PLEDGE AND SECURITY AGREEMENT
Dated as of December 15, 2025
THIS PLEDGE AND SECURITY AGREEMENT (this "Agreement") is made and entered into as of December 15, 2025, by and between:
PLEDGOR:
Cornerstone Fiduciary Services, Inc., a Florida corporation (FL Trust Company License No. FTC-2014-00287), in its capacity as Trustee of The Salvatore A. Pellegrino 2025 Family Trust, an irrevocable trust established under the laws of the State of Florida (the "Pledgor" or the "Trust"), with its principal office at 200 West Forsyth Street, Suite 1500, Jacksonville, FL 32202;
and
SECURED PARTY:
Salvatore A. Pellegrino, an individual residing at 610 Casuarina Concourse, Coral Gables, FL 33143 (the "Secured Party").
The Pledgor and the Secured Party are sometimes referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS:
A. The Salvatore A. Pellegrino 2025 Family Trust (the "Trust") was established pursuant to that certain Trust Agreement dated November 10, 2025 (the "Trust Agreement"), by and between Salvatore A. Pellegrino, as Grantor, and Cornerstone Fiduciary Services, Inc. (FL Trust Company License No. FTC-2014-00287), as Trustee, with its principal office at 200 West Forsyth Street, Suite 1500, Jacksonville, FL 32202, with Helena R. Matsuda serving as Senior Trust Officer responsible for the administration of the Trust;
B. Pursuant to that certain Membership Interest Purchase Agreement dated as of December 15, 2025 (the "MIPA"), between Salvatore A. Pellegrino, acting through Pellegrino Capital Group LLC, a Florida limited liability company (EIN 65-1238074), with its principal office at 2400 Salzedo Street, Suite 1200, Coral Gables, FL 33134 ("PCG"), as Seller, and the Trust, as Purchaser, the Trust has acquired the following membership interests (collectively, the "Purchased Interests"):
(i) a 92% Class A membership interest in Meridian Shores Hospitality LLC, a Florida limited liability company (EIN 59-4021867), which operates a 142-room boutique resort located at 4500 Gulf Shore Boulevard, Naples, FL 34102;
(ii) a 100% membership interest in Costa Luma Resort Holdings LLC, a Florida limited liability company (EIN 59-4173920), which holds a 96-room oceanfront property located at 81700 Overseas Highway, Islamorada, FL 33036; and
(iii) an 88% Class A membership interest in Azulia Beach Club LLC, a Florida limited liability company (EIN 59-4285413), which operates an upscale beachfront food & beverage / events venue located at 22 Baymont Drive, Clearwater Beach, FL 33767;
C. The aggregate purchase price under the MIPA is Forty Million Dollars ($40,000,000), representing the fair market value of the Purchased Interests after application of a 20% combined discount for lack of marketability and lack of control, as supported by a qualified appraisal prepared by Hargrove & Lindquist LLP (Dennis W. Hargrove, ASA, CFA, Managing Director), delivered November 3, 2025 (the "Appraisal"), which Appraisal determined the aggregate pre-discount fair market value of the Purchased Interests to be Fifty Million Dollars ($50,000,000);
D. In payment of the purchase price, the Trust has issued to the Secured Party that certain Secured Promissory Note dated December 15, 2025 (the "Note"), in the original principal amount of Forty Million Dollars ($40,000,000), bearing interest at the rate of 4.40% per annum (the September 2025 mid-term applicable federal rate, annual compounding), payable in annual interest-only installments of One Million Seven Hundred Sixty Thousand Dollars ($1,760,000) each, commencing on December 15, 2026, and continuing on each anniversary thereof, with all outstanding principal and accrued but unpaid interest due and payable in full on December 15, 2034 (the "Maturity Date");
E. As a condition to the Secured Party's acceptance of the Note and the consummation of the transactions contemplated by the MIPA, the Trust has agreed to grant the Secured Party a first-priority security interest in the Purchased Interests and all related distributions, proceeds, and cash flow to secure the Trust's obligations under the Note, and the Secured Party has required such security interest as an essential inducement to accepting the Note as consideration for the sale of the Purchased Interests;
F. This Agreement is entered into in connection with the intra-family wealth transfer structured by Calderwood & Harkness LLP (Matter No. 1027-00005), in furtherance of the estate planning objectives of the Secured Party and for the benefit of the beneficiaries of the Trust as identified in the Trust Agreement; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, the premises recited above (which are incorporated herein by this reference), the acceptance of the Note by the Secured Party, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each Party, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 — Defined Terms
As used in this Agreement, the following terms shall have the meanings set forth below:
"Agreement" means this Pledge and Security Agreement, dated as of December 15, 2025, as it may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms hereof.
"Appraisal" means the qualified appraisal of the Purchased Interests prepared by Hargrove & Lindquist LLP (Dennis W. Hargrove, ASA, CFA, Managing Director), dated and delivered November 3, 2025.
"Collateral" means, collectively, all of the following property, assets, and rights, whether now owned or hereafter acquired by the Pledgor: (a) the Pledged Interests; (b) the Distributions; (c) the Proceeds; and (d) all books, records, ledgers, correspondence, files, and documentation related to any of the foregoing.
"Cornerstone" means Cornerstone Fiduciary Services, Inc., a Florida corporation, in its individual corporate capacity.
"Distributions" means all distributions, dividends, payments, returns of capital, allocations of income, liquidating distributions, draws, and all other amounts of whatever kind or nature payable or distributable to the Pledgor in respect of the Pledged Interests, whether in cash, property, or in kind, and whether ordinary, special, or extraordinary in nature. For informational purposes only, the estimated annual distributable cash flow from the Portfolio Entities in the aggregate is approximately Four Million Eight Hundred Thousand Dollars ($4,800,000), representing an approximately 12% cash-on-cash yield based on the aggregate purchase price of the Purchased Interests; provided, however, that such estimate is not a guarantee or projection, and actual Distributions may be more or less than such estimate.
