FILED: KINGS COUNTY CLERK 05/23/ :04 PM INDEX NO /2016 NYSCEF DOC. NO. 14 RECEIVED NYSCEF: 05/23/2016 EXHIBIT F

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1 FILED: KINGS COUNTY CLERK 05/23/ :04 PM INDEX NO /2016 NYSCEF DOC. NO. 14 RECEIVED NYSCEF: 05/23/2016 EXHIBIT F

2 0 Corporate Solutions NAS SURETY GROUP North American Specialty Insurance Company 475 N. Martirigale Road Suite 850 Schaumburg, L Washington International Insurance Company Westport Insurance Corporation Randall Nay Vice President Direct Dial: Toll Free: Facsimile: Randy_Neyswissre.com DECLINATION LETTER April 4, 2016 Anthony T. Rinaldi, President The Rinaldi Group LLC Gateway Plaza One Harmon Meadow Boulevard Secaucus, NJ RE: Surety: North American Specialty Company ( NAS or Surety ) Principal: Anchorage Construction Corp. ( Anchorage ) Obligee: The Rinaldi Group LLC ( Rinaldi ) Bond#: Project: 81 Fleet Place, Brooklyn, NY ( Project ) Claim #: Dear Mr. Rinaldi: NAS investigated Rinaldi s claim under the above referenced Subcontract Performance Bond ( Bond ). NAS with its consultants reviewed the documentation that was provided by Rinalcli and/or Anchorage including but not limited to the following: Rinaldi s November 19, 2014 Notice to Default to Anchorage; Rinaldi s December 5, Hour Default Notice to Anchorage: Rinaldi s January 7, 2015 Letter of Termination of the Anchorage Subcontract; Rinaldi s March 13, 2015 Claim Letter to NAS; Rinaldi s March 18, 2015 Claim Spreadsheet to NAS; Rinaldi s June 19, 2015 Claim Letter and Spreadsheet to NAS; Owner and Rinaldi Contract; Rina!di and Anchorage Subcontract; Rinaldi and Universal Wall Solutions Subcontract ( Universal ); Rinaldi s November 10, 2015 Claim Letter and Spreadsheet to NAS; Rinaldi s February 19, 2016 Claim Letter and Claim Documents to NAS which includes: Rinaldi s Payment Applications; Rinaldi s Daily Reports; Anchorage Payment Applications; Anchorage Shop Drawings; Rinaldi / Anchorage Meeting Minutes; Rinaldi s Subcontractor Bonds; Project Bulletins; Rinaldi s Schedules; Universal s Payment Applications with Change Orders; and Contract plans and specifications. A MEMBER OF THE SWISS RE GROUP

3 NAS notes that with respect to the Rinaldi Subcontract Performance Bond Claim the following information or documents were requested but Rinaldi advised are not available or noted as N/A: Meeting Minutes between Rinaldi, Owner andfor Architect; Meeting Minutes between Rinaldi and all Subcontractors; Rinaldi s Progress Reports to Owner and/or Architect; Any assessment or claim by Rinaldi for delay damages to any other Subcontractors; Time extensions requested by Rinaldi or any other Subcontractors or time extensions issued by Rinaldi to any Subcontractor or issued by the Owner to Rinaldi; and Any written agreement between Owner and Rinaldi relating to Owner payment of completion costs for Anchorage Subcontract or Owner reserving rights against Rinaldi; In further support of the NAS s investigation of the Rinaldi Performance Bond Claim, NAS retained Alliance Consulting Group LLC, specifically, John McManus and Steve Migliorino as consultants t assist NAS in its review and analysis of the project information and documentation, visited and inspected the project site and met with representatives of Rinalcii and Anchorage. Mr. Migliorino has over 30 years of experience in construction. Mr. McManus has over 20 years of experience in surety consulting. The January 7, 2015 default letter provides as follows that terminating the Rinaldi/Anchorage Subcontract is based upon the various defaults and breaches committed by Anchorage over a period of many months dating back to the start of the project. In Default Notice letters, Rinaldi also provides more than reasonable notice to Anchorage and to NAS that the various defaults committed by Anchorage have been inhibiting the progress of Rinaldi, the other trade contractors and the Project as a whole. By the termination letter, Rinaldi exercised the option pursuant to Section 15.2 of the Contract and Section 1 of the Bond. The termination letter states: Rinaldi is hereby terminating Anchorage s Contract and exercising its right to cause the remainder of Anchorage Contract work to be performed and completed by another subcontractor or subcontractors. The termination letter continues to state: that Anchorage s material defaults in failing to perform its Contract Work have been inhibiting the progress of Rinaldi, the other trade contractors and the Project as a whole. However, Anchorage has repeatedly failed to complete its Contract Work in a timely and appropriate manner. As a direct result, the work and progress of the other trades and the completion of the Project as a whole have been continuously delayed. For these reasons, Rinaldi is hereby terminating the remainder of Anchorage s Contract. Anchorage advised NAS that it disputed Rinaldi s Notice of Default because: 1. Anchorage was allowed on site after the termination of its subcontract to perform work on January 12, 2015; 2. Anchorage had performed all work on site that was available and that could be performed under its subcontract through January 12, 2015; 3. The overall Project was delayed and that Anchorage was not delaying the progress of the Project by Rinaldi or the other subcontractors.

