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SETTLEMENT AGREEMENT AND MUTUAL RELEASE

DRAFT — Version 1 — April 2, 2024

Prepared by: Calderwood & Harkness LLP 110 SE 6th Street, Suite 2800 Fort Lauderdale, FL 33301

Circulated to: Whitfield, Barrow & Crane LLP 1221 Brickell Avenue, Suite 3000 Miami, FL 33131

Submitted for review and comment. Please return redline by April 10, 2024.

SETTLEMENT AGREEMENT AND MUTUAL RELEASE

This Settlement Agreement and Mutual Release (this "Agreement") is entered into as of ___, 2024 (the "Effective Date"), by and among:

VERIMARK HOSPITALITY GROUP INC., a Delaware corporation, with its principal place of business at 2400 East Las Olas Boulevard, Suite 3100, Fort Lauderdale, FL 33301 (Nasdaq: VHMK) (hereinafter referred to as "Verimark" or "VHG");

and

COASTAL PALMS FRANCHISE HOLDINGS LLC, a Florida limited liability company, with its principal office at 9500 Gulf Shore Drive, Suite 450, Naples, FL 34108 (hereinafter referred to as "Coastal Palms" or "CPFH");

RANDALL "RANDY" BRECKER, an individual, Managing Member of Coastal Palms (60% equity holder) and President of Suncoast Room Management Inc., residing in Naples, Florida (hereinafter referred to as "R. Brecker");

THERESA BRECKER, an individual, Member of Coastal Palms (15% equity holder), residing in Naples, Florida (hereinafter referred to as "T. Brecker");

NOLAN PRESCOTT, an individual, Member of Coastal Palms (25% equity holder), residing in Naples, Florida (hereinafter referred to as "Prescott");

GULF BREEZE HOSPITALITY LLC, a Florida limited liability company (hereinafter referred to as "Gulf Breeze");

SAVANNAH LODGING PARTNERS LLC, a Georgia limited liability company (hereinafter referred to as "Savannah Lodging"); and

SUNCOAST ROOM MANAGEMENT INC., a Florida corporation (hereinafter referred to as "Suncoast").

Coastal Palms, R. Brecker, T. Brecker, Prescott, Gulf Breeze, Savannah Lodging, and Suncoast are hereinafter collectively referred to as the "Coastal Palms Parties." Verimark and the Coastal Palms Parties are hereinafter collectively referred to as the "Parties" and individually as a "Party."

RECITALS

WHEREAS:

A. Franchise Relationship. Coastal Palms and Verimark are parties to twenty-two (22) individual Franchise License Agreements (collectively, the "FLAs"), the first of which was executed on June 15, 2007, pertaining to a hotel property located in Naples, Florida, and the most recent of which was executed on September 3, 2019. The FLAs govern the operation of twenty-two (22) franchised hotel properties, of which eighteen (18) are branded "Verimark Suites" and four (4) are branded "Verimark Select," located across the States of Florida and Georgia, comprising approximately 3,740 total guest rooms. Each FLA provides for a twenty (20)-year initial term and is governed by the laws of the State of Florida, with mandatory venue for any dispute in Broward County, Florida. Under the terms of each FLA, Coastal Palms is obligated to pay to Verimark: (i) a royalty fee equal to five percent (5%) of Gross Room Revenue ("GRR") (FLA § 4.1); (ii) a marketing-fund contribution equal to two and one-half percent (2.5%) of GRR (FLA § 4.2); and (iii) a technology fee of Twelve Dollars and Fifty Cents ($12.50) per available room per month (FLA § 4.3).

B. The Dispute. An internal audit conducted by Verimark, triggered by a whistleblower report received on November 8, 2021, together with a compliance audit performed by Thornbury & Associates CPAs LLP (whose preliminary findings were delivered on January 18, 2022), revealed that Coastal Palms had systematically underreported GRR over the period from 2013 through 2021. The underreporting was accomplished by diverting guest-room revenues through Suncoast Room Management Inc. and an unbranded website (gulfcoastrooms.com), and by improperly netting revenues received through online travel agencies ("OTAs"). Verimark estimated total underreported GRR at approximately One Hundred Ninety-Seven Million Eight Hundred Thousand Dollars ($197,800,000), resulting in underpayment of royalties of approximately Nine Million Eight Hundred Ninety Thousand Dollars ($9,890,000), underpayment of marketing-fund contributions of approximately Four Million Nine Hundred Forty-Five Thousand Dollars ($4,945,000), and underpayment of technology fees of approximately One Million Two Hundred Sixty Thousand Dollars ($1,260,000), plus contractual late-payment interest of approximately Twenty-Eight Million Four Hundred Thousand Dollars ($28,400,000) and liquidated damages of approximately One Hundred Five Million Five Hundred Thousand Dollars ($105,500,000), for total claimed damages of approximately One Hundred Fifty Million Dollars ($150,000,000). On February 4, 2022, Verimark issued a Notice of Material Breach to Coastal Palms; no cure was tendered within the thirty (30)-day cure period prescribed by the FLAs.

C. The Litigation. On March 7, 2022, Verimark filed a ten (10)-count Complaint in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida, styled Verimark Hospitality Group Inc. v. Coastal Palms Franchise Holdings LLC, et al., Case No. 1021-00006 (the "Litigation"), before the Honorable Richard M. Calloway, Circuit Judge. The Complaint asserted claims for, among other things, breach of contract (royalties), breach of contract (marketing-fund contributions), breach of contract (technology fees), breach of the implied covenant of good faith and fair dealing, fraudulent concealment, negligent misrepresentation, unjust enrichment, declaratory judgment, accounting, and civil conspiracy. On April 18, 2022, Coastal Palms filed an Answer, Affirmative Defenses, and a Counterclaim seeking approximately Twelve Million Dollars ($12,000,000) in damages for alleged brand-standard violations and over-billing by Verimark. Extensive discovery was conducted over the course of the Litigation, including the processing and review of approximately 2.3 million documents, the taking of fourteen (14) fact depositions, and the completion of two (2) expert depositions.

D. Summary Judgment. On February 9, 2024, the Court entered an Order granting Verimark's Motion for Partial Summary Judgment on Count I (Breach of Contract — Royalties) and Count II (Breach of Contract — Marketing Fund), finding that Coastal Palms' exclusion of revenues collected through Suncoast Room Management Inc. from its calculation of GRR constituted a material breach of FLA §§ 4.1 and 4.2 as a matter of law. The Court denied Coastal Palms' Cross-Motion for Summary Judgment and deferred the determination of damages to trial.

