Exhibit 10.3

 

TRANSITION SERVICES AGREEMENT

 

THIS TRANSITION SERVICES AGREEMENT (this “Agreement”), is made and entered into
as of October 22, 2019, by and between W. P. Carey Inc., a Maryland corporation
(“WPC”), and Carey Watermark Investors 2 Incorporated, a Maryland corporation
(“Recipient”). For purposes of this Agreement, WPC is sometimes referred to as a
“Service Provider.” Service Provider and Recipient are each referred to herein
individually as a “Party” and collectively as “Parties.” Capitalized terms used
but not otherwise defined herein shall have the meaning ascribed thereto in the
Internalization Agreement (as hereinafter defined).

 

RECITALS:

 

WHEREAS, pursuant to the terms and conditions of that certain Agreement and Plan
of Merger dated as of the date hereof (the “Merger Agreement”), by and among
Recipient, Carey Watermark Investors Incorporated, a Maryland corporation
(“CWI 1”), and Apex Merger Sub LLC, a Maryland limited liability company
(“Merger Sub”), Merger Sub will merge (the “Merger”) with and into CWI 1, with
CWI 1 being the surviving company;

 

WHEREAS, in connection with the proposed consummation of the Merger, the Parties
entered into that certain Internalization Agreement dated as of the date hereof
(the “Internalization Agreement”), by and among each of the Parties, CWI 1, and
certain other parties signatory thereto;

 

WHEREAS, pursuant to the terms of the (i) CWI 1 Advisory Agreement, Advisor
provides certain advisory services to CWI 1, and (ii) CWI 2 Advisory Agreement,
Advisor provides certain advisory services to CWI 2, each of which shall
terminate following the REIT Merger Effective Time in accordance with the terms
of the Internalization Agreement; and

 

WHEREAS, Service Provider and Recipient have agreed to enter into this
Agreement, pursuant to which, from and after the Closing, Service Provider will
provide, or cause its Affiliates to provide, Recipient with certain services, in
each case on a transitional basis and subject to the terms and conditions set
forth herein.

 

NOW, THEREFORE, in consideration of the foregoing recitals, the covenants set
forth herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and intending to be legally bound
hereby, the Parties hereto hereby agree as follows:

 

ARTICLE I
SERVICES

 

Section 1.01               Provision of Services.

 

(a)                               Services.  From and after the Closing, Service
Provider agrees to provide, or to cause its Affiliates to provide, the services
set forth on Exhibit A (collectively, the “Initial Services”), to Recipient for
the Term (as hereinafter defined), in each instance, on the terms and conditions
set forth in this Agreement.

 

 

(b)                              Additional Services. From and after the
Closing, Service Provider agrees to provide, or to cause its Affiliates to
provide, those additional services that (i) are reasonably requested by
Recipient, and agreed to by the Service Provider, from time to time in order to
operate its business in the ordinary course, and (ii) were provided by Service
Provider or one of its Affiliates at any time during the twelve (12) month
period prior to the Closing, from time to time in order to operate the Business
in the Ordinary Course (the “Additional Services” and together with the Initial
Services, the “Services”). To the extent that the Parties agree upon the
inclusion of an Additional Service, they shall mutually determine the scope of
and applicable fees for such Additional Service, and amend Exhibit A to reflect
such terms, it being understood and agreed that the term for any such Additional
Service shall not exceed the Term. The price for each Service shall be as set
forth on Exhibit A.

 

(c)                               The Parties hereto acknowledge the
transitional nature of the Services. Accordingly, as promptly as practicable
following the execution of this Agreement, Recipient agrees to use commercially
reasonable efforts to make a transition of each Service to its own internal
organization or to obtain alternate third-party sources to provide the Services,
and Service Provider shall reasonably cooperate with Recipient to make such
transitions or to obtain such alternate third-party sources for provision of the
Services, including, without limitation, to the extent requested by Recipient
and at Recipient’s expense, the transition of existing third-party service
providers or subcontractors of Service Provider to Recipient.

 

(d)                             The Parties hereto acknowledge and agree that in
no instance shall Service Provider be obligated to provide Services to any
person other than Recipient and its Subsidiaries. The Parties hereto further
acknowledge and agree that in no instance shall Recipient be permitted to
transfer any Services to any other person other than Recipient’s Subsidiaries.

 

Section 1.02               Standard of Service.

