CAREY WATERMARK INVESTORS INCORPORATED 207 E. WESTMINSTER SUITE 200 LAKE FOREST, IL 60045 FORM OF SALES AGENCY AGREEMENT
EXHIBIT 10.3
XXXXX WATERMARK INVESTORS INCORPORATED
000 X. XXXXXXXXXXX
XXXXX 000
XXXX XXXXXX, XX 00000
000 X. XXXXXXXXXXX
XXXXX 000
XXXX XXXXXX, XX 00000
FORM OF SALES AGENCY AGREEMENT
[•], 2008
Xxxxx Financial, LLC
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Ladies and Gentlemen:
Xxxxx Watermark Investors Incorporated, a Maryland corporation (the “Company”), hereby
confirms its agreement with you as follows:
1. Introduction. This Sales Agency Agreement (the “Agreement”) sets forth the
understandings and agreements between the Company and you whereby you will offer and sell on a best
efforts basis for the account and risk of the Company, along with a group of Selected Dealers (as
defined in Section 3(c) below) to be formed with your assistance, up to 125,000,000 shares of
common stock, par value $0.001 per share (each a “Share,” and collectively, the
“Shares”) of the Company, of which 25,000,000 Shares are being offered pursuant to the
Company’s Distribution Reinvestment and Stock Purchase Plan (the “DRIP”), registered on
Form S-11. Shares sold to the public other than through the DRIP shall be sold at $10 per share
(subject to certain volume discounts) and shares sold through the DRIP shall be sold at $9.50 per
share (the “Offering”). The Shares are more fully described in the Registration Statement
referred to below.
The Company represents, warrants and agrees that:
(a) Registration Statement and Prospectus. The Company has filed with the Securities
and Exchange Commission (the “Commission”) a registration statement on Form S-11 (File No.
333-149899), for the registration of the Shares under the Securities Act of 1933, as amended (the
“Securities Act”) and the regulations thereunder (the “Regulations”). The
registration statement, as amended, (including financial statements, exhibits and all other
documents related thereto filed as a part thereof or incorporated therein), and any registration
statement filed under Rule 462(b) of the Securities Act, are herein called the “Registration
Statement” and the prospectus contained therein is called the “Prospectus,” respectively, except
that if the Registration Statement is amended by a post-effective amendment, the term
“Registration Statement” shall, from and after the declaration of effectiveness of such
post-effective amendment, refer to the Registration Statement as so amended and the term
“Prospectus” shall refer to the Prospectus as so amended, and if the Prospectus filed by the
Company pursuant to Rule 424(b) or 424(c) of the Regulations shall differ from the Prospectus on
file at the time the Registration Statement or any post-effective amendment shall become
effective, the term “Prospectus” shall refer to the Prospectus filed pursuant to either of such
Rules from and after the date on which it shall have been filed with the Commission. Further, if
a separate prospectus is filed and becomes effective with respect solely to the DRIP (a “DRIP
Prospectus”), the term “Prospectus” shall refer to such DRIP Prospectus from and after the
declaration of effectiveness of such DRIP Prospectus.
(b) Compliance with the Securities Act. The Registration Statement has been prepared
and filed by the Company and has been declared effective by the Commission. Neither the
Commission nor any state securities authority has issued any order preventing or suspending the
use of any Prospectus filed with the Registration Statement or any amendments or supplements
thereto and no proceeding for that purpose has been instituted, or to the Company’s knowledge, is
threatened or contemplated by the Commission or by the states securities authorities. At the time
the Registration Statement became effective (the “Effective Date”) and at the time that
any post-effective amendments thereto or any additional registration statement filed under Rule
462(b) of the Securities Act becomes effective, the Registration Statement or any amendment
thereto (1) complied, or will comply, as to form in all material respects with the requirements of
the Securities Act and the Regulations and (2) did not or will not contain an untrue statement of
a material fact or omit to state a material fact necessary to make the statements therein not
misleading. When the Prospectus or any amendment or supplement thereto is filed with the
Commission pursuant to Rule 424(b) or 424(c) of the Regulations and at all times subsequent
thereto through the date on which the Offering is terminated (“Termination Date”), the
Prospectus (as amended or as supplemented) will comply in all material respects with the
requirements of the Securities Act and the Regulations, and will not include any untrue statement
of a material fact or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they were made, not
misleading.
(c) The Company. The Company has been duly incorporated and validly exists as a
corporation in good standing under the laws of the State of Maryland with full power and authority
to conduct the business in which it is engaged in as described in the Prospectus. The Company is
duly qualified to do business as a foreign corporation and is in good standing in each other
jurisdiction in which it owns or leases property of a nature, or transacts business of a type that
would make such qualification necessary except where the failure to be so qualified or in good
standing could not have, individually or in the aggregate, a material adverse effect on the
financial condition, stockholders’ equity, results of operation or business of the Company, taken
as a whole (a “Material Adverse Effect”).
(d) The Shares. The Shares, when issued, will be duly and validly issued, fully paid
and non-assessable and will conform in all material respects to the description thereof contained
in the Prospectus; no holder thereof will be subject to personal liability for the obligations of
the Company
solely by reason of being such a holder; such Shares are not subject to the preemptive rights
of any shareholder of the Company; and all corporate action required to be taken for the
authorization, issue and sale of such Shares has been validly and sufficiently taken.
(e) Violations. The Company is not in violation of its Articles of Incorporation
(“Articles”) or Bylaws or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other agreement or instrument to which it is a party or by which it or
any of its properties is bound.
(f) Taxes. The Company has filed all federal, state and foreign income tax returns
which have been required to be filed on or before the due date (taking into account all extensions
of time to file). The Company has paid or provided for the payment of all taxes indicated by said
returns and all assessments received by the Company to the extent that such taxes or assessment
have become due, except where the Company is contesting such assessments in good faith and except
for such taxes and assessments of immaterial amounts, the failure of which to pay, would not,
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(g) Pending Action. Except as disclosed in the Registration Statement and the
Prospectus, there is no action, suit or proceeding pending or, to the best of the knowledge,
information and belief of the Company, threatened to which the Company is a party, before or by
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any court or governmental agency or body which would reasonably be expected to have a Material
Adverse Effect.
