The watermark is probably inserted as a graphic object in the section 2
header or footer.

wrote:

I have a Word document with a watermark starting in
section 2. When I go to Format Background Printed
Watermark, the No Watermark option is selected. There is
also no watermark selected in the Print Properties
Effects Watermarks list box. And there is no picture
in any of the headers. I can't figure out how the
watermark got in there.