Document:

Exhibit 10.8

 

FORM OF SELECTED DEALER AGREEMENT

 

WITH CAREY FINANCIAL, LLC

 

 

 

To:                             ____________________________

 

RE:                           CAREY WATERMARK INVESTORS INCORPORATED

 

Ladies and Gentlemen:

 

Carey Financial, LLC (the “Dealer Manager”) entered into a dealer manager agreement, dated as of ____________, 2013 (the “Dealer Manager Agreement”), with Carey Watermark Investors Incorporated, a Maryland corporation (the “Company”), under which the Dealer Manager agreed to use its reasonable best efforts to solicit subscriptions in connection with the follow-on public offering (the “Offering”) for its shares of common stock, $.001 par value per share, of which amount: (i) up to 350,000,000 shares for a purchase price of $10.00 per share (subject in certain circumstances to discounts based upon the volume of shares purchased and for certain categories of purchasers) (the “Primary Shares”), and (ii) up to 31,578,947.3684 shares for a purchase price of $9.50 per share (the “DRIP Shares” and, together with the Primary Shares, the “Shares”) commencing on the initial Effective Date (as defined below).  Notwithstanding the foregoing, the Company has reserved the right to reallocate the Shares between Primary Shares and the DRIP Shares.  Unless otherwise defined herein, capitalized terms used herein shall have the respective meanings therefor as in the Dealer Manager Agreement.

 

In connection with the performance of the Dealer Manager’s obligations under Section 3 of the Dealer Manager Agreement, the Dealer Manager is authorized to retain the services of securities dealers (the “Selected Dealers”) who are members of the Financial Industry Regulatory Authority (“FINRA”) to solicit subscriptions for Shares in connection with the Offering.  You are hereby invited to become a Selected Dealer and, as such, to use your reasonable best efforts to solicit subscribers for Shares, in accordance with the following terms and conditions of this selected dealer agreement (this “Agreement”):

 

1.                                      Registration Statement.

 

(a)                                 Registration Statement and Prospectus.  A registration statement on Form S-11 (File No. 333-191913), including a preliminary prospectus, has been prepared by the Company and was filed with the Securities and Exchange Commission (the “Commission”) on October 25, 2013, in accordance with the applicable requirements of the Securities Act of 1933, as amended (the “Securities Act”), and the applicable rules and regulations of the Commission promulgated thereunder (the “Securities Act Rules and Regulations”) for the registration of the Offering.  The Company has prepared and filed such amendments thereto and such amended prospectus as may have been required to the date hereof, and will file such additional amendments and supplements thereto as may hereafter be required.  The registration statement on Form S-11 and the prospectus contained therein, as finally amended at the date the registration statement is declared effective by the Commission (the “Effective Date”) are respectively hereinafter referred to as the “Registration Statement” and the “Prospectus”, except that:

 

(i)                                     if the Company files a post-effective amendment to such registration statement, then the term “Registration Statement” shall, from and after the declaration of the effectiveness of such post-effective amendment by the Commission, refer to such registration statement as amended by such post-effective amendment, and the term “Prospectus” shall refer to the amended prospectus then on file with the Commission; and

 

	
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(ii)                                  if the prospectus filed by the Company pursuant to either Rule 424(b) or 424(c) of the Securities Act Rules and Regulations shall differ from the prospectus on file at the time the Registration Statement or the most recent post-effective amendment thereto, if any, shall have become effective, then the term “Prospectus” shall refer to such prospectus filed pursuant to either Rule 424(b) or 424(c), as the case may be, from and after the date on which it shall have been filed.

 

As used herein, the terms “Registration Statement”, “preliminary Prospectus” and “Prospectus” shall include the documents, if any, incorporated by reference therein.  As used herein, the term “Effective Date” also shall refer to the effective date of each post-effective amendment to the Registration Statement, unless the context otherwise requires.

 

2.                                      Compliance with Applicable Rules and Regulations; License and Association Membership.

 

Upon the effectiveness of this Agreement, the undersigned dealer will become one of the “Selected Dealers” referred to in the Dealer Manager Agreement and is referred to herein as “Selected Dealer”. Selected Dealer agrees that solicitation and other activities by it hereunder shall comply with, and shall be undertaken only in accordance with, the terms of the Dealer Manager Agreement, the terms of this Agreement, the Securities Act, the Securities Act Rules and Regulations, the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the applicable rules and regulations promulgated thereunder (the “Exchange Act Rules and Regulations”), the Blue Sky Survey (as defined below), the FINRA Rules (including, without limitation,  NASD Conduct Rules 2340 (Customer Account Statements), and 2420 (Dealing with Non-Members), and FINRA Rules 2111 (Suitability), 2310 (Direct Participation Programs), 5130 (Restrictions on the Purchase and Sale of Initial Equity Public Offerings), and 5141 (Sale of Securities in a Fixed Price Offering) therein), and the provisions of Article III.C. of the Statement of Policy Regarding Real Estate Investment Trusts of the North American Securities Administrators Association, Inc., as revised and amended on May 7, 2007 and as may be further revised and amended (the “NASAA Guidelines”).

 

Selected Dealer’s acceptance of this Agreement constitutes a representation to the Company and to the Dealer Manager that Selected Dealer is a properly registered or licensed broker-dealer, duly authorized to sell Shares under federal and state securities laws and regulations in all states where it offers or sells Shares, and that it is a member in good standing of FINRA.  Selected Dealer represents and warrants that it is currently licensed as a broker-dealer in the jurisdictions identified on Schedule I to this Agreement and that its independent contractors and registered representatives have the appropriate licenses to offer and sell the Shares in such jurisdictions.

 

This Agreement shall automatically terminate with no further action by either party if Selected Dealer ceases to be a member in good standing of FINRA or with the securities commission of the state in which Selected Dealer’s principal office is located.  Selected Dealer agrees to notify the Dealer Manager immediately if Selected Dealer ceases to be a member in good standing of FINRA or with the securities commission of any state in which Selected Dealer is currently registered or licensed.

 

3.                                     Limitation of Offer; Investor Suitability.

 

(a)                                 Investor Suitability.  Selected Dealer will offer Shares only:

 

(i)                                     to persons that meet the financial qualifications set forth in the Prospectus or in any suitability letter or memorandum sent to it by the Company or the Dealer Manager, and

 

	
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(ii)                                  in accordance with Section 8, to persons in the jurisdictions in which it is advised in writing by the Company or the Dealer Manager that the Shares are qualified for sale or that qualification is not required (the “Blue Sky Survey”).

 

Notwithstanding the qualification of Shares for sale in any respective jurisdiction (or exemption therefrom), Selected Dealer will not offer Shares and will not permit any of its registered representatives to offer Shares in any jurisdiction unless both Selected Dealer and such registered representative are duly licensed to transact securities business in such jurisdiction.  In offering Shares, Selected Dealer shall comply with the provisions of the FINRA Rules, as well as other applicable rules and regulations relating to suitability of investors, including, but not limited to, the provisions of Section III.C. of the NASAA Guidelines.

 

In offering the sale of Shares to any person, Selected Dealer will have reasonable grounds to believe (based on such information obtained from the investor concerning the investor’s age, investment objectives, other investments, financial situation, needs or any other information known by Selected Dealer after due inquiry) that:  (A) such person is in a financial position appropriate to enable such person to realize to a significant extent the benefits described in the Prospectus, including the tax benefits where they are a significant aspect of the Company; (B) the investor has a fair market net worth sufficient to sustain the risks inherent in the program, including loss of investment and lack of liquidity; (C) the purchase of the Shares is otherwise suitable for such person; and (D) such person has either: (1) a minimum annual gross income of $70,000 and a minimum net worth (exclusive of home, home furnishings and automobiles) of $70,000; or (2) a minimum net worth (determined with the foregoing exclusions) of $250,000 and meets the higher suitability standards, if applicable, imposed by the state in which the investment by such investor is made as described in the Prospectus.  Selected Dealer further will use its best efforts to determine the suitability and appropriateness of an investment in the Shares of each proposed investor solicited by a person associated with Selected Dealer by reviewing documents and records disclosing the basis upon which the determination as to suitability was reached as to each proposed investor, whether such documents and records relate to accounts which have been closed, accounts which are currently maintained or accounts hereinafter established.  In making the determinations as to financial qualifications and as to suitability required by the NASAA Guidelines, Selected Dealer may rely on (x) representations from investment advisers who are not affiliated with Selected Dealer, banks acting as trustees or fiduciaries, and (y) information it has obtained from a prospective investor, including such information as the investment objectives, other investments, financial situation and needs of the person or any other information known by Selected Dealer after due inquiry.

 

Notwithstanding the foregoing, Selected Dealer shall not execute any transaction with the Company in a discretionary account without prior written approval of the transaction by the customer.

 

(b)                                 Maintenance of Records.  Selected Dealer shall maintain, for at least six years or for a period of time not less than that required in order to comply with all applicable federal, state and other regulatory requirements, whichever is later, a record of the information obtained to determine that an investor meets the suitability standards imposed on the offer and sale of the Shares (both at the time of the initial subscription and at the time of any additional subscriptions) and a representation of the investor that the investor is investing for the investor’s own account or, in lieu of such representation, information indicating that the investor for whose account the investment was made met the suitability standards. Selected Dealer may satisfy its obligation by contractually requiring such information to be maintained by the investment advisers or banks discussed above.  Selected Dealer further agrees to comply with the record keeping requirements of the

 

	
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Exchange Act, including, but not limited to, Rules 17a-3 and 17a-4 promulgated under the Exchange Act.  Selected Dealer agrees to make such documents and records available to the Dealer Manager and the Company upon request, and representatives of the Commission, FINRA and applicable state securities administrators upon Selected Dealer’s receipt of an appropriate document subpoena or other appropriate request for documents from any such agency.