E. Mediation and Settlement. On March 14 and 15, 2024, the Parties participated in a two-day mediation before the Honorable Patricia Everwood (Ret.) at Everwood Dispute Resolution PLLC, 396 Alhambra Circle, Suite 800, Coral Gables, FL 33134. A tentative settlement was reached at the conclusion of the mediation on March 15, 2024, and a binding Term Sheet was executed by the Parties on March 22, 2024. The Parties now desire to enter into this Agreement to fully and finally resolve all disputes, claims, counterclaims, and controversies between them arising from or related to the FLAs and the Litigation, upon the terms and conditions set forth herein.

F. Consideration. The Parties acknowledge and agree that the mutual covenants, promises, releases, and undertakings contained herein, including the payment of the Settlement Amount, the surrender and retention of franchise rights, and the mutual releases, constitute good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each Party.

NOW, THEREFORE, in consideration of the foregoing recitals (which are incorporated herein by reference), the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

ARTICLE I — DEFINITIONS

As used in this Agreement, the following terms shall have the meanings set forth below. Capitalized terms used but not defined in this Article I shall have the meanings ascribed to them elsewhere in this Agreement.

1.1 "Affiliate" means, with respect to any Party, any entity that directly or indirectly controls, is controlled by, or is under common control with such Party. For purposes of this definition, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of an entity, whether through the ownership of voting securities, by contract, or otherwise.

1.2 "Closing" means the date on which the Initial Payment is made and this Agreement becomes effective in accordance with its terms.

1.3 "Closing Date" means the Effective Date of this Agreement, targeted for April 22, 2024.

1.4 "Collateral Properties" means the eight (8) unencumbered hotel properties described in Exhibit F hereto, which shall serve as collateral to secure the Structured Payment obligations of the Coastal Palms Parties, and which have an aggregate appraised value of approximately Seventy-One Million Two Hundred Thousand Dollars ($71,200,000).

1.5 "Confidential Information" means the terms, amount, and existence of this Agreement, the negotiations leading to this Agreement, and all documents and communications exchanged in connection therewith, subject to the exceptions set forth in Section 9.2 of this Agreement, including but not limited to disclosures required by applicable securities laws and regulations (including Verimark's SEC disclosure obligations), legal or regulatory requirements, disclosures compelled by valid legal process, and disclosures to professional advisors bound by confidentiality obligations.

1.6 "Counterclaim" means the counterclaim filed by Coastal Palms on April 18, 2022, in the Litigation, seeking approximately Twelve Million Dollars ($12,000,000) in damages for alleged brand-standard violations and over-billing.

1.7 "De-Identification Deadline" means the date that is one hundred twenty (120) calendar days after the Closing Date (i.e., August 20, 2024, assuming a Closing Date of April 22, 2024).

1.8 "Enhanced Audit Protocol" means the enhanced audit and reporting requirements set forth in Exhibit D hereto, as further described in Article VI of this Agreement.

1.9 "FLA" or "Franchise License Agreement" means each of the twenty-two (22) individual Franchise License Agreements entered into between Verimark and Coastal Palms, governing the operation of Coastal Palms' franchised hotel properties under the Verimark Suites and Verimark Select brands.

1.10 "GRR" or "Gross Room Revenue" means, as defined in Section 4.1 of each FLA, "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."

1.11 "Initial Payment" means the sum of Twenty-Five Million Dollars ($25,000,000) payable by the Coastal Palms Parties to Verimark on the Closing Date by wire transfer of immediately available funds, as set forth in Section 2.2 of this Agreement.

1.12 "Ironclad" means Ironclad National Bank, the commercial lender holding first-lien mortgage loans on eighteen (18) of the twenty-two (22) Coastal Palms hotel properties, with an aggregate outstanding principal balance of approximately Ninety-Four Million Dollars ($94,000,000) as of the date hereof.

1.13 "Litigation" means the action styled Verimark Hospitality Group Inc. v. Coastal Palms Franchise Holdings LLC, et al., Case No. 1021-00006, pending in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida, before the Honorable Richard M. Calloway, Circuit Judge.

1.14 "New FLAs" means the new ten (10)-year Franchise License Agreements to be entered into between Verimark and Coastal Palms for each of the Retained Properties, substantially in the form attached hereto as Exhibit C.

1.15 "Payment Schedule" means the schedule of payments set forth in Exhibit A hereto.

1.16 "Personal Guarantors" means Randall Brecker and Nolan Prescott, each of whom shall execute a personal guaranty in accordance with Article IV of this Agreement.

1.17 "Released Claims" has the meaning set forth in Article VII of this Agreement.

1.18 "Retained Properties" means the eight (8) hotel properties listed in Section 5.2 of this Agreement that Coastal Palms shall continue to operate under new Franchise License Agreements with Verimark, located in Naples, Florida (4 properties), Marco Island, Florida (2 properties), and Tampa, Florida (2 properties).

1.19 "Security Agreement" means the form of security agreement and UCC-1 financing statement attached hereto as Exhibit F.

1.20 "Settlement Amount" means the aggregate sum of Eighty-Seven Million Five Hundred Thousand Dollars ($87,500,000), comprising the Initial Payment and the Structured Payments.

1.21 "Structured Payments" means the aggregate sum of Sixty-Two Million Five Hundred Thousand Dollars ($62,500,000), payable in eight (8) equal semi-annual installments of Seven Million Eight Hundred Twelve Thousand Five Hundred Dollars ($7,812,500) each, commencing on October 22, 2024, and ending on April 22, 2028, as more fully described in Section 2.3 and the Payment Schedule attached as Exhibit A.

1.22 "Surrendered Properties" means the fourteen (14) hotel properties listed in Exhibit B hereto that Coastal Palms shall de-identify and cease operating under Verimark branding in accordance with Section 5.4 of this Agreement.