(h) Financial Statements. The financial statements of the Company, including the
notes thereto, filed as part of the Registration Statement and those included in the Prospectus
present fairly in all material respects the financial position of the Company as of the date
indicated and the results of its operations for the periods specified; said financial statements
have been prepared in conformity with generally accepted accounting principles applied on a
consistent basis and comply with the requirements of Regulation S-X promulgated by the Commission;
and PricewaterhouseCoopers LLP, whose report is filed with the Commission as a part of the
Registration Statement, are independent accountants as required by the Securities Act and the
Regulations.
(i) No Subsequent Material Events. Since the respective dates as of which
information is given in the Registration Statement and the Prospectus, except as may otherwise be
stated in or contemplated by the Registration Statement and the Prospectus, (a) there has not been
any material adverse change in the condition (financial or otherwise) of the Company or in the
earnings, affairs or business prospects of the Company, whether or not arising in the ordinary
course of business, and (b) there have not been any material transactions entered into by the
Company except in the ordinary course of business.
(j) Investment Company Act. The Company does not intend to conduct its business so
as to be an “investment company” as that term is defined in the Investment Company Act of 1940, as
amended and the rules and regulations thereunder, and it will exercise reasonable diligence to
ensure that it does not become an “investment company” within the meaning of the Investment
Company Act of 1940.
(k) Authorization of Agreement. This Agreement and the Advisory Agreement (the
“Advisory Agreement”) among the Company, Xxxxx Watermark Advisors, LLC (the
“Advisor”) and CWI Limited Partnership have been duly and validly authorized, executed and
delivered by the Company and CWI Limited Partnership and constitute the valid agreements of the
Company and CWI Limited Partnership enforceable in accordance with their terms. The execution and
delivery of this
Agreement and the Advisory Agreement, the consummation of the transactions herein and therein
contemplated and the compliance with the terms of this Agreement and the Advisory Agreement by the
Company and CWI Limited Partnership will not conflict with or constitute a default under (1) the
Articles or bylaws of the Company or the Operating Partnership Agreement of CWI Limited
Partnership or (2) any indenture, mortgage, deed of trust, lease or other agreement or instrument
to which the Company is a party, or (3) any law, order, rule or regulation, writ, injunction or
decree of any government, governmental instrumentality or court, domestic or foreign, having
jurisdiction over the Company, or any of its property, except in the case of clauses (2) and (3),
where such conflict, breach, violation or default would not reasonably be expected to have
individually or in the aggregate, a Material Adverse Effect and except to the extent that the
enforceability of the indemnity and/or contribution provisions contained in Section 8 of this
Agreement may be limited under applicable securities law; and no consent, approval, authorization
or order of any court or other governmental agency or body has been or is required for the
performance of this Agreement or the Advisory Agreement by the Company, or CWI Limited
Partnership, or for the consummation of the transactions contemplated hereby and thereby (except
such as have been obtained under the Securities Act or as may be required under state securities
or “blue sky” laws in connection with the distribution of the Shares).
(l) Description of Agreements. The Company is not a party to or bound by any
contract or other instrument of a character required to be described in the Registration Statement
or the Prospectus or to be filed as an exhibit to the Registration Statement that is not described
and filed as required.
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(m) Qualification as a Real Estate Investment Trust. The Company intends to satisfy
the requirements of the Internal Revenue Code of 1986 as amended (the “Code”) for
qualification of the Company as a real estate investment trust. Commencing with the taxable year
ending December 31, 2008, the Company has been organized and has operated in conformity with the
requirements for qualification as a real estate investment trust under the Code and its actual
method of operation has enabled it and its proposed method of operation as described in the
Prospectus will enable it to continue to meet the requirements for taxation as a real estate
investment trust under the Code.
3. Sales of Shares. On the basis of the representations, warranties and covenants
herein contained, but subject to the terms and conditions herein set forth, the Company hereby
appoints you as its sales agent (“Sales Agent”) to solicit purchasers, along with the
Selected Dealers, for the Shares during the period (the “Effective Term”) from the
Effective Date to the Termination Date, including the Shares pursuant to the DRIP, each in the
manner described in the Registration Statement. Subject to the performance by the Company of all
obligations to be performed by it hereunder and the completeness and accuracy of all of its
representations and warranties, you agree to use your best efforts as Sales Agent, promptly
following written or telegraphic receipt of notice of the Effective Date from the Company, to offer
and sell such number of Shares as contemplated by this Agreement at the price stated in the
Prospectus.
(a) Purchase of Shares. The purchase of Shares must be made during the offering
period described in the Prospectus, or after such offering period in the case of purchases made
pursuant to the DRIP (each such purchase hereinafter defined as an “Order”). Persons
desiring to purchase Shares are required to (i) deliver to you or the appropriate Selected Dealer
a check in the amount of $10 per Share purchased (subject to certain volume discounts or other
discounts as described in the Prospectus) payable to Xxxxx Fargo
Bank, National Association, or Xxxxx Fargo, until subscription proceeds reach $20
million and thereafter to Bank of the West (each of such Bank of
the West and Xxxxx Fargo being an “Agent Bank”)
or (ii) authorize a debit of such amount to the account such purchaser maintains with you, the
appropriate Selected Dealer. During the Offering and until the first annual valuation of the
Company’s assets is completed, Shares issued pursuant to the DRIP shall be purchased at $9.50 per
share. Subsequent to the first annual valuation of the Company’s assets, the price
of shares purchased pursuant to the DRIP will be 95% of the then-current net asset value per
share. For investors residing in certain states, an enrollment form in the form attached to the
Prospectus (each an “Enrollment Form”) must be completed and submitted to the Company. On
a daily basis, you will submit all checks received from investors and transfer, via Federal
Reserve bank wire, the total amount debited from investor accounts for the purchase of Shares
along with a list including the name, address and telephone number of, the social security number
or taxpayer identification number of, the brokerage account number of (if applicable), the number
of Shares purchased by, any election to participate in the DRIP by, and the total dollar amount of
investment by, each investor on whose behalf checks are submitted or the wire transfer is made.