"Event of Default" has the meaning set forth in Section 6.1 of this Agreement.
"Grantor" means Salvatore A. Pellegrino, in his capacity as the grantor of the Trust under the Trust Agreement.
"Maturity Date" means December 15, 2034, the date on which all outstanding principal and accrued but unpaid interest under the Note shall be due and payable in full.
"Membership Interest" means a membership interest in any of the Portfolio Entities, including all economic rights (including rights to allocations and distributions), voting rights, governance rights, information rights, consent rights, and all other rights, privileges, authority, and powers of any kind or nature associated with such membership interest under the applicable operating agreement of the relevant Portfolio Entity and under the Florida Revised Limited Liability Company Act (Chapter 605, Florida Statutes).
"MIPA" means the Membership Interest Purchase Agreement dated as of December 15, 2025, by and between Salvatore A. Pellegrino (acting through PCG) and the Trust, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Note" means the Secured Promissory Note dated as of December 15, 2025, issued by the Trust in favor of the Secured Party, in the original principal amount of Forty Million Dollars ($40,000,000), bearing interest at 4.40% per annum (the September 2025 mid-term applicable federal rate, annual compounding), as the same may be amended, restated, supplemented, renewed, extended, or otherwise modified from time to time.
"Obligations" means all present and future indebtedness, liabilities, and obligations of the Pledgor to the Secured Party arising under or in connection with the Note, this Agreement, or any other document executed in connection herewith, whether now existing or hereafter arising, direct or indirect, absolute or contingent, joint or several, matured or unmatured, liquidated or unliquidated, including without limitation: (a) all principal in the amount of Forty Million Dollars ($40,000,000); (b) all interest thereon at the rate of 4.40% per annum (annual interest-only installments of One Million Seven Hundred Sixty Thousand Dollars ($1,760,000) per annum); (c) all fees, costs, expenses, indemnification obligations, and other amounts payable by the Pledgor to the Secured Party under the Note or this Agreement; (d) all costs and expenses, including reasonable attorneys' fees and disbursements, incurred by the Secured Party in connection with the enforcement, preservation, or protection of any of the foregoing or any of the Secured Party's rights hereunder or under the Note; and (e) all extensions, renewals, refinancings, modifications, and rearrangements of any of the foregoing.
"PCG" means Pellegrino Capital Group LLC, a Florida limited liability company (EIN 65-1238074), with its principal office at 2400 Salzedo Street, Suite 1200, Coral Gables, FL 33134.
"Pledged Interests" means, collectively: (i) the 92% Class A membership interest in Meridian Shores Hospitality LLC; (ii) the 100% membership interest in Costa Luma Resort Holdings LLC; and (iii) the 88% Class A membership interest in Azulia Beach Club LLC, in each case as more particularly described on Schedule A attached hereto and incorporated herein by reference, together with any and all additional membership interests, units, participations, or other equity interests in the Portfolio Entities hereafter acquired by the Pledgor by purchase, contribution, distribution, dividend, exchange, merger, consolidation, or otherwise.
"Portfolio Entities" means, collectively, Meridian Shores Hospitality LLC, a Florida limited liability company (EIN 59-4021867); Costa Luma Resort Holdings LLC, a Florida limited liability company (EIN 59-4173920); and Azulia Beach Club LLC, a Florida limited liability company (EIN 59-4285413); and "Portfolio Entity" means any one of them individually.
"Proceeds" means all proceeds (as defined in Section 9-102(a)(64) of Article 9 of the UCC) of the Pledged Interests and Distributions, including without limitation all cash, checks, deposit accounts, securities, financial assets, instruments, chattel paper, general intangibles, and other property of whatever kind or nature at any time received or receivable upon any sale, lease, license, exchange, collection, or other disposition of any of the Collateral, and all proceeds of proceeds.
"Purchased Interests" has the meaning set forth in Recital B.
"Secured Party" means Salvatore A. Pellegrino, an individual residing at 610 Casuarina Concourse, Coral Gables, FL 33143, and his successors, assigns, heirs, executors, and administrators.
"Trust" means The Salvatore A. Pellegrino 2025 Family Trust, an irrevocable trust established under the laws of the State of Florida pursuant to the Trust Agreement.
"Trust Agreement" means the Trust Agreement establishing The Salvatore A. Pellegrino 2025 Family Trust, dated November 10, 2025, by and between Salvatore A. Pellegrino, as Grantor, and Cornerstone Fiduciary Services, Inc., as Trustee, as the same may be amended, restated, or otherwise modified from time to time in accordance with its terms.
"Trustee" means Cornerstone Fiduciary Services, Inc., in its capacity as independent trustee of the Trust, and any duly appointed successor trustee.
"UCC" means the Uniform Commercial Code as enacted and in effect from time to time in the State of Florida (Chapters 671–680, Florida Statutes), or, when the context requires, the Uniform Commercial Code as enacted and in effect in any other applicable jurisdiction.
Section 1.2 — Rules of Construction
(a) Terms defined in the UCC and not otherwise defined herein shall have the meanings ascribed to them under the UCC. In the event of a conflict between the meaning of a term as defined herein and as defined under the UCC, the definition set forth herein shall control.
(b) Unless the context otherwise requires, all references in this Agreement to articles, sections, subsections, schedules, and exhibits are to articles, sections, subsections, schedules, and exhibits of and to this Agreement.
(c) The words "herein," "hereof," "hereto," "hereunder," and words of similar import refer to this Agreement as a whole and not to any particular article, section, or provision hereof.
(d) The words "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation" and shall not be construed to limit any general statement that precedes such words to the specific or similar items or matters immediately following such words.
(e) The headings and captions of the articles, sections, and subsections of this Agreement are inserted for convenience of reference only and shall not affect the meaning, interpretation, or construction of this Agreement.
(f) Words in the singular shall include the plural, and words in the plural shall include the singular. Words importing any gender shall include the other genders.
