EXECUTION VERSION

EXECUTION VERSION
PLEDGE AND SECURITY AGREEMENT
dated as of
July 21, 2022
among
VERIMARK HOSPITALITY GROUP INC., as Borrower,
THE GUARANTORS PARTY HERETO,
and
CRESCENT HARBOR BANK, NATIONAL ASSOCIATION, as Collateral Agent
Right-click to update Table of Contents
PLEDGE AND SECURITY AGREEMENT
This PLEDGE AND SECURITY AGREEMENT (as amended, restated, supplemented, or otherwise modified from time to time, this "Agreement") is made and entered into as of July 21, 2022, by and among VERIMARK HOSPITALITY GROUP INC., a Delaware corporation (the "Borrower"), each of the Guarantors listed on the signature pages hereto (together with any additional entities that become parties hereto pursuant to Section 7.14, the "Guarantors," and, collectively with the Borrower, the "Grantors"), and CRESCENT HARBOR BANK, NATIONAL ASSOCIATION, a national banking association, in its capacity as Collateral Agent for the benefit of the Secured Parties (in such capacity, the "Collateral Agent").
Reference is made to that certain Credit Agreement, dated as of July 21, 2022 (as amended, restated, supplemented, or otherwise modified from time to time, the "Credit Agreement"), among Verimark Hospitality Group Inc., as Borrower, the Guarantors party thereto, Crescent Harbor Bank, National Association, as Administrative Agent and Collateral Agent, and the Lenders from time to time party thereto, pursuant to which the Lenders have agreed to extend credit to the Borrower in the form of a $700,000,000 Senior Secured Term Loan B Facility (the "Term Loan B Facility"), subject to the terms and conditions set forth therein.
RECITALS
WHEREAS:
A. The Credit Agreement provides for a $700,000,000 senior secured Term Loan B facility (the "Term Loan B"), with Crescent Harbor Bank, National Association acting as Administrative Agent, Collateral Agent, Lead Arranger, and Bookrunner, and the Lenders party thereto providing commitments in respect of such facility;
B. The Borrower is Verimark Hospitality Group Inc., a corporation duly organized and existing under the laws of the State of Delaware (Delaware Secretary of State File Number 7291843; Employer Identification Number 82-3741956), publicly traded on the New York Stock Exchange under the ticker symbol "VMRK," with its principal executive office located at 8200 West Palmetto Park Road, Suite 1500, Boca Raton, Florida 33433, and its registered agent office located at 1209 Orange Street, Wilmington, Delaware 19801;
C. The Guarantors are each material domestic subsidiaries of the Borrower, as follows:
(i) Verimark Resort Properties LLC, a Delaware limited liability company ("VRP");
(ii) VHG Management Services Inc., a Delaware corporation ("VHG Mgmt");
(iii) Verimark Convention Holdings LLC, a Delaware limited liability company ("VCH");
(iv) Palmetto Beachfront Hotels LLC, a Florida limited liability company ("Palmetto"); and
(v) Cascadia Hospitality Corp., a Delaware corporation ("Cascadia");
D. It is a condition precedent to the obligations of the Lenders to make the Term Loan B available to the Borrower under the Credit Agreement that the Grantors shall have executed and delivered this Pledge and Security Agreement to the Collateral Agent for the benefit of the Secured Parties;
E. Each Grantor will derive substantial direct and indirect benefit from the extensions of credit under the Credit Agreement, and each Grantor has determined that its execution, delivery, and performance of this Agreement is in furtherance of its corporate or limited liability company purposes and is in its best interest;
F. Reference is made to that certain Amended and Restated Intercreditor Agreement, dated as of July 21, 2022 (as amended, restated, supplemented, or otherwise modified from time to time, the "Intercreditor Agreement"), by and among Crescent Harbor Bank, National Association, in its capacity as Collateral Agent for the Term Loan B Facility, and Crescent Harbor Bank, National Association, in its capacity as Collateral Agent for the $400,000,000 senior secured revolving credit facility (the "RCF"), which Intercreditor Agreement governs the pari passu relationship between the liens and security interests securing the Term Loan B and the liens and security interests securing the RCF; and
G. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Credit Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I — DEFINITIONS
Section 1.01 — Defined Terms
As used in this Agreement, the following terms shall have the meanings set forth below:
"Account Control Agreement" means any deposit account control agreement or securities account control agreement, in each case in form and substance reasonably satisfactory to the Collateral Agent, entered into among a Grantor, the Collateral Agent, and the relevant depository institution, securities intermediary, or other financial institution maintaining such deposit account or securities account, as applicable, in order to perfect the Collateral Agent's security interest in such account.
"Agreement" has the meaning set forth in the preamble hereto.
"Borrower" means Verimark Hospitality Group Inc., a Delaware corporation.
"Collateral" has the meaning set forth in Section 2.01, and includes all property and assets of each Grantor that are subject to the security interest granted hereunder.
"Collateral Agent" means Crescent Harbor Bank, National Association, a national banking association, in its capacity as Collateral Agent under the Credit Agreement and hereunder, for the benefit of the Secured Parties, and any successor thereto in such capacity. The principal office of the Collateral Agent for purposes of this Agreement is located at 600 Lexington Avenue, 34th Floor, New York, New York 10022.
"Copyright Security Agreement" means each copyright security agreement, in form suitable for filing with the United States Copyright Office, executed by one or more Grantors in favor of the Collateral Agent, for the benefit of the Secured Parties, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Credit Agreement" has the meaning set forth in the preamble hereto, and refers to that certain Credit Agreement, dated as of July 21, 2022, providing for the $700,000,000 Senior Secured Term Loan B Facility, as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms.
"Domestic Subsidiary" means any subsidiary of the Borrower that is organized under the laws of the United States, any state thereof, or the District of Columbia.
"Equity Interests" means, with respect to any person, all shares of capital stock, membership interests, partnership interests, limited liability company interests, or other ownership or equity interests in such person, whether or not certificated, and all options, warrants, and other rights to acquire any of the foregoing.