 

4.                                      Delivery of Prospectus and Approved Sales Literature.

 

(a)                                 Delivery of Prospectus and Approved Sales Literature.  Selected Dealer will:

 

(i)                                     deliver a Prospectus, as then supplemented or amended, to each person who subscribes for Shares at least five business days prior to the tender of such person’s subscription agreement (the “Subscription Agreement”);

 

(ii)                                  promptly comply with the written request of any person for a copy of the Prospectus, as then supplemented or amended, during the period between the initial Effective Date and the termination of the Offering;

 

(iii)                               deliver to any person, in accordance with applicable law or as prescribed by any state securities administrator, a copy of any prescribed document included within or incorporated by reference in the Registration Statement and any supplements thereto during the course of the Offering;

 

(iv)                              not use any sales materials in connection with the solicitation of purchasers of the Shares except Approved Sales Literature;

 

(v)                                 to the extent the Company provides Approved Sales Literature, not use such materials unless accompanied or preceded by the Prospectus, as then currently in effect, and as may be supplemented in the future; and

 

(vi)                              not give or provide any information or make any representation or warranty other than information or representations contained in the Prospectus or the Approved Sales Literature.  Selected Dealer will not publish, circulate or otherwise use any other advertisement or solicitation material in connection with the Offering without the Dealer Manager’s express prior written approval.

 

(b)                                 Agency is Not Created.  Nothing contained in this Agreement shall be deemed or construed to make Selected Dealer an employee, agent, representative or partner of the Dealer Manager or the Company, and Selected Dealer is not authorized to act for the Dealer Manager or the Company.

 

(c)                                  Documents Must Be Accompanied or Preceded by a Prospectus.  Selected Dealer will not send or provide supplements to the Prospectus or any Approved Sales Literature to any investor unless it has previously sent or provided a Prospectus and all supplements thereto to that investor or has simultaneously sent or provided a Prospectus and all supplements thereto with such Prospectus supplement or Approved Sales Literature.

 

(d)                                 Broker-Dealer Use Only Material.  Selected Dealer will not show to or provide any investor or reproduce any material or writing which is supplied to it by the Dealer Manager and marked “broker-dealer use only” or otherwise bearing a legend denoting that it is not to be used in connection with the offer or sale of Shares to members of the public.

 

	
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(e)                                  Copies of Prospectuses and Approved Sales Literature.  The Dealer Manager will supply Selected Dealer with reasonable quantities of the Prospectus (including any supplements thereto), as well as any Approved Sales Literature, for delivery to investors.

 

(f)                                   Prospectus Delivery Requirement.  Selected Dealer shall furnish a copy of any revised preliminary Prospectus to each person to whom it has furnished a copy of any previous preliminary Prospectus, and further agrees that it will mail or otherwise deliver all preliminary and final Prospectuses required for compliance with the provisions of Rule 15c2-8 under the Exchange Act.

 

5.                                      Submission of Orders; Right to Reject Orders.

 

(a)                                 Minimum Investment.  Subject to certain individual state requirements and except for shares issued pursuant to the DRIP, Shares may be sold only to investors who initially purchase a minimum of 200 Shares for $2,000, subject to certain state requirements as described in the Prospectus.  With respect to Selected Dealer’s participation in any resales or transfers of the Shares, Selected Dealer agrees to comply with any applicable requirements set forth in Section 2 and to fulfill the obligations pursuant to FINRA Rule 2310.

 

(b)                                 No Escrow Agreement.  Payments for Shares shall be made by checks payable to “Carey Watermark Investors Incorporated”.

 

Selected Dealer shall forward original checks together with an original Subscription Agreement, executed and initialed by the subscriber as provided for in the Subscription Agreement, to Carey Watermark Investors Incorporated, c/o DST Systems, Inc., at the address provided in the Subscription Agreement.

 

(c)                                  Acceptance and Confirmation.  All orders, whether initial or additional, are subject to acceptance by and shall become effective upon confirmation by the Company or the Dealer Manager, each of which reserve the right to reject any order in their sole discretion for any or no reason.  Orders not accompanied by the required instrument of payment for Shares may be rejected.  Issuance and delivery of a Share will be made only after a sale of a Share is deemed by the Company to be completed in accordance with Section 3(c) of the Dealer Manager Agreement.

 

If an order is rejected, cancelled or rescinded for any reason, then Selected Dealer will return to the Dealer Manager any selling commissions or dealer manager fees theretofore paid with respect to such order, and, if Selected Dealer fails to so return any such selling commissions or dealer manager fees, the Dealer Manager shall have the right to offset amounts owned against future commissions or dealer manager fees due and otherwise payable to Selected Dealer (it being understood and agreed that such right to offset shall not be in limitation of any other rights or remedies that the Dealer Manager may have in connection with such failure).

 

6.                                      Selected Dealer Compensation.

 

(a)                                 Selling Commissions.  Subject to the terms and conditions set forth herein and in the Dealer Manager Agreement and, subject to the volume discounts and other special circumstances described in the “The Offering/Plan of Distribution” section of the Prospectus, the Dealer Manager shall pay to Selected Dealer a selling commission of 7% of the gross proceeds from the Shares sold by it and accepted and confirmed by the Company.  For purposes of this Section 6(a), Shares are “sold” only if an executed Subscription Agreement is accepted by the Company and the

 

	
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Company has thereafter distributed the commission to the Dealer Manager in connection with such transaction.

 

(b)                                 DRIP Sales.  Selected Dealer acknowledges and agrees that no selling commissions will be paid for sales of DRIP Shares.

 

(c)                                  Dealer Manager’s Authority to Issue Confirmation.  Notwithstanding the foregoing, it is understood and agreed that no commission shall be payable with respect to particular Shares if the Dealer Manager or the Company rejects a proposed subscriber’s Subscription Agreement.  Accordingly, Selected Dealer shall have no authority to issue a confirmation (pursuant to Exchange Act Rule 10b-10) to any subscriber; such authority residing solely in the Dealer Manager, as the Dealer Manager and processing broker-dealer.

 

(d)                                 Reallowance of Dealer Manager Fee.  The Dealer Manager may, in its sole discretion, re-allow a portion of the Dealer Manager Fee received by it to Selected Dealer as a marketing fee if the Selected Dealer has executed an addendum to this Agreement, which is attached hereto as Schedule II.

 

The Dealer Manager may, in its sole discretion, request the Company to reimburse, to Selected Dealer for reasonable accountable bona fide due diligence expenses, provided such expenses have actually been incurred, are supported by detailed and itemized invoices provided to the Company and the Company had theretofore given its prior written approval of incurrence of such expenses.

 

(e)                                  Limitation on Underwriting Compensation.  Notwithstanding anything herein to the contrary, Selected Dealer will not be entitled to receive any Dealer Manager Fee which would cause the aggregate amount of selling commissions, dealer manager fees and other forms of underwriting compensation (as defined in accordance with applicable FINRA rules) received by the Dealer Manager and all Selected Dealers to exceed 10.0% of the gross proceeds raised from the sale of Shares in the Offering.

 

(f)                                   Limitations on Dealer Manager’s Liability for Commissions.  The Company will not be liable or responsible to any Selected Dealer for the payment of any selling commissions or any reallowance of fees to Selected Dealer, it being the sole and exclusive responsibility of the Dealer Manager for the payment of selling commissions or any reallowance to Selected Dealer.

 

Selected Dealer acknowledges and agrees that the Dealer Manager’s liability for commissions (including the marketing fee, if any) payable to Selected Dealer is limited solely to commissions received and the portion of the Dealer Manager fee which represents the marketing fee received by the Dealer Manager from the Company in connection with Selected Dealer’s sale of Shares.

 

(g)                                  RIA Sales.  In the event Selected Dealer has an affiliated registered investment advisor (“RIA”) which is recommending the purchase of Shares to an investor who has agreed to pay compensation for investment advisory or other financial services and the Selected Dealer elects to waive the sales commission of 7.0% and the marketing fee, neither of which will be paid on the sale, then the Selected Dealer must execute the RIA Addendum which is attached hereto as Schedule III.

 

7.                                      Reserved Shares.  The number of Shares, if any, to be reserved for sale by each Selected Dealer may be decided by the mutual agreement, from time to time, of the Dealer Manager and the Company.  The Dealer Manager reserves the right to notify Selected Dealer by United States mail or by other means of the number of Shares reserved for sale by Selected Dealer, if any. Such Shares will be reserved for sale by Selected Dealer until the time specified in the Dealer Manager’s notification to Selected Dealer. Sales of any

 

	
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reserved Shares after the time specified in the notification to Selected Dealer or any requests for additional Shares will be subject to rejection in whole or in part.

 

8.                                      Blue Sky Qualification.

 

(a)                                 Notice of Blue Sky Qualification. The Dealer Manager will inform Selected Dealer as to the jurisdictions in which the Dealer Manager has been advised by the Company that the Shares have been qualified for sale or are exempt under the respective securities or “blue sky” laws of such jurisdictions, but the Dealer Manager has not assumed and will not assume any obligation or responsibility as to Selected Dealer’s right to act as a broker and/or dealer with respect to the Shares in any such jurisdiction. Selected Dealer agrees that Selected Dealer will not make any offers or sell any Shares except in states in which the Dealer Manager may advise Selected Dealer that the Offering has been qualified or is exempt and in which Selected Dealer is legally qualified to make offers and further agrees to assure that each person to whom Selected Dealer sells Shares (at both the time of the initial purchase as well as at the time of any subsequent purchases) meets any special suitability standards which apply to sales in a particular jurisdiction, as described in the Blue Sky Survey and the Subscription Agreement.

 

Neither the Dealer Manager nor the Company assume any obligation or responsibility in respect of the qualification of the Shares covered by the Prospectus under the laws of any jurisdiction or Selected Dealer’s qualification to act as a broker and/or dealer with respect to the Shares in any jurisdiction. The Blue Sky Survey which has been or will be furnished to Selected Dealer indicates the jurisdictions in which it is believed that the offer and sale of Shares covered by the Prospectus is exempt from, or requires action under, the applicable blue sky or securities laws thereof, and what action, if any, has been taken with respect thereto.

 

(b)                                 Selected Dealer’s Compliance Obligation.  It is understood and agreed that under no circumstances will Selected Dealer, as a Selected Dealer, engage in any activities hereunder in any jurisdiction in which Selected Dealer may not lawfully so engage or in any activities in any jurisdiction with respect to the Shares in which Selected Dealer may lawfully so engage unless Selected Dealer has complied with the provisions hereof.

