1021-00007 · Verimark Hospitality Group · Termination & Settlement

deposit-settlement-letter-agreement.docx DOCUMENT Real Estate

35 / 43 ← → ✕

CONFIDENTIAL

CALDERWOOD & HARKNESS LLP Attorneys at Law 100 Southeast Second Street Suite 3800 Miami, Florida 33131 Telephone: (305) 555-7200 Facsimile: (305) 555-7201

February 28, 2023

VIA EMAIL AND OVERNIGHT COURIER

Coral Palms Resort Holdings LLC c/o Verimark Hospitality Group Inc. 1400 Bayshore Boulevard, Suite 2200 Miami, Florida 33131

Attn: Derek Huang, SVP – Capital Markets & Treasury

Verimark Hospitality Group Inc. 1400 Bayshore Boulevard, Suite 2200 Miami, Florida 33131

Attn: Natasha Ricard, Chief Financial Officer

Pinnacle Atlantic Capital, LLC 200 Lexington Avenue, 38th Floor New York, New York 10016

Attn: Martin Drubeck, Managing Director – Real Estate Lending

Re: Settlement of Deposit Dispute — Proposed $160,000,000 First Mortgage Refinancing of the Coral Palms Grand Resort & Spa, 99000 Overseas Highway, Key Largo, Monroe County, Florida 33037

Ladies and Gentlemen:

This letter agreement (this "Agreement" or "Letter Agreement"), dated as of February 28, 2023, sets forth the terms and conditions pursuant to which Coral Palms Resort Holdings LLC, a Florida limited liability company ("Borrower"), Verimark Hospitality Group Inc., a Delaware corporation ("Guarantor" or "VHG"), and Pinnacle Atlantic Capital, LLC, a Delaware limited liability company ("Lender" or "PAC"), have agreed to settle and resolve all disputes arising out of or related to the Deposits (as defined below) held in escrow in connection with the proposed $160,000,000 first mortgage refinancing of the property commonly known as the Coral Palms Grand Resort & Spa, located at 99000 Overseas Highway, Key Largo, Monroe County, Florida 33037 (the "Property"), all as more fully described herein. Borrower and Guarantor are collectively referred to herein as the "Borrower Parties." Each of the Borrower Parties and PAC is sometimes referred to herein individually as a "Party" and collectively as the "Parties."

1. RECITALS AND BACKGROUND

The following recitals are made as background to the settlement set forth in this Agreement and are incorporated herein by reference:

1.1 The Commitment Letter

Reference is hereby made to that certain Commitment Letter dated December 9, 2022 (the "Commitment Letter"), entered into by and between Coral Palms Resort Holdings LLC, a Florida limited liability company, as borrower, and Pinnacle Atlantic Capital, LLC, a Delaware limited liability company, as lender, pursuant to which Lender committed to provide a first mortgage loan in the original principal amount of One Hundred Sixty Million Dollars ($160,000,000) (the "Loan") to Borrower, secured by a first priority mortgage lien and security interest encumbering the Property. Verimark Hospitality Group Inc., a Delaware corporation (Nasdaq: VMRK), was named as the guarantor of certain of Borrower's obligations under the Commitment Letter.

The purpose of the Loan was to refinance the existing first mortgage loan held by Tidewater National Bank, N.A. (the "Existing Loan"), which carried an outstanding principal balance of approximately One Hundred Eighteen Million Five Hundred Thousand Dollars ($118,500,000) at the time the Commitment Letter was executed. The Commitment Letter set forth the following principal economic terms for the Loan: (a) a fixed interest rate of 5.35% per annum; (b) a maximum loan-to-value ratio ("LTV") of 68.0%; (c) a minimum debt yield of 9.5%; and (d) a term of five (5) years (collectively, the "Original Loan Terms"). Additional terms and conditions were set forth in the Commitment Letter and the related term sheet attached thereto as Exhibit A.

1.2 The Deposits

In accordance with the terms of the Commitment Letter, Borrower deposited the following amounts with Meridian Title & Escrow, Inc. ("Escrow Agent"), at its offices located at 9100 South Dadeland Boulevard, Suite 1500, Miami, Florida 33156:

(a) A good faith deposit in the amount of One Million Six Hundred Thousand Dollars ($1,600,000), representing 1.0% of the Loan amount, deposited with Escrow Agent on December 12, 2022 (the "Good Faith Deposit"); and

(b) A rate lock deposit in the amount of Eight Hundred Thousand Dollars ($800,000), representing 0.50% of the Loan amount, deposited with Escrow Agent on January 5, 2023 (the "Rate Lock Deposit").

The Good Faith Deposit and the Rate Lock Deposit are collectively referred to herein as the "Deposits." The aggregate principal amount of the Deposits held by Escrow Agent totals Two Million Four Hundred Thousand Dollars ($2,400,000). All Deposits have been held in escrow by Escrow Agent at its offices located at 9100 South Dadeland Boulevard, Suite 1500, Miami, Florida 33156, in accordance with the escrow provisions set forth in the Commitment Letter and the related escrow agreement dated December 12, 2022.

1.3 The Appraisal and Repricing

On January 20, 2023, Lender received an appraisal report (the "Appraisal") prepared by Hargrove & Whitley Valuation Services LLC (Scott Tremaine, MAI, MRICS, Senior Managing Director), with an effective date of value of January 6, 2023. The Appraisal concluded a market value for the Property of One Hundred Ninety-Two Million Dollars ($192,000,000) — a shortfall of Forty-Three Million Dollars ($43,000,000), or approximately 18.30%, below VHG's projected value of Two Hundred Thirty-Five Million Dollars ($235,000,000) as presented to Lender during the underwriting process.

As a result of the Appraisal, the Loan as originally sized at $160,000,000 would have resulted in a loan-to-value ratio of approximately 83.33%, which materially exceeded the Commitment Letter's maximum LTV covenant of 68.0%. The Appraisal also raised concerns regarding the minimum debt yield covenant of 9.5% based on the Property's trailing twelve-month net operating income as reported in the appraisal.

In response to the Appraisal, on January 27, 2023, Lender delivered to Borrower Parties a set of repriced and restructured loan terms (the "Repriced Terms"), which included, among other things, the following material modifications to the Original Loan Terms:

(a) A reduced loan amount of One Hundred Thirty-Nine Million Dollars ($139,000,000), representing approximately 72.5% of the appraised value (a reduction of Twenty-One Million Dollars ($21,000,000) from the original commitment amount);

(b) An increased fixed interest rate of 6.90% per annum (an increase of 155 basis points over the original fixed rate of 5.35%);

(c) Cross-collateralization of the Loan with a second property owned and operated by VHG, specifically the Driftwood Bay Hotel located in Sarasota, Florida;

(d) An upgrade of the guaranty structure from a limited (non-recourse carve-out) recourse guaranty to a full recourse guaranty by VHG; and

(e) An additional capital reserve of Three Million Two Hundred Thousand Dollars ($3,200,000) to fund a property improvement plan and capital improvements to the Property (the "PIP Reserve").

1.4 Counter-Proposal and Rejection

On February 3, 2023, VHG, on behalf of Borrower, submitted a written counter-proposal to PAC (the "Counter-Proposal") in response to the Repriced Terms. The Counter-Proposal sought, among other things, to maintain the original loan amount of $160,000,000, to limit the interest rate increase to 50 basis points, and to reject the cross-collateralization requirement and the full recourse guaranty structure. On February 7, 2023, PAC formally rejected VHG's Counter-Proposal in writing, reaffirming its position that the Repriced Terms represented Lender's final offer and that Lender was unwilling to proceed with the Loan on terms other than the Repriced Terms.

1.5 Termination. On February 10, 2023, the board of directors of VHG held a special meeting at which it determined that the Repriced Terms were not commercially viable and that the Transaction, as restructured, would not be in the best interests of VHG and its shareholders. Following such determination, on February 15, 2023, the Borrower Parties delivered a formal written notice of termination (the "Termination Notice") to PAC, terminating the Commitment Letter and the Transaction effective immediately.

On February 22, 2023, PAC responded to the Termination Notice in writing, asserting that, pursuant to the terms and conditions of the Commitment Letter, both the Good Faith Deposit and the Rate Lock Deposit were non-refundable upon Borrower's voluntary termination, and that PAC was entitled to retain the entire $2,400,000 in Deposits as liquidated damages.

VHG disputed PAC's position, contending that the Repriced Terms constituted a material modification and substantial restructuring of the Commitment Letter that fundamentally altered the economic terms of the Transaction, thereby excusing Borrower's obligation to proceed and entitling VHG to a full refund of the Deposits. VHG further asserted that the repricing was triggered by the Appraisal, which was a condition beyond Borrower's control, and that the Commitment Letter's deposit forfeiture provisions were not intended to apply in such circumstances.

1.6 Settlement Negotiations

The Parties have engaged in good faith negotiations since the delivery of PAC's response on February 22, 2023, with the objective of resolving the deposit dispute and all related claims amicably and without the necessity of commencing litigation or other adversarial proceedings. The Parties have determined that it is in their mutual best interests to resolve this matter on the terms set forth herein, in order to avoid the uncertainty, expense, and disruption of protracted legal proceedings. This Letter Agreement sets forth the terms and conditions of their negotiated settlement.

2. DEFINED TERMS

For purposes of this Agreement, the following terms shall have the meanings ascribed to them below. Capitalized terms used but not otherwise defined in this Agreement shall have the meanings ascribed to them in the Commitment Letter.

"Agreement" or "Letter Agreement" means this Deposit Settlement Letter Agreement, dated as of February 28, 2023, by and among Borrower, Guarantor, and Lender, including all exhibits attached hereto.

"Borrower" means Coral Palms Resort Holdings LLC, a Florida limited liability company.

"Borrower Parties" means, collectively, Borrower and Guarantor.

"Commitment Letter" means that certain Commitment Letter dated December 9, 2022, by and between Borrower and Lender, together with all exhibits, schedules, and side letters attached thereto or delivered in connection therewith.

"Deposits" means, collectively, the Good Faith Deposit and the Rate Lock Deposit, in the aggregate principal amount of Two Million Four Hundred Thousand Dollars ($2,400,000), together with all interest accrued thereon while held in escrow.

"Escrow Agent" means Meridian Title & Escrow, Inc., with its principal offices at 9100 South Dadeland Boulevard, Suite 1500, Miami, Florida 33156.

"Good Faith Deposit" means the deposit in the principal amount of One Million Six Hundred Thousand Dollars ($1,600,000) deposited by Borrower with Escrow Agent on December 12, 2022, together with all interest accrued thereon.