"Excluded Accounts" means deposit accounts exclusively used for payroll, payroll taxes, or employee benefit obligations, to the extent such accounts constitute Excluded Assets pursuant to Section 2.03 hereof.
"Excluded Assets" has the meaning set forth in Section 2.03.
"First-Tier Foreign Subsidiary" means any subsidiary of the Borrower or a Guarantor that is organized under the laws of a jurisdiction outside the United States and that is directly owned by the Borrower or a Guarantor (i.e., any foreign subsidiary in which the Borrower or a Guarantor directly holds Equity Interests).
"Grantor" and "Grantors" have the meanings set forth in the preamble hereto, and include, collectively, the Borrower and the Guarantors party hereto from time to time.
"Guarantors" means Verimark Resort Properties LLC, VHG Management Services Inc., Verimark Convention Holdings LLC, Palmetto Beachfront Hotels LLC, and Cascadia Hospitality Corp., together with any additional entities that become Guarantors under the Credit Agreement and Grantors hereunder pursuant to Section 7.14.
"Intercreditor Agreement" means the Amended and Restated Intercreditor Agreement, dated as of July 21, 2022, by and among Crescent Harbor Bank, National Association (in its dual capacity as Collateral Agent for the Term Loan B Facility and as Collateral Agent for the RCF), governing the relative priorities and rights of the Secured Parties under the Term Loan B Facility and the secured parties under the RCF, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"IP Security Agreements" means, collectively, the Patent Security Agreement, the Trademark Security Agreement, and the Copyright Security Agreement, in each case as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Lenders" means the lenders from time to time party to the Credit Agreement, including, as of the date hereof:
(a) Crescent Harbor Bank, National Association (commitment: $50,000,000);
(b) Ridgeline Capital Partners, LP (commitment: $125,000,000);
(c) Beacon Atlantic Credit Fund III (commitment: $100,000,000);
(d) Tidewater Institutional Investors, Inc. (commitment: $75,000,000);
(e) Ironbridge Loan Management LLC (commitment: $100,000,000);
(f) Northway Savings Bank (commitment: $75,000,000);
(g) Copperleaf Asset Management, LP (commitment: $100,000,000); and
(h) Harborview Mutual Life Insurance Company (commitment: $75,000,000).
"Obligations" means all Secured Obligations as defined in the Credit Agreement, including, without limitation, (a) all principal of and interest on the Term Loan B (including interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization, or like proceeding, whether or not a claim for post-filing interest is allowed in such proceeding), (b) all fees, commissions, charges, costs, and expenses payable by the Borrower or any Guarantor under the Credit Agreement or any other Loan Document, (c) all indemnification obligations of the Borrower or any Guarantor under the Credit Agreement, the Guarantee Agreement, and the other Loan Documents, and (d) all other amounts owing by the Borrower or any Guarantor under or in connection with the Credit Agreement, the Guarantee Agreement, this Agreement, and the other Loan Documents, in each case whether now existing or hereafter arising, direct or indirect, absolute or contingent, joint or several, matured or unmatured, and whether or not from time to time decreased or extinguished and later increased, created, or incurred.
"Patent Security Agreement" means each patent security agreement, in form suitable for filing with the United States Patent and Trademark Office, executed by one or more Grantors in favor of the Collateral Agent, for the benefit of the Secured Parties, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Perfection Certificate" means that certain Perfection Certificate, dated as of July 21, 2022, executed and delivered by the Grantors to the Collateral Agent in connection with the closing of the Credit Agreement, as the same may be supplemented or updated from time to time in accordance with the terms of this Agreement and the Credit Agreement.
"Pledged Equity" has the meaning set forth in Section 2.01(h).
"RCF" means the $400,000,000 senior secured revolving credit facility established pursuant to that certain Revolving Credit Agreement, dated as of July 21, 2022, among the Borrower, the Guarantors party thereto, Crescent Harbor Bank, National Association, as Administrative Agent and Collateral Agent, and the revolving lenders party thereto, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Secured Parties" means, collectively, the Collateral Agent, the Administrative Agent, and the Lenders, together with their respective successors and assigns.
"Trademark Security Agreement" means each trademark security agreement, in form suitable for filing with the United States Patent and Trademark Office, executed by one or more Grantors in favor of the Collateral Agent, for the benefit of the Secured Parties, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"UCC" means the Uniform Commercial Code as in effect from time to time in the State of New York; provided that, if by reason of mandatory provisions of law, the perfection, the effect of perfection or non-perfection, or the priority of any security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, "UCC" means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection, or priority.
Section 1.02 — UCC Terms
Unless otherwise defined herein, terms used herein that are defined in the UCC shall have the respective meanings given to such terms in the UCC. Such terms include, without limitation, "account," "chattel paper," "commercial tort claim," "deposit account," "document," "electronic chattel paper," "equipment," "general intangible," "goods," "instrument," "inventory," "investment property," "letter-of-credit right," "payment intangible," "proceeds," "securities account," "security," "security entitlement," "supporting obligation," and "tangible chattel paper." To the extent any such term is defined both herein and in the UCC, the definition set forth herein shall control.
Section 1.03 — Rules of Construction
(a) Unless the context otherwise requires, all references herein to the "Credit Agreement" shall mean the Credit Agreement as defined in the preamble, and all capitalized terms used herein and not otherwise defined shall have the meanings ascribed to such terms in the Credit Agreement.
(b) The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine, and neuter forms. The words "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation." The word "will" shall be construed to have the same meaning and effect as the word "shall."
(c) Unless the context otherwise requires, references to Articles, Sections, Schedules, and Exhibits are references to Articles and Sections of, and Schedules and Exhibits to, this Agreement.
(d) To the extent there is any conflict between the terms of this Agreement and the UCC as in effect in the State of New York, the provisions of the New York UCC shall govern the interpretation of UCC-defined terms used herein, unless the context otherwise requires application of the UCC of another jurisdiction.
(e) In the event of any conflict between this Agreement and the Credit Agreement with respect to the creation, perfection, or priority of any security interest or lien, the terms of the Credit Agreement shall control, and in the event of any conflict between this Agreement and the Intercreditor Agreement, the terms of the Intercreditor Agreement shall control.