 

9.                                      Dealer Manager’s Authority. Subject to the Dealer Manager Agreement, the Dealer Manager shall have full authority to take such action as it may deem advisable with respect to all matters pertaining to the Offering or arising thereunder. The Dealer Manager shall not be under any liability to Selected Dealer (except for (i) its own lack of good faith and (ii) for obligations expressly assumed by us hereunder) for or in respect of the validity or value of or title to, the Shares; the form of, or the statements contained in, or the validity of, the Registration Statement, the Prospectus or any amendment or supplement thereto, or any other instrument executed by the Company or by others; the form or validity of the Dealer Manager Agreement or this Agreement; the delivery of the Shares; the performance by the Company or by others of any agreement on its or their part; the qualification of the Shares for sale under the laws of any jurisdiction; or any matter in connection with any of the foregoing; provided, however, that nothing in this paragraph shall be deemed to relieve the Company or the Dealer Manager from any liability imposed by the Securities Act. No obligations or liability on the part of the Company or the Dealer Manager shall be implied or inferred herefrom.

 

10.                               Indemnification.

 

(a)                                 Incorporation of Indemnification Obligations Under the Dealer Manager Agreement.  Under the Dealer Manager Agreement, the Company has agreed to indemnify Selected Dealer and the Dealer Manager and each person, if any, who controls Selected Dealer or the Dealer Manager, in certain instances and against certain liabilities, including liabilities under the Securities Act in

 

	
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certain circumstances. Selected Dealer hereby agrees to indemnify the Company and each person who controls it as provided in the Dealer Manager Agreement and to indemnify the Dealer Manager to the extent and in the manner that Selected Dealer agrees to indemnify the Company in the Dealer Manager Agreement.

 

(b)                                 Selected Dealer’s Hold Harmless Obligation.  In furtherance of, and not in limitation of the foregoing, Selected Dealer will indemnify, defend and hold harmless the Dealer Manager and the Company, and their officers, directors, employees, members, partners, affiliates, agents and representatives, and each person, if any, who controls such entity within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and each person who has signed the Registration Statement (“Indemnified Parties”), from and against any losses, claims, damages or liabilities to which any of the Indemnified Parties, and each person who signed the Registration Statement, may become subject, under the Securities Act or the Exchange Act, or otherwise, insofar as such losses, claims and expenses (including the reasonable legal and other expenses incurred in  investigating and defending any such claims or liabilities), damages or liabilities (or actions in respect thereof) arise out of or are based upon:

 

(i)                                     in whole or in part, any material inaccuracy in the representations or warranties contained in this Agreement or any material breach of a covenant contained herein by Selected Dealer;

 

(ii)                                  any untrue statement or any alleged untrue statement of a material fact contained in any Registration Statement or any post-effective amendment thereto or in the Prospectus or any amendment or supplement to the Prospectus; or in any Approved Sales Literature; or any blue sky application or other document executed by the Company or on its behalf specifically for the purpose of qualifying any or all of the Shares for sale under the securities laws of any jurisdiction or based upon written information furnished by the Company under the securities laws thereof;

 

(iii)                               the omission or alleged omission to state a material fact required to be stated in the Registration Statement or any post-effective amendment thereof to make the statements therein not misleading or the omission or alleged omission to state a material fact required to be stated in the Prospectus or any amendment or supplement to the Prospectus to make the statements therein, in light of the circumstances under which they were made, not misleading, provided, however, that in each case described in clauses (ii) and (iii) to the extent, but only to the extent, that such untrue statement or omission was made in reliance upon and in conformity with written information furnished to the Company or the Dealer Manager by Selected Dealer specifically for use with reference to Selected Dealer in the preparation of the Registration Statement or any such post-effective amendments thereof or the Prospectus or any such amendment thereof or supplement thereto;

 

(iv)                              any use of sales literature, including “broker dealer use only” materials, by Selected Dealer that is not Approved Sales Literature;

 

(v)                                 any untrue statement made by Selected Dealer or Selected Dealer’s representatives or agents or omission by Selected Dealer or Selected Dealer’s representatives or agents to state a fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading in connection with the offer and sale of the Shares in each case, other than statements or omissions made in conformity with the

 

	
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Registration Statement, Prospectus, Approved Sales Literature or any other materials or information furnished by or on behalf of the Company; or

 

(vi)                              any failure by Selected Dealer to comply with applicable laws governing money laundry abatement and anti-terrorist financing efforts in connection with the Offering, including applicable FINRA Rules, Exchange Act Rules and Regulations and the USA PATRIOT Act.

 

Selected Dealer will reimburse the aforesaid parties for any reasonable legal or other expenses incurred in connection with investigation or defense of such loss, claim, damage, liability or action.  This indemnity agreement will be in addition to any liability which Selected Dealer may otherwise have.

 

(c)                                  Notice of Claim.  Promptly after receipt by any indemnified party under this Section 10 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 10, promptly notify the indemnifying party of the commencement thereof; provided, however, the failure to give such notice shall not relieve the indemnifying party of its obligations hereunder except to the extent it shall have been prejudiced by such failure.

 

In case any such action is brought against any indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled, to the extent it may wish, jointly with any other indemnifying party similarly notified, to participate in the defense thereof, with separate counsel.  Such participation shall not relieve such indemnifying party of the obligation to reimburse the indemnified party for reasonable legal and other expenses incurred by such indemnified party in defending itself, except for such expenses incurred after the indemnifying party has deposited funds sufficient to effect the settlement, with prejudice, of, and unconditional release of all liabilities from, the claim in respect of which indemnity is sought.  Any such indemnifying party shall not be liable to any such indemnified party on account of any settlement of any claim or action effected without the consent of such indemnifying party, such consent not to be unreasonably withheld or delayed.

 

(d)                                 Reimbursement.  An indemnifying party under Section 10 of this Agreement shall be obligated to reimburse an indemnified party for reasonable legal and other expenses as follows: the indemnifying party shall pay all legal fees and expenses reasonably incurred by the indemnified party in the defense of such claims or actions; provided, however, that the indemnifying party shall not be obligated to pay legal expenses and fees to more than one law firm in connection with the defense of similar claims arising out of the same alleged acts or omissions giving rise to such claims notwithstanding that such actions or claims are alleged or brought by one or more parties against more than one indemnified party.

 

If such claims or actions are alleged or brought against more than one indemnified party, then the indemnifying party shall only be obliged to reimburse the expenses and fees of the one law firm (in addition to local counsel) that has been participating by a majority of the indemnified parties against which such action is finally brought; and in the event a majority of such indemnified parties is unable to agree on which law firm for which expenses or fees will be reimbursable by the indemnifying party, then payment shall be made to the first law firm of record representing an indemnified party against the action or claim.  Such law firm shall be paid only to the extent of services performed by such law firm and no reimbursement shall be payable to such law firm on account of legal services performed by another law firm.

 

	
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11.                               Contribution.  If the indemnification provided for in Section 10 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, the contributions provisions set forth in Section 8 of the Dealer Manager Agreement shall be applicable.

 

12.                               Company as Party to Agreement.  The Company shall be a third party beneficiary of Selected Dealer’s representations, warranties, covenants and agreements contained in Sections 10 and 11.  The Company shall have all enforcement rights in law and in equity with respect to those portions of this Agreement as to which it is third party beneficiary.

 

13.                               Privacy Laws; Compliance.

 

(a)                                 Selected Dealer agrees to:

 

(i)                                     abide by and comply with (A) the privacy standards and requirements of the Gramm-Leach-Bliley Act of 1999 (the “GLB Act”); B) the privacy standards and requirements of any other applicable federal or state law; and  (C) Selected Dealer’s own internal privacy policies and procedures, each as may be amended from time to time;

 

(ii)                                  refrain from the use or disclosure of nonpublic personal information (as defined under the GLB Act) of all customers, except as necessary to service the customers or as otherwise necessary or required by applicable law; and

 

(iii)                               determine which customers have opted out of the disclosure of nonpublic personal information by periodically reviewing and, if necessary, retrieving an aggregated list of such customers (the “List”) as provided by each to identify customers that have exercised their opt-out rights.

 

If either party uses or discloses nonpublic personal information of any customer for purposes other than servicing the customer, or as otherwise required by applicable law, that party will consult the List to determine whether the affected customer has exercised his or her opt-out rights.  Each party understands that it is prohibited from using or disclosing any nonpublic personal information of any customer that is identified on the List as having opted out of such disclosures.

 

14.                               Anti-Money Laundering Compliance Programs.  Selected Dealer represents to the Dealer Manager and to the Company that it has established and implemented an anti-money laundering compliance program (“AML Program”) in accordance with Section 352 of the USA PATRIOT Act of 2001 (the “PATRIOT Act”) and FINRA Rule 3310, that complies with applicable anti-money laundering laws and regulations, including, but not limited to, the customer identification program requirements of Section 326 of the PATRIOT Act, and the suspicious activity reporting requirements of Section 356 of the PATRIOT Act, and the laws, regulations and Executive Orders administered by the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of Treasury (collectively, “AML/OFAC Laws”).  The Selected Dealer hereby covenants to remain in compliance with the AML/OFAC Laws and shall, upon request by the Dealer Manager and/or the Company, provide a certification to the Dealer Manager and/or the Company that, as of the date of such certification, its AML Program is compliant with the AML/OFAC Laws.

 

Upon request by the Dealer Manager and/or the Company at any time, Selected Dealer will (i) furnish a written copy of its AML Program, or a summary of its AML Program, to the Dealer Manager and/or the Company for review, and (ii) furnish any information that the Dealer Manager and/or the Company may request to satisfy applicable AML/OFAC laws.

 

	
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15.                               Miscellaneous.

 

(a)                                 Ratification of Dealer Manager Agreement.  Selected Dealer hereby authorizes and ratifies the execution and delivery of the Dealer Manager Agreement by the Dealer Manager as Dealer Manager for itself and on behalf of all Selected Dealers (including Selected Dealer party hereto) and authorizes the Dealer Manager to agree to any variation of its terms or provisions and to execute and deliver any amendment, modification or supplement thereto. Selected Dealer hereby agrees to be bound by all provisions of the Dealer Manager Agreement relating to Selected Dealers. Selected Dealer also authorizes the Dealer Manager to exercise, in the Dealer Manager’s discretion, all the authority or discretion now or hereafter vested in the Dealer Manager by the provisions of the Dealer Manager Agreement and to take all such actions as the Dealer Manager may believe desirable in order to carry out the provisions of the Dealer Manager Agreement and of this Agreement.

