Contract analysis

From: Grace Nakamura <gnakamura@calderwoodharkness.com> To: Derek Huang <dhuang@verimarkhotels.com> Cc: Douglas Fairchild <dfairchild@calderwoodharkness.com> Date: Fri, 24 Feb 2023 04:47:00 -0000 Subject: Coral Palms Refinancing — Negotiated Deposit Settlement Terms with Pinnacle Atlantic Capital

I am writing to provide you with an update on the deposit disposition in connection with the Coral Palms Grand Resort & Spa refinancing matter (Matter No. 1021-00007).

As you know, following VHG's termination notice delivered to Pinnacle Atlantic Capital, LLC ("PAC") on February 15, 2023, PAC responded on February 22, 2023, asserting its right to retain all deposits held by Meridian Title & Escrow, Inc. Since that time, we have been in active discussions with PAC and its counsel at Whitford Baines & Driscoll LLP (Philip Tarrant Corporation) to negotiate the disposition of VHG's dep

**Summary of Negotiated Settlement Terms**

The total deposits held by Meridian Title & Escrow, Inc. aggregate $2,400,000, consisting of two components:

1. **Good Faith Deposit — $1,600,000 (Forfeited to PAC).** PAC will retain the $1,600,000 good faith deposit as liquidated damages under Section 8(b) of the Commitment Letter dated December 9, 2022. As we have discussed, VHG's position has been that the repricing PAC delivered on January 27, 2023, constituted a material modification of the commitment terms, which should entitle VHG to a full refund of this deposit. P

2. **Rate Lock Deposit — $800,000 (Refunded to VHG).** PAC has agreed to refund the $800,000 rate lock deposit in full. This represents a meaningful negotiated concession. PAC's initial position, as set forth in its February 22 response, was that both deposits were non-refundable upon borrower termination. We argued successfully that the rate lock deposit was functionally distinct from the good faith deposit — it was

**Net Result:** Of the $2,400,000 in total deposits, $1,600,000 will be forfeited to PAC and $800,000 will be refunded to VHG.

I have attached a draft Deposit Settlement Letter Agreement for your review. The principal terms are as follows:

- The agreement provides for mutual instructions to Meridian Title & Escrow, Inc. (Lisa Portman, Title Officer) to disburse the $1,600,000 good faith deposit to PAC and to return the $800,000 rate lock deposit to Coral Palms Resort Holdings LLC (or as VHG may otherwise direct). - The agreement includes a mutual release of all claims between Coral Palms Resort Holdings LLC, Verimark Hospitality Group Inc., and Pinnacl

I would ask that you review the attached draft with Natasha and, if appropriate, Conrad Elliston. We would appreciate receiving any comments or revisions no later than **Monday, February 27, 2023**, so that we can finalize execution by **February 28, 2023** — the target date we have discussed with PAC's counsel. Douglas Fairchild is available should VHG's board or executive team wish to discuss the settlement terms b

A few additional points for your records:

- The $800,000 commitment fee (0.50% of the $160,000,000 loan amount) was payable only at closing and was never incurred. Accordingly, there is no outstanding exposure on that item. - Once the settlement agreement is executed and the $800,000 rate lock deposit is returned, this matter will be effectively closed from a transactional standpoint. At that time, we will prepare a matter closing memorandum summarizing the

I am available to discuss any of the foregoing by phone at your convenience. While the forfeiture of the $1,600,000 good faith deposit is an unfortunate outcome, the full recovery of the $800,000 rate lock deposit — together with the mutual release of claims — represents a reasonable resolution given the circumstances and the inherent uncertainties of litigating the forfeiture provision. We believe this settlement po

Thank you, Derek. Please do not hesitate to reach out with any questions.

**Grace Nakamura** Associate, Real Estate Calderwood & Harkness LLP 100 Southeast Second Street, Suite 3800 Miami, FL 33131 Direct: (305) 814-2260 Email: gnakamura@calderwoodharkness.com

**Attachment:** Draft Deposit Settlement Letter Agreement — PAC-VHG (02.24.2023).docx

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