CALDERWOOD & HARKNESS LLP Attorneys at Law
One Liberty Plaza, 52nd Floor New York, New York 10006 Telephone: (212) 555-7800 Facsimile: (212) 555-7801 www.calderwoodharkness.com
July 15, 2022
VIA ELECTRONIC MAIL AND OVERNIGHT COURIER
Continental Fidelity Title Company 1221 Brickell Avenue, Suite 900 Miami, Florida 33131
Attention: Title Department
Jennifer Cabrera, Senior Title Officer
Re: Mortgagee Title Insurance Policies and Endorsements — $700,000,000 Senior Secured Term Loan B Credit Facility; Credit Agreement dated as of July 21, 2022, among Verimark Hospitality Group Inc. (as Borrower), the Guarantors party thereto, Crescent Harbor Bank, N.A. (as Administrative Agent and Collateral Agent), and the Lenders party thereto; Crescent Harbor Bank Internal Loan Number CHB-LF-2022-07814
Dear Ms. Cabrera:
1. Introduction and Background
Calderwood & Harkness LLP ("C&H" or this "Firm") represents Verimark Hospitality Group Inc. ("VHG"), a corporation duly organized and existing under the laws of the State of Delaware, publicly listed on the New York Stock Exchange under the ticker symbol "VMRK," with its principal executive offices located at 8200 West Palmetto Park Road, Suite 1500, Boca Raton, Florida 33433, in its capacity as borrower in connection with the above-referenced transaction. This letter sets forth our instructions to Continental Fidelity Title Company ("CFTC") regarding the issuance of mortgagee title insurance policies and endorsements for the mortgaged properties securing the credit facility described herein.
The transaction involves a Seven Hundred Million Dollar ($700,000,000) Senior Secured Term Loan B credit facility (the "Term Loan B"), pursuant to that certain Credit Agreement dated as of July 21, 2022 (the "Credit Agreement"), among VHG, as Borrower, the Guarantors party thereto from time to time, Crescent Harbor Bank, N.A., a national banking association with offices at 600 Lexington Avenue, 34th Floor, New York, New York 10022, acting as Administrative Agent and Collateral Agent (in such capacities, the "Agent"), and the several banks and other financial institutions party thereto as lenders (collectively, the "Lenders," and together with the Agent and certain other secured parties, the "Secured Parties").
The proceeds of the Term Loan B will be used to refinance in full VHG's existing $625,000,000 Senior Secured Term Loan B credit facility, which was originally closed on February 14, 2020, with Greystone Federal Credit Corp. serving as administrative agent (CUSIP 92347LAA0) (the "Existing Term Loan B"), and to fund general corporate purposes, including the payment of fees, premiums, expenses, and transaction costs incurred in connection with the refinancing. The new Term Loan B has been assigned CUSIP 92347LAB8.
The Closing Date for the Term Loan B is July 21, 2022, with the transaction structured as a simultaneous sign-and-close. Pursuant to the Post-Closing Letter Agreement dated as of July 21, 2022, executed by VHG and the Agent (the "Post-Closing Letter"), certain post-closing deliverables — including recorded mortgages, final mortgagee title insurance policies, and related items — are required to be delivered no later than August 5, 2022 (the "Post-Closing Deadline"). Time is of the essence with respect to such delivery obligations, as failure to satisfy the post-closing conditions by the Post-Closing Deadline would constitute an Event of Default under the Credit Agreement.
The Term Loan B shares a first-priority lien on the collateral (including the mortgaged real properties described herein) on a pari passu basis with VHG's existing $400,000,000 Senior Secured Revolving Credit Facility (the "RCF"), for which Crescent Harbor Bank, N.A. also serves as Administrative Agent and Collateral Agent. The relative rights and priorities of the Term Loan B Lenders and the RCF lenders are governed by that certain Amended and Restated Intercreditor Agreement dated as of July 21, 2022 (the "Intercreditor Agreement"), among VHG, the Guarantors, Crescent Harbor Bank, N.A. (in its various capacities), and the other parties thereto.
CFTC has been engaged as the title insurer for all mortgaged hotel properties in connection with this transaction. We understand that CFTC will be issuing title commitments and final policies either directly or through its network of agents in each applicable jurisdiction. In each case, the underwriter of record shall be Continental Fidelity Title Company.
The purpose of this letter is to provide CFTC with comprehensive instructions regarding the form, content, and endorsements required for each mortgagee title insurance policy to be issued in connection with the Term Loan B. These instructions should be read in conjunction with the schedules and exhibits attached hereto, and any supplemental instructions that may be delivered by C&H, by Whitfield Gage & Partridge LLP (as counsel to the Agent), or by the Agent directly.
