1021-00007 · Verimark Hospitality Group · Commitment Letter

good-faith-deposit-escrow-instructions.docx DOCUMENT Real Estate

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CONFIDENTIAL

CALDERWOOD & HARKNESS LLP Attorneys at Law

100 Southeast Second Street, Suite 3800 Miami, Florida 33131 Telephone: (305) 555-7200 Facsimile: (305) 555-7201 www.calderwoodharkness.com

December 12, 2022

VIA OVERNIGHT COURIER AND EMAIL

Meridian Title & Escrow, Inc.

Attn: Lisa Portman, Title Officer

9100 South Dadeland Boulevard, Suite 1500 Miami, FL 33156

Re: Escrow Instructions — Good Faith Deposit in Connection with Proposed $160,000,000 First Mortgage Loan from Pinnacle Atlantic Capital, LLC to Coral Palms Resort Holdings LLC; Commitment Letter dated December 9, 2022

Calderwood & Harkness LLP Client Matter No.: 1021-00007

Dear Ms. Portman:

This firm represents Coral Palms Resort Holdings LLC, a Florida limited liability company (the "Borrower"), and its parent company, Verimark Hospitality Group Inc., a Delaware corporation (Nasdaq: VMRK) (the "Guarantor"), in connection with a proposed first mortgage loan in the original principal amount of One Hundred Sixty Million Dollars ($160,000,000) (the "Loan") to be made by Pinnacle Atlantic Capital, LLC, a Delaware limited liability company (the "Lender"), to the Borrower. The Loan will be secured by, among other things, a first priority mortgage lien on the property known as the Coral Palms Grand Resort & Spa, located at 99000 Overseas Highway, Key Largo, Monroe County, Florida 33037, together with all improvements, fixtures, and appurtenances thereto (the "Property"). The terms and conditions of the Loan are set forth in that certain Commitment Letter dated December 9, 2022, by and between the Borrower and the Lender (the "Commitment Letter"), a copy of which is enclosed herewith for reference.

The purpose of this letter is to provide escrow instructions governing the Borrower's good faith deposit in the amount of One Million Six Hundred Thousand Dollars ($1,600,000) (the "Good Faith Deposit" or "Deposit"), representing one percent (1.0%) of the Loan amount, which the Borrower is required to deposit with a third-party escrow agent pursuant to Section 4(a) of the Commitment Letter. As of the date hereof, the Borrower has initiated a wire transfer in the amount of $1,600,000 from Coral Palms Resort Holdings LLC to Meridian Title & Escrow, Inc. (in such capacity, the "Escrow Agent"). These instructions are intended to govern the Escrow Agent's receipt, holding, investment, and disbursement of the Good Faith Deposit and all interest earned thereon.

We respectfully request that you and your firm act as Escrow Agent in accordance with the terms and conditions set forth below.

1. Receipt and Acknowledgment of Deposit

Upon receipt of the wire transfer of One Million Six Hundred Thousand Dollars ($1,600,000) from Coral Palms Resort Holdings LLC, the Escrow Agent is requested to promptly acknowledge such receipt in writing. Such written confirmation shall be sent by email (with a hard copy to follow by overnight courier) to each of the following:

(a) Borrower's Counsel: Calderwood & Harkness LLP, Attn: Grace Nakamura, Lead Associate, 100 Southeast Second Street, Suite 3800, Miami, FL 33131; email: gnakamura@calderwoodharkness.com;

(b) Lender's Counsel: Whitford Baines & Driscoll LLP, Attn: Catherine Yee, Associate, and Philip Tarrant Corporation, Partner, 1221 Avenue of the Americas, Suite 4400, New York, NY 10020; emails: cyee@wbdlaw.com and pnordstrom@wbdlaw.com; and

(c) Borrower/Guarantor Representative: Derek Huang, SVP – Capital Markets & Treasury, Verimark Hospitality Group Inc., 1400 Bayshore Boulevard, Suite 2200, Miami, FL 33131; email: dhuang@verimarkhospitality.com.

The written confirmation of receipt shall include, at a minimum, the following information: (i) the date and time of receipt of the wire transfer; (ii) the amount received; (iii) the name and account number of the escrow account in which the funds have been deposited; and (iv) the identity of the financial institution at which such account is maintained. The Escrow Agent shall provide such confirmation no later than one (1) business day following receipt of the wire transfer.

2. Escrow Account and Investment of Deposit

The Deposit shall be held by the Escrow Agent in a segregated, federally insured, interest-bearing escrow account at a commercial bank that is reasonably acceptable to both the Borrower and the Lender (the "Escrow Account"). The Escrow Agent shall identify the proposed depository institution to the Borrower and the Lender promptly upon receipt of the Deposit, and the Borrower and the Lender shall each have two (2) business days from such notification to object to the proposed institution. In the absence of any timely objection, the proposed depository institution shall be deemed acceptable.

All interest earned on the Deposit shall accrue for the benefit of the Borrower. Interest income shall be reported to the Internal Revenue Service under the Borrower's taxpayer identification number, which shall be provided by the Borrower separately under cover of a completed IRS Form W-9. The Escrow Agent shall not file any tax returns or information reports with respect to the Escrowed Funds (as defined below) until such time as the Borrower has provided the Escrow Agent with a completed W-9 or other applicable tax documentation.

The principal amount of the Deposit, together with all interest accrued thereon from time to time (collectively, the "Escrowed Funds"), shall be held by the Escrow Agent in accordance with the terms and conditions of these escrow instructions. The Escrow Agent shall not commingle the Escrowed Funds with any other funds held by the Escrow Agent, whether on behalf of third parties or on its own account. The Escrow Agent shall maintain accurate records of all deposits, interest accruals, and disbursements with respect to the Escrow Account and shall make such records available for inspection by the Borrower and the Lender (or their respective counsel) upon reasonable request.