ARTICLE II — GRANT OF SECURITY INTEREST
Section 2.01 — Security Interest
Each Grantor hereby unconditionally and irrevocably grants, pledges, assigns, hypothecates, and transfers to the Collateral Agent, for the ratable benefit of the Secured Parties, a continuing first-priority security interest in and lien upon all of such Grantor's right, title, and interest in, to, and under the following property, whether now owned or hereafter acquired, whether now existing or hereafter arising, and wherever located (collectively, the "Collateral"):
(a) Accounts. All accounts and accounts receivable, including all rights to payment for goods sold, leased, or licensed or services rendered, whether or not earned by performance, and all rights associated with such accounts, including all rights of enforcement and collection thereof.
(b) Chattel Paper. All chattel paper (including electronic chattel paper and tangible chattel paper), including all right, title, and interest in and to any tangible or electronic chattel paper evidencing both a monetary obligation and a security interest in or a lease of specific goods.
(c) Deposit Accounts. All deposit accounts (other than Excluded Accounts), wherever maintained, including all funds on deposit therein and all certificates of deposit and other depository receipts relating thereto.
(d) Documents. All documents, including all warehouse receipts, bills of lading, and other documents of title covering goods, whether negotiable or non-negotiable.
(e) Equipment. All equipment, including all furniture, fixtures, and fittings, hotel furnishings (including guest room furnishings, lobby furnishings, and conference room furnishings), machinery, vehicles, tools, molds, dies, and other tangible personal property used or usable in the operation of the Grantors' businesses, including all equipment deployed in connection with the operation and maintenance of the seventy-four (74) hotel properties owned, leased, or operated by the Grantors and their subsidiaries, and all accessions thereto and substitutions and replacements therefor.
(f) General Intangibles. All general intangibles, including all payment intangibles, software (including proprietary hotel management software and reservation systems), customer lists, hotel management agreements, franchise agreements, liquor licenses and permits (in each case, to the extent assignable under applicable law), goodwill (including goodwill associated with any trademark, service mark, or trade name), tax refunds and tax refund claims, and all other intangible personal property of any kind or nature.
(g) Instruments. All instruments, including all promissory notes, drafts, bills of exchange, and intercompany notes, whether or not negotiable, and all other writings evidencing a right to the payment of a monetary obligation.
(h) Pledged Equity. The following Equity Interests (collectively, the "Pledged Equity"):
(i) one hundred percent (100%) of the issued and outstanding membership interests in Verimark Resort Properties LLC, a Delaware limited liability company;
(ii) one hundred percent (100%) of the issued and outstanding shares of capital stock of VHG Management Services Inc., a Delaware corporation;
(iii) one hundred percent (100%) of the issued and outstanding membership interests in Verimark Convention Holdings LLC, a Delaware limited liability company;
(iv) one hundred percent (100%) of the issued and outstanding membership interests in Palmetto Beachfront Hotels LLC, a Florida limited liability company;
(v) one hundred percent (100%) of the issued and outstanding shares of capital stock of Cascadia Hospitality Corp., a Delaware corporation;
(vi) sixty-five percent (65%) of the issued and outstanding Equity Interests in each First-Tier Foreign Subsidiary, if any (subject to the limitations set forth in Section 2.03(b));
(vii) all certificates, if any, representing any of the foregoing Equity Interests, and all options, warrants, rights of conversion, rights of first refusal, and other rights, contractual or otherwise, relating to or arising in connection with any of the foregoing Equity Interests; and
(viii) all dividends, distributions, returns of capital, cash, instruments, and other property from time to time received, receivable, or otherwise distributed in respect of, in exchange for, or upon the conversion of, any of the foregoing Equity Interests, to the extent provided herein and in the Credit Agreement.
All Pledged Equity is described in detail on Schedule I hereto, which Schedule shall be updated from time to time in accordance with the terms hereof.
(i) intellectual Property. All intellectual property owned by any Grantor, including:
(i) all patents, patent applications, and patent licenses (including utility patents and design patents), together with all reissues, divisions, continuations, continuations-in-part, extensions, renewals, and reexaminations thereof, in each case to be covered by the Patent Security Agreement filed with the United States Patent and Trademark Office;
(ii) all trademarks, service marks, trade names, trade dress, logos, slogans, and other source identifiers, and all trademark registrations and trademark applications relating thereto (including the "Verimark" family of marks and all hotel brand marks used in connection with the Grantors' businesses), together with all renewals and extensions thereof and all goodwill associated therewith, in each case to be covered by the Trademark Security Agreement filed with the United States Patent and Trademark Office;
(iii) all copyrights and copyright registrations and copyright applications, together with all renewals and extensions thereof, in each case to be covered by the Copyright Security Agreement filed with the United States Copyright Office;
(iv) all trade secrets, know-how, proprietary information, inventions (whether or not patentable), processes, methods, techniques, formulas, algorithms, databases, data compilations, and customer and supplier information, in each case to the extent constituting Collateral under applicable law; and
(v) all rights to sue or recover at law or in equity for any past, present, or future infringement, dilution, misappropriation, or other violation of any of the foregoing, and all proceeds of the foregoing, including license fees, royalties, income, payments, claims, damages, and proceeds of suit.
(j) Inventory. All inventory, including all goods held for sale, lease, or furnishing under contracts of service, all raw materials, work-in-process, finished goods, supplies, and packaging materials, and specifically including all hotel supplies, food and beverage inventory, linens, amenities, cleaning supplies, and other consumable goods used in the operation of the Grantors' hotel properties.
(k) Investment Property. All investment property, including all securities (whether certificated or uncertificated), securities accounts, securities entitlements, commodity contracts, and commodity accounts, other than Excluded Assets.
(l) Letter-of-Credit Rights. All letter-of-credit rights, including all rights to payment or performance under any letter of credit issued in favor of any Grantor, whether as beneficiary or assignee.
(m) Money. All money, whether in the form of coin, currency, or funds credited to a deposit account or otherwise, other than money held in Excluded Accounts.
