Contract analysis

1. Certified Mail, Return Receipt Requested, to: Coastal Palms Franchise Holdings LLC 9500 Gulf Shore Drive, Suite 450 Naples, FL 34108 Attention: Randall Brecker, Managing Member

2. Electronic Mail, to Randall Brecker at the email address on file with Verimark Franchise Operations.

3. Certified Mail, Return Receipt Requested, to the registered agent: Garrison Registered Agents LLC 100 S. Ashley Drive, Suite 600 Tampa, FL 33602

4. Certified Mail, Return Receipt Requested, to opposing counsel (if identified prior to sending): Whitfield, Barrow & Crane LLP 1221 Brickell Avenue, Suite 3000 Miami, FL 33131 Attention: Nathan Whitfield III We request your review and comments at your earliest convenience. We anticipate finalizing and sending this Notice on or about February 4, 2022, subject to your approval and confirmation of the final audit figu

1. Introduction and Purpose of Notice This letter constitutes a formal Notice of Material Breach (this "Notice") issued pursuant to Section 14.1 of each of the twenty-two (22) Franchise License Agreements (individually, an "FLA," and collectively, the "FLAs") by and between Verimark Hospitality Group Inc. ("Verimark") and Coastal Palms Franchise Holdings LLC ("Coastal Palms" or "Franchisee"). Verimark is a Delaware c

2. Relevant Contractual Provisions For the convenience of Coastal Palms and its advisors, and without limitation or waiver, Verimark sets forth below a summary of the contractual provisions most directly relevant to the material breaches identified in this Notice. In the event of any inconsistency between the summaries below and the actual language of the FLAs, the FLAs shall control. All capitalized terms not otherw

Section 4.1 of each FLA defines "Gross Room Revenue" (or "GRR") as follows: "all revenues derived from or attributable to the rental of guest rooms at the Hotel, including revenues from any booking channel, direct or indirect, and regardless of the entity collecting such revenue." The breadth of this definition is both intentional and significant. It encompasses all booking channels without exception — including dire

Section 14.1 of each FLA provides that, in the event of a material breach by the Franchisee of any provision of the FLA, Verimark shall provide written notice to the Franchisee specifying the nature of the breach and the actions required to cure the breach. Upon receipt of such written notice, the Franchisee shall have thirty (30) days to cure the identified breach to Verimark's reasonable satisfaction. If the Franch

Section 14.2(c) of each FLA provides, in pertinent part: "Notwithstanding Section 14.1, systematic underreporting of Gross Room Revenue shall constitute a material breach that is incapable of cure, and Franchisor shall have the right to terminate this Agreement immediately upon written notice to Franchisee, without obligation to provide any cure period." While Verimark is providing the thirty (30) day cure period und

Section 15.3 of each FLA provides that, upon termination of the FLA for cause by Verimark, the Franchisee shall pay to Verimark, as liquidated damages and not as a penalty, an amount equal to three times (3×) the total royalties paid or payable by the Franchisee to Verimark during the twelve (12) month period immediately preceding the effective date of termination (the "Trailing-Twelve-Month Royalties") for each term

3. Factual Basis for the Material Breach 3.1 Overview of the Revenue Diversion Scheme Verimark's investigation has revealed that Coastal Palms, through its principals and affiliated entities, has engaged in the systematic underreporting of Gross Room Revenue across all twenty-two (22) of its franchised Hotels over an extended period spanning at least from January 2013 through the present. The underreporting is not th

4. Identification of Breached Provisions Based upon the facts set forth in Section 3 of this Notice, Verimark identifies the following specific provisions of the FLAs that Coastal Palms has materially breached: (a) FLA § 4.1 — Royalty Obligations and GRR Reporting. Coastal Palms has failed to report and pay royalties on the full amount of Gross Room Revenue as defined in the FLAs by (i) systematically excluding from

5. Demand for Cure Pursuant to Section 14.1 of each FLA, Verimark hereby demands that Coastal Palms cure the material breaches identified in this Notice within thirty (30) days of Coastal Palms' receipt of this Notice. To effectuate cure, Coastal Palms must take each of the following actions within the 30-day cure period: (a) Full Payment of All Underpaid Amounts. Coastal Palms shall pay to Verimark the full amount o

6. Reservation of Rights Verimark expressly reserves all rights and remedies available to it under the FLAs, at law, and in equity, including but not limited to the following: (a) Termination for Cause. Verimark reserves the right to terminate each of the twenty-two (22) FLAs for cause upon expiration of the 30-day cure period if cure is not tendered in full, or at any time if the breaches identified herein are deter

7. Direction Regarding Communications All communications regarding this Notice, the breaches identified herein, and any proposed cure shall be directed to: Renata Solis-Vega Senior Vice President & General Counsel Verimark Hospitality Group Inc. 2400 East Las Olas Boulevard, Suite 3100 Fort Lauderdale, FL 33301 Telephone: (954) 555-8400 Email: rsolis-vega@verimark.com With a copy to: Priya Anand, Partner Calderwood &

1. Schedule A — List of All Twenty-Two (22) Franchise License Agreements (identifying each FLA by date of execution, property name, property location, brand designation (Verimark Suites or Verimark Select), and property-level operating entity) [To be attached to final version]

2. Summary of Thornbury & Associates CPAs LLP Preliminary Audit Findings dated January 18, 2022 (summary reference only; full audit report and work papers reserved as confidential and privileged) [To be attached to final version] cc: Randall Brecker, individually Nolan Prescott, Member, Coastal Palms Franchise Holdings LLC Theresa Brecker, Member, Coastal Palms Franchise Holdings LLC [Opposing counsel — to be added i

1. Audit Figures. This draft is prepared based on the Thornbury preliminary findings delivered January 18, 2022. The $197.8 million total underreported GRR figure and all derivative calculations (underpaid royalties, marketing-fund contributions, technology fees) are based on Thornbury's extrapolation methodology as described in their preliminary report. Before we finalize and send this Notice, we should confirm all

2. Timing — Cure Period. If this Notice is sent on or about February 4, 2022, the 30-day cure period under FLA § 14.1 would expire on or about March 6, 2022 (assuming receipt on the date of sending or within one to two business days thereafter). We can begin preparing the complaint for filing promptly after the cure deadline passes, assuming cure is not tendered. I recommend we have a substantially complete draft com

3. Whistleblower — Janet Kerrigan. This draft intentionally does not reference Janet Kerrigan by name, nor does it reference the November 8, 2021 whistleblower complaint through which Verimark initially became aware of the Suncoast revenue diversion scheme. The factual basis section references only the Thornbury audit findings and Verimark's own investigation. This approach is designed to protect Ms. Kerrigan's ident

4. FLA § 14.2(c) — Strategic Positioning. The strategic decision to provide the 30-day cure period under § 14.1 while simultaneously reserving the incurable-breach position under § 14.2(c) is intentional and has been discussed with Renata. This approach provides maximum flexibility for our litigation posture. By offering the cure period, we foreclose any argument by Coastal Palms that Verimark failed to comply with t

5. Client Approval. This draft should be circulated to Renata Solis-Vega (SVP & General Counsel) and Deidre Langston (SVP, Franchise Operations) for client approval before finalization. I will send the transmittal memorandum and draft to both of them today for review. Please let me know if you would like to schedule a call with the client team to walk through the draft before finalizing. END OF INTERNAL DRAFTING NOTE