Contract analysis

I. PURPOSE AND SCOPE OF MEMORANDUM The purpose of this memorandum is to memorialize the final disposition of the above-referenced matter, provide a comprehensive summary of the engagement from inception through closing, document the financial outcomes of the litigation — including fees, costs, and the terms of the settlement achieved on behalf of the client — capture key learnings and practice points for the benefit

II. MATTER OVERVIEW A. Client and Parties

1. Client. Verimark Hospitality Group Inc. ("Verimark" or "VHG") is a Delaware corporation publicly traded on the Nasdaq Stock Market under the ticker symbol VHMK. Verimark is headquartered at 2400 East Las Olas Boulevard, Suite 3100, Fort Lauderdale, Florida 33301. For fiscal year 2021 — the most recent full fiscal year preceding the commencement of this litigation — Verimark reported consolidated revenue of approxi

2. Defendants. The following parties were named as defendants in this action: (a) Coastal Palms Franchise Holdings LLC ("Coastal Palms" or "CPFH") — a Florida limited liability company with its principal office at 9500 Gulf Shore Drive, Suite 450, Naples, Florida 34108. Coastal Palms' registered agent is Garrison Registered Agents LLC, 100 S. Ashley Drive, Suite 600, Tampa, Florida 33602. Coastal Palms was, at the ti

3. Defense Counsel Coastal Palms and all individual and entity defendants were jointly represented by Whitfield, Barrow & Crane LLP ("WBC"), 1221 Brickell Avenue, Suite 3000, Miami, Florida 33131. The defense team was led by: • Nathan Whitfield III, Senior Partner — lead trial counsel. • Gabriela Montes, Partner — responsible for discovery and motions practice. • Ethan Doyle, Associate — supporting research, briefing

III. ENGAGEMENT HISTORY AND KEY MILESTONES A. Pre-Litigation Phase (November 2021 – March 2022) The origins of this matter trace to a whistleblower complaint received by Verimark's compliance hotline. On November 8, 2021, Janet Kerrigan, a former regional controller for Coastal Palms who had been terminated in October 2021, contacted the Verimark compliance hotline and reported allegations of systematic revenue diver

1. Initiation of Litigation On March 4, 2022, the formal engagement letter for litigation services was executed between Verimark and Calderwood & Harkness LLP, formally retaining the firm to prosecute the breach-of-contract action and related claims. On March 7, 2022, Calderwood & Harkness LLP filed the Complaint in the Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida, initiating Case No.

2. Responsive Pleadings On April 18, 2022, Coastal Palms, through WBC, filed its Answer, Affirmative Defenses, and Counterclaim. The Answer denied all material allegations and asserted numerous affirmative defenses, including waiver, estoppel, laches, and ambiguity of the GRR definition. The Counterclaim sought $12 million in damages for alleged brand-standard violations and over-billing by Verimark, contending that

3. Case Management and discovery On June 14, 2022, the initial Case Management Conference was held before Judge Calloway. The Court set the matter for trial in February 2024 and established a discovery schedule with fact-discovery closing in August 2023. On June 20, 2022, the parties filed a Joint Stipulation regarding the E-discovery Protocol, establishing procedures for the identification, preservation, collection,

4. Discovery Disputes and Motion to Compel On September 8, 2022, Calderwood & Harkness LLP sent a formal meet-and-confer letter to WBC regarding the deficient production, specifically demanding production of all Suncoast Room Management Inc. records. WBC responded by asserting that Suncoast was a separate entity not subject to the discovery requests directed to Coastal Palms, notwithstanding that Suncoast was a named

5. Expert Retention and Reports On December 12, 2022, Calderwood & Harkness LLP retained Ridgeline Forensic Advisory LLC (Dr. Sharon Kettlewell, CPA/CFF, CFE; principal office: 200 S. Biscayne Boulevard, Suite 1400, Miami, Florida 33131) as Verimark's damages expert. Dr. Kettlewell's engagement rates were $475 per hour for principal-level work and $325 per hour for staff-level support. On April 14, 2023, Verimark ser

6. Fact Depositions Between January 9 and March 17, 2023, the parties conducted fourteen (14) fact depositions. The key deponents and their significance were as follows: • Randall Brecker — deposed over two (2) days, totaling fourteen (14) hours. Mr. Brecker's testimony was central to establishing the intent and mechanics of the revenue-diversion scheme. He acknowledged directing Suncoast to collect direct-booking re

7. Close of discovery and Summary Judgment On August 4, 2023, discovery closed. On September 29, 2023, Verimark filed its Motion for Partial Summary Judgment on Counts I and II (liability only), supported by a forty-two (42)-page memorandum of law and a Statement of Undisputed Material Facts containing one hundred twenty-seven (127) numbered paragraphs. The motion argued that the undisputed documentary evidence and t