(g) All references to any agreement, instrument, or document shall be deemed to refer to such agreement, instrument, or document as it may be amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms, unless otherwise expressly stated.
(h) All references to "dollars" or "$" shall mean United States dollars.
(i) All references to statutes, laws, regulations, or rules shall include any successor statutes, laws, regulations, or rules and shall be deemed to refer to such statutes, laws, regulations, or rules as amended from time to time.
ARTICLE II
GRANT OF SECURITY INTEREST
Section 2.1 — Pledge and Grant
As collateral security for the prompt and complete payment, performance, and discharge of all Obligations, the Pledgor hereby pledges, assigns, hypothecates, transfers, sets over, and grants to the Secured Party a continuing first-priority security interest in, and a first lien upon, all of the Pledgor's right, title, and interest in, to, and under the following property, whether now existing or owned or hereafter arising or acquired and wherever located (collectively, the "Collateral"):
(a) Pledged Interests. The 92% Class A membership interest in Meridian Shores Hospitality LLC (EIN 59-4021867); the 100% membership interest in Costa Luma Resort Holdings LLC (EIN 59-4173920); and the 88% Class A membership interest in Azulia Beach Club LLC (EIN 59-4285413), together with all rights, privileges, authority, powers, options, and other interests of the Pledgor relating thereto under the respective operating agreements of the Portfolio Entities and under applicable law, including all economic rights (including rights to allocations, distributions, and returns of capital), all voting rights, all governance and consent rights, and all information and inspection rights;
(b) Distributions. All distributions, dividends, cash flow, income, returns of capital, allocations of income or gain, liquidating distributions, and all other amounts of whatever kind at any time payable or distributable to the Pledgor in respect of, on account of, or in exchange for, any or all of the Pledged Interests, whether in cash, property, or in kind, and whether ordinary, special, or extraordinary in nature;
(c) Proceeds. All proceeds (as defined in Article 9 of the UCC) of any and every kind in respect of the foregoing Collateral, including all cash, securities, instruments, deposit accounts, general intangibles, and other property at any time received or receivable upon any sale, lease, license, exchange, collection, or other disposition of any of the Collateral, and all proceeds of proceeds, to the fullest extent permitted by applicable law;
(d) Additional Collateral. All additional membership interests, units, participations, equity interests, options, warrants, conversion rights, exchange rights, and other interests in the Portfolio Entities hereafter acquired by the Pledgor, whether by purchase, contribution, gift, distribution, dividend, exchange, merger, consolidation, or otherwise, and all rights and interests relating thereto; and
(e) Books and Records. All books, records, ledgers, files, correspondence, customer lists, operating data, financial statements, tax records, and other documentation relating to any of the foregoing.
Section 2.2 — Secured Obligations
The security interest granted herein secures the prompt and complete payment when due (whether at the stated maturity, by acceleration, or otherwise), performance, and discharge of all Obligations, including without limitation:
(a) all principal in the amount of Forty Million Dollars ($40,000,000), and all interest thereon at the rate of 4.40% per annum (representing annual interest-only installments of One Million Seven Hundred Sixty Thousand Dollars ($1,760,000) each), together with the balloon payment of all outstanding principal and accrued but unpaid interest due and payable on the Maturity Date, in each case as set forth in the Note;
(b) all costs and expenses, including reasonable attorneys' fees and disbursements, incurred by the Secured Party in connection with the preparation, execution, administration, enforcement, preservation, or protection of this Agreement, the Note, or the security interest granted herein;
(c) all indemnification obligations and other amounts payable by the Pledgor to the Secured Party under or in connection with this Agreement, the Note, or any other document executed in connection herewith; and
(d) all extensions, renewals, refinancings, modifications, rearrangements, and substitutions of any of the foregoing, howsoever arising and whether or not contemplated by the Parties as of the date hereof.
Section 2.3 — Priority
The security interest granted herein is intended to be, and shall at all times constitute, a first-priority security interest in and lien upon the Collateral, subject to no prior liens, encumbrances, security interests, claims, charges, or restrictions of any kind, other than (a) restrictions on transfer set forth in the operating agreements of the Portfolio Entities, to the extent such restrictions do not impair the creation or enforceability of the security interest granted herein, and (b) liens in favor of governmental authorities for taxes not yet due and payable. The Pledgor shall take all actions and execute all documents necessary to ensure that the security interest granted herein retains its first-priority status at all times.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PLEDGOR
The Pledgor hereby represents and warrants to the Secured Party as of the date hereof, and as of each date on which any payment is due under the Note, as follows:
Section 3.1 — Organization and Authority of Trustee
Cornerstone Fiduciary Services, Inc. is a corporation duly organized, validly existing, and in good standing under the laws of the State of Florida. Cornerstone is duly licensed as a trust company by the State of Florida, Office of Financial Regulation, under Florida Trust Company License No. FTC-2014-00287, and such license is currently in full force and effect and has not been suspended, revoked, or otherwise impaired. Cornerstone has all necessary corporate power and authority to act as Trustee of the Trust and to execute, deliver, and perform its obligations under this Agreement, the Note, and each other document to which it is a party in connection with the transactions contemplated hereby. Helena R. Matsuda serves as Senior Trust Officer of Cornerstone and is duly authorized to execute this Agreement on behalf of the Pledgor.
Section 3.2 — Due Authorization and Enforceability
The execution, delivery, and performance by the Pledgor of this Agreement and each other document to which the Pledgor is a party in connection with the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Cornerstone, acting in its capacity as Trustee, and are in accordance with the terms, conditions, and provisions of the Trust Agreement and all applicable law, including the Florida Trust Code (Chapter 736, Florida Statutes) and the Florida Revised Limited Liability Company Act (Chapter 605, Florida Statutes). This Agreement has been duly executed and delivered by the Pledgor and constitutes the legal, valid, and binding obligation of the Pledgor, enforceable against the Pledgor in accordance with its terms, subject only to applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).