You also will forward all Enrollment Forms to the Company. You shall use your best efforts to
wire such funds or transmit checks to the applicable Agent Bank not later than noon of the next
business day after receipt by you from your customer of each Order. You will advise the
applicable Agent Bank whether the funds you are submitting are attributable to individual
retirement accounts, Xxxxx plans, or any other employee benefit plan subject to Title I of the
Employee Retirement Income Security Act of 1974 or from some other type of investor.
All Orders solicited by you will be strictly subject to review and acceptance by the Company and
the Company reserves the right in its absolute discretion to reject any Order or to accept or
reject Orders in the order of their receipt by the Company or otherwise. Within 30 days of receipt
of an Order, the Company must accept or reject such Order. If the Company elects to reject such
Order, within 10 business days after such rejection, it will notify the purchaser of such fact and
cause the return of such purchaser’s funds submitted with such application and any interest earned
thereon. If you receive no notice of rejection within the foregoing time limits or if funds
submitted by the purchaser are released from escrow to the Company within the foregoing time
limits, the Order shall be deemed accepted. You agree to make every reasonable effort to determine
that the purchase of
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Shares is a suitable and appropriate investment for each potential purchaser of Shares
based on information provided by such purchaser regarding such purchaser’s financial situation and
investment objectives. You agree to maintain copies of the Orders received from investors.
(b) Closing Dates and Delivery of Shares. In no event shall a sale of Shares to an
investor be completed until at least five business days after the date the investor receives a
copy of the Prospectus. On the date Shares are first issued to shareholders (such date being
herein referred to as the “Initial Closing Date”), the applicable Agent Bank will at such
time and place as instructed by you and the Company (which instruction shall be subject to the
satisfaction on such date of the conditions contained herein), deliver to the Company or its
designee immediately available funds in an amount equal to the escrow funds maintained by the
Company and on deposit in the escrow account of the applicable Agent Bank prior to the date
designated by the Company. If, after the Initial Closing Date, additional sales of Shares are
made, on each such date (each such date being referred to as an “Additional Closing Date”)
and at each such time and place as instructed by you and the Company (which instruction shall be
subject to the satisfaction on each such date of the conditions contained herein), the applicable
Agent Bank shall be required to deliver to the Company or its designee immediately available funds
in an amount equal to the escrow funds on deposit in the escrow account of the applicable Agent
Bank prior to the date specified by the Company. The Initial Closing Date and each Additional
Closing Date are each herein referred to as a “Closing Date.” Closing dates for purchases
made pursuant to the DRIP will be as set forth in the DRIP.
(c) Selected Dealers. The Shares offered and sold under this Agreement, other than
sales made by the Company directly to its officers and directors, shall be offered and sold only
by you as Sales Agent and by a selling group of brokers or dealers (the “Selected
Dealers”), all of whom must be members in good standing of the Financial Industry Regulatory
Authority (the “FINRA”), who execute Selected Dealer Agreements with you substantially in
the form attached hereto as Exhibit A, all of whom are acceptable to the Company and you (which
acceptance shall not be unreasonably withheld by you). You will assist the Company in forming the
selling group of Selected Dealers. No firm shall be invited to join the selling group of Selected
Dealers if it is (i) currently subject to any suspension or expulsion pursuant to the rules and
regulations of the Commission, the state securities commissions of any of the fifty states, the
New York Stock Exchange, Inc. or the American Stock Exchange, Inc. as those rules and regulations
relate to broker-dealers, or the rules and regulations of the FINRA or (ii) a “discount broker” as
that term is commonly understood in the brokerage industry. The Company and the Advisor or an
affiliate thereof agree to participate in your marketing efforts to the extent that you may
reasonably request and, without limiting the generality of the foregoing, agree to visit the
offices of Selected Dealers as you may reasonably designate.
(d) Compensation. In consideration for your execution of this Agreement, and for the
performance of your obligations hereunder, the Company agrees to pay or cause to be paid to you a
selling commission (the “Selling Commission”) of six and one-half percent ($0.65) of the
price of each Share (except for Shares sold pursuant to the DRIP, as to which no Selling
Commissions shall be paid) sold by you or by a Selected Dealer; provided, however, that your
Selling Commission shall be reduced with respect to volume sales of Shares to single purchasers
(as defined in the Prospectus). In the case of such volume sales to single purchasers, on orders
of $250,000 or more your Selling Commission shall be reduced by the amount of the Share purchase
price discount. In the case of such volume sales to single purchasers, your Selling Commission
will be reduced for each incremental share purchase in the total volume ranges set forth in the
table below. Such reduced share purchase price will not affect the amount received by the Company
for investment. The following table sets forth the reduced Share purchase price and Selling
Commission payable to you:
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Purchase Price per share for | Selling Commission per share | |||||||
Volume Discount Range for a | Incremental Share in Volume | for Incremental Share in | ||||||
Single Purchaser | Discount Range | Volume Discount | ||||||
$ 2000 — $ 250,000
|
$ | 10.00 | $ | 0.65 | ||||
$ 250,001 — $ 500,000
|
$ | 9.85 | $ | 0.50 | ||||
$ 500,001 — $ 750,000
|
$ | 9.70 | $ | 0.35 | ||||
$ 750,001 — $1,000,000
|
$ | 9.60 | $ | 0.25 | ||||
$1,000,001 — $5,000,000
|
$ | 9.50 | $ | 0.15 |
As an example, a single purchaser would receive 50,380.7107 Shares rather than 50,000 Shares
for his/her or its investment of $500,000 and the Selling Commission would be $28,940. On the
first $250,000 of the investment there would be no discount and the purchaser would receive 25,000
Shares at $10 per share. On the remaining $250,000, the per share price would be $9.85 and the
purchaser would receive 25,380.7107 Shares.
