(b) “Person” means any individual, entity, corporation, partnership, joint venture, limitedliability company, estate, trust, unincorporated association, any federal, state, county ormunicipal government or any bureau, department or agency thereof and any fiduciary acting in suchcapacity on behalf of any of the foregoing.(c) “Subadvisor Indemnitees” means the Subadvisor, its Affiliates, and the directors,officers, employees, agents and equity holders of the Subadvisor and its Affiliates.Section 2. Services by Subadvisor. Pursuant to the Subadvisory Agreement, theSubadvisor will serve as subadvisor to the Advisor. However, this Agreement shall not impose anyobligation on the Subadvisor or the Advisor to continue the Subadvisor’s service to the Advisorbeyond any period otherwise required by the Subadvisory Agreement.Section 3. Limitations on Activities.(a) Anything else in this Agreement to the contrary notwithstanding, the Subadvisor shallrefrain from taking any action which, in its sole judgment made in good faith, would (i) adverselyaffect the status of the Company as a real estate investment trust or of the Operating Partnershipas a partnership for Federal income tax purposes, (ii) subject the Company or the OperatingPartnership to regulation under the Investment Company Act of 1940, as amended, or (iii) wouldviolate any law, rule, regulation or statement of policy of any governmental body or agency havingjurisdiction over the Company, its shares of common stock, par value $0.001, or any othersecurities of the Company, or otherwise not be permitted by the Company’s Amended and RestatedArticles of Incorporation or Bylaws or agreement of limited partnership of the OperatingPartnership, except if such action shall be ordered by the Advisor, pursuant to an order by theBoard of Directors (the “Board”) of the Company. In such event the Subadvisor shall have noliability for acting in accordance with the specific instructions of the Advisor so given.(b) Notwithstanding the foregoing, the Company shall indemnify and hold harmless theSubadvisor Indemnitees for any loss or liability suffered by them, and the Subadvisor Indemniteesshall not be liable to the Company, the Operating Partnership or to the members of the Board or theCompany’s shareholders for any act or omission by the Subadvisor Indemnitees, if in each case thefollowing conditions are met:(1) the Subadvisor Indemnitees have determined, in good faith, that the courseof conduct which caused the loss or liability was in the best interests of theCompany;(2) the Subadvisor Indemnitees were acting on behalf of or performing servicesfor the Company; and(3) such liability or loss was not the result of negligence or misconduct bythe Subadvisor Indemnitees.
 
- 2 -

 
(c) Notwithstanding the foregoing, the Subadvisor Indemnitees shall not be indemnified by theCompany or the Operating Partnership for any losses, liabilities or expensesarising from or out of the alleged violation of federal or state securities laws unless one ormore of the following conditions are met:(1) there has been a successful adjudication on the merits of each countinvolving alleged securities law violations as to the particular indemnitee;(2) such claims have been dismissed with prejudice on the merits by a court ofcompetent jurisdiction as to the particular indemnitee; or(3) a court of competent jurisdiction approves a settlement of the claimsagainst a particular indemnitee and finds that indemnification of the settlement andthe related costs should be made, and the court considering the request forindemnification has been advised of the position of the Securities and ExchangeCommission and of the published position of any state securities regulatoryauthority in which securities of Company were offered or sold as to indemnificationfor violation of securities laws.Section 4. Advance of Expenses. The Company and the Operating Partnership shall,within ten (10) days after the receipt by the Company of a statement or statements from anySubadvisor Indemnitee requesting such advance or advances from time to time, whether prior to orafter final disposition of any legal activities for which indemnification is being sought, advancefunds to the Subadvisor Indemnitees for legal expenses and other costs incurred as a result of anylegal action for which indemnification is being sought only if all of the following conditions aresatisfied:(a) the legal action relates to acts or omissions with respect to the performance of duties orservices on behalf of the Company;(b) the Subadvisor Indemnitee has provided the Company or the Operating Partnership with awritten affirmation of his, her or its good faith belief that the standard of conduct necessary forindemnification has been met;(c) the legal action is initiated by a third party who is not a shareholder of the Company orthe legal action is initiated by a shareholder of the Company acting in his or her capacity as suchand a court of competent jurisdiction specifically approves such advancement; and(d) the Subadvisor Indemnitee undertakes to repay the advanced funds to the Company, togetherwith the applicable legal rate of interest thereon, in cases in which such Subadvisor Indemnitee isfound not to be entitled to indemnification.Section 5. Indemnification by the Company and the Operating Partnership. Neither theCompany nor the Operating Partnership shall indemnify any Subadvisor Indemnitee for any loss orliability suffered by the Subadvisor Indemnitee, or hold the Subadvisor Indemnitee harmless for anyloss or liability suffered by the Company, except as permitted under Sections 3 and 4 hereof.
 