3. Conditions for Release and Disbursement

The Escrow Agent shall release and disburse the Escrowed Funds only in accordance with the provisions of this Section 3. Under no circumstances shall the Escrow Agent release or disburse any portion of the Escrowed Funds except as expressly authorized herein or as otherwise directed by joint written instructions of the Borrower and the Lender (or their respective counsel) or by a final, non-appealable order of a court of competent jurisdiction.

3.1 Release to Lender at Closing

Upon the closing of the Loan (the "Closing"), the Escrow Agent shall release and disburse the Escrowed Funds, or such portion thereof as may be directed, to the Lender or as otherwise directed by joint written instructions executed by authorized representatives of both the Borrower and the Lender (or their respective counsel). At Closing, the Good Faith Deposit shall be applied toward the Borrower's closing costs, including without limitation the commitment fee of Eight Hundred Thousand Dollars ($800,000), representing fifty basis points (0.50%) of the Loan amount, payable to the Lender at Closing pursuant to Section 6(b) of the Commitment Letter. To the extent the Good Faith Deposit exceeds the closing costs to which it is to be applied, the balance shall be credited against the Loan proceeds or otherwise disbursed as directed by the joint written instructions of the parties.

Disbursement of the Escrowed Funds at Closing shall occur only upon receipt by the Escrow Agent of joint written instructions executed by an authorized representative of the Borrower (or the Borrower's counsel, Calderwood & Harkness LLP) and an authorized representative of the Lender (or the Lender's counsel, Whitford Baines & Driscoll LLP). Such joint written instructions shall specify the amount(s) to be disbursed, the payee(s), and the wire transfer instructions for each payee. The Escrow Agent shall be entitled to rely upon such joint written instructions without independent investigation or verification of the underlying facts or conditions giving rise to such instructions.

3.2 Refund to Borrower

The Escrowed Funds shall be returned in full to the Borrower upon the occurrence of any of the following events or circumstances:

(a) The failure of any condition precedent to the Lender's obligation to fund the Loan under the Commitment Letter, which failure is not caused by or attributable to the Borrower's default, breach, or failure to perform any obligation under the Commitment Letter or any ancillary document executed in connection therewith;

(b) Termination of the Commitment Letter by the Lender for any reason other than a default or breach by the Borrower under the Commitment Letter, including without limitation termination due to the Lender's inability to obtain satisfactory internal credit approval, failure of the Lender to satisfy its own conditions to funding, or the Lender's election to withdraw the commitment for reasons unrelated to the Borrower's performance;

(c) Mutual written agreement of the Borrower and the Lender directing the return of the Deposit to the Borrower, executed by authorized representatives of both parties; or

(d) Any other circumstance under which the Commitment Letter expressly provides for the return of the Good Faith Deposit to the Borrower, including without limitation any material modification of the commitment terms by the Lender that is not consented to by the Borrower in writing.

In the event that any of the foregoing circumstances has occurred, the Borrower shall deliver to the Escrow Agent written notice specifying the applicable provision of this Section 3.2, together with supporting documentation reasonably satisfactory to the Escrow Agent. Unless the Lender delivers written objection to the Escrow Agent within five (5) business days following the Lender's receipt of such notice and supporting documentation (copies of which shall be delivered simultaneously to the Lender and its counsel in accordance with Section 6 below), the Escrow Agent shall refund the Escrowed Funds to the Borrower by wire transfer to the account designated by the Borrower in writing pursuant to Section 4 below. If the Lender delivers a timely written objection, the matter shall be treated as a disputed disbursement under Section 3.4 below.

3.3 Retention by Lender (Forfeiture)

The Lender shall be entitled to receive and retain the Good Faith Deposit (together with all accrued interest thereon) as liquidated damages, and not as a penalty, in the event that:

(a) The Borrower defaults under or breaches the Commitment Letter, including without limitation the Borrower's failure to satisfy any condition precedent to Closing that is within the Borrower's control, the Borrower's failure to deliver any document, instrument, or information required under the Commitment Letter within the time periods specified therein, or the Borrower's material misrepresentation of any fact or circumstance upon which the Lender relied in issuing the Commitment Letter; or

(b) The Borrower elects to terminate the transaction or withdraw from the proposed Loan under circumstances where the Commitment Letter expressly provides that the Good Faith Deposit is non-refundable, including without limitation a voluntary termination by the Borrower following the expiration of any applicable due diligence or feasibility period.

Notwithstanding the foregoing, disbursement of the Escrowed Funds to the Lender under this Section 3.3 shall require either: (i) joint written instructions executed by authorized representatives of both the Borrower and the Lender (or their respective counsel) directing such disbursement; or (ii) a final, non-appealable order of a court of competent jurisdiction or a final, binding arbitration award issued pursuant to a proceeding conducted in accordance with the rules of the American Arbitration Association, directing the Escrow Agent to disburse the Escrowed Funds to the Lender. The Escrow Agent shall not disburse any portion of the Escrowed Funds to the Lender solely on the basis of a unilateral demand or claim by the Lender.

3.4 Disputed Disbursement

In the event of any dispute, disagreement, or conflicting claims between the Borrower and the Lender regarding the entitlement to or proper disbursement of the Escrowed Funds, the Escrow Agent shall continue to hold the Escrowed Funds in the Escrow Account, without disbursement to any party, until receipt of one of the following:

(a) Joint written instructions from the Borrower and the Lender, executed by authorized representatives of both parties (or their respective counsel), resolving the dispute and directing the Escrow Agent as to the disbursement of the Escrowed Funds; or

(b) A final, non-appealable order of a court of competent jurisdiction in the State of Florida directing the Escrow Agent as to the disbursement of the Escrowed Funds.

In the event of any such dispute, the Escrow Agent may, at its sole option and in its sole discretion, file an action in interpleader and deposit the Escrowed Funds with a court of competent jurisdiction in Monroe County or Miami-Dade County, Florida, and upon such deposit shall be relieved and discharged of all further obligations and liability under these escrow instructions with respect to the Escrowed Funds so interpleaded. The Escrow Agent shall be entitled to recover its reasonable costs and expenses (including reasonable attorneys' fees) incurred in connection with any such interpleader action from the Escrowed Funds prior to deposit with the court, or from the Borrower and the Lender jointly and severally, as provided in Section 5 below.