"Guarantor" or "VHG" means Verimark Hospitality Group Inc., a Delaware corporation (Nasdaq: VMRK).

"Lender" or "PAC" means Pinnacle Atlantic Capital, LLC, a Delaware limited liability company.

"Loan Documents" means, collectively, all draft loan documents circulated by or on behalf of Lender in connection with the Loan, including, without limitation, the draft Loan Agreement, Promissory Note, Mortgage, Guaranty Agreement, Environmental Indemnity Agreement, Cash Management Agreement, Reserve Agreement, and all ancillary documents, instruments, and certificates prepared or circulated in connection therewith.

"Property" means the real property and improvements commonly known as the Coral Palms Grand Resort & Spa, located at 99000 Overseas Highway, Key Largo, Monroe County, Florida 33037, together with all easements, appurtenances, and rights pertaining thereto.

"Rate Lock Deposit" means the deposit in the principal amount of Eight Hundred Thousand Dollars ($800,000) deposited by Borrower with Escrow Agent on January 5, 2023, together with all interest accrued thereon.

"Termination Notice" means that certain written notice of termination dated February 15, 2023, delivered by the Borrower Parties to Lender, terminating the Commitment Letter and the Transaction.

"Transaction" means the proposed $160,000,000 first mortgage refinancing of the Property contemplated by the Commitment Letter.

3. SETTLEMENT TERMS

3.1 Disposition of Good Faith Deposit

PAC shall retain the Good Faith Deposit in the principal amount of One Million Six Hundred Thousand Dollars ($1,600,000) as liquidated damages in connection with Borrower's termination of the Transaction. Escrow Agent is hereby irrevocably authorized, instructed, and directed to disburse the Good Faith Deposit, together with any and all interest accrued thereon from and after December 12, 2022, through the date of disbursement, to PAC by wire transfer of immediately available funds to a bank account designated by PAC in writing to Escrow Agent.

PAC shall deliver its wire transfer instructions to Escrow Agent within five (5) business days following the date on which PAC receives a fully executed copy of this Agreement. Escrow Agent shall effect the disbursement of the Good Faith Deposit and all accrued interest thereon within three (3) business days following Escrow Agent's receipt of PAC's wire transfer instructions. In the event that PAC fails to deliver wire instructions within the five (5) business day period specified above, Escrow Agent shall hold the Good Faith Deposit pending receipt of such instructions and shall disburse the same within three (3) business days following its eventual receipt thereof.

3.2 Refund of Rate Lock Deposit

PAC hereby agrees that the Rate Lock Deposit in the principal amount of Eight Hundred Thousand Dollars ($800,000) shall be refunded in full to Borrower. PAC hereby waives any right, claim, or entitlement it may have under the Commitment Letter or otherwise to retain the Rate Lock Deposit or any portion thereof. Escrow Agent is hereby irrevocably authorized, instructed, and directed to disburse the Rate Lock Deposit, together with any and all interest accrued thereon from and after January 5, 2023, through the date of disbursement, to Borrower by wire transfer of immediately available funds to a bank account designated by Borrower in writing to Escrow Agent.

Borrower shall deliver its wire transfer instructions to Escrow Agent within five (5) business days following the date on which Borrower receives a fully executed copy of this Agreement. Escrow Agent shall effect the disbursement of the Rate Lock Deposit and all accrued interest thereon within three (3) business days following Escrow Agent's receipt of Borrower's wire transfer instructions. In the event that Borrower fails to deliver wire instructions within the five (5) business day period specified above, Escrow Agent shall hold the Rate Lock Deposit pending receipt of such instructions and shall disburse the same within three (3) business days following its eventual receipt thereof.

3.3 Summary of Deposit Disposition

The following table summarizes the agreed disposition of the Deposits under this Agreement:

The net amount to be forfeited by the Borrower Parties and retained by PAC is One Million Six Hundred Thousand Dollars ($1,600,000), consisting of the principal amount of the Good Faith Deposit plus all accrued interest thereon. The net amount to be refunded to Borrower is Eight Hundred Thousand Dollars ($800,000), consisting of the principal amount of the Rate Lock Deposit plus all accrued interest thereon. All Deposits held by Escrow Agent are fully accounted for and shall be disbursed in the manner set forth above.

3.4 Liquidated Damages Acknowledgment

The Parties hereby acknowledge and agree that the Good Faith Deposit retained by PAC pursuant to Section 3.1 above constitutes liquidated damages and not a penalty. The Parties further acknowledge and agree that, in light of the circumstances existing at the time of the execution of the Commitment Letter and as of the date hereof, the actual damages that would be suffered by PAC as a result of the termination of the Transaction are difficult or impossible to ascertain with reasonable certainty. The Parties have negotiated and agreed that the sum of One Million Six Hundred Thousand Dollars ($1,600,000) is a fair, reasonable, and proportionate estimate of such damages, taking into account, among other things, PAC's lost opportunity costs, due diligence expenses, third-party report costs, legal fees, internal underwriting costs, and the costs associated with the allocation and reservation of capital for the Transaction.

PAC acknowledges and agrees that, except as otherwise expressly provided in this Agreement, the retention of the Good Faith Deposit (together with accrued interest thereon) constitutes PAC's sole and exclusive monetary remedy against the Borrower Parties and their respective affiliates, subsidiaries, officers, directors, employees, agents, successors, and assigns in connection with the termination of the Transaction, the Commitment Letter, and all matters arising therefrom or related thereto. PAC shall not be entitled to seek or recover any additional damages, whether direct, indirect, consequential, special, incidental, punitive, or otherwise, from the Borrower Parties in connection with the Transaction.

4. ESCROW AGENT INSTRUCTIONS

4.1 Joint Instructions

This Section 4 shall constitute joint, irrevocable escrow instructions from the Borrower Parties and PAC to Meridian Title & Escrow, Inc. (Attn: Lisa Portman, Title Officer, 9100 South Dadeland Boulevard, Suite 1500, Miami, Florida 33156), and shall supersede any prior escrow instructions delivered to Escrow Agent in connection with the Deposits, including the escrow provisions set forth in the Commitment Letter and any separate escrow agreement between the Parties and Escrow Agent. Escrow Agent is hereby authorized and directed to disburse the Deposits in accordance with Section 3 above promptly upon Escrow Agent's receipt of a fully executed copy of this Agreement and the applicable wire transfer instructions from the respective recipients.

4.2 Escrow Agent Reliance

Escrow Agent shall be entitled to rely conclusively on the instructions contained in this Agreement and on a fully executed copy of this Agreement as full and complete authorization for all disbursements contemplated herein. Escrow Agent shall not be required to undertake any independent investigation or inquiry as to the authority of the Parties or the validity of this Agreement. Escrow Agent shall have no liability whatsoever to any Party or to any other person or entity for acting in good faith in accordance with these instructions, and the Parties hereby agree to indemnify and hold harmless Escrow Agent from and against any and all claims, losses, damages, costs, and expenses (including reasonable attorneys' fees) arising out of or related to Escrow Agent's performance of its obligations under this Section 4, except to the extent caused by Escrow Agent's gross negligence or willful misconduct.

4.3 Escrow Agent Fees

Each Party shall bear its own costs and expenses associated with the escrow and the disbursements contemplated herein. Any fees or charges assessed by Escrow Agent in connection with the disbursement of the Deposits pursuant to this Agreement (including wire transfer fees) shall be split equally between the Borrower Parties, on the one hand, and PAC, on the other hand. Escrow Agent is authorized to deduct its share of any such fees from the Deposits prior to disbursement, provided that Escrow Agent shall provide the Parties with reasonable advance notice of any such deduction and a written accounting of the fees so deducted.

4.4 Interest. Any interest that has accrued on the Good Faith Deposit from and after December 12, 2022, through the date of disbursement shall be disbursed to PAC along with the principal amount of the Good Faith Deposit in accordance with Section 3.1. Any interest that has accrued on the Rate Lock Deposit from and after January 5, 2023, through the date of disbursement shall be disbursed to Borrower along with the principal amount of the Rate Lock Deposit in accordance with Section 3.2. For the avoidance of doubt, interest shall follow the principal to which it relates, and no Party shall have any claim to interest accrued on a Deposit that is being disbursed to the other Party.

5. MUTUAL RELEASE

5.1 Release by Borrower Parties

Effective as of the date hereof, Borrower and Guarantor, individually and collectively, on behalf of themselves and each of their respective past, present, and future affiliates, subsidiaries, parent entities, officers, directors, members, managers, partners, shareholders, employees, agents, representatives, attorneys, advisors, consultants, successors, and assigns (collectively, the "Borrower Releasing Parties"), hereby irrevocably and unconditionally release, acquit, and forever discharge PAC and each of its past, present, and future affiliates (including, without limitation, Greystone Peak Asset Management LP and each of its affiliated funds and investment vehicles), members, managers, partners, officers, directors, employees, agents, representatives, attorneys (including, without limitation, Whitford Baines & Driscoll LLP and each of its partners, associates, and employees), advisors, consultants, successors, and assigns (collectively, the "PAC Released Parties") from any and all claims, counterclaims, cross-claims, actions, causes of action, suits, demands, debts, dues, sums of money, accounts, damages (including consequential, special, incidental, and punitive damages), costs, expenses, losses, liabilities, liens, obligations, judgments, and rights of every kind and nature whatsoever, whether at law or in equity, whether based in contract, tort, statute, or otherwise, whether known or unknown, suspected or unsuspected, disclosed or undisclosed, fixed or contingent, accrued or unaccrued, matured or unmatured, that any of the Borrower Releasing Parties have, have ever had, or may hereafter have against any of the PAC Released Parties, in each case arising out of, relating to, or in any way connected with the Transaction, the Commitment Letter, the Loan Documents, the Deposits, the Good Faith Deposit, the Rate Lock Deposit, the Appraisal, the Repriced Terms, the Counter-Proposal, PAC's rejection of the Counter-Proposal, the Termination Notice, PAC's response thereto, or any other events, acts, omissions, representations, agreements, negotiations, discussions, or circumstances related to any of the foregoing.