Section 3.3 — No Conflicts
The execution, delivery, and performance by the Pledgor of this Agreement and the consummation of the transactions contemplated hereby do not and will not: (a) conflict with, violate, or result in a breach of any provision of the Trust Agreement or any amendment thereto; (b) conflict with, violate, or result in a breach of the articles of incorporation, bylaws, or other organizational documents of Cornerstone; (c) conflict with, violate, or result in a breach of, or constitute a default (or an event that, with the giving of notice or the passage of time, or both, would constitute a default) under, any operating agreement, limited liability company agreement, or other governing document of any Portfolio Entity, including the Amended and Restated Operating Agreement of Meridian Shores Hospitality LLC, the Operating Agreement of Costa Luma Resort Holdings LLC, and the Operating Agreement of Azulia Beach Club LLC; (d) violate any applicable federal, state, or local law, statute, rule, regulation, order, judgment, injunction, or decree binding upon or applicable to the Pledgor, the Trust, or any Portfolio Entity; or (e) result in the creation or imposition of any lien, encumbrance, or security interest on any of the Collateral, other than the security interest created by this Agreement.
Section 3.4 — Title to Collateral
The Pledgor is the sole record and beneficial owner of the Pledged Interests, free and clear of all liens, pledges, charges, encumbrances, security interests, options, rights of first refusal, preemptive rights, claims, and demands of any kind, other than (a) the security interest granted herein in favor of the Secured Party and (b) any restrictions on transfer set forth in the operating agreements of the Portfolio Entities, none of which restrictions prohibit the creation of the security interest granted herein. The Pledgor has good and marketable title to all Collateral, with full right and authority to pledge the same hereunder.
Section 3.5 — Description of Pledged Interests
Schedule A attached hereto and incorporated herein by reference accurately and completely sets forth a description of each of the Pledged Interests, including, with respect to each Portfolio Entity: (a) the name of such Portfolio Entity; (b) its employer identification number; (c) its jurisdiction of formation; (d) the percentage membership interest owned by the Pledgor; (e) the class of membership interest, if applicable; (f) the address of the principal property held or operated by such Portfolio Entity; and (g) valuation information as reflected in the Appraisal. The information set forth in Schedule A is true, correct, and complete in all respects as of the date hereof.
Section 3.6 — Consents and Approvals
All consents, approvals, authorizations, permits, licenses, and orders of any governmental authority, regulatory body, or other person or entity required for (a) the execution, delivery, and performance by the Pledgor of this Agreement, (b) the creation and perfection of the security interest granted herein, and (c) the pledge of the Pledged Interests (including any consents required under the operating agreements of the Portfolio Entities, the Trust Agreement, or any applicable provision of the Florida Revised Limited Liability Company Act) have been duly obtained, are in full force and effect, and are final and non-appealable. No further consent, approval, or authorization is required in connection with the execution, delivery, or performance of this Agreement by the Pledgor.
Section 3.7 — No Prior Assignment
The Pledgor has not previously assigned, pledged, hypothecated, encumbered, granted a security interest in, or otherwise transferred or disposed of any of the Collateral or any interest therein to any other person or entity. No financing statement, security agreement, or similar instrument covering any of the Collateral has been filed or is in effect in any jurisdiction with respect to any person or entity other than the Secured Party.
Section 3.8 — Validity of Membership Interests
Each of the Pledged Interests has been validly issued in compliance with the applicable operating agreement of the relevant Portfolio Entity and all applicable laws, is fully paid and non-assessable (to the extent such concept is applicable to membership interests in a limited liability company under Florida law), and represents the percentage membership interest described on Schedule A hereto. No additional capital contributions or payments are required to be made by the Pledgor with respect to any of the Pledged Interests, except as may be set forth in the applicable operating agreement.
Section 3.9 — Location of Records
All books, records, ledgers, correspondence, files, and other documentation of the Pledgor relating to the Collateral are maintained at the offices of Cornerstone Fiduciary Services, Inc., 200 West Forsyth Street, Suite 1500, Jacksonville, FL 32202. The Pledgor shall not change the location of such books and records without at least thirty (30) days' prior written notice to the Secured Party.
Section 3.10 — No Litigation
There is no action, suit, proceeding, investigation, arbitration, mediation, or other dispute before any court, tribunal, arbitrator, governmental body, regulatory authority, or other forum that is pending or, to the actual knowledge of the Pledgor (after due inquiry), threatened against or affecting the Pledgor, the Trust, or any Portfolio Entity that (a) could reasonably be expected to materially and adversely affect the value, condition, or enforceability of the Collateral, (b) could reasonably be expected to materially and adversely affect the Pledgor's ability to perform its obligations under this Agreement or the Note, or (c) questions the validity or enforceability of this Agreement, the Note, the MIPA, or any of the transactions contemplated hereby or thereby.
ARTICLE IV
COVENANTS OF PLEDGOR
The Pledgor hereby covenants and agrees with the Secured Party as follows, which covenants shall remain in full force and effect until all Obligations have been indefeasibly paid and performed in full and this Agreement has been terminated:
Section 4.1 — Preservation of Collateral
The Pledgor shall at all times take all actions reasonably necessary or advisable to maintain the Collateral in full force and effect, to preserve and protect the value of the Collateral, and to preserve and maintain the Secured Party's first-priority security interest therein. Without limiting the generality of the foregoing, the Pledgor shall not permit or suffer any deterioration, waste, or diminution in the value of the Collateral (other than as may result from ordinary market fluctuations), and shall take all actions necessary to ensure that the Pledged Interests remain validly issued and outstanding.
Section 4.2 — Defense of Title
The Pledgor shall defend the Collateral against all claims, demands, actions, and proceedings of all persons at any time claiming any interest in the Collateral or any part thereof adverse to the Secured Party. The Pledgor shall promptly notify the Secured Party of any such claim, demand, action, or proceeding and shall take all actions reasonably necessary to protect and preserve the Secured Party's rights and interests in the Collateral, including, without limitation, the institution or defense of legal proceedings at the Pledgor's sole cost and expense.