The Escrow Agent shall not be liable for any delay in the disbursement of the Escrowed Funds resulting from any dispute between the Borrower and the Lender, and the Borrower and the Lender hereby agree to hold the Escrow Agent harmless from and against any and all claims, losses, liabilities, costs, and expenses arising out of or in connection with any such delay.

4. Wire Transfer Instructions for Return of Deposit

In the event the Escrowed Funds are to be returned to the Borrower pursuant to Section 3.2 above or as otherwise directed by joint written instructions of the parties, the Escrow Agent shall wire the Escrowed Funds to the following account (to be confirmed by the Borrower in a separate writing delivered to the Escrow Agent with a copy to the Lender's counsel):

Beneficiary: Coral Palms Resort Holdings LLC

Bank Name: To be provided by Borrower under separate cover

ABA Routing Number: To be provided by Borrower under separate cover

Account Number: To be provided by Borrower under separate cover

Reference: Escrow Return — Good Faith Deposit — Calderwood & Harkness LLP Matter No. 1021-00007

The Borrower shall deliver confirmed wire transfer instructions to the Escrow Agent no later than three (3) business days prior to the anticipated date of disbursement. The Escrow Agent shall not be obligated to disburse any funds by wire transfer until it has received complete and verified wire transfer instructions from the Borrower.

In the event the Escrowed Funds are to be disbursed to the Lender pursuant to Section 3.1 or Section 3.3 above, the Escrow Agent shall wire the Escrowed Funds to the account designated by Pinnacle Atlantic Capital, LLC in a writing delivered to the Escrow Agent, with a copy to Calderwood & Harkness LLP, Attn: Grace Nakamura. The Lender shall bear sole responsibility for providing accurate and complete wire transfer instructions for any disbursement to the Lender.

5. Escrow Agent Duties, Liability, and Indemnification

The Escrow Agent's duties hereunder are purely ministerial in nature. The Escrow Agent is not a party to, and has no interest in, the Commitment Letter, the proposed Loan, or any other agreement between the Borrower and the Lender. The Escrow Agent's sole obligation is to hold, invest, and disburse the Escrowed Funds in accordance with these escrow instructions and any supplemental written instructions delivered in accordance herewith.

The Escrow Agent shall have no liability whatsoever for acting or refraining from acting in good faith upon any written notice, instruction, demand, certificate, or other document that the Escrow Agent reasonably believes to be genuine, to have been signed or presented by the proper party or parties, and to be authorized in accordance with the terms of these escrow instructions. The Escrow Agent shall not be required to determine or inquire into the authenticity or validity of any document delivered to it, the authority of any person executing or delivering such document (other than verifying signatures against specimen signatures provided to the Escrow Agent by the parties), or the truth, accuracy, or completeness of any statement or representation contained in any such document.

The Escrow Agent shall not be liable for any loss of principal or interest resulting from the failure, insolvency, or default of any financial institution in which the Escrowed Funds are deposited, provided that the Escrow Agent has selected such institution in accordance with the requirements of Section 2 above. The Escrow Agent shall not be liable for any loss resulting from any investment made in accordance with these instructions or for any decline in the value of any investment.

The Borrower and the Lender shall jointly and severally indemnify, defend, and hold harmless the Escrow Agent and its directors, officers, employees, and agents from and against any and all claims, demands, actions, losses, liabilities, damages, costs, and expenses (including, without limitation, reasonable attorneys' fees and court costs) arising out of or in connection with the Escrow Agent's performance of, or failure to perform, its duties hereunder, except to the extent that such claims, losses, liabilities, costs, or expenses are finally determined by a court of competent jurisdiction to have resulted from the Escrow Agent's gross negligence or willful misconduct. This indemnification obligation shall survive the termination of these escrow instructions and the disbursement of the Escrowed Funds.

The Escrow Agent's fees and costs for acting as escrow agent hereunder and for holding the Deposit shall be borne by the Borrower as part of the Borrower's transaction costs in connection with the Loan. The Escrow Agent shall provide the Borrower with a schedule of its fees promptly upon acceptance of these escrow instructions. Payment of such fees shall not be contingent upon the closing of the Loan or the outcome of any dispute regarding the Escrowed Funds.

6. Notices

All notices, instructions, demands, consents, and other communications required or permitted to be given under these escrow instructions (each, a "Notice") shall be in writing and shall be deemed to have been duly given and received: (i) upon delivery, if delivered by hand; (ii) on the next business day following deposit with a nationally recognized overnight courier service (such as FedEx or Halcyon Partners LLC), with all charges prepaid; or (iii) upon transmission by email, provided that the sender receives electronic confirmation of receipt or the recipient acknowledges receipt in writing (whether by email or otherwise). All Notices shall be addressed as follows:

If to the Escrow Agent:

Meridian Title & Escrow, Inc.

Attn: Lisa Portman, Title Officer

9100 South Dadeland Boulevard, Suite 1500 Miami, FL 33156

Email: lportman@meridiantitle.com

Copies of all Notices delivered to the Escrow Agent shall be delivered simultaneously to each of the following:

Borrower's Counsel:

Calderwood & Harkness LLP

Attn: Grace Nakamura

100 Southeast Second Street, Suite 3800 Miami, FL 33131

Email: gnakamura@calderwoodharkness.com

Lender's Counsel:

Whitford Baines & Driscoll LLP

Attn: Philip Tarrant Corporation, Partner / Catherine Yee, Associate

1221 Avenue of the Americas, Suite 4400 New York, NY 10020

Email: pnordstrom@wbdlaw.com / cyee@wbdlaw.com

Borrower:

Coral Palms Resort Holdings LLC c/o Verimark Hospitality Group Inc.