Selling Commissions for purchases of more than $5,000,000 are negotiable but in no event will
the net purchase price be less than $9.35 per Share. Selling Commissions paid will in all cases be
the same for the same level of sales.
The Company will pay to you for reallowance to Selected Dealers only, the amount of any due
diligence expense reimbursement paid to the Selected Dealers which you have agreed to pay in the
amount of up to one-half percent of the total proceeds received by the Company from Shares sold by
each Selected Dealer to which you have agreed to make such reimbursement.
From your total Selling Commissions, you agree to reallow to each Selected Dealer with whom
you have entered into a Selected Dealer Agreement the full $0.65 Selling Commission per Share for
Shares sold by the Company pursuant to Orders solicited by such Selected Dealer and up to the full
amount of the $0.20 per Share Selected Dealer Fee (as defined in the Selected Dealer Agreement)
paid to you by the Company with respect to Shares solicited by the Selected Dealer. The Company
will pay to you a Wholesaling Fee of $0.15 per Share sold. This fee is intended to cover your
wholesaling expenses. No Selling Commissions, Selected Dealer Fees or Wholesaling Fees will be
paid in connection with purchases of Shares made through the DRIP.
No payment of Selling Commissions will be made by the Company with respect to Orders (or
portions thereof), which are rejected by the Company. In addition, we will not pay you a Selected
Dealer Fee if the aggregate underwriting compensation to be paid to us, you and the other Selected
Dealers in connection with the Offering and sale of the Shares (including such Selected Dealer Fee)
exceed the limitations prescribed by the FINRA. Selling Commissions, Selected Dealer Fees and
Wholesaling Fees will be paid within five business days following any Closing Date with respect to
the Shares sold to purchasers whose Shares are issued on such Closing Date. Selling Commissions,
Selected Dealer Fees and Wholesaling Fees will be payable only with respect to transactions lawful
in the jurisdictions where they occur. Purchases of Shares by the
Company’s executive officers and directors and their family
members, as well as officers, directors and employees and immediate
family members of the Advisor, its members and their affiliates, and
if approved by the Company’s board, consultants as well as clients of selected investment advisors (other than any investment advisor
that is also registered as a broker-dealer) shall be net of Selling
Commissions, Selected Dealer Fees and Wholesaling Fees.
Except as provided in the Prospectus with respect to the initial sale of 22,222 Shares to the
Advisor, the Company represents that neither it nor any of its affiliates have offered or sold any
Shares pursuant to this Offering, other than directly to the Company’s officers and directors and
to registered investment advisers, and agrees that, through the date on which the Offering is
terminated (the “Termination Date”), the Company will not offer or sell any Shares
otherwise than through you as herein provided, except to its officers and directors and to
registered investment advisers.
(e) Finders Fee. Neither the Company nor any Selected Dealer participating in the
Offering shall, directly or indirectly, pay or award any finder’s fees, commissions or other
compensation to any person engaged by a potential investor for investment advice as an inducement
to such advisor to advise the purchase of Shares; provided, however, that normal Selling
Commissions payable to a registered broker-dealer or other properly licensed person for selling
Shares shall not be prohibited hereby.
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(f) Wholesaling Activities. You hereby agree to provide the following additional
services for the Company:
(i) reviewing sales literature prepared by the Company to be used in the offer and sale
of the Shares for compliance with the Securities Act and the Regulations thereunder, the
Conduct Rules of the FINRA and the “blue sky” laws of any jurisdiction in which such
material is used (“Blue Sky Law”). The sales literature may include, but not be
limited to, a slide presentation, a property acquisition report, a brochure and seminar
invitations for presentation and distribution to the public and an audio program, a video
program and a brochure for presentation and distribution to broker-dealers;
(ii) assisting broker-dealers participating in the Offering by coordinating
broker-dealer seminars, informational meetings, distributing brochures and other sales
literature designed for broker-dealers and providing information and answering any questions
with regard to the Offering; and
(iii) assisting the Company in enlisting broker-dealers to participate in the Offering
as Selected Dealers.
4. Covenants. The Company covenants to you and each Selected Dealer that it will:
(a) Commission Orders. Use its best efforts to cause the Registration Statement and
any subsequent amendments thereto, to become effective as promptly as possible, and will promptly
notify you and confirm the notice in writing if requested, (i) when the Registration Statement and
any post-effective amendment thereto become effective, (ii) of the issuance by the Commission or
any state securities authority of any jurisdiction of any stop order or of the initiation, or the
threatening, of any proceedings for that purpose or of the suspension of the qualification of the
Shares for offering or sale in any jurisdiction or of the institution or threatening of any
proceedings for any of such purposes, (iii) of the receipt of any comments from the Commission
with respect to the Registration Statement, and (iv) of any request by the Commission for any
amendment to the Registration Statement as filed or any amendment or supplement to the Prospectus
or for additional information relating thereto. The Company and you will make every reasonable
effort to prevent the issuance by the Commission of a stop order or a suspension order and if the
Commission shall enter a stop order or suspension order at any time, the Company will make every
reasonable effort to obtain the lifting of such order at the earliest possible moment.
(b) Registration Statement. Deliver to you and Selected Dealers without charge the
Registration Statement and each amendment thereto, and as soon as the Registration Statement or
any amendment or supplement thereto become effective, such number of copies of the Prospectus (as
amended or supplemented), the Registration Statement and supplements and amendments thereto, if
any (without exhibits), as you may reasonably request. The Company hereby consents to the use of
the Prospectus or any amendment or supplement thereto by you and Selected Dealers both in
connection with the Offering and for such period of time thereafter as the Prospectus is required
to be delivered in connection therewith.
