8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): April 9, 2020

Carey Watermark Investors 2 Incorporated

(Exact Name of Registrant as Specified in its Charter)

Maryland

(State or Other Jurisdiction of Incorporation)

000-55461	46-5765413
(Commission File Number)	(IRS Employer Identification No.)
50 Rockefeller Plaza, New York, NY	10020
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (212) 492-1100

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	N/A	N/A

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company    x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ¨

Item 1.01 — Entry Into a Material Definitive Agreement.

The information set forth in the fourth paragraph of Item 5.02 of this Current Report on Form 8-K is incorporated herein by reference.

Item 1.02  — Termination of a Material Definitive Agreement.

The information set forth in the seventh paragraph of Item 2.01 of this Current Report on Form 8-K is incorporated herein by reference.

Item 2.01 — Completion of Acquisition or Disposition of Assets.

Merger

The information set forth in Item 5.02 of this Current Report on Form 8-K is incorporated herein by reference.

On April 13, 2020, Carey Watermark Investors 2 Incorporated, a Maryland corporation (“CWI 2” or, following the completion of the merger, the “combined company”), announced that it has filed articles of merger with the Maryland State Department of Assessments and Taxation (the “SDAT”) and completed the previously announced merger (the “merger”) of Apex Merger Sub LLC, a Maryland limited liability company and direct, wholly owned subsidiary of CWI 2 (“Merger Sub”), with and into Carey Watermark Investors Incorporated, a Maryland corporation (“CWI 1”), effective as of April 13, 2020, pending confirmation of the SDAT's acceptance of the articles of merger. After giving effect to the merger, CWI 1 became a wholly owned subsidiary of CWI 2. The merger was effected pursuant to the Agreement and Plan of Merger, dated as of October 22, 2019 (as amended, the “merger agreement”), by and among CWI 1, CWI 2, and Merger Sub.

In accordance with the merger agreement, at the effective time of the merger (the “effective time”) each issued and outstanding share of the CWI 1’s common stock (or fraction thereof), $0.001 par value per share (“CWI 1 common stock”), was converted into the right to receive 0.9106 shares (the “exchange ratio”) of validly issued, fully paid and nonassessable shares of CWI 2’s Class A common stock, $0.001 par value per share (“CWI 2 Class A common stock”). Also at the effective time, all CWI 1 RSUs outstanding and unvested immediately prior to the effective time were converted into a CWI 2 restricted stock unit with respect to a whole number of shares of CWI 2 Class A common stock equal to (i) the number of shares of CWI 1 common stock subject to such unvested CWI 1 RSU, multiplied by (ii) the exchange ratio.

The foregoing descriptions of the merger agreement and the transactions contemplated thereby do not purport to be complete and are subject to and qualified in their entirety by reference to the merger agreement.  A copy of the merger agreement and amendments were attached as Exhibit 2.1 to CWI 2’s Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on October 22, 2019, and Exhibit 2.1 to CWI 2’s Current Report on Form 8-K filed with the SEC on March 31, 2020, and the terms thereof are incorporated herein by reference.

Completion of Internalization

Immediately following the effective time of the merger, and pending confirmation of the SDAT's acceptance of the articles of merger, the internalization of the management of the combined company (the “internalization”) was consummated pursuant to the Internalization Agreement, dated as of October 22, 2019 (as amended, the “internalization agreement”), by and among CWI 1, CWI OP, LP (“CWI OP”), CWI 2 OP, LP (“CWI 2 OP”), W. P. Carey Inc. (“WPC”), Carey Watermark Holdings, LLC (“SGP 1”), CLA Holdings, LLC, Carey REIT II, Inc., WPC Holdco LLC, Carey Watermark Holdings 2, LLC (“SGP 2”), Carey Lodging Advisors, LLC (the “Advisor”), Watermark Capital Partners, LLC (“Watermark Capital”), CWA, LLC (the “CWI 1 Subadvisor”), and CWA2, LLC (the “CWI 2 Subadvisor”).

