

California

Northrop & Johnson Holding, LLC, (1)

 

Florida

Private Insurance Services, LLC (1)

 

Florida

Northrop & Johnson France E.U.R.L. (6)

 

France

Northrop & Johnson Monaco S.A.M. (7)

 

Monaco

Skipper Marine of Madison, LLC (1)

 

Wisconsin

Skipper Marine of Chicago-Land, LLC (1)

 

Illinois

Skipper Marine of Michigan, LLC (1)

 

Michigan

Silver Seas Yachts, LLC (1)

 

Arizona

Silver Seas California, Inc. (8)

 

California

Skipper Marine, LLC (1)

 

Wisconsin

Skipper Marine of Fox Valley, LLC (1)

 

Wisconsin

Skipper Marine of Ohio, LLC (1)

 

Ohio

Marinemax Products, Inc. (1)

 

Florida

KCS International, Inc. (9)

 

Wisconsin

KCS RE Acquisition Company, LLC (10)

 

Wisconsin

JDG Undaunted, LLC (9)

 

Texas

Undaunted Holdings, Inc. (11)

 

Delaware

Intrepid Powerboats, Inc. (12)

 

Florida

Intrepid Southeast, Inc. (13)

 

Florida

Nisswa Marine, LLC (1)

 

Minnesota

N&J Media, LLC (1)

 

Florida

Marinemax KW, LLC (1)

 

Florida

BY Holdings, LLC (1)

 

Florida

Newcoast Insurance Services, LLC (14)

 

Florida

N&J Group, LLC (15)

 

Florida

Wave Aviation, LLC (2)

 

Florida

Global Marine Brokerage, LLC (16)

 

Florida

Perfect Yacht Charter, LLC (16)

 

Delaware

Northrop & Johnson California, Inc. (17)

 

California

Northrop & Johnson Yachts-Ships LLC (5)

 

Florida

Northrop & Johnson Group Spain, S.L. (4)

 

Spain

Skipper Bud’s of Illinois, LLC (1)

 

Illinois

 

 

(1)

Wholly owned subsidiary of MarineMax, Inc.

(2)

Wholly owned subsidiary of MarineMax East, Inc.

(3)

Wholly owned subsidiary of FWW, LLC

(4)

Wholly owned subsidiary of FWW UK Limited

(5)

Wholly owned subsidiary of Fraser Yachts Florida, Inc.  

(6)

Wholly owned subsidiary of TCN Antibes S.A.R.L.

(7)

Wholly owned subsidiary of Fraser Worldwide S.A.M.

(8)

Wholly owned subsidiary of Silver Seas Yachts, LLC

(9)

Wholly owned subsidiary of Marinemax Products, Inc.

(10)

Wholly owned subsidiary of KCS International, Inc.

(11)

Wholly owned subsidiary of JDG Undaunted, LLC

(12)

Wholly owned subsidiary of Undaunted Holdings, Inc.

(13)

Wholly owned subsidiary of Intrepid Powerboats, Inc.

(14)

Wholly owned subsidiary of Private Insurance Services, LLC

(15)

Wholly owned subsidiary of Northrop & Johnson Holding LLC

(16)

Wholly owned subsidiary of My Web Services, LLC

(17)

Wholly owned subsidiary of Fraser Yachts California, Inc.

Exhibit 23.1

 

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the registration statements (No. 333-236617, 333-236618, 333-141657, 333-83332, 333-63307, 333-156358, 333-177019, 333-218563, 333-140366, 333-218566 and 333-251083) on Form S-8 of our reports dated November 19, 2021, with respect to the consolidated financial statements of MarineMax, Inc. and the effectiveness of internal control over financial reporting.

 

 

/s/ KPMG LLP

Tampa, Florida

November 19, 2021

 

Exhibit 31.1

CERTIFICATION

I, W. Brett McGill, certify that:

1. I have reviewed this report on Form 10-K of MarineMax, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

/s/ W. BRETT McGill

 

W. Brett McGill

 

Chief Executive Officer and President

 

(Principal Executive Officer)

Date:  November 19, 2021

Exhibit 31.2

CERTIFICATION

I, Michael H. McLamb, certify that:

1. I have reviewed this report on Form 10-K of MarineMax, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

/s/ Michael H.  McLamb

 

Michael H.  McLamb

 

Chief Financial Officer

 

(Principal Financial Officer)

Date:  November 19, 2021

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C.  SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of MarineMax, Inc.  (the “Company”) for the year ended September 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, W. Brett McGill, Chief Executive Officer of the Company, certify, to my best knowledge and belief, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C.  78m(a) or 78o(d)); and

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

/s/ W. BRETT McGILL

 

W. Brett McGill

 

Chief Executive Officer

Date: November 19, 2021

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C.  SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of MarineMax, Inc.  (the “Company”) for the year ended September 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael H. McLamb, Chief Financial Officer of the Company, certify, to my best knowledge and belief, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C.  78m(a) or 78o(d)); and

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

/s/ Michael H.  McLamb

 

Michael H.  McLamb

 

Chief Financial Officer

Date: November 19, 2021