(c) “Blue Sky” Qualifications. Endeavor in good faith, in cooperation with you,
Selected Dealers and counsel to Selected Dealers, at or prior to the time the Registration
Statement becomes effective, to seek the approval of the Offering by the FINRA, and to qualify the
Shares for offering and sale under the securities laws of all 50 states and the District of
Columbia, except in those jurisdictions you may reasonably designate, provided, however, the
Company shall not be obligated to subject itself to taxation as a party doing business in any such
jurisdiction. In each
jurisdiction where such qualification shall be effected, the Company will, unless you agree
that such action is not at the time necessary or advisable, file and make such statements or
reports as are or may reasonably be required by the laws of such jurisdiction.
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(d) Amendments and Supplements. If during the time when a Prospectus is required to
be delivered under the Securities Act, any event relating to the Company shall occur as a result
of which it is necessary, in the opinion of the Company’s counsel, to amend or supplement the
Prospectus in order to make the Prospectus not misleading in light of the circumstances existing
at the time it is delivered to an investor, the Company will forthwith prepare and furnish without
expense to you and the Selected Dealers, a reasonable number of copies of an amendment or
amendments of, or a supplement or supplements to, the Registration Statement or the Prospectus
which will amend or supplement the Registration Statement or Prospectus so that as amended or
supplemented it will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading. During the time
when a Prospectus is required to be delivered under the Securities Act, the Company shall comply
in all material respects with all requirements imposed upon it by the Securities Act, as from time
to time in force, so far as necessary to permit the continuance of sales of the Shares in
accordance with the provisions hereof and the Prospectus.
(e) Copies of Reports. During the Offering, you will be furnished with the
following:
(i) as soon as practicable after they have been sent by the Company to the shareholders
or to any class of security holders of the Company or filed with the Commission, copies of
each annual and interim financial and each other report provided to such shareholder;
(ii) as soon as practicable, copies of every press release issued by the Company and
every material news item and article in respect of the Company or its affairs released by
the Company; and
(iii) additional documents and information with respect to the Company and its affairs
as you may from time to time reasonably request.
(f) Sales Material. Will deliver to you from time to time, all advertising and
supplemental sales material (whether designated solely for broker-dealer use or otherwise)
proposed to be used or delivered in connection with the Offering, prior to the use or delivery to
third parties of such material, and will not so use or deliver, in connection with the Offering,
any such material to which you or your counsel shall reasonably object or disapprove within seven
days of delivery of such material to you or which shall be reasonably disapproved by your counsel
within such seven-day period.
(g) Use of Proceeds. Apply the proceeds from the sale of Shares as set forth in the
section of the Prospectus entitled “Estimated Use of Proceeds” and operate the business of the
Company in accordance with the descriptions of its business set forth in the Prospectus.
(h) Prospectus Delivery. In case you or any Selected Dealer is required to deliver a
Prospectus in connection with sales of any of the Shares at any time nine months or more after the
Effective Date, upon your or such Selected Dealer’s request, the Company will, at its expense,
prepare and deliver to you or such Selected Dealer as many copies as you may request of an amended
or supplemented Prospectus complying with Section 10(a)(3) of the Securities Act.
(i) Financial Statements. Make generally available to its security holders as soon
as practicable, but not later than 60 days after the close of the period covered thereby, an
earnings statement of the Company (in form complying with the provisions of Rule 158 under
the Securities Act) covering a period of 12 months beginning after the Effective Date but not
later than the first day of the Company’s fiscal quarter next following the Effective Date.
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(j) Compliance with Exchange Act. Comply with the requirements of the Securities
Exchange Act of 1934 (“Exchange Act”) relating to the Company’s obligation to file
periodic reports including annual reports on Form 10-K, quarterly reports on Form 10-Q and current
reports on Form 8-K.
5. Covenants of the Sales Agent. You covenant and agree with the Company as follows;
(a) Compliance with Laws. In connection with the offer and sale of Shares, you shall
comply with any applicable requirements of the Securities Act, the Exchange Act and the applicable
state securities or “blue sky” laws, and the rules and regulations thereunder.
(b) Accuracy of Information. No information supplied by you for use in the
Registration Statement will contain any untrue statements of a material fact or omit to state any
material fact necessary to make such information not misleading.
(c) No Additional Information. You will not give any information or make any
representation in connection with the offering of the Shares other than that contained in the
Prospectus.
(d) Sale of Shares. You shall act as Sales Agent and solicit, directly or through
Selected Dealers, purchasers of the Shares only in the jurisdictions in which you have been
advised by the Company that such solicitations can be made and in which you or the soliciting
Selected Dealer, as the case may be, are qualified to so act.
(e) Licensing. Any person employed or retained by either the Company or you to
provide sales support or wholesaling services in support of you or your clients shall be licensed
in accordance with all applicable laws and will comply with all applicable federal and state
securities laws and regulations.