Section 4.3 — No Transfer or Encumbrance
The Pledgor shall not, without the prior written consent of the Secured Party (which consent may be withheld in the Secured Party's sole and absolute discretion):
(a) sell, assign, transfer, convey, exchange, contribute, gift, or otherwise dispose of or part with possession of any of the Collateral or any interest therein, whether voluntarily or involuntarily, by operation of law or otherwise;
(b) create, incur, assume, suffer, or permit to exist any lien, pledge, charge, encumbrance, security interest, option, right of first refusal, or other restriction or claim upon the Collateral or any part thereof, other than the security interest granted herein in favor of the Secured Party and liens in favor of governmental authorities for taxes not yet due and payable; or
(c) enter into any agreement, arrangement, or understanding with any person or entity that would or could reasonably be expected to impair the value of the Collateral, the priority or enforceability of the Secured Party's security interest therein, or the Secured Party's rights under this Agreement.
Section 4.4 — Distributions and Cash Flow
(a) Prior to an Event of Default. Prior to the occurrence of an Event of Default, the Pledgor shall be entitled to receive all Distributions from the Portfolio Entities in the ordinary course of business; provided, however, that the Pledgor shall apply such Distributions first to the timely payment of all amounts due and owing under the Note, including annual interest-only payments of One Million Seven Hundred Sixty Thousand Dollars ($1,760,000) due on each anniversary of the date of the Note, and the balloon payment of all outstanding principal and accrued but unpaid interest due on the Maturity Date. The Pledgor shall maintain adequate records of all Distributions received and shall provide the Secured Party with a quarterly written summary of all Distributions received from each Portfolio Entity within thirty (30) days after the end of each calendar quarter.
(b) Upon an Event of Default. Upon the occurrence and during the continuance of an Event of Default, the Secured Party shall be entitled to receive all Distributions and other amounts payable in respect of the Pledged Interests directly from the Portfolio Entities. The Pledgor shall, and hereby does, irrevocably direct each Portfolio Entity to remit all Distributions directly to the Secured Party upon receipt of written notice from the Secured Party that an Event of Default has occurred and is continuing. Any Distributions received by the Pledgor after the occurrence and during the continuance of an Event of Default shall be held in trust for the Secured Party and shall be immediately remitted to the Secured Party.
Section 4.5 — Voting Rights
(a) Prior to an Event of Default. Prior to the occurrence of an Event of Default, the Pledgor, acting through the Trustee in accordance with the Trust Agreement, shall be entitled to exercise all voting, consent, governance, approval, and other non-economic rights with respect to the Pledged Interests under the operating agreements of the Portfolio Entities and applicable law; provided, however, that the Pledgor shall not exercise any such rights in a manner that would be reasonably likely to materially and adversely affect the value of the Collateral, the financial condition or operations of any Portfolio Entity, or the Secured Party's rights or interests under this Agreement or the Note.
(b) Upon an Event of Default. Upon the occurrence and during the continuance of an Event of Default, all voting, consent, governance, approval, and other non-economic rights with respect to the Pledged Interests shall, at the election of the Secured Party, be exercised exclusively by the Secured Party or the Secured Party's designee. The Pledgor shall execute and deliver to the Secured Party, upon request, such proxies, consents, authorizations, and other instruments as the Secured Party may reasonably require to enable the Secured Party to exercise such rights.
Section 4.6 — Maintenance of Existence
The Pledgor shall cause each Portfolio Entity to (a) maintain its existence in good standing as a limited liability company under the laws of the State of Florida, (b) maintain all licenses, permits, authorizations, and qualifications necessary for the conduct of its business, including all liquor licenses, hotel and hospitality licenses, food service permits, and certificates of occupancy, (c) continue to operate its business in the ordinary course consistent with past practice, and (d) not dissolve, liquidate, wind up, merge, consolidate, or otherwise terminate its existence without the prior written consent of the Secured Party.
Section 4.7 — Compliance with Operating Agreements
The Pledgor shall comply in all material respects with the terms, conditions, and provisions of the operating agreements of each of the Portfolio Entities, including, without limitation, the Amended and Restated Operating Agreement of Meridian Shores Hospitality LLC, the Operating Agreement of Costa Luma Resort Holdings LLC, and the Operating Agreement of Azulia Beach Club LLC. The Pledgor shall not consent to or permit any amendment, modification, restatement, or waiver of any provision of any such operating agreement that would be reasonably likely to materially and adversely affect the value of the Collateral or the Secured Party's rights under this Agreement, without the prior written consent of the Secured Party.
Section 4.8 — Further Assurances
The Pledgor shall, at its sole cost and expense, promptly execute, acknowledge, and deliver, or cause to be executed, acknowledged, and delivered, all such additional documents, instruments, agreements, certificates, financing statements, continuation statements, amendments, and other writings as the Secured Party may from time to time reasonably request in order to (a) effectuate the purposes and intent of this Agreement, (b) create, perfect, continue, preserve, and maintain the first-priority security interest in the Collateral granted herein, (c) enable the Secured Party to exercise and enforce its rights and remedies under this Agreement, and (d) otherwise carry out the terms and provisions hereof.
Section 4.9 — Notification of Material Events
The Pledgor shall promptly, and in any event within five (5) business days, notify the Secured Party in writing of the occurrence of any of the following:
(a) any material change in the value, condition, or composition of the Collateral, including any disposition of material assets by any Portfolio Entity, any material capital expenditure, or any material change in the operations, financial condition, or prospects of any Portfolio Entity;
(b) any claim, lien, encumbrance, security interest, or other restriction or charge asserted or imposed against any of the Collateral by any person or entity;
(c) any default or event of default (or any event or condition that, with the giving of notice or the passage of time, or both, would constitute a default or event of default) under any operating agreement of a Portfolio Entity;
(d) any litigation, arbitration, investigation, proceeding, or other dispute pending or threatened against the Trust or any Portfolio Entity that could reasonably be expected to materially and adversely affect the Collateral;
(e) any change in the Trustee, any change in the Senior Trust Officer, or any proposed amendment to the Trust Agreement; and
(f) any event or condition that could reasonably be expected to have a material adverse effect on the ability of the Pledgor to perform its obligations under this Agreement or the Note.