ARTICLE II — SETTLEMENT PAYMENT

2.1 Total Settlement Amount. In full and final settlement of all claims, counterclaims, causes of action, and controversies between the Parties arising from or related to the FLAs and the Litigation, the Coastal Palms Parties shall pay to Verimark the aggregate sum of Eighty-Seven Million Five Hundred Thousand Dollars ($87,500,000) (the "Settlement Amount"), payable in accordance with this Article II and the Payment Schedule attached hereto as Exhibit A. The Settlement Amount represents a negotiated compromise of all disputed matters, and no Party admits liability or wrongdoing by entering into this Agreement or agreeing to the payment of the Settlement Amount.

2.2 Initial Payment. On the Closing Date, the Coastal Palms Parties shall pay to Verimark the sum of Twenty-Five Million Dollars ($25,000,000) (the "Initial Payment") by wire transfer of immediately available funds to a bank account designated in writing by Verimark. The Initial Payment shall be funded from an escrow account maintained at Ironclad National Bank, which has been established for this purpose. Verimark shall provide complete wire transfer instructions to Coastal Palms no later than five (5) business days prior to the Closing Date. Upon receipt of the Initial Payment by Verimark, Verimark shall promptly confirm such receipt in writing to Coastal Palms' counsel.

2.3 Structured Payments. Following the Closing Date, the Coastal Palms Parties shall pay to Verimark the sum of Sixty-Two Million Five Hundred Thousand Dollars ($62,500,000), payable in eight (8) equal semi-annual installments of Seven Million Eight Hundred Twelve Thousand Five Hundred Dollars ($7,812,500) each (each, a "Structured Payment"), in accordance with the following schedule:

(a) The first Structured Payment shall be due and payable on October 22, 2024;

(b) Subsequent Structured Payments shall be due and payable on April 22 and October 22 of each succeeding year thereafter; and

All Structured Payments shall be made by wire transfer of immediately available funds to a bank account designated in writing by Verimark. The complete Payment Schedule, including estimated interest calculations, is set forth in Exhibit A hereto.

2.4 Interest on Structured Payments. Interest shall accrue on the outstanding principal balance of the Structured Payments at the rate of six and one-half percent (6.5%) per annum, calculated as simple interest on the basis of a three hundred sixty-five (365)-day year and the actual number of days elapsed. Interest shall commence accruing on the Closing Date and shall be payable semi-annually concurrently with each Structured Payment. The estimated interest amounts for each payment period are set forth in the Payment Schedule attached as Exhibit A.

2.5 Prepayment. The Coastal Palms Parties may, at any time and from time to time, prepay all or any portion of the outstanding principal balance of the Structured Payments without premium, penalty, or additional charge. Any partial prepayment shall be applied first to all accrued and unpaid interest on the outstanding principal balance and then to principal in inverse order of maturity (i.e., applied to the latest-maturing Structured Payment first). Coastal Palms shall provide Verimark with at least five (5) business days' prior written notice of any intended prepayment, specifying the amount and intended payment date.

2.6 Late Payment. Any Structured Payment (or portion thereof) not received by Verimark within ten (10) business days of its scheduled due date shall bear additional default interest at the rate of one and one-half percent (1.5%) per month, compounded monthly, on the overdue amount from the original due date until such overdue amount is paid in full. The assessment of default interest under this Section 2.6 shall be in addition to, and not in lieu of, any other rights or remedies available to Verimark under this Agreement, at law, or in equity. Any late payment shall also constitute an Event of Default under Section 2.8 of this Agreement.

2.7 Taxes. Each Party shall be solely responsible for its own tax obligations arising from or in connection with the Settlement Amount, including any federal, state, or local income taxes, franchise taxes, or other taxes attributable to the receipt or payment of any portion of the Settlement Amount. No Party shall have any obligation to withhold taxes from any payment made under this Agreement absent a legal obligation to do so under applicable law. In the event any Party determines that withholding is legally required with respect to any payment, such Party shall provide prompt written notice to the other Party and shall withhold only the minimum amount required by applicable law. The Parties shall cooperate in good faith in the preparation and filing of any tax forms or returns relating to the settlement payments.

2.8 Events of Default and Acceleration. An "Event of Default" shall be deemed to have occurred upon the happening of any of the following events:

(a) Failure to Pay. Failure by any Coastal Palms Party to make any Structured Payment within ten (10) business days of its scheduled due date;

(b) Breach of Covenant. Breach by any Coastal Palms Party of any material covenant, obligation, or undertaking under this Agreement (other than a payment obligation) that remains uncured for a period of thirty (30) calendar days after written notice of such breach is delivered by Verimark to the breaching Coastal Palms Party;

(c) Bankruptcy or Insolvency. The filing by any Coastal Palms Party of a voluntary petition in bankruptcy, or the commencement of any proceeding under any federal or state bankruptcy, insolvency, reorganization, receivership, or similar law, or the making of a general assignment for the benefit of creditors by any Coastal Palms Party, or the entry of an order for relief against any Coastal Palms Party in an involuntary bankruptcy case that is not dismissed within sixty (60) days;

(d) Material Misrepresentation. Any representation or warranty made by any Coastal Palms Party under this Agreement or any document delivered in connection herewith proves to have been materially false or misleading when made; and

(e) Unauthorized Transfer of Collateral. The sale, transfer, conveyance, encumbrance, or other disposition of any Collateral Property (or any interest therein) by any Coastal Palms Party without the prior written consent of Verimark.

Upon the occurrence of an Event of Default, Verimark may, at its sole election and upon written notice to the Coastal Palms Parties, declare all remaining unpaid Structured Payments, together with all accrued and unpaid interest (including default interest), immediately due and payable in full (an "Acceleration"). The exercise of Acceleration shall not constitute a waiver of any other rights or remedies available to Verimark under this Agreement, the Security Agreement, the Personal Guaranties, or applicable law.

[Note to Whitfield, Barrow & Crane LLP: Acceleration triggers to be discussed. Coastal Palms may seek extended cure periods for certain non-payment defaults under subsection (b), and may request that the cure period for subsection (a) be extended from 10 business days to 15 business days. Verimark is prepared to discuss reasonable cure provisions but considers the payment-default trigger in subsection (a) to be firm.]