 

(a)                               Service Provider represents, warrants and
agrees that the Services provided thereby shall be provided to Recipient in good
faith, in accordance with Law and, except as specifically provided on Exhibit A,
in a manner generally consistent with the historical provision of the Services
(to the extent applicable) and with the same standard of care, skill and
diligence as historically provided to Recipient, CWI 1 and their respective
Affiliates (to the extent applicable).  Subject to Section 1.03, Service
Provider agrees to assign sufficient resources as are reasonably required to
perform the Services in accordance with the standards set forth in the preceding
sentence.

 

(b)                              Except as expressly set forth in
Section 1.02(a) or in any Contract entered into in connection herewith, Service
Provider does not make any representation or warranty of any kind, implied or
expressed, with respect to the Services, including, without limitation, any
warranties of merchantability or fitness for a particular purpose, all of which
the Parties acknowledge are specifically disclaimed.  The Parties acknowledge
and agree that this Agreement does not create a fiduciary relationship,
partnership, joint venture or relationship of trust or agency between the
Parties and that all Services are provided by Service Provider as an independent
contractor.  The Parties further agree that this Agreement does not render
Service Provider an advisor to the Company because, among other reasons, the
Company’s management is responsible for directing and performing the day-to-day
business affairs of the Company.

 

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Section 1.03               Third-Party Service Sellers.  It is understood and
agreed that Service Provider may, at its sole discretion, retain third-party
service providers to provide some of the Services to the Recipient.  Service
Provider shall have the right, at its sole discretion, to hire third-party
subcontractors to provide all or part of any such Service hereunder.  Service
Provider shall, in all cases, retain responsibility for the provision to
Recipient of Services performed on behalf of Service Provider by any third-party
service provider or subcontractor or by any of Service Provider’s Affiliates.

 

Section 1.04               Access to Premises; No Commingling.

 

(a)                               In order to enable the provision of the
Services by the Service Providers, Recipient agrees that it shall provide to
Service Provider’s and its Affiliates’ employees and any third-party service
providers or subcontractors engaged by Service Provider to provide the Services,
reasonable access during normal business hours to the facilities, assets and
books and records of Recipient and its Affiliates, in all cases to the extent
necessary for Service Provider to fulfill its obligations under this Agreement.

 

(b)                              Service Provider agrees that all of its and its
Affiliates’ employees and any third-party service providers and subcontractors,
when given access to any equipment, computer, software, network or files owned
or controlled by Recipient, shall conform to the applicable policies and
procedures of Recipient concerning health, safety, confidentiality and security
which are made known to such Service Provider in advance in writing, including
but not limited to, handling material non-public information in accordance with
applicable Laws.

 

(c)                               Recipient agrees that all of its and its
Affiliates’ employees and any of its third-party service providers and
subcontractors, to the extent given access to any equipment, computer, software,
network or files owned or controlled by Service Provider or its Affiliates,
shall conform to the applicable policies and procedures of such person
concerning health, safety, confidentiality and security which are made known to
such Recipient in advance in writing, including but not limited to, handling
material non-public information in accordance with applicable Laws.

 

(d)                             The Service Provider shall use commercially
reasonable efforts in order to insure that no funds of Service Provider shall be
commingled with the funds of Recipient, and Service Provider shall from time to
time render reasonable and appropriate accountings to Recipient and its auditors
of all cash collections and payments made by Service Provider in Recipient’s
name in the course of providing the Services.

 

Section 1.05               Relationship Managers.  Each Party hereto will
appoint an individual (each, a “Relationship Manager”) who, until replaced by
the appointing Party, will serve as that Party’s representative under and during
the Term.  Each Relationship Manager will (a) have overall responsibility for
managing and coordinating the performance of the appointing Party’s obligations
under this Agreement and (b) be authorized to act for and on behalf of the
appointing Party concerning all matters relating to this Agreement. Neither
Party will reassign a Relationship Manager, unless and until it provides prior
written notice to the other Party. If a Party terminates the employment of or
reassigns its Relationship Manager or its Relationship Manager resigns, dies or
becomes disabled, such Party will appoint a new Relationship Manager within
fifteen (15) days after such termination, reassignment, resignation, death or
disability.