2. Identification of Insured and Named Insured
The named insured on each mortgagee title insurance policy issued in connection with the Term Loan B shall be:
Crescent Harbor Bank, N.A., as Collateral Agent for the benefit of the Secured Parties (as such term is defined in the Credit Agreement)
The policies shall insure the interest of Crescent Harbor Bank, N.A. solely in its capacity as Collateral Agent and not in its individual capacity. The definition of "Secured Parties" under the Credit Agreement encompasses the Administrative Agent, the Collateral Agent, the Lenders, and certain other secured parties (including hedging counterparties and cash management banks), as more particularly set forth in the Credit Agreement. It is essential that the named insured designation be stated precisely as set forth above, without variation, on each policy and endorsement.
For purposes of all notices, correspondence, claims, and other communications under the mortgagee title insurance policies, the address for the named insured shall be:
Crescent Harbor Bank, N.A. 600 Lexington Avenue, 34th Floor New York, New York 10022
Attention: Theodore "Ted" Marchetti, Managing Director, Leveraged Finance
Telephone: (212) 555-3400
Email: ted.marchetti@crescentharbor.com
Counsel to the Agent for purposes of this transaction is:
Whitfield Gage & Partridge LLP 383 Madison Avenue, 28th Floor New York, New York 10179
Attention: Harrison Whitfield III, Partner / Megan Yeung, Associate
Telephone: (212) 555-6100 / (212) 555-6142
Email: hwhitfield@wgplaw.com / myeung@wgplaw.com
Borrower's counsel for coordination purposes is:
Calderwood & Harkness LLP One Liberty Plaza, 52nd Floor New York, New York 10006
Attention: Sophie Tremblay, Lead Associate / Daniel Obi, Associate
Telephone: (212) 555-7822 / (212) 555-7835
Email: sophie.tremblay@calderwoodharkness.com / daniel.obi@calderwoodharkness.com
3. Amount of Insurance
The aggregate insured amount across all mortgagee title insurance policies to be issued in connection with the Term Loan B shall be Seven Hundred Million Dollars ($700,000,000), which represents the full principal amount of the Term Loan B as of the Closing Date.
The insurance amount for each individual mortgagee title policy shall be allocated among the forty-two (42) mortgaged properties as set forth in Schedule A attached hereto. The allocation is based upon the appraised values of the respective properties, as determined by independent appraisals conducted in accordance with the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA") and as approved by the Agent. The forty-two (42) mortgaged properties (which are owned by Verimark Resort Properties LLC and Palmetto Beachfront Hotels LLC, each as more particularly described in Section 4 below) have an aggregate appraised value of approximately Two Billion One Hundred Eighty Million Dollars ($2,180,000,000), resulting in a weighted-average loan-to-value ratio of approximately 32.1%.
Individual policy amounts have been allocated on a pro rata basis by appraised value relative to the aggregate appraised value, unless otherwise directed in Schedule A. In the event that the Agent or its counsel requests any adjustment to the allocated insurance amounts, C&H will promptly notify CFTC and provide an amended Schedule A. CFTC should coordinate directly with C&H and with Crescent Harbor Bank, N.A. regarding any questions concerning the allocation methodology or individual policy amounts.
In addition, as described in Section 6 below, a tie-in or co-insurance endorsement shall be issued in connection with each individual policy so that the aggregate coverage across all forty-two (42) policies is available up to the full $700,000,000 policy amount in the event of a loss or claim affecting one or more of the mortgaged properties.
4. Identification of Mortgaged Properties and Mortgagor Entities
4.1 Overview. The Term Loan B is secured by first-priority mortgage liens on forty-two (42) hotel properties located across twelve (12) states: Florida, New York, California, Texas, Georgia, Colorado, Arizona, Illinois, Washington, Oregon, Nevada, and Virginia. The properties comprise a diversified portfolio of full-service and select-service hotels, resort properties, and conference center hotels operated under nationally recognized brand flags.
The mortgaged properties are owned by the following Guarantor subsidiaries of VHG, each of which is a direct or indirect wholly-owned subsidiary of VHG and a party to the Credit Agreement as a Guarantor:
Verimark Resort Properties LLC ("VRP"), a limited liability company duly organized and existing under the laws of the State of Delaware, with its principal office at 8200 West Palmetto Park Road, Suite 1500, Boca Raton, Florida 33433. VRP owns forty-two (42) of the seventy-four (74) hotel properties in VHG's overall portfolio. For purposes of these title insurance instructions, VRP is the fee simple owner and mortgagor for thirty (30) of the forty-two (42) mortgaged properties, comprising:
• New York — six (6) properties
• California — five (5) properties
• Texas — four (4) properties
• Georgia — three (3) properties
• Colorado — three (3) properties
• Arizona — two (2) properties
• Illinois — two (2) properties
• Washington — two (2) properties
• Oregon — one (1) property
• Nevada — one (1) property
• Virginia — one (1) property
Palmetto Beachfront Hotels LLC ("Palmetto"), a limited liability company duly organized and existing under the laws of the State of Florida, with its principal office at 8200 West Palmetto Park Road, Suite 1500, Boca Raton, Florida 33433. Palmetto is the fee simple owner and mortgagor for twelve (12) Florida coastal resort properties included among the forty-two (42) mortgaged properties.