(n) Commercial Tort Claims. All commercial tort claims identified on Schedule IV hereto, as such Schedule may be supplemented from time to time in accordance with Section 4.07 hereof.
(o) Supporting Obligations. All supporting obligations, including all letters of credit, guaranties, suretyship agreements, and other credit support and credit enhancement relating to or supporting payment or performance of any of the foregoing Collateral.
(p) Books and Records. All books, records, ledger cards, files, correspondence, customer lists, blueprints, technical data, computer programs, databases, computer files, printouts, and other computer output, and all other documents and general intangibles at any time evidencing, describing, or relating to any of the foregoing Collateral.
(q) Proceeds and Products. All proceeds and products of any and all of the foregoing Collateral, in whatever form, including:
(i) all proceeds of any insurance, indemnity, warranty, or guaranty payable from time to time with respect to any of the foregoing Collateral;
(ii) all payments (in any form whatsoever) made or due and payable from time to time in connection with any requisition, confiscation, condemnation, seizure, or forfeiture of all or any part of the foregoing Collateral by any governmental authority;
(iii) all accessions to, substitutions and replacements for, and rents, profits, and products of, each of the foregoing; and
(iv) all proceeds of proceeds.
(r) Hotel Revenue. All hotel room revenues, food and beverage revenues, convention and banquet revenues, parking revenues, spa and recreational facility revenues, resort fee income, and all other revenues, receipts, and income arising from the operation of the Grantors' hotel properties, whether received in cash, by check, by credit card settlement, by electronic funds transfer, or in any other form.
Section 2.02 — Security for Obligations
The security interest granted hereunder secures the prompt and complete payment and performance of all Obligations under the Credit Agreement, the Guarantee Agreement, this Agreement, and each other Loan Document, including, without limitation:
(a) all principal of the $700,000,000 Term Loan B;
(b) all interest thereon (at the rate of Adjusted Term SOFR plus 375 basis points per annum, or, following the occurrence and during the continuance of an Event of Default, at the default rate of Adjusted Term SOFR plus 575 basis points per annum, in each case as more fully set forth in the Credit Agreement);
(c) all fees, including the administrative agent fee of $150,000 per annum payable to the Administrative Agent;
(d) all costs, charges, and expenses payable by the Borrower or any Guarantor under the Credit Agreement and the other Loan Documents;
(e) all indemnification obligations of the Borrower and the Guarantors under the Credit Agreement, the Guarantee Agreement, and the other Loan Documents; and
(f) all other amounts from time to time owing by the Borrower or any Guarantor under or in connection with the Credit Agreement, the Guarantee Agreement, this Agreement, or any other Loan Document.
Section 2.03 — Excluded Assets
Notwithstanding anything to the contrary contained in Section 2.01 or elsewhere in this Agreement, the Collateral shall not include any of the following (collectively, the "Excluded Assets"):
(a) Anti-Assignment Provisions. Any lease, license, contract, agreement, instrument, or other document to the extent that the grant of a security interest therein would violate or invalidate such lease, license, contract, agreement, instrument, or other document or create a right of termination or acceleration in favor of any other party thereto (other than any Grantor), provided, however, that (i) any such lease, license, contract, agreement, instrument, or other document shall be included in the Collateral to the extent that any such prohibition on assignment or grant of a security interest is rendered ineffective under Section 9-406, 9-407, 9-408, or 9-409 of the UCC or any other applicable law (including the United States Bankruptcy Code), and (ii) the proceeds and receivables arising under any such lease, license, contract, agreement, instrument, or other document shall constitute Collateral to the extent not otherwise excluded hereunder.
(b) Foreign Subsidiary Equity. Equity Interests in any First-Tier Foreign Subsidiary in excess of sixty-five percent (65%) of the issued and outstanding voting Equity Interests of such First-Tier Foreign Subsidiary, to the extent that a pledge of a greater percentage would result in material adverse tax consequences to the Borrower or any Guarantor under Sections 956 and 1248 of the Internal Revenue Code of 1986, as amended, or any successor provision thereof.
(c) Intent-to-Use Trademark Applications. Any intent-to-use trademark application filed pursuant to Section 1(b) of the Lanham Act (15 U.S.C. § 1051(b)) to the extent that, and solely during the period in which, the grant of a security interest therein would impair the validity or enforceability of such intent-to-use trademark application under applicable federal trademark law; provided that upon the filing and acceptance of a statement of use or amendment to allege use with respect to any such intent-to-use trademark application, such application shall automatically become Collateral hereunder without further action by any party.
(d) Payroll and Benefits Accounts. Deposit accounts exclusively used for payroll, payroll taxes, or employee benefit obligations, including health savings accounts, flexible spending accounts, and other accounts established and maintained solely in connection with employee benefit plans.
(e) Prohibited Pledges. Any property to the extent that the pledge thereof would be prohibited by applicable law, regulation, or order (including governmental licenses, permits, franchises, charters, and authorizations that by their express terms or by operation of law may not be pledged or assigned), provided that the proceeds of any such property shall constitute Collateral to the extent not otherwise excluded hereunder.
(f) Permitted Lien Restrictions. Any assets subject to a Permitted Lien (as defined in the Credit Agreement) pursuant to which the holder of such Permitted Lien has a contractual right to prohibit the creation of any additional pledges, liens, or security interests on such assets, limited to purchase money security interests and capital lease obligations expressly permitted under Section 7.01 of the Credit Agreement.
(g) Intercreditor Agreement Exclusions. Any property excluded from the Collateral pursuant to the express terms of the Intercreditor Agreement.
Section 2.04 — Pari Passu Treatment
The security interest granted hereunder, and the liens on the Collateral created hereby, are and shall at all times be pari passu with the security interests and liens on the same Collateral securing the $400,000,000 senior secured revolving credit facility (for which Crescent Harbor Bank, National Association also serves as Collateral Agent), subject in all respects to the terms, conditions, and priorities set forth in the Amended and Restated Intercreditor Agreement dated as of July 21, 2022. In the event of any conflict between this Section 2.04 and the Intercreditor Agreement, the terms of the Intercreditor Agreement shall govern and control.