 

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Section 1.06               Certain Information.  Upon the termination of any or
all of the Services in accordance with this Agreement, Service Provider shall,
subject to applicable Law and at the expense of, Recipient, use commercially
reasonable efforts to cooperate with Recipient to support any transfer of data
concerning the relevant Services to Recipient.  Without limiting the foregoing,
Service Provider shall, at the expense of Recipient, deliver, or cause to be
delivered, to Recipient, within such time periods as the Parties may reasonably
agree, all information received or generated for the benefit of Recipient in
connection with the provision of the applicable Services; provided, however,
that Service Provider may retain a copy of such information to the extent that
such retention is required to demonstrate compliance with applicable Law, and
such copy shall be subject to the terms of Section 4.01.

 

ARTICLE II
TERM

 

Section 2.01               Term.  Except as otherwise provided on Exhibit A with
respect to a particular Service, the term of this Agreement will commence as of
the Closing and shall continue for twelve (12) months, unless earlier terminated
in accordance with the terms of this Agreement (the “Term”).

 

Section 2.02               Expense Reimbursement.

 

(a)                               In the event that Service Provider or any of
its Affiliates or any third-party service providers or subcontractors engaged by
Service Provider pursuant to the terms of this Agreement to provide Services
incurs reasonable and documented out-of-pocket expenses in connection with the
provision of any Service (such included expenses, collectively, “Out-of-Pocket
Costs”), Recipient shall reimburse Service Provider for such specified
Out-of-Pocket Costs in a manner consistent with the expense reimbursement
practices under the existing advisory agreements among the Parties.  Invoices
for such Out-of-Pocket Costs shall follow the invoicing procedures set forth in
this Section 2.02.

 

(b)                              Service Provider shall provide Recipient, in
accordance with Section 6.01, with invoices (“Invoices”), which shall set forth
in reasonable detail, with such supporting documentation as Recipient may
reasonably request with respect to Services or Out-of-Pocket Costs, amounts
payable under this Agreement. Payments with respect to such Services or
Out-of-Pocket Costs pursuant to this Agreement shall be made within thirty (30)
days after the date of receipt of an Invoice by Recipient from a Service
Provider.

 

Section 2.03               Terminated Services.  Upon termination or expiration
of any or all  Services pursuant to this Agreement, or upon the termination or
expiration of this Agreement in its entirety, Service Provider shall have no
further obligation to provide the applicable terminated Services (or any
Services in the case of a termination or expiration of this Agreement) and
Recipient shall have no obligation to pay any future compensation or
Out-of-Pocket Costs relating to such Services (other than for or in respect of
Services already provided in accordance with the terms of this Agreement and
received by Recipient prior to such termination or expiration).

 

Section 2.04               Invoice Disputes.  In the event of an Invoice dispute
in respect of Services being provided by Service Provider hereunder, Recipient
shall deliver a written statement to

 

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Service Provider no later than ten (10) days prior to the date payment is due on
the disputed Invoice listing all disputed items and providing a reasonably
detailed description of each disputed item. Amounts not so disputed shall be
deemed accepted and shall be paid, notwithstanding disputes on other items,
within the period set forth in Section 2.02(b).  The Parties shall seek to
resolve all such disputes expeditiously and in good faith. Service Provider
shall continue performing the Services in accordance with this Agreement pending
resolution of any dispute.

 

Section 2.05               No Right of Setoff.  Each of the Parties hereby
acknowledges that it shall have no right under this Agreement to offset any
amounts owed (or to become due and owing) to the other Party, whether under this
Agreement or otherwise, against any other amount owed (or to become due and
owing) to it by the other Party.

 

Section 2.06               Taxes.  Recipient shall be responsible for all sales
or use taxes imposed or assessed as a result of the provision of Services by
Service Provider to Recipient, other than federal, state or local income taxes
of Service Provider with respect to payments made to Service Provider hereunder;
provided that each Party shall take reasonable steps to minimize the imposition
of, and the amount of, such taxes.

 

ARTICLE III
TERMINATION

 

Section 3.01               Termination for Convenience.  Notwithstanding the
terms of Section 2.01, the Parties hereto acknowledge and agree that Recipient
may determine from time to time that it does not require all or some of the
Services or that it does not require such Services for the entire Term.
Accordingly, Recipient may terminate any Service, in whole and in part, upon
ninety (90) days advance written notification to the Service Providers
specifying any such determination. Upon any such partial termination, Recipient
will remain liable for all payments due with respect to such terminated Services
and all Out-of-Pocket Costs for all properly performed Services, in each case,
up to the effective date of such partial termination.