Attn: Derek Huang, SVP – Capital Markets & Treasury

1400 Bayshore Boulevard, Suite 2200 Miami, FL 33131

Email: dhuang@verimarkhospitality.com

Lender:

Pinnacle Atlantic Capital, LLC

Attn: Martin Drubeck, Managing Director – Real Estate Lending /

Jennifer Kwon, Vice President – Originations 200 Lexington Avenue, 38th Floor New York, NY 10016

Email: mscholes@pinnacleatlantic.com / jkwon@pinnacleatlantic.com

Any party may change its address or email for purposes of Notices hereunder by delivering written notice of such change to all other parties in accordance with this Section 6.

7. Relationship to Rate Lock Deposit

The Borrower and the Lender have indicated that a separate rate lock deposit in the amount of Eight Hundred Thousand Dollars ($800,000), representing fifty basis points (0.50%) of the Loan amount, is anticipated to be deposited with the Escrow Agent on or about January 5, 2023 (the "Rate Lock Deposit"), in connection with the Borrower's election to lock the applicable interest rate under the Commitment Letter.

These escrow instructions govern solely the Good Faith Deposit of $1,600,000 and all interest accrued thereon. Separate escrow instructions will be provided to the Escrow Agent for the Rate Lock Deposit at or prior to the time such deposit is made, or, at the election of the Borrower and the Lender, these instructions may be supplemented or amended at that time to incorporate the Rate Lock Deposit. Until such time as supplemental or separate instructions are delivered, the Escrow Agent shall have no duties or obligations with respect to the Rate Lock Deposit.

The Good Faith Deposit and the Rate Lock Deposit are to be held and accounted for separately in all respects, including without limitation the maintenance of separate escrow accounts and separate records of interest accrual, unless otherwise directed in a joint written instruction executed by both the Borrower and the Lender (or their respective counsel). The Escrow Agent shall not apply, set off, or commingle any portion of the Good Faith Deposit with or against the Rate Lock Deposit, or vice versa, absent such joint written direction.

8. Governing Law

These escrow instructions and the Escrow Agent's duties hereunder shall be governed by, and construed and enforced in accordance with, the laws of the State of Florida, without regard to principles of conflicts of law that would require or permit the application of the laws of any other jurisdiction. The parties hereby consent to the exclusive jurisdiction and venue of the state and federal courts located in Miami-Dade County, Florida, for the resolution of any dispute arising out of or in connection with these escrow instructions, except as otherwise provided in Section 3.4 above with respect to interpleader actions filed in Monroe County, Florida.

9. Termination of Escrow

The escrow established hereunder shall terminate upon the earliest to occur of the following events:

(a) The Closing of the Loan and the disbursement of the Escrowed Funds in accordance with Section 3.1 above;

(b) The return of the Escrowed Funds to the Borrower in accordance with Section 3.2 above;

(d) The interpleader of the Escrowed Funds into a court of competent jurisdiction by the Escrow Agent in accordance with Section 3.4 above.

Upon the termination of the escrow, the Escrow Agent shall have no further duties, obligations, or liabilities hereunder, except for any obligations that expressly survive termination, including without limitation the indemnification obligations of the Borrower and the Lender set forth in Section 5 above.

10. Acknowledgment and Countersignature

We respectfully request that the Escrow Agent execute and return a copy of this letter to Calderwood & Harkness LLP to indicate the Escrow Agent's acceptance of these escrow instructions and agreement to act in accordance with the terms and conditions set forth herein. We further request that the Lender's counsel, Whitford Baines & Driscoll LLP, execute the acknowledgment set forth below to confirm the Lender's agreement to and acceptance of these escrow instructions.

These escrow instructions may be executed in counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one and the same instrument. Delivery of an executed counterpart by facsimile or electronic transmission (including PDF) shall be equally effective as delivery of a manually executed counterpart.

We appreciate your willingness to serve as Escrow Agent in connection with this transaction, and we look forward to working with you and your colleagues at Meridian Title & Escrow toward a successful closing. Please do not hesitate to contact me or Grace Nakamura at (305) 555-7214 if you have any questions regarding these instructions.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Name: Douglas Fairchild

Title: Partner

On behalf of Coral Palms Resort Holdings LLC

ACKNOWLEDGMENT AND ACCEPTANCE BY ESCROW AGENT

The undersigned hereby acknowledges receipt of the foregoing Escrow Instructions dated December 12, 2022, and agrees to act as Escrow Agent in accordance with the terms and conditions set forth therein.

MERIDIAN TITLE & ESCROW, INC.

By: ________

Name: Lisa Portman

Title: Title Officer

Date: ________

ACKNOWLEDGMENT BY LENDER'S COUNSEL

The undersigned hereby acknowledges and agrees to the foregoing Escrow Instructions dated December 12, 2022, on behalf of Pinnacle Atlantic Capital, LLC.

WHITFORD BAINES & DRISCOLL LLP

By: ________

Name: Philip Tarrant Corporation

Title: Partner

On behalf of Pinnacle Atlantic Capital, LLC

Date: ________

Enclosures:

1. Copy of Commitment Letter dated December 9, 2022, between Coral Palms Resort Holdings LLC and Pinnacle Atlantic Capital, LLC (for reference)

2. Wire transfer confirmation (to follow upon receipt)

cc: (via email and overnight courier)

Conrad W. Elliston, Chairman & CEO, Verimark Hospitality Group Inc. Natasha Ricard, CFO, Verimark Hospitality Group Inc. Derek Huang, SVP – Capital Markets & Treasury, Verimark Hospitality Group Inc. Angela Fontaine, Calderwood & Harkness LLP Grace Nakamura, Calderwood & Harkness LLP Rafael Dominguez, Calderwood & Harkness LLP Philip Tarrant Corporation, Whitford Baines & Driscoll LLP Catherine Yee, Whitford Baines & Driscoll LLP