5.2 Release by Lender

Effective as of the date hereof, PAC, on behalf of itself and each of its past, present, and future affiliates (including, without limitation, Greystone Peak Asset Management LP and each of its affiliated funds and investment vehicles), members, managers, partners, officers, directors, employees, agents, representatives, attorneys, advisors, consultants, successors, and assigns (collectively, the "PAC Releasing Parties"), hereby irrevocably and unconditionally releases, acquits, and forever discharges Borrower, Guarantor, and each of their respective past, present, and future affiliates, subsidiaries, parent entities, officers, directors, members, managers, partners, shareholders, employees, agents, representatives, attorneys (including, without limitation, Calderwood & Harkness LLP and each of its partners, associates, and employees), advisors, consultants, successors, and assigns (collectively, the "Borrower Released Parties") from any and all claims, counterclaims, cross-claims, actions, causes of action, suits, demands, debts, dues, sums of money, accounts, damages (including consequential, special, incidental, and punitive damages), costs, expenses, losses, liabilities, liens, obligations, judgments, and rights of every kind and nature whatsoever, whether at law or in equity, whether based in contract, tort, statute, or otherwise, whether known or unknown, suspected or unsuspected, disclosed or undisclosed, fixed or contingent, accrued or unaccrued, matured or unmatured, that any of the PAC Releasing Parties have, have ever had, or may hereafter have against any of the Borrower Released Parties, in each case arising out of, relating to, or in any way connected with the Transaction, the Commitment Letter, the Loan Documents, the Deposits, the Good Faith Deposit, the Rate Lock Deposit, the Appraisal, the Repriced Terms, the Counter-Proposal, VHG's submission of the Counter-Proposal, the Termination Notice, or any other events, acts, omissions, representations, agreements, negotiations, discussions, or circumstances related to any of the foregoing.

5.3 Scope of Release

The releases set forth in Sections 5.1 and 5.2 above are intended to be as broad and comprehensive as permitted by applicable law and shall be interpreted and construed to the fullest extent permitted thereby. The Parties acknowledge and agree that the foregoing releases are a material inducement to each Party's execution of this Agreement and that, but for such releases, the Parties would not have entered into this Agreement. Notwithstanding the foregoing, the releases set forth herein do not extend to, and shall not be construed to release, discharge, or otherwise affect, any obligations, duties, or liabilities arising under or pursuant to this Agreement itself, including, without limitation, the obligations to effectuate the deposit disbursements set forth in Section 3 and the escrow instructions set forth in Section 4.

Each Party hereby expressly, knowingly, and voluntarily waives any and all rights it may have under Section 1542 of the California Civil Code, or any similar statute or common law principle of any jurisdiction, that would otherwise limit the scope of the releases set forth herein to claims that are known or suspected to exist at the time of execution. Section 1542 of the California Civil Code provides as follows:

"A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party."

Each Party acknowledges that it may discover facts different from, or in addition to, those which it now knows or believes to be true with respect to the subject matter of the releases herein, and each Party agrees that the releases set forth herein shall remain in full force and effect notwithstanding the discovery of any such different or additional facts.

5.4 Covenant Not to Sue

Each Party hereby covenants and agrees that it will not, directly or indirectly, institute, prosecute, maintain, or participate in any action, suit, arbitration, mediation, or other proceeding of any kind, whether at law or in equity, in any court, tribunal, administrative body, or other forum, against any released party with respect to any claim, cause of action, demand, or liability that has been released pursuant to Sections 5.1 or 5.2 above. In the event that any Party breaches this covenant not to sue, the breaching Party shall be liable to the released party or parties for all damages, costs, and expenses (including reasonable attorneys' fees) incurred by such released party or parties in connection with the defense of any such action, suit, or proceeding.

6. REPRESENTATIONS AND WARRANTIES

6.1 Mutual Representations

Each Party hereby represents and warrants to each other Party as follows:

(a) Power and Authority. Such Party has full power and authority to enter into this Agreement, to execute and deliver this Agreement, and to perform all of its obligations hereunder. The execution, delivery, and performance of this Agreement do not and will not conflict with, result in a breach of, or constitute a default under any agreement, instrument, order, judgment, decree, law, regulation, or rule to which such Party is a party or by which such Party is bound.

(b) Due Authorization. The execution and delivery of this Agreement by such Party has been duly authorized by all necessary corporate, limited liability company, partnership, or other organizational action, as applicable, on the part of such Party. No further approval, consent, or authorization of any person, entity, governmental authority, or other body is required in connection with such Party's execution, delivery, or performance of this Agreement.

(c) Binding Obligation. This Agreement constitutes the legal, valid, and binding obligation of such Party, enforceable against such Party in accordance with its terms, subject only to applicable bankruptcy, insolvency, reorganization, moratorium, and other similar laws of general application affecting creditors' rights and to general principles of equity.

(d) No Prior Assignment. Such Party has not heretofore assigned, transferred, conveyed, pledged, encumbered, or otherwise disposed of any of the claims, demands, rights, or causes of action released by such Party pursuant to Section 5 hereof, and no other person or entity has any interest in any such claims by virtue of any assignment, transfer, or other disposition by such Party.

6.2 Borrower Parties Representations

In addition to the mutual representations and warranties set forth in Section 6.1, each of the Borrower Parties hereby represents and warrants as follows:

(a) Borrower Organization. Borrower is a Florida limited liability company duly organized, validly existing, and in good standing under the laws of the State of Florida. Borrower has all requisite limited liability company power and authority to own, lease, and operate the Property and to carry on its business as presently conducted.

(b) Guarantor Organization. Guarantor is a Delaware corporation duly incorporated, validly existing, and in good standing under the laws of the State of Delaware. Guarantor is duly qualified to do business and is in good standing in the State of Florida and in each other jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary.

(c) Authority of Signatories. The persons executing this Agreement on behalf of Borrower and Guarantor, respectively, are duly authorized to do so and to bind such entity to the terms and conditions of this Agreement.

6.3 Lender Representations

In addition to the mutual representations and warranties set forth in Section 6.1, PAC hereby represents and warrants as follows:

(a) Organization. PAC is a Delaware limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware. PAC has all requisite limited liability company power and authority to carry on its business as presently conducted.

(b) Authority of Signatories. The persons executing this Agreement on behalf of PAC are duly authorized to do so and to bind PAC to the terms and conditions of this Agreement.

7. TERMINATION OF COMMITMENT LETTER AND RELATED AGREEMENTS

7.1 Confirmation of Termination

The Parties hereby confirm and acknowledge that the Commitment Letter dated December 9, 2022, and all related agreements, side letters (including, without limitation, the Side Letter dated December 9, 2022, regarding deposit refundability and rate lock provisions), term sheets, engagement letters, fee letters, and other ancillary agreements or understandings entered into by or among the Parties in connection with the Transaction, are hereby terminated and shall be of no further force or effect as of the date hereof. Notwithstanding the foregoing, any provisions of the Commitment Letter or the related agreements that by their express terms are intended to survive termination (including, without limitation, confidentiality provisions, indemnification provisions, and provisions relating to third-party reports) shall survive in accordance with their terms; provided, however, that all deposit-related provisions of the Commitment Letter and the related agreements are hereby expressly superseded by the terms and conditions of this Agreement.

7.2 Return and Destruction of Loan Documents

All draft Loan Documents circulated by Whitford Baines & Driscoll LLP, as counsel to PAC, on or about December 19, 2022, and all subsequent mark-ups, revisions, redlines, and comments thereto exchanged by the Parties and their respective counsel, are hereby deemed void, of no legal effect, and superseded in their entirety. No Party shall have any obligation or liability under any such draft Loan Documents, and no such draft Loan Documents shall be deemed to create any binding agreement, obligation, or commitment on the part of any Party. Each Party shall use commercially reasonable efforts to return or destroy all copies of such draft Loan Documents in its possession within thirty (30) days following the date hereof, subject to any document retention policies or legal or regulatory requirements applicable to such Party.

7.3 No Obligation to Close

For the avoidance of doubt, neither Lender, on the one hand, nor the Borrower Parties, on the other hand, shall have any obligation to consummate the Transaction, to fund or originate the Loan, or to enter into any refinancing of the Property. Nothing in this Agreement shall be construed as a commitment, agreement, or undertaking by any Party to engage in any future lending, borrowing, or other business transaction with any other Party.

8. CONFIDENTIALITY

The terms, conditions, and substance of this Agreement, including the settlement amount, the disposition of the Deposits, and the fact that a settlement has been reached, shall be confidential and shall not be disclosed, published, or otherwise communicated by any Party to any third party without the prior written consent of the other Parties, except as follows:

(a) Internal Disclosure. A Party may disclose the terms hereof to such Party's affiliates, subsidiaries, officers, directors, members, managers, partners, employees, accountants, auditors (including, in the case of VHG, Keswick & Holt LLP, as VHG's independent registered public accounting firm), legal counsel, financial advisors, and other professional advisors who have a reasonable need to know the terms hereof in connection with the performance of their duties, provided that such Party shall be responsible for ensuring that each such recipient maintains the confidentiality of such information;

(b) Legal and Regulatory Requirements. A Party may disclose the terms hereof to the extent required by applicable law, rule, regulation, or legal process, including, without limitation, any disclosure obligations of VHG arising under the Securities Exchange Act of 1934, as amended, and the rules and regulations of the U.S. Securities and Exchange Commission promulgated thereunder, as well as any disclosure requirements of the Nasdaq Stock Market LLC (ticker symbol: VMRK). In the event that a Party is required to make such a disclosure, such Party shall, to the extent legally permissible and reasonably practicable, provide the other Parties with prompt written notice of such requirement prior to making such disclosure and shall cooperate with the other Parties in seeking a protective order or other appropriate remedy to limit the scope of such disclosure;

(c) Tax Filings. A Party may disclose the terms hereof to the extent reasonably necessary in connection with the preparation and filing of any tax returns or other tax filings with applicable taxing authorities; and

(d) Escrow Agent. A Party may disclose the terms hereof to Meridian Title & Escrow, Inc., solely to the extent necessary to effectuate the disbursements contemplated by Section 3 and Section 4 of this Agreement.

9. NO ADMISSION OF LIABILITY

This Agreement is a compromise and settlement of disputed claims between the Parties, entered into solely for the purpose of avoiding the uncertainty, burden, and expense of further dispute and potential litigation. Nothing contained in this Agreement, including the disposition of the Deposits as set forth in Section 3, shall be construed or deemed to be, or used as, an admission, concession, or evidence of liability, wrongdoing, fault, or breach of any duty or obligation, whether legal, contractual, fiduciary, or otherwise, by any Party. This Agreement and the terms hereof shall not be offered or received in evidence in any action, suit, or proceeding as an admission, concession, or evidence of any liability or wrongdoing of any kind on the part of any Party.