(a) Expenses. Whether or not the transactions contemplated in this Agreement are
consummated or if this Agreement is terminated, the Company will pay, in addition to the
compensation described in Section 3(d) (which you may retain up to the point of termination unless
this agreement is terminated without any Shares being sold, in which case no such compensation
shall be paid), all fees and expenses incurred in connection with the formation, qualification and
registration of the Company and in marketing, distributing and processing the Shares under
applicable Federal and state law, and any other fees and expenses actually incurred and directly
related to the offering and sale of the Shares and your other obligations under this Agreement,
including such fees and expenses as: (i) the preparing, printing, filing and delivering of the
Registration Statement (as originally filed and all amendments thereto) and of any preliminary
prospectus and of the Prospectus and any amendments thereof or supplements thereto and the
preparing and printing of the Selected Dealer Agreements, this Agreement and Enrollment Forms,
including the cost of all copies thereof and any financial statements or exhibits relating to the
foregoing supplied to you or the Selected Dealers in quantities reasonably requested by you; (ii)
the preparing and printing of the solicitation material and related documents and the filing
and/or recording of such certified certificates or other documents necessary to comply with the
laws of the State of Maryland for the formation of a corporation and thereafter for the continued
good standing of a Company; (iii) the issuance and delivery of the Shares, including any transfer
or other taxes payable thereon; (iv) any escrow arrangements in connection with the transactions
described herein,
including any compensation or reimbursement to an escrow agent for its services as such; (v)
the qualification or registration of the Shares under state securities or “blue sky” laws; (vi)
the filing fees payable to the Commission and to the FINRA; (vii) the preparation and printing of
advertising material in connection with and relating to the Offering, including the cost of all
sales literature and
9
investor and broker-dealer sales and information meetings; (viii) the cost
and expenses of counsel and accountants of the Company; and (ix) any other expenses of issuance
and distribution of the Shares. The Company shall also reimburse directly all other entities for
the expenses of the type described in clauses (i) through (ix) of the preceding sentence incurred
directly by those entities at your request.
(b) Sales Incentive Programs. Subject to the satisfactory completion of any
regulatory reviews and examinations which may be required, the prior review and approval and the
rules of the FINRA (including Rule 2710 (c)(6)(B)(xiii)) and approval by the Company or the
Advisor, the Company, the Advisor and Affiliates of the Advisor may establish sales incentive
programs for your associated persons or the associated persons of Selected Dealers only. Sales
incentives will be deemed to be additional compensation. The aggregate value of incentives paid
directly to an individual associated person during the Offering will not exceed $100 in any given
year.
(c) Limitation. Notwithstanding the foregoing, the total compensation paid to the
Sales Agent and Selected Dealers from any source in connection with the Offering pursuant to
Section 3(d) hereof and this Section 6 shall not exceed the limitations prescribed by the FINRA.
The Company and you agree to monitor the payment of all fees and expense reimbursements to assure
that the FINRA limitations are not exceeded.
7. Conditions of Your Obligations. Your obligations hereunder shall be subject to the
continued accuracy throughout the Effective Term of the representations, warranties and agreements
of the Company, to the performance by the Company of its obligations hereunder and to the following
terms and conditions:
(a) Effectiveness of Registration Statement. The Registration Statement shall have
initially become effective not later than 5:30 p.m., Eastern time, on the date of this Agreement,
at any time during the term of this Agreement, no stop order shall have been issued or proceedings
therefor initiated or threatened by the Commission; and all requests for additional information on
the part of the Commission and state securities administrators shall have been complied with to
the reasonable satisfaction of your counsel and no stop order or similar order shall have been
issued or proceedings therefor initiated or threatened by any state securities authority in any
jurisdiction in which the Company intends to offer Shares.
(b) Stop Orders. On the Effective Date and during the Effective Term no order
suspending the sale of the Shares in any jurisdiction (except the Designated Jurisdictions) nor
any stop order issued by the Commission shall have been issued, and on the Effective Date and
during the Effective Term no proceedings relating to any such suspension or stop orders shall have
been instituted, or to the knowledge of the Company, shall be contemplated.
(c) Information Concerning the Advisor. On the Effective Date, you shall receive a
letter dated the Effective Date from the Advisor, confirming that: (1) the Advisory Agreement has
been duly and validly authorized, executed and delivered by the Advisor and constitutes a valid
agreement of the Advisor enforceable in accordance with its terms; (2) the execution and delivery
of the Advisory Agreement, the consummation of the transactions therein contemplated and
compliance with the terms of the Advisory Agreement by the Advisor will not conflict with or
constitute a default under its articles of incorporation or bylaws or any indenture, mortgage,
deed of trust, lease or other agreement or instrument to which the Advisor is a party, or any law,
order, rule or regulation, writ, injunction or decree of any government, governmental
instrumentality or court, domestic or foreign, having jurisdiction over the Advisor, or any of its
property; (3) no consent, approval, authorization or order of any court or other governmental
agency or body has been or is required for the performance of the Advisory Agreement by the
Advisor, or for the consummation of the transactions contemplated thereby; and (4) the Advisor is
a corporation duly formed, validly existing and in good standing under the laws of the State of
Delaware and is
10
duly qualified to do business as a foreign corporation in each other jurisdiction
in which the nature of its business would make such qualification necessary.
If any of the conditions specified in this Section 7 shall not have been fulfilled when and as
required by this Agreement, this Agreement and all your obligations hereunder may be canceled by
you by notifying the Company of such cancellation in writing or by telecopy at any time, and any
such cancellation or termination shall be without liability of any party to any other party except
as otherwise provided in Sections 3(d), 6, 8, 9 and 10 hereof.
All certificates, letters and other documents referred to in this Section 7 will be in
compliance with the provisions hereof only if they are reasonably satisfactory in form and
substance to you and your counsel. The Company will furnish you with conformed copies of such
certificates, letters and other documents, as you shall reasonably request.
8. Indemnification.
(a) Indemnification by the Company. Subject to the conditions set forth below and
those included in the Articles and Bylaws, the Company agrees to indemnify and hold harmless you,
each Selected Dealer and each person, if any, who controls you or any such Selected Dealer within
the meaning of Section 15 of the Securities Act, from and against any and all loss, liability,
claim, damage and expense whatsoever (including but not limited to any and all expenses whatsoever
reasonably incurred in investigating, preparing for, defending against or settling any litigation,
commenced or threatened, or any claim whatsoever) arising out of or based upon: (1) any untrue or
alleged untrue statement of a material fact contained (i) in the Registration Statement at the
time it became effective or in the Prospectus (as from time to time amended or supplemented) or
any related preliminary prospectus; or (ii) in any application or other document (in this Section
8 collectively called “application”) executed by the Company or based upon information
furnished by the Company and filed in any jurisdiction in order to qualify the Shares under the
securities laws thereof or (2) the omission or alleged omission from the Registration Statement
(or any amendment thereto) at the time it became effective or from the Prospectus, of a material
fact required to be stated therein or necessary to make the statements therein in light of the
circumstances under which they were made not misleading; provided however that the Company shall
not be liable in any such case to the extent any such statement or omission was made in reliance
upon and in conformity with written information furnished to the Company by you expressly for use
in the Registration Statement or related preliminary prospectus or Prospectus or any amendment or
supplement thereof or in any of such applications or in any such sales as the case may be.
