Exhibit 10.1

 

INTERNALIZATION AGREEMENT

 

This Internalization Agreement, dated as of October 22, 2019 (this “Agreement”),
is entered into by and among Carey Watermark Investors Incorporated, a Maryland
corporation (“CWI 1”), CWI OP, LP, a Delaware limited partnership and the
operating partnership of CWI 1 (“CWI 1 OP,” and together with CWI 1, the “CWI 1
Entities”), Carey Watermark Investors 2 Incorporated, a Maryland corporation
(“CWI 2”), CWI 2 OP, LP, a Delaware limited partnership and the operating
partnership of CWI 2 (“CWI 2 OP,” and together with CWI 2 the “CWI 2 Entities”),
W. P. Carey Inc., a Maryland corporation (“WPC”), Carey Watermark Holdings, LLC,
a Delaware limited liability company (“SGP”), CLA Holdings, LLC, a Delaware
limited liability company (“CLA”), Carey REIT II, Inc., a Maryland corporation
(“Carey II”), Carey Watermark Holdings 2, LLC, a Delaware limited liability
company (“SGP 2”), WPC Holdco LLC, a Delaware limited liability company
(“Holdco”), Carey Lodging Advisors, LLC, a Delaware limited liability company
(“Advisor,” and together with WPC, SGP, CLA, Carey II, SGP 2 and Holdco, the
“WPC Entities”), Watermark Capital Partners, LLC, a Delaware limited liability
company (“Watermark Capital”), CWA, LLC, an Illinois limited liability company
(“CWA”) and CWA 2, LLC, an Illinois limited liability company (“CWA 2,” and
together with Watermark Capital and CWA, the “Watermark Entities”). Each of the
CWI 1 Entities, the CWI 2 Entities, the WPC Entities and the Watermark Entities
is also a “Party,” and collectively such entities are the “Parties.” Capitalized
terms used but not otherwise defined herein shall have the meaning ascribed
thereto in Annex I.

 

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 CWI
1, CWI 2 and Merger Sub, Merger Sub will merge (the “Merger”) with and into CWI
1, with CWI 1 being the surviving company;

 

WHEREAS, pursuant to the terms of the (i) CWI 1 Advisory Agreement, Advisor
provides certain advisory services to CWI 1, (ii) CWI 1 LPA, SGP holds a special
general partnership interest in CWI 1 OP (the “CWI 1 SGP Interest”), (iii) CWI 1
Subadvisory Agreement, CWA provides Advisor with sub-advisory services in
connection with the CWI 1 Advisory Agreement, and (iv) SGP LLCA, CWA, CLA and
Carey II each hold an indirect interest in the CWI 1 SGP Interest;

 

WHEREAS, pursuant to the terms of the (i) CWI 2 Advisory Agreement, Advisor
provides certain advisory services to CWI 2, (ii) CWI 2 LPA, SGP 2 holds a
special general partnership interest in CWI 2 OP (the “CWI 2 SGP Interest”),
(iii) CWI 2 Subadvisory Agreement, CWA 2 provides Advisor with sub-advisory
services in connection with the CWI 2 Advisory Agreement, and (iv) SGP 2 LLCA,
CWA 2 and Holdco each hold an indirect interest in the CWI 2 SGP Interest; and

 

WHEREAS, in connection with the consummation of the Merger, the parties hereto
desire to, among other things, subject to the terms and conditions set forth
herein, (i) cause the redemption of the CWI 1 SGP Interest and the CWI 2 SGP
Interest, (ii) cause the termination of the CWI 1 Advisory Agreement, CWI 2
Advisory Agreement and the Subadvisory Agreements, and (iii) set forth the terms
pursuant to which CWI 2 will internalize (the “Internalization”) certain
management services provided directly or indirectly as of the date of this
Agreement by the WPC Entities and the Watermark Entities.

 

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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:

 

AGREEMENT

 

Article I
Internalization

 

1.1          Internalization.

 

(a)           Senior Management Team. Concurrently with, and as a condition to
the execution and delivery of this Agreement, CWI 2 has entered into an
employment agreement (the “Medzigian Employment Agreement”) with Michael G.
Medzigian (“Medzigian”), pursuant to which Medzigian shall serve from and after
the REIT Merger Effective Time (as defined in the Merger Agreement) as Chief
Executive Officer of CWI 2 or an applicable Affiliate in accordance with the
terms of such employment agreement (the “Medzigian Employment Agreement”). Prior
to the REIT Merger Effective Time, CWI 2 shall use its commercially reasonable
efforts to adopt employment terms (for services to be provided from and after
the REIT Merger Effective Time) with certain other individuals selected by the
board of directors of CWI 2 with respect to each of the roles within the senior
management team of CWI 2 as detailed on Exhibit A in each case to the extent
such individuals are identified in the definitive Joint Proxy Statement (as
defined in the Merger Agreement) (the “Additional Employment Agreements”).

 

(b)           Onboarding of Employees. Prior to the date hereof, CWI 2 has
offered employment (on an at-will basis and subject to the consummation of the
Merger and the Internalization) to certain employees of the WPC Entities and,
prior to 15 Business Days before the Closing, CWI 2 will have offered employment
(on an at-will basis and subject to the consummation of the Merger and the
Internalization) to certain employees of the Watermark Entities, in each case
pursuant to discussions among the Parties. Those employees who have or will have
received offers (each, an “Identified Employee”) are identified on a list
previously agreed among the Parties, and have a target start date within three
(3) months following the REIT Merger Effective Time (the “Cutoff Time”). Subject
to Section 1.1(e), with respect to any such Identified Employee, CWI 2 has or
will have offered, or caused an Affiliate to offer, base salary and a bonus
opportunity that are no less favorable, in the aggregate, than the base salary
and bonus opportunity provided to such Identified Employee for the 2019 fiscal
year by the applicable WPC Entity or Watermark Entity that employs such Person
as of the date of such offer. Such offer includes or will include a covenant
pursuant to which CWI 2 or an Affiliate will provide such person, upon hiring,
with a benefits package that CWI 2 determines in its discretion is reasonably
appropriate and, in connection therewith, CWI 2 may also elect to offer an
equity compensation opportunity for certain Identified Employees. All such
Persons who accept employment with CWI 2 (each a “Hired Employee”) will become
employees of CWI 2 effective as of their respective hire date (each a “Hire
Date”). To the extent applicable, each Hired Employee shall receive service
credit for service performed for any WPC Entities, Watermark Entities or
predecessors of either WPC Entities or Watermark Entities for purposes of
eligibility, vesting and benefit accrual under any employee benefit plans
sponsored by CWI 2 or any of its Affiliates. CWI 2, or an Affiliate thereof,
shall take commercially reasonable efforts to waive, or cause to be waived, any
pre-existing condition limitations, exclusions, actively-at-work requirements,
evidence of insurability and waiting periods and shall, or shall cause its
Affiliate to recognize, or cause to be recognized, the dollar amount of all
co-payments, deductibles and similar expenses incurred by each Hired Employee
(and his or her eligible dependents) under a corresponding welfare benefit plan
(to the extent such a plan is in place) during the calendar year of the Hire
Date for purposes of satisfying such year’s deductible, co-payment and
out-of-pocket limitations under such corresponding welfare benefit plan. To the
extent that, as of the closing of the Merger, any Identified Employee has not
been hired by CWI 2 or an Affiliate thereof, the applicable WPC Entities or
Watermark Entities shall use commercially reasonable efforts to, subject to the
terms and conditions set forth therein, cause the services of such Persons to be
provided to CWI 2 pursuant to the WPC Transition Services Agreement or Watermark
Transition Services Agreement, as applicable (subject, in all instances, to
customary employee performance and other employment considerations, including,
but not limited to, changes in financial markets and general economic
conditions).

 