4.2 Schedule A Reference
A detailed property-by-property schedule is attached hereto as Schedule A (the "Property Schedule"). Schedule A sets forth, for each of the forty-two (42) mortgaged properties, the following information:
(a) Property name (including any brand affiliation);
(b) Street address;
(c) County and state;
(d) Legal description reference (by reference to recorded instruments, plat books, and/or metes and bounds descriptions, as applicable);
(e) Owner/mortgagor entity (either VRP or Palmetto, as applicable);
(f) Appraised value (based on the most recent FIRREA-compliant appraisal);
(g) Allocated insurance amount under the mortgagee title insurance policy; and
(h) Applicable recording jurisdiction.
CFTC is instructed to confirm the accuracy and completeness of the legal descriptions set forth in Schedule A against the existing title commitments, recorded instruments, and surveys for each property. In the event of any discrepancy between the legal description set forth in Schedule A and the legal description reflected in the title commitment, survey, or recorded mortgage, CFTC shall promptly notify C&H so that corrections can be made prior to the issuance of the final title policy.
4.3 Mortgages. The form of mortgage or deed of trust for each state has been prepared by C&H and is being executed by the applicable mortgagor entity in favor of Crescent Harbor Bank, N.A. (as Collateral Agent for the benefit of the Secured Parties). The security instruments vary by state to comply with applicable local law requirements, as follows:
Florida (12 properties): Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed by Palmetto Beachfront Hotels LLC, as mortgagor, in favor of Crescent Harbor Bank, N.A., as Collateral Agent, in the standard Florida mortgage form. Each mortgage will be recorded in the Official Records of the county in which the applicable property is located.
New York (6 properties): Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed by Verimark Resort Properties LLC, as mortgagor, in favor of Crescent Harbor Bank, N.A., as Collateral Agent. Each mortgage will be recorded in the Office of the City Register (for properties located in the five boroughs of New York City) or the applicable County Clerk's Office, as applicable. New York mortgage recording tax will be paid in connection with the recording of each mortgage.
California (5 properties): Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed by Verimark Resort Properties LLC, as trustor, in favor of a deed of trust trustee to be designated by CFTC, for the benefit of Crescent Harbor Bank, N.A., as Collateral Agent (as beneficiary), in the deed of trust form as required under California law. Each deed of trust will be recorded with the County Recorder of the county in which the applicable property is located.
Texas (4 properties): Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed by Verimark Resort Properties LLC, as grantor, in favor of a deed of trust trustee, for the benefit of Crescent Harbor Bank, N.A., as Collateral Agent. Each deed of trust will be recorded in the Real Property Records of the applicable Texas county.
Georgia (3 properties): Deed to Secure Debt, Assignment of Leases and Rents, Security Agreement and Fixture Filing (in the form of a "Security Deed" under Georgia law), executed by Verimark Resort Properties LLC, as grantor, in favor of Crescent Harbor Bank, N.A., as Collateral Agent. Each security deed will be recorded in the office of the Clerk of the Superior Court of the applicable Georgia county.
Colorado (3 properties): Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed by Verimark Resort Properties LLC, as grantor, in favor of the Public Trustee of the applicable Colorado county, for the benefit of Crescent Harbor Bank, N.A., as Collateral Agent. Each deed of trust will be recorded with the County Clerk and Recorder of the applicable county.
Arizona (2 properties): Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed by Verimark Resort Properties LLC, as trustor, in favor of a deed of trust trustee, for the benefit of Crescent Harbor Bank, N.A., as Collateral Agent. Each deed of trust will be recorded with the County Recorder of the applicable Arizona county.
Illinois (2 properties): Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed by Verimark Resort Properties LLC, as mortgagor, in favor of Crescent Harbor Bank, N.A., as Collateral Agent. Each mortgage will be recorded with the Recorder of Deeds of the applicable Illinois county.
Washington (2 properties): Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed by Verimark Resort Properties LLC, as grantor, in favor of a deed of trust trustee, for the benefit of Crescent Harbor Bank, N.A., as Collateral Agent. Each deed of trust will be recorded with the County Auditor or Recording Division of the applicable Washington county.
Oregon (1 property): Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed by Verimark Resort Properties LLC, as grantor, in favor of a deed of trust trustee, for the benefit of Crescent Harbor Bank, N.A., as Collateral Agent. The deed of trust will be recorded with the County Clerk of the applicable Oregon county.