 

Section 3.02               Termination for Cause.  Any Party (the “Non-Breaching
Party”) may terminate this Agreement with respect to any Service, in whole or in
part, at any time upon prior written notice to the other Parties (the “Breaching
Party”) if the Breaching Party has failed (other than pursuant to Section 3.05)
to perform any of its material obligations under this Agreement relating to such
Service, and such failure shall have continued without cure for a period of ten
(10) days after receipt by the Breaching Party of a written notice of such
failure from the Non- Breaching Party seeking to terminate such Service.  For
the avoidance of doubt, non-payment by Recipient for a Service provided by
Service Provider in accordance with this Agreement which is not the subject of a
good-faith dispute shall be deemed a breach for purposes of this Section 3.02.

 

Section 3.03               Insolvency.  In the event that a Party hereto shall
(i) file a petition in bankruptcy, (ii) become or be declared insolvent, or
become the subject of any proceedings (not dismissed within sixty (60) days)
related to its liquidation, insolvency or the appointment of a receiver,
(iii) make an assignment on behalf of all or substantially all of its creditors,
or (iv) take any corporate action for its winding up or dissolution, then the
other Party shall have the right to terminate this Agreement immediately by
providing written notice in accordance with Section 6.01.

 

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Section 3.04               Effect of Termination.  Upon termination or
expiration of this Agreement in its entirety, all obligations of the Parties
hereto shall terminate, except for the provisions of Section 2.02, Section 2.03,
Section 2.04, Section 2.05, Section 2.06, this Section 3.04, Article IV,
Article V and Article VI, which shall survive any termination or expiration of
this Agreement, and except that Service Provider shall use commercially
reasonable efforts to cooperate with Recipient to provide an orderly transition
of Services.

 

Section 3.05               Force Majeure. The obligations of the Service
Provider under this Agreement with respect to any Service shall be suspended
during the period and to the extent that Service Provider is prevented or
hindered from providing such Service, or Recipient is prevented or hindered from
receiving such Service, due to any of the following causes beyond such Party’s
reasonable control (such causes, “Force Majeure Events”): (i) acts of God,
(ii) flood, fire or explosion, (iii) war, invasion, riot or other civil unrest,
(iv) Governmental Order (as hereinafter defined) or Law, actions, embargoes or
blockades, (vi) action by any Governmental Authority, (vii) national or regional
emergency, (viii) strikes, labor stoppages or slowdowns or other industrial
disturbances, (ix) shortage of adequate power or transportation facilities, or
(x) any other event which is beyond the reasonable control of such Party.  The
Party suffering a Force Majeure Event shall give notice of suspension as soon as
reasonably practicable to the other Party stating the date and extent of such
suspension and the cause thereof, and the Service Provider shall resume the
performance of its obligations as soon as reasonably practicable after the
removal of the cause. No Party shall be liable for the nonperformance or delay
in performance of its respective obligations under this Agreement when such
failure is due to a Force Majeure Event.

 

ARTICLE IV
CONFIDENTIALITY

 

Section 4.01               Confidentiality.

 

(a)                               During the Term and thereafter, the Parties
hereto shall, and shall instruct their respective officers, employees, agents
and other representatives (collectively, “Representatives”) to, maintain in
confidence and not disclose any other Party’s financial, technical, sales,
marketing, development, personnel, and other information, records, or data,
including, without limitation, customer lists, supplier lists, trade secrets,
designs, product formulations, product specifications or any other proprietary
or confidential information, however recorded or preserved, whether written or
oral (any such information, “Confidential Information”).  Each Party hereto
shall use the same degree of care, but no less than reasonable care, to protect
each other Party’s Confidential Information as it uses to protect its own
Confidential Information of like nature.  Unless otherwise authorized in any
other agreement between the Parties, any Party receiving any Confidential
Information of any other Party (the “Receiving Party”) may use Confidential
Information only for the purposes of fulfilling its obligations under this
Agreement (the “Permitted Purpose”). Any Receiving Party may disclose such
Confidential Information only to its Representatives who have a need to know
such information for the Permitted Purpose and who have been advised of the
terms of this Section 4.01 and the Receiving Party shall be liable for any
breach of these confidentiality provisions by such Persons; provided, however,
that any Receiving Party may disclose such Confidential Information to the
extent such Confidential Information is required to be disclosed by an order of
a Governmental Authority (a “Governmental Order”), in which case the Receiving
Party shall promptly notify, to the extent possible, the disclosing Party (the

 

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“Disclosing Party”), and take reasonable steps to assist in contesting such
Governmental Order or in protecting the Disclosing Party’s rights prior to
disclosure, and in which case the Receiving Party shall only disclose such
Confidential Information that it is advised by its counsel that it is legally
bound to disclose under such Governmental Order.  In addition, the Parties agree
that each of Service Provider and Recipient may disclose this Agreement in its
public filings with the Securities and Exchange Commission.

