Contract analysis

Section 1.1 — Defined Terms As used in this Agreement, the following terms shall have the meanings ascribed to them below. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Loan Agreement. "Borrower" shall mean Coral Palms Resort Holdings LLC, a Florida limited liability company, having its principal address at c/o Verimark Hospitality Group Inc., 1400 Baysh

Section 1.2 — Rules of Construction (a) Unless the context otherwise requires, words importing the singular number shall include the plural and vice versa, and words importing the masculine gender shall include the feminine and neuter genders and vice versa. (b) References in this Agreement to "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation" and shall not be con

ARTICLE II — LOCKBOX AND CASH MANAGEMENT ACCOUNTS

Section 2.1 — Establishment of Lockbox Account (a) Borrower shall establish and maintain a Lockbox Account at a Lockbox Bank . > [C&H Comment: The WBD draft gives Lender sole discretion over the choice of Lockbox Bank. Borrower requires mutual approval rights, with each party acting reasonably. This is consistent with the revised definition of "Lockbox Bank" in Section 1.1.] (b) All Gross Revenue from the Property sh

Section 2.2 — Sweeps to Cash Management Account (a) > [C&H Comment: This is the single most material commercial point in this Agreement. The WBD draft imposes a day-one hard lockbox structure, under which all Property revenue is swept to a Lender-controlled account from the Closing Date forward, regardless of whether the Property is performing satisfactorily. This is commercially unreasonable and not market-standard

Section 2.3 — Clearing Account / Operating Account (a) amounts from the Cash Management Account to Borrower's Clearing Account in accordance with the Waterfall set forth in Section 4.2 hereof. (b) The Clearing Account shall be maintained at a bank designated by Borrower and reasonably acceptable to Lender. (c) Borrower shall use funds in the Clearing Account solely for the payment of Property operating expenses and o

Section 2.4 — Deposit Account Control Agreements (a) Borrower shall execute Deposit Account Control Agreements with respect to each of the Lockbox Account and the Cash Management Account (and any other account required to be subject to a control agreement under the Loan Documents). (b) Each DACA shall be in form and substance . > [C&H Comment: Borrower should have the right to review and provide input on the form of

Section 2.5 — Account Maintenance Costs (a) Borrower shall pay all fees and costs of establishing and maintaining the Lockbox Account, the Cash Management Account, and the Clearing Account, including, without limitation, account maintenance fees, wire transfer fees, sweep fees, and any fees charged by the applicable depository institution in connection with the DACA. (b) > [C&H Comment: Borrower should not be subject

ARTICLE III — CASH MANAGEMENT PERIODS AND TRIGGER EVENTS

Section 3.1 — Cash Management Period; Trigger Events (a) A "Cash Management Period" shall commence upon the occurrence and during the continuance of any of the following events (each, a "Trigger Event"): (i) Monetary Default. Borrower's failure to make any payment of principal, interest, or other amounts due under the Loan Documents within after the applicable due date therefor. > [C&H Comment: Five (5) Business Days

Section 3.2 — Cash Sweep Events (a) > [C&H Comment: The WBD draft makes the Cash Sweep Event co-extensive with the Cash Management Period, meaning that any Trigger Event that activates a Cash Management Period also activates a cash sweep. This is overly aggressive. A Cash Management Period (which imposes Lender oversight and control of disbursements) is a less severe remedy than a Cash Sweep Event (which traps all Ex

Section 3.3 — Cure and Termination of Cash Management Period (a) A Cash Management Period shall terminate, and Lender shall to the pre-Cash Management Period cash management structure described in Section 2.2(a)(i) hereof, upon the occurrence of the following, as applicable: (i) Monetary Default Cure. With respect to a Cash Management Period triggered under Section 3.1(a)(i), the cure of the applicable monetary defau

Section 3.4 — Lender Discretion During Cash Management Period (a) During a Cash Management Period, Lender shall have the right to direct disbursements from the Cash Management Account in accordance with the Waterfall set forth in Section 4.2 hereof. (b) During a Cash Management Period, Lender shall have the right to . > [C&H Comment: Line-item approval authority is unworkable for a 342-room resort hotel with approxim