4 On November 10, 2015 Rinaldi issued aletterto NAS revising its claim amount to $3,897, The claim includes alleged amounts for excess costs to complete Anchorage s work, extended general conditions and liquidated damages and costs incurred by Red Apple 81 Fleet Place Development, LLC. ( Red Apple and/or Owner ). Rinaldi s demand for alleged excess costs to complete Anchorage s work is calculated as follows: Total Costs Incurred $2,518, Anchorage s Contract Balance, Including Retainage $1,121, Net Claim Amount $1,397, Therefore, Rinaldi is currently demanding payment of $1,397, to cover the cost-to-complete Anchorage s work over and above Anchorage s remaining contract balance. Rinaldi s claim also demands additional costs incurred by Rinaldi and Red Apple in the amounts of $2,277, and $222,496.21, respectively. Rinaldi s alleged damages include, but are not limited to, temporary heat, five months of general conditions and fee, 153 days of liquidated damages (March 31 through August 31, 2015), legal fees and a loss of shared savings. The alleged Red Apple damages primarily consist of architectural, insurance, legal, consulting, and electricity costs. PENAL SUM Rinaldi submitted a claim for completion costs and delay in the total amount of $3,897, The penal sum of the bond is the amount of $3,500, NAS cannot have any liability in excess of the penal sum. SCHEDULE The Owner/Rinaldi Contract incorporates AlA Document A , General Conditions of the Contract for Construction which provides as follows: Section Contractors Construction Schedules. Rinaldi was required to revise its schedule consistent with adjustments to the contract time and provide ongoing updates not less than monthly that reflect actual progress of the work relative to the schedule. Section provides that Rinaldi must prepare a submittal schedule after being awarded the contract and maintain a current submittal schedule. The submittal schedule must be coordinated with the project schedule. Rinaldi has provided nine schedules dated September 28, 2012, November 7, 2012, June 14, 2013, July 22, 2013, February 21, 2014, July 23, 2014, August 6, 2014, August 25, 2014 and December 24, A tenth schedule reflecting only Anchorage s claimed delayed activities was generated by Rinaldi s consultant, Jennings Consulting, LLC ( Jennings ). Rinaldi included Jennings s time impact analysis and damages claim in its November 10, 2015 letter to the surety. Rinaldi provided a partial submittal log dated July 14, 2015, but did not provide a current and final submittal log for all subcontractors coordinated with the project schedule throughout the duration of the Project. The construction project was approximately five months behind schedule when Anchorage commenced work on its Subcontract. The delay and completion of the project of approximately five months continued through Rinaldi s completion of Anchorage s Subcontract by August 31, Rinaldi extended the completion date to March 31, 2015 in its last schedule. Anchorage maintains that its subcontract Section 7.1 Time for Completion of the Work Rider #2 requiring compliance with Rinaldi s project schedule did not reference or include a project schedule. Further, Anchorage denied receipt of contract schedules. NAS with its consultants relied primarily on Rinaldi s schedules dated June 14, 2013, July 22, 2013, February 21, 2014, August25, 2014 and December 24, 2014 to review the sequence of the project. NAS with its consultants also relied on Rinaldi s and Anchorage s Daily Reports and Payment Requisitions to determine the work status at any given time. NAS concludes that the project delays began almost immediately after Rinaldi commenced work and before Anchorage mobilized on-site.

5 Rinaldi has not provided as-built schedule information except for the Jennings s schedule. The Jennings schedule is dated October 20, 2015 and reportedly reflects the actual completion dates for Anchorage s work items. Jennings alleges that all project delays were caused by Anchorage, and that the project would have been completed on March 31, 2015 instead of August 31, 2015 if Anchorage hadn t delayed the project. The schedule does not incorporate many activities that possibly impacted the project or reflect concurrent delays by other trades, e.g., the hoist was not removed until mid-to-late April 2015, and then corresponding masonry needed to be completed before window installation. Rinaldi was required to actively manage their schedule and provide periodic updates. Rinaldi did not provide periodic updates and has not supported their contention that Anchorage delayed the project. The initial trades were delayed and Rinaldi increased the initial trade s respective time durations with each schedule. Rinaldi shifted, extended or decreased work activities in its schedules dated June 14, 2013 through December 24, NAS was informed that Rinaldi and its subcontractors were experiencing concurrent delays, and that they could not meet the accelerated durations reflected in Rinaldi s August 25 or December 24, 2014 schedules. As the project progressed and the other trades s activities fell behind, Anchorage s work progress appears to he keeping pace with Rinaldi s program through November At this time and as reflected in Rinaldi s December 24, 2014 schedule, Rinaldi s Floor Units activities were apparently falling further behind schedule. However, the delays were not the responsibility of Anchorage because it had substantially completed its window installation prior to the other trades activities start date on each floor. Anchorage s failure to acquire the proper glazing size material for some of the storefronts could have been remedied by a temporary enclosure. The installation of the incorrect storefront glass on the 2nd floor while unapproved, offered a temporary enclosure which could be changed out at a later time. Therefore, this item did not delay the project or the other trades. Other subcontract items that Rinaldi claims Anchorage had fallen behind on prior to the December 24, 2014 schedule, e.g. roof railings, were not delaying other trades. Rinaldi s position that Anchorage was the sole reason for the project being completed on August 31, 2015 instead of March 31, 2015 is not supported by Rinaldi s schedules or its payment applications to the owner. It appears that Rinaldi managed completion of Anchorage s work concurrently with other work. PEFORMANCE BOND SUBCONTRACT OBLIGEE The Bond Obligee is the Rinaldi Group LLC. The Bond is written for the benefit of the Obligee, for example, for completion costs that the Bond Obligee sustains in excess of the subcontract price pursuant to the terms, provisions and conditions of the Bond. The Bond Obligee does not include Red Apple Real Estate or Red Apple 81 Fleet Place Development LLC. Rinaldi claims that the total cost-to-complete Anchorage s work is $2,518, of which $856, was funded by Anchorage s contract balance and $1,661, funded by the Owner. Therefore, it appears that Rinaldi has been compensated for the costs-to-complete Anchorage s work. Rinaldi is also claiming delay damages of $2,277, and Owner damages in the amount of $222,496. Rineldi s Application #33 does not reflect a backcharge for liquidated damages. In summary, Application #33 reflects the following: Anchorage s work has been invoiced by Rinaldi to the Owner; Rinaldi has been paid for the cost-to-complete Anchorage s work; and. The Owner has not assessed liquidated damages against Rinaldi s contract.