Nevada (1 property): Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed by Verimark Resort Properties LLC, as trustor, in favor of a deed of trust trustee, for the benefit of Crescent Harbor Bank, N.A., as Collateral Agent. The deed of trust will be recorded with the County Recorder of the applicable Nevada county.
Virginia (1 property): Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, executed by Verimark Resort Properties LLC, as grantor, in favor of deed of trust trustees to be designated, for the benefit of Crescent Harbor Bank, N.A., as Collateral Agent. The deed of trust will be recorded in the appropriate Circuit Court Clerk's Office in Virginia.
Copies of the executed mortgage and deed of trust forms for each state will be delivered to CFTC under separate cover promptly following execution, and are referenced herein as Exhibit 1.
5. Required Form of Mortgagee Title Insurance Policies
Each mortgagee title insurance policy issued in connection with the Term Loan B shall be in the form of an ALTA 2006 Loan Policy (06-17-06), or the most current ALTA Loan Policy form available and accepted in the applicable state at the time of issuance. In states where a modified or state-specific version of the ALTA Loan Policy form is required or customarily used (such as the TIRSA form in New York or the CLTA/ALTA combined form in California), the applicable state form shall be used, provided that the coverage afforded is substantively equivalent to or broader than the coverage provided under the standard ALTA 2006 Loan Policy.
The effective date of each mortgagee title insurance policy shall be the date and time of recording of the applicable mortgage, deed of trust, or security deed in the relevant county recording office. CFTC shall confirm the recording date and time and shall reflect such information accurately on the face of each policy.
Each policy must insure the lien of the applicable mortgage, deed of trust, or security deed as a valid first-priority mortgage lien on the applicable property, subject only to those encumbrances, easements, restrictions, and other matters set forth in Schedule B of the Credit Agreement as "Permitted Liens" (the definition of which will be provided to CFTC under separate cover and is referenced herein as Schedule B). No exceptions other than Permitted Liens shall appear in Schedule B-II of any policy without the prior written approval of the Agent and C&H.
With respect to the pari passu treatment of the Term Loan B and the RCF: the mortgagee title policies must recognize and appropriately address the fact that the Term Loan B lien and the existing $400,000,000 RCF lien share first-priority status with respect to the mortgaged properties, pursuant to the Intercreditor Agreement. Specifically, the RCF mortgage shall not be listed as an exception to coverage or characterized as a prior lien in any policy issued in favor of the Agent in its capacity as Collateral Agent for the Term Loan B Secured Parties. To the extent that the RCF mortgage is recorded prior to or simultaneously with the Term Loan B mortgage on any given property, the title policy shall affirmatively insure that such liens are of equal priority and that the Term Loan B lien is not subordinate to the RCF lien. CFTC should contact C&H to discuss the appropriate manner in which to address this issue in each policy, including whether a specific endorsement (such as an ALTA 20.0 "First Loss" or similar co-insurance endorsement addressing pari passu liens) is required or available in the applicable state.
6. Required Endorsements
The following endorsements are required for each mortgagee title insurance policy, to the extent available in the applicable state. Where a particular endorsement form is not available in a given state, CFTC shall provide the closest equivalent endorsement form, or shall issue an affirmative assurance or coverage modification within the body of the policy itself, in each case providing substantially equivalent coverage. CFTC shall promptly notify C&H of any endorsement that is unavailable in any jurisdiction, together with a description of any alternative coverage available.
6.1 Standard Endorsements (All States)
The following endorsements are required for each of the forty-two (42) mortgaged properties, subject to the qualifications noted below:
1. ALTA 9.0 — Comprehensive (Restrictions, Encroachments, Minerals) or the applicable state equivalent, providing comprehensive coverage against loss arising from violations of covenants, conditions, and restrictions; encroachments of improvements onto easements or beyond boundary lines; and damage from the exercise of subsurface mineral rights.
2. ALTA 3.0 / 3.1 — Zoning. The ALTA 3.1 endorsement (for improved land with zoning compliance) is preferred for all properties. The endorsement shall confirm that the existing use of the property as a hotel is a permitted use under the applicable zoning ordinance and that the property complies with applicable zoning requirements, including setback, height, floor area ratio, and parking requirements. The ALTA 3.0 endorsement (providing zoning classification only, without compliance confirmation) shall be issued only in jurisdictions where the ALTA 3.1 form is unavailable.
3. ALTA 4.0 / 4.1 — Condominium. This endorsement is required only for those properties that include condominium elements, as identified in Schedule A. If no property is subject to a condominium regime, this endorsement may be omitted.
4. ALTA 5.0 / 5.1 — Planned Unit Development. This endorsement is required only for those properties that are located within a planned unit development, as identified in Schedule A. If no property is part of a planned unit development, this endorsement may be omitted.