ARTICLE IV — WATERFALL AND DISBURSEMENTS

Section 4.1 — Operating Budget (a) No later than prior to the commencement of each calendar year during the term of the Loan (commencing with the first full calendar year following the Closing Date), Borrower shall submit to Lender a proposed annual operating budget for the Property (each, an "Operating Budget"), setting forth in reasonable detail Borrower's good faith projections for the upcoming calendar year, incl

Section 4.2 — Waterfall Priorities Amounts in the Cash Management Account (or, prior to a Cash Management Period, amounts in the Clearing Account that are subject to the Waterfall) shall be applied on each Monthly Distribution Date in the following order of priority (the "Waterfall"): > [C&H Comment: Borrower proposes a revised ordering of the Waterfall to move Operating Expenses ahead of FF&E Reserve and Capital Res

Section 4.3 — Monthly Distribution Date "Monthly Distribution Date" shall mean the Business Day of each calendar month, commencing the first full calendar month following the Closing Date. On each Monthly Distribution Date, amounts in the Cash Management Account shall be disbursed in accordance with the Waterfall. > [C&H Comment: The fifth (5th) Business Day is too early to reconcile the prior month's revenue and exp

Section 4.4 — True-Up Payments (a) If, during any , amounts disbursed for Operating Expenses from the Cash Management Account (or, prior to a Cash Management Period, from the Clearing Account) exceed the amounts approved in the Operating Budget for such period (taking into account the permitted variance thresholds set forth in Section 4.1(d) hereof), Lender may deduct the amount of such overage from Excess Cash Flow

ARTICLE V — RESERVE FUNDING MECHANICS

Section 5.1 — Coordination with Reserve Agreement (a) Monthly reserve contributions shall be funded from the Cash Management Account (or, prior to a Cash Management Period, from the Clearing Account) through the Waterfall in accordance with the Reserve Agreement of even date herewith. (b) Upfront reserves in the aggregate amount of Four Million Eight Hundred Thousand and No/100 Dollars ($4,800,000) shall be funded at

Section 5.2 — Reserve Account Control (a) All Reserve Accounts shall be held at the Cash Management Bank or such other . > [C&H Comment: Consistent with the requirements for the Cash Management Bank and Lockbox Bank. Borrower also requests the right to receive periodic statements for all Reserve Accounts.] (b) All Reserve Accounts shall be pledged to Lender as additional collateral for the Loan, and Lender shall have

Section 5.3 — Interest on Reserve Accounts > [C&H Comment: The WBD draft is entirely silent on interest accrual for Reserve Accounts. These are Borrower's funds being held for the benefit of the Property. Borrower should receive the benefit of interest earned on these deposits. This is a standard provision.]

ARTICLE VI — REPORTING AND INFORMATION COVENANTS

Section 6.1 — Monthly Operating Statements (a) Borrower shall deliver to Lender, within after the end of each calendar month, unaudited monthly operating statements for the Property, in the form attached hereto as Exhibit B or in such other form as may be reasonably approved by Lender, including the following: (i) Revenue detail by department, including room revenue, food and beverage revenue (three (3) outlets), spa

Section 6.2 — Annual Financial Statements (a) Borrower shall deliver to Lender, within after the end of each fiscal year, . > [C&H Comment: The Property entity (Coral Palms Resort Holdings LLC) is a single-purpose entity and may not be separately audited. Borrower proposes delivery of audited consolidated financial statements of the Guarantor (which is a publicly traded company on Nasdaq and is audited by Keswick & H

Section 6.3 — STR Reports Borrower shall deliver to Lender copies of any STR (Penmark Enterprises) reports, or reports from similar competitive set benchmarking services, received by Borrower or its management company for the Property, within after Borrower's receipt thereof. > [C&H Comment: No substantive objection to this provision. Extended delivery timeframe from five (5) to ten (10) Business Days for operational