6 The completion costs in excess of the contract balance were paid by Red Apple and were not paid by Rinaldi. Rinaldi states that there are no written documents between Red Apple and Rinaldi relating to the Owner payment of completion costs, the Anchorage Subcontract or for Red Apple reserving rights against Rinaldi. THE DELAY CLAIM Rinaldi s Application #33 reflects that Red Apple has paid Rinaldi for the performance of Rinaldi s work inclusive of the completion of the Anchorage Subcontract and without reducing the amount of the final payment application for liquidated or delay damages. The Rinaldi claim for delay damages is for liquidated damages and actual claimed delay costs and expenses. The Rinaldi delay claim improperly includes both liquidated damages and actual delay and expenses; is improperly calculated based upon the total cost method which inequitably assumes that Anchorage is responsible for the total delay for the completion of the project; and that Red Apple has, upon information and belief paid to Rinaldi Application #33 representing the final requisition for completion of the Contract which includes the completion of Anchorage s Subcontract without assessing liquidated or delay damages. BOND PERIOD OF LIMITATIONS The Subcontract Performance Bond Provides in relevant part: Paragraph 4- Any lawsuit by Obligee under this Bond must be instituted before the earlier of the following (A) the expiration of one year before from the time of substantial completion of the construction work under the Subcontract or (B) one year after the Principal ceased performing the construction work under the Subcontract. The last date on which Anchorage performed work on the Subcontract was January 12, Suit has not been commenced against NAS as Surety under the Performance Bond on or before January 12, Therefore, the time for Rinaldi as the Obligee to commence suit under the Bond has expired. CONCLUSION Based upon NAS s investigation of Rinaldi s Subcontract Performance Bond Claim, NAS as Surety denies Rinaldi s Subcontract Performance Bond Claim on the following grounds: 1. Rinaldi has not substantiated that Anchorage s performance of its Subcontract was responsible for a delay with respect to completion of the Contract; 2. Rinaldi as the Obligee has been paid by Red Apple as the Owner of the Project for completion of the Anchorage Subcontract. Rinaldi as the Obligee has not incurred completion costs in excess of the subcontract price completing the Anchorage subcontract. Red Apple incurred the completion costs completing the Anchorage Subcontract. Red Apple is not an obligee under the NAS Subcontract Performance Bond; and 3. Rinaldi has not instituted a lawsuit against NAS as Surety within the period of time required by the Bond which is one year after the principal has ceased work performing the Construction Work under the Subcontract. If you believe NAS s decision is based upon incomplete or inaccurate information, you may forward to us additional information or documentation in support of Rinaldi s claim. Upon receipt of that information and documentation, NAS will reevaluate its position as warranted subject to terms, provisions and conditions of the Bond. This letter is sent under a full reservation of all of NASs and Anchorage s rights and defenses under the Bond, the contract documents, at equity and under law and NAS expressly reserves those rights and defenses whether mentioned herein or not.

7 Very.til yours, Ra dali Ney, Vice Presi North American Specialty Insurance Company nt cc: Gerstman, Schwartz & Malito, LLP 1399 Franklin Avenue Suite 200 Garden City, NY Meltzer, Lippe, Goldstein & Breitstone, LLP 190 Willis Avenue Mineola, NY Anchorage Construction Corp 516 Industrial Loop Staten Island, NY John McManus Alliance Consulting Group, LLC P.O. Box 261 Southington, CT Gottesman, Wolgel, Flynn, Weinberg & Lee, P.C. 11 Hanover Square, 4th Floor New York, NY Att. Steven Weinberg, Esq.

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