5. ALTA 6.0 / 6.2 — Variable Rate Mortgage. This endorsement is required for all policies, confirming coverage for the variable-rate nature of the interest rate applicable to the Term Loan B, which bears interest at Adjusted Term SOFR (as defined in the Credit Agreement) plus 375 basis points (3.75%) per annum. The endorsement shall insure that the variable interest rate provisions of the mortgage or deed of trust do not impair the priority or enforceability of the insured lien.
6. ALTA 8.1 — Environmental Protection Lien. This endorsement (or the applicable state equivalent, such as the Texas T-36 endorsement) shall provide coverage against loss arising from the existence of environmental protection liens, including liens arising under federal or state environmental laws (e.g., CERCLA, RCRA, or applicable state environmental lien statutes) that are given priority over the insured mortgage lien.
7. ALTA 9.0 — Restrictions, Encroachments, Minerals — Comprehensive Coverage. To the extent not duplicative of endorsement (1) above, this endorsement shall provide full mineral and subsurface rights coverage, insuring against loss or damage arising from the exercise of any right to extract or develop minerals, water, or other subsurface substances that may exist with respect to the insured property.
8. ALTA 11.0 / 11.2 — Mortgage Modification. This endorsement is not required at closing but shall be issued post-recording in the event that any amendments, modifications, or supplements are made to any mortgage or deed of trust after the original recording date. CFTC should note this requirement and confirm its willingness to issue such endorsements upon request.
9. ALTA 13.0 / 13.1 — Leasehold (Loan Policy). This endorsement is required for any mortgaged property held under a ground lease or long-term leasehold interest. Based on our current understanding, none of the forty-two (42) properties is held under a ground lease; however, CFTC should confirm this through its title search and, if any ground lease is identified, issue the appropriate ALTA 13.0 or 13.1 endorsement.
10. ALTA 14.0 / 14.3 — Future Advance. This endorsement shall confirm coverage for future advances under the Term Loan B, to the extent that the Credit Agreement or any related loan document contemplates additional advances, including any revolving or delayed-draw features. The endorsement shall insure that the lien of the mortgage secures all advances (whether obligatory or optional) made by the Lenders under the Credit Agreement, and that such advances have the same priority as the original advance.
11. ALTA 17.0 / 17.2 — Access and Entry. This endorsement shall insure that each mortgaged property has actual vehicular and pedestrian access to and from a physically open and publicly maintained street or highway. The ALTA 17.2 form (insuring access to a specific street identified in the endorsement) is preferred where available.
12. ALTA 19.0 / 19.1 — Contiguity. This endorsement is required for any mortgaged property consisting of two or more contiguous parcels, as identified in Schedule A. The endorsement shall insure that the parcels are contiguous along specified boundaries and that there are no gaps or gores between or among such parcels.
13. ALTA 20.0 — First Loss. If available in the applicable jurisdiction, this endorsement shall be issued to facilitate the coordination of coverage across multiple policies in connection with the aggregate insured amount of $700,000,000. The ALTA 20.0 endorsement addresses first-loss allocation in co-insurance arrangements and is an important component of the tie-in/co-insurance structure described in endorsement (21) below.
14. ALTA 22.0 — Location. This endorsement shall confirm that the land described in Schedule A of the policy is the same land identified on the applicable survey, as depicted and described thereon.
15. ALTA 25.0 / 25.1 — Same as Survey. This endorsement shall tie the legal description in the policy to the legal description shown on the applicable ALTA/NSPS survey, confirming that the two descriptions are identical or that the survey depicts the same land as that described in the policy. The ALTA 25.1 form, which also addresses the depiction of easements, is preferred where available.
16. ALTA 28.0 / 28.1 — Easement — Damage or Enforced Removal. This endorsement is required for any property where improvements encroach upon an easement or where there is a risk that improvements may be required to be removed due to the exercise of easement rights. CFTC should evaluate the applicability of this endorsement for each property based on the title search results and survey.
17. ALTA 32.0 / 32.1 — Construction Loan. This endorsement is required only for any mortgaged property that is currently undergoing construction, renovation, or improvement at a level that would implicate construction loan title insurance coverage. Based on our current understanding, none of the forty-two (42) properties is currently undergoing material construction; CFTC should confirm and, if applicable, issue the endorsement.
18. ALTA 35.0 / 35.1 — Collateral Assignment of Beneficial Interest. For properties located in deed of trust states (California, Texas, Colorado, Arizona, Washington, Oregon, Nevada, and Virginia), this endorsement shall insure against loss arising from a collateral assignment of the beneficial interest in the deed of trust.