Notwithstanding the foregoing, the Company shall not indemnify the Sales Agent for any losses,
liabilities or expenses arising from or out of an alleged violation of federal or state securities
laws unless: (i) there has been a successful adjudication on the merits of each count involving
alleged securities law violations as to the particular indemnitee, (ii) such claims have been
dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular
indemnitee or (iii) a court of competent jurisdiction approves a settlement of the claims against
a particular indemnitee and finds that indemnification of the settlement and the related costs
should be made, and the court considering the request for indemnification has been advised of the
position of the Commission and of the published position of any state securities regulatory
authority in which securities of the Company were offered or sold as to indemnification for
violations of securities laws.
(b) Indemnification by You. Subject to the conditions set forth below, you agree to
indemnify and hold harmless the Company, each of its directors, those of its officers who have
signed the Registration Statement and each other person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act to the same extent as the foregoing indemnity from
the Company but only with respect to an untrue statement or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact in the Registration
Statement (as from time to time amended or supplemented) or Prospectus, or any related preliminary
prospectus, or any application made in reliance upon or, in conformity with, written information
furnished by you
11
expressly for use in such Registration Statement or Prospectus or any amendment
or supplement thereto, or in any related preliminary prospectus or in any of such applications.
(c) Procedure for Making Claims. Each indemnified party shall give prompt notice to
each indemnifying party of any claim or action (including any governmental investigation)
commenced against it in respect of which indemnity may be sought hereunder, but failure to so
notify any indemnifying party shall not relieve it from any liability, except to the extent it has
been materially prejudiced by such failure, and in any event shall not relieve it from any
liability that it may have otherwise than on account of this indemnity agreement. The
indemnifying party, jointly with any other indemnifying parties receiving such notice, shall
assume the defense of such action with counsel chosen by it and reasonably satisfactory to the
indemnified parties defendant in such action, unless such indemnified parties reasonably object to
such assumption on the ground that there may be legal defenses available to them which are
different from or in addition to those available to such indemnifying party. Any indemnified
party shall have the right to employ a separate counsel in any such action and to participate in
the defense thereof but the reasonable fees and expenses of such counsel shall be borne by such
party unless such party has objected in accordance with the preceding sentence, in which event
such fees and expenses shall be borne by the indemnifying parties. Except as set forth in the
preceding sentence, if an indemnifying party assumes the defense of such action, the indemnifying
party shall not be liable for any fees and expenses of separate counsel for the indemnified
parties incurred thereafter in connection with such action. In no event shall the indemnifying
parties be liable for the reasonable fees and expenses of more than one counsel for all
indemnified parties in connection with any one action or separate but similar or related actions
in the same jurisdiction arising out of the same general allegations or circumstances.
The indemnity agreements contained in this Section 8 and the warranties and representations
contained in this Agreement shall remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified party and shall survive any termination of this Agreement.
An indemnifying party shall not be liable to an indemnified party on account of any settlement,
compromise or consent to the entry of judgment of any claim or action effected without the consent
of such indemnifying party. The Company agrees promptly to notify you of the commencement of any
litigation or proceedings against the Company in connection with the issue and sale of the Shares
or in connection with the Registration Statement or Prospectus.
(d) Contribution. Subject to the limitations set forth in Section 8(a) hereof and in
order to provide for just and equitable contribution where the indemnification provided for in
this Section 8 is unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, liabilities, claims, damages or expenses (or
actions in respect thereof) referred to therein, except by reason of the terms thereof, the
Company on the one hand and you on the other shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, liabilities, claims, damages or expenses (or
actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and you on the other from the Offering based on the public
offering price of the Shares sold and the Selling Commissions received by you with respect to such
Shares sold. If, however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law, then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such indemnified party in
such proportion as is appropriate to reflect not only such relative benefits referred to above but
also the relative fault of the Company on the one hand and you on the other in connection with the
statements or omissions which resulted in such losses, liabilities, claims, damages or expenses
(or actions in respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand
and you on the other shall be deemed to be in the same proportion as (i) the aggregate net
compensation retained by the Company and its affiliates for the purchase of Shares and (ii) the
total proceeds from the Offering (net of Selling Commissions, Selected Dealer Fees and Wholesaling
Fees but before deducting expenses) received by the Company bear to the total Selling Commissions
12
received by you. The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Company on the one hand or you on the other.
The Company agrees with you that it would not be just and equitable if contribution pursuant to
this subsection (d) were determined by pro rata allocation, or by any other method of allocation
which does not take account of the equitable considerations referred to above in this subsection
(d). The amount paid or payable by an indemnified party as a result of the losses, liabilities,
claims, damages or expenses (or action in respect thereof) referred to above in this subsection
(d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), you shall not be required to contribute any amount in excess of
the amount by which the total price of the Shares sold by you to the public exceeds the amount of
any damages which you have otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act or Section 10(b) of
the Securities Exchange Act of 1934, as amended) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of this Section, any person
that controls you within the meaning of Section 15 of the Securities Act shall have the same right
to contribution as you, and each person who controls the Company within the meaning of Section 15
of the Securities Act shall have the same right to contribution as the Company.