 

(b)                              Notwithstanding the foregoing, “Confidential
Information” shall not include any information that the Receiving Party can
demonstrate: (i) was publicly known at the time of disclosure to it, or has
become publicly known through no act of the Receiving Party or its
Representatives in breach of this Section 4.01; (ii) was rightfully received
from a third party without a known duty of confidentiality; or (iii) was
developed by it independently without any reliance on the Confidential
Information.

 

(c)                               Upon demand by the Disclosing Party at any
time, or upon expiration or termination of this Agreement with respect to any
Service, the Receiving Party agrees promptly to return or destroy, at the
Disclosing Party’s option, all Confidential Information.  If such Confidential
Information is destroyed, an authorized officer of the Receiving Party shall
certify to such destruction in writing. Notwithstanding anything contained in
this agreement, the Receiving Party may retain a copy of Confidential
Information as required by Law, as stored in its electronic backup systems or in
connection with ordinary course record retention policies and procedures.

 

(d)                             Recipient shall (i) cause any of its
Representatives who receive Confidential Information relating to the business
and operations of Service Provider and its Affiliates to acknowledge in writing
the obligations imposed by this Section 4.01, and (ii) be liable for breaches of
this Section 4.01 by any of its Representatives.

 

(e)                               Service Provider shall (i) cause any of its
Representatives who receive Confidential Information relating to the business
and operations of Recipient and its Affiliates to acknowledge in writing the
obligations imposed by this Section 4.01, and (ii) be liable for breaches of
this Section 4.01 by any of its Representatives .

 

ARTICLE V
LIMITATION ON LIABILITY; INDEMNIFICATION

 

Section 5.01               Limitation on Liability.  In no event shall any Party
have any liability under any provision of this Agreement for any punitive,
incidental, consequential, special or indirect damages, including loss of future
revenue or income, loss of business reputation or opportunity relating to the
breach or alleged breach of this Agreement, or diminution of value or any
damages based on any type of multiple, whether based on statute, contract, tort
or otherwise, and whether or not arising from any other Party’s sole, joint, or
concurrent negligence, strict liability, criminal liability or other fault,
except to the extent any damages have resulted from such Parties’ gross
negligence or willful misconduct in connection with any such Services, actions
or inactions. Each Party acknowledges that the Services to be provided to it
hereunder are subject to, and that its remedies under this Agreement are limited
by, the applicable provisions of Section 1.02, including the limitations on
representations and warranties with respect to the Services.

 

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Section 5.02               Indemnification by Recipient.  Recipient shall
defend, indemnify and hold harmless Service Provider (and each of its Affiliates
and Representatives) from and against any and all liabilities, losses, claims,
damages, assessments, fines, penalties, costs and expenses of any nature,
including reasonable attorneys’, accountants’, investigators’ and experts’ fees
and expenses (collectively, “Adverse Consequences”), incurred or suffered by it
in connection with (a) Service Provider’s, or its Affiliate’s,  rendering of
Services pursuant to this Agreement, except to the extent of Service Provider’s,
or its Affiliate’s, negligence or willful misconduct, and (b) the breach of any
covenant or agreement made by Recipient under or in connection with this
Agreement.  No claim for indemnification under this Section 5.02 may be brought
after the one (1) year anniversary of the termination or expiration of the last
Service provided hereunder. Recipient’s maximum liability for any action,
regardless of the form of action, whether in tort or contract, arising under
this Agreement, will be limited to the aggregate amount paid by Recipient for
Services hereunder.