19. Usury Endorsement. Where available under applicable state law, a usury endorsement shall be issued insuring that the interest rate charged under the Term Loan B does not violate applicable usury laws and that any such violation would not impair the enforceability or priority of the insured lien.
20. Tax Parcel Endorsement. This endorsement shall confirm that the land described in the policy is assessed for real property tax purposes under a specified tax parcel identification number (or numbers), and that no other land is included within such tax parcel. This endorsement supports the Agent's ability to monitor real property tax payments and ensure compliance with the Credit Agreement's tax covenant.
21. Tie-In / Co-Insurance Endorsement. A tie-in or co-insurance endorsement shall be issued in connection with each individual policy to aggregate coverage across all forty-two (42) properties up to the full $700,000,000 aggregate policy amount. The effect of this endorsement shall be that, in the event of a loss or claim affecting any one or more of the mortgaged properties, the insured may recover up to the full aggregate amount of $700,000,000 (less any amounts recovered under individual policies for unrelated claims), regardless of the allocated insurance amount for the specific property or properties giving rise to the loss. CFTC should coordinate with C&H and with the Agent's counsel at Whitfield Gage & Partridge LLP regarding the specific form and mechanics of the tie-in endorsement.
6.2 State-Specific Endorsements
In addition to the standard endorsements set forth in Section 6.1 above, the following state-specific endorsements are required, as applicable:
Florida (12 properties — Palmetto Beachfront Hotels LLC):
• Florida Form 9 endorsement (comprehensive form providing coverage against loss arising from violations of restrictions, encroachments, and other matters);
• Florida survey endorsement, in the form customarily issued in connection with commercial loan policies in Florida;
• Any additional state-mandated endorsement forms required by the Florida Department of Financial Services or the Florida Office of Insurance Regulation for commercial mortgagee title insurance policies;
• Florida gap endorsement (to the extent not otherwise addressed through the deletion of the standard gap exception from Schedule B-I).
New York (6 properties — Verimark Resort Properties LLC):
• New York standard endorsements as customarily issued in connection with commercial mortgage transactions in New York;
• TIRSA (Title Insurance Rate Service Association) forms as applicable, including the TIRSA survey reading, access endorsement, and any other TIRSA endorsements customarily required by institutional lenders in New York commercial real estate transactions;
• New York mortgage recording tax endorsement, if available, confirming the amounts of mortgage recording tax paid in connection with the recording of the mortgages.
California (5 properties — Verimark Resort Properties LLC):
• CLTA endorsements as supplements to the ALTA forms, to the extent required or customarily issued in California;
• California Fairway endorsement (CLTA 100 series or equivalent), providing comprehensive coverage against loss arising from restrictive covenant violations, encroachments, and related matters;
• California zoning endorsement, in the form customarily issued by California title insurers for commercial loan transactions;
• Any additional endorsements required under California Insurance Code or Department of Insurance regulations.
Texas (4 properties — Verimark Resort Properties LLC):
• T-19 — Restrictions, Encumbrances, Minerals endorsement (Texas promulgated form);
• T-19.1 — Restrictions, Encumbrances, Minerals endorsement (comprehensive form);
• T-36 — Environmental Protection Lien endorsement (Texas promulgated form);
• T-42 — Commercial endorsement, in the form promulgated by the Texas Department of Insurance;
• Any other Texas promulgated endorsements required or customarily issued in connection with commercial mortgage transactions, including but not limited to T-38 (Tax Identification), T-33 (Aggregation / Tie-In), and T-43 (Access) endorsements.
Other States (Georgia, Colorado, Arizona, Illinois, Washington, Oregon, Nevada, Virginia):
For properties located in Georgia, Colorado, Arizona, Illinois, Washington, Oregon, Nevada, and Virginia, CFTC shall issue such state-specific endorsements as are required to deliver substantially equivalent coverage to that described in Section 6.1 and this Section 6.2. Where specific endorsement forms are prescribed or promulgated by the applicable state's department of insurance, CFTC shall issue such promulgated forms. CFTC should notify C&H of any state-specific endorsement limitations or availability issues as soon as practicable.
6.3 Additional Endorsement Instructions
In connection with the issuance of each mortgagee title insurance policy, CFTC is further instructed as follows:
Deletion of Standard Exceptions. All standard or "pre-printed" exceptions from Schedule B-I (or Part I of Schedule B) of each title commitment and title insurance policy shall be deleted, to the extent permitted by applicable state law and subject to the payment of applicable additional premiums. Without limiting the generality of the foregoing, the following standard exceptions shall be deleted from each policy:
(a) The survey exception (i.e., the exception for matters that would be disclosed by an accurate survey and inspection of the property) — to be replaced by the specific survey-related endorsements described above;
(b) The mechanic's lien exception (i.e., the exception for liens or claims of liens arising from labor performed or materials furnished) — to be deleted or, if deletion is not permitted in the applicable jurisdiction, affirmatively insured over;
(c) The parties in possession exception (i.e., the exception for rights or claims of parties in possession not shown by the public records) — to be deleted based upon the Agent's receipt of tenant estoppel certificates or other evidence of possession satisfactory to the Agent;
(d) The gap exception (i.e., the exception for any matters arising between the effective date of the commitment and the recording of the mortgage) — to be deleted by the issuance of a gap endorsement or by CFTC's agreement to assume gap coverage; and
(e) Any other standard or "boilerplate" exception customarily deleted in connection with institutional commercial mortgage transactions in the applicable state.