ARTICLE III — REPRESENTATIONS AND WARRANTIES
Each Grantor hereby represents and warrants to the Collateral Agent and each of the other Secured Parties as follows:
Section 3.01 — Title and Ownership
Each Grantor is the sole legal and beneficial owner of, or otherwise has sufficient rights in, all Collateral purported to be pledged by such Grantor hereunder, free and clear of all liens, security interests, claims, charges, and encumbrances of any kind, except for (a) the security interest and lien created by this Agreement in favor of the Collateral Agent for the benefit of the Secured Parties, (b) the pari passu security interest and lien securing the RCF, and (c) Permitted Liens (as defined in the Credit Agreement). No Grantor has granted, and no Grantor will grant, any security interest in or lien upon any Collateral to any person other than as permitted by the Credit Agreement.
Section 3.02 — Validity and Perfection
(a) The security interest granted by each Grantor hereunder constitutes a valid and enforceable security interest under the UCC in all right, title, and interest of such Grantor in and to the Collateral, securing the payment and performance of the Obligations.
(b) Upon the filing of UCC-1 financing statements with the Delaware Secretary of State (with respect to Verimark Hospitality Group Inc., Verimark Resort Properties LLC, VHG Management Services Inc., Verimark Convention Holdings LLC, and Cascadia Hospitality Corp., each of which is organized under the laws of the State of Delaware) and the Florida Secured Transaction Registry (with respect to Palmetto Beachfront Hotels LLC, which is organized under the laws of the State of Florida), naming such Grantors as debtors and the Collateral Agent as secured party, the security interest granted hereunder in personal property Collateral of the type perfectable by the filing of a financing statement will constitute a perfected security interest therein.
(c) Upon the filing of the IP Security Agreements with the United States Patent and Trademark Office (with respect to patents, patent applications, trademarks, trademark applications, and service marks) and the United States Copyright Office (with respect to copyrights and copyright applications), the security interest granted hereunder in registered intellectual property will be perfected to the extent perfectable by such filings under applicable federal law.
(d) Upon the delivery of all certificated Pledged Equity to the Collateral Agent, together with duly executed undated stock powers or transfer instruments endorsed in blank, the security interest in such certificated Pledged Equity will be perfected by possession under Article 8 of the UCC.
(e) Upon the execution and delivery of Account Control Agreements with respect to each deposit account and securities account identified on Schedule III hereto (other than Excluded Accounts), the security interest in such accounts will be perfected by control under Article 9 of the UCC.
Section 3.03 — Organizational Information
Each Grantor's organizational information is accurately set forth in the Perfection Certificate dated as of July 21, 2022, as delivered to the Collateral Agent on the date hereof, including, without limitation, the following:
(a) Verimark Hospitality Group Inc.: A corporation duly organized and validly existing under the laws of the State of Delaware; Delaware Secretary of State File Number 7291843; Employer Identification Number 82-3741956; chief executive office located at 8200 West Palmetto Park Road, Suite 1500, Boca Raton, Florida 33433; registered agent office located at 1209 Orange Street, Wilmington, Delaware 19801.
(b) Verimark Resort Properties LLC: A limited liability company duly organized and validly existing under the laws of the State of Delaware; directly owns forty-two (42) of the Grantors' seventy-four (74) hotel properties, with an aggregate appraised value of approximately $2,180,000,000 as of the most recent appraisal date.
(c) VHG Management Services Inc.: A corporation duly organized and validly existing under the laws of the State of Delaware; provides hotel management, operations, and administrative services to the Grantors' hotel properties.
(d) Verimark Convention Holdings LLC: A limited liability company duly organized and validly existing under the laws of the State of Delaware; owns and operates convention center facilities and related assets.
(e) Palmetto Beachfront Hotels LLC: A limited liability company duly organized and validly existing under the laws of the State of Florida; directly owns twelve (12) Florida coastal resort properties.
(f) Cascadia Hospitality Corp.: A corporation duly organized and validly existing under the laws of the State of Delaware; directly owns eight (8) Pacific Northwest hotel properties located in the states of Washington and Oregon.
No Grantor has changed its legal name, state of organization, organizational identification number, or organizational structure at any time during the five (5) years immediately preceding the date hereof, except as disclosed in the Perfection Certificate.
Section 3.04 — Pledged Equity
(a) Schedule I hereto accurately sets forth, as of the date hereof, one hundred percent (100%) of the Equity Interests in each Domestic Subsidiary that is directly owned by each Grantor, including the issuer name, the type of Equity Interest, the certificate number (if certificated), the number of shares or percentage of membership interests, and the percentage of total outstanding Equity Interests represented thereby.
(b) All Pledged Equity has been duly authorized and validly issued and, to the extent applicable, is fully paid and non-assessable. No Grantor is in default under the organizational documents of any issuer of Pledged Equity, and no issuer of Pledged Equity is in default under its organizational documents with respect to the Pledged Equity.
(c) As of the date hereof, no Grantor owns any Equity Interests in any First-Tier Foreign Subsidiary requiring the application of the sixty-five percent (65%) limitation set forth in Section 2.01(h)(vi) and Section 2.03(b). If any Grantor shall hereafter acquire Equity Interests in a First-Tier Foreign Subsidiary, only sixty-five percent (65%) of the voting Equity Interests of such First-Tier Foreign Subsidiary shall be required to be pledged hereunder.
(d) There are no outstanding options, warrants, rights of conversion, or other agreements pursuant to which any Grantor is or may become obligated to issue, sell, or transfer any Equity Interests in any Domestic Subsidiary, except as disclosed on Schedule I hereto or as permitted under the Credit Agreement.
Section 3.05 — Intellectual Property
(a) Schedule II hereto accurately lists all material registered patents, patent applications, trademarks, trademark applications, service marks, service mark applications, copyrights, and copyright applications of each Grantor as of the date hereof, including the applicable registration or application number, the filing or registration date, and a brief description thereof.
(b) To the knowledge of each Grantor, as of the date hereof, no material infringement, misappropriation, or dilution claims have been asserted against any Grantor with respect to any intellectual property listed on Schedule II, and no Grantor is aware of any facts or circumstances that would reasonably be expected to give rise to any such claim that would have a Material Adverse Effect.