 

(b)                                 Termination.  This Agreement, except for the provisions of Sections 9 (Dealer Manager’s Authority), 10 (Indemnification), 11 (Contribution), 12 (Company as Party to Agreement), 13 (Privacy Laws; Compliance) and this Section 15 (Miscellaneous), may be terminated at any time by either party hereto by two days’ prior written notice to the other party and, in all events, this Agreement shall terminate on the termination date of the Dealer Manager Agreement, except for the provisions of Sections 9, 10, 11, 12, 13 and this Section 15.

 

(c)                                  Communications.  Any communications from Selected Dealer should be in writing addressed to the Dealer Manager at:

 

Carey Financial, LLC

50 Rockefeller Plaza

New York, New York 10020

Facsimile No.: (212) 492-8922

Attention:  Richard J. Paley

 

with a copy to:

 

Kunzman & Bollinger, Inc.

5100 N. Brookline Avenue, Suite 600

Oklahoma City, Oklahoma 73112

Facsimile No: (405) 942-3501

Attention:  Wallace W. Kunzman, Jr.

 

Any notice from the Dealer Manager to Selected Dealer shall be deemed to have been duly given if mailed, communicated by electronic delivery or facsimile or delivered by overnight courier to Selected Dealer at Selected Dealer’s address shown below.

 

(d)                                 No Partnership.  Nothing herein contained shall constitute the Dealer Manager, Selected Dealer, the other Selected Dealers or any of them as an association, partnership, limited liability company, unincorporated business or other separate entity.

 

(e)                                  Notice of Registration Statement Effectiveness.  If this Agreement is executed before the initial Effective Date, then the Dealer Manager will notify Selected Dealer in writing when the initial Effective Date has occurred.  Selected Dealer agrees that Selected Dealer will not make any offers to sell the Shares or solicit purchasers for the Shares until Selected Dealer has received such written notice of the initial Effective Date from the Dealer Manager or the Company. This Agreement shall be effective for all sales by Selected Dealer on and after the initial Effective Date.

 

	
Carey   Financial, LLC
    	
 
    	
 
    
	
Selected   Dealer Agreement
    	
11

 
    	
 
    

 

 

(f)                                   Transfer Agent.  The Company may authorize its transfer agent to provide information to the Dealer Manager and Selected Dealer regarding record holder information about the clients of Selected Dealer who have invested with the Company on an on-going basis for so long as Selected Dealer has a relationship with such client.  Selected Dealer shall not disclose any password for a restricted website or portion of a website provided to Selected Dealer in connection with the Offering and shall not disclose to any person, other than an officer, director, employee or agent of Selected Dealer, any material downloaded from such restricted website or portion of a restricted website.

 

(g)                                  Assignment.  Selected Dealer shall have no right to assign this Agreement or any of its rights hereunder or to delegate any of its obligations.  Any purported assignment or delegation by Selected Dealer shall be null and void.  The Dealer Manager shall have the right to assign any or all of its rights and obligations under this Agreement by written notice, and Selected Dealer shall be deemed to have consented to such assignment by execution hereof.  Dealer Manager shall provide written notice of any such assignment to Selected Dealer.

 

(h)                                 Counterparts.  This Agreement may be executed (including by facsimile transmission) with counterpart signature pages or in counterpart copies, each of which shall be deemed an original but all of which together shall constitute one and the same instrument comprising this Agreement.

 

(i)                                     Invalidity.  The invalidity or unenforceability of any provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted.

 

(j)                                    Strict Performance.  The failure of any party to insist upon or enforce strict performance by any other party of any provision of this Agreement or to exercise any right under this Agreement shall not be construed as a waiver or relinquishment to any extent of such party’s right to assert or rely upon any such provision or right in that or any other instance; rather, such provision or right shall be and remain in full force and effect.

 

If the foregoing is in accordance with Selected Dealer’s understanding and agreement, please sign and return the attached duplicate of this Agreement. Selected Dealer’s indicated acceptance thereof shall constitute a binding agreement between Selected Dealer and the Dealer Manager.

 

	
 
    	
DEALER   MANAGER:
    
	
 
    	
 
    
	
 
    	
CAREY   FINANCIAL, LLC
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
Date:
    	
 
    

 

	
Carey   Financial, LLC
    	
 
    	
 
    
	
Selected   Dealer Agreement
    	
12

 
    	
 
    

 

 

The undersigned dealer confirms its agreement to act as a Selected Dealer pursuant to all the terms and conditions of the above Selected Dealer Agreement and the attached Dealer Manager Agreement. The undersigned dealer hereby represents that it will comply with the applicable requirements of the Securities Act and the Exchange Act and the published rules and regulations of the Commission thereunder, and applicable blue sky or other state securities laws. The undersigned dealer represents and warrants that the undersigned dealer is duly registered as a broker-dealer under the provisions of the Exchange Act and the Exchange Act Rules and Regulations or is exempt from such registration.  The undersigned dealer confirms that it and each salesperson acting on its behalf are members in good standing of FINRA and duly licensed by each regulatory authority in each jurisdiction in which the undersigned dealer or such salesperson will offer and sell Shares, or are exempt from registration with such authorities. The undersigned dealer hereby represents that it will comply with the Rules of FINRA and all rules and regulations promulgated by FINRA.

 

	
Dated:   ____________, 2013
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Name   of Selected Dealer
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Federal   Identification Number
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    	
 
    
	
 
    	
 
    	
Authorized   Signatory
    	
 
    

 

Kindly have checks representing commissions forwarded as follows (if different than above): (Please type or print)

 

	
Name   of Firm:
    	
 
    
	
 
    	
 
    
	
Address:
    	
 
    
	
 
    	
Street
    
	
 
    	
 
    
	
 
    	
City
    
	
 
    	
 
    
	
 
    	
State   and Zip Code
    
	
 
    	
 
    
	
 
    	
(Area   Code) Telephone No.
    
	
 
    	
 
    
	
Attention:
    	
 
    

 

	
Carey   Financial, LLC
    	
 
    	
 
    
	
Selected   Dealer Agreement
    	
13

 
    	
 
    

 

 

SCHEDULE I

 

TO

 

SELECTED DEALER AGREEMENT WITH

 

CAREY FINANCIAL, LLC

 

Selected Dealer represents and warrants that it is currently licensed as a broker-dealer in the following jurisdictions:

 

	
 
    	
o                                         Alabama
    	
o                                         Nebraska
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
o                                         Alaska
    	
o                                         Nevada
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
o                                         Arizona
    	
o                                         New Hampshire
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
o                                         Arkansas
    	
o                                         New Jersey
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
o                                         California
    	
o                                         New Mexico
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
o                                         Colorado
    	
o                                         New York
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
o                                         Connecticut
    	
o                                         North   Carolina
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
o                                         Delaware
    	
o                                         North Dakota
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
o                                         District of   Columbia
    	
o                                         Ohio
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
o                                         Florida
    	
o                                         Oklahoma
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
o                                         Georgia
    	
o                                         Oregon
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
o                                         Hawaii
    	
o                                         Pennsylvania
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
o                                         Idaho
    	
o                                         Puerto Rico
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
o                                         Illinois
    	
o                                         Rhode Island
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
o                                         Indiana
    	
o                                         South   Carolina
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
o                                         Iowa
    	
o                                         South Dakota
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
o                                         Kansas
    	
o                                         Tennessee
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
o                                         Kentucky
    	
o                                         Texas
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
o                                         Louisiana
    	
o                                         Utah
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
o                                         Maine
    	
o                                         Vermont
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
o                                         Maryland
    	
o                                         Virgin   Islands
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
o                                         Massachusetts
    	
o                                         Virginia
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
o                                         Michigan
    	
o                                         Washington
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
o                                         Minnesota
    	
o                                         West Virginia
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
o                                         Mississippi
    	
o                                         Wisconsin
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
o                                         Missouri
    	
o                                         Wyoming
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
o                                         Montana
    	
 
    	
 
    

 

	
Carey   Financial, LLC
    	
 
    	
 
    
	
Selected   Dealer Agreement
    	
14

 
    	
 
    

 

 

SCHEDULE II

 

TO

 

CAREY WATERMARK INVESTORS INCORPORATED

 

ADDENDUM TO SELECTED DEALER AGREEMENT

 

The following reflects the marketing fee as agreed upon between Carey Financial, LLC (the “Dealer Manager”) and the Selected Dealer, effective [_______], 2013.

 

Each calendar year, the Selected Dealer may qualify to receive a fee (the “Marketing Fee”), of up to _____% per share in connection with sales of Carey Watermark Investors Incorporated’s (the “Company”) common stock by the Selected Dealer.

 

Eligibility to receive the Marketing Fee is conditioned upon the Selected Dealer’s compliance with one or more of the following conditions.  Any determination regarding the Selected Dealer’s compliance with the listed conditions will be made by the Dealer Manager, in its sole discretion.

 

1.                                      The Selected Dealer has internal marketing and support personnel (telemarketers, marketing director, etc.) who assist the Dealer Manager’s marketing team;

 

2.                                      The Selected Dealer has and uses internal marketing communications vehicle(s) to promote the Company.  Vehicles may include, but are not restricted to, newsletters, conference calls, internal mail, etc.;

 

3.                                      The Selected Dealer will respond to investors’ inquiries concerning monthly statements, valuations, distribution rates, tax information, annual reports, reinvestment and redemption rights and procedures, the financial status of the Company and the real estate markets in which the Company has invested;

 

4.                                      The Selected Dealer will assist investors with reinvestments and redemptions; and/or

 

5.                                      The Selected Dealer will provide other services requested by investors from time to time and will maintain the technology necessary to adequately service investors.

 

IN WITNESS WHEREOF, the parties have executed this Addendum on the date and year shown below.