 

Section 5.03               Indemnification by Service Provider.  Service
Provider shall defend, indemnify and hold harmless Recipient (and each of its
Affiliates and Representatives) from and against any and all Adverse
Consequences, incurred or suffered by it in connection with (a) Service
Provider’s, or its Affiliate’s, negligence or willful misconduct in rendering
Services pursuant to this Agreement, and (b) the breach of any covenant or
agreement made by Service Provider under or in connection with this Agreement. 
No claim for indemnification under this Section 5.03 may be brought after the
one (1) year anniversary of the termination or expiration of the last Service
provided hereunder. Service Provider’s maximum liability for any action,
regardless of the form of action, whether in tort or contract, arising under
this Agreement, will be limited to the amount of received by Service Provider
for Services hereunder.

 

Section 5.04               Indemnification Procedures.

 

(a)                               Any Party or its Affiliates or Representatives
entitled or seeking to assert rights to indemnification under this Article V (an
“Indemnified Party”) shall give prompt written notification (a “Claim Notice”)
to the other Party from whom indemnification is sought (an “Indemnifying Party”)
which contains (i) a description and the amount or estimation thereof (the
“Claimed Amount”), if then known, of any Adverse Consequences incurred or
reasonably expected to be incurred by the Indemnified Party and (ii) a statement
that the Indemnified Party is entitled to indemnification under this Article V
for such Adverse Consequences and a reasonable explanation of the basis
therefor.

 

(b)                              Within thirty (30) days after delivery of a
Claim Notice, the Indemnifying Party shall deliver to the Indemnified Party a
written response (the “Response”) in which the Indemnifying Party shall either:
(i) agree that the Indemnified Party is entitled to receive all of the Claimed
Amount or (ii) dispute that the Indemnified Party is entitled to receive any or
all of the Claimed Amount and the basis for such dispute (in such an event, the
Response shall be referred to as an “Objection Notice”).  If no Response is
delivered by the Indemnifying Party to the Indemnified Party within such 30-day
period, the Indemnifying Party shall be deemed to have agreed that an amount
equal to the entire Claimed Amount shall be payable to the Indemnified Party and
such Claimed Amount shall be promptly paid to Indemnified Party.

 

(c)                               In the event that the applicable Parties are
unable to agree on whether Adverse Consequences exist or on the amount of such
Adverse Consequences within the 30-day period

 

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after delivery of an Objection Notice, such Parties may (but are not required
to) petition or file an action in a court of competent jurisdiction for
resolution of such dispute.

 

(d)                             In the event that the Indemnified Party is
entitled or is seeking to assert rights to indemnification under this Article V
relating to a third-party claim, the Indemnified Party shall give written
notification to the Indemnifying Party of the commencement of any action
relating to such third-party claim.  Such notification shall be given promptly
after receipt by the Indemnified Party of notice of such action, shall be
accompanied by reasonable supporting documentation submitted by such third-party
(to the extent then in the possession of the Indemnified Party) and shall
describe in reasonable detail (to the extent known by the Indemnified Party) the
facts constituting the basis for such action and the amount of the claimed
Adverse Consequences, if then known; provided, however, that no delay,
deficiency or failure on the part of the Indemnified Party in so notifying the
Indemnifying Party shall relieve the Indemnifying Party of any liability or
obligation hereunder except to the extent the Indemnifying Party can demonstrate
in writing that the defense of such action has been materially prejudiced by
such delay, deficiency or failure.   Within thirty (30) days after delivery of
such notification, the Indemnifying Party may, upon written notice thereof to
the Indemnified Party, assume control of the defense of such action with counsel
reasonably satisfactory to the Indemnified Party; provided, however, that
(i) the Indemnifying Party may assume control of such defense only if it
acknowledges in writing to the Indemnified Party that any Adverse Consequences
that may be assessed against the Indemnified Party in connection with such
action constitute Adverse Consequences for which the Indemnified Party shall be
indemnified pursuant to this Article V, and (ii) the Indemnifying Party may not
assume control of the defense of an action (A) involving criminal liability;
(B) in which any injunction or relief other than monetary damages is sought
against the Indemnified Party; or (C) in which increased statutory, enhanced or
treble damages are sought based on willful misconduct.  If the Indemnifying
Party does not so assume control of such defense, the Indemnified Party shall
control such defense at the Indemnified Party’s expense subject to reimbursement
as a part of a Claimed Amount.  The party not controlling such defense (the
“Non-controlling Party”) may participate therein at its own expense; provided,
however, that if the Indemnifying Party assumes control of such defense and the
Indemnified Party reasonably concludes that the Indemnifying Party and the
Indemnified Party have conflicting interests or different defenses available
with respect to such action, the reasonable fees and expenses of counsel to the
Indemnified Party shall be considered “Adverse Consequences” for purposes of
this Agreement.  The party controlling such defense (the “Controlling Party”)
shall keep the Non-controlling Party reasonably advised of the status of such
action and the defense thereof and shall consider in good faith recommendations
made by the Non-controlling Party with respect thereto.  The Non-controlling
Party shall furnish the Controlling Party with such information as it may have
with respect to such action (including copies of any summons, complaint or other
pleading which may have been served on such party and any written claim, demand,
invoice, billing or other document evidencing or asserting the same) and shall
otherwise cooperate with and assist the Controlling Party in the defense of such
action.  The Indemnifying Party shall not agree to any settlement of, or the
entry of any judgment arising from, any such action without the prior written
consent of the Indemnified Party, which shall not be unreasonably withheld,
conditioned or delayed.  The Indemnified Party shall not agree to any settlement
of, or the entry of any judgment arising from, any such Action without the prior
written consent of the Indemnifying Party, which shall not be unreasonably
withheld, conditioned or delayed.