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(c)           Assignment of Contracts; Shared Contracts. At the Closing, the
applicable WPC Entity or Watermark Entity shall use commercially reasonable
efforts to assign all Contracts, other than Shared Contracts (as defined below),
to which all WPC Entities and Watermark entities are a party that materially
relate to the Business as conducted by CWI 1 or CWI 2 as of the REIT Merger
Effective Time, all of which are set forth on Exhibit B, from the applicable WPC
Entity or Watermark Entity to CWI 2 or an Affiliate thereof (the “Transferred
Contracts”) pursuant to an Assignment and Assumption Agreement; provided that
the Parties may mutually agree after the date hereof that certain Transferred
Contracts not be assigned at the Closing and Exhibit B shall be amended
accordingly. Notwithstanding the foregoing, to the extent any Transferred
Contract is not capable of being assigned without the consent or waiver of the
other party thereto or any third party (including any Governmental Authority),
or if such assignment or attempted assignment would constitute a breach thereof
or a violation of any Law or Order, this Agreement shall not constitute an
assignment or an attempted assignment of such Transferred Contract. If any such
consents and waivers are not obtained with respect to any Transferred Contract,
this Section 1.1(c) shall constitute an equitable assignment by the applicable
WPC Entity or Watermark Entity to CWI 2 or an Affiliate thereof of all of such
Person’s rights, benefits, title and interest in and to such Transferred
Contract, to the extent permitted by Law, and CWI 2 or the applicable Affiliate
thereof shall be deemed to be such Person’s agent for the purpose of completing,
fulfilling and discharging all of such Person’s rights and liabilities arising
on and after the Closing Date under such Transferred Contract, and such Person
shall take all necessary steps and actions to provide CWI 2 or the applicable
Affiliate thereof with the benefits of such Transferred Contract. Subject to the
terms and conditions set forth in the WPC Transition Services Agreement, to the
extent that any Transferred Contract that is not actually transferred to CWI 2
or an Affiliate thereof in accordance with this Section 1.1(c) by a WPC Entity,
the cost, fees and expenses incurred by the WPC Entity prior to the earlier of
the actual transfer, termination or expiration, will be included on the Invoice
(as defined in the WPC Transition Services Agreement) and paid on a monthly
basis in accordance with the WPC Transition Services Agreement. Subject to the
terms and conditions set forth in the Watermark Transition Services Agreement,
to the extent that any Transferred Contract that is not actually transferred to
CWI 2 or an Affiliate thereof in accordance with this Section 1.1(c) by a
Watermark Entity, the cost, fees and expenses incurred by the Watermark Entity
prior to the earlier of the actual transfer, termination or expiration, will be
included on the Invoice (as defined in the Watermark Transition Services
Agreement) and paid on a monthly basis in accordance with the Watermark
Transition Services Agreement. To the extent a Watermark Entity or a WPC Entity
is a party to a Contract that, from and after the Closing, the goods or services
provided thereunder will be shared by such Watermark Entity or WPC Entity, as
applicable, on the one hand, and the CWI 2 Entities’ business, on the other hand
(each, a “Shared Contract”), the applicable Watermark Entity or WPC Entity will
use commercially reasonable efforts to continue to make such shared goods or
services available to the CWI 2 Entities until the earlier of (i) the expiration
of the applicable term of the applicable shared good or service under the
applicable Transition Services Agreement, or (ii) the expiration or termination
of the Shared Contract. Any such shared goods or services provided in accordance
with the preceding sentence will be provided to the CWI 2 Entities for such
periods on an “at cost” basis. From and after the Closing, with respect to any
Shared Contract, the applicable Watermark Entity or WPC Entity, on the one hand,
and the CWI 2 Entities, on the other hand, will cooperate in arranging separate
Contracts to be entered into (as promptly as reasonably practicable) by the CWI
2 Entities with respect to such shared goods or services. From and after any
such separation, the applicable Watermark Entity or WPC Entity shall have no
further obligation or liability to the CWI 2 Entities with respect to such
Shared Contract. To the extent that, from and after the earlier of (x) the
expiration of the applicable term of the applicable shared good or service under
the applicable Transition Services Agreement, or (y) the expiration or
termination of the Shared Contract, either (i) a Transferred Contract has not
been assigned in accordance with this Section 1.1(c), or (ii) a Shared Contract
has not separated in accordance with this Section 1.1(c), in each instance, from
and after such date, the Watermark Entity or WPC Entity, as applicable, shall
have no further obligation or liability to the CWI 2 Entities in connection
therewith and shall be entitled to terminate, amend or modify such Contract at
its sole discretion.

 

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(d)           Transition Services. From and after the Closing, CWI 2 shall, or
shall cause an Affiliate to, use its reasonable best efforts to internalize the
functions set forth in the (i) WPC Transition Services Agreement prior to the
expiration of the applicable term set forth in the WPC Transition Services
Agreement, and (ii) Watermark Transition Services Agreement prior to the
expiration of the applicable term set forth in the Watermark Transition Services
Agreement, as applicable. For the avoidance of doubt, nothing in this Section
1.1(d) shall require the WPC Entities or Watermark Entities or any respective
Affiliate thereof to provide any transition services beyond the applicable term
expressly set forth in the WPC Transition Services Agreement or Watermark
Transition Services Agreement, as applicable.

 

(e)           REIT Non-Solicitation Waiver. The Parties hereto acknowledge and
agree that, with respect to any person hired in accordance with Section 1.1(a),
effective as of the Closing or the date of any offer of employment if earlier,
any Non-Solicitation Covenant relating to any person hired or to be hired
pursuant to Section 1.1(a) is hereby waived. The Parties hereto further
acknowledge and agree that any Non-Solicitation Covenant is hereby waived with
respect to any Identified Employee; provided, however, that if any Identified
Employee is not hired by CWI 2 within three (3) months following the REIT Merger
Effective Time, the Non-Solicitation Covenant shall then again apply to such
Identified Employee. For the avoidance of doubt (x) with respect to any
Identified Employee who has not actually been provided with an offer in
contravention with Section 1.1(b), or (y) with respect to any other person
employed by the WPC Entities or the Watermark Entities (other than those hired
in accordance with Section 1.1(a)), in each instance, all Non-Solicitation
Covenants shall remain in full force and effect in accordance with the
applicable Contract related thereto.

 

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(f)            Bonus Liabilities. Not later than December 1, 2020, CWI 2 shall
deliver to the WPC Entities and the Watermark Entities a report providing a good
faith estimate of the bonuses and other cash incentive compensation, if any,
expected to be paid by CWI 2 to those Persons who became Hired Employees after
January 1, 2020 related to calendar year 2020 (all such bonuses and incentive
compensation, the “Stub-Period Bonus Liabilities”). No later than January 15,
2021, CWI 2 shall send a final report of the Stub-Period Bonus Liabilities to
the WPC Entities and the Watermark Entities. No later than March 31, 2021, the
WPC Entities and the Watermark Entities shall reimburse CWI 2 in cash for their
respective pro rata shares of the Stub-Period Bonus Liabilities, taking into
account any accrued amounts already reimbursed by CWI 2 for such compensation
pursuant to the WPC Transition Services Agreement or Watermark Transition
Services Agreement, based on the percentage of time that each Hired Employee was
employed by CWI 2, the WPC Entities and the Watermark Entities, as applicable,
during calendar year 2020, and any other adjustments reasonably agreed to in
good faith by the Parties.

 

(g)           Allocation of Liabilities. Except to the extent provided in the
Transition Services Agreements, the WPC Entities and the Watermark Entities
shall be solely responsible for all wages and compensation earned by all
personnel providing services to CWI 2 and any related employer-side employment
taxes in respect of all periods prior to the respective Hire Dates (if any) of
such personnel including, without limitation, bonuses relating to periods prior
to each Hired Employee's Hire Date that are payable after such Hire Dates. In
addition, the WPC Entities shall be solely responsible for the costs of any
awards of WPC common stock or other equity-based awards made by WPC to any
Identified Employee. On and after the date on which any such personnel became
Hired Employees, CWI 2 shall be solely liable for all wages and compensation,
and any related employer-side employment taxes, due to such employees with
respect to periods of their employment by CWI 2 and its Affiliates.

 

(h)           Qualified Plans. Following the Closing, CWI 2 intends to adopt a
defined contribution plan that is qualified under Section 401(a) of the Code and
that includes a qualified cash or deferred arrangement within the meaning of
Section 401(k) of the Code (the “CWI 2 Savings Plan”) in which Hired Employees
shall be eligible to participate. Following the adoption of such a plan, the
Parties shall reasonably cooperate with each other to take all reasonable steps
necessary to permit each Hired Employee, if any, who shall receive an eligible
rollover distribution (as defined in Section 402(c)(4) of the Code) from the
corresponding WPC Entities' or Watermark Entities' plans to rollover such
eligible rollover distribution, including any associated loans, into an account
under the CWI 2 Savings Plan as soon as administratively practicable following
CWI 2’s receipt of such Hired Employee’s rollover application.

 

(i)            Termination Costs. The WPC Entities shall be solely responsible
for any costs of termination, including, without limitation, severance costs and
continuation coverage required by COBRA, for any employee of the WPC Entities
who are terminated by them in connection with the Internalization, and their
qualified beneficiaries. The Watermark Entities shall be solely responsible for
any costs of termination, including, without limitation, severance costs and
continuation coverage required by COBRA, for any employee of the Watermark
Entities who are terminated by them in connection with the Internalization, and
their qualified beneficiaries. Notwithstanding anything contained herein to the
contrary, if CWI 2 has requested that a particular Identified Employee who is
not hired prior to the Cutoff Time in accordance with the terms set forth in
Section 1.1(b), be retained by the WPC Entities or the Watermark Entities, as
applicable, to perform services for CWI 2 under a Transition Services Agreement
in lieu of being terminated by the WPC Entities or the Watermark Entities from
and after the Cutoff Time, then the WPC Entities or the Watermark Entities, as
applicable, shall deliver to CWI 2 a good faith estimate of the cost to retain
such Person to perform services from and after the Cutoff Time (including under
the applicable Transition Services Agreement) and, if such cost is acceptable to
CWI 2, CWI 2 shall pay the WPC Entities or the Watermark Entities, as
applicable, fifty percent (50%) of the costs of retaining such person to perform
services from and after the Cutoff Time (including under the applicable
Transition Services Agreement).

 

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(j)            No Third Party Beneficiaries. This Section 1.1 shall inure solely
to the benefit of each of the Parties, and nothing in this Section 1.1 shall
confer upon any Business Employee, or any legal representative or beneficiary
thereof, any rights or remedies, including any right to employment or continued
employment for any specified period, or compensation or benefits of any nature
or kind whatsoever under this Agreement. Nothing in this Section 1.1, express or
implied, shall be deemed an amendment of any plan providing benefits to any
Business Employee or as altering the at-will nature of any Business Employee’s
employment. Nothing in this Agreement shall be deemed to limit the right of CWI
2 and its Affiliates to terminate the employment of any Business Employee at any
time or construed as altering the at-will nature of any Business Employee’s
employment; and provided further that nothing in this Agreement shall be deemed
to limit the right of CWI 2 and its Affiliates, following the Closing, to (y)
change or modify the terms and conditions of employment for any Business
Employee or (z) change, modify, or terminate any employee benefit plan or
arrangement.

 

(k)           Purchase of Certain Assets. At the Closing, the applicable
Watermark Entity shall sell and transfer to CWI 2, and CWI 2 shall purchase and
accept from such Watermark Entity, those assets set forth on Schedule 1 to the
Watermark Bill of Sale (the “Purchased Assets”) for an aggregate purchase price
of $295,000.