Section 4.10 — Insurance
The Pledgor shall cause each Portfolio Entity to maintain, at its own expense, comprehensive insurance coverage on its properties, assets, and operations in amounts, with carriers, and on terms and conditions customary for businesses of similar size and nature in the hospitality industry in the State of Florida, including, without limitation: (a) property and casualty insurance (including windstorm, hurricane, and flood coverage) for the Meridian Shores Resort & Spa (4500 Gulf Shore Boulevard, Naples, FL 34102), the Costa Luma Resort (81700 Overseas Highway, Islamorada, FL 33036), and the Azulia Beach Club (22 Baymont Drive, Clearwater Beach, FL 33767); (b) commercial general liability insurance; (c) business interruption insurance; (d) liquor liability insurance; (e) workers' compensation insurance; and (f) umbrella/excess liability insurance. The Pledgor shall, upon request, furnish to the Secured Party certificates of insurance evidencing such coverage.
Section 4.11 — Tax Obligations
The Pledgor shall cause all federal, state, and local tax obligations of each Portfolio Entity and the Trust to be timely filed, reported, and paid or satisfied when due, including without limitation all income taxes, franchise taxes, employment taxes, sales and use taxes, tangible personal property taxes, real property taxes, and tourist development taxes. The Pledgor shall coordinate with Baxter Whitfield CPA Group, P.A. (Sandra T. Whitfield, CPA, Managing Partner) or such other qualified tax advisors as the Trustee may engage, for the preparation and filing of all required tax returns and for ongoing tax compliance with respect to the Trust and the Portfolio Entities. The Pledgor shall not take any tax reporting position with respect to the Collateral or the Portfolio Entities that is inconsistent with the structure of the transactions contemplated by the MIPA, the Note, and this Agreement without the prior written consent of the Secured Party.
ARTICLE V
PERFECTION OF SECURITY INTEREST
Section 5.1 — UCC Financing Statements
(a) The Pledgor hereby authorizes the Secured Party, without the necessity of any further action or consent by the Pledgor, to file or cause to be filed one or more UCC-1 financing statements, and any continuation statements, amendments, assignments, or other filings or recordings, with the Florida Secured Transaction Registry maintained by the Secretary of State of the State of Florida, Division of Corporations, and in any other jurisdiction as the Secured Party may deem necessary or appropriate, to perfect, continue, and maintain the security interest granted herein. The Pledgor acknowledges that a copy of this Agreement or a financing statement may be filed as a financing statement.
(b) The Pledgor shall execute, authenticate, and deliver, or cause to be executed, authenticated, and delivered, any and all financing statements, amendments, continuation statements, and other documents and instruments required for such filing, promptly upon request by the Secured Party. The Pledgor agrees that a carbon, photographic, facsimile, or other reproduction of this Agreement or of any financing statement is sufficient as a financing statement for all purposes.
(c) The form of UCC-1 financing statement to be filed in connection herewith is attached hereto as Exhibit A and incorporated herein by reference.
Section 5.2 — Control Agreements
To the extent required or desirable for perfection of the security interest granted herein under Article 9 of the UCC as applied to membership interests in limited liability companies (which are generally classified as "general intangibles" under Florida law pursuant to Section 679.1021(42), Florida Statutes), the Pledgor shall promptly execute and deliver, or cause to be executed and delivered, such control agreements, acknowledgment agreements, tri-party agreements, or other arrangements as the Secured Party may from time to time reasonably request to perfect, continue, and maintain the first-priority status of the security interest granted herein.
Section 5.3 — Notation on Books and Records
The Pledgor shall promptly cause the pledge of the Pledged Interests and the security interest granted herein to be reflected and noted on the books, records, membership ledger, schedule of members, and any other applicable records of each Portfolio Entity. Such notation shall reference this Agreement and shall state that the Pledged Interests are subject to a first-priority security interest in favor of the Secured Party. The Pledgor shall furnish to the Secured Party certified copies of such books and records promptly following such notation.
Section 5.4 — Notices to Portfolio Entities
(a) The Pledgor shall deliver, or cause to be delivered, written notice of the security interest granted herein to each Portfolio Entity, in the form reasonably acceptable to the Secured Party, within five (5) business days after the date hereof.
(b) The Pledgor shall cause each Portfolio Entity to acknowledge receipt of such notice and to agree to comply with the provisions of this Agreement applicable to such Portfolio Entity, including the obligation to remit Distributions to the Secured Party upon notice of an Event of Default as provided in Section 4.4(b). The Pledgor shall furnish to the Secured Party copies of each such acknowledgment promptly upon receipt.
ARTICLE VI
EVENTS OF DEFAULT
Section 6.1 — Events of Default
Each of the following events or circumstances shall constitute an "Event of Default" under this Agreement:
(a) Payment Default. The Pledgor shall fail to pay any amount of principal, interest, or other amount due and payable under the Note when due, including without limitation any annual interest-only payment of One Million Seven Hundred Sixty Thousand Dollars ($1,760,000) or the balloon principal payment of Forty Million Dollars ($40,000,000) together with all accrued and unpaid interest thereon at the Maturity Date on December 15, 2034, and such failure shall continue uncured for a period of ten (10) business days after written notice thereof from the Secured Party to the Pledgor.
(b) Breach of Representation. Any representation or warranty made by the Pledgor in this Agreement, the Note, the MIPA, or any certificate, report, financial statement, or other document furnished by or on behalf of the Pledgor in connection herewith or therewith shall prove to have been materially false, misleading, or inaccurate in any respect when made or deemed made.