- 3 -

 
Section 6. Indemnification by the Subadvisor. The Subadvisor shall indemnify and holdharmless the Company and the Operating Partnership from liability, claims, damages, taxes or lossesand related expenses including attorneys’ fees, to the extent that such liability, claims, damages,taxes or losses and related expenses are not fully reimbursed by insurance and are incurred byreason of the bad faith, fraud, willful misfeasance, misconduct, negligence or reckless disregardof the duties of any Subadvisor Indemnitee.Section 7. Limitations on Indemnification.(a) Anything else in this Agreement to the contrary notwithstanding, the SubadvisorIndemnitees shall not be entitled to indemnification or be held harmless pursuant to Sections 3 and4 hereof for any activity which the Subadvisor shall be required to indemnify or hold harmless theCompany pursuant to Section 6 hereof.(b) Any amounts paid pursuant to Sections 3 and 4 hereof shall be recoverable or paid only outthe net assets of the Company and not from shareholders of the Company.Section 8. Severability. If any provision or provisions of this Agreement shall beheld to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legalityand enforceability of the remaining provisions of this Agreement (including, without limitation,each portion of any section of this Agreement containing any such provision held to be invalid,illegal or unenforceable that is not itself invalid, illegal or unenforceable) shall not in any waybe affected or impaired thereby; and (b) to the fullest extent possible, the provisions of thisAgreement (including, without limitation, each portion of any section of this Agreement containingany such provision held to be invalid, illegal or unenforceable, that is not itself invalid,illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.Section 9. Identical Counterparts. This Agreement may be executed in one or morecounterparts, each of which shall for all purposes be deemed to be an original but all of whichtogether shall constitute one and the same Agreement. One such counterpart signed by the partyagainst whom enforceability is sought shall be sufficient to evidence the existence of thisAgreement.Section 10. Headings. The headings of the paragraphs of this Agreement are insertedfor convenience only and shall not be deemed to constitute part of this Agreement or to affect theconstruction thereof.Section 11. Modification and Waiver. No supplement, modification or amendment of thisAgreement shall be binding unless executed in writing by both of the parties hereto. No waiver ofany of the provisions of this Agreement shall be deemed or shall constitute a waiver of any otherprovisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.
 
- 4 -

 
Section 12. Notices. All notices, requests, demands and other communicationshereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by handand receipted for by the party to whom said notice or other communication shall have beendirected, or (ii) mailed by certified or registered mail with postage prepaid, on the thirdbusiness day after the date on which it is so mailed: (a) If to the Subadvisor, to:CWA, LLCc/o Watermark Capital Partners, LLC207 East Westminster, Ste. 200Lake Forest, IL 60045Attn: Michael G. MedzigianWith a copy to:Ungaretti & Harris LLP70 West Madison StreetSuite 3500Chicago, Illinois 60602Attention: Richard A. Ungaretti, Esq. and Michael W. Black, Esq. (b) If to the Company to:Carey Watermark Investors Incorporatedc/o W. P. Carey & Co. LLC50 Rockefeller PlazaNew York, New York 10020Attn: General Counselor to such other address as may have been furnished to the Subadvisor by the Company or to theCompany by the Subadvisor, as the case may be.Section 13. Governing Law. The parties agree that this Agreement shall be governedby, and construed and enforced in accordance with, the laws of the State of New York, withoutregard to its conflicts of laws rules.[SIGNATURE PAGE FOLLOWS]
 
- 5 -

 
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year firstabove written.      CAREY WATERMARK INVESTORS INCORPORATED