 

	
SELECTED DEALER:
    	
 
    	
 
    	
DEALER MANAGER:
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
CAREY FINANCIAL,   LLC
    
	
(Name of   Selected Dealer)
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    	
 
    	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    	
 
    	
 
    	
 
    	
Title:
    	
 
    
	
 
    	
Date:
    	
 
    	
 
    	
 
    	
 
    	
Date:
    	
 
    
										

 

	
Carey   Financial, LLC
    	
 
    	
 
    
	
Selected   Dealer Agreement
    	
15

 
    	
 
    

 

 

SCHEDULE III

 

RIA ADDENDUM TO SELECTED DEALER AGREEMENT

 

1.                                      Covenants of the Selected Dealer.  The Selected Dealer covenants, warrants and represents, during the full term of this Agreement, that:

 

(a)                                 The RIA is affiliated with the Selected Dealer.

 

(b)                                 Any investment advisor representative of the Selected Dealer’s affiliated RIA who recommends a purchase of Shares to an investor must also be associated with the Selected Dealer as a registered representative and be supervised by the Selected Dealer pursuant to the requirements set forth in the Selected Dealer Agreement.

 

(c)                                  The sale of any Shares that are recommended by its affiliated RIA must be made by the Selected Dealer pursuant to the Selected Dealer Agreement and reflected on the books and records of the Selected Dealer, regardless of whether the Shares are held with a custodian.

 

(d)                                 The Selected Dealer shall review and approve the investor’s account with its affiliated RIA as well as the transaction involving the sale of the Company’s Shares to the investor, including but not limited to, the activities of its registered representative who also is dually licensed with its affiliated RIA as an investment advisor representative.

 

(e)                                  The Selected Dealer shall review and approve any outside custodial arrangement in connection with any purchase of Shares recommended by its affiliated RIA.

 

(f)                                   The Selected Dealer’s affiliated RIA is registered as an investment advisor under the Investment Advisers Act.

 

(g)                                  The Selected Dealer’s affiliated RIA shall comply with all applicable federal and state securities laws, including, without limitation, the disclosure requirements of the Investment Advisers Act, and the provisions thereof requiring disclosure of the compensation to be paid to the RIA.

 

(h)                                 The Selected Dealer’s affiliated RIA shall maintain the records required by Section 204 of the Investment Advisers Act, and Rule 204-2 thereunder in the form and for the periods required thereby.

 

IN WITNESS WHEREOF, the parties have executed this Schedule III on the date and year shown below.

 

	
SELECTED DEALER:
    	
 
    	
 
    	
DEALER MANAGER:
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
CAREY FINANCIAL,   LLC
    
	
(Name of   Selected Dealer)
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    	
 
    	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    	
 
    	
 
    	
 
    	
Title:
    	
 
    
	
 
    	
Date:
    	
 
    	
 
    	
 
    	
 
    	
Date:
    	
 
    
										

 

	
Carey   Financial, LLC
    	
 
    	
 
    
	
Selected   Dealer Agreement
    	
16Exhibit 4.2

 

Execution Version

 

SHAREHOLDERS’ AGREEMENT

 

This SHAREHOLDERS’ AGREEMENT, dated as of January 12, 2011 (this “Agreement”), is entered into by and among Patriot Holding Corp., a Minnesota corporation (the “Company”), Transport Investors, LLC, a Delaware limited liability company (“Transport”), and the parties set forth on Schedule 1 attached hereto (the “So Cal Shareholders”, and together with Transport, the “Shareholders”).  All capitalized and undefined terms used herein shall have the meaning given to such terms in the Merger Agreement.

 

RECITALS

 

WHEREAS, pursuant to that certain Agreement and Plan of Merger, dated as of December 30, 2010 (the “Merger Agreement”), by and among the Company, the So Cal Shareholders, Southern Cal Transport, Inc., an Alabama close corporation (“So Cal”), and Saints Acquisition, Inc., an Alabama corporation and wholly owned subsidiary of the Company (“Merger Sub”), the Company will purchase all of the equity interests of the So Cal Shareholders in So Cal, and So Cal will be merged with and into Merger Sub (the “Merger”), with Merger Sub to be the surviving corporation of the Merger;

 

WHEREAS, a portion of the consideration that the So Cal Shareholders will receive in connection with the Merger will be shares of common stock of the Company (such shares, together with the shares of common stock of the Company owned by Transport, the “Shares”); and

 

WHEREAS, as a condition to consummation of the transactions contemplated by the Merger Agreement, the Company and the Shareholders are entering into this Agreement for the purpose of establishing certain rights and obligations with respect to the Shares.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the Company and each of the Shareholders hereby agree as follows:

 

1.             Board of Directors Prior to the Initial Public Offering.

 

a.             From and after the Closing Date and until the provisions of this Section 1 shall cease to be effective, each Shareholder shall vote all of his, her or its Shares and any other voting securities of the Company over which such Shareholder has voting control and shall take all other necessary or desirable actions within his, her or its control (whether in his, her or its capacity as a shareholder, director, member of a board committee or officer of the Company or otherwise, and including, without limitation, attendance at meetings in person or by proxy for purposes of obtaining a quorum and execution of written consents in lieu of meetings), and the Company shall take all necessary or desirable actions within its control (including, without limitation, calling special board and shareholder meetings), so that:

 

 

(1)           the authorized number of directors on the board of directors of the Company (the “Board”) shall be determined by Transport;

 

(2)           so long as Kenneth R. Adams (“Adams”) Owns at least 10% of the outstanding common stock of the Company, Adams, or his designee (who shall be reasonably acceptable to Transport), shall be elected to the Board;

 

(3)           a number of representatives designated by Transport equal to the number of remaining authorized director positions shall be elected to the Board (each such director, a “Transport Designee”);

 

(4)           the removal from the Board (with or without cause) of any Transport Designee shall be at Transport’s written request, but only upon such written request and under no other circumstances except for cause based upon gross negligence or willful misconduct with respect to the Company or the conviction of a felony;

 

(5)           the removal from the Board (with or without cause) of Adams or his designee shall be at Adam’s written request, but only upon such written request and under no other circumstances except for cause based upon gross negligence or willful misconduct with respect to the Company or the conviction of a felony;

 

(6)           in the event that any Transport Designee ceases to serve as a member of the Board during his or her term of office, the resulting vacancy on the Board shall be filled by a representative designated by Transport as provided hereunder; and

 

(7)           in the event that Adam’s designee (if applicable) ceases to serve as a member of the Board during his or her term of office, the resulting vacancy on the Board shall be filled by Adams or a representative designated by Adams (who shall be reasonably acceptable to Transport) as provided hereunder.

 

Notwithstanding the foregoing, nothing in this Section 1 shall require any Shareholder to vote for any director who has engaged in gross negligence or willful misconduct with respect to the Company or who has been convicted of a felony.

 

b.             To assure each Shareholder’s obligation to vote such Shareholder’s Shares in accordance with the provisions of this Agreement, each Shareholder hereby appoints Transport as his, her or its true and lawful proxy and attorney, with full power of substitution, to vote all of such Shareholder’s Shares, in such proxy’s sole discretion but consistent with the foregoing, to set the number of directors and for the election of directors as set forth in Section 1 if such Shareholder fails to comply with the provisions of this Section 1.  The proxies and power granted by each Shareholder pursuant to this Section 1.b are coupled with an interest and are given to secure the performance of such Shareholder’s duties to the parties under this Agreement.  Such proxies shall be irrevocable for the term of this Agreement and shall survive the death, incompetency, disability or dissolution of any Shareholder or other holder of such Shareholder’s Shares.

 

2

 

c.             None of the Company, the Board, Merger Sub or the Shareholders shall authorize the payment of management or monitoring fees by the Company or Merger Sub to Goldner Hawn Johnson & Morrison Incorporated or any of its Affiliates.

 

d.             The provisions of this Section 1 shall terminate automatically and be of no further force and effect upon the first to occur of (i) an Initial Public Offering or (ii) a Sale of the Company.

 

2.             Board of Directors Upon an Initial Public Offering.  In the event (i) an Initial Public Offering occurs and (ii) Adams Owns at least 10% of the outstanding common stock of the Company following such Initial Public Offering, Transport shall cause the Transport Designees to nominate Adams for election to the Board at the first annual shareholders meeting following the Initial Public Offering.

 

3.             Co-Sale Rights.

 

a.             At least 30 days prior to any Transfer of Shares by any Shareholder, such Shareholder (the “Selling Shareholder”) shall deliver a written notice (the “Sale Notice”) to the Company and the other Shareholders (the “Other Shareholders”), specifying in reasonable detail the identity of the prospective Transferee(s), the number of shares to be Transferred and the terms and conditions of the Transfer.

 

The Other Shareholders may elect to participate in the contemplated Transfer at the same price per share and on the same terms by delivering written notice to the Company and the Selling Shareholder within 30 days after delivery of the Sale Notice (the “Authorization Date”).  If any Other Shareholders have elected to participate in such Transfer, each of the Selling Shareholder and such Other Shareholders shall be entitled to sell in the contemplated Transfer, at the same price and on the same terms, a number of Shares equal to the product of (i) the quotient determined by dividing the percentage of the number of Shares owned by such Shareholder by the aggregate percentage of the number of Shares owned by the Selling Shareholder and the Other Shareholders participating in such sale and (ii) the number of Shares to be sold in the contemplated Transfer.

 

For example, if the Sale Notice contemplated a sale of 100 Shares by the Selling Shareholder, and if the Selling Shareholder at such time owns 30% of all Shares and if one Other Shareholder elects to participate and owns 20% of all Shares, the Selling Shareholder would be entitled to sell 60 Shares (30% ÷ 50% x 100 Shares) and the Other Shareholder would be entitled to sell 40 Shares (20% ÷ 50% x 100 Shares).

 

b.             The Selling Shareholder shall use his, her or its reasonable best efforts to obtain the agreement of the prospective Transferee(s) to the participation of the Other Shareholders in any contemplated Transfer, and the Selling Shareholder shall not Transfer any of his, her or its Shares to any prospective Transferee if such prospective Transferee(s) declines to allow the participation of the Other Shareholders.  Each Other Shareholder Transferring Shares pursuant to this Section 3.b shall pay his, her or its pro

 

3

 

rata share (based on the number of Shares to be sold) of the expenses incurred by the Shareholders in connection with such Transfer, provided that no such payment shall be required with respect to any expenses that are otherwise paid by the Company, if any, or the Transferee.