(c) Covenant Default. The Pledgor shall fail to perform, observe, or comply with any covenant, agreement, condition, or obligation contained in this Agreement (other than a payment obligation covered by clause (a) above), and such failure shall continue uncured for a period of thirty (30) days after written notice thereof from the Secured Party to the Pledgor specifying the nature of such failure; provided, however, that if such failure is susceptible of cure but cannot reasonably be cured within such thirty (30)-day period, such period shall be extended for an additional thirty (30) days so long as the Pledgor commences cure within the initial thirty (30)-day period and diligently and continuously pursues such cure to completion.
(d) Cross-Default. The occurrence of a default or event of default (after giving effect to any applicable notice, cure, or grace period) under the Note, the MIPA, any operating agreement of a Portfolio Entity, or any other agreement, instrument, or document executed in connection with the transactions contemplated hereby.
(e) Involuntary Proceedings. The commencement of any involuntary case or proceeding against the Trust, the Pledgor, or any Portfolio Entity under any applicable federal or state bankruptcy, insolvency, reorganization, receivership, or similar law, or the appointment of a receiver, custodian, conservator, trustee, liquidator, or similar official for the Trust, the Pledgor, any Portfolio Entity, or any substantial part of their respective properties, and such case, proceeding, or appointment shall not be dismissed, discharged, or stayed within sixty (60) days after the commencement thereof.
(f) Voluntary Proceedings. The filing by the Trust, the Pledgor, or any Portfolio Entity of a voluntary petition in bankruptcy, a general assignment for the benefit of creditors, an admission in writing of its inability to pay its debts as they become due, or the consent by the Trust, the Pledgor, or any Portfolio Entity to the appointment of a receiver, custodian, conservator, trustee, liquidator, or similar official for all or any substantial part of its properties.
(g) Dissolution or Termination. The dissolution, termination, revocation, or invalidity of the Trust, or the resignation, removal, or incapacity of Cornerstone Fiduciary Services, Inc. as Trustee of the Trust, without the prior appointment of a qualified successor trustee reasonably acceptable to the Secured Party and such successor trustee's written assumption of all obligations of the Pledgor hereunder.
(h) Impairment of Collateral. The occurrence of any event, circumstance, or condition that materially impairs or diminishes the value of the Collateral (individually or in the aggregate), or that materially impairs the validity, priority, enforceability, or perfection of the Secured Party's security interest in the Collateral, including without limitation any condemnation, seizure, environmental contamination, casualty, or material deterioration of any property owned or operated by a Portfolio Entity.
(i) Judgment. The entry of any final, non-appealable judgment or order for the payment of money against the Trust or any Portfolio Entity in an amount in excess of Five Hundred Thousand Dollars ($500,000) (individually or in the aggregate), and such judgment or order shall not be discharged, vacated, bonded, or stayed within sixty (60) days after the date of entry thereof.
ARTICLE VII
REMEDIES
Section 7.1 — Remedies Upon Default
Upon the occurrence and during the continuance of an Event of Default, the Secured Party shall have, in addition to all other rights and remedies provided in this Agreement, the Note, or any other document executed in connection herewith, and all rights and remedies available at law or in equity (including under the Florida Revised Limited Liability Company Act and any other applicable statute), the following remedies, which may be exercised individually or concurrently, in any order and at any time, in the Secured Party's sole discretion:
(a) Acceleration. The Secured Party may, by written notice to the Pledgor, declare all Obligations immediately due and payable in full, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration, or any other notice of any kind, all of which are hereby expressly waived by the Pledgor to the fullest extent permitted by applicable law.
(b) UCC Remedies. The Secured Party may exercise all rights and remedies of a secured party under Article 9 of the UCC (including Sections 679.601 through 679.628, Florida Statutes), including without limitation the right to take possession of, collect, receive, manage, and dispose of the Collateral, in whole or in part, and to require the Pledgor to assemble the Collateral and make it available to the Secured Party at a place designated by the Secured Party.
(c) Foreclosure and Sale. The Secured Party may foreclose on the Pledged Interests and sell, lease, license, or otherwise dispose of the Collateral, in whole or in part, by public sale or private sale, in one or more parcels, at any broker's board, at any exchange, at any office of the Secured Party or any other location, or elsewhere, at such price or prices as the Secured Party may deem best, for cash, on credit, or for future delivery, without assumption of any credit risk. The Secured Party shall give the Pledgor at least ten (10) days' prior written notice of any such sale or other disposition, which the Parties agree shall constitute commercially reasonable notice. The Pledgor hereby waives any right to any greater period of notice to the extent permitted by applicable law.
(d) Direct Collection of Distributions. The Secured Party may collect and receive, directly from each Portfolio Entity, all Distributions, income, proceeds, and other amounts payable in respect of the Pledged Interests, and may apply such amounts to the Obligations in accordance with Section 7.2. Each Portfolio Entity is hereby irrevocably authorized and directed to honor the Secured Party's instructions with respect to the payment of Distributions upon receipt of written notice from the Secured Party that an Event of Default has occurred and is continuing.
(e) Exercise of Voting and Governance Rights. The Secured Party may exercise all voting, consent, governance, management, and approval rights with respect to the Pledged Interests as if the Secured Party were the sole owner and holder thereof, including without limitation the right to attend and vote at meetings of members, to execute written consents, to appoint or remove managers, and to approve or disapprove any action requiring member approval under the applicable operating agreement.
(f) Appointment of Receiver. The Secured Party may apply to any court of competent jurisdiction for the appointment of a receiver, custodian, or conservator over the Collateral, all or any portion of the assets of any Portfolio Entity, or any other property constituting Collateral, and the Pledgor hereby consents to the appointment of such receiver, custodian, or conservator and agrees not to oppose any such application.