In accordance with the internalization agreement, CWI OP and CWI 2 OP redeemed the special general partnership interests held by SGP 1 and SGP 2 in CWI OP and CWI 2 OP, respectively (the “redemption”). As consideration for the redemption and the other transactions contemplated by the internalization agreement, CWI 2 or CWI 2 OP (as applicable) issued equity consisting of (x) 2,840,549 shares of CWI 2 Class A common stock, to affiliates of WPC, (y) 1,300,000 shares of CWI 2 Series A preferred stock, $0.001 par value per share, to affiliates of WPC, with a liquidation preference of $50.00 per share ($65,000,000 in the aggregate), and (z) 2,417,996 limited partnership units in CWI 2 OP, to affiliates of Watermark Capital.  Following the redemption, SGP 1 and SGP 2 have no further liability or obligation pursuant to the limited partnership agreements of CWI OP or CWI 2 OP, respectively.

Immediately following the redemption, the existing advisory agreements, as amended, between CWI 1 or CWI 2 (as applicable) and the Advisor, and the existing sub-advisory agreements, as amended, between the Advisor and the CWI 1 Subadvisor or the CWI 2 Subadvisor (as applicable), were automatically terminated. The secured credit facilities entered into by CWI OP or CWI 2 OP (as applicable) as borrower, and CWI 1 or CWI 2 (as applicable) as guarantor, with WPC as lender, each matured at the time of the expiration of such existing advisory agreements and the applicable loan agreements and loan documents were terminated. Neither CWI 1 nor CWI 2 had any outstanding obligations under the respective facilities.

The foregoing descriptions of the internalization agreement and the transactions contemplated thereby do not purport to be complete and are subject to and qualified in their entirety by reference to the internalization agreement.  A copy of the internalization agreement was attached as Exhibit 2.2 to CWI 2’s Current Report on Form 8-K filed with the SEC on October 22, 2019, and the terms thereof are incorporated herein by reference.

Item 3.02 –– Unregistered Sales of Equity Securities.

The information set forth in the seventh paragraph of Item 2.01 of this Current Report on Form 8-K is incorporated herein by reference.

Item 5.02 –– Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

The information set forth in Item 2.01 of this Current Report on Form 8-K is incorporated herein by reference.

In connection with the merger and effective as of immediately following the effective time, the size of the board of directors of the combined company was increased from five to nine members and the resulting vacancies were filled by the appointment of Charles S. Henry, Michael D. Johnson, Simon M. Turner, and John J. Park to the board of directors until their respective successors are duly elected and qualify or their earlier resignation or removal.

Effective as of April 13, 2020, Mr. Henry, Mr. Johnson, Katherine G. Lugar, Robert E. Parsons, Jr., William H. Reynolds, Jr., and Mr. Turner each agreed with CWI 2 to waive the pro rata portion of the annual cash retainer that is part of his or her respective compensation for services as a director of the combined company for the period through July 15, 2020.

In connection with the closing of the internalization, Michael G. Medzigian, the combined company’s Chief Executive Officer, entered into a letter agreement with CWI 2 (the “Medzigian letter agreement”) to confirm his agreement to reduce by 50% the pro rata portion of Mr. Medzigian’s annual base salary payable by the combined company through July 15, 2020.

In addition, Mallika Sinha, the combined company’s Chief Financial Officer, and Gil Murillo, the combined company’s Chief Investment Officer, each agreed with CWI 2 to reduce by 20% the pro rata portion of his or her respective annual base salary payable by the combined company through July 15, 2020.

The foregoing description of the letter agreement does not purport to be complete and is qualified in its entirety by reference to the Medzigian letter agreement, a copy of which is filed as Exhibit 2.1 to this Current Report on Form 8-K and incorporated herein by reference.

Item 5.03 –– Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

The information set forth in Item 2.01 of this Current Report on Form 8-K is incorporated herein by reference.