ARTICLE III — SECURITY

3.1 Security Interest in Collateral Properties. To secure the timely and complete payment and performance of all obligations of the Coastal Palms Parties under Article II of this Agreement, including all Structured Payments, accrued interest, default interest, and any costs or expenses arising from enforcement, Coastal Palms and the applicable property-level entities owning the Collateral Properties shall grant to Verimark a first-priority lien and security interest in the eight (8) Collateral Properties identified in Exhibit F hereto. The Collateral Properties have an aggregate appraised value of approximately Seventy-One Million Two Hundred Thousand Dollars ($71,200,000), as determined by independent appraisals conducted within the twelve (12) months preceding the date of this Agreement. Each of the Collateral Properties is represented to be unencumbered by any mortgage, deed of trust, or similar lien as of the Closing Date. The security interest granted under this Section 3.1 shall be documented by the Security Agreement and related instruments in the forms attached as Exhibit F.

[Note to Whitfield, Barrow & Crane LLP: Need to confirm that all 8 Collateral Properties are indeed unencumbered. Ironclad National Bank holds first-lien mortgages on 18 of the 22 properties. Please verify that there is no overlap between the 8 designated Collateral Properties and the 18 Ironclad-encumbered properties, and confirm that no cross-collateralization or negative-pledge provisions in Ironclad's loan documentation extend to any of the 8 Collateral Properties.]

3.2 UCC-1 Financing Statements. Within five (5) business days of the Closing Date, the Coastal Palms Parties shall execute and deliver to Verimark duly completed UCC-1 financing statements, substantially in the form attached as Exhibit F, for filing with the Florida Secured Transaction Registry and any other applicable filing offices, including the office of the Secretary of State of the State of Florida and the appropriate county recorder's offices in each county in which a Collateral Property is located. The Coastal Palms Parties shall cooperate fully and in all respects with Verimark in the perfection and maintenance of Verimark's security interest, including by executing and delivering any additional instruments, amendments, continuation statements, or other documents that Verimark may reasonably request in connection with the perfection or continuation of such security interest.

3.3 Maintenance of Collateral. Throughout the period during which any Structured Payment obligations remain outstanding, the Coastal Palms Parties shall:

(a) Maintain each Collateral Property in good condition and repair, consistent with prudent industry standards for comparable hotel properties;

(b) Maintain adequate property, casualty, and liability insurance on each Collateral Property, with coverage amounts and insurance carriers reasonably acceptable to Verimark, and naming Verimark as an additional insured and loss payee, as its interests may appear;

(c) Pay all real-property taxes, assessments, and other governmental charges or levies imposed upon each Collateral Property when due and before any penalty or interest accrues;

(d) Not create, incur, assume, or permit to exist any mortgage, lien, pledge, security interest, encumbrance, or other charge or restriction on any Collateral Property, except for liens in favor of Verimark under this Agreement and permitted liens (limited to current-year property tax liens not yet due and payable); and

(e) Not sell, transfer, lease (other than to hotel guests in the ordinary course of hotel operations), convey, or otherwise dispose of any Collateral Property or any interest therein without Verimark's prior written consent.

3.4 Release of Security Interest. Upon the payment in full of all Structured Payments, together with all accrued and unpaid interest, default interest (if any), and any other amounts due under this Agreement, Verimark shall, within thirty (30) calendar days of such payment in full, execute and deliver to the Coastal Palms Parties releases, satisfactions, and UCC-3 termination statements sufficient to release and terminate Verimark's security interest in each Collateral Property, and shall take all actions reasonably requested by the Coastal Palms Parties to evidence such release. Pro-rata partial releases of individual Collateral Properties prior to payment in full of all Structured Payments may be negotiated upon written request by the Coastal Palms Parties, at Verimark's sole and absolute discretion, and subject to such terms and conditions (including substitute collateral or additional payments) as Verimark may require.

3.5 Ironclad National Bank Consent. To the extent that Ironclad National Bank's existing loan documentation, including any credit agreements, mortgage instruments, inter-creditor agreements, or ancillary documents, contains negative-pledge covenants, cross-collateralization provisions, or other restrictions that affect or purport to affect any of the eight (8) designated Collateral Properties, the Parties shall use commercially reasonable efforts to obtain Ironclad's written consent or acknowledgment prior to the Closing Date. The Coastal Palms Parties shall initiate contact with Devon Schultz, Senior Vice President, Commercial Real Estate Lending, Ironclad National Bank, promptly following execution of this Agreement and shall keep Verimark reasonably informed of the status of such efforts.

[Note to Whitfield, Barrow & Crane LLP: Although the 8 Collateral Properties are believed to be unencumbered, coordination with Ironclad is prudent. Please confirm Coastal Palms' current relationship status with Ironclad and whether any consent process has been initiated.]

ARTICLE IV — PERSONAL GUARANTIES

4.1 Guaranty by Randall Brecker. Concurrently with the execution and delivery of this Agreement, Randall Brecker shall execute and deliver to Verimark an unconditional, continuing, and irrevocable personal guaranty of all obligations of the Coastal Palms Parties under this Agreement, including without limitation all Structured Payment obligations, accrued interest, default interest, indemnification obligations, and any costs and expenses arising from the enforcement of this Agreement (the "R. Brecker Guaranty"), substantially in the form attached hereto as Exhibit E-1. The R. Brecker Guaranty shall be a guaranty of payment and performance, and not merely a guaranty of collection, and Verimark shall not be required to proceed first against any Coastal Palms Party or any collateral before seeking recovery from R. Brecker under the R. Brecker Guaranty.

4.2 Guaranty by Nolan Prescott. Concurrently with the execution and delivery of this Agreement, Nolan Prescott shall execute and deliver to Verimark an unconditional, continuing, and irrevocable personal guaranty of all obligations of the Coastal Palms Parties under this Agreement, including without limitation all Structured Payment obligations, accrued interest, default interest, indemnification obligations, and any costs and expenses arising from the enforcement of this Agreement (the "Prescott Guaranty"), substantially in the form attached hereto as Exhibit E-2. The Prescott Guaranty shall be a guaranty of payment and performance, and not merely a guaranty of collection, and Verimark shall not be required to proceed first against any Coastal Palms Party or any collateral before seeking recovery from Prescott under the Prescott Guaranty.

[Note to Whitfield, Barrow & Crane LLP: Coastal Palms may seek to cap the personal guaranty exposure of both R. Brecker and Prescott. Verimark is prepared to discuss whether a reasonable cap may be appropriate but considers uncapped guaranties to be the default position given the magnitude of the Structured Payments. Please indicate Coastal Palms' position on guaranty caps and any proposed cap amounts.]