 

1.2          Non-Competition and Non-Solicitation.

 

(a)           Non-Competition. Subject to the other provisions set forth in this
Section 1.2(a), from and after the Closing until the Restriction Termination
Date and without prior written consent of CWI 2, each of the WPC Entities and
their respective Affiliates shall be prohibited from sponsoring, acting as the
external advisor to or externally managing any new or existing real estate
program focused on lodging properties. From and after the Closing, each of the
Watermark Entities and their Affiliates agree to be prohibited from engaging in
the Business if and solely to the same extent that Medzigian is prohibited from
such engagement in the Commitment Agreement and the Medzigian Employment
Agreement. Notwithstanding anything contained herein (i) nothing contained
herein shall prohibit the WPC Entities from acquiring (via stock purchase, asset
purchase, merger or otherwise) any properties or assets or any Person that has
operations related to, but whose primary business is not focused on, the
Business, and (ii) the restrictions set forth in this Section 1.2 (A) shall in
no way apply to an acquirer of all or substantially all of the business,
operations, assets or equity interests of any of the WPC Entities, and (B) shall
automatically and immediately (without, for the avoidance of doubt, the need to
comply with the temporal elements set forth in the definition of “Restriction
Termination Date”) terminate with respect to the WPC Entities, upon (1) such
time as the WPC Entities do not have the right to designate any persons for
election of directors at the annual meeting of stockholders of CWI 2 in
accordance with this Agreement, or (2) if earlier, a Change in Control of either
(x) CWI 2, or (y) WPC, in the case of each of subclause (x) and (y) if at such
time any WPC representatives on CWI 2's Board of Directors resigns from the
Board and the WPC Entities agree not to exercise their director designations
right in the future (it if would otherwise continue).

 

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(b)           Non-Solicitation of CWI 2 Employees. From and after the Closing
until the Restriction Termination Date (or, in the case of the Watermark
Entities, the expiration of the one (1) year period applicable to Medzigian set
forth in Section 7(d) of the Medzigian Employment Agreement, if earlier) and
without prior written consent of CWI 2, none of the WPC Entities or Watermark
Entities shall either directly or indirectly, solicit (or encourage any other
Person to solicit) or encourage to leave the employment of CWI 2 or any of its
Affiliates, any person who is an officer or employee of CWI 2 or any of its
Affiliates, or who has been employed by CWI 2 or any of its Affiliates during
the six (6) months prior to the date of such solicitation. Notwithstanding the
foregoing, general solicitations of employment published in a newspaper, over
the Internet, or in another publication of general circulation and not
specifically directed towards such officers, employees or consultants shall not
be deemed to constitute solicitation for purposes of this paragraph.

 

1.3          Non-Interference with Business Relationships. From and after the
Closing until the applicable Restriction Termination Date, none of the Watermark
Entities and the WPC Entities shall intentionally seek to induce or otherwise
cause any client, supplier, vendor, licensee, licensor, franchisor, management
company or any other Person with whom CWI 2 or any of its Affiliates then has,
or during the six (6) months prior to such time had, a business relationship,
whether by contract or otherwise, in each case in connection with the Business,
to discontinue or alter such business relationship in a manner that is adverse
to CWI 2 or any of its Affiliates.

 

1.4          Redemption. The Parties shall take the steps set forth in this
Section 1.4 (collectively, the “Redemption”):

 

(a)           CWI 1 SGP Interest Distribution. Immediately following the REIT
Merger Effective Time, SGP shall distribute (the “CWI 1 Distribution”) (i) forty
percent (40%) of the CWI 1 SGP Interest to CLA, (ii) forty percent (40%) of the
CWI 1 SGP Interest to Carey II, and (iii) twenty percent (20%) of the CWI 1 SGP
Interest to CWA.

 

(b)           CWI 2 SGP Interest Distribution. Immediately following the REIT
Merger Effective Time, SGP 2 shall distribute (the “CWI 2 Distribution”) (i)
seventy five percent (75%) of the CWI 2 SGP Interest to Holdco, and (ii) twenty
five percent (25%) of the CWI 2 SGP Interest to CWA 2.

 

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(c)           CWI 1 SGP Exchange and Contribution. Immediately following the
REIT Merger Effective Time, without any further action required by any Party,
(i) CLA shall exchange with CWI 2 that portion of the CWI 1 SGP Interest that it
received pursuant to Section 1.4(a)(i) for (A) eight hundred and fifty four
thousand three hundred and eighty eight (854,388) shares of Common Stock, and
(B) shares of Preferred Stock with a liquidation preference of nineteen million
five hundred and fifty thousand eight hundred and seventy nine dollars
($19,550,879), (ii) Carey II shall exchange with CWI 2 that portion of the CWI 1
SGP Interest that it received pursuant to Section 1.4(a)(ii) for (A) eight
hundred and fifty four thousand three hundred and eighty eight (854,388) shares
of Common Stock, and (B) shares of Preferred Stock with a liquidation preference
of nineteen million five hundred and fifty thousand eight hundred and seventy
nine dollars ($19,550,879), and (iii) CWA shall contribute to CWI 2 OP that
portion of the CWI 1 SGP Interest that it received pursuant to Section
1.4(a)(iii) for one million two hundred eighty four thousand forty seven
(1,284,047) common limited partnership interests (the “OP Units”) in CWI 2 OP.

 

(d)           CWI 2 SGP Exchange and Contribution. Immediately following the
REIT Merger Effective Time, without any further action required by any Party,
(i) Holdco shall exchange with CWI 2 that portion of the CWI 2 SGP Interest that
it received pursuant to Section 1.4(b)(i) for (A) one million one hundred and
thirty one thousand seven hundred and seventy three (1,131,773) shares of Common
Stock, and (B) shares of Preferred Stock with a liquidation preference of twenty
five million eight hundred and ninety eight thousand two hundred and forty two
dollars ($25,898,242) and (ii) CWA 2 shall contribute to CWI 2 OP that portion
of the CWI 2 SGP Interest that it received pursuant to Section 1.4(b)(ii) for
one million one hundred thirty three thousand nine hundred forty nine
(1,133,949) OP Units.

 

(e)           No Further Liability. Following the Redemption, (i) SGP shall have
no further liability or obligation pursuant to the CWI 1 LPA, (ii) SGP 2 shall
have no further liability or obligation pursuant to the CWI 2 LPA, (iii) none of
the CWI 1 Entities shall have any further liability or obligation pursuant to
the CWI 1 LPA in respect of the CWI 1 SGP Interest, and (iv) none of the CWI 2
Entities shall have any further liability or obligation pursuant to the CWI 2
LPA in respect of the CWI 2 SGP Interest. The Parties agree that, subject to the
consummation of the Redemption, the Redemption shall be in lieu of any right
that SGP and SGP 2, and its successors and assigns, would otherwise have in
connection with a change of control event of any CWI I Entity or any CWI 2
Entity under the CWI 1 LPA or CWI 2 LPA, as applicable, and each of SGP and SGP
2 hereby waives all rights to any distributions that it would otherwise be
entitled to receive in connection with the Merger pursuant to the CWI 1 LPA and
the CWI 2 LPA.

 

1.5          Limited Partnership Interests. Notwithstanding anything to the
contrary in the CWI 2 OP LPA or this Agreement:

 

(a)           At any time at the sole discretion of any Watermark Entity, the OP
Units issued to such Watermark Entity shall be redeemable or exchangeable at the
option of the holder thereof in exchange for such number of Common Stock of
equivalent value of such OP Units at the time of such redemption or exchange;

 

(b)           Distributions shall be made to the holder(s) of the OP Units at
the same time, and in the same form as, any dividend payable to the holders of
Common Stock, and the amount of such distributions shall be determined using the
same rate of return as is used to determine such dividends payable with respect
to the Common Stock;

 

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(c)               The OP Units and Common Stock shall be transferable by any
Watermark Entity to any Affiliate of such Person or to any family members,
trusts or other estate planning vehicles of any direct or indirect equityholder
of such Person; and

 

(d)               The foregoing provisions shall not be waived, modified or
amended, whether in this Agreement or the CWI 2 OP LPA, in any way that
adversely affects the limited liability of any Watermark Entity as a limited
partner, the rights of any Watermark Entity to exchange its equity interests for
cash, or at the election of CWI 2, Common Stock, or in any way that
disproportionality affects a Watermark Entity’s rights to distributions or
allocations, in each case, without the prior written consent of the Watermark
Entity then holding the OP Units.

 

1.6          Holding Period.

 

(a)           In addition to any restrictions on transfer contained in the CWI 2
OP LPA and without prior written consent of CWI 2, until the earlier of (a) the
completion of CWI 2’s initial underwritten public offering of Common Stock, (b)
ninety (90) days after the listing of Common Stock on a national securities
exchange (either (a) or (b) an “IPO Event”), (c) the consummation of a Change in
Control of CWI 2, (d) solely in the case of securities held by the WPC Entities,
such time following either (1) the resignation of all representatives of the WPC
Entities from CWI 2's Board of Directors following a Change in Control of CWI 2
or WPC, or (2) as the WPC Entities do not have the right to designate any
persons for election of directors at the annual meeting of stockholders of CWI 2
in accordance with this Agreement, or (e) except as contemplated by Section
1.5(a), solely in the case of securities held by the Watermark Entities, such
time as Medzigian no longer serves as Chief Executive Officer or a director of
CWI 2, the WPC Entities or the Watermark Entities, as applicable, shall not
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option or warrant for the
sale of, make any short sale or otherwise transfer or dispose or encumber
(collectively, “Transfer”) the Common Stock, Preferred Stock or limited
partnership interests in CWI 2 OP that it receives pursuant to Section 1.4 of
this Agreement; provided, however, that, subject to compliance with applicable
Laws, including applicable securities Laws, the WPC Entities and the Watermark
Entities may engage in a Permitted Transfer; provided, further, that the
foregoing restrictions on pledges and encumbrances shall not apply where the
beneficiary of the pledge or encumbrance has agreed in writing to be bound by
the restrictions set forth in this Section 1.6. In addition, in the event of an
underwritten public offering of securities of CWI 2 and to the extent requested
by the underwriters of such public offering, the WPC entities and Watermark
Entities shall enter into customary lockup agreements to be negotiated in good
faith by the applicable parties.