 

c.             If any Other Shareholder elects not to participate in the contemplated Transfer by the Selling Shareholder, the Selling Shareholder and any Other Shareholder that has elected to participate in such Transfer pursuant to this Section 3 may Transfer the Shares specified in the Sale Notice at a price and on terms no more favorable to the Transferee(s) thereof than specified in the Sale Notice during the 90-day period immediately following the Authorization Date.  Any Shares not Transferred within such 90-day period shall be subject to the provision of this Section 3 in the case of any proposed subsequent Transfer.

 

d.             Notwithstanding anything to the contrary contained in any other provision of this Agreement, the restrictions set forth in this Section 3 shall not apply to any Transfer of Shares (a) by Transport among its Affiliates controlled by Goldner Hawn Johnson & Morrison Incorporated, or (b) by a So Cal Shareholder to a Permitted Transferee, or to any other Person made for bona fide estate planning purposes and approved by consent of the Board; or (c) by any Shareholder (i) in an Initial Public Offering or in a Public Sale following an Initial Public Offering or (ii) pursuant to a proportionate redemption of common stock by the Company, provided that the restrictions contained in this Section 3 shall continue to be applicable to the Shares after any such Transfer described in clause (a), (b) and (c)(ii) and provided further that the Transferees of such Shares described in clause (a), (b) and (c)(ii) shall have agreed in writing to be bound by the obligations of the Transferor under the provisions of this Agreement affecting the Shares so Transferred.

 

e.             Termination of Restrictions.  The provisions of this Section 3 shall terminate automatically and be of no further force and effect upon the first to occur of a (i) an Initial Public Offering or (ii) a Sale of the Company.

 

4.             Drag-Along Rights.

 

a.             If Transport and the Board approve a Sale of the Company (an “Approved Sale”), the Company shall give written notice to the Other Shareholders setting forth in reasonable detail the terms of the Approved Sale (the “Approved Sale Notice”).  Each Shareholder shall, to the extent authorized by law or the terms of the purchase agreement, vote for the Approved Sale, consent to and raise no objections against such Approved Sale.  If the Approved Sale is structured as a (i) merger or consolidation, each Shareholder shall waive any dissenters’ rights, appraisal rights or similar rights in connection with such merger or consolidation or (ii) sale of stock, each Shareholder shall agree to sell all of his, her or its Shares on the terms and conditions approved by Transport and the Board.  Each Shareholder shall take all necessary or desirable actions in connection with the consummation of the Approved Sale as requested by the Company.

 

4

 

b.             The obligations of the Shareholders with respect to an Approved Sale are subject to the satisfaction of the following conditions: (i) the proposed buyer(s) in such Approved Sale (the “Offerors”) shall have delivered a written offer addressed to the Company and each of the Shareholders to consummate such Approved Sale on or before a date that is no less than 30 days and no more than 150 days after delivery of the Approved Sale Notice; (ii) the Offerors shall have provided evidence reasonably satisfactory to the Company and the Shareholders as to the Offeror’s financial ability to consummate the Approved Sale (which may include delivery of financing commitments from one or more financial institutions in customary form); (iii) upon the consummation of the Approved Sale, each Shareholder shall receive cash and/or Publicly Traded Securities and the same amount of consideration per share; and (iv) if any Shareholders are given an option as to the form and amount of consideration to be received, each Shareholder shall be given the same option.

 

c.             Shareholders will bear their pro rata share (based upon the number of shares sold) of the costs of any sale of such Shares pursuant to an Approved Sale to the extent such costs are incurred for the benefit of all Shareholders and are not otherwise paid by the Company or the acquiring party.  Costs incurred by Shareholders on their own behalf will not be considered costs of the transaction hereunder.  The Shareholders shall be obligated to join on a pro rata basis (based on the number of Shares to be sold) in any reasonable indemnification or other obligations in connection with such Approved Sale (other than any such obligations that relate specifically to a particular Shareholder such as indemnification with respect to representations and warranties given by a Shareholder regarding such Shareholder’s title to and ownership of Shares); provided, that no Shareholder shall be obligated in connection with such Transfer to agree to indemnify or hold harmless the Transferees with respect to an amount in excess of the net cash proceeds paid to such holder in connection with such Transfer; and provided further, that all Shareholders will receive the same form of consideration per Share and the same amount of consideration per Share in such Approved Sale.

 

d.             If at any time (i) an agreement signed by Transport and, if applicable, approved by the Board, is submitted by Transport to the Other Shareholders that provides for a sale or exchange of all of the Shares and (ii) such matter is an Approved Sale, then each of such Other Shareholders shall promptly join in the execution of such agreement thereby obligating each of such Other Shareholders to sell his, her or its Shares on the terms set forth in such agreement consistent herewith if such Approved Sale is consummated.

 

e.             The provisions of this Section 4 shall terminate automatically and be of no further force and effect upon the first to occur of (i) an Initial Public Offering or (ii) a Sale of the Company.

 

5.             Piggyback Registrations.

 

a.             Right to Piggyback.  Whenever the Company proposes to register any of its securities under the Securities Act of 1933, as amended from time to time (the “Securities Act”), and the registration is not being effected to implement an employee

 

5

 

benefit plan or transaction to which Rule 145 under the Securities Act (or similar rule then in force) applies (a “Piggyback Registration”), the Company shall give prompt written notice to all Shareholders of its intention to effect such a registration and shall, subject to Section 5.c below, include in such registration all Shares with respect to which the Company has received written requests for inclusion therein within 20 days after the receipt of the Company’s notice.

 

b.             Delay of Registration.  No Shareholder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration pursuant to this Agreement as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 5 or Sections 6 through 11 of this Agreement.

 

c.             Priority on Primary Registrations.  If a Piggyback Registration is an underwritten primary registration on behalf of the Company, and the managing underwriters advise the Company in writing that, in their opinion, the number of securities requested to be included in such registration exceeds the number which can be sold in such offering without adversely affecting the marketability of the offering, the Company shall include in such registration (i) first, the securities the Company proposes to sell, and (ii) second, unless in like manner the managing underwriters advise that the inclusion of any Shares might adversely affect the marketability of the offering, the Shares requested to be included in such registration by the Shareholders requesting such registration, pro rata among such Shareholders.

 

d.             Priority on Secondary Registrations.  If a Piggyback Registration is an underwritten secondary registration on behalf of holders of the Company’s securities, and the managing underwriters advise the Company in writing that, in their opinion, the number of securities requested to be included in such registration exceeds the number which can be sold in such offering without adversely affecting the marketability of the offering, the Company shall include in such registration (i) first, the Shares requested to be included therein by the Shareholders requesting such registration, pro rata among such Shareholders on the basis of the number of Shares owned by each such Shareholder, and (ii) second, other securities requested to be included in such registration.

 

e.             Selection of Underwriters.  If any Piggyback Registration is an underwritten offering, the Company shall have the right to select the investment banker(s) and manager(s) for such offering.

 

f.             Termination of Rights.  This Section 5 terminates as to any Shareholder on the earlier to occur of (i) two (2) years after the Initial Public Offering or (ii) the first date on which such Shareholder is able to sell all Shares held by such Shareholder into the public markets without registration pursuant to Rule 144 (or any successor provision) under the Securities Act.

 

6

 

6.             Holdback Agreements.

 

a.             Unless the underwriters managing the registered public offering otherwise agree, each Shareholder shall not effect any public sale or distribution of equity securities of the Company, or any securities convertible into or exchangeable or exercisable for such securities, during the Holdback Period, except as part of such underwritten registration or pursuant to registrations on Form S-8 or any successor form.

 

b.             Unless the underwriters managing the registered public offering otherwise agree, the Company shall not effect any public sale or distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities, during the Holdback Period, except as part of such underwritten registration or pursuant to registrations on Form S-8 or any successor form.

 

c.             Unless the underwriters managing the registered public offering otherwise agree, the Company shall cause each holder of its common stock, or any securities convertible into or exchangeable or exercisable for common stock, purchased from the Company (other than in a registered public offering) during the time that any Shareholder has rights under Section 5 of this Agreement to agree not to effect any public sale or distribution (including sales pursuant to Rule 144) of any such securities during the Holdback Period (except as part of such underwritten registration, if otherwise permitted).

 

7.             Registration Procedures.  Whenever a Shareholder has requested that any Shares be registered pursuant to a Piggyback Registration, the Company shall use its reasonable best efforts to effect the registration and the sale of such Shares in accordance with the intended method of disposition thereof and, pursuant thereto, the Company shall, as expeditiously as possible:

 

a.             prepare and file with the Securities and Exchange Commission (“SEC”) a registration statement with respect to such Shares and use its best efforts to cause such registration statement to become effective (provided that, before filing a registration statement or prospectus or any amendments or supplements thereto, the Company shall furnish to the counsel selected by the holders of a majority of the Shares covered by such registration statement copies of all such documents proposed to be filed);

 

b.             notify each Shareholder offering Shares in a Piggyback Registration of the effectiveness of each registration statement filed hereunder, prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period of not less than 180 days, and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the selling Shareholders thereof set forth in such registration statement;

 

c.             furnish to each Shareholder offering Shares in a Piggyback Registration such number of copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including each

 

7

 

preliminary prospectus) and such other documents as such Shareholder may reasonably request in order to facilitate the disposition of the Shares owned by such Shareholder;

 

d.             use its reasonable best efforts to register or qualify such Shares under such securities or blue sky laws of such jurisdictions as any selling Shareholder reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such Shareholder to consummate the disposition in such jurisdictions of the Shares owned by such Shareholder (provided that, the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph, (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction);

 

e.             notify each Shareholder offering Shares in a Piggyback Registration, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading, and, at the request of any such Shareholder, the Company shall prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Shares, such prospectus shall not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading; provided that, upon such notification by the Company, each Shareholder offering Shares in a Piggyback Registration will not offer or sell such Shares until the Company has notified such Seller that it has prepared a supplement or amendment to such prospectus and delivered copies of such supplement or amendment to such Shareholder;

 

f.             cause all such Shares to be listed on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed;

 

g.             provide a transfer agent and registrar for all such Shares not later than the effective date of such registration statement;

 

h.             enter into such customary agreements (including underwriting agreements in customary form) and take all such other actions as the holders of a majority of the Shares being sold or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Shares (including effecting a stock split or a combination of shares);

 

i.              make available for inspection by any Shareholder offering Shares in a Piggyback Registration, any underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other agent retained by any such Shareholder or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company’s officers, directors, employees and independent accountants to supply all information reasonably requested by any such

 

8

 

Shareholder, underwriter. attorney, accountant or agent in connection with such registration statement;

 

j.              otherwise use its best efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months beginning with the first day of the Company’s first full fiscal quarter after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;

 

k.             permit any Shareholder which, in such Shareholder’s sole and exclusive judgment, might be deemed to be an underwriter or a controlling person of the Company, to participate in the preparation of such registration statement and to require the insertion therein of material, furnished to the Company in writing, which in the reasonable judgment of such Shareholder and his, her or its counsel should be included;

 

l.              in the event of the issuance of any stop order suspending the effectiveness of a registration statement or of any order suspending or preventing the use of any related prospectus or suspending the qualification of any common stock included in such registration statement for sale in any jurisdiction, the Company shall use its best efforts promptly to obtain the withdrawal of such order; and

 

m.           obtain a comfort letter from the Company’s independent public accountants in customary form and covering such matters of the type customarily covered by comfort letters as the holders of a majority of the Shares being sold reasonably request (provided that such Shares constitute at least 10% of the securities covered by such registration statement).