Permitted Exceptions. Any exceptions retained in Schedule B-II (or Part II of Schedule B) of each policy shall be limited to the "Permitted Liens" as defined in Section 7.01 of the Credit Agreement. A draft list of Permitted Liens, together with specific exception language acceptable to the Agent and its counsel, will be provided to CFTC for review under separate cover and is referenced herein as Schedule B. CFTC shall not include any exception in Schedule B-II that is not a Permitted Lien without the prior written consent of C&H and the Agent's counsel.
7. Release / Discharge of Existing Greystone Liens
As described in Section 1 above, the proceeds of the Term Loan B will be used in part to refinance in full the Existing Term Loan B, which was originated on February 14, 2020, with Greystone Federal Credit Corp. ("Greystone") serving as administrative agent. The Existing Term Loan B is secured by mortgages, deeds of trust, and security deeds on the same forty-two (42) properties that are being mortgaged in connection with the Term Loan B.
The Existing Term Loan B is being repaid and discharged in full on July 21, 2022 (the Closing Date). The total payoff amount is approximately Six Hundred Twenty-Seven Million Nine Hundred Sixteen Thousand Six Hundred Sixty-Seven Dollars ($627,916,667), comprising the following:
(a) Outstanding principal: $621,875,000;
(b) Accrued and unpaid interest through the Closing Date: approximately $2,916,667; and
(c) Prepayment premium (as calculated pursuant to Section 2.11(a) of the Existing Term Loan B credit agreement): $3,125,000.
Greystone has executed and delivered a Lien Release and Termination Authorization dated July 21, 2022 (a copy of which will be provided to CFTC as Exhibit 2), authorizing the filing and recording of (i) mortgage releases, satisfactions, reconveyances, and/or cancellations (as applicable) with respect to each of the existing Greystone mortgages, deeds of trust, and security deeds, and (ii) UCC-3 Termination Statements with respect to all existing UCC-1 Financing Statements filed by or on behalf of Greystone in connection with the Existing Term Loan B.
CFTC is instructed to confirm that all existing Greystone mortgages, deeds of trust, and security deeds are released, satisfied, reconveyed, or otherwise discharged of record prior to, or simultaneously with, the recording of the new mortgages and deeds of trust in favor of Crescent Harbor Bank, N.A. (as Collateral Agent). In jurisdictions where simultaneous recording is not possible or practicable, the Greystone release instruments must be recorded immediately prior to the recording of the new security instruments.
Each mortgagee title insurance policy must affirmatively insure that the Greystone liens have been released and fully discharged and that no such Greystone liens constitute exceptions to coverage under the policy. In no event shall any Greystone mortgage, deed of trust, security deed, assignment of leases and rents, or UCC financing statement appear as an exception on any policy issued in connection with the Term Loan B.
For questions regarding the payoff or discharge of the Greystone liens, or to obtain copies of release instruments, the contact at Greystone is:
Marion Stillwell Vice President, Agency Services Greystone Federal Credit Corp. 200 Park Avenue South, 22nd Floor New York, New York 10003 Telephone: (212) 555-2200
Email: marion.stillwell@greystonefcc.com
C&H will coordinate with Greystone and with CFTC to ensure that all release instruments are recorded in a timely manner and that the corresponding title clearance is completed prior to the Post-Closing Deadline of August 5, 2022.
8. Survey Requirements
Updated ALTA/NSPS surveys have been ordered and are being obtained for each of the forty-two (42) mortgaged properties in connection with the Term Loan B transaction. Surveys for certain properties have already been completed and delivered to the parties; the remaining surveys are in progress and are expected to be completed no later than July 25, 2022.
Each survey must comply in all respects with the 2021 ALTA/NSPS Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys, as jointly adopted by the American Land Title Association and the National Society of Professional Surveyors, including all applicable items from Table A. Specifically, the following Table A items (items 1 through 20, as applicable to improved commercial properties) are required:
• Item 1: Monuments placed or found on property corners
• Item 2: Address of the surveyed property
• Item 3: Flood zone designation and community panel number
• Item 4: Gross land area
• Item 5: Vertical relief (contour lines or spot elevations)
• Item 6: Setback, building restriction, and yard requirement lines
• Item 7: Exterior dimensions of all buildings
• Item 8: Substantial visible improvements (parking lots, drives, fences, walls, etc.)