(c) Each Grantor owns or has valid licenses to use all intellectual property necessary for the conduct of its business as currently conducted, except where the failure to own or license such intellectual property would not reasonably be expected to have a Material Adverse Effect.
Section 3.06 — Commercial Tort Claims
Schedule IV hereto accurately lists all commercial tort claims of each Grantor known to such Grantor as of the date hereof that have a value (or potential value) exceeding $1,000,000, including a brief description of the nature and basis of each such claim and the parties thereto. Each Grantor agrees to supplement Schedule IV from time to time in accordance with Section 4.07 hereof.
Section 3.07 — Deposit Accounts and Securities Accounts
Schedule III hereto accurately lists, as of the date hereof, all deposit accounts and securities accounts of each Grantor (other than Excluded Accounts), including the name of the financial institution at which each such account is maintained, the account number, the type of account, and whether such account is subject to an Account Control Agreement in favor of the Collateral Agent.
Section 3.08 — No Conflicts
The execution, delivery, and performance by each Grantor of this Agreement and the grant of the security interest hereunder do not and will not (a) violate or conflict with any provision of such Grantor's certificate of incorporation, certificate of formation, bylaws, operating agreement, or other organizational documents, (b) violate or conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any material agreement, indenture, instrument, or other document to which such Grantor is a party or by which such Grantor or any of its assets is bound, (c) result in or require the creation or imposition of any lien upon any Collateral other than the lien created hereunder and Permitted Liens, or (d) violate any applicable law, rule, regulation, order, writ, judgment, injunction, decree, determination, or award.
Section 3.09 — Existing Liens
(a) Except for (i) the security interest and lien created by this Agreement and the other Loan Documents in favor of the Collateral Agent for the benefit of the Secured Parties, (ii) the pari passu security interest and lien securing the RCF, and (iii) Permitted Liens, no Grantor has granted or suffered to exist any security interest in, lien upon, or encumbrance against any of the Collateral.
(b) All existing liens, security interests, and encumbrances in favor of Greystone Federal Credit Corp. under the prior $625,000,000 Term Loan B (which is being refinanced in connection with the closing of the Credit Agreement) have been or, simultaneously with the closing on July 21, 2022, will be terminated and released in full, as evidenced by (i) UCC-3 termination statements filed or to be filed with the Delaware Secretary of State and the Florida Secured Transaction Registry, (ii) lien release authorizations and termination letters executed by Greystone Federal Credit Corp. in favor of the Grantors, and (iii) payoff letters confirming the repayment in full of all obligations owing to Greystone Federal Credit Corp. under such prior term loan facility.
ARTICLE IV — COVENANTS
Each Grantor covenants and agrees with the Collateral Agent, for the benefit of the Secured Parties, as follows:
Section 4.01 — Delivery of Pledged Equity Certificates
(a) Each Grantor shall deliver, or cause to be delivered, to the Collateral Agent on or prior to the closing date (July 21, 2022) all certificates, if any, representing the Pledged Equity owned by such Grantor as of such date, together with undated stock powers or transfer instruments duly executed in blank by such Grantor (or by the registered holder thereof, if other than such Grantor) and in form and substance reasonably satisfactory to the Collateral Agent.
(b) With respect to any Pledged Equity acquired after the closing date, each Grantor shall deliver, or cause to be delivered, to the Collateral Agent all certificates representing such after-acquired Pledged Equity, together with undated stock powers or transfer instruments duly executed in blank, within the time periods specified in the Credit Agreement (and in any event no later than five (5) Business Days after the acquisition thereof, or such longer period as the Collateral Agent may agree in writing).
(c) In the event that any Pledged Equity is uncertificated, each Grantor shall cause the issuer thereof to register the security interest of the Collateral Agent on the books and records of such issuer and, upon the request of the Collateral Agent, to deliver to the Collateral Agent an acknowledgment of such registration, in each case in form and substance reasonably satisfactory to the Collateral Agent.
Section 4.02 — Further Assurances
Each Grantor shall, at its own cost and expense, execute and deliver to the Collateral Agent, or cause to be executed and delivered to the Collateral Agent, from time to time, such additional instruments, documents, certificates, agreements, and other writings as the Collateral Agent may reasonably request to perfect, protect, continue, or enforce the security interest granted hereunder and the first-priority lien of the Collateral Agent in the Collateral, including, without limitation:
(a) UCC Financing Statements. Additional UCC-1 financing statements, UCC-3 amendments, continuations, and other filings under the UCC in any jurisdiction in which any Collateral is or may be located or in which any Grantor is or may be organized;
(b) IP Security Agreements. IP Security Agreement filings with the United States Patent and Trademark Office and the United States Copyright Office, including amendments or supplements thereto to cover any after-acquired registered intellectual property;
(c) Account Control Agreements. Account Control Agreements in form and substance reasonably satisfactory to the Collateral Agent with respect to each deposit account and securities account (other than Excluded Accounts) maintained by any Grantor, whether existing on the date hereof or opened after the date hereof;
(d) Mortgages. Mortgages, deeds of trust, or amendments to existing mortgages or deeds of trust covering real property owned by the Grantors and their subsidiaries, as may be required under the Credit Agreement; provided that, as set forth in the Post-Closing Letter Agreement dated as of July 21, 2022, the Grantors shall deliver or cause to be delivered mortgages (or amendments thereto) covering forty-two (42) hotel properties located in twelve (12) states (Florida, New York, California, Texas, Georgia, Colorado, Arizona, Illinois, Washington, Oregon, Nevada, and Virginia) by no later than August 5, 2022; and
(e) Other Documents. Such other documents, instruments, agreements, legal opinions, and certificates as the Collateral Agent may from time to time reasonably request in order to ensure the continued validity, perfection, and priority of the security interest created hereunder.
Section 4.03 — Maintenance of Collateral
(a) Each Grantor shall maintain and preserve all Collateral in good working order and condition (ordinary wear and tear excepted), and shall not permit any waste, impairment, or deterioration of the Collateral (other than ordinary depreciation in the normal course of business).