4.3 Joint and Several Liability. The obligations of R. Brecker and Prescott under their respective personal guaranties shall be joint and several with the obligations of the Coastal Palms Parties under this Agreement. Without limiting the generality of the foregoing, Verimark may, at its election, proceed against R. Brecker, Prescott, any one or more of the Coastal Palms Parties, or the Collateral Properties, in any order and in any combination, without exhausting remedies against any other obligor or collateral.

4.4 Theresa Brecker. Theresa Brecker, as a Member of Coastal Palms holding a fifteen percent (15%) equity interest, shall execute this Agreement and shall be bound by all of its terms and conditions, including without limitation the release provisions set forth in Article VII, the confidentiality provisions set forth in Article IX, and the non-disparagement provisions set forth in Article X. Notwithstanding the foregoing, T. Brecker shall not be required to provide a separate personal guaranty of the obligations of the Coastal Palms Parties under this Agreement.

[Note to Whitfield, Barrow & Crane LLP: Please confirm Coastal Palms' position on T. Brecker's obligations. Verimark's position is that T. Brecker must execute the Agreement as a Party and be bound by the release and confidentiality provisions, but a separate guaranty is not required at this time.]

ARTICLE V — FRANCHISE SURRENDER AND RETAINED PROPERTIES

5.1 Surrender of Franchise Rights — 14 Properties. Effective as of the Closing Date, Coastal Palms hereby irrevocably surrenders all franchise rights under the applicable FLAs for the fourteen (14) Surrendered Properties identified in Exhibit B hereto. Each FLA applicable to a Surrendered Property shall terminate in its entirety as of the Closing Date, and Coastal Palms shall have no further right to operate any Surrendered Property under the Verimark Suites or Verimark Select brand or to use any Verimark trademarks, trade names, service marks, or trade dress in connection with any Surrendered Property. The Surrendered Properties are located in the following markets:

(a) Sarasota, Florida: three (3) properties;

(b) Fort Myers, Florida: four (4) properties;

(d) Savannah, Georgia: three (3) properties; and

(e) Brunswick, Georgia: two (2) properties.

The specific property names, addresses, room counts, applicable FLA dates, and property-level entities for each Surrendered Property are set forth in Exhibit B.

5.2 Retained Properties — 8 Properties. Coastal Palms shall retain franchise rights for the following eight (8) hotel properties (the "Retained Properties"), subject to the execution of the New FLAs as provided in Section 5.3:

(a) Naples, Florida: four (4) properties;

(b) Marco Island, Florida: two (2) properties; and

The existing FLAs applicable to the Retained Properties shall terminate as of the Closing Date and shall be simultaneously replaced by the New FLAs described in Section 5.3 below, such that there shall be no interruption in the franchise relationship with respect to the Retained Properties.

5.3 New FLA Terms. The Parties shall execute new Franchise License Agreements for each of the eight (8) Retained Properties concurrently with the execution of this Agreement. Each New FLA shall be substantially in the form attached hereto as Exhibit C and shall include the following key terms:

(a) Term. Each New FLA shall have an initial term of ten (10) years, commencing on the Closing Date;

(b) Royalty Fee. Five percent (5%) of GRR, consistent with the royalty rate under the original FLAs (New FLA § 4.1);

(c) Marketing-Fund Contribution. Two and one-half percent (2.5%) of GRR, consistent with the contribution rate under the original FLAs (New FLA § 4.2);

(d) Technology Fee. Twelve Dollars and Fifty Cents ($12.50) per available room per month, subject to annual adjustment based on the Consumer Price Index for All Urban Consumers (CPI-U), as published by the Bureau of Labor Statistics, capped at three percent (3%) per year (New FLA § 4.3);

(e) Enhanced Audit Protocol. Each New FLA shall incorporate the Enhanced Audit Protocol set forth in Exhibit D hereto;

(f) Governing Law and Venue. Each New FLA shall be governed by the laws of the State of Florida, with exclusive venue in Broward County, Florida;

(g) Late-Payment Interest. Interest on overdue payments at the rate of one and one-half percent (1.5%) per month, compounded monthly (New FLA § 4.6);

(h) Liquidated Damages. Upon termination of any New FLA for cause, Coastal Palms shall pay to Verimark liquidated damages equal to three times (3×) the trailing-twelve-month royalty payments attributable to the applicable Retained Property (New FLA § 14.3); and

(i) Material Breach. The New FLAs shall provide that systematic underreporting of GRR shall constitute a material breach incapable of cure, entitling Verimark to terminate the applicable New FLA immediately upon written notice.

5.4 De-Identification of Surrendered Properties. Coastal Palms shall, at its sole cost and expense, complete the de-identification of all fourteen (14) Surrendered Properties no later than the De-Identification Deadline (i.e., one hundred twenty (120) calendar days after the Closing Date, which is August 20, 2024, assuming a Closing Date of April 22, 2024). De-identification shall include, without limitation, the following:

(a) Complete removal of all Verimark branding, signage, logos, trademarks, service marks, and trade dress from the interior and exterior of each Surrendered Property, including but not limited to building signage, monument signage, directional signage, lobby signage, room signage, and all branded amenities and collateral materials;

(b) Complete removal of all Verimark proprietary reservation systems, property-management systems, revenue-management systems, and any other Verimark-owned or Verimark-licensed technology systems from each Surrendered Property;

(c) Cessation of all use of the Verimark Suites and Verimark Select brand names, and any variations thereof, in all marketing materials, advertising, websites, social media accounts, online travel agency ("OTA") listings, and global distribution system ("GDS") listings associated with any Surrendered Property; and

(d) Return to Verimark of all Verimark-branded operating manuals, training materials, quality-assurance standards, and other proprietary materials in the possession or control of Coastal Palms or any of its Affiliates relating to the Surrendered Properties.

Failure to complete de-identification of all Surrendered Properties by the De-Identification Deadline shall constitute an Event of Default under Section 2.8 of this Agreement.

5.5 Cooperation During Transition. The Parties shall cooperate in good faith during the de-identification period to ensure minimal disruption to hotel guests, employees, and ongoing hotel operations at the Surrendered Properties. Without limiting the foregoing, the Parties agree that:

(a) All existing hotel guest reservations booked under the Verimark Suites or Verimark Select brands for stays at any Surrendered Property through the De-Identification Deadline shall be honored by Coastal Palms, and the Parties shall cooperate to ensure that guests experience a seamless transition;

(b) Verimark shall provide reasonable technical support to facilitate the removal of Verimark proprietary systems from the Surrendered Properties, provided that Coastal Palms shall bear all costs associated with such removal and any replacement systems; and

(c) The Parties shall coordinate on communications to OTAs, travel agents, and distribution partners to effectuate the orderly transition of the Surrendered Properties from Verimark branding.