 

1.7         Termination of Agreements. Immediately following the Redemption,
without any further action required by any party thereto, the (a) CWI 1 Advisory
Agreement, (b) CWI 2 Advisory Agreement, and (c) Subadvisory Agreements, shall
terminate (the “Termination”). Within ninety (90) days following the
Termination, (i) CWI 2 shall pay, or cause to be paid, to Advisor or, at
Advisor’s election, an Affiliate thereof, all reimbursable expenses and fees
owed to Advisor under the CWI 1 Advisory Agreement and the CWI 2 Advisory
Agreement, as applicable, accrued through the Termination (by way of example,
and without limitation, this shall include all earned but unpaid asset
management fees, disposition fees (excluding any disposition fees that may be
owed in connection with the Merger), property management fees, loan refinancing
fees, and the reimbursement of other selling, general and administrative
expenses), and (ii) the Advisor shall pay, or cause to be paid, to CWA and CWA
2, as applicable, or, at such Person’s election, an Affiliate thereof
(including, for the avoidance of doubt, Watermark Capital), all reimbursable
expenses and fees owed to CWA or CWA 2 under Subadvisory Agreements. From and
after the Redemption, (i) CWA, CLA and Carey II shall use commercially
reasonably efforts to cause SGP to liquidate or dissolve, and SGP LLCA to be
terminated in connection therewith, and (ii) CWA 2 and Holdco shall use
commercially reasonable efforts to cause SGP 2 to liquidate or dissolve, and SGP
2 LLCA to be terminated in connection therewith.

 

9

 

 

1.8          Watermark Name. Immediately following the REIT Merger Effective
Time, the Trademark Coexistence Agreement substantially in the form attached
hereto as Exhibit D, related to the use of the “Watermark” name by the
applicable parties, shall become automatically effective without any action on
the part of any Party.

 

1.9          Allocation. Unless otherwise required by a determination of a
taxing authority that is final, all parties hereto shall report the transactions
contemplated hereby (other than the reimbursable expenses and fees payable
pursuant to Section 1.1) for tax purposes as allocated to the Redemption.

 

1.10        Board Composition. CWI 2 hereby agrees to take all necessary actions
to set the size of the Board of Directors of CWI 2 at nine (9) directors upon
the closing of the Merger. Prior to the consummation of an IPO Event, CWI 2
shall not modify the size of its Board of Directors from nine (9) without the
prior written consent of WPC. For so long as the WPC Entities, collectively,
beneficially own shares of Capital Stock with (i) a Value equal to or greater
than one hundred million dollars ($100 million), WPC shall have the right to
designate for election at the annual meeting of stockholders of CWI 2 two (2)
directors to the Board of Directors of CWI 2, (ii) a Value less than one hundred
million dollars ($100 million) but equal to or greater than fifty million
dollars ($50 million), WPC shall have the right to designate for election at the
annual meeting of stockholders of CWI 2 one (1) director to the Board of
Directors of CWI 2, and (iii) a Value less than fifty million dollars ($50
million), WPC shall not have the contractual right to designate for election at
the annual meeting of stockholders of CWI 2 any directors to the Board of
Directors of CWI 2.

 

Article II
CLOSING AND CLOSING DATE DELIVERIES

 

2.1          Closing. The closing of the transactions contemplated hereunder
(the “Closing”) shall take place at the offices of DLA Piper LLP (US) in New
York, New York as soon as reasonably practicable following the satisfaction or
waiver of all conditions to the obligations of the parties hereto to consummate
the transactions contemplated hereby (other than conditions with respect to
actions that any party will take at the Closing itself) or at such other place
and time as is mutually agreed to in writing by the parties hereto (the “Closing
Date”).

 

10

 

 

2.2          Ancillary Agreements. Immediately following the REIT Merger
Effective Time, the following agreements shall become automatically effective
without any action on the part of any Party:

 

(a)           the WPC Trademark Assignment Agreement;

 

(b)           the WPC Transition Services Agreement;

 

(c)           the Watermark Transition Services Agreement;

 

(d)           the Assignment and Assumption Agreement;

 

(e)           Watermark Bill of Sale; and

 

(f)            the Trademark Coexistence Agreement.

 

2.3          Cooperation. Each Party shall and shall cause its subsidiaries and
Affiliates to use their respective commercially reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other Parties in doing, all things necessary, proper or
advisable under applicable Law or pursuant to any Contract to consummate and
make effective, as promptly as practicable, the transactions contemplated by
this Agreement, including (i) the taking of all actions necessary to cause the
conditions to Closing set forth in Article VII to be satisfied, (ii) the
obtaining of all necessary waivers, consents and approvals from all Persons
necessary in connection with the consummation of transactions contemplated by
this Agreement and the giving of any notices to any Person, if any, and the
taking of all reasonable actions as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by, any Person necessary in
connection with the consummation of the transactions contemplated by this
Agreement, (iii) the execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by this Agreement, and
(iv) cooperating in good faith prior to and following the Closing to (A)
identify all Contracts that contemplate the provision of services to or relate
to the rights, operations or assets of CWI 1 or CWI 2 or their respective
Affiliates, (B) determine whether such Contracts identified in clause (A) should
have been included in the list of Transferred Contracts attached hereto as
Exhibit B or are Shared Contracts, and (C) with respect to any Transferred
Contract, assign such Transferred Contract to a CWI 2 Entity designated by CWI 2
in accordance with the terms of Section 1.1(c), and with respect to any Shared
Contract, make such goods and services available to the CWI 2 Entities in
accordance with the terms of Section 1.1(c).

 

Article III
Representations and warranties of the cwi 1 entities

 

CWI 1 and CWI 1 OP hereby represent and warrant to WPC and Watermark Capital as
of the date hereof and as of the Closing as follows:

 

3.1          Organization and Qualification. CWI 1 is a corporation duly
organized, validly existing and in good standing under the Laws of Maryland. CWI
1 OP is a limited partnership duly formed, validly existing and in good standing
under the laws of Delaware. Each CWI 1 Entity has the requisite power and
authority to own, lease and operate its properties and assets and to carry on
its business as it is now conducted, except where the failure to have such power
and authority would not, individually or in the aggregate, reasonably be
expected to prevent or materially delay the ability of the CWI 1 Entities to
consummate the transactions contemplated hereunder. No CWI 1 Entity is in
violation of any material provision of its Organizational Documents.

 

11

 

 

3.2          Authority. Each CWI 1 Entity (a) has the respective right and power
to enter into, and perform its obligations under, this Agreement and each other
agreement delivered in connection herewith to which it is a party and (b) has
taken all requisite action to authorize (i) the execution, delivery and
performance of this Agreement and each such other agreement delivered in
connection herewith to which it is a party and (ii) the consummation of the
transactions contemplated by this Agreement and each such other agreement
delivered in connection herewith to which it is a party. This Agreement has been
duly executed and delivered by each CWI 1 Entity and, assuming the due
authorization, execution and delivery of this Agreement by each other party
hereto, is binding upon, and legally enforceable against, each CWI 1 Entity in
accordance with its terms, except as such enforceability may be subject to, and
limited by, applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, receivership and similar Laws affecting the
enforcement of creditors’ rights generally, and general equitable principles
(regardless of whether enforceability is considered a proceeding at law or in
equity) (the “Bankruptcy and Equity Exception”).

 

3.3          No Violations and Consents.

 

(a)            None of the execution, delivery or performance of this Agreement
by any CWI 1 Entity or the consummation by a CWI 1 Entity of the transactions
contemplated by this Agreement will: (i) conflict with or violate any provision
of the Organizational Documents of any such Person, (ii) conflict with or
violate any Law applicable to any such Person, or any of its properties or
assets, or (iii) require any consent, notice or approval under, violate,
conflict with, result in any breach of or any loss of any benefit under, or
constitute a default under (with or without notice or lapse of time, or both),
or result in termination or give to others any right of termination, vesting,
amendment, acceleration, modification, cancellation, purchase or sale of, or
result in the triggering of any payment or in the creation of a lien upon any of
the respective properties or assets (including rights) of any such Person
pursuant to, any Contract to which any such Person is a party (or by which any
of their respective properties or assets (including rights) are bound), except,
with respect to clauses (ii) and (iii) of this Section 3.3(a), as would not,
individually or in the aggregate, reasonably be expected to prevent or
materially delay the ability of the CWI 1 Entities to consummate the
transactions contemplated hereby.

 

(b)           None of the execution, delivery or performance of this Agreement
by the CWI 1 Entities or the consummation by the CWI 1 Entities of the
transactions contemplated by this Agreement will require (with or without notice
or lapse of time, or both) any consent, approval, authorization or permit of, or
filing or registration with or notification to, any Governmental Authority with
respect to any such Person or any of its respective properties or assets, other
than where the failure to obtain such consents, approvals, authorizations or
permits of, or to make such filings, registrations with or notifications to, any
Governmental Authority would not, individually or in the aggregate, reasonably
be expected to prevent or materially delay the ability of the CWI 1 Entities to
consummate the transactions contemplated hereunder.

 

3.4          Brokers. No CWI 1 Entity has any liability to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement, other than Barclays.

 

12

 

 

3.5          Acknowledgement of No Other Representations or Warranties. The CWI
1 Entities acknowledge and agree that, (i) except for the representations and
warranties contained in Article V or Article VI or any certificate or schedule
delivered in connection with the Closing pursuant hereto, as applicable, no WPC
Entity, Watermark Entity, or any of their respective Affiliates or
representatives, makes or has made, nor is any CWI 1 Entity relying on, and
expressly disclaims any reliance on, any representation or warranty, either
express or implied, concerning the WPC Entities or the Watermark Entities or any
of their respective businesses, operations, assets, liabilities, results of
operations, conditions (financial or otherwise) or prospects or the transactions
contemplated by this Agreement, and (ii) the WPC Entities and Watermark Entities
and their respective Affiliates and each of their respective representatives
hereby disclaim all liability and responsibility for any representation,
warranty, projection, forecast, statement or information communicated, or
furnished (orally or in writing) by the WPC Entities or Watermark Entities or
any of their respective Affiliates or representatives (including any opinion,
information, projection, or advice that may have been or may be provided to the
CWI 1 Entities by any representative of a WPC Entity or Watermark Entity or of
their respective Affiliates) except for the representations and warranties
expressly set forth in Article V or Article VI, as applicable, or any
certificate or schedule delivered by or on behalf of any such Person in
connection with the Closing pursuant hereto.