1. Agreement to Mediate On February 23, 2024, following the Court's ruling on summary judgment, the parties agreed to mediate the dispute. The timing of this agreement was significant: the summary-judgment ruling had eliminated Coastal Palms' primary defense — the GRR-ambiguity argument — and left only the question of damages for trial. This fundamentally altered the settlement dynamics. On February 27, 2024, a media

2. Mediation Preparation On March 8, 2024, Verimark submitted its Confidential Mediation Statement to Mediator Everwood. The statement was twenty-eight (28) pages in length and set forth the factual background, procedural history, the significance of the Court's summary-judgment ruling, the damages analysis, and Verimark's settlement range of $80 million to $110 million. On March 11, 2024, Calderwood & Harkness LLP t

3. Mediation Sessions On March 14–15, 2024, a two-day mediation was conducted at Everwood Dispute Resolution's offices in Coral Gables, Florida. Day 1 (March 14, 2024): Following opening statements in joint session and an extended caucus, Coastal Palms opened with a settlement offer of $32 million. Verimark opened with a demand of $110 million. Through several rounds of proposals and counterproposals facilitated by J

4. Settlement Documentation and Execution On March 22, 2024, the parties executed an eight (8)-page Settlement Term Sheet memorializing the principal terms of the agreement reached at mediation. The Term Sheet was designated as non-binding except for the exclusivity and confidentiality provisions, which were binding upon execution. On April 2, 2024, Calderwood & Harkness LLP circulated to WBC the initial draft of the

IV. FINAL DISPOSITION — SETTLEMENT TERMS SUMMARY The following is a summary of the material terms of the Settlement Agreement and Mutual Release executed on April 22, 2024. This summary is provided for internal reference purposes only and is not a substitute for the full text of the Settlement Agreement, which is maintained in the matter file. A. Total Settlement Amount The total settlement amount is $87.5 million. B

I. Settlement Agreement Exhibits The Settlement Agreement includes the following exhibits: • Exhibit A: Payment Schedule • Exhibit B: List of Surrendered Properties (14 properties) • Exhibit C: Form of New Franchise License Agreements for Retained Properties (8 properties) • Exhibit D: Enhanced Audit Protocol • Exhibit E: Personal Guaranty Forms (Brecker, Prescott) • Exhibit F: Form of Security Agreement / UCC-1 Fina

V. DAMAGES ANALYSIS — COMPARISON OF CLAIMED DAMAGES TO SETTLEMENT RECOVERY A. Verimark's Claimed Damages ($150 Million) Verimark's total claimed damages, as set forth in the Complaint and quantified in Dr. Kettlewell's expert report, were approximately $150 million, comprising the following components: B. Coastal Palms' Defense Position Coastal Palms, through its counsel at WBC and its damages expert, Prof. Grant Har

VI. FEE AND COST SUMMARY A. Calderwood & Harkness LLP Fees Total Calderwood & Harkness LLP professional fees for this engagement were $6,820,000, representing approximately 9,950 billed hours at a blended rate of approximately $685 per hour. The breakdown by individual timekeeper is as follows: Note: Hourly totals are approximate and reflect rounding. The aggregate fee figure of $6,820,000 is based on actual invoiced

VII. INSURANCE COVERAGE Verimark's relevant insurance coverage for this matter was held with Pinnacle Indemnity Insurance Co. under Policy No. PLI-VHG-2021-08874, a commercial general liability policy that included franchise-litigation coverage provisions. A coverage notification letter was sent on March 14, 2022, to Arthur Baines, Claims Counsel at Pinnacle Indemnity, advising of the filing of the Complaint and the

VIII. KEY LEARNINGS AND PRACTICE POINTS The following key learnings and practice points are documented for the benefit of Calderwood & Harkness LLP's attorneys and for future matters involving similar issues. A. Discovery Strategy — Early Pursuit of Affiliate Entity Records The early and aggressive pursuit of Suncoast Room Management Inc.'s financial records was critical to the successful prosecution of this matter.

IX. OPEN POST-SETTLEMENT OBLIGATIONS AND MONITORING Reference is made to the Post-Settlement Compliance Monitoring Memorandum dated April 26, 2024, prepared by Yuki Nakamura and transmitted to Renata Solis-Vega and Deidre Langston at Verimark. That memorandum provides detailed monitoring protocols and timelines for each post-settlement obligation. The following is a summary of the key monitoring items:

1. Structured Payment Monitoring: The first semi-annual structured payment of $7,812,500 is due on October 22, 2024. Subsequent payments of the same amount are due every six (6) months thereafter, with the final payment due on April 22, 2028. Interest at 6.5% per annum (simple) on the outstanding balance is payable concurrently with each installment. A total of eight (8) installments plus associated interest will be