In connection with the internalization, on April 9, 2020, CWI 2 filed an amendment to its articles of incorporation with the SDAT, effective as of April 9, 2020. This charter amendment removed the restriction of issuing redeemable securities under clause (A) of Section 9.3(f), in order to permit the issuance of the Series A preferred stock in connection with the internalization. This charter amendment was approved on April 8, 2020, at a special meeting of CWI 2’s stockholders. Confirmation of the SDAT’s acceptance of the charter amendment is pending.

In connection with the merger and the internalization, on April 9, 2020, and April 13, 2020, CWI 2 filed further amendments to its articles of incorporation, as amended, with the SDAT, effective as of April 14, 2020. These charter amendments change the name of CWI 2 to “Watermark Lodging Trust, Inc.” Confirmation of the SDAT’s acceptance of the charter amendments is pending.

The foregoing descriptions of the charter amendments do not purport to be complete and are subject to and qualified in their entirety by reference to their respective full texts. Copies of the charter amendments are filed as Exhibits 3.1 and 3.2 to this Current Report on Form 8-K and are incorporated herein by reference.

Item 9.01 –– Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired

The Company intends to file any financial statements required by this Item 9.01(a) in a Form 8-K/A that will be filed not later than 71 days after the date that this Form 8-K is required to be filed.

(b) Pro Forma Financial Information

The Company intends to file any pro forma financial information required by this Item 9.01(b) in a Form 8-K/A that will be filed not later than 71 days after the date that this Form 8-K is required to be filed.

(d) Exhibits

Exhibit No.	Description
2.1	Letter agreement, dated April 13, 2020, by and between Carey Watermark Investors 2 Incorporated and Michael G. Medzigian
3.1	Articles of Amendment of Carey Watermark Investors 2 Incorporated
3.2	Articles of Amendment of Watermark Lodging Trust Incorporated

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, Carey Watermark Investors 2 Incorporated has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Carey Watermark Investors 2 Incorporated
Date: April 13, 2020	By:	/s/ Susan C. Hyde
		Susan C. Hyde
		Chief Administrative Officer and Corporate Secretary

EX-2.1

Exhibit 2.1

STRICTLY CONFIDENTIAL

April 13, 2020

Carey Watermark Investors 2 Incorporated

50 Rockefeller Plaza

New York, NY 10020

Attn: Chairman of the Board of Directors;

General Counsel

Re: Temporary Modification to Compensation

Reference is made to that certain Agreement, executed on October 22, 2019 (the “Employment Agreement”), by and between Carey Watermark Investors 2 Incorporated (and any successor in interest thereto, the “Employer”) and Michael G. Medzigian (the “Executive”). Capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Employment Agreement.

This letter agreement confirms the agreement between the Executive and the Employer regarding the compensation that the Executive shall receive from the Employer.

Pursuant to Section 10(a) of the Employment Agreement, the Executive and the Employer hereby agree that effective as of the Closing Date, notwithstanding anything to the contrary in the Employment Agreement (including without limitation Section 2(b) thereof), the pro rata portion of the Annual Base Salary payable to the Executive by the Employer for the period from April 15, 2020, through July 15, 2020, shall be reduced by fifty percent (50%), which amount is $96,875.00.

Except as expressly set forth in this letter agreement, (i) the Employment Agreement shall remain in full force and effect, and (ii) this letter agreement shall not be deemed and does not constitute a modification or waiver of any provision of the Employment Agreement or operate as a modification or waiver of any right, power, or remedy under the Employment Agreement. In the event of any conflict between this letter agreement (or any portion hereof) and the Employment Agreement, the terms of this letter agreement shall prevail.

This letter agreement shall be governed by and construed in accordance with the laws of the State of Illinois without reference to principles of conflict of laws. This letter agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

From and after the date of this letter agreement, all references to the Employment Agreement (whether in the Employment Agreement or otherwise) shall mean the Employment Agreement as supplemented by this letter agreement.