10. MISCELLANEOUS PROVISIONS

10.1 Governing Law

This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Florida, without regard to any choice of law or conflict of laws rules or principles (whether of the State of Florida or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Florida. Each Party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts located in Miami-Dade County, Florida, for the purpose of any action, suit, or proceeding arising out of or relating to this Agreement, and each Party hereby irrevocably waives, to the fullest extent permitted by law, any objection it may now or hereafter have to the laying of venue of any such action, suit, or proceeding in any such court or any claim that any such action, suit, or proceeding has been brought in an inconvenient forum.

10.2 Entire Agreement

This Agreement, together with any exhibits attached hereto, constitutes the entire agreement among the Parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations, discussions, representations, warranties, and commitments, whether oral or written, relating to the Deposits, the disposition of the Deposits, and the termination and settlement of the Transaction. No amendment, modification, supplement, or waiver of any provision of this Agreement shall be effective unless set forth in a written instrument signed by all of the Parties. No oral statement, course of dealing, or course of performance shall be deemed to amend or modify this Agreement.

10.3 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one and the same instrument. The delivery of an executed counterpart of this Agreement by electronic transmission, including by portable document format (PDF), shall be deemed to be, and shall be as effective as, delivery of a manually executed original counterpart. Each Party agrees that the electronic signatures appearing on this Agreement are the same as handwritten signatures for the purposes of validity, enforceability, and admissibility.

10.4 Notices. All notices, requests, demands, consents, instructions, and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given or delivered: (a) upon personal delivery to the addressee; (b) one (1) business day after deposit with a nationally recognized overnight courier service, postage prepaid, for next-business-day delivery; (c) upon transmission by electronic mail (with confirmation of transmission); or (d) three (3) business days after deposit in the United States mail, by certified or registered mail, postage prepaid, return receipt requested, in each case addressed as follows (or to such other address as may be specified by a Party in a notice given in accordance with this Section):

If to Borrower or Guarantor:

Verimark Hospitality Group Inc. 1400 Bayshore Boulevard, Suite 2200 Miami, Florida 33131

Attention: Natasha Ricard, Chief Financial Officer

Email: nricard@verimarkgroup.com

with a copy (which shall not constitute notice) to:

Calderwood & Harkness LLP 100 Southeast Second Street, Suite 3800 Miami, Florida 33131

Attention: Douglas Fairchild, Partner

Email: dfairchild@calderwoodharkness.com

If to Lender:

Pinnacle Atlantic Capital, LLC 200 Lexington Avenue, 38th Floor New York, New York 10016

Attention: Martin Drubeck, Managing Director – Real Estate Lending

Email: mscholes@pinnacleatlantic.com

with a copy (which shall not constitute notice) to:

Whitford Baines & Driscoll LLP 1221 Avenue of the Americas, Suite 4400 New York, New York 10020

Attention: Philip Tarrant Corporation, Partner

Email: pnordstrom@whitfordbaines.com

10.5 Successors and Assigns

This Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective heirs, executors, administrators, legal representatives, successors, and permitted assigns. No Party may assign, delegate, or otherwise transfer any of its rights or obligations under this Agreement to any other person or entity without the prior written consent of each of the other Parties, and any attempted assignment without such consent shall be null and void.

10.6 Severability. If any provision of this Agreement, or the application thereof to any person, entity, or circumstance, is held by a court of competent jurisdiction or other tribunal to be invalid, illegal, or unenforceable for any reason, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and the remaining provisions shall continue in full force and effect and shall be enforceable to the fullest extent permitted by law. In such event, the Parties shall negotiate in good faith to agree upon a valid, legal, and enforceable substitute provision that most nearly reflects the original intent of the Parties.

10.7 Waiver. No failure or delay by any Party in exercising any right, power, or remedy under this Agreement shall operate as a waiver thereof, and no single or partial exercise of any right, power, or remedy shall preclude any other or further exercise thereof or the exercise of any other right, power, or remedy. No waiver of any provision of this Agreement shall be effective unless set forth in a written instrument signed by the Party against whom enforcement of such waiver is sought. Any waiver shall be limited to the specific provision and specific circumstances to which it relates and shall not constitute a continuing waiver or a waiver with respect to any other provision, breach, or default.

10.8 Further Assurances

Each Party hereby agrees to execute, acknowledge, and deliver such additional documents, instruments, conveyances, and assurances, and to take such further actions, as may be reasonably requested by any other Party from time to time in order to carry out, evidence, and confirm the rights and obligations of the Parties contemplated by this Agreement, including, without limitation, any additional or supplemental instructions to Escrow Agent as may be necessary or appropriate to effectuate the disbursements contemplated by Sections 3 and 4 hereof.

10.9 Attorneys' Fees

In the event that any action, suit, or proceeding is commenced by any Party to enforce any provision of this Agreement or to seek damages for breach hereof, the prevailing Party in any such action, suit, or proceeding shall be entitled to recover from the non-prevailing Party its reasonable attorneys' fees, court costs, expert witness fees, and all other costs and expenses incurred in connection with such action, suit, or proceeding, including any appeal thereof, in addition to any other relief to which such prevailing Party may be entitled.

10.10 Third-Party Beneficiaries

Meridian Title & Escrow, Inc., in its capacity as Escrow Agent, is an intended third-party beneficiary of Section 4 and of the protections, limitations of liability, and indemnification provisions set forth in this Agreement solely to the extent that such provisions relate to Escrow Agent's rights, duties, and obligations in connection with the escrow and the disbursement of the Deposits. Except as expressly set forth in the preceding sentence, nothing in this Agreement, whether express or implied, is intended to confer upon any person or entity other than the Parties (and their respective permitted successors and assigns) any rights, benefits, remedies, obligations, or liabilities of any nature whatsoever under or by reason of this Agreement.

10.11 Construction. This Agreement has been negotiated at arm's length by the Parties and their respective legal counsel. Each Party has had a full and fair opportunity to review, negotiate, and revise the terms of this Agreement. Accordingly, this Agreement shall not be construed more strictly against any Party as the drafter hereof, and the rule of construction that ambiguities are to be resolved against the drafting party shall not apply to the interpretation or enforcement of this Agreement. Headings and captions used in this Agreement are for convenience of reference only and shall not affect the meaning or interpretation of any provision hereof. As used in this Agreement, the words "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation."

11. EXECUTION

If the foregoing accurately reflects our mutual agreement, please indicate your acceptance and agreement by executing this Letter Agreement in the spaces provided below and returning a fully executed counterpart to each of the other Parties and to Escrow Agent.

[Signature Pages Follow]

SIGNATURE PAGE TO DEPOSIT SETTLEMENT LETTER AGREEMENT

IN WITNESS WHEREOF, the undersigned have executed this Deposit Settlement Letter Agreement as of the date first written above.

BORROWER:

CORAL PALMS RESORT HOLDINGS LLC, a Florida limited liability company

By: ________

Name: Conrad W. Elliston

Title: Authorized Signatory (in his capacity as Chairman & CEO of Verimark Hospitality Group Inc., sole member/manager of Borrower's parent entity)

Date: February 28, 2023

SIGNATURE PAGE TO DEPOSIT SETTLEMENT LETTER AGREEMENT

GUARANTOR:

VERIMARK HOSPITALITY GROUP INC., a Delaware corporation

By: ________

Name: Natasha Ricard

Title: Chief Financial Officer

Date: February 28, 2023

SIGNATURE PAGE TO DEPOSIT SETTLEMENT LETTER AGREEMENT

LENDER:

PINNACLE ATLANTIC CAPITAL, LLC, a Delaware limited liability company

By: ________

Name: Martin Drubeck

Title: Managing Director – Real Estate Lending

Date: February 28, 2023

SIGNATURE PAGE TO DEPOSIT SETTLEMENT LETTER AGREEMENT

12. ACKNOWLEDGED AND AGREED BY ESCROW AGENT

The undersigned, Meridian Title & Escrow, Inc., in its capacity as Escrow Agent, hereby acknowledges receipt of a fully executed copy of this Deposit Settlement Letter Agreement and agrees to hold and disburse the Deposits (including all interest accrued thereon) in accordance with the terms and conditions set forth in Sections 3 and 4 hereof. Escrow Agent confirms that it currently holds the Deposits in the aggregate principal amount of Two Million Four Hundred Thousand Dollars ($2,400,000), consisting of the Good Faith Deposit in the principal amount of $1,600,000 and the Rate Lock Deposit in the principal amount of $800,000, together with all interest accrued thereon, and that no claims, liens, or encumbrances have been asserted against the Deposits other than as set forth in this Agreement.

ESCROW AGENT:

MERIDIAN TITLE & ESCROW, INC.

By: ________

Name: Lisa Portman

Title: Title Officer

Date: February 28, 2023

cc (via email):

Whitford Baines & Driscoll LLP 1221 Avenue of the Americas, Suite 4400 New York, New York 10020

Attn: Philip Tarrant Corporation, Partner

Meridian Title & Escrow, Inc. 9100 South Dadeland Boulevard, Suite 1500 Miami, Florida 33156

Attn: Lisa Portman, Title Officer

Douglas Fairchild, Esq., Calderwood & Harkness LLP

Angela Fontaine, Esq., Calderwood & Harkness LLP

EXHIBIT A

WIRE TRANSFER INSTRUCTIONS

I. Wire Instructions for Pinnacle Atlantic Capital, LLC (For receipt of the Good Faith Deposit of $1,600,000 plus accrued interest)

To be delivered separately by PAC to Meridian Title & Escrow, Inc. (Attn: Lisa Portman, Title Officer) within five (5) business days of full execution of this Agreement in accordance with Section 3.1.