 

Article IV
Representations and warranties of the cwi 2 entities

 

CWI 2 and CWI 2 OP hereby represent and warrant to WPC and Watermark Capital as
of the date hereof and as of the Closing as follows:

 

4.1          Organization and Qualification. CWI 2 is a corporation duly
organized, validly existing and in good standing under the Laws of Maryland. CWI
2 OP is a limited partnership duly formed, validly existing and in good standing
under the laws of Delaware. Each CWI 2 Entity has the requisite power and
authority to own, lease and operate its properties and assets and to carry on
its business as it is now conducted, except where the failure to have such power
and authority would not, individually or in the aggregate, reasonably be
expected to prevent or materially delay the ability of the CWI 2 Entities to
consummate the transactions contemplated hereunder. No CWI 2 Entity is in
violation of any material provision of its Organizational Documents.

 

4.2          Authority. Each CWI 2 Entity (a) has the respective right and power
to enter into, and perform its obligations under, this Agreement and each other
agreement delivered in connection herewith to which it is a party and (b) has
taken all requisite action to authorize (i) the execution, delivery and
performance of this Agreement and each such other agreement delivered in
connection herewith to which it is a party and (ii) the consummation of the
transactions contemplated by this Agreement and each such other agreement
delivered in connection herewith to which it is a party. This Agreement has been
duly executed and delivered by each CWI 2 Entity and, assuming the due
authorization, execution and delivery of this Agreement by each other party
hereto, is binding upon, and legally enforceable against, each CWI 2 Entity in
accordance with its terms, except as such enforceability may be subject to, and
limited by, the Bankruptcy and Equity Exception.

 

13

 

 

4.3          No Violations and Consents.

 

(a)           None of the execution, delivery or performance of this Agreement
by any CWI 2 Entity or the consummation by a CWI 2 Entity of the transactions
contemplated by this Agreement will: (i) conflict with or violate any provision
of the Organizational Documents of any such Person, (ii) conflict with or
violate any Law applicable to any such Person, or any of its properties or
assets, or (iii) require any consent, notice or approval under, violate,
conflict with, result in any breach of or any loss of any benefit under, or
constitute a default under (with or without notice or lapse of time, or both),
or result in termination or give to others any right of termination, vesting,
amendment, acceleration, modification, cancellation, purchase or sale of, or
result in the triggering of any payment or in the creation of a lien upon any of
the respective properties or assets (including rights) of any such Person
pursuant to, any Contract to which any such Person is a party (or by which any
of their respective properties or assets (including rights) are bound), except,
with respect to clauses (ii) and (iii) of this Section 4.3(a), as would not,
individually or in the aggregate, reasonably be expected to prevent or
materially delay the ability of the CWI 2 Entities to consummate the
transactions contemplated hereby.

 

(b)           None of the execution, delivery or performance of this Agreement
by the CWI 2 Entities or the consummation by the CWI 2 Entities of the
transactions contemplated by this Agreement will require (with or without notice
or lapse of time, or both) any consent, approval, authorization or permit of, or
filing or registration with or notification to, any Governmental Authority with
respect to any such Person or any of its respective properties or assets, other
than where the failure to obtain such consents, approvals, authorizations or
permits of, or to make such filings, registrations with or notifications to, any
Governmental Authority would not, individually or in the aggregate, reasonably
be expected to prevent or materially delay the ability of the CWI 2 Entities to
consummate the transactions contemplated hereunder.

 

4.4          Brokers. No CWI 2 Entity has any liability to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement, other than Morgan Stanley.

 

4.5          Acknowledgement of No Other Representations or Warranties. The CWI
2 Entities acknowledge and agree that, (i) except for the representations and
warranties contained in Article V or Article VI or any certificate or schedule
delivered in connection with the Closing pursuant hereto, as applicable, no WPC
Entity, Watermark Entity, or any of their respective Affiliates or
representatives, makes or has made, nor is any CWI 2 Entity relying on, and
expressly disclaims any reliance on, any representation or warranty, either
express or implied, concerning the WPC Entities or the Watermark Entities or any
of their respective businesses, operations, assets, liabilities, results of
operations, conditions (financial or otherwise) or prospects or the transactions
contemplated by this Agreement, and (ii) the WPC Entities and Watermark Entities
and their respective Affiliates and each of their respective representatives
hereby disclaim all liability and responsibility for any representation,
warranty, projection, forecast, statement or information communicated, or
furnished (orally or in writing) by the WPC Entities or Watermark Entities or
any of their respective Affiliates or representatives (including any opinion,
information, projection, or advice that may have been or may be provided to the
CWI 2 Entities by any representative of a WPC Entity or Watermark Entity or of
their respective Affiliates) except for the representations and warranties
expressly set forth in Article V or Article VI, as applicable, or any
certificate or schedule delivered by or on behalf of any such Person in
connection with the Closing pursuant hereto.

 

14

 

 

Article V
Representations and warranties of the watermark entities

 

Watermark Capital, CWA and CWA 2 hereby represent and warrant to WPC, CWI 1 and
CWI 2 as of the date hereof and as of the Closing as follows:

 

5.1          Organization and Qualification. Each Watermark Entity is a limited
liability company duly organized, validly existing and in good standing under
the Laws of its respective state of formation. Each Watermark Entity has the
requisite power and authority to own, lease and operate its properties and
assets and to carry on its business as it is now conducted, except where the
failure to have such power and authority would not, individually or in the
aggregate, reasonably be expected to prevent or materially delay the ability of
the Watermark Entities to consummate the transactions contemplated hereunder. No
Watermark Entity is in violation of any material provision of its Organizational
Documents.

 

5.2          Authority. Each Watermark Entity (a) has the respective right and
power to enter into, and perform its obligations under, this Agreement and each
other agreement delivered in connection herewith to which it is a party and (b)
has taken all requisite action to authorize (i) the execution, delivery and
performance of this Agreement and each such other agreement delivered in
connection herewith to which it is a party and (ii) the consummation of the
transactions contemplated by this Agreement and each such other agreement
delivered in connection herewith to which it is a party. This Agreement has been
duly executed and delivered by each Watermark Entity and, assuming the due
authorization, execution and delivery of this Agreement by each other party
hereto, is binding upon, and legally enforceable against, each Watermark Entity
in accordance with its terms, except as such enforceability may be subject to,
and limited by, the Bankruptcy and Equity Exception.

 

5.3          No Violations and Consents.

 

(a)           None of the execution, delivery or performance of this Agreement
by any Watermark Entity or the consummation by a Watermark Entity of the
transactions contemplated by this Agreement will: (i) conflict with or violate
any provision of the Organizational Documents of any such Person, (ii) conflict
with or violate any Law applicable to any such Person, or any of its properties
or assets, or (iii) require any consent, notice or approval under, violate,
conflict with, result in any breach of or any loss of any benefit under, or
constitute a default under (with or without notice or lapse of time, or both),
or result in termination or give to others any right of termination, vesting,
amendment, acceleration, modification, cancellation, purchase or sale of, or
result in the triggering of any payment or in the creation of a lien upon any of
the respective properties or assets (including rights) of any such Person
pursuant to, any Contract to which any such Person is a party (or by which any
of their respective properties or assets (including rights) are bound), except,
with respect to clauses (ii) and (iii) of this Section 5.3(a), as would not,
individually or in the aggregate, reasonably be expected to prevent or
materially delay the ability of the Watermark Entities to consummate the
transactions contemplated hereby.

 

15

 

 

(b)           None of the execution, delivery or performance of this Agreement
by the Watermark Entities or the consummation by the Watermark Entities of the
transactions contemplated by this Agreement will require (with or without notice
or lapse of time, or both) any consent, approval, authorization or permit of, or
filing or registration with or notification to, any Governmental Authority with
respect to any such Person or any of its respective properties or assets, other
than where the failure to obtain such consents, approvals, authorizations or
permits of, or to make such filings, registrations with or notifications to, any
Governmental Authority would not, individually or in the aggregate, reasonably
be expected to prevent or materially delay the ability of the Watermark Entities
to consummate the transactions contemplated hereunder.

 

5.4          Brokers. No Watermark Entity has any liability to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement.

 

5.5          No Defaults Under Transferred Contracts. None of the Watermark
Entities is in material default under any Transferred Contracts to which such
entity is a party.

 

5.6          Acknowledgement of No Other Representations or Warranties. The
Watermark Entities acknowledge and agree that, (i) except for the
representations and warranties contained in Article III, Article IV or Article
VI, as applicable, or any certificate or schedule delivered in connection with
the Closing pursuant hereto, none of the WPC Entities, CWI 1 or CWI 2, nor any
of their respective Affiliates or representatives, makes or has made, nor is any
Watermark Entity relying on, and expressly disclaims any reliance on, any
representation or warranty, either express or implied, concerning the WPC
Entities, CWI 1 or CWI 2 or any of their respective businesses, operations,
assets, liabilities, results of operations, condition (financial or otherwise)
or prospects or the transactions contemplated by this Agreement, and (ii) the
WPC Entities, CWI 1 and CWI 2 and their respective Affiliates and each of their
respective representatives hereby disclaims all liability and responsibility for
any representation, warranty, projection, forecast, statement or information
communicated, or furnished (orally or in writing) by the WPC Entities, CWI 1 or
CWI 2 or any of their respective Affiliates or representatives (including any
opinion, information, projection, or advice that may have been or may be
provided to the Watermark Entities by any representative of a WPC Entity, CWI 1
or CWI 2 or their respective Affiliates) except for the representations and
warranties expressly set forth in Article III, Article IV or Article VI, as
applicable, or any certificate or schedule delivered by or on behalf of any such
Person in connection with the Closing pursuant hereto.