 

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Section 5.05               Exclusive Remedy.  The Parties hereto agree that,
except in the case of fraud, the sole and exclusive remedies of the Parties
hereto for any losses based upon, arising out of or otherwise in respect of the
matters set forth in this Agreement or the transactions contemplated hereby are
the indemnification obligations of the Parties set forth in this Article V.  The
provisions of this Section 5.05 will not, however, prevent or limit a cause of
action, prior to the valid termination of this Agreement, to obtain an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof.

 

ARTICLE VI
MISCELLANEOUS

 

Section 6.01               Notices.

 

(a)                               All Invoices, notices, requests, consents,
claims, demands, waivers and other communications under this Agreement shall be
in writing and delivered in person, or sent by email or sent by reputable
overnight delivery service and properly addressed as set out in Exhibit B.

 

(b)                              Any party may from time to time change its
address for the purpose of notices to that party by a similar notice specifying
a new address, but no such change shall be deemed to have been given until it is
actually received by the party sought to be charged with its contents.

 

(c)                               All notices and other communications required
or permitted under this Agreement which are addressed as provided in this
Section 6.01 if delivered personally or courier, shall be effective upon
delivery; if sent by email, shall be delivered upon receipt of proof of
transmission.

 

Section 6.02               Headings.  The headings in this Agreement are for
reference only and shall not affect the interpretation of this Agreement.

 

Section 6.03               Severability.  If any term or provision of this
Agreement is invalid, illegal or unenforceable in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other term or
provision of this Agreement or invalidate or render unenforceable such term or
provision in any other jurisdiction.  Upon such determination that any term or
other provision is invalid, illegal or unenforceable, the Parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated hereby be consummated as originally
contemplated to the greatest extent possible.

 

Section 6.04               Entire Agreement.  This Agreement, together with the
Internalization Agreement, constitutes the sole and entire agreement of the
Parties to this Agreement with respect to the subject matter contained herein
and supersedes all prior and contemporaneous understandings and agreements, both
written and oral, with respect to such subject matter. In the event and to the
extent that there is a conflict between the provisions of this Agreement and the
provisions of the Internalization Agreement as it relates to the Services
hereunder, the provisions of this Agreement shall control.

 

Section 6.05               Successors and Assigns.  This Agreement shall be
binding upon and shall inure to the benefit of the Parties hereto and their
respective successors and permitted assigns. Subject to the following sentence,
neither Party may assign its rights or obligations hereunder

 

10

 

without the prior written consent of the other Party, which consent shall not be
unreasonably withheld or delayed.  Notwithstanding the foregoing, Recipient may,
without the prior written consent of Service Provider, assign all or any portion
of its right to receive the respective Services to any of its Affiliates;
provided, however, that such Affiliate shall receive such Services from Service
Provider in the same place and manner as Recipient would have received such
Service.  No assignment shall relieve the assigning Party of any of its
obligations hereunder.

 

Section 6.06               No Third-Party Beneficiaries.  This Agreement is for
the sole benefit of the Parties hereto and their respective successors and
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever, under or by reason of this Agreement.