CONFIDENTIAL
CALDERWOOD & HARKNESS LLP Attorneys at Law
100 Southeast Second Street, Suite 3800 Miami, Florida 33131 Telephone: (305) 555-7200 Facsimile: (305) 555-7201 www.calderwoodharkness.com
December 12, 2022
VIA OVERNIGHT COURIER AND EMAIL
Meridian Title & Escrow, Inc.
Attn: Lisa Portman, Title Officer
9100 South Dadeland Boulevard, Suite 1500 Miami, FL 33156
Re: Escrow Instructions — Good Faith Deposit in Connection with Proposed $160,000,000 First Mortgage Loan from Pinnacle Atlantic Capital, LLC to Coral Palms Resort Holdings LLC; Commitment Letter dated December 9, 2022
Calderwood & Harkness LLP Client Matter No.: 1021-00007
Dear Ms. Portman:
This firm represents Coral Palms Resort Holdings LLC, a Florida limited liability company (the "Borrower"), and its parent company, Verimark Hospitality Group Inc., a Delaware corporation (Nasdaq: VMRK) (the "Guarantor"), in connection with a proposed first mortgage loan in the original principal amount of One Hundred Sixty Million Dollars ($160,000,000) (the "Loan") to be made by Pinnacle Atlantic Capital, LLC, a Delaware limited liability company (the "Lender"), to the Borrower. The Loan will be secured by, among other things, a first priority mortgage lien on the property known as the Coral Palms Grand Resort & Spa, located at 99000 Overseas Highway, Key Largo, Monroe County, Florida 33037, together with all improvements, fixtures, and appurtenances thereto (the "Property"). The terms and conditions of the Loan are set forth in that certain Commitment Letter dated December 9, 2022, by and between the Borrower and the Lender (the "Commitment Letter"), a copy of which is enclosed herewith for reference.
The purpose of this letter is to provide escrow instructions governing the Borrower's good faith deposit in the amount of One Million Six Hundred Thousand Dollars ($1,600,000) (the "Good Faith Deposit" or "Deposit"), representing one percent (1.0%) of the Loan amount, which the Borrower is required to deposit with a third-party escrow agent pursuant to Section 4(a) of the Commitment Letter. As of the date hereof, the Borrower has initiated a wire transfer in the amount of $1,600,000 from Coral Palms Resort Holdings LLC to Meridian Title & Escrow, Inc. (in such capacity, the "Escrow Agent"). These instructions are intended to govern the Escrow Agent's receipt, holding, investment, and disbursement of the Good Faith Deposit and all interest earned thereon.
We respectfully request that you and your firm act as Escrow Agent in accordance with the terms and conditions set forth below.
1. Receipt and Acknowledgment of Deposit
Upon receipt of the wire transfer of One Million Six Hundred Thousand Dollars ($1,600,000) from Coral Palms Resort Holdings LLC, the Escrow Agent is requested to promptly acknowledge such receipt in writing. Such written confirmation shall be sent by email (with a hard copy to follow by overnight courier) to each of the following:
(a) Borrower's Counsel: Calderwood & Harkness LLP, Attn: Grace Nakamura, Lead Associate, 100 Southeast Second Street, Suite 3800, Miami, FL 33131; email: gnakamura@calderwoodharkness.com;
(b) Lender's Counsel: Whitford Baines & Driscoll LLP, Attn: Catherine Yee, Associate, and Philip Tarrant Corporation, Partner, 1221 Avenue of the Americas, Suite 4400, New York, NY 10020; emails: cyee@wbdlaw.com and pnordstrom@wbdlaw.com; and
(c) Borrower/Guarantor Representative: Derek Huang, SVP – Capital Markets & Treasury, Verimark Hospitality Group Inc., 1400 Bayshore Boulevard, Suite 2200, Miami, FL 33131; email: dhuang@verimarkhospitality.com.
The written confirmation of receipt shall include, at a minimum, the following information: (i) the date and time of receipt of the wire transfer; (ii) the amount received; (iii) the name and account number of the escrow account in which the funds have been deposited; and (iv) the identity of the financial institution at which such account is maintained. The Escrow Agent shall provide such confirmation no later than one (1) business day following receipt of the wire transfer.
2. Escrow Account and Investment of Deposit
The Deposit shall be held by the Escrow Agent in a segregated, federally insured, interest-bearing escrow account at a commercial bank that is reasonably acceptable to both the Borrower and the Lender (the "Escrow Account"). The Escrow Agent shall identify the proposed depository institution to the Borrower and the Lender promptly upon receipt of the Deposit, and the Borrower and the Lender shall each have two (2) business days from such notification to object to the proposed institution. In the absence of any timely objection, the proposed depository institution shall be deemed acceptable.
All interest earned on the Deposit shall accrue for the benefit of the Borrower. Interest income shall be reported to the Internal Revenue Service under the Borrower's taxpayer identification number, which shall be provided by the Borrower separately under cover of a completed IRS Form W-9. The Escrow Agent shall not file any tax returns or information reports with respect to the Escrowed Funds (as defined below) until such time as the Borrower has provided the Escrow Agent with a completed W-9 or other applicable tax documentation.
The principal amount of the Deposit, together with all interest accrued thereon from time to time (collectively, the "Escrowed Funds"), shall be held by the Escrow Agent in accordance with the terms and conditions of these escrow instructions. The Escrow Agent shall not commingle the Escrowed Funds with any other funds held by the Escrow Agent, whether on behalf of third parties or on its own account. The Escrow Agent shall maintain accurate records of all deposits, interest accruals, and disbursements with respect to the Escrow Account and shall make such records available for inspection by the Borrower and the Lender (or their respective counsel) upon reasonable request.
3. Conditions for Release and Disbursement
The Escrow Agent shall release and disburse the Escrowed Funds only in accordance with the provisions of this Section 3. Under no circumstances shall the Escrow Agent release or disburse any portion of the Escrowed Funds except as expressly authorized herein or as otherwise directed by joint written instructions of the Borrower and the Lender (or their respective counsel) or by a final, non-appealable order of a court of competent jurisdiction.
3.1 Release to Lender at Closing