 

Article VI
Representations and warranties of the WPC entities

 

WPC, SGP, SGP 2 and Advisor hereby represent and warrant to each of CWI 1, CWI 2
and Watermark Capital as of the date hereof and as of the Closing as follows:

 

6.1          Organization and Qualification. Each WPC Entity is a corporation or
limited liability company, as applicable, duly organized, validly existing and
in good standing under the Laws of its respective state of formation. Each WPC
Entity has the requisite power and authority to own, lease and operate its
properties and assets and to carry on its business as it is now conducted,
except where the failure to have such power and authority would not,
individually or in the aggregate, reasonably be expected to prevent or
materially delay the ability of the WPC Entities to consummate the transactions
contemplated hereunder. No WPC Entity is in violation of any material provision
of its Organizational Documents.

 

16

 

 

6.2          Authority. Each WPC Entity (a) has the respective right and power
to enter into, and perform its obligations under, this Agreement and each other
agreement delivered in connection herewith to which it is a party and (b) has
taken all requisite action to authorize (i) the execution, delivery and
performance of this Agreement and each such other agreement delivered in
connection herewith to which it is a party and (ii) the consummation of the
transactions contemplated by this Agreement and each such other agreement
delivered in connection herewith to which it is a party. This Agreement has been
duly executed and delivered by each WPC Entity and, assuming the due
authorization, execution and delivery of this Agreement by each other party
hereto, is binding upon, and legally enforceable against, each WPC Entity in
accordance with its terms, except as such enforceability may be subject to, and
limited by, the Bankruptcy and Equity Exception.

 

6.3          No Violations and Consents.

 

(a)           None of the execution, delivery or performance of this Agreement
by any WPC Entity or the consummation by a WPC Entity of the transactions
contemplated by this Agreement will: (i) conflict with or violate any provision
of the Organizational Documents of any such Person, (ii) conflict with or
violate any Law applicable to any such Person, or any of its properties or
assets, or (iii) require any consent, notice or approval under, violate,
conflict with, result in any breach of or any loss of any benefit under, or
constitute a default under (with or without notice or lapse of time, or both),
or result in termination or give to others any right of termination, vesting,
amendment, acceleration, modification, cancellation, purchase or sale of, or
result in the triggering of any payment or in the creation of a lien upon any of
the respective properties or assets (including rights) of any such Person
pursuant to, any Contract to which any such Person is a party (or by which any
of their respective properties or assets (including rights) are bound), except,
with respect to clauses (ii) and (iii) of this Section 6.3(a), as would not,
individually or in the aggregate, reasonably be expected to prevent or
materially delay the ability of the WPC Entities to consummate the transactions
contemplated hereby.

 

(b)           None of the execution, delivery or performance of this Agreement
by the WPC Entities or the consummation by the WPC Entities of the transactions
contemplated by this Agreement will require (with or without notice or lapse of
time, or both) any consent, approval, authorization or permit of, or filing or
registration with or notification to, any Governmental Authority with respect to
any such Person or any of its respective properties or assets, other than where
the failure to obtain such consents, approvals, authorizations or permits of, or
to make such filings, registrations with or notifications to, any Governmental
Authority would not, individually or in the aggregate, reasonably be expected to
prevent or materially delay the ability of the WPC Entities to consummate the
transactions contemplated hereunder.

 

6.4          Brokers. No WPC Entity has any liability to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement.

 

6.5          No Defaults Under Transferred Contracts. None of the WPC Entities
is in material default under any Transferred Contracts to which such entity is a
party.

 

17

 

 

6.6          Acknowledgement of No Other Representations or Warranties. The WPC
Entities acknowledge and agree that, (i) except for the representations and
warranties contained in Articles III, IV or V or any certificate or schedule
delivered in connection with the Closing pursuant hereto, none of the CWI 1
Entities, CWI 2 Entities or Watermark Entities nor any of their respective
Affiliates or representatives makes or has made, nor is any WPC Entity relying
on, and expressly disclaims any reliance on, any representation or warranty,
either express or implied, concerning the any of the foregoing or any of their
respective businesses, operations, assets, liabilities, results of operations,
condition (financial or otherwise) or prospects or the transactions contemplated
by this Agreement, and (ii) the each of the CWI 1 Entities, CWI 2 Entities or
Watermark Entities and their respective Affiliates and each of their respective
representatives hereby disclaims all liability and responsibility for any
representation, warranty, projection, forecast, statement or information
communicated, or furnished (orally or in writing) by such Person or any of their
respective Affiliates or representatives (including any opinion, information,
projection, or advice that may have been or may be provided to the WPC Entities
by any representative of any of the foregoing or its respective Affiliates)
except for the representations and warranties expressly set forth in Articles
III, IV or V or any certificate or schedule delivered by or on behalf of any
such Person in connection with the Closing pursuant hereto.

 

Article VII
CONDITIONS TO THE SALE

 

7.1          Conditions to Obligations of Each Party. The respective obligations
of each Party hereto to effect the transactions contemplated hereunder shall be
subject to the satisfaction or waiver (where permitted) at or prior to the
Closing of each of the following conditions:

 

(a)           No Injunction. No Governmental Authority of competent jurisdiction
shall have issued any Order that is in effect, and no Law shall have been
enacted or promulgated, that renders the transactions contemplated hereunder
illegal, or prohibits, enjoins, restrains or otherwise prevents or delays the
transactions contemplated hereunder.

 

(b)           Merger. The Merger shall have occurred on the terms set forth in
the Merger Agreement.

 

(c)           Employment Agreements. The Medzigian Employment Agreement shall
not have been amended or terminated, except by agreement of all parties to the
Medzigian Employment Agreement, and employment terms shall have been agreed to
by CWI 2 and any executive officer set forth on Exhibit A that has been
identified in the definitive Joint Proxy Statement.

 

(d)           Redemption. The Redemption shall have occurred.

 

7.2          Additional Condition to Obligations of WPC. The obligations of WPC
to effect the transactions contemplated hereunder at the Closing are also
subject to the satisfaction or waiver by WPC of the following additional
condition:

 

(a)           CWI 2 Board. At the closing of the Merger, the size of the Board
of Directors of CWI 2, shall have been set at nine (9) directors, and two (2)
directors shall be appointed by WPC.

 

18

 

 

Article VIII

Termination

 

8.1          Termination. This Agreement may be terminated at any time prior to
the Closing only as follows:

 

(a)           By the mutual written consent of WPC, CWI 1, CWI 2 and Watermark
Capital;

 

(b)           By any party if the conditions set forth in Section 7.1 shall not
have been satisfied substantially concurrently with the closing of the Merger;
or

 

(c)           By WPC, CWI 1, CWI 2 or Watermark Capital, by written notice to
the other, if any Governmental Authority of competent jurisdiction shall have
issued any Order permanently enjoining, restraining or prohibiting the
transactions contemplated hereunder, and such Order shall have become final and
non-appealable, if applicable; provided, however, that the right to terminate
this Agreement under this Section 8.1(c) shall not be available to any such
Person if such Person is then in breach in any material respect of its
obligations under this Agreement has been the principal cause of, or principally
resulted in, such Order, restraint or prohibition.

 

8.2          Effect of Termination.

 

(a)           In the event of termination of this Agreement by WPC, CWI 1, CWI 2
or Watermark Capital, in each instance, as provided in Section 8.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of any party hereto or their respective representatives,
in either case, relating to, based on or arising under or out of this Agreement,
the transactions contemplated hereby or the subject matter hereof (including
the negotiation and performance of this Agreement), in each case whether based
on Contract, tort, equity or strict liability, by the enforcement of any
assessment, by any legal or equitable proceeding, by virtue of any Laws or
otherwise and whether by or through attempted piercing of the corporate veil, by
or through any claim by or on behalf of a party hereto or another Person or
otherwise, except with respect to Annex I, this Section 8.2, and Article X (and
such provisions shall remain in full force and effect following such
termination.

 

Article IX
survival

 

9.1          No Survival. The representations and warranties contained in this
Agreement or any certificate, agreement or instrument furnished or to be
furnished to at the Closing pursuant to this Agreement shall not survive the
Closing and shall terminate on the Closing Date, and no party hereto shall have
any obligation for indemnification hereunder or other liability to any other
party with respect to any claim for breach of any representation or warranty
contained in this Agreement or other agreement or instrument delivered by any
other party at the Closing. All covenants and agreements contained herein that
by their terms are to be performed in whole or in part, or which prohibit
actions, subsequent to the Closing Date shall survive in accordance with their
terms.

 

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Article X

GENERAL PROVISIONS

 

10.1        Cost and Expenses. Each party will pay its own costs and expenses
(including attorneys’ fees, accountants’ fees and other professional fees and
expenses) in connection with the negotiation, preparation, execution and
delivery of this Agreement and the consummation of the transactions contemplated
by this Agreement (except as otherwise specifically provided for herein).

 

10.2        Amendment, Modification and Waiver. This Agreement may be amended,
modified or supplemented at any time only by written agreement signed by the
parties hereto, and any failure of a party to comply with any term or provision
of this Agreement may be waived by the other parties, at any time by an
instrument in writing signed by or on behalf of such other parties, but such
waiver shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure to comply.

 

10.3        Savings Clause. If any provision hereof shall be held invalid or
unenforceable by any court of competent jurisdiction or as a result of future
legislative action, such holding or action shall be strictly construed and shall
not affect the validity or effect of any other provision hereof. Upon such
declaration that any term or other provision is invalid, illegal or incapable of
being enforced, the parties to this Agreement shall negotiate in good faith to
modify this Agreement, as needed, 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 by this Agreement be consummated as originally
contemplated to the greatest extent possible.