 

Section 6.07               Section Amendment and Modification; Waiver.  This
Agreement may only be amended, modified or supplemented by an agreement in
writing signed by each Party hereto. No waiver by any Party of any of the
provisions hereof shall be effective unless explicitly set forth in writing and
signed by the Party so waiving.  No failure to exercise, or delay in exercising,
any right, remedy, power or privilege arising from this Agreement shall operate
or be construed as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.

 

Section 6.08               Governing Law. This Agreement shall be governed by
and construed in accordance with the Laws of the State of Maryland, without
giving effect to any principles of conflicts of Law that would require the
application of the Laws of any other jurisdiction.

 

Section 6.09               Venue.  Each of the Parties irrevocably agrees that
any legal action or proceeding arising out of or relating to this Agreement
brought by any other Party or its successors or assigns shall be brought and
determined in the State Court of the State of Maryland or, if such court lacks
subject matter jurisdiction, any state or federal court in the State of
Maryland, and in each case any appellate courts therefrom, and each of the
Parties hereby irrevocably submits to the exclusive jurisdiction of the
aforesaid courts for itself and with respect to its property, generally and
unconditionally, with regard to any such action or proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby.  Each of the
Parties agrees not to commence any action, suit or proceeding relating thereto
except in the courts described above in Maryland, except for actions in any
court of competent jurisdiction to enforce any judgment, decree or award
rendered by any such court in Maryland as described herein.  Each of the Parties
further agrees that notice as provided herein shall constitute sufficient
service of process and the Parties further waive any argument that such service
is insufficient.  Each of the Parties hereby irrevocably and unconditionally
waives, and agrees not to assert, by way of motion or as a defense, counterclaim
or otherwise, in any action or proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby, (a) any claim that it is not
personally subject to the jurisdiction of the courts in Maryland as described
herein for any reason, (b) that it or its property is exempt or immune from
jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise)
and (c) that (i) the suit, action or proceeding in any such court is brought in
an inconvenient forum, (ii) the venue of such suit, action or proceeding

 

11

 

is improper or (iii) this Agreement, or the subject matter hereof, may not be
enforced in or by such courts.

 

Section 6.10               Waiver of Jury Trial and Certain Damages.  EACH PARTY
ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS
AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE
IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THE FOREGOING
WAIVER, (III) IT MAKES THE FOREGOING WAIVER VOLUNTARILY, AND (IV) IT HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION 6.10.

 

Section 6.11               Counterparts.  This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall be deemed to be one and the same agreement.  A signed copy of
this Agreement delivered by facsimile, e-mail or other means of electronic
transmission shall be deemed to have the same legal effect as delivery of an
original signed copy of this Agreement.

 

Section 6.12               Representation of Counsel; Mutual Negotiation.  Each
Party has had the opportunity to be represented by counsel of its choice in
negotiating this Agreement.  This Agreement will therefore be deemed to have
been negotiated and prepared at the joint request, direction, and construction
of the Parties, at arm’s-length, with the advice and participation of counsel,
and will be interpreted in accordance with its terms without favor to any Party.

 

[The remainder of this page has been intentionally left blank.]

 

12

 

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

 

 

 

SERVICE PROVIDER:

 

 

 

W. P. CAREY INC.

 

 

 

 

 

 

By:

/s/ Jason E. Fox

 

 

 

Name: Jason E. Fox

 

 

Title:  Chief Executive Officer

 

 

 

 

 

 

 

RECIPIENT:

 

 

 

CAREY WATERMARK INVESTORS 2 INCORPORATED

 

 

 

 

 

 

By:

/s/ Michael G. Medzigian

 

 

 

Name: Michael G. Medzigian

 

 

Title:   Chief Executive Officer

 

 

[WPC Transition Services Agreement]

 

 

EXHIBIT A

 

Initial Services

 

 

[Transition Services Agreement]

 

 

EXHIBIT B

 

Notices

 

 

Party

Address

CWI 2 (Recipient)

Carey Watermark Investors 2 Incorporated

50 Rockefeller Plaza
New York, New York 10020

 

WPC (Service Provider)

W. P. Carey Inc.
50 Rockefeller Plaza
New York, New York 10020

 

with a copy to (for information purposes only):

 

DLA Piper LLP (US)

1251 Avenue of the Americas

New York, New York 10020

Attention: Christopher Giordano

Jon Venick

Email: Christopher.Giordano@dlapiper.com

Jon.Venick@us.dlapiper.com

 

 

[Transition Services Agreement]