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2021-06-07 SRR Dev Co - Status Report 2 re Notice of Default to PSDAJune 7, 2021 VIA E-MAIL AND REGISTERED FIRST CLASS MAIL RETURN RECEIPT REQUESTED 9214 8901 8804 0800 0365 55 SilverRock Development Company, LLC c/o The Robert Green Company 3551 Fortuna Ranch Road Encinitas, CA 92024 Attention: Robert Green Re: Status Report No. 2 Notice of Default of Purchase, Sale, and Development Agreement (PSDA) Dear Mr. Green: As set forth in the April 7, 2021 Notice of Default of Purchase Sale, and Development Agreement (“Default Notice”) for the SilverRock Resort Project, the City identified items for performance that would be deemed by the City as the “commencement to cure” pursuant to Section 501 of the PSDA. (Please note that capitalized terms and abbreviations in this Status Report have the same meaning ascribed to them in the Default Notice.) The City received from Developer’s counsel proposed drafts for an amendment to the PSDA (the “Amendment No. 4”). In response to those drafts, the City Manager and City Attorney substantially revised and delivered a proposed draft of Amendment No. 4, as a settlement communication, for the purpose of addressing project milestones and revisions to project incentives in connection with Amendment No. 4 and future performance under the proposed revised Schedule of Performance. As was memorialized in Status Report No. 1, while the amendment was not and is not, at this time, in a form that could have been brought before the City Council within the 30-day “commencement to cure” period, the City, at this time, again extends (as it did with Status Report No. 1) the “commencement to cure” period and will not declare Developer in breach of the PSDA so that the City and Developer can continue to engage in good faith negotiations for the proposed amendment’s language and its terms and conditions. As referenced in Status Report No. 1, the City received information that Poppy Bank and Mosaic are to be included as sources for the financing of the Project. While a financing commitment(s) has not been brought before the City Council for consideration within the 30-day “commencement to cure” period, the City, at this time, again extends (as it did with Status Report No. 1) the “commencement to cure” period and will not declare Developer in breach of the PSDA. However, the City demands an immediate update on the status of these financial commitment(s) documents with the delivery of this Status Report. Furthermore, the Developer must deliver immediately when completed the final draft(s)—in a form(s) to be executed and (as applicable) recorded—of the necessary financial commitment(s) that will allow the Developer to commence construction and, with due diligence, continuously perform the project components which are now (or likely to become) in Default under the current (or if approved, revised) Schedule of Performance; in the alternative, the Developer shall allow the City Manager and City Attorney to inspect the final draft(s) of the necessary financial commitment(s), at a time and place mutually agreeable to the parties. The recurring study sessions at the Regular Meetings of the City Council will continue to be required until such time as all items in the Default Notice have been addressed to the Council’s satisfaction so that “commencement of cure” can be attained. In this regard, at the study session during the City Council’s last Regular Meeting, the Developer referenced expenditures of $5 million per month on the project, as well as confirming that the Montage Hotel group remains committed as the “Luxury Hotel” as defined in the PSDA. The City demands the immediate delivery of Developer’s financial records supporting the claimed expenditures of $5 million per month or, in the alternative, the Developer shall allow the City Manager and City Attorney to inspect those financial records at a time and place mutually agreeable to the parties. Additionally, the Developer shall deliver immediately to the City the “Hotel Management Agreement” (as defined in the PSDA) and any applicable amendments, for the Luxury Hotel, with the Montage Hotel group. Per the direction of City Council and recommendation of the City Attorney, regular Status Report letters, such as this one, will be issued until such time as the Developer has commenced cure of the Default or the City declares the Developer in breach of the PSDA due to a failure to sufficiently commence cure and, with due diligence, continuously perform under the PSDA.