 

10.4        Entire Agreement. This Agreement (together with the Annexes,
Exhibits, and the other documents delivered pursuant hereto) constitutes the
entire agreement of the parties and supersede all prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof.

 

10.5        Assignment; Successors and Assigns. The respective rights and
obligations of the parties hereto shall not be assignable without the prior
written consent of the other parties. Any assignment or transfer in violation of
the preceding sentence shall be void. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their successors and permitted
assigns.

 

10.6        Parties in Interest. The parties hereby agree that their respective
representations, warranties and covenants set forth herein are solely for the
benefit of the other parties hereto, in accordance with and subject to the terms
of this Agreement, and this Agreement is not intended to, and does not, confer
upon any Person, other than the parties hereto, any rights or remedies
hereunder, including, the right to rely upon the representations and warranties
set forth herein. The representations and warranties in this Agreement are the
product of negotiations among the parties hereto and are for the sole benefit of
the parties hereto. Any inaccuracies in such representations and warranties may
be subject to waiver by the parties hereto in accordance with Section 10.2
without notice or liability to any other Person. In some instances, the
representations and warranties in this Agreement may represent an allocation
among the parties hereto of risks associated with particular matters regardless
of the Knowledge of any of the parties hereto. Consequently, Persons, other than
the parties hereto, may not rely upon the representations and warranties in this
Agreement as characterizations of actual facts or circumstances as of the date
of this Agreement or as of any other date.

 

20

 

 

10.7        Mutual Drafting; Interpretation; Headings.

 

(a)            Each party hereto has participated in the drafting of this
Agreement, which each party acknowledges is the result of extensive negotiations
between the parties. If an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties,
and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any provision.

 

(b)           For purposes of this Agreement, whenever the context requires: (i)
the singular number shall include the plural, and vice versa; (ii) the masculine
gender shall include the feminine and neuter genders; (iii) the feminine gender
shall include the masculine and neuter genders; and (iv) the neuter gender shall
include masculine and feminine genders. As used in this Agreement, the words
“include” and “including,” and words of similar meaning, shall not be deemed to
be terms of limitation, but rather shall be deemed to be followed by the words
“without limitation.” Except as otherwise indicated, all references in this
Agreement to “Sections,” “Annexes” and “Exhibits,” are intended to refer to
Sections of this Agreement and the Annexes and Exhibits to this Agreement. All
references in this Agreement to “$” are intended to refer to U.S. dollars.] The
term “or” shall not be deemed to be exclusive. The words “hereof,” “herein” and
“hereunder” and words of similar import, when used in this Agreement, refer to
this Agreement as a whole and not to any particular provision of this Agreement.
The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.

 

10.8        Governing Law. The validity, interpretation and effect of this
Agreement shall be governed exclusively by the Laws of the State of Maryland,
excluding the “conflict of laws” rules thereof.

 

10.9        Venue. Each of the parties irrevocably agrees that any legal Action
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 Action in any such
court is brought in an inconvenient forum, (ii) the venue of such Action is
improper or (iii) this Agreement, or the subject matter hereof, may not be
enforced in or by such courts.

 

21

 

 

10.10     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 SECTION10.10.

 

10.11      Notices.

 

(a)           All notices, requests, demands 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
Annex II.

 

(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 10.11 if
delivered personally or courier, shall be effective upon delivery; if sent by
email, shall be delivered upon receipt of proof of transmission.

 

10.12      Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which, together, shall constitute
one and the same instrument. A copy transmitted via e-mail as a portable
document format (.pdf) of this Agreement, bearing the signature of any party
shall be deemed to be of the same legal force and effect as an original of this
Agreement bearing such signature(s) as originally written of such one or more
parties.

 

22

 

 

10.13      Specific Performance. Each party hereto agrees that irreparable
damage would occur to a party if any provision of this Agreement were breached
or not performed by the other party in accordance with the terms hereof. It is
accordingly agreed that, prior to the valid termination hereof, each party
hereto shall be entitled to an injunction or injunctions, specific performance
or other equitable relief to prevent breaches of this Agreement by the other
party hereto and to enforce specifically the terms and provisions of this
Agreement, in addition to any other remedy, at law or in equity, to which it is
entitled. Each party further agrees that (a) no such party will oppose the
granting of an injunction, specific performance and other equitable relief as
provided herein on the basis that the other party has an adequate remedy at law
or that an award of specific performance is not an appropriate remedy for any
reason at law or equity and (b) no other party or any other Person shall be
required to obtain, furnish or post any bond or similar instrument in connection
with or as a condition to obtaining any remedy referred to in this Section10.13,
and each party irrevocably waives any right it may have to require the
obtaining, furnishing or posting of any such bond or similar instrument.

 

[Signature Page Follows]

 

23

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their respective officers thereunto duly authorized all as of the date first
written above.

 

 

  CAREY WATERMARK INVESTORS INCORPORATED           /s/ Charles S. Henry   Name:
Charles S. Henry   Title: Authorized Representative           CWI OP LP,      
By Carey Watermark Investors Incorporated, its general partner           /s/
Charles S. Henry   Name: Charles S. Henry   Title: Authorized Representative    
      CAREY WATERMARK INVESTORS 2 INCORPORATED           /s/ Robert E. Parsons,
Jr.   Name: Robert E. Parsons, Jr.   Title: Director           CWI 2 OP LP,    
  By Carey Watermark Investors 2 Incorporated, its general partner           /s/
Robert E. Parsons, Jr.   Name: Robert E. Parsons, Jr.   Title: Director        
  W. P. CAREY INC.           /s/ Jason E. Fox   Name: Jason E. Fox   Title:
Chief Executive Officer

 

[Signature Page to Internalization Agreement]

 

 

 

 

  CAREY WATERMARK HOLDINGS, LLC       By: CLA Holdings, LLC, its managing member
      By: Carey REIT II, Inc., its sole member       /s/ ToniAnn Sanzone   Name:
ToniAnn Sanzone   Title: Chief Financial Officer           CLA HOLDINGS LLC    
  By: Carey REIT II, Inc., its sole member       /s/ ToniAnn Sanzone   Name:
ToniAnn Sanzone   Title: Chief Financial Officer           CAREY REIT II, INC.  
        /s/ ToniAnn Sanzone   Name: ToniAnn Sanzone   Title: Chief Financial
Officer           CAREY WATERMARK HOLDINGS 2, LLC       By: WPC Holdco LLC, its
managing member       By: W. P. Carey Inc., its sole member       /s/ Jason E.
Fox   Name: Jason E. Fox   Title: Chief Executive Officer           WPC HOLDCO
LLC           /s/ Jason E. Fox   Name: Jason E. Fox   Title: Chief Executive
Officer

 

[Signature Page to Internalization Agreement]

 

 

 

 

  CAREY LODGING ADVISORS, LLC           /s/ Susan C. Hyde_   Name: Susan C. Hyde
  Title: Chief Administrative Officer           WATERMARK CAPITAL PARTNERS, LLC
          /s/ Michael G. Medzigian   Name: Michael G. Medzigian   Title:
Chairman           CWA, LLC           /s/ Michael G. Medzigian   Name: Michael
G. Medzigian   Title: A           CWA 2, LLC           /s/ Michael G. Medzigian
  Name: Michael G. Medzigian   Title: Authorized Representative

 

[Signature Page to Internalization Agreement]

 

 

 

 

ANNEX I

 

DEFINITIONS

 

For purposes of this Agreement:

 

“Action” means any action, administrative enforcement, appeal, petition, plea,
charge, complaint, claim, suit, demand, litigation, arbitration, mediation,
hearing, investigation, audit or other proceeding commenced, brought, or heard
by or before any Governmental Authority.

 

“Affiliate” means as to any Person, any other Person which, directly or
indirectly, is controlled by, controls, or is under common control with, such
first-mentioned Person; provided, however, that for purposes of this Agreement,
the CWI 1 Entities and the CWI 2 Entities shall be deemed not to be Affiliates
of the Watermark Entities and the WPC Entities.

 

“Agreement” has the meaning set forth in the caption.

 

“Articles Supplementary” mean the Articles Supplementary of CWI 2 substantially
in the form attached hereto as Exhibit F.

 

“Assignment and Assumption Agreement” means that certain assignment and
assumption agreement attached hereto as Exhibit F, entered into on the date
hereof to become automatically effective at the Closing by and between Watermark
Capital and CWI 2.

 

“Business” means the business of acquiring, holding, managing, leasing;
disposing and financing lodging properties and lodging-related real properties
and debt investments related to lodging properties.

 

“Business Day” means any day, except for a Saturday or Sunday or a day on which
banks are required or authorized by Law to close in New York, New York.

 

“Business Employee” means any employee of any of the Parties.

 

“Capital Stock” means the Preferred Stock together with the Common Stock.

 

“Change in Control” means, in one or a series of related transactions, (i) the
sale of all or substantially all of the assets of a Person to a Person that is
not an Affiliate, (ii) the sale or transfer of the outstanding shares of capital
stock of Person, or (iii) the merger or consolidation of such Person with
another Person or entity, in each case in clauses (ii) and (iii) above under
circumstances in which the holders (together with any Affiliates of such
holders) of the voting power of outstanding capital stock of such Person,
immediately prior to such transaction, own less than 50% in voting power of the
outstanding capital stock of such Person or the surviving or resulting entity
immediately following such transaction. Notwithstanding the foregoing, the
Merger shall be deemed not to be a Change in Control.

 

“Commitment Agreement” means the Commitment Agreement, dated as of October 1,
2019, among CWI 1, CWI 2, Watermark and Medzigian, as the same may be amended
from time to time.

 

 I-1 

 

 

“Common Stock” means shares of CWI 2 Class A Common Stock, $0.001 par value per
share.