• Item 9: Number and type of parking spaces
• Item 10: Utilities observed or located
• Item 11: Location of utilities from record sources
• Item 13: Names of adjoining property owners from recorded instruments
• Item 14: Wetlands delineation
• Item 16: Observed evidence of site use (cemetery, dump site, etc.)
• Item 17: Proposed improvements located on survey
• Item 18: Offsite easements and servitudes
• Item 19: Professional liability insurance certification
• Item 20: Plottable recorded documents
CFTC is instructed to review each survey upon receipt and to issue the ALTA 25.0/25.1 "Same as Survey" endorsement (as described in Section 6.1(15) above) confirming that the legal description in the title policy matches the legal description depicted on the survey. In the event of any discrepancy between the survey legal description and the legal description in the title commitment, CFTC shall immediately notify C&H for resolution.
Each survey shall be certified to the following parties:
(a) Verimark Hospitality Group Inc.;
(b) Verimark Resort Properties LLC (for VRP-owned properties);
(c) Palmetto Beachfront Hotels LLC (for Palmetto-owned properties);
(d) Crescent Harbor Bank, N.A., as Administrative Agent and Collateral Agent for the benefit of the Secured Parties;
(e) Calderwood & Harkness LLP; and
(f) Continental Fidelity Title Company.
Any survey-revealed encroachments, overlaps, boundary discrepancies, unrecorded easements, or other matters that could constitute title defects or exceptions must be reported to Sophie Tremblay and Daniel Obi at C&H immediately upon identification, so that the appropriate remedial action can be taken and any required title curative measures can be completed prior to the Post-Closing Deadline of August 5, 2022. CFTC should also promptly communicate any such matters to the Agent's counsel at Whitfield Gage & Partridge LLP.
9. Flood Zone Determinations
Standard flood zone determinations (FEMA flood zone certifications) are required for each of the forty-two (42) mortgaged properties. The flood zone determinations shall be performed by a FEMA-recognized flood zone determination provider and shall identify, for each property, the applicable flood zone classification(s), the FEMA Flood Insurance Rate Map ("FIRM") community panel number(s), and the effective date of the applicable FIRM.
Given that a significant number of the mortgaged properties are coastal resort hotels (particularly the twelve Florida properties owned by Palmetto Beachfront Hotels LLC), it is expected that one or more properties may be located in whole or in part within a Special Flood Hazard Area ("SFHA"), designated as Zone A, Zone AE, Zone V, Zone VE, or another special flood hazard zone designation. For any property located within an SFHA, the following additional requirements apply:
(a) CFTC shall promptly identify the affected property and the applicable SFHA zone designation;
(b) Evidence of flood insurance coverage compliant with the insurance requirements set forth in Section 6.07 of the Credit Agreement must be confirmed and provided to the Agent. Such flood insurance must be issued under the National Flood Insurance Program ("NFIP") or by a private insurer providing coverage at least equivalent to NFIP coverage, in amounts satisfactory to the Agent;
(c) The flood zone certifications, together with any required flood insurance evidence, shall be provided to Crescent Harbor Bank, N.A. for compliance with the mandatory flood insurance purchase requirements under the National Flood Insurance Act of 1968 (as amended), the Flood Disaster Protection Act of 1973 (as amended), and the Biggert-Waters Flood Insurance Reform Act of 2012, as well as the regulations promulgated by federal banking regulators thereunder.
Flood zone determinations should be delivered to C&H and to the Agent no later than the Closing Date to the extent practicable, and in any event no later than the Post-Closing Deadline of August 5, 2022.
10. Title Searches and Exceptions
CFTC is instructed to conduct full and complete title searches for each of the forty-two (42) mortgaged properties. The scope of each title search shall encompass the applicable statutory period under the law of the state in which the property is located, or a minimum period of fifty (50) years if no specific statutory period is prescribed. The title search for each property shall include, without limitation, the following components:
(a) Chain of title search: A complete examination of the chain of title for the applicable search period, identifying all conveyances, transfers, and other instruments affecting the fee simple ownership of the property, and confirming that the mortgagor entity (VRP or Palmetto, as applicable) holds clear fee simple title to the property;
(b) Mortgage search: A search for all outstanding mortgages, deeds of trust, security deeds, assignments of rents, and other encumbrances securing indebtedness, including the existing Greystone liens to be discharged as described in Section 7;
(c) Judgment search: A search of federal and state court records for judgments, lis pendens, and other judicial liens affecting the property or the mortgagor entity, including judgments entered in any jurisdiction in which the mortgagor entity is organized or maintains its principal place of business;