Upon the closing of the Loan (the "Closing"), the Escrow Agent shall release and disburse the Escrowed Funds, or such portion thereof as may be directed, to the Lender or as otherwise directed by joint written instructions executed by authorized representatives of both the Borrower and the Lender (or their respective counsel). At Closing, the Good Faith Deposit shall be applied toward the Borrower's closing costs, including without limitation the commitment fee of Eight Hundred Thousand Dollars ($800,000), representing fifty basis points (0.50%) of the Loan amount, payable to the Lender at Closing pursuant to Section 6(b) of the Commitment Letter. To the extent the Good Faith Deposit exceeds the closing costs to which it is to be applied, the balance shall be credited against the Loan proceeds or otherwise disbursed as directed by the joint written instructions of the parties.
Disbursement of the Escrowed Funds at Closing shall occur only upon receipt by the Escrow Agent of joint written instructions executed by an authorized representative of the Borrower (or the Borrower's counsel, Calderwood & Harkness LLP) and an authorized representative of the Lender (or the Lender's counsel, Whitford Baines & Driscoll LLP). Such joint written instructions shall specify the amount(s) to be disbursed, the payee(s), and the wire transfer instructions for each payee. The Escrow Agent shall be entitled to rely upon such joint written instructions without independent investigation or verification of the underlying facts or conditions giving rise to such instructions.
3.2 Refund to Borrower
The Escrowed Funds shall be returned in full to the Borrower upon the occurrence of any of the following events or circumstances:
(a) The failure of any condition precedent to the Lender's obligation to fund the Loan under the Commitment Letter, which failure is not caused by or attributable to the Borrower's default, breach, or failure to perform any obligation under the Commitment Letter or any ancillary document executed in connection therewith;
(b) Termination of the Commitment Letter by the Lender for any reason other than a default or breach by the Borrower under the Commitment Letter, including without limitation termination due to the Lender's inability to obtain satisfactory internal credit approval, failure of the Lender to satisfy its own conditions to funding, or the Lender's election to withdraw the commitment for reasons unrelated to the Borrower's performance;
(c) Mutual written agreement of the Borrower and the Lender directing the return of the Deposit to the Borrower, executed by authorized representatives of both parties; or
(d) Any other circumstance under which the Commitment Letter expressly provides for the return of the Good Faith Deposit to the Borrower, including without limitation any material modification of the commitment terms by the Lender that is not consented to by the Borrower in writing.
In the event that any of the foregoing circumstances has occurred, the Borrower shall deliver to the Escrow Agent written notice specifying the applicable provision of this Section 3.2, together with supporting documentation reasonably satisfactory to the Escrow Agent. Unless the Lender delivers written objection to the Escrow Agent within five (5) business days following the Lender's receipt of such notice and supporting documentation (copies of which shall be delivered simultaneously to the Lender and its counsel in accordance with Section 6 below), the Escrow Agent shall refund the Escrowed Funds to the Borrower by wire transfer to the account designated by the Borrower in writing pursuant to Section 4 below. If the Lender delivers a timely written objection, the matter shall be treated as a disputed disbursement under Section 3.4 below.
3.3 Retention by Lender (Forfeiture)
The Lender shall be entitled to receive and retain the Good Faith Deposit (together with all accrued interest thereon) as liquidated damages, and not as a penalty, in the event that:
(a) The Borrower defaults under or breaches the Commitment Letter, including without limitation the Borrower's failure to satisfy any condition precedent to Closing that is within the Borrower's control, the Borrower's failure to deliver any document, instrument, or information required under the Commitment Letter within the time periods specified therein, or the Borrower's material misrepresentation of any fact or circumstance upon which the Lender relied in issuing the Commitment Letter; or
(b) The Borrower elects to terminate the transaction or withdraw from the proposed Loan under circumstances where the Commitment Letter expressly provides that the Good Faith Deposit is non-refundable, including without limitation a voluntary termination by the Borrower following the expiration of any applicable due diligence or feasibility period.
Notwithstanding the foregoing, disbursement of the Escrowed Funds to the Lender under this Section 3.3 shall require either: (i) joint written instructions executed by authorized representatives of both the Borrower and the Lender (or their respective counsel) directing such disbursement; or (ii) a final, non-appealable order of a court of competent jurisdiction or a final, binding arbitration award issued pursuant to a proceeding conducted in accordance with the rules of the American Arbitration Association, directing the Escrow Agent to disburse the Escrowed Funds to the Lender. The Escrow Agent shall not disburse any portion of the Escrowed Funds to the Lender solely on the basis of a unilateral demand or claim by the Lender.
3.4 Disputed Disbursement
In the event of any dispute, disagreement, or conflicting claims between the Borrower and the Lender regarding the entitlement to or proper disbursement of the Escrowed Funds, the Escrow Agent shall continue to hold the Escrowed Funds in the Escrow Account, without disbursement to any party, until receipt of one of the following:
(a) Joint written instructions from the Borrower and the Lender, executed by authorized representatives of both parties (or their respective counsel), resolving the dispute and directing the Escrow Agent as to the disbursement of the Escrowed Funds; or
(b) A final, non-appealable order of a court of competent jurisdiction in the State of Florida directing the Escrow Agent as to the disbursement of the Escrowed Funds.
In the event of any such dispute, the Escrow Agent may, at its sole option and in its sole discretion, file an action in interpleader and deposit the Escrowed Funds with a court of competent jurisdiction in Monroe County or Miami-Dade County, Florida, and upon such deposit shall be relieved and discharged of all further obligations and liability under these escrow instructions with respect to the Escrowed Funds so interpleaded. The Escrow Agent shall be entitled to recover its reasonable costs and expenses (including reasonable attorneys' fees) incurred in connection with any such interpleader action from the Escrowed Funds prior to deposit with the court, or from the Borrower and the Lender jointly and severally, as provided in Section 5 below.