[TO BE PROVIDED]

II. Wire Instructions for Coral Palms Resort Holdings LLC (For receipt of the Rate Lock Deposit of $800,000 plus accrued interest)

CONFIDENTIAL
CALDERWOOD & HARKNESS LLP Attorneys at Law 100 Southeast Second Street Suite 3800 Miami, Florida 33131 Telephone: (305) 555-7200 Facsimile: (305) 555-7201
February 28, 2023
VIA EMAIL AND OVERNIGHT COURIER
Coral Palms Resort Holdings LLC c/o Verimark Hospitality Group Inc. 1400 Bayshore Boulevard, Suite 2200 Miami, Florida 33131
Attn: Derek Huang, SVP – Capital Markets & Treasury
Verimark Hospitality Group Inc. 1400 Bayshore Boulevard, Suite 2200 Miami, Florida 33131
Attn: Natasha Ricard, Chief Financial Officer
Pinnacle Atlantic Capital, LLC 200 Lexington Avenue, 38th Floor New York, New York 10016
Attn: Martin Drubeck, Managing Director – Real Estate Lending
Re: Settlement of Deposit Dispute — Proposed $160,000,000 First Mortgage Refinancing of the Coral Palms Grand Resort & Spa, 99000 Overseas Highway, Key Largo, Monroe County, Florida 33037
Ladies and Gentlemen:
This letter agreement (this "Agreement" or "Letter Agreement"), dated as of February 28, 2023, sets forth the terms and conditions pursuant to which Coral Palms Resort Holdings LLC, a Florida limited liability company ("Borrower"), Verimark Hospitality Group Inc., a Delaware corporation ("Guarantor" or "VHG"), and Pinnacle Atlantic Capital, LLC, a Delaware limited liability company ("Lender" or "PAC"), have agreed to settle and resolve all disputes arising out of or related to the Deposits (as defined below) held in escrow in connection with the proposed $160,000,000 first mortgage refinancing of the property commonly known as the Coral Palms Grand Resort & Spa, located at 99000 Overseas Highway, Key Largo, Monroe County, Florida 33037 (the "Property"), all as more fully described herein. Borrower and Guarantor are collectively referred to herein as the "Borrower Parties." Each of the Borrower Parties and PAC is sometimes referred to herein individually as a "Party" and collectively as the "Parties."
1. RECITALS AND BACKGROUND
The following recitals are made as background to the settlement set forth in this Agreement and are incorporated herein by reference:
1.1 The Commitment Letter
Reference is hereby made to that certain Commitment Letter dated December 9, 2022 (the "Commitment Letter"), entered into by and between Coral Palms Resort Holdings LLC, a Florida limited liability company, as borrower, and Pinnacle Atlantic Capital, LLC, a Delaware limited liability company, as lender, pursuant to which Lender committed to provide a first mortgage loan in the original principal amount of One Hundred Sixty Million Dollars ($160,000,000) (the "Loan") to Borrower, secured by a first priority mortgage lien and security interest encumbering the Property. Verimark Hospitality Group Inc., a Delaware corporation (Nasdaq: VMRK), was named as the guarantor of certain of Borrower's obligations under the Commitment Letter.
The purpose of the Loan was to refinance the existing first mortgage loan held by Tidewater National Bank, N.A. (the "Existing Loan"), which carried an outstanding principal balance of approximately One Hundred Eighteen Million Five Hundred Thousand Dollars ($118,500,000) at the time the Commitment Letter was executed. The Commitment Letter set forth the following principal economic terms for the Loan: (a) a fixed interest rate of 5.35% per annum; (b) a maximum loan-to-value ratio ("LTV") of 68.0%; (c) a minimum debt yield of 9.5%; and (d) a term of five (5) years (collectively, the "Original Loan Terms"). Additional terms and conditions were set forth in the Commitment Letter and the related term sheet attached thereto as Exhibit A.
1.2 The Deposits
In accordance with the terms of the Commitment Letter, Borrower deposited the following amounts with Meridian Title & Escrow, Inc. ("Escrow Agent"), at its offices located at 9100 South Dadeland Boulevard, Suite 1500, Miami, Florida 33156:
(a) A good faith deposit in the amount of One Million Six Hundred Thousand Dollars ($1,600,000), representing 1.0% of the Loan amount, deposited with Escrow Agent on December 12, 2022 (the "Good Faith Deposit"); and
(b) A rate lock deposit in the amount of Eight Hundred Thousand Dollars ($800,000), representing 0.50% of the Loan amount, deposited with Escrow Agent on January 5, 2023 (the "Rate Lock Deposit").
The Good Faith Deposit and the Rate Lock Deposit are collectively referred to herein as the "Deposits." The aggregate principal amount of the Deposits held by Escrow Agent totals Two Million Four Hundred Thousand Dollars ($2,400,000). All Deposits have been held in escrow by Escrow Agent at its offices located at 9100 South Dadeland Boulevard, Suite 1500, Miami, Florida 33156, in accordance with the escrow provisions set forth in the Commitment Letter and the related escrow agreement dated December 12, 2022.
1.3 The Appraisal and Repricing
On January 20, 2023, Lender received an appraisal report (the "Appraisal") prepared by Hargrove & Whitley Valuation Services LLC (Scott Tremaine, MAI, MRICS, Senior Managing Director), with an effective date of value of January 6, 2023. The Appraisal concluded a market value for the Property of One Hundred Ninety-Two Million Dollars ($192,000,000) — a shortfall of Forty-Three Million Dollars ($43,000,000), or approximately 18.30%, below VHG's projected value of Two Hundred Thirty-Five Million Dollars ($235,000,000) as presented to Lender during the underwriting process.
As a result of the Appraisal, the Loan as originally sized at $160,000,000 would have resulted in a loan-to-value ratio of approximately 83.33%, which materially exceeded the Commitment Letter's maximum LTV covenant of 68.0%. The Appraisal also raised concerns regarding the minimum debt yield covenant of 9.5% based on the Property's trailing twelve-month net operating income as reported in the appraisal.
In response to the Appraisal, on January 27, 2023, Lender delivered to Borrower Parties a set of repriced and restructured loan terms (the "Repriced Terms"), which included, among other things, the following material modifications to the Original Loan Terms:
(a) A reduced loan amount of One Hundred Thirty-Nine Million Dollars ($139,000,000), representing approximately 72.5% of the appraised value (a reduction of Twenty-One Million Dollars ($21,000,000) from the original commitment amount);
(b) An increased fixed interest rate of 6.90% per annum (an increase of 155 basis points over the original fixed rate of 5.35%);
(c) Cross-collateralization of the Loan with a second property owned and operated by VHG, specifically the Driftwood Bay Hotel located in Sarasota, Florida;
(d) An upgrade of the guaranty structure from a limited (non-recourse carve-out) recourse guaranty to a full recourse guaranty by VHG; and
(e) An additional capital reserve of Three Million Two Hundred Thousand Dollars ($3,200,000) to fund a property improvement plan and capital improvements to the Property (the "PIP Reserve").
1.4 Counter-Proposal and Rejection
On February 3, 2023, VHG, on behalf of Borrower, submitted a written counter-proposal to PAC (the "Counter-Proposal") in response to the Repriced Terms. The Counter-Proposal sought, among other things, to maintain the original loan amount of $160,000,000, to limit the interest rate increase to 50 basis points, and to reject the cross-collateralization requirement and the full recourse guaranty structure. On February 7, 2023, PAC formally rejected VHG's Counter-Proposal in writing, reaffirming its position that the Repriced Terms represented Lender's final offer and that Lender was unwilling to proceed with the Loan on terms other than the Repriced Terms.
1.5 Termination.  On February 10, 2023, the board of directors of VHG held a special meeting at which it determined that the Repriced Terms were not commercially viable and that the Transaction, as restructured, would not be in the best interests of VHG and its shareholders. Following such determination, on February 15, 2023, the Borrower Parties delivered a formal written notice of termination (the "Termination Notice") to PAC, terminating the Commitment Letter and the Transaction effective immediately.
On February 22, 2023, PAC responded to the Termination Notice in writing, asserting that, pursuant to the terms and conditions of the Commitment Letter, both the Good Faith Deposit and the Rate Lock Deposit were non-refundable upon Borrower's voluntary termination, and that PAC was entitled to retain the entire $2,400,000 in Deposits as liquidated damages.
VHG disputed PAC's position, contending that the Repriced Terms constituted a material modification and substantial restructuring of the Commitment Letter that fundamentally altered the economic terms of the Transaction, thereby excusing Borrower's obligation to proceed and entitling VHG to a full refund of the Deposits. VHG further asserted that the repricing was triggered by the Appraisal, which was a condition beyond Borrower's control, and that the Commitment Letter's deposit forfeiture provisions were not intended to apply in such circumstances.
1.6 Settlement Negotiations
The Parties have engaged in good faith negotiations since the delivery of PAC's response on February 22, 2023, with the objective of resolving the deposit dispute and all related claims amicably and without the necessity of commencing litigation or other adversarial proceedings. The Parties have determined that it is in their mutual best interests to resolve this matter on the terms set forth herein, in order to avoid the uncertainty, expense, and disruption of protracted legal proceedings. This Letter Agreement sets forth the terms and conditions of their negotiated settlement.
2. DEFINED TERMS
For purposes of this Agreement, the following terms shall have the meanings ascribed to them below. Capitalized terms used but not otherwise defined in this Agreement shall have the meanings ascribed to them in the Commitment Letter.
"Agreement" or "Letter Agreement" means this Deposit Settlement Letter Agreement, dated as of February 28, 2023, by and among Borrower, Guarantor, and Lender, including all exhibits attached hereto.
"Borrower" means Coral Palms Resort Holdings LLC, a Florida limited liability company.
"Borrower Parties" means, collectively, Borrower and Guarantor.
"Commitment Letter" means that certain Commitment Letter dated December 9, 2022, by and between Borrower and Lender, together with all exhibits, schedules, and side letters attached thereto or delivered in connection therewith.
"Deposits" means, collectively, the Good Faith Deposit and the Rate Lock Deposit, in the aggregate principal amount of Two Million Four Hundred Thousand Dollars ($2,400,000), together with all interest accrued thereon while held in escrow.
"Escrow Agent" means Meridian Title & Escrow, Inc., with its principal offices at 9100 South Dadeland Boulevard, Suite 1500, Miami, Florida 33156.
"Good Faith Deposit" means the deposit in the principal amount of One Million Six Hundred Thousand Dollars ($1,600,000) deposited by Borrower with Escrow Agent on December 12, 2022, together with all interest accrued thereon.
"Guarantor" or "VHG" means Verimark Hospitality Group Inc., a Delaware corporation (Nasdaq: VMRK).
"Lender" or "PAC" means Pinnacle Atlantic Capital, LLC, a Delaware limited liability company.
"Loan Documents" means, collectively, all draft loan documents circulated by or on behalf of Lender in connection with the Loan, including, without limitation, the draft Loan Agreement, Promissory Note, Mortgage, Guaranty Agreement, Environmental Indemnity Agreement, Cash Management Agreement, Reserve Agreement, and all ancillary documents, instruments, and certificates prepared or circulated in connection therewith.
"Property" means the real property and improvements commonly known as the Coral Palms Grand Resort & Spa, located at 99000 Overseas Highway, Key Largo, Monroe County, Florida 33037, together with all easements, appurtenances, and rights pertaining thereto.
"Rate Lock Deposit" means the deposit in the principal amount of Eight Hundred Thousand Dollars ($800,000) deposited by Borrower with Escrow Agent on January 5, 2023, together with all interest accrued thereon.