ARTICLE VI — ENHANCED AUDIT PROTOCOL

6.1 Applicability. The Enhanced Audit Protocol, as set forth in detail in Exhibit D hereto, shall apply to all eight (8) Retained Properties for a period of five (5) years commencing on the Closing Date. The Enhanced Audit Protocol is designed to ensure the accurate and complete reporting of GRR by Coastal Palms and to provide Verimark with enhanced oversight and verification mechanisms in light of the revenue-underreporting practices that gave rise to the Litigation. The Enhanced Audit Protocol shall be incorporated into each New FLA by reference and shall be binding upon Coastal Palms as a material term thereof.

6.2 Key Terms of Enhanced Audit Protocol. The Enhanced Audit Protocol shall include, without limitation, the following requirements:

(a) Quarterly Audits. An independent auditor selected by Verimark shall conduct quarterly audits of GRR for each Retained Property. All audit costs, including auditor fees, travel expenses, and related costs, shall be borne exclusively by Coastal Palms for the full five (5)-year enhanced-audit period, regardless of the findings of any audit;

(b) Real-Time POS Integration. Within ninety (90) calendar days of the Closing Date, Coastal Palms shall integrate its point-of-sale ("POS") systems and property-management systems ("PMS") at all Retained Properties with Verimark's revenue-management platform, such that all booking and revenue data flows to Verimark in real time;

(c) Monthly GRR Reporting. Coastal Palms shall submit monthly GRR reports for each Retained Property within fifteen (15) calendar days of each month-end. Each monthly report shall be accompanied by supporting documentation, including bank-deposit reconciliations, OTA settlement statements, direct-booking channel summaries, and any other documentation reasonably requested by Verimark;

(d) Unrestricted Audit Access. Verimark and its designated auditors shall have unrestricted access to all financial records, bank statements, tax returns, OTA contracts, third-party booking data, and all other records related to the operation and revenues of each Retained Property, upon five (5) business days' prior written notice (shortened from the ten (10) business days' notice period provided under the original FLAs);

(e) Audit-Cost Allocation. All costs and expenses of the quarterly audits and any supplemental audits during the five (5)-year enhanced-audit period shall be borne exclusively by Coastal Palms, including fees of the independent auditor, travel costs, data-processing costs, and any costs associated with the real-time POS integration;

(f) Underreporting Threshold. Any underreporting of GRR exceeding two percent (2%) of reported GRR in any quarterly audit period shall constitute a material breach of the applicable New FLA, triggering the cure obligations and remedies set forth in the New FLA and this Agreement; and

(g) Annual Certification. Within ninety (90) calendar days of each fiscal year-end, Coastal Palms' Managing Member (currently Randall Brecker) shall deliver to Verimark a sworn written certification, under penalty of perjury, that all GRR has been accurately and completely reported for the preceding fiscal year in accordance with the terms of the applicable New FLAs and this Agreement.

6.3 Remedies for Audit Violations. In the event that any audit conducted pursuant to the Enhanced Audit Protocol reveals an underreporting of GRR, the following remedies shall apply:

(a) Payment of Deficiency. Coastal Palms shall pay to Verimark the full amount of the deficiency (calculated as the unpaid royalties, marketing-fund contributions, and technology fees attributable to the underreported GRR), together with interest on such deficiency at the rate of one and one-half percent (1.5%) per month, compounded monthly, from the date the payment was originally due until the date of payment in full. Payment shall be made within thirty (30) calendar days of Coastal Palms' receipt of written notice from Verimark specifying the deficiency amount and supporting calculations.

(b) Repeated Underreporting. If audits reveal underreporting of GRR in two (2) or more quarters within any twelve (12)-month period, such repeated underreporting shall constitute an Event of Default under Section 2.8 of this Agreement and shall constitute grounds for immediate termination of the applicable New FLA, without any further cure period.

ARTICLE VII — MUTUAL RELEASE

7.1 Release by Verimark. Effective upon the Closing, Verimark, on behalf of itself and its Affiliates, successors, assigns, parents, subsidiaries, officers, directors, employees, agents, attorneys, representatives, insurers, and all persons and entities claiming through or under any of them (collectively, the "Verimark Releasors"), hereby irrevocably and unconditionally releases and forever discharges the Coastal Palms Parties and their respective Affiliates, members, managers, officers, directors, employees, agents, attorneys, representatives, insurers, heirs, executors, administrators, successors, and assigns (collectively, the "Coastal Palms Releasees") from any and all claims, demands, actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, obligations, liabilities, losses, costs, expenses, and attorneys' fees of every kind and nature whatsoever, whether at law or in equity, whether known or unknown, suspected or unsuspected, asserted or unasserted, foreseen or unforeseen, accrued or unaccrued, contingent or non-contingent, direct or indirect, that the Verimark Releasors now have, have ever had, or may hereafter have against any of the Coastal Palms Releasees arising from, related to, or in connection with the FLAs, the Litigation (including all claims asserted or that could have been asserted in the Litigation), the conduct of Coastal Palms' franchise operations, and any acts, omissions, events, or transactions occurring through the Effective Date (collectively, the "Released Claims").

Notwithstanding the foregoing, the Released Claims shall not include: (i) any obligations arising under this Agreement; (ii) any obligations arising under the New FLAs; and (iii) any claims arising from acts, omissions, events, or transactions occurring after the Effective Date.

7.2 Release by Coastal Palms Parties. Effective upon the Closing, each of the Coastal Palms Parties, on behalf of itself, himself, or herself, as applicable, and on behalf of their respective Affiliates, members, managers, officers, directors, employees, agents, attorneys, representatives, insurers, heirs, executors, administrators, successors, and assigns (collectively, the "Coastal Palms Releasors"), hereby irrevocably and unconditionally releases and forever discharges Verimark and its Affiliates, parents, subsidiaries, officers, directors, employees, agents, attorneys, representatives, insurers, successors, and assigns (collectively, the "Verimark Releasees") from any and all Released Claims, including without limitation all claims, counterclaims, cross-claims, defenses, and causes of action asserted or that could have been asserted in the Counterclaim or otherwise in the Litigation.