 

8.             Cooperation by Shareholders.

 

a.             It shall be a condition precedent to the obligations of the Company with respect to the Piggyback Registration rights of any Shareholder, that such Shareholder offering Shares in a Piggyback Registration will furnish to the Company in writing such information as the Company may reasonably request from such Shareholder, and otherwise reasonably cooperate with the Company and its counsel and managing underwriter(s) in connection with any registration with respect to such Shareholder’s Shares.

 

b.             The failure of any Shareholder offering Shares in a Piggyback Registration to furnish any information or documents in accordance with any provision contained in this Agreement shall not affect the obligations of the Company hereunder to any other Shareholders who do furnish such information and documents unless, in the reasonable opinion of counsel to the Company or the underwriters, such failure impairs or may impair the viability of the offering or the legality of any registration statements in connection therewith.  For the avoidance of doubt, the failure of any Shareholder offering Shares in a Piggyback Registration to furnish any information or documents in

 

9

 

accordance with any provision contained in this Agreement will cause such Shareholder to lose such Shareholder’s participation rights in such Piggyback Registration.

 

c.             At the end of any period during which the Company is obligated to keep any registration statement current and effective as provided in Section 7, the Shareholders whose Shares are included in such registration statement shall discontinue sales of Shares pursuant to such registration statement upon receipt of notice from the Company of its intention to remove from registration the shares covered by such registration statement which remain unsold.  Each such Shareholder shall notify the Company of the number of Shares registered for the benefit of such Shareholder which remain unsold promptly after receipt of such notice from the Company.

 

9.             Registration Expenses.

 

a.             All expenses incidental to the Company’s performance of or compliance with the terms of Sections 5 through 10 of this Agreement, including without limitation all registration and filing fees, fees and expenses of compliance with securities or blue sky laws, printing expenses, messenger and delivery expenses, fees and disbursements of custodians, and fees and disbursements of counsel for the Company and all independent certified public accountants, underwriters (excluding discounts and commissions) and other Persons retained by the Company (all such expenses being herein called “Registration Expenses”), shall be borne as provided in this Agreement, except that the Company shall, in any event, pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit or quarterly review, the expense of any liability insurance and the expenses and fees for listing the securities to be registered on each securities exchange on which similar securities issued by the Company are then listed.

 

b.             In connection with each Piggyback Registration, the Company shall reimburse the Shareholders, whose Shares are included in such Piggyback Registration for the reasonable fees and disbursements of one law firm chosen by the holders of a majority of the Shares initially requesting such registration.

 

c.             To the extent Registration Expenses are not required to be paid by the Company, each Shareholder whose Shares are included in any registration hereunder shall pay those Registration Expenses allocable to the registration of such Shareholder’s Shares so included, and any Registration Expenses not so allocable shall be borne by all Shareholders whose Shares are included in such registration in proportion to the aggregate selling price of the Shares to be so registered.

 

d.             The Company will not bear the cost of or pay for any stock transfer tax imposed in respect of the Transfer of any Shares to any purchaser thereof by any Shareholder in connection with any registration of Shares pursuant to this Agreement.

 

10.          Indemnification.

 

a.             The Company agrees to indemnify, to the extent permitted by law, each Shareholder, its officers and directors and each Person who controls such Shareholder

 

10

 

(within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses caused by any untrue or alleged untrue statement of material fact contained in any registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Company by such Shareholder expressly for use therein or by such holder’s failure to deliver a copy of the registration statement or prospectus or any amendments or supplements thereto after the Company has furnished such Shareholder with a sufficient number of copies of the same.  In connection with an underwritten offering, the Company shall indemnify such underwriters, their officers and directors and each Person who controls such underwriters (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the Shareholders.

 

b.             In connection with any registration statement in which a Shareholder is participating, each such Shareholder shall furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such registration statement or prospectus and, to the extent permitted by law, shall indemnify the Company, its directors and officers and each Person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of material fact contained in the registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such holder; provided, that the obligation to indemnify shall be individual, not joint and several, for each Shareholder and shall be limited to the net amount of proceeds received by such Shareholder from the sale of Shares pursuant to such registration statement.  In connection with an underwritten offering in which a Shareholder is participating, each such Shareholder shall indemnify such underwriters, their officers and directors and each Person who controls such underwriters (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the Company.

 

c.             Any Person entitled to indemnification hereunder shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that, the failure to give prompt notice shall not impair any Person’s right to indemnification hereunder, except to the extent such failure has prejudiced the indemnifying party) and (ii) unless, in such indemnified party’s reasonable judgment, a conflict of interest between such indemnified and indemnifying parties exists with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party.  If such defense is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent shall not be unreasonably withheld or delayed).  An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of no more than one counsel for all parties indemnified by such indemnifying

 

11

 

party with respect to such claim, unless, in the reasonable judgment of any indemnified party, a conflict of interest exists between such indemnified party and any other of such indemnified parties with respect to such claim.

 

d.             The indemnification provided for under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling Person of such indemnified party and shall survive the transfer of securities.  The Company also agrees to make such provisions, as are reasonably requested by any indemnified party, and as are permitted by law and the Company’s articles of incorporation and bylaws, for contribution to such party in the event the Company’s indemnification is unavailable for any reason.

 

11.          Participation in Underwritten Registrations.  No Shareholder may participate in any registration hereunder which is underwritten unless such Shareholder (i) agrees to sell such Shareholder’s Shares on the basis provided in any underwriting arrangements approved by the Shareholder entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements; provided that, no Shareholder whose Shares are included in any underwritten registration shall be required to make any representations or warranties to the Company or the underwriters (other than representations and warranties regarding such Shareholder and such Shareholder’s intended method of distribution) or to undertake any indemnification obligations to the Company or the underwriters with respect thereto, except as otherwise provided in Section 10 hereof.

 

12.          Transfers.

 

a.             Prior to Transferring any Shares (other than in an Initial Public Offering, a Public Sale or a Sale of the Company) to any Person, the prospective Transferring Shareholder (i) shall cause the prospective Transferee to be bound by this Agreement and to execute and deliver to the Company and the other Shareholders a counterpart to this Agreement, and (ii) shall have satisfied any requests by the Company, which may include, without limitation, the provision to the Company of an opinion of counsel of such prospective Transferring Shareholder, which counsel and opinion shall be reasonably satisfactory to the Company, to the effect that the Transfer is exempt from all applicable registration requirements and such Transfer will not violate any applicable federal or state laws regulating the Transfer of securities; provided, that no Shareholder may Transfer any Shares to (y) an entity which, in the reasonable determination of the Board, directly or indirectly, competes with the Company or its subsidiaries or (z) any customer, distributor or supplier of the Company or its subsidiaries, if the Board should reasonably determine that such Transfer would result in such customer, distributor or supplier receiving information that would place the Company or its subsidiaries at a competitive disadvantage with respect to such customer, distributor or supplier.

 

b.             Any sale, transfer, assignment, pledge or other disposition of (whether with or without consideration and whether voluntarily or involuntarily or by operation of law) (“Transfer”) or attempted Transfer of any Shares in violation of any provision of this

 

12

 

Agreement shall be void, and the Company shall not record such Transfer on its books or treat any purported Transferee of such Shares as the owner of such Shares for any purpose.

 

13.          Legend.  Each certificate evidencing Shares and each certificate issued in exchange for or upon the Transfer of any Shares shall be stamped or otherwise imprinted with a legend in substantially the following form:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THAT CERTAIN SHAREHOLDERS AGREEMENT, DATED AS OF JANUARY       , 2011, AMONG PATRIOT HOLDING CORP. (THE “COMPANY”) AND CERTAIN OF THE COMPANY’S SHAREHOLDERS, AS AMENDED AND MODIFIED FROM TIME TO TIME.  A COPY OF SUCH SHAREHOLDERS AGREEMENT SHALL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST.”

 

The Company shall imprint such legend on certificates evidencing Shares outstanding as of the date hereof.

 

In addition, each certificate evidencing Shares owned by the So Cal Shareholders shall be stamped or otherwise imprinted with a legend in substantially the following form:

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE SUBJECT TO FORFEITURE OR CANCELLATION, IN PART OR IN WHOLE, PURSUANT TO A CERTAIN AGREEMENT AND PLAN OF MERGER ENTERED INTO BY THE SHAREHOLDER WITH THE ISSUER OF SUCH SECURITIES, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE ISSUER.”

 

The Company shall promptly remove such legend, at the sole cost and expense of the Company, from any certificate evidencing Shares owned by the So Cal Shareholders upon request of the holder thereof once the period provided in the Merger Agreement during which such Shares shall be subject to forfeiture or cancellation shall have expired.