(b) Each Grantor shall maintain insurance on and with respect to the Collateral in accordance with the requirements set forth in the Credit Agreement, including, without limitation, all-risk property insurance, commercial general liability insurance, and business interruption insurance, in each case in amounts and with insurers reasonably satisfactory to the Collateral Agent. Crescent Harbor Bank, National Association, as Collateral Agent for the benefit of the Secured Parties, shall be named as additional insured and loss payee (or mortgagee, as applicable) on all such insurance policies, pursuant to endorsements in form and substance reasonably satisfactory to the Collateral Agent.
Section 4.04 — Use and Disposition of Collateral
No Grantor shall sell, lease, license, exchange, assign, convey, transfer, or otherwise dispose of, or grant any option with respect to, any of the Collateral, or create or permit to exist any lien, security interest, or other charge or encumbrance upon or with respect to any of the Collateral, except (a) dispositions permitted under the Credit Agreement (including dispositions of obsolete or worn-out equipment in the ordinary course of business and sales of inventory in the ordinary course of business), (b) Permitted Liens as defined in and permitted by the Credit Agreement, and (c) as otherwise expressly permitted hereunder.
Section 4.05 — Changes in Name, Location, or Structure
No Grantor shall (a) change its legal name, (b) change its jurisdiction of organization, (c) change its organizational identification number (or acquire an organizational identification number if it does not currently have one), (d) change the location of its chief executive office or principal place of business, or (e) merge with or into, or consolidate with, any other person, in each case without providing at least thirty (30) days' prior written notice to the Collateral Agent (or such shorter period as the Collateral Agent may agree in writing), and, in the case of a change in jurisdiction of organization, only if the Collateral Agent's security interest shall remain continuously perfected during and after such change (including by the filing of UCC financing statements in the new jurisdiction of organization prior to the effective date of such change). Each Grantor shall, promptly following any such change, deliver to the Collateral Agent all additional financing statements and other documents as may be necessary or advisable to maintain the perfection and priority of the Collateral Agent's security interest in the Collateral.
Section 4.06 — After-Acquired Property
(a) The security interest granted hereunder shall extend to, and shall automatically attach to, all after-acquired Collateral of each Grantor without any further action by any party, to the same extent as if such after-acquired Collateral were owned by such Grantor and described herein as of the date hereof.
(b) Each Grantor shall promptly (and in any event within ten (10) Business Days) notify the Collateral Agent in writing of the acquisition of any material assets constituting Collateral not previously disclosed to the Collateral Agent, including the acquisition of any new subsidiary, any certificated Equity Interest, any deposit account or securities account, or any registered intellectual property, and shall take all actions necessary or reasonably requested by the Collateral Agent to ensure that the Collateral Agent's security interest in such after-acquired Collateral is duly perfected with the priority contemplated herein.
Section 4.07 — Commercial Tort Claims
Each Grantor shall promptly (and in any event within fifteen (15) Business Days) notify the Collateral Agent in writing of the existence of any new commercial tort claim of such Grantor that has a value (or potential value) exceeding $1,000,000, and shall deliver to the Collateral Agent an amendment to Schedule IV hereto describing such commercial tort claim in reasonable detail, together with such documents, instruments, and agreements as the Collateral Agent may reasonably request to perfect its security interest in such commercial tort claim.
Section 4.08 — Intellectual Property
(a) Each Grantor shall use commercially reasonable efforts to maintain and preserve the validity and enforceability of all material intellectual property owned by such Grantor, including by (i) timely filing all necessary renewal applications, affidavits of use, maintenance fees, and other documents required to maintain registrations in full force and effect, (ii) diligently prosecuting all pending applications to registration, and (iii) taking all actions reasonably necessary to enforce such Grantor's rights against infringers, misappropriators, and diluters, to the extent that a failure to do so would reasonably be expected to have a Material Adverse Effect.
(b) Each Grantor shall promptly (and in any event within fifteen (15) Business Days) notify the Collateral Agent in writing of (i) any new registration of patents, trademarks, service marks, or copyrights obtained by such Grantor after the date hereof, (ii) any new applications for registration filed by such Grantor after the date hereof, and (iii) any material adverse developments affecting any material intellectual property of such Grantor, including any infringement, misappropriation, or dilution claims asserted against such Grantor. Each Grantor shall deliver to the Collateral Agent amendments to Schedule II hereto and supplemental IP Security Agreement filings as may be necessary to ensure the perfection of the Collateral Agent's security interest in all registered intellectual property.
Section 4.09 — Voting Rights; Dividends
(a) So long as no Event of Default shall have occurred and be continuing:
(i) each Grantor shall be entitled to exercise all voting, consent, and other consensual rights pertaining to the Pledged Equity owned by such Grantor for any purpose not inconsistent with the terms of this Agreement, the Credit Agreement, or the other Loan Documents; and
(ii) each Grantor shall be entitled to receive and retain all cash dividends, distributions, and other payments paid in respect of the Pledged Equity owned by such Grantor, to the extent that the declaration and payment of such dividends, distributions, or other payments is permitted under the Credit Agreement.
(b) Upon the occurrence and during the continuance of an Event of Default:
(i) all rights of each Grantor to exercise the voting and other consensual rights that such Grantor would otherwise be entitled to exercise pursuant to clause (a)(i) above shall, at the election of the Collateral Agent (acting at the direction of the Required Lenders), cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole right to exercise such voting and other consensual rights; and
(ii) all rights of each Grantor to receive and retain the dividends, distributions, and other payments that such Grantor would otherwise be entitled to receive and retain pursuant to clause (a)(ii) above shall, at the election of the Collateral Agent (acting at the direction of the Required Lenders), cease, and all such dividends, distributions, and other payments shall be paid directly to the Collateral Agent and held as additional Collateral hereunder, to be applied against the Obligations in such order as the Collateral Agent shall determine in accordance with the Credit Agreement and the Intercreditor Agreement.