7.3 Covenant Not to Sue. Each Party hereby covenants and agrees, for itself and on behalf of its respective Releasors, that it will not commence, maintain, prosecute, encourage, or voluntarily participate in any action, suit, proceeding, complaint, charge, or other legal or administrative proceeding in any court, tribunal, agency, or other forum against any other Party or any other Released Party based upon, arising from, or related to any Released Claim. Any violation of this covenant not to sue shall entitle the non-breaching Party to recover from the breaching Party its reasonable attorneys' fees, costs, and expenses incurred in defending against such action, in addition to any other remedies available at law or in equity.

7.4 Waiver of Unknown Claims. Each Party expressly waives and relinquishes, to the fullest extent permitted by applicable law, all rights and benefits that such Party may have under any statute, regulation, or common-law principle (including, without limitation, Section 1542 of the California Civil Code and any analogous provision of the laws of any other state or jurisdiction) that limits or restricts a general release to those claims that the releasing party knows or suspects to exist in its favor at the time of executing the release. Each Party acknowledges that it may discover facts different from or in addition to those that it now knows or believes to be true with respect to the subject matter of this Agreement and the Released Claims, and each Party agrees that this release shall be and remain effective in all respects notwithstanding any such discovery and notwithstanding any change in law or fact that might otherwise affect or limit the scope of this release.

ARTICLE VIII — DISMISSAL OF LITIGATION

8.1 Joint Stipulation of Dismissal. Within five (5) business days following the Closing Date, the Parties shall jointly prepare, execute, and file with the Clerk of the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida, a Stipulation of Dismissal with Prejudice in the Litigation, Case No. 1021-00006, dismissing all claims and counterclaims with prejudice, with each Party bearing its own attorneys' fees, costs, and expenses. The Stipulation of Dismissal shall be signed by counsel for all Parties, including Priya Anand (FL Bar No. 0087451), Calderwood & Harkness LLP, on behalf of Verimark, and Nathan Whitfield III, Whitfield, Barrow & Crane LLP, on behalf of the Coastal Palms Parties. Counsel for the Parties shall cooperate in the preparation and filing of the Stipulation and any related documents required by the Court.

8.2 Counterclaim Dismissal. Coastal Palms hereby irrevocably agrees to dismiss its Counterclaim (filed April 18, 2022, in the Litigation, alleging approximately Twelve Million Dollars ($12,000,000) in damages for brand-standard violations and over-billing) with prejudice as of the Effective Date. The dismissal of the Counterclaim shall be incorporated into the Joint Stipulation of Dismissal filed pursuant to Section 8.1 and shall be effective regardless of whether the Joint Stipulation has been formally entered by the Court as of the Effective Date.

8.3 Court Retention of Jurisdiction.

[Note to Whitfield, Barrow & Crane LLP: The Parties should discuss whether to request that the Court retain jurisdiction to enforce the terms of this Settlement Agreement, or whether disputes arising under this Agreement should instead be resolved through binding arbitration or through a new action filed in the courts designated in Section 13.2. Verimark's preliminary view is that court retention of jurisdiction may be the more efficient mechanism, but is open to discussion.]

ARTICLE IX — CONFIDENTIALITY

9.1 Confidentiality Obligations. Subject to the exceptions set forth in Section 9.2, the Parties shall keep the terms, amount, and existence of this Agreement, as well as the substance and content of all negotiations leading to this Agreement, strictly confidential and shall not disclose, publish, or disseminate the same to any third party, whether directly or indirectly, voluntarily or involuntarily. The confidentiality obligations set forth in this Article IX shall survive the termination or expiration of this Agreement and shall continue in perpetuity.

9.2 Permitted Disclosures. Notwithstanding Section 9.1, disclosure of Confidential Information is permitted in the following circumstances:

(a) Professional Advisors. Disclosures to the Parties' respective legal counsel, accountants, tax advisors, and financial advisors, on a need-to-know basis, provided that such persons are bound by confidentiality obligations at least as restrictive as those contained in this Article IX and that the disclosing Party shall be responsible for any breach by its advisors;

(b) Legal and Regulatory Requirements. Disclosures required by applicable federal, state, or local law, regulation, or court order, including without limitation Verimark's disclosure obligations under the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Securities and Exchange Commission ("SEC") and the Nasdaq Stock Market, as a publicly traded company (Nasdaq: VHMK);

(c) Ironclad National Bank. Disclosures to Ironclad National Bank as reasonably necessary in connection with Coastal Palms' existing loan obligations, credit facilities, and the consent process contemplated by Section 3.5;

(d) Insurance. Disclosures to Pinnacle Indemnity Insurance Co. as reasonably necessary in connection with Verimark's insurance claims under Policy No. PLI-VHG-2021-08874; and

(e) Compulsory Legal Process. Disclosures made in response to a valid subpoena, civil investigative demand, or other compulsory legal process, provided that the disclosing Party (i) gives prompt written notice (and, where possible, advance notice) to the other Parties of the receipt of such process, (ii) cooperates with the other Parties in seeking a protective order or other appropriate remedy to limit or prevent the disclosure, and (iii) discloses only the minimum amount of Confidential Information necessary to comply with such process.

9.3 SEC Disclosure. The Parties acknowledge and agree that Verimark, as a publicly traded company listed on the Nasdaq Stock Market (Nasdaq: VHMK), may be required to disclose the settlement as a "material litigation settlement" in its filings with the SEC, including without limitation its Quarterly Report on Form 10-Q for the fiscal quarter ending June 30, 2024 (the "Q2 2024 10-Q"), its Current Report on Form 8-K, and any other periodic or current reports required by applicable securities laws and regulations. Any such disclosure shall be limited to the minimum information required by applicable securities laws and SEC regulations, and Verimark shall use reasonable efforts to seek confidential treatment of the specific financial terms of the settlement to the extent permitted by law.

9.4 Public Statements. If asked by any third party, including members of the press, media, industry analysts, business associates, or the general public, about the resolution of the Litigation, the Parties and their respective officers, directors, members, managers, employees, agents, and representatives shall state only that "the matter has been resolved to the mutual satisfaction of the parties" or substantially similar words to that effect, and shall not disclose the terms, amount, or specific conditions of the settlement. The Parties shall not issue any press release or public statement regarding this Agreement without the prior written consent of the other Parties, except as required by applicable securities laws or regulations.

