Contract analysis

1. LOAN AMOUNT AND SIZING — LTV AND DEBT YIELD COVENANTS 1.1 Maximum Loan-to-Value Ratio (LTV) The Commitment Letter provides for a Loan Amount of $160,000,000, subject to a maximum loan-to-value ratio ("LTV") of 68.0%, based upon the appraised value of the Coral Palms Grand Resort & Spa as determined by a Lender-engaged appraiser. We note that, based on VHG's internal valuation of the property at $235,000,000—a figu

2. INTEREST RATE AND RATE LOCK 2.1 Fixed Interest Rate The Commitment Letter provides for a fixed interest rate of 5.35% per annum for a five-year term, stated to be based upon an interpolated U.S. Treasury yield plus a spread of 175 basis points as of the pricing date in November 2022. The Borrower requests confirmation that the 5.35% rate is locked as of a date certain and that the Commitment Letter identify the pr

3. GOOD FAITH DEPOSIT 3.1 Deposit Amount and Escrow The Commitment Letter provides for a good faith deposit of $1,600,000, equal to 1.0% of the $160,000,000 Loan Amount, which the Borrower wired to Meridian Title & Escrow, Inc. on December 12, 2022. Meridian Title & Escrow, Inc. serves as the escrow agent for the deposit. The Borrower requests confirmation that the good faith deposit is held in a federally insured, i

4. COMMITMENT FEE The Commitment Letter provides for a commitment fee of $800,000, equal to 0.50% of the $160,000,000 Loan Amount, payable at closing. The Borrower requests the following clarifications and modifications with respect to the commitment fee: (a) Payable Only at Closing. The Borrower requests confirmation that the commitment fee is payable only upon a successful closing of the Loan and is not payable in

5. LOAN TERM, AMORTIZATION, AND EXTENSION OPTIONS 5.1 Loan Term and Amortization The Commitment Letter provides for a five-year term from the funding date, with interest-only payments during years one and two, and a 30-year amortization schedule commencing in year three. The Borrower requests that the Commitment Letter confirm the following: (a) The amortization schedule commencing in year three shall be calculated o

6. PREPAYMENT AND EXIT FEE 6.1 Prepayment. The Commitment Letter does not clearly set forth the terms governing voluntary prepayment of the Loan, including the lockout period, the prepayment mechanism, and the applicable prepayment premium or penalty. The Borrower requests that the Commitment Letter be amended to address the following: (a) Lockout Period. The Borrower proposes a lockout period of twenty-four (24) mon

7. GUARANTY STRUCTURE 7.1 Limited Recourse / Carve-Out Guaranty The Commitment Letter provides that Verimark Hospitality Group Inc. will execute a limited recourse guaranty (commonly referred to as a "bad boy" carve-out guaranty) in connection with the Loan. The Borrower acknowledges the customary nature of such a guaranty in non-recourse commercial mortgage transactions and does not object to the requirement in prin

8. COLLATERAL AND SECURITY 8.1 Property as Sole Collateral The Commitment Letter contemplates the following collateral package for the Loan: (i) a first priority mortgage lien on the Coral Palms Grand Resort & Spa, 99000 Overseas Highway, Key Largo, Monroe County, Florida 33037 (Folio No. 00460780-000100); (ii) an assignment of leases, rents, and profits arising from the property; (iii) a security interest in all tan

9. RESERVES The Commitment Letter requires upfront reserves totaling $4,800,000 for tax, insurance, furniture, fixtures, and equipment ("FF&E"), and capital improvement reserves. The Borrower requests the following clarifications and modifications: (a) Itemization. The Commitment Letter should provide a detailed itemization of the reserve amounts by category (i.e., the amount allocated to tax reserves, the amount all

10. CASH MANAGEMENT The Commitment Letter contemplates a lockbox and cash management structure pursuant to which all revenues from the property will be deposited into a lockbox account controlled by the Lender, with a cash sweep mechanism triggered by specified events. The Borrower acknowledges the Lender's interest in establishing appropriate cash management controls but requests that the cash management structure b

11. CONDITIONS PRECEDENT TO CLOSING The Borrower requests that the Commitment Letter include a comprehensive and definitive list of all conditions precedent to closing. The current draft of the Commitment Letter references certain conditions in general terms but does not provide the specificity necessary for the Borrower to evaluate the feasibility and timeline for satisfaction of each condition. The Borrower provide

12. LENDER'S COUNSEL FEES AND EXPENSES The Commitment Letter provides that the Borrower shall pay the reasonable legal fees and expenses of the Lender's counsel, Whitford Baines & Driscoll LLP, in connection with the negotiation, drafting, and closing of the definitive loan documents, subject to a cap of $275,000 plus reasonable disbursements. The Borrower accepts the $275,000 fee cap, which is within the range of ma

13. TRANSFER RESTRICTIONS The Commitment Letter contains transfer restrictions that limit the Borrower's ability to sell, assign, transfer, or otherwise dispose of the property or any direct or indirect interest therein without the Lender's prior written consent. The Borrower acknowledges the customary nature of transfer restrictions in commercial mortgage transactions and does not object to the requirement in princi

14. GOVERNING LAW AND DISPUTE RESOLUTION The Borrower requests confirmation that the Commitment Letter and all definitive loan documents, including but not limited to the Loan Agreement, the Mortgage, the Note, the Guaranty, the Assignment of Leases and Rents, the Cash Management Agreement, and the Environmental Indemnity Agreement, will be governed by and construed in accordance with the laws of the State of Florida

15. MISCELLANEOUS COMMENTS 15.1 Reporting Requirements The Commitment Letter references ongoing financial reporting obligations, including quarterly and annual delivery of property-level and guarantor-level financial statements. The Borrower requests that the reporting requirements be aligned with VHG's existing reporting obligations as a publicly traded company listed on the Nasdaq Stock Market (ticker symbol: VMRK)