(c) In order to permit the Collateral Agent to exercise the voting and other rights that it may be entitled to exercise pursuant to clause (b)(i) above, each Grantor shall, upon the request of the Collateral Agent following the occurrence and during the continuance of an Event of Default, execute and deliver to the Collateral Agent such proxies, powers of attorney, and other instruments as the Collateral Agent may reasonably request.
ARTICLE V — RIGHTS OF THE COLLATERAL AGENT
Section 5.01 — Attorney-in-Fact
(a) Each Grantor hereby irrevocably constitutes and appoints the Collateral Agent (and any officer, employee, or agent thereof designated by the Collateral Agent) as such Grantor's true and lawful attorney-in-fact, with full power of substitution and subrogation, coupled with an interest, to exercise, upon the occurrence and during the continuance of an Event of Default (unless otherwise specified herein), in the name of such Grantor or in the name of the Collateral Agent or otherwise, all rights and remedies of such Grantor with respect to the Collateral, and to take any and all appropriate action and to execute and deliver any and all documents and instruments that the Collateral Agent may deem necessary or desirable to accomplish the purposes of this Agreement, including, without limitation:
(i) to execute and file UCC financing statements, continuation statements, and amendments thereto, in each case in any jurisdiction, naming such Grantor as debtor and the Collateral Agent as secured party, and to execute and file IP Security Agreements and amendments thereto with the United States Patent and Trademark Office and the United States Copyright Office;
(ii) to endorse and collect any and all checks, notes, drafts, money orders, and other instruments of payment relating to the Collateral;
(iii) to enforce, settle, adjust, or compromise any and all accounts, general intangibles, and other payment obligations constituting Collateral, and to sue thereon and collect the same;
(iv) to execute and deliver assignments, licenses, transfers, conveyances, and other documents and instruments relating to any Collateral;
(v) to receive, open, and dispose of all mail addressed to any Grantor and to notify postal authorities to change the address for delivery of mail to any Grantor to such address as the Collateral Agent may designate;
(vi) to take any action and to execute and deliver any document necessary to protect, preserve, and realize upon the Collateral and the rights of the Collateral Agent and the other Secured Parties therein; and
(vii) generally, to do and perform all acts and things that the Collateral Agent may deem necessary or advisable to exercise and enforce the rights, powers, and remedies granted to the Collateral Agent hereunder or under any other Loan Document with respect to the Collateral.
(b) Each Grantor hereby ratifies all that any such attorney-in-fact shall lawfully do or cause to be done by virtue of and in compliance with this Section 5.01. The power of attorney granted hereby is irrevocable and coupled with an interest and shall not be affected by any subsequent disability or incapacity of any Grantor or by the dissolution, termination, or other cessation of existence of any Grantor.
(c) Notwithstanding the foregoing, the Collateral Agent shall not exercise any rights under this Section 5.01 unless an Event of Default has occurred and is continuing, except that the Collateral Agent may, at any time, without the occurrence of an Event of Default, execute and file UCC financing statements, continuation statements, and amendments to financing statements as contemplated by Article 9 of the UCC, without the signature of the applicable Grantor where permitted by applicable law.
Section 5.02 — Collateral Agent's Duties
(a) The powers conferred on the Collateral Agent hereunder are solely to protect the interests of the Secured Parties in the Collateral and shall not impose any duty upon the Collateral Agent to exercise any such powers. The Collateral Agent shall have no obligation to preserve rights against prior parties, collect or realize upon any Collateral, or take any other action with respect to the Collateral or any part thereof, except as expressly provided herein, in the Credit Agreement, or in any other Loan Document.
(b) The Collateral Agent shall exercise reasonable care in the custody and preservation of any Collateral in its possession, and shall be deemed to have exercised reasonable care if it treats such Collateral in the same manner as it treats similar property for its own account. Except as otherwise expressly provided herein or in the Credit Agreement, the Collateral Agent shall have no duty to (i) take any steps to preserve rights against any person with respect to any Collateral, (ii) take any necessary steps to collect or realize upon the Obligations or any guarantee thereof or any part thereof, (iii) take any necessary steps to collect or realize upon any Collateral, or (iv) take any action with respect to the Collateral or any part thereof.
(c) The Collateral Agent acts in its capacity as Collateral Agent for the ratable benefit of all Secured Parties under both the Term Loan B Facility and the RCF, subject at all times to the terms, conditions, and priorities set forth in the Intercreditor Agreement. The rights, privileges, protections, immunities, and indemnities afforded to the Collateral Agent under the Credit Agreement shall apply to the Collateral Agent in its capacity as Collateral Agent hereunder as if fully set forth herein.
ARTICLE VI — REMEDIES
Section 6.01 — Remedies Upon Event of Default
Upon the occurrence and during the continuance of an Event of Default (as defined in the Credit Agreement), the Collateral Agent shall have, in addition to all other rights and remedies granted to it hereunder, under any other Loan Document, or by applicable law, the following rights and remedies:
(a) UCC Remedies. The Collateral Agent may exercise all rights and remedies of a secured party under the UCC (whether or not the UCC applies to the affected Collateral) and all other rights and remedies available to it under this Agreement, the Credit Agreement, or any other Loan Document, or at law or in equity;
(b) Disposition of Collateral. The Collateral Agent may sell, lease, license, assign, or otherwise dispose of all or any part of the Collateral, at public or private sale or at any broker's board or on any securities exchange, for cash, upon credit, or for future delivery, in such parcel or parcels and at such time or times and at such place or places and upon such terms and conditions as the Collateral Agent may deem commercially reasonable, and for such consideration as the Collateral Agent may deem appropriate, and the Collateral Agent or any Secured Party may be the purchaser, lessee, licensee, or assignee of any or all of the Collateral at any public disposition;
(c) Collection of Proceeds. The Collateral Agent may collect, receive, appropriate, and retain all proceeds of any Collateral, including all cash, checks, deposit account funds, and other monies received in payment of or on account of any Collateral;
(d) Exercise of Equity Rights. The Collateral Agent may exercise all voting, conversion, registration, and other rights, and all other options, warrants, and similar rights, with respect to the Pledged Equity, in each case as though the Collateral Agent were the outright owner thereof;
(e) Appointm