"Termination Notice" means that certain written notice of termination dated February 15, 2023, delivered by the Borrower Parties to Lender, terminating the Commitment Letter and the Transaction.
"Transaction" means the proposed $160,000,000 first mortgage refinancing of the Property contemplated by the Commitment Letter.
3. SETTLEMENT TERMS
3.1 Disposition of Good Faith Deposit
PAC shall retain the Good Faith Deposit in the principal amount of One Million Six Hundred Thousand Dollars ($1,600,000) as liquidated damages in connection with Borrower's termination of the Transaction. Escrow Agent is hereby irrevocably authorized, instructed, and directed to disburse the Good Faith Deposit, together with any and all interest accrued thereon from and after December 12, 2022, through the date of disbursement, to PAC by wire transfer of immediately available funds to a bank account designated by PAC in writing to Escrow Agent.
PAC shall deliver its wire transfer instructions to Escrow Agent within five (5) business days following the date on which PAC receives a fully executed copy of this Agreement. Escrow Agent shall effect the disbursement of the Good Faith Deposit and all accrued interest thereon within three (3) business days following Escrow Agent's receipt of PAC's wire transfer instructions. In the event that PAC fails to deliver wire instructions within the five (5) business day period specified above, Escrow Agent shall hold the Good Faith Deposit pending receipt of such instructions and shall disburse the same within three (3) business days following its eventual receipt thereof.
3.2 Refund of Rate Lock Deposit
PAC hereby agrees that the Rate Lock Deposit in the principal amount of Eight Hundred Thousand Dollars ($800,000) shall be refunded in full to Borrower. PAC hereby waives any right, claim, or entitlement it may have under the Commitment Letter or otherwise to retain the Rate Lock Deposit or any portion thereof. Escrow Agent is hereby irrevocably authorized, instructed, and directed to disburse the Rate Lock Deposit, together with any and all interest accrued thereon from and after January 5, 2023, through the date of disbursement, to Borrower by wire transfer of immediately available funds to a bank account designated by Borrower in writing to Escrow Agent.
Borrower shall deliver its wire transfer instructions to Escrow Agent within five (5) business days following the date on which Borrower receives a fully executed copy of this Agreement. Escrow Agent shall effect the disbursement of the Rate Lock Deposit and all accrued interest thereon within three (3) business days following Escrow Agent's receipt of Borrower's wire transfer instructions. In the event that Borrower fails to deliver wire instructions within the five (5) business day period specified above, Escrow Agent shall hold the Rate Lock Deposit pending receipt of such instructions and shall disburse the same within three (3) business days following its eventual receipt thereof.
3.3 Summary of Deposit Disposition
The following table summarizes the agreed disposition of the Deposits under this Agreement:
The net amount to be forfeited by the Borrower Parties and retained by PAC is One Million Six Hundred Thousand Dollars ($1,600,000), consisting of the principal amount of the Good Faith Deposit plus all accrued interest thereon. The net amount to be refunded to Borrower is Eight Hundred Thousand Dollars ($800,000), consisting of the principal amount of the Rate Lock Deposit plus all accrued interest thereon. All Deposits held by Escrow Agent are fully accounted for and shall be disbursed in the manner set forth above.
3.4 Liquidated Damages Acknowledgment
The Parties hereby acknowledge and agree that the Good Faith Deposit retained by PAC pursuant to Section 3.1 above constitutes liquidated damages and not a penalty. The Parties further acknowledge and agree that, in light of the circumstances existing at the time of the execution of the Commitment Letter and as of the date hereof, the actual damages that would be suffered by PAC as a result of the termination of the Transaction are difficult or impossible to ascertain with reasonable certainty. The Parties have negotiated and agreed that the sum of One Million Six Hundred Thousand Dollars ($1,600,000) is a fair, reasonable, and proportionate estimate of such damages, taking into account, among other things, PAC's lost opportunity costs, due diligence expenses, third-party report costs, legal fees, internal underwriting costs, and the costs associated with the allocation and reservation of capital for the Transaction.
PAC acknowledges and agrees that, except as otherwise expressly provided in this Agreement, the retention of the Good Faith Deposit (together with accrued interest thereon) constitutes PAC's sole and exclusive monetary remedy against the Borrower Parties and their respective affiliates, subsidiaries, officers, directors, employees, agents, successors, and assigns in connection with the termination of the Transaction, the Commitment Letter, and all matters arising therefrom or related thereto. PAC shall not be entitled to seek or recover any additional damages, whether direct, indirect, consequential, special, incidental, punitive, or otherwise, from the Borrower Parties in connection with the Transaction.
4. ESCROW AGENT INSTRUCTIONS
4.1 Joint Instructions
This Section 4 shall constitute joint, irrevocable escrow instructions from the Borrower Parties and PAC to Meridian Title & Escrow, Inc. (Attn: Lisa Portman, Title Officer, 9100 South Dadeland Boulevard, Suite 1500, Miami, Florida 33156), and shall supersede any prior escrow instructions delivered to Escrow Agent in connection with the Deposits, including the escrow provisions set forth in the Commitment Letter and any separate escrow agreement between the Parties and Escrow Agent. Escrow Agent is hereby authorized and directed to disburse the Deposits in accordance with Section 3 above promptly upon Escrow Agent's receipt of a fully executed copy of this Agreement and the applicable wire transfer instructions from the respective recipients.
4.2 Escrow Agent Reliance
Escrow Agent shall be entitled to rely conclusively on the instructions contained in this Agreement and on a fully executed copy of this Agreement as full and complete authorization for all disbursements contemplated herein. Escrow Agent shall not be required to undertake any independent investigation or inquiry as to the authority of the Parties or the validity of this Agreement. Escrow Agent shall have no liability whatsoever to any Party or to any other person or entity for acting in good faith in accordance with these instructions, and the Parties hereby agree to indemnify and hold harmless Escrow Agent from and against any and all claims, losses, damages, costs, and expenses (including reasonable attorneys' fees) arising out of or related to Escrow Agent's performance of its obligations under this Section 4, except to the extent caused by Escrow Agent's gross negligence or willful misconduct.
4.3 Escrow Agent Fees
Each Party shall bear its own costs and expenses associated with the escrow and the disbursements contemplated herein. Any fees or charges assessed by Escrow Agent in connection with the disbursement of the Deposits pursuant to this Agreement (including wire transfer fees) shall be split equally between the Borrower Parties, on the one hand, and PAC, on the other hand. Escrow Agent is authorized to deduct its share of any such fees from the Deposits prior to disbursement, provided that Escrow Agent shall provide the Parties with reasonable advance notice of any such deduction and a written accounting of the fees so deducted.
4.4 Interest.  Any interest that has accrued on the Good Faith Deposit from and after December 12, 2022, through the date of disbursement shall be disbursed to PAC along with the principal amount of the Good Faith Deposit in accordance with Section 3.1. Any interest that has accrued on the Rate Lock Deposit from and after January 5, 2023, through the date of disbursement shall be disbursed to Borrower along with the principal amount of the Rate Lock Deposit in accordance with Section 3.2. For the avoidance of doubt, interest shall follow the principal to which it relates, and no Party shall have any claim to interest accrued on a Deposit that is being disbursed to the other Party.
5. MUTUAL RELEASE
5.1 Release by Borrower Parties
Effective as of the date hereof, Borrower and Guarantor, individually and collectively, on behalf of themselves and each of their respective past, present, and future affiliates, subsidiaries, parent entities, officers, directors, members, managers, partners, shareholders, employees, agents, representatives, attorneys, advisors, consultants, successors, and assigns (collectively, the "Borrower Releasing Parties"), hereby irrevocably and unconditionally release, acquit, and forever discharge PAC and each of its past, present, and future affiliates (including, without limitation, Greystone Peak Asset Management LP and each of its affiliated funds and investment vehicles), members, managers, partners, officers, directors, employees, agents, representatives, attorneys (including, without limitation, Whitford Baines & Driscoll LLP and each of its partners, associates, and employees), advisors, consultants, successors, and assigns (collectively, the "PAC Released Parties") from any and all claims, counterclaims, cross-claims, actions, causes of action, suits, demands, debts, dues, sums of money, accounts, damages (including consequential, special, incidental, and punitive damages), costs, expenses, losses, liabilities, liens, obligations, judgments, and rights of every kind and nature whatsoever, whether at law or in equity, whether based in contract, tort, statute, or otherwise, whether known or unknown, suspected or unsuspected, disclosed or undisclosed, fixed or contingent, accrued or unaccrued, matured or unmatured, that any of the Borrower Releasing Parties have, have ever had, or may hereafter have against any of the PAC Released Parties, in each case arising out of, relating to, or in any way connected with the Transaction, the Commitment Letter, the Loan Documents, the Deposits, the Good Faith Deposit, the Rate Lock Deposit, the Appraisal, the Repriced Terms, the Counter-Proposal, PAC's rejection of the Counter-Proposal, the Termination Notice, PAC's response thereto, or any other events, acts, omissions, representations, agreements, negotiations, discussions, or circumstances related to any of the foregoing.
5.2 Release by Lender
Effective as of the date hereof, PAC, on behalf of itself and each of its past, present, and future affiliates (including, without limitation, Greystone Peak Asset Management LP and each of its affiliated funds and investment vehicles), members, managers, partners, officers, directors, employees, agents, representatives, attorneys, advisors, consultants, successors, and assigns (collectively, the "PAC Releasing Parties"), hereby irrevocably and unconditionally releases, acquits, and forever discharges Borrower, Guarantor, and each of their respective past, present, and future affiliates, subsidiaries, parent entities, officers, directors, members, managers, partners, shareholders, employees, agents, representatives, attorneys (including, without limitation, Calderwood & Harkness LLP and each of its partners, associates, and employees), advisors, consultants, successors, and assigns (collectively, the "Borrower Released Parties") from any and all claims, counterclaims, cross-claims, actions, causes of action, suits, demands, debts, dues, sums of money, accounts, damages (including consequential, special, incidental, and punitive damages), costs, expenses, losses, liabilities, liens, obligations, judgments, and rights of every kind and nature whatsoever, whether at law or in equity, whether based in contract, tort, statute, or otherwise, whether known or unknown, suspected or unsuspected, disclosed or undisclosed, fixed or contingent, accrued or unaccrued, matured or unmatured, that any of the PAC Releasing Parties have, have ever had, or may hereafter have against any of the Borrower Released Parties, in each case arising out of, relating to, or in any way connected with the Transaction, the Commitment Letter, the Loan Documents, the Deposits, the Good Faith Deposit, the Rate Lock Deposit, the Appraisal, the Repriced Terms, the Counter-Proposal, VHG's submission of the Counter-Proposal, the Termination Notice, or any other events, acts, omissions, representations, agreements, negotiations, discussions, or circumstances related to any of the foregoing.