 

14.          Definitions.  When each of the following terms is used in this Agreement, it shall have the meaning stated in the Section indicated:

 

	
Adams
    	
Section 1.a(2)
    
	
Agreement
    	
Preamble
    
	
Approved Sale
    	
Section 4.a
    
	
Approved Sale Notice
    	
Section 4.a
    
	
Authorization Date
    	
Section 3.a
    
	
Board
    	
Section 1.a(1)
    
	
Company
    	
Preamble
    
	
Merger
    	
Recitals
    

 

13

 

	
Merger Agreement
    	
Recitals
    
	
Merger Sub
    	
Recitals
    
	
Offerors
    	
Section 4.b
    
	
Other Shareholders
    	
Section 3.a
    
	
Piggyback Registration
    	
Section 5.a
    
	
Registration Expenses
    	
Section 9.a
    
	
Sale Notice
    	
Section 3.a
    
	
SEC
    	
Section 7.a
    
	
Securities Act
    	
Section 5.a
    
	
Selling Shareholder
    	
Section 3.a
    
	
Shareholders
    	
Preamble
    
	
Shares
    	
Recitals
    
	
So Cal
    	
Recitals
    
	
So Cal Shareholders
    	
Preamble
    
	
Transfer
    	
Section 12.b
    
	
Transport
    	
Preamble
    
	
Transport Designee
    	
Section 1.a(3)
    

 

The following terms when used in this Agreement shall have the following meanings:

 

“Affiliate” of a Person means any other Person, directly or indirectly controlling, controlled by or under common control with such Person.

 

“Holdback Period” means seven days prior to the effective date of any underwritten Piggyback Registration and the 180-day period thereafter, or such longer period as may be requested by the Company or an underwriter to accommodate regulatory restrictions on (1) the publication or other distribution of research reports and (2) analyst recommendations and opinions, including, but not limited to, the restrictions contained in FINRA Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto.

 

“Independent Third Party” means any Person who, immediately prior to the contemplated transaction, does not own in excess of 5% of the Company’s common stock on a fully diluted basis (a “5% Owner”), who is not controlling, controlled by or under common control with any such 5% Owner and who is not the spouse or descendent (by birth or adoption) of any such 5% Owner or a trust for the benefit of such 5% Owner and/or such other Persons

 

“Initial Public Offering” means the sale in a firmly underwritten initial public offering registered under the Securities Act of shares of the Company’s common stock.

 

“Owns” means ownership of record or beneficially or otherwise has the right to vote the Shares in question, including without limitation by virtue of being the trustee of a trust.

 

“Permitted Transferee” means, with respect to a So Cal Shareholder, a Transfer for bona fide estate planning purposes to (i) such Shareholder’s spouse, children (including

 

14

 

natural, adopted and stepchildren), grandchildren or other direct lineal descendent of such So Cal Shareholder, or (ii) a custodian or trustee of a trust for the benefit of such So Cal Shareholder or such Shareholder’s spouse, children (including natural, adopted and stepchildren), grandchildren or other direct lineal descendent of such So Cal Shareholder.

 

“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

 

“Public Sale” means any sale of Shares to the public pursuant to an offering registered under the Securities Act or to the public through a broker, dealer or market maker pursuant to the provisions of Rule 144 (or any successor provision) adopted under the Securities Act.

 

“Sale of the Company” means the sale of the Company to an Independent Third Party or group of Independent Third Parties pursuant to which such party or parties acquire (i) capital stock of the Company possessing the voting power under normal circumstances to elect a majority of the Company’s Board (whether by merger, consolidation or sale or Transfer of the Company’s capital stock) or (ii) all or substantially all of the Company’s assets determined on a consolidated basis.

 

15.          Miscellaneous.

 

a.             Amendment and Waiver.  Except as otherwise provided herein, no modification, amendment or waiver of any provision of this Agreement shall be effective against the Company or the Shareholders unless such modification, amendment or waiver is approved in writing by (i) the Company, (ii) Transport and (iii), if Adams Owns at least 10% of the outstanding common stock of the Company, Adams.  Any amendment or waiver effected in accordance with this Section 15.a shall be binding on all of the parties hereto, regardless of whether any such party has consented thereto.  The failure of any party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms.  No course of dealing between or among any parties hereto shall be deemed effective to modify or amend any part of this Agreement or any rights or obligations of any party under or by reason of this Agreement.

 

b.             Severability.  Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law.  If any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, however, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision of this Agreement in such jurisdiction or affect the validity, legality or enforceability of any provision in any other jurisdiction.  In such event, this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

 

15

 

c.             Entire Agreement.  Except as otherwise expressly set forth herein, this Agreement embodies the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.

 

d.             Successors and Assigns.  Except as otherwise provided herein, this Agreement shall bind, inure to the benefit of and be enforceable by the Company and its successors and assigns and the Shareholders and any subsequent Transferees of Shares (other than Transferees resulting from the Initial Public Offering or the Sale of the Company).

 

e.             Counterparts.  This Agreement may be executed in one or more counterparts (including via facsimile or via e-mail with scanned attachment), all of which taken together shall constitute one and the same instrument.

 

f.             Remedies.  The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that, except as set forth in Section 5(b), the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which they are entitled at law or in equity.

 

g.             Notices.  All notices, demands and other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and will be deemed to have been given (a) when personally delivered, (b) when receipt is electronically confirmed, if sent by facsimile or telecopy; provided, however, that, if receipt is confirmed after normal business hours of the recipient, notice shall be deemed to have been given on the next business day; and provided, further, that a confirmation copy is sent by overnight courier specifying next day delivery, (c) one day after deposit with a nationally recognized overnight courier, specifying next day delivery or (d) three days after being sent by registered or certified mail, postage prepaid, return receipt requested.  Notices, demands and other communications shall be given to the Company and Transport at the addresses set forth below and to any other recipient at the address indicated on the schedules hereto and to any subsequent holder of Shares subject to this Agreement at such address as indicated by the Company’s records, or at such address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.

 

Notices to the Company, Merger Sub or to Transport:

 

Goldner Hawn Johnson & Morrison Incorporated

90 South Seventh Street, Suite 3700

Minneapolis, MN 55402

Attention: Van Zandt Hawn and Joseph M. Heinen

Facsimile: (612) 338-2860

 

16

 

with a copy to:

 

Dorsey & Whitney LLP

Suite 1500

50 South Sixth Street

Minneapolis, Minnesota 55402

Attention:  Robert A. Rosenbaum

Facsimile:  (612) 340-7800

 

h.             Governing Law.  The internal law, without regard to conflicts of laws principles, of the State of Delaware shall govern all questions concerning the construction, validity and interpretation of this Agreement and the performance of the obligations imposed by this Agreement.  The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in the courts of the State of Delaware or of the United States of America for the District of Delaware, this being in addition to any other remedy to which they are entitled at law or in equity.

 

i.                 Consent to Jurisdiction; Waiver of Jury Trial.  Any legal action or proceeding with respect to this Agreement and any action for enforcement of any judgment in respect thereof may be brought in the courts of the State of Delaware or of the United States of America for the District of Delaware, and, by execution and delivery of this Agreement, the parties hereby accept for themselves and in respect of their property, generally and unconditionally, the jurisdiction of the aforesaid courts and appellate courts.  The parties waive the right to trial by jury with respect to any claims hereby. The parties further irrevocably consent to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the parties at their addresses referred to in Section 15(g).  The parties hereby irrevocably waive any objection which they may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement brought in the courts referred to and hereby further irrevocably waive and agree, to the extent permitted by applicable law, not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum.

 

j.              Descriptive Headings.  The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

 

[Remainder of page intentionally left blank; signature page to follow]

 

17

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

 

	
 
    	
THE   COMPANY:
    
	
 
    	
 
    
	
 
    	
PATRIOT   HOLDING CORP.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Van Zandt Hawn
    
	
 
    	
Name:   Van Zandt Hawn
    
	
 
    	
Its:   Chief Executive Officer
    

 

Signature Page to Shareholders Agreement

 

 

	
 
    	
SHAREHOLDERS:
    
	
 
    	
 
    
	
 
    	
TRANSPORT   INVESTORS, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Van Zandt Hawn
    
	
 
    	
Name:
    	
Van   Zandt Hawn
    
	
 
    	
Its:
    	
Chief   Executive Officer
    

 

Signature Page to Shareholders Agreement

 

 

	
 
    	
SHAREHOLDERS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Kenneth R. Adams
    
	
 
    	
Kenneth   R. Adams
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Kenneth R. Adams
    
	
 
    	
Kenneth   R. Adams as Trustee of the
    
	
 
    	
Kenneth   R. Adams 2010 Three-Year Trust
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Philip G. DeSimone
    
	
 
    	
Philip   G. DeSimone
    

 

Signature Page to Shareholders Agreement

 

 

	
 
    	
Solely   for purposes of Section 1.c, 
    
	
 
    	
MERGER   SUB:
    
	
 
    	
 
    
	
 
    	
SAINTS   ACQUISITION, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Van Zandt Hawn
    
	
 
    	
Van   Zandt Hawn, Chief Executive Officer
    

 

Signature Page to Shareholders Agreement

 

 

SCHEDULE 1

 

	
1.
    	
 
    	
Kenneth R. Adams, an individual resident of   the state of Alabama
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
2800   North Woodridge Road
    
	
 
    	
 
    	
Birmingham,   Alabama 35223
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
with   a copy to:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Sirote &   Permutt, PC
    
	
 
    	
 
    	
2311   Highland Avenue South
    
	
 
    	
 
    	
Birmingham,   AL 35205
    
	
 
    	
 
    	
Attention:   John Cooper
    
	
 
    	
 
    	
 
    
	
2.
    	
 
    	
Kenneth R. Adams as Trustee of the Kenneth   R. Adams 2010 Three-Year Trust
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
2800   North Woodridge Road
    
	
 
    	
 
    	
Birmingham,   Alabama 35223
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
with   a copy to:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Sirote &   Permutt, PC
    
	
 
    	
 
    	
2311   Highland Avenue South
    
	
 
    	
 
    	
Birmingham,   AL 35205
    
	
 
    	
 
    	
Attention:   John Cooper
    
	
 
    	
 
    	
 
    
	
3.
    	
 
    	
Philip G. DeSimone
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
328   Palace Drive
    
	
 
    	
 
    	
Trussville,   AL 35173
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
with   a copy to:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Sirote &   Permutt, PC
    
	
 
    	
 
    	
2311   Highland Avenue South
    
	
 
    	
 
    	
Birmingham,   AL 35205
    
	
 
    	
 
    	
Attention:   John Cooper

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00224-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00224-of-00352.parquet"}]]