The Escrow Agent shall not be liable for any delay in the disbursement of the Escrowed Funds resulting from any dispute between the Borrower and the Lender, and the Borrower and the Lender hereby agree to hold the Escrow Agent harmless from and against any and all claims, losses, liabilities, costs, and expenses arising out of or in connection with any such delay.
4. Wire Transfer Instructions for Return of Deposit
In the event the Escrowed Funds are to be returned to the Borrower pursuant to Section 3.2 above or as otherwise directed by joint written instructions of the parties, the Escrow Agent shall wire the Escrowed Funds to the following account (to be confirmed by the Borrower in a separate writing delivered to the Escrow Agent with a copy to the Lender's counsel):
Beneficiary: Coral Palms Resort Holdings LLC
Bank Name: To be provided by Borrower under separate cover
ABA Routing Number: To be provided by Borrower under separate cover
Account Number: To be provided by Borrower under separate cover
Reference: Escrow Return — Good Faith Deposit — Calderwood & Harkness LLP Matter No. 1021-00007
The Borrower shall deliver confirmed wire transfer instructions to the Escrow Agent no later than three (3) business days prior to the anticipated date of disbursement. The Escrow Agent shall not be obligated to disburse any funds by wire transfer until it has received complete and verified wire transfer instructions from the Borrower.
In the event the Escrowed Funds are to be disbursed to the Lender pursuant to Section 3.1 or Section 3.3 above, the Escrow Agent shall wire the Escrowed Funds to the account designated by Pinnacle Atlantic Capital, LLC in a writing delivered to the Escrow Agent, with a copy to Calderwood & Harkness LLP, Attn: Grace Nakamura. The Lender shall bear sole responsibility for providing accurate and complete wire transfer instructions for any disbursement to the Lender.
5. Escrow Agent Duties, Liability, and Indemnification
The Escrow Agent's duties hereunder are purely ministerial in nature. The Escrow Agent is not a party to, and has no interest in, the Commitment Letter, the proposed Loan, or any other agreement between the Borrower and the Lender. The Escrow Agent's sole obligation is to hold, invest, and disburse the Escrowed Funds in accordance with these escrow instructions and any supplemental written instructions delivered in accordance herewith.
The Escrow Agent shall have no liability whatsoever for acting or refraining from acting in good faith upon any written notice, instruction, demand, certificate, or other document that the Escrow Agent reasonably believes to be genuine, to have been signed or presented by the proper party or parties, and to be authorized in accordance with the terms of these escrow instructions. The Escrow Agent shall not be required to determine or inquire into the authenticity or validity of any document delivered to it, the authority of any person executing or delivering such document (other than verifying signatures against specimen signatures provided to the Escrow Agent by the parties), or the truth, accuracy, or completeness of any statement or representation contained in any such document.
The Escrow Agent shall not be liable for any loss of principal or interest resulting from the failure, insolvency, or default of any financial institution in which the Escrowed Funds are deposited, provided that the Escrow Agent has selected such institution in accordance with the requirements of Section 2 above. The Escrow Agent shall not be liable for any loss resulting from any investment made in accordance with these instructions or for any decline in the value of any investment.
The Borrower and the Lender shall jointly and severally indemnify, defend, and hold harmless the Escrow Agent and its directors, officers, employees, and agents from and against any and all claims, demands, actions, losses, liabilities, damages, costs, and expenses (including, without limitation, reasonable attorneys' fees and court costs) arising out of or in connection with the Escrow Agent's performance of, or failure to perform, its duties hereunder, except to the extent that such claims, losses, liabilities, costs, or expenses are finally determined by a court of competent jurisdiction to have resulted from the Escrow Agent's gross negligence or willful misconduct. This indemnification obligation shall survive the termination of these escrow instructions and the disbursement of the Escrowed Funds.
The Escrow Agent's fees and costs for acting as escrow agent hereunder and for holding the Deposit shall be borne by the Borrower as part of the Borrower's transaction costs in connection with the Loan. The Escrow Agent shall provide the Borrower with a schedule of its fees promptly upon acceptance of these escrow instructions. Payment of such fees shall not be contingent upon the closing of the Loan or the outcome of any dispute regarding the Escrowed Funds.
6. Notices
All notices, instructions, demands, consents, and other communications required or permitted to be given under these escrow instructions (each, a "Notice") shall be in writing and shall be deemed to have been duly given and received: (i) upon delivery, if delivered by hand; (ii) on the next business day following deposit with a nationally recognized overnight courier service (such as FedEx or Halcyon Partners LLC), with all charges prepaid; or (iii) upon transmission by email, provided that the sender receives electronic confirmation of receipt or the recipient acknowledges receipt in writing (whether by email or otherwise). All Notices shall be addressed as follows:
If to the Escrow Agent:
Meridian Title & Escrow, Inc.
Attn: Lisa Portman, Title Officer
9100 South Dadeland Boulevard, Suite 1500 Miami, FL 33156
Email: lportman@meridiantitle.com
Copies of all Notices delivered to the Escrow Agent shall be delivered simultaneously to each of the following:
Borrower's Counsel:
Calderwood & Harkness LLP
Attn: Grace Nakamura
100 Southeast Second Street, Suite 3800 Miami, FL 33131
Email: gnakamura@calderwoodharkness.com
Lender's Counsel:
Whitford Baines & Driscoll LLP
Attn: Philip Tarrant Corporation, Partner / Catherine Yee, Associate
1221 Avenue of the Americas, Suite 4400 New York, NY 10020
Email: pnordstrom@wbdlaw.com / cyee@wbdlaw.com
Borrower:
Coral Palms Resort Holdings LLC c/o Verimark Hospitality Group Inc.
Attn: Derek Huang, SVP – Capital Markets & Treasury
1400 Bayshore Boulevard, Suite 2200 Miami, FL 33131
Email: dhuang@verimarkhospitality.com
Lender:
Pinnacle Atlantic Capital, LLC
Attn: Martin Drubeck, Managing Director – Real Estate Lending /
Jennifer Kwon, Vice President – Originations 200 Lexington Avenue, 38th Floor New York, NY 10016
Email: mscholes@pinnacleatlantic.com / jkwon@pinnacleatlantic.com
Any party may change its address or email for purposes of Notices hereunder by delivering written notice of such change to all other parties in accordance with this Section 6.
7. Relationship to Rate Lock Deposit
The Borrower and the Lender have indicated that a separate rate lock deposit in the amount of Eight Hundred Thousand Dollars ($800,000), representing fifty basis points (0.50%) of the Loan amount, is anticipated to be deposited with the Escrow Agent on or about January 5, 2023 (the "Rate Lock Deposit"), in connection with the Borrower's election to lock the applicable interest rate under the Commitment Letter.
These escrow instructions govern solely the Good Faith Deposit of $1,600,000 and all interest accrued thereon. Separate escrow instructions will be provided to the Escrow Agent for the Rate Lock Deposit at or prior to the time such deposit is made, or, at the election of the Borrower and the Lender, these instructions may be supplemented or amended at that time to incorporate the Rate Lock Deposit. Until such time as supplemental or separate instructions are delivered, the Escrow Agent shall have no duties or obligations with respect to the Rate Lock Deposit.
The Good Faith Deposit and the Rate Lock Deposit are to be held and accounted for separately in all respects, including without limitation the maintenance of separate escrow accounts and separate records of interest accrual, unless otherwise directed in a joint written instruction executed by both the Borrower and the Lender (or their respective counsel). The Escrow Agent shall not apply, set off, or commingle any portion of the Good Faith Deposit with or against the Rate Lock Deposit, or vice versa, absent such joint written direction.
8. Governing Law
These escrow instructions and the Escrow Agent's duties hereunder shall be governed by, and construed and enforced in accordance with, the laws of the State of Florida, without regard to principles of conflicts of law that would require or permit the application of the laws of any other jurisdiction. The parties hereby consent to the exclusive jurisdiction and venue of the state and federal courts located in Miami-Dade County, Florida, for the resolution of any dispute arising out of or in connection with these escrow instructions, except as otherwise provided in Section 3.4 above with respect to interpleader actions filed in Monroe County, Florida.
9. Termination of Escrow
The escrow established hereunder shall terminate upon the earliest to occur of the following events:
(a) The Closing of the Loan and the disbursement of the Escrowed Funds in accordance with Section 3.1 above;
(b) The return of the Escrowed Funds to the Borrower in accordance with Section 3.2 above;
(c) The disbursement of the Escrowed Funds to the Lender in accordance with Section 3.3 above; or
(d) The interpleader of the Escrowed Funds into a court of competent jurisdiction by the Escrow Agent in accordance with Section 3.4 above.
Upon the termination of the escrow, the Escrow Agent shall have no further duties, obligations, or liabilities hereunder, except for any obligations that expressly survive termination, including without limitation the indemnification obligations of the Borrower and the Lender set forth in Section 5 above.
10. Acknowledgment and Countersignature
We respectfully request that the Escrow Agent execute and return a copy of this letter to Calderwood & Harkness LLP to indicate the Escrow Agent's acceptance of these escrow instructions and agreement to act in accordance with the terms and conditions set forth herein. We further request that the Lender's counsel, Whitford Baines & Driscoll LLP, execute the acknowledgment set forth below to confirm the Lender's agreement to and acceptance of these escrow instructions.
These escrow instructions may be executed in counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one and the same instrument. Delivery of an executed counterpart by facsimile or electronic transmission (including PDF) shall be equally effective as delivery of a manually executed counterpart.
We appreciate your willingness to serve as Escrow Agent in connection with this transaction, and we look forward to working with you and your colleagues at Meridian Title & Escrow toward a successful closing. Please do not hesitate to contact me or Grace Nakamura at (305) 555-7214 if you have any questions regarding these instructions.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Name: Douglas Fairchild
Title: Partner
On behalf of Coral Palms Resort Holdings LLC
ACKNOWLEDGMENT AND ACCEPTANCE BY ESCROW AGENT
The undersigned hereby acknowledges receipt of the foregoing Escrow Instructions dated December 12, 2022, and agrees to act as Escrow Agent in accordance with the terms and conditions set forth therein.
MERIDIAN TITLE & ESCROW, INC.
By: ________
Name: Lisa Portman
Title: Title Officer
Date: ________
ACKNOWLEDGMENT BY LENDER'S COUNSEL
The undersigned hereby acknowledges and agrees to the foregoing Escrow Instructions dated December 12, 2022, on behalf of Pinnacle Atlantic Capital, LLC.
WHITFORD BAINES & DRISCOLL LLP
By: ________
Name: Philip Tarrant Corporation
Title: Partner
On behalf of Pinnacle Atlantic Capital, LLC
Date: ________
Enclosures:
1.  Copy of Commitment Letter dated December 9, 2022, between Coral Palms Resort Holdings LLC and Pinnacle Atlantic Capital, LLC (for reference)
2.  Wire transfer confirmation (to follow upon receipt)
cc: (via email and overnight courier)
Conrad W. Elliston, Chairman & CEO, Verimark Hospitality Group Inc. Natasha Ricard, CFO, Verimark Hospitality Group Inc. Derek Huang, SVP – Capital Markets & Treasury, Verimark Hospitality Group Inc. Angela Fontaine, Calderwood & Harkness LLP Grace Nakamura, Calderwood & Harkness LLP Rafael Dominguez, Calderwood & Harkness LLP Philip Tarrant Corporation, Whitford Baines & Driscoll LLP Catherine Yee, Whitford Baines & Driscoll LLP

CONFIDENTIAL

VIA OVERNIGHT COURIER AND EMAIL

CALDERWOOD & HARKNESS LLP

ACKNOWLEDGMENT AND ACCEPTANCE BY ESCROW AGENT

MERIDIAN TITLE & ESCROW, INC.

ACKNOWLEDGMENT BY LENDER'S COUNSEL

WHITFORD BAINES & DRISCOLL LLP

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