5.3 Scope of Release
The releases set forth in Sections 5.1 and 5.2 above are intended to be as broad and comprehensive as permitted by applicable law and shall be interpreted and construed to the fullest extent permitted thereby. The Parties acknowledge and agree that the foregoing releases are a material inducement to each Party's execution of this Agreement and that, but for such releases, the Parties would not have entered into this Agreement. Notwithstanding the foregoing, the releases set forth herein do not extend to, and shall not be construed to release, discharge, or otherwise affect, any obligations, duties, or liabilities arising under or pursuant to this Agreement itself, including, without limitation, the obligations to effectuate the deposit disbursements set forth in Section 3 and the escrow instructions set forth in Section 4.
Each Party hereby expressly, knowingly, and voluntarily waives any and all rights it may have under Section 1542 of the California Civil Code, or any similar statute or common law principle of any jurisdiction, that would otherwise limit the scope of the releases set forth herein to claims that are known or suspected to exist at the time of execution. Section 1542 of the California Civil Code provides as follows:
"A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party."
Each Party acknowledges that it may discover facts different from, or in addition to, those which it now knows or believes to be true with respect to the subject matter of the releases herein, and each Party agrees that the releases set forth herein shall remain in full force and effect notwithstanding the discovery of any such different or additional facts.
5.4 Covenant Not to Sue
Each Party hereby covenants and agrees that it will not, directly or indirectly, institute, prosecute, maintain, or participate in any action, suit, arbitration, mediation, or other proceeding of any kind, whether at law or in equity, in any court, tribunal, administrative body, or other forum, against any released party with respect to any claim, cause of action, demand, or liability that has been released pursuant to Sections 5.1 or 5.2 above. In the event that any Party breaches this covenant not to sue, the breaching Party shall be liable to the released party or parties for all damages, costs, and expenses (including reasonable attorneys' fees) incurred by such released party or parties in connection with the defense of any such action, suit, or proceeding.
6. REPRESENTATIONS AND WARRANTIES
6.1 Mutual Representations
Each Party hereby represents and warrants to each other Party as follows:
(a) Power and Authority. Such Party has full power and authority to enter into this Agreement, to execute and deliver this Agreement, and to perform all of its obligations hereunder. The execution, delivery, and performance of this Agreement do not and will not conflict with, result in a breach of, or constitute a default under any agreement, instrument, order, judgment, decree, law, regulation, or rule to which such Party is a party or by which such Party is bound.
(b) Due Authorization. The execution and delivery of this Agreement by such Party has been duly authorized by all necessary corporate, limited liability company, partnership, or other organizational action, as applicable, on the part of such Party. No further approval, consent, or authorization of any person, entity, governmental authority, or other body is required in connection with such Party's execution, delivery, or performance of this Agreement.
(c) Binding Obligation. This Agreement constitutes the legal, valid, and binding obligation of such Party, enforceable against such Party in accordance with its terms, subject only to applicable bankruptcy, insolvency, reorganization, moratorium, and other similar laws of general application affecting creditors' rights and to general principles of equity.
(d) No Prior Assignment. Such Party has not heretofore assigned, transferred, conveyed, pledged, encumbered, or otherwise disposed of any of the claims, demands, rights, or causes of action released by such Party pursuant to Section 5 hereof, and no other person or entity has any interest in any such claims by virtue of any assignment, transfer, or other disposition by such Party.
6.2 Borrower Parties Representations
In addition to the mutual representations and warranties set forth in Section 6.1, each of the Borrower Parties hereby represents and warrants as follows:
(a) Borrower Organization. Borrower is a Florida limited liability company duly organized, validly existing, and in good standing under the laws of the State of Florida. Borrower has all requisite limited liability company power and authority to own, lease, and operate the Property and to carry on its business as presently conducted.
(b) Guarantor Organization. Guarantor is a Delaware corporation duly incorporated, validly existing, and in good standing under the laws of the State of Delaware. Guarantor is duly qualified to do business and is in good standing in the State of Florida and in each other jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary.
(c) Authority of Signatories. The persons executing this Agreement on behalf of Borrower and Guarantor, respectively, are duly authorized to do so and to bind such entity to the terms and conditions of this Agreement.
6.3 Lender Representations
In addition to the mutual representations and warranties set forth in Section 6.1, PAC hereby represents and warrants as follows:
(a) Organization. PAC is a Delaware limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware. PAC has all requisite limited liability company power and authority to carry on its business as presently conducted.
(b) Authority of Signatories. The persons executing this Agreement on behalf of PAC are duly authorized to do so and to bind PAC to the terms and conditions of this Agreement.
7. TERMINATION OF COMMITMENT LETTER AND RELATED AGREEMENTS
7.1 Confirmation of Termination
The Parties hereby confirm and acknowledge that the Commitment Letter dated December 9, 2022, and all related agreements, side letters (including, without limitation, the Side Letter dated December 9, 2022, regarding deposit refundability and rate lock provisions), term sheets, engagement letters, fee letters, and other ancillary agreements or understandings entered into by or among the Parties in connection with the Transaction, are hereby terminated and shall be of no further force or effect as of the date hereof. Notwithstanding the foregoing, any provisions of the Commitment Letter or the related agreements that by their express terms are intended to survive termination (including, without limitation, confidentiality provisions, indemnification provisions, and provisions relating to third-party reports) shall survive in accordance with their terms; provided, however, that all deposit-related provisions of the Commitment Letter and the related agreements are hereby expressly superseded by the terms and conditions of this Agreement.
7.2 Return and Destruction of Loan Documents
All draft Loan Documents circulated by Whitford Baines & Driscoll LLP, as counsel to PAC, on or about December 19, 2022, and all subsequent mark-ups, revisions, redlines, and comments thereto exchanged by the Parties and their respective counsel, are hereby deemed void, of no legal effect, and superseded in their entirety. No Party shall have any obligation or liability under any such draft Loan Documents, and no such draft Loan Documents shall be deemed to create any binding agreement, obligation, or commitment on the part of any Party. Each Party shall use commercially reasonable efforts to return or destroy all copies of such draft Loan Documents in its possession within thirty (30) days following the date hereof, subject to any document retention policies or legal or regulatory requirements applicable to such Party.
7.3 No Obligation to Close
For the avoidance of doubt, neither Lender, on the one hand, nor the Borrower Parties, on the other hand, shall have any obligation to consummate the Transaction, to fund or originate the Loan, or to enter into any refinancing of the Property. Nothing in this Agreement shall be construed as a commitment, agreement, or undertaking by any Party to engage in any future lending, borrowing, or other business transaction with any other Party.
8. CONFIDENTIALITY
The terms, conditions, and substance of this Agreement, including the settlement amount, the disposition of the Deposits, and the fact that a settlement has been reached, shall be confidential and shall not be disclosed, published, or otherwise communicated by any Party to any third party without the prior written consent of the other Parties, except as follows:
(a) Internal Disclosure. A Party may disclose the terms hereof to such Party's affiliates, subsidiaries, officers, directors, members, managers, partners, employees, accountants, auditors (including, in the case of VHG, Keswick & Holt LLP, as VHG's independent registered public accounting firm), legal counsel, financial advisors, and other professional advisors who have a reasonable need to know the terms hereof in connection with the performance of their duties, provided that such Party shall be responsible for ensuring that each such recipient maintains the confidentiality of such information;
(b) Legal and Regulatory Requirements. A Party may disclose the terms hereof to the extent required by applicable law, rule, regulation, or legal process, including, without limitation, any disclosure obligations of VHG arising under the Securities Exchange Act of 1934, as amended, and the rules and regulations of the U.S. Securities and Exchange Commission promulgated thereunder, as well as any disclosure requirements of the Nasdaq Stock Market LLC (ticker symbol: VMRK). In the event that a Party is required to make such a disclosure, such Party shall, to the extent legally permissible and reasonably practicable, provide the other Parties with prompt written notice of such requirement prior to making such disclosure and shall cooperate with the other Parties in seeking a protective order or other appropriate remedy to limit the scope of such disclosure;
(c) Tax Filings. A Party may disclose the terms hereof to the extent reasonably necessary in connection with the preparation and filing of any tax returns or other tax filings with applicable taxing authorities; and
(d) Escrow Agent. A Party may disclose the terms hereof to Meridian Title & Escrow, Inc., solely to the extent necessary to effectuate the disbursements contemplated by Section 3 and Section 4 of this Agreement.
9. NO ADMISSION OF LIABILITY
This Agreement is a compromise and settlement of disputed claims between the Parties, entered into solely for the purpose of avoiding the uncertainty, burden, and expense of further dispute and potential litigation. Nothing contained in this Agreement, including the disposition of the Deposits as set forth in Section 3, shall be construed or deemed to be, or used as, an admission, concession, or evidence of liability, wrongdoing, fault, or breach of any duty or obligation, whether legal, contractual, fiduciary, or otherwise, by any Party. This Agreement and the terms hereof shall not be offered or received in evidence in any action, suit, or proceeding as an admission, concession, or evidence of any liability or wrongdoing of any kind on the part of any Party.
10. MISCELLANEOUS PROVISIONS
10.1 Governing Law