This letter agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute the same instrument. Delivery of an executed signature page by electronic transmission (including via .PDF or .TIF format) shall be effective as actual delivery thereof, and execution of a signature page by electronic signature shall be effective as manual, original ink execution thereof; and the parties hereto shall be permitted to rely upon any signature page so delivered or so executed to the same extent and effect as if delivered via non-electronic transmission or as if executed via manual, original ink signatures, respectively.

[SIGNATURE PAGE FOLLOWS]

Sincerely,

MICHAEL G. MEDZIGIAN

/s/ Michael G. Medzigian

ACKNOWLEDGED AND AGREED:
CAREY WATERMARK Investors 2 Incorporated
(and any successor in interest)
By:	/s/ Robert E. Parsons, Jr.
	Name:	Robert E. Parsons, Jr.
	Title:	Chairman of Special Committee of the Board of Directors

Copies to:

Clifford Chance US LLP

31 West 52nd Street

New York, NY 10019

Attn: Kathleen L. Werner

Howard Adler

Vedder Price P.C.

222 North LaSalle Street, Suite 2400

Chicago, Illinois 60601

Attn: Michael A. Nemeroff

Philip L. Mowery

EX-3.1

Exhibit 3.1

EXECUTION VERSION

CAREY WATERMARK INVESTORS 2 INCORPORATED

ARTICLES OF AMENDMENT

CAREY WATERMARK INVESTORS 2 INCORPORATED, a Maryland corporation (the “Corporation”), desires to amend its charter as currently in effect and as hereinafter amended.

FIRST: The charter of the Corporation as currently in effect (the “Charter”) is hereby amended by deleting clause (A) of Section 9.3(f).

SECOND: The amendment of the Charter as hereinabove set forth has been duly advised and approved by the Board of Directors and approved by the stockholders of the Corporation to the extent required by law.

THIRD:  These Articles of Amendment shall be effective at 12:31 p.m., local time in Baltimore City, Maryland, on April 9, 2020.

FOURTH:  The undersigned acknowledges these Articles of Amendment to be the corporate act of the Corporation and as to all matters or facts required to be verified under oath, the undersigned acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be signed in its name and on its behalf by its Chief Executive Officer and attested to by its Corporate Secretary on this 9th day of April, 2020.

ATTEST:	CAREY WATERMARK INVESTORS 2 INCORPORATED
/s/ Susan C. Hyde	/s/ Michael G. Medzigian	(SEAL)
Name: Susan C. Hyde	Name: Michael G. Medzigian
Title: Corporate Secretary	Title: Chief Executive Officer

EX-3.2

Exhibit 3.2

EXECUTION VERSION

WATERMARK LODGING TRUST INCORPORATED

ARTICLES OF AMENDMENT

THIS IS TO CERTIFY THAT:

FIRST: The charter of Watermark Lodging Trust Incorporated, a Maryland corporation (the “Corporation”), is hereby amended by deleting the existing Article I in its entirety and substituting in lieu thereof a new article to read as follows:

ARTICLE I

NAME

The name of the corporation (which is hereinafter called the “Corporation” is):

Watermark Lodging Trust, Inc.

SECOND: The amendment to the charter of the Corporation as set forth above has been duly approved by at least a majority of the entire Board of Directors of the Corporation as required by law. The amendment set forth above is made without action by the stockholders of the Corporation, pursuant to Section 2-605(a)(1) of the Maryland General Corporation Law.

THIRD:  These Articles of Amendment shall be effective at 12:02 a.m., local time in Baltimore City, Maryland, on April 14, 2020.

FOURTH: The undersigned acknowledges these Articles of Amendment to be the corporate act of the Corporation and as to all matters or facts required to be verified under oath, the undersigned acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be signed in its name and on its behalf by its Chief Executive Officer and attested to by its Corporate Secretary on this 12th day of April, 2020.

ATTEST:	WATERMARK LODGING TRUST INCORPORATED
/s/ Susan C. Hyde	/s/ Michael G. Medzigian	(SEAL)
Name: Susan C. Hyde	Name: Michael G. Medzigian
Title: Corporate Secretary	Title: Chief Executive Officer