Section 7.2 — Application of Proceeds
All amounts received by the Secured Party in respect of the Collateral upon the exercise of any remedy following an Event of Default, including all Distributions, sale proceeds, and other amounts collected or recovered, shall be applied by the Secured Party in the following order of priority:
(a) First, to the payment of all costs and expenses (including reasonable attorneys' fees, court costs, appraisal fees, broker's fees, auctioneer's fees, and all other costs and expenses of collection, enforcement, preservation, and disposition) incurred by the Secured Party in connection with the exercise of remedies under this Agreement, the Note, or applicable law;
(b) Second, to the payment of all accrued and unpaid interest under the Note;
(c) Third, to the repayment of outstanding principal under the Note;
(d) Fourth, to the payment of any other Obligations then due and payable, including indemnification obligations and other amounts; and
(e) Fifth, the balance, if any, remaining after the application of all amounts in clauses (a) through (d) above, shall be paid to the Pledgor or as a court of competent jurisdiction may otherwise direct.
Section 7.3 — Cumulative Remedies
All rights, powers, and remedies of the Secured Party under this Agreement, the Note, and applicable law are cumulative and not exclusive of one another, and may be exercised concurrently, successively, and in any order, at any time and from time to time. No delay, omission, or failure by the Secured Party to exercise any right, power, or remedy shall operate as a waiver thereof or of any other right, power, or remedy, nor shall any single or partial exercise of any right, power, or remedy preclude any other or further exercise thereof or the exercise of any other right, power, or remedy. No waiver of any Event of Default shall be deemed a waiver of any subsequent Event of Default, whether or not of the same nature.
Section 7.4 — Secured Party's Right to Bid
At any public or private sale of the Collateral conducted pursuant to this Article VII, the Secured Party shall have the right to bid for and purchase all or any portion of the Collateral, free and clear of any right of redemption, equity of redemption, or other claim of the Pledgor, all of which are hereby waived and released to the fullest extent permitted by applicable law. The Secured Party may credit the amount of any bid against the Obligations in lieu of paying cash.
Section 7.5 — Commercially Reasonable Disposition
The Parties acknowledge and agree that the Pledged Interests represent membership interests in closely held Florida limited liability companies that are not publicly traded on any securities exchange or quotation system. The Parties further recognize that the private and illiquid nature of such interests, the restrictions on transfer set forth in the operating agreements of the Portfolio Entities, and the limited market for minority and controlling interests in closely held hospitality entities may significantly limit the number of prospective purchasers who would be interested in purchasing such interests and the prices obtainable in any sale thereof. Accordingly, the Parties agree that a private sale or other disposition of the Collateral shall be deemed to be commercially reasonable within the meaning of Section 679.627, Florida Statutes, even if conducted with a limited number of potential bidders, and even if the price obtained is substantially less than the price that might have been obtained through a public sale or auction. The Secured Party shall not incur any liability or responsibility for selling all or any part of the Collateral at a price that the Secured Party, in good faith, believes to be commercially reasonable under the circumstances.
ARTICLE VIII
ADDITIONAL PROVISIONS REGARDING COLLATERAL
Section 8.1 — Pledgor Remains Liable
Notwithstanding anything in this Agreement to the contrary, the Pledgor shall remain liable to perform all of the obligations of the holder of the Pledged Interests under the operating agreements of the Portfolio Entities and under any other contracts, agreements, instruments, or documents relating to the Collateral, to the extent set forth therein, and nothing contained in this Agreement is intended to or shall relieve the Pledgor from the performance of any such obligation. The Secured Party shall have no obligation or liability under any operating agreement, contract, or other agreement relating to the Collateral by reason of or arising out of this Agreement or the grant of the security interest herein, nor shall the Secured Party be required or obligated in any manner to perform or fulfill any of the obligations of the Pledgor thereunder, to make any inquiry as to the nature or sufficiency of any payment received by the Pledgor thereunder, or to present or file any claim, take any action to collect or enforce any performance, or collect the payment of any amounts that may have been assigned to the Secured Party or to which the Secured Party may be entitled at any time or times.
Section 8.2 — Secured Party's Appointment as Attorney-in-Fact
The Pledgor hereby irrevocably constitutes and appoints the Secured Party as the Pledgor's true and lawful attorney-in-fact, with full power of substitution and revocation, in the Pledgor's name, place, and stead, or in the Secured Party's own name, to take any and all actions and to execute, deliver, and file any and all documents, instruments, and agreements that the Secured Party may deem necessary or advisable to accomplish the purposes of this Agreement, upon the occurrence and during the continuance of an Event of Default, including without limitation:
(a) endorsing the Pledgor's name on all checks, drafts, instruments, and other items of payment relating to the Collateral;
(b) executing assignments, transfers, conveyances, and other instruments of transfer of the Collateral;
(c) executing financing statements, amendments, continuation statements, and other UCC filings;
(d) receiving, opening, and disposing of all mail addressed to the Pledgor relating to the Collateral;
(e) executing written consents, proxies, and other instruments required to exercise voting and governance rights with respect to the Pledged Interests; and
(f) taking any other action that the Secured Party may deem necessary or appropriate in connection with the collection, preservation, or disposition of the Collateral.
This power of attorney is coupled with an interest and is irrevocable so long as any Obligations remain outstanding. The Pledgor hereby ratifies and confirms all acts and things that the Secured Party, as attorney-in-fact, shall lawfully do or cause to be done by virtue of this power of attorney.
Section 8.3 — No Assumption of Duties
The grant of the security interest in the Collateral pursuant to this Agreement shall not impose upon the Secured Party any duty, obligation, or responsibility to manage, operate, or control any Portfolio Entity, to exercise any rights of a member or manager of any Portfolio Entity, or to take any action with respect to the Collateral, except upon the occurrence and during the continuance of an Event of Default as expressly provided herein. Until an Event of Default has occurred and is continuing, the Secured Party shall have no obligation to preserve or protect the Collateral, to collect any amounts payable in respect of the Collateral, or to enforce any rights or remedies with respect thereto. The Secured Party shall not be liable for any loss, depreciation, or diminution in the value of the Collateral, except to the extent caused by the Secured Party's own gross negligence or willful misconduct.
ARTICLE IX
RELEASE OF COLLATERAL
Section 9.1 — Release Upon Payment in Full