Section 6.4 — DSCR and Debt Yield Certificates (a) Borrower shall deliver to Lender, within after the end of each calendar quarter, a quarterly DSCR and Debt Yield compliance certificate, substantially in the form attached hereto as Exhibit C, including: (i) Trailing twelve (12) month Net Operating Income, calculated in accordance with the definition of Net Operating Income in Section 1.1 hereof; (ii) DSCR calculatio

Section 6.5 — Capital Expenditure Reports (a) Borrower shall deliver to Lender, within forty-five (45) days after the end of each calendar quarter, a quarterly report on capital expenditures, FF&E replacements, and use of Reserve Account funds during the preceding calendar quarter. (b) Such reports shall include invoices, contractor certifications (including lien waivers), and evidence of completion for all disbursem

Section 6.6 — Insurance Reporting (a) Borrower shall deliver to Lender evidence of insurance renewals, endorsements, and certificates of insurance naming Lender as mortgagee and additional insured (as applicable), at least thirty (30) days prior to the expiration of any insurance policy covering the Property. (b) Insurance coverage shall comply with the requirements set forth in the Loan Agreement, including property

Section 7.1 — Revenue Direction Covenant (a) Borrower covenants and agrees that all Gross Revenue from the operation of the Property shall be deposited directly into the Lockbox Account, and that Borrower shall not maintain any other depository account for the receipt of Property revenue. (b) > [C&H Comment: A petty cash exception is necessary for the practical operation of a resort hotel. Requiring every petty cash

Section 7.2 — No Commingling Borrower shall not commingle funds in the Lockbox Account, the Cash Management Account, the Clearing Account, or any Reserve Account with funds from any other property owned by Borrower or its affiliates, or from any other entity. All accounts established hereunder shall be maintained as segregated, single-purpose accounts for the benefit of the Property. > [C&H Comment: Acceptable. Consi

Section 7.3 — Account Maintenance (a) Borrower shall maintain the Lockbox Account, the Cash Management Account, and the Clearing Account throughout the term of the Loan, and shall not close, transfer, or modify any such account without Lender's prior written consent . > [C&H Comment: Borrower should be able to make administrative modifications to accounts (e.g., changes to authorized signatories, updating contact inf

Section 7.4 — Compliance with DACA Borrower shall at all times comply with the terms and conditions of each Deposit Account Control Agreement executed in connection with this Agreement and the other Loan Documents. Borrower shall not take any action, or fail to take any action, that is inconsistent with Lender's security interest in any account subject to a DACA.

Section 7.5 — Seasonal Adjustments > [C&H Comment: This is a new section requested by Borrower. The Florida Keys hospitality market is highly seasonal, and it is critical that the Cash Management Agreement acknowledge this reality. Without this provision, Lender could trigger a Cash Management Period based on a single weak off-season quarter, even if the Property is performing well on an annualized basis. The trailin

ARTICLE VIII — EVENTS OF DEFAULT

Section 8.1 — Events of Default Under This Agreement The following shall constitute Events of Default under this Agreement (each, an "Event of Default"): (a) Failure of Borrower to deposit Gross Revenue into the Lockbox Account within of receipt thereof ; > [C&H Comment: Three (3) Business Days is more reasonable given the multiple revenue streams at a 342-room resort. Additionally, Borrower should receive written no

Section 8.2 — Remedies Upon Event of Default (a) Upon the occurrence and during the continuance of an Event of Default , Lender may exercise one or more of the following remedies: (i) Exercise exclusive control over the Lockbox Account, the Cash Management Account, the Clearing Account, and all Reserve Accounts, by delivering instructions to the applicable depository institutions pursuant to the DACAs; (ii) Direct al

ARTICLE IX — REPRESENTATIONS AND WARRANTIES

Section 9.1 — Borrower Representations Borrower hereby represents and warrants to Lender as follows, as of the date hereof : (a) Organization and Good Standing. Borrower is Coral Palms Resort Holdings LLC, a Florida limited liability company, duly organized, validly existing, and in good standing under the laws of the State of Florida. (b) Ownership. Borrower is a wholly owned indirect subsidiary of Verimark Hospital