 

“Contract” means, with respect to any Person, any contract, agreement, deed,
mortgage, lease, license, purchase order, commitment, arrangement or
undertaking, written or oral, or other document or instrument to which or by
which such Person is a party or otherwise subject or bound or to which or by
which any asset, property or right of such Person is subject or bound.

 

“CWI 1 Advisory Agreement” means that certain Amended and Restated Advisory
Agreement dated as of January 1, 2016, as amended, entered into by and among CWI
1, CWI 1 OP and Advisor.

 

“CWI 1 Agreements” means the CWI 1 Advisory Agreement together with the CWI 1
LPA.

 

“CWI 1 LPA” means that certain Agreement of Limited Partnership dated as of
September 15, 2010, as amended, entered into by and among CWI 1 OP, CWI 1, and
SGP.

 

“CWI 1 Subadvisory Agreement” means that certain Sub-Advisory Agreement dated as
of September 15, 2010, as amended, by and between Advisor and CWA.

 

“CWI 2 Advisory Agreement” means that certain Advisory Agreement dated as of
February 9, 2015, as amended, entered into by and among CWI 2, CWI 2 OP and
Advisor.

 

“CWI 2 Agreements” means the CWI 2 Advisory Agreement together with the CWI 2
LPA.

 

“CWI 2 LPA” means that certain Agreement of Limited Partnership dated as of
February 9, 2015, as amended, entered into by and among CWI 2 OP, CWI 2, and SGP
2.

 

“CWI 2 OP LPA” means that certain amended and restated limited partnership
agreement of CWI 2 OP as in effect on the date of this Agreement.

 

“CWI 2 Subadvisory Agreement” means that certain Subadvisory Agreement dated as
of February 9, 2015, as amended, by and between Advisor and CWA 2.

 

“REIT Merger Effective Time” shall have the meaning ascribed to such term in the
Merger Agreement.

 

“Governmental Authority” means the government of the United States or any
foreign country or any state or political subdivision thereof and any entity,
body or authority exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, including
quasi-governmental entities established to perform such functions.

 

“Law” means any law, statute, code, regulation, ordinance, rule, common law,
Order or governmental requirement enacted, promulgated, entered into, agreed,
imposed or enforced by any Governmental Authority.

 

 I-2 

 

 

“Merger Sub” means Apex Merger Sub, LLC, a Maryland limited liability.

 

“Non-Solicitation Covenants” shall mean, collectively, any non-solicitation,
non-hire or other similar restrictive covenant contained in the CWI 1
Agreements, CWI 2 Agreements or Subadvisory Agreements.

 

“Order” means any decree, order, judgment, writ, award, injunction, stipulation
or consent of or by, or settlement agreement with, a Governmental Authority.

 

“Organizational Documents” means the articles of incorporation, articles or
certificate of incorporation, bylaws, articles or certificate of formation,
operating agreement, certificate of limited partnership, partnership agreement,
and all other similar documents, instruments or certificates executed, adopted
or filed in connection with the creation, formation, or organization of a
Person, including any amendments thereto, as applicable.

 

“Permitted Transfer” means (1) a Transfer of all or a portion of the applicable
securities by any WPC Party to its Affiliates or by any Watermark Entity to its
Affiliates; (2) a Transfer of all or a portion of the applicable securities to
any family member of a direct or indirect equityholder of any Watermark Entity
or to any trust, partnership, corporation, limited liability company or other
estate planning vehicle established and held for the direct or indirect benefit
of a holder of the applicable securities (including pursuant to a Transfer
permitted by clause (3) below) or his or her respective family members, provided
that any such Transfer shall not involve a disposition for value other than
equity interests in any such trust, partnership, corporation, or limited
liability company; or (3) a Transfer of all or a portion of the applicable
securities as required by applicable Law or Order.

 

“Person” means any natural person, corporation, limited liability company,
partnership, firm, joint venture, joint-stock company, trust, association,
unincorporated entity or organization of any kind, Governmental Authority or
other entity of any kind.

 

“Preferred Stock” means shares of CWI 2 Series A Preferred Stock, $0.001 par
value per share, to be authorized via the Articles Supplementary.

 

“Representatives” means, with respect to any Person, the directors, officers,
employees, advisors (including investment bankers, financial advisors, legal
counsel, accountants and consultants), financing sources and other agents and
representatives of such Person and its Affiliates.

 

“Restriction Cancellation Event” means the occurrence of any of the following:
(i) any “person,” as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) is or becomes
the “beneficial owner” (as defined in rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of CWI 2 representing a majority of the
voting power of CWI 2’s then outstanding securities, (ii) a change in the
composition of the board of directors of CWI 2 occurs such that the individuals
who, as of immediately after the closing, constitute the board of directors of
CWI 2 cease for any reason to constitute at least a majority of the board of
directors of CWI 2, other than in the case of any individual who becomes a
member of the board of directors of CWI 2 subsequent to the Closing whose
election or nomination for election by CWI 2’s equityholders was approved by a
vote of at least a majority of those individuals who were former members of the
board of directors of CWI 2, or (iii) a reorganization, merger or consolidation,
sale or other disposition of all or substantially all of the assets of CWI 2 or
other transaction is consummated (other than a transaction between CWI 2 or one
of its Affiliates, on the one hand, and any entity that is, at the time of such
transaction, sponsored or advised by a Party or its Affiliates, on the other
hand), unless, in each case, immediately following such transaction or
disposition, the individuals and entities who were the beneficial owners of the
voting securities of CWI 2 immediately prior to the transaction or disposition
beneficially own, directly or indirectly, a majority of the voting power of the
then outstanding voting securities of the surviving entity in the transaction or
disposition (including an entity which as a result of such transaction owns CWI
2 or all or substantially all of its assets).

 

 I-3 

 

 

“Restriction Termination Date” means, (i) with respect to the WPC Entities, (A)
the date on which the WPC Entities do not have the right to designate any
persons for election of directors at the annual meeting of stockholders of CWI 2
in accordance with this Agreement, or (B) if earlier, a Change in Control of
either (x) CWI 2, or (y) WPC, in the case of each of subclauses (x) and (y) if
at such time any WPC representatives on CWI 2's Board of Directors resigns from
the Board and the WPC Entities agree not to exercise their director designations
right in the future (it if would otherwise continue); and (ii) with respect to
the Watermark Entities, immediately upon the occurrence of a Restriction
Cancellation Event.

 

“SDAT” means the State Department of Assessments and Taxation of Maryland.

 

“SGP LLCA” means that certain Limited Liability Company Agreement of SGP dated
as of September 15, 2010, as amended, by and among CWA, CLA and Carey II.

 

“SGP 2 LLCA” means that certain Limited Liability Company Agreement of SGP 2
dated as of February 9, 2015, as amended, by and between CWA 2 and Holdco.

 

“Subadvisory Agreements” means the CWI 1 Subadvisory Agreement together with the
CWI 2 Subadvisory Agreement.

 

“Subsidiary” of any Person means another Person (a) at least 50% of the
securities or ownership interests having by their terms ordinary voting power to
elect a majority of the board of directors or other Persons performing similar
functions is owned or controlled directly or indirectly by such first Person
and/or by one or more of its Subsidiaries or (b) of which such first Person
and/or one of its Subsidiaries serves as a general partner (in the case of a
partnership) or a manager or managing member (in the case of a limited liability
company) or similar function.

 

“Trademark Coexistence Agreement” means that certain trademark coexistence
agreement attached hereto as Exhibit D, entered into on the date hereof to
become automatically effective at the Closing by and between Watermark Capital
and CWI 2.

 

“Transition Services Agreements” means the Watermark Transition Services
Agreement and the WPC Transition Services Agreement.

 

 I-4 

 

 

“Value” means, with respect to any Capital Stock beneficially owned by a
particular Person, the sum of (i) with respect to Preferred Stock, the aggregate
liquidation preference of any shares of Preferred Stock beneficially owned by
such Person, plus (ii) with respect to Common Stock, the aggregate value of
Common Stock beneficially owned by such Person (measured (A) prior to an IPO
Event, in relation to the then-current net asset value of CWI 2 on a
consolidated basis, and (B) from and after an IPO Event, in accordance with the
thirty (30) day volume weighted average price of Common Stock).

 

“Watermark Bill of Sale” means that certain Bill of Sale attached hereto as
Exhibit I, entered into on the date hereof to become automatically effective at
the Closing by and between Watermark Capital and CWI 2.

 

“Watermark Transition Services Agreement” means that certain transition services
agreement attached hereto as Exhibit G, entered into on the date hereof to
become automatically effective at the Closing by and between Watermark Capital
and CWI 2.

 

“WPC Trademark Assignment Agreement” means that certain Trademark Assignment
Agreement attached hereto as Exhibit J, entered into on the date hereof to
become automatically effective at the Closing between WPC and CWI 2.

 

“WPC Transition Services Agreement” means that certain transition services
agreement substantially in the form attached hereto as Exhibit H, entered into
on the date hereof to become automatically effective at the Closing between WPC
and CWI 2.

 

 I-5 

 

 

ANNEX II

 

Notices

 

Party Address CWI 1 Entities:

Carey Watermark Investors Incorporated

50 Rockefeller Plaza
New York, New York 10020

CWI 2 Entities:

Carey Watermark Investors 2 Incorporated

50 Rockefeller Plaza
New York, New York 10020

WPC Entities:

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 

Watermark Entities:

Watermark Capital Partners, LLC
150 North Riverside Plaza, Suite 4200
Chicago, Illinois 60606
Attention: Michael Medzigian

 

Email: medzigian@watermarkcap.com

 

 

with a copy to (for information purposes only):

 

Vedder Price P.C.

222 North LaSalle Street, Suite 2400
Chicago, Illinois 60601

Attention: Michael A. Nemeroff

Shelby E. Parnes

Email: mnemeroff@vedderprice.com 

sparnes@vedderprice.com

 

 II-1