Contract analysis

I. Introduction and Purpose of This Letter This firm represents Verimark Hospitality Group Inc. ("Verimark" or "VHG"), a Delaware corporation publicly traded on the Nasdaq Stock Market under ticker symbol VHMK, with its principal executive offices located at 2400 East Las Olas Boulevard, Suite 3100, Fort Lauderdale, Florida 33301. We write on behalf of Verimark in connection with the above-referenced litigation and I

II. Background — The Litigation On March 7, 2022, Verimark filed a ten-count Complaint against Coastal Palms Franchise Holdings LLC, a Florida limited liability company with its principal office at 9500 Gulf Shore Drive, Suite 450, Naples, Florida 34108, and certain affiliated parties in the Circuit Court of the 17th Judicial Circuit, in and for Broward County, Florida, assigned Case No. 1021-00006. The named defenda

III. The Settlement On April 22, 2024, Verimark and Coastal Palms, together with the following additional parties—Randall Brecker (individually), Theresa Brecker (individually), Nolan Prescott (individually), Gulf Breeze Hospitality LLC, Savannah Lodging Partners LLC, and Suncoast Room Management Inc.—executed a Settlement Agreement and Mutual Release (the "Settlement Agreement") resolving all claims and counterclaim

1. Cash Payment at Closing. A cash payment of Twenty-Five Million Dollars ($25,000,000.00), which was funded via wire transfer from an Ironclad National Bank escrow account (Account No. ending in 4781) on April 22, 2024, the date of execution of the Settlement Agreement. Verimark acknowledges receipt of this payment in full.

2. Structured Payments. The remaining balance of Sixty-Two Million Five Hundred Thousand Dollars ($62,500,000.00), payable in eight (8) equal semi-annual installments of Seven Million Eight Hundred Twelve Thousand Five Hundred Dollars ($7,812,500.00) each, with the first installment due and payable on October 22, 2024, and successive installments due on the twenty-second day of each subsequent April and October, with

3. Interest on Deferred Payments. The outstanding balance of the structured payments shall bear simple interest at a rate of six and one-half percent (6.5%) per annum, calculated on the unpaid principal balance from the date of execution of the Settlement Agreement. Interest shall be payable concurrently with each semi-annual installment. B. Additional Settlement Terms Relevant to Ironclad The Settlement Agreement co

1. Franchise Surrender — 14 Properties. Coastal Palms is required to surrender its franchise rights to fourteen (14) of the twenty-two (22) hotel properties within one hundred twenty (120) days of the date of the Settlement Agreement. The de-identification deadline—by which all Verimark branding, signage, logos, proprietary systems, and reservation-system integrations must be removed from the surrendered properties—i

2. Retained Properties — 8 Properties. Eight (8) hotel properties will be retained under new ten-year Franchise License Agreements executed contemporaneously with the Settlement Agreement. The retained properties are located in Naples, Florida (4 properties); Marco Island, Florida (2 properties); and Tampa, Florida (2 properties). The new Franchise License Agreements incorporate enhanced quarterly audit protocols, in

3. Counterclaim Dismissal. Coastal Palms' Twelve Million Dollar ($12,000,000.00) counterclaim, which alleged wrongful termination threats, tortious interference with business relationships, and unfair franchise practices, has been dismissed with prejudice pursuant to the terms of the Settlement Agreement.

4. Joint Stipulation of Dismissal. A Joint Stipulation of Dismissal with Prejudice was filed with the Circuit Court of the 17th Judicial Circuit, Broward County, Florida, on April 26, 2024, and the Court is expected to enter an order of dismissal in due course. C. Confidentiality. We note that the terms of the Settlement Agreement are subject to confidentiality provisions binding on all parties thereto, with limited

IV. Ironclad's Existing Loan Position We understand, based on publicly available information and representations made by Coastal Palms during the course of the litigation, that Ironclad National Bank holds first-lien mortgage loans on eighteen (18) of the twenty-two (22) hotel properties in the Coastal Palms portfolio, with an aggregate outstanding principal balance of approximately Ninety-Four Million Dollars ($94,0

V. Verimark's Security Interest — First-Priority Lien on the 8 Unencumbered Properties A. Grant of Security Interest Pursuant to Section 7.1 of the Settlement Agreement, Coastal Palms has granted Verimark a first-priority security interest in the eight (8) hotel properties described above that are not encumbered by Ironclad's existing mortgage loans. This security interest was granted as collateral to secure Coastal

VI. Impact on Coastal Palms' Operations and Ironclad's Collateral We believe it is important to bring certain operational implications of the settlement to Ironclad's attention, as they may bear upon the Bank's assessment of its collateral position and the financial condition of Coastal Palms as borrower. A. Franchise Surrender — Impact on Ironclad's Collateral As noted in Section III.B above, Coastal Palms is requir

VII. Requests for Acknowledgment and Consent In light of the foregoing, Verimark respectfully requests that Ironclad National Bank provide written acknowledgment and, to the extent applicable, consent with respect to the following:

1. Receipt and Review. Written acknowledgment that Ironclad has received and reviewed this notice regarding the settlement of Verimark Hospitality Group Inc. v. Coastal Palms Franchise Holdings LLC et al., Case No. 1021-00006, and the terms thereof as they affect Ironclad's lending relationship with Coastal Palms, including Verimark's first-priority security interest in the eight (8) unencumbered hotel properties.

2. Confirmation of Unencumbered Status. Written confirmation that the eight (8) properties subject to Verimark's first-priority lien, as described in Exhibit F to the Settlement Agreement and in Section V of this letter, are not encumbered by Ironclad's existing first-lien mortgage loans—that is, that these eight (8) properties do not serve as collateral under any Ironclad loan or credit facility.

3. Consent to Verimark's Lien. To the extent that any provision in Ironclad's loan documents with Coastal Palms—including but not limited to any negative pledge covenant, negative lien covenant, or other restrictive covenant—requires the prior written consent of Ironclad as lender for the granting of additional liens or security interests on assets of the borrower or its affiliates, Verimark requests that Ironclad pr

VIII. Confidentiality Notice As noted above, the settlement terms described in this letter are subject to confidentiality provisions under the Settlement Agreement. While disclosure to Ironclad in its capacity as lender to Coastal Palms is expressly permitted under Section 11.3 of the Settlement Agreement, Ironclad is requested to treat the information contained in this letter, and any settlement documents provided i

IX. Contact Information and Closing Should you have any questions regarding the matters addressed in this letter, or should you wish to discuss any aspect of the settlement, Verimark's security interest, or the operational implications described herein, please do not hesitate to contact me directly at the telephone number and email address listed below. I am available to arrange a call or meeting at your convenience,