9. Representations and Agreements to Survive. All representations, warranties and
agreements contained in this Agreement or in certificates shall remain operative and in full force
and effect regardless of any investigation made by any party, and shall survive the Termination
Date.
(a) This Agreement shall become effective as of the date it is executed by all parties
hereto. You or the Company may elect to terminate this Agreement prior to the time the
Registration Statement is declared effective by the Commission without liability of any party to
any other party, except as provided in Section 10(e) hereof.
(b) You shall have the right to terminate this Agreement at any time during the Effective
Term without liability of any party to any other party except as provided in Section 10(e) hereof
if: (i) any representations or warranties hereunder shall be found to have been incorrect; or (ii)
the Company shall fail, refuse or be unable to perform any condition of its obligations hereunder,
or (iii) the Prospectus shall have been amended or supplemented despite your objection to such
amendment or supplement as provided in subsection (a) of Section 2 hereof, or (iv) all trading on
the New York Stock Exchange or the American Stock Exchange shall have been suspended, or minimum
or maximum prices for trading generally shall have been fixed, or maximum ranges for prices for
all securities shall have been required, on the New York Stock Exchange or the American Stock
Exchange by such exchanges or by order of the Commission or any other governmental authority
having jurisdiction; or (v) the United States shall have become involved in a war or major
hostilities or a material escalation of hostilities or acts of terrorism involving the United
States or other national or international calamity or crisis (other than hostilities including
Iraq and Afghanistan); or (vi) a banking moratorium shall have been declared by a state or federal
authority or person; or (vii) the Company shall have sustained a material or substantial loss by
fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity or malicious act
which, whether or not said loss shall have been insured, will in your good faith opinion make it
inadvisable to proceed with the offering and sale of the Shares; or (viii) there shall have been,
subsequent to the dates information is given in the Registration Statement and the Prospectus,
such change in the business,
properties, affairs, condition (financial or otherwise) or prospects of the Company whether
or not in the ordinary course of business or in the condition of securities markets generally as
in your good faith judgment would make it inadvisable to proceed with the offering and sale of the
Shares, or which would materially adversely affect the operations of the Company.
13
(c) If this Agreement shall be terminated for reason of any failure on the part of the
Company to perform any undertaking or satisfy any condition of this Agreement to be performed or
satisfied by them pursuant to Section 7 hereof, you may elect to terminate this Agreement without
liability of any party to any other party except as provided in Section 10(e) hereof.
(d) The Company shall have the right to terminate this Agreement without cause on 60 days’
notice in writing to you without penalty, subject to liability as provided in Section 10(e)
hereof.
(e) In the event this Agreement is terminated by any party pursuant to Sections 10(a), 10(b),
10(c) or 10(d) hereof, the Company shall pay all expenses of the Offering as required by Section 6
hereof and no party will have any additional liability to any other party except for any liability
which may exist under Section 8 hereof; and provided further, that if you terminate your
participation in the Offering in other than good faith, the Company shall not be responsible for
the expenses described in clause (vii) of subsection (a) of Section 6 hereof other than expenses
of counsel to the Selected Dealers. In no event will the Company be liable to reimburse you for
expenses other than your actual and reasonable out-of-pocket expenses.
(f) If you elect to terminate this Agreement as provided in this Section 10, you shall notify
the Company promptly by telephone or telegram with confirmation by letter. If the Company elects
to terminate this Agreement as provided in this Section 10, the Company shall notify you promptly
by telephone or telegram with confirmation by letter.
11. Notices.
(a) All communications hereunder, except as herein otherwise specifically provided, shall be
in writing and if sent to you shall be mailed, or personally delivered, to you at 00 Xxxxxxxxxxx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, and if sent to the Company shall be mailed, or personally
delivered, to the Company at 000 X. Xxxxxxxxxxx, Xxxxx 000, Xxxx Xxxxxx, XX 00000, Attention: Xx.
Xxxxxxx X. Xxxxxxxxx.
(b) Notice shall be deemed to be given by you to the Company or by the Company to you when it
is mailed or personally delivered as provided in subsection (a) of this Section 11.
12. Parties. This Agreement shall inure solely to the benefit of, and shall be
binding upon you, the Company, and the controlling persons, directors and officers referred to in
Section 8 hereof, and their respective successors, legal representatives and assigns, and no other
person shall have or be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained, except that the
Selected Dealers shall have the rights granted to them pursuant to Section 8 hereof.
Notwithstanding the foregoing, this Agreement may not be assigned without the consent of the
parties hereto.
13. Construction. This Agreement shall be construed in accordance with the laws of
the State of New York applicable to agreements to be made and performed entirely within such state.
14. Finders’ Fees. You shall have no liability for any finders’ fees owed in
connection with the transactions contemplated by this Agreement.
15. Severability. Any provision of this Agreement, which is invalid or unenforceable
in any jurisdiction, shall be ineffective to the extent of such invalidity or unenforceability
without invalidating or rendering unenforceable the remaining provisions hereof, and any such
invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable
such provisions in any other jurisdiction.
14
16. Additional Offerings. The terms of this Agreement may be extended to cover
additional offerings of shares of the Company by the execution by the parties hereto of an addendum
identifying the shares and registration statement relating to such additional offering. Upon
execution of such addendum, the terms “Shares”, “Offering”, “Registration Statement” and
“Prospectus” set forth herein shall be deemed to be amended as set forth in such addendum.
15
If the foregoing correctly sets forth the understanding between you and the Company, please so
indicate in the space provided on the attached page for that purpose, whereupon this letter shall
constitute a binding agreement between us.
XXXXX WATERMARK INVESTORS | ||||
INCORPORATED | ||||
By: | ||||
Its: | ||||
Accepted as of the Date first above | ||||
Written: | ||||
XXXXX FINANCIAL, LLC | ||||
By: | ||||
Its: | ||||
16
EXHIBIT INDEX
Exhibit A — Selected Dealer Agreement
A-1