This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Florida, without regard to any choice of law or conflict of laws rules or principles (whether of the State of Florida or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Florida. Each Party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts located in Miami-Dade County, Florida, for the purpose of any action, suit, or proceeding arising out of or relating to this Agreement, and each Party hereby irrevocably waives, to the fullest extent permitted by law, any objection it may now or hereafter have to the laying of venue of any such action, suit, or proceeding in any such court or any claim that any such action, suit, or proceeding has been brought in an inconvenient forum.
10.2 Entire Agreement
This Agreement, together with any exhibits attached hereto, constitutes the entire agreement among the Parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations, discussions, representations, warranties, and commitments, whether oral or written, relating to the Deposits, the disposition of the Deposits, and the termination and settlement of the Transaction. No amendment, modification, supplement, or waiver of any provision of this Agreement shall be effective unless set forth in a written instrument signed by all of the Parties. No oral statement, course of dealing, or course of performance shall be deemed to amend or modify this Agreement.
10.3 Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one and the same instrument. The delivery of an executed counterpart of this Agreement by electronic transmission, including by portable document format (PDF), shall be deemed to be, and shall be as effective as, delivery of a manually executed original counterpart. Each Party agrees that the electronic signatures appearing on this Agreement are the same as handwritten signatures for the purposes of validity, enforceability, and admissibility.
10.4 Notices.  All notices, requests, demands, consents, instructions, and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given or delivered: (a) upon personal delivery to the addressee; (b) one (1) business day after deposit with a nationally recognized overnight courier service, postage prepaid, for next-business-day delivery; (c) upon transmission by electronic mail (with confirmation of transmission); or (d) three (3) business days after deposit in the United States mail, by certified or registered mail, postage prepaid, return receipt requested, in each case addressed as follows (or to such other address as may be specified by a Party in a notice given in accordance with this Section):
If to Borrower or Guarantor:
Verimark Hospitality Group Inc. 1400 Bayshore Boulevard, Suite 2200 Miami, Florida 33131
Attention: Natasha Ricard, Chief Financial Officer
Email: nricard@verimarkgroup.com
with a copy (which shall not constitute notice) to:
Calderwood & Harkness LLP 100 Southeast Second Street, Suite 3800 Miami, Florida 33131
Attention: Douglas Fairchild, Partner
Email: dfairchild@calderwoodharkness.com
If to Lender:
Pinnacle Atlantic Capital, LLC 200 Lexington Avenue, 38th Floor New York, New York 10016
Attention: Martin Drubeck, Managing Director – Real Estate Lending
Email: mscholes@pinnacleatlantic.com
with a copy (which shall not constitute notice) to:
Whitford Baines & Driscoll LLP 1221 Avenue of the Americas, Suite 4400 New York, New York 10020
Attention: Philip Tarrant Corporation, Partner
Email: pnordstrom@whitfordbaines.com
10.5 Successors and Assigns
This Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective heirs, executors, administrators, legal representatives, successors, and permitted assigns. No Party may assign, delegate, or otherwise transfer any of its rights or obligations under this Agreement to any other person or entity without the prior written consent of each of the other Parties, and any attempted assignment without such consent shall be null and void.
10.6 Severability.  If any provision of this Agreement, or the application thereof to any person, entity, or circumstance, is held by a court of competent jurisdiction or other tribunal to be invalid, illegal, or unenforceable for any reason, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and the remaining provisions shall continue in full force and effect and shall be enforceable to the fullest extent permitted by law. In such event, the Parties shall negotiate in good faith to agree upon a valid, legal, and enforceable substitute provision that most nearly reflects the original intent of the Parties.
10.7 Waiver.  No failure or delay by any Party in exercising any right, power, or remedy under this Agreement shall operate as a waiver thereof, and no single or partial exercise of any right, power, or remedy shall preclude any other or further exercise thereof or the exercise of any other right, power, or remedy. No waiver of any provision of this Agreement shall be effective unless set forth in a written instrument signed by the Party against whom enforcement of such waiver is sought. Any waiver shall be limited to the specific provision and specific circumstances to which it relates and shall not constitute a continuing waiver or a waiver with respect to any other provision, breach, or default.
10.8 Further Assurances
Each Party hereby agrees to execute, acknowledge, and deliver such additional documents, instruments, conveyances, and assurances, and to take such further actions, as may be reasonably requested by any other Party from time to time in order to carry out, evidence, and confirm the rights and obligations of the Parties contemplated by this Agreement, including, without limitation, any additional or supplemental instructions to Escrow Agent as may be necessary or appropriate to effectuate the disbursements contemplated by Sections 3 and 4 hereof.
10.9 Attorneys' Fees
In the event that any action, suit, or proceeding is commenced by any Party to enforce any provision of this Agreement or to seek damages for breach hereof, the prevailing Party in any such action, suit, or proceeding shall be entitled to recover from the non-prevailing Party its reasonable attorneys' fees, court costs, expert witness fees, and all other costs and expenses incurred in connection with such action, suit, or proceeding, including any appeal thereof, in addition to any other relief to which such prevailing Party may be entitled.
10.10 Third-Party Beneficiaries
Meridian Title & Escrow, Inc., in its capacity as Escrow Agent, is an intended third-party beneficiary of Section 4 and of the protections, limitations of liability, and indemnification provisions set forth in this Agreement solely to the extent that such provisions relate to Escrow Agent's rights, duties, and obligations in connection with the escrow and the disbursement of the Deposits. Except as expressly set forth in the preceding sentence, nothing in this Agreement, whether express or implied, is intended to confer upon any person or entity other than the Parties (and their respective permitted successors and assigns) any rights, benefits, remedies, obligations, or liabilities of any nature whatsoever under or by reason of this Agreement.
10.11 Construction.  This Agreement has been negotiated at arm's length by the Parties and their respective legal counsel. Each Party has had a full and fair opportunity to review, negotiate, and revise the terms of this Agreement. Accordingly, this Agreement shall not be construed more strictly against any Party as the drafter hereof, and the rule of construction that ambiguities are to be resolved against the drafting party shall not apply to the interpretation or enforcement of this Agreement. Headings and captions used in this Agreement are for convenience of reference only and shall not affect the meaning or interpretation of any provision hereof. As used in this Agreement, the words "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation."
11. EXECUTION
If the foregoing accurately reflects our mutual agreement, please indicate your acceptance and agreement by executing this Letter Agreement in the spaces provided below and returning a fully executed counterpart to each of the other Parties and to Escrow Agent.
[Signature Pages Follow]
SIGNATURE PAGE TO DEPOSIT SETTLEMENT LETTER AGREEMENT
IN WITNESS WHEREOF, the undersigned have executed this Deposit Settlement Letter Agreement as of the date first written above.
BORROWER:
CORAL PALMS RESORT HOLDINGS LLC, a Florida limited liability company
By: ________
Name: Conrad W. Elliston
Title: Authorized Signatory (in his capacity as Chairman & CEO of Verimark Hospitality Group Inc., sole member/manager of Borrower's parent entity)
Date: February 28, 2023
SIGNATURE PAGE TO DEPOSIT SETTLEMENT LETTER AGREEMENT
GUARANTOR:
VERIMARK HOSPITALITY GROUP INC., a Delaware corporation
By: ________
Name: Natasha Ricard
Title: Chief Financial Officer
Date: February 28, 2023
SIGNATURE PAGE TO DEPOSIT SETTLEMENT LETTER AGREEMENT
LENDER:
PINNACLE ATLANTIC CAPITAL, LLC, a Delaware limited liability company
By: ________
Name: Martin Drubeck
Title: Managing Director – Real Estate Lending
Date: February 28, 2023
SIGNATURE PAGE TO DEPOSIT SETTLEMENT LETTER AGREEMENT
12. ACKNOWLEDGED AND AGREED BY ESCROW AGENT
The undersigned, Meridian Title & Escrow, Inc., in its capacity as Escrow Agent, hereby acknowledges receipt of a fully executed copy of this Deposit Settlement Letter Agreement and agrees to hold and disburse the Deposits (including all interest accrued thereon) in accordance with the terms and conditions set forth in Sections 3 and 4 hereof. Escrow Agent confirms that it currently holds the Deposits in the aggregate principal amount of Two Million Four Hundred Thousand Dollars ($2,400,000), consisting of the Good Faith Deposit in the principal amount of $1,600,000 and the Rate Lock Deposit in the principal amount of $800,000, together with all interest accrued thereon, and that no claims, liens, or encumbrances have been asserted against the Deposits other than as set forth in this Agreement.
ESCROW AGENT:
MERIDIAN TITLE & ESCROW, INC.
By: ________
Name: Lisa Portman
Title: Title Officer
Date: February 28, 2023
cc (via email):
Whitford Baines & Driscoll LLP 1221 Avenue of the Americas, Suite 4400 New York, New York 10020
Attn: Philip Tarrant Corporation, Partner
Meridian Title & Escrow, Inc. 9100 South Dadeland Boulevard, Suite 1500 Miami, Florida 33156
Attn: Lisa Portman, Title Officer
Douglas Fairchild, Esq., Calderwood & Harkness LLP
Angela Fontaine, Esq., Calderwood & Harkness LLP
EXHIBIT A
WIRE TRANSFER INSTRUCTIONS
I. Wire Instructions for Pinnacle Atlantic Capital, LLC (For receipt of the Good Faith Deposit of $1,600,000 plus accrued interest)
To be delivered separately by PAC to Meridian Title & Escrow, Inc. (Attn: Lisa Portman, Title Officer) within five (5) business days of full execution of this Agreement in accordance with Section 3.1.
[TO BE PROVIDED]
II. Wire Instructions for Coral Palms Resort Holdings LLC (For receipt of the Rate Lock Deposit of $800,000 plus accrued interest)
To be delivered separately by Borrower to Meridian Title & Escrow, Inc. (Attn: Lisa Portman, Title Officer) within five (5) business days of full execution of this Agreement in accordance with Section 3.2.
[TO BE PROVIDED]
Note: Wire transfer instructions are to be delivered by each respective party directly to Escrow Agent in accordance with the time periods specified in Sections 3.1 and 3.2 of this Agreement. This Exhibit A shall be deemed supplemented and completed upon receipt by Escrow Agent of such wire instructions, without the need for further amendment of this Agreement.
Deposit | Principal Amount | Disposition | Recipient
Good Faith Deposit | $1,600,000 | Retained as liquidated damages | PAC
Rate Lock Deposit | $800,000 | Refunded in full | Borrower
Total Deposits | $2,400,000

CONFIDENTIAL

VIA EMAIL AND OVERNIGHT COURIER

SIGNATURE PAGE TO DEPOSIT SETTLEMENT LETTER AGREEMENT

BORROWER:

SIGNATURE PAGE TO DEPOSIT SETTLEMENT LETTER AGREEMENT

GUARANTOR:

SIGNATURE PAGE TO DEPOSIT SETTLEMENT LETTER AGREEMENT

LENDER:

SIGNATURE PAGE TO DEPOSIT SETTLEMENT LETTER AGREEMENT

ESCROW AGENT:

MERIDIAN TITLE & ESCROW, INC.

EXHIBIT A

WIRE TRANSFER INSTRUCTIONS

Record

Parties

Dates

Amounts