9.5 Remedies for Breach. Any breach or threatened breach of the confidentiality obligations set forth in this Article IX shall entitle the non-breaching Party to seek immediate injunctive relief, specific performance, and any other equitable remedies available from a court of competent jurisdiction, without the necessity of posting a bond or proving actual damages. In addition, the non-breaching Party shall be entitled to recover from the breaching Party all actual damages suffered as a result of such breach, together with reasonable attorneys' fees, costs, and expenses incurred in enforcing the provisions of this Article IX.

ARTICLE X — NON-DISPARAGEMENT

10.1 Mutual Non-Disparagement. For a period of three (3) years from the Effective Date, no Party shall, and each Party shall cause its officers, directors, members, managers, employees, and agents not to, make or publish any statement, whether oral, written, or electronic (including on any social media platform, website, blog, or similar forum), that disparages, defames, impugns, or casts in a negative light any other Party, or any other Party's business, products, services, brands, reputation, officers, directors, members, managers, employees, or operations. This non-disparagement obligation shall apply to all public and private statements, except as set forth in Section 10.2.

10.2 Exceptions. The non-disparagement obligations set forth in Section 10.1 shall not restrict:

(a) Truthful testimony compelled by subpoena, court order, or other valid legal process in any judicial, administrative, or arbitral proceeding;

(b) Statements made in connection with the enforcement or defense of any right or obligation under this Agreement, the New FLAs, the Security Agreement, or the Personal Guaranties; or

(c) Statements made in confidence to a Party's legal counsel, tax advisors, or financial advisors in a confidential professional setting, provided that such advisors are informed of the non-disparagement obligations contained herein.

ARTICLE XI — REPRESENTATIONS AND WARRANTIES

11.1 Mutual Representations. Each Party hereby represents and warrants to the other Parties, as of the date hereof and as of the Closing Date, as follows:

(a) Authority. Such Party has full power, authority, and legal capacity to execute and deliver this Agreement and to perform all of its obligations hereunder. With respect to each entity Party, the execution, delivery, and performance of this Agreement has been duly authorized by all necessary corporate, limited liability company, or other organizational action, as applicable, including, with respect to Verimark, any required approvals of its board of directors or authorized committee thereof.

(b) Binding Obligation. This Agreement constitutes a valid and binding obligation of such Party, enforceable against such Party in accordance with its terms, subject only to applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).

(c) No Conflict. The execution, delivery, and performance of this Agreement by such Party does not and will not (i) violate any provision of such Party's organizational documents (if applicable), (ii) conflict with, result in a breach of, or constitute a default under any material agreement, instrument, order, judgment, decree, or obligation to which such Party is a party or by which such Party or its assets are bound, or (iii) violate any applicable law, regulation, or order of any governmental authority.

(d) No Other Proceedings. Such Party is not aware of any pending or threatened claim, action, suit, or proceeding (other than the Litigation) that would materially affect such Party's ability to perform its obligations under this Agreement.

11.2 Representations by Coastal Palms Parties. Each of the Coastal Palms Parties hereby represents and warrants to Verimark, as of the date hereof and as of the Closing Date, as follows:

(a) Clear Title to Collateral. The Collateral Properties are free and clear of all liens, mortgages, deeds of trust, pledges, security interests, encumbrances, restrictions, easements, and other charges of any kind, other than as specifically disclosed in Exhibit F hereto and other than permitted liens consisting solely of current-year real-property tax liens not yet due and payable.

(b) No Insolvency. No Coastal Palms Party has filed, and no Coastal Palms Party intends to file or contemplates filing, any voluntary petition in bankruptcy or any petition or application seeking reorganization, arrangement, composition, readjustment, dissolution, liquidation, or similar relief under any federal or state bankruptcy, insolvency, or similar law. No involuntary petition in bankruptcy has been filed against any Coastal Palms Party, and no Coastal Palms Party has made or contemplates making a general assignment for the benefit of creditors.

(c) Accuracy of Financial Information. The financial information, data, statements, and projections provided by the Coastal Palms Parties to Verimark in connection with the settlement negotiations and the mediation are materially accurate and complete in all respects and do not contain any material misstatement or omission that would render such information misleading.

(d) Authority of Randall Brecker. Randall Brecker is the duly appointed Managing Member of Coastal Palms Franchise Holdings LLC, with full authority to execute this Agreement and all ancillary documents on behalf of Coastal Palms, and is further authorized to bind Gulf Breeze Hospitality LLC, Savannah Lodging Partners LLC, and Suncoast Room Management Inc. to the terms hereof in his capacities as Managing Member and President, respectively, of each such entity.

(e) No Undisclosed Liabilities. There are no undisclosed liabilities, judgments, liens, orders, injunctions, or pending or threatened litigation, arbitration, or administrative proceedings that would materially impair the ability of any Coastal Palms Party to perform its obligations under this Agreement or that would affect the Collateral Properties.

11.3 Representations by Verimark. Verimark hereby represents and warrants to the Coastal Palms Parties, as of the date hereof and as of the Closing Date, as follows:

(a) No Third-Party Interests. No third party (other than Verimark's insurers, to the extent of their subrogation rights, which have been discharged or will be discharged prior to or concurrently with Closing) has any right, title, or interest in or to the Released Claims that has not been discharged or assigned to Verimark.

(b) Board Approval. Verimark's board of directors (or a duly authorized committee thereof) has approved the execution, delivery, and performance of this Agreement and the transactions contemplated hereby, and no further corporate action is required for Verimark to consummate the settlement on the terms set forth herein.

ARTICLE XII — INDEMNIFICATION

12.1 Indemnification by Coastal Palms Parties. The Coastal Palms Parties shall, jointly and severally, indemnify, defend, and hold harmless Verimark and the Verimark Releasees (collectively, the "Verimark Indemnified Parties") from and against any and all losses, claims, damages, liabilities, obligations, penalties, judgments, awards, costs, fees, and expenses (including without limitation reasonable attorneys' fees, expert witness fees, and costs of investigation and litigation) of any kind or nature whatsoever (collectively, "Losses") arising from, relating to, or in connection with:

(a) Any breach of any representation, warranty, covenant, or obligation of any Coastal Palms Party under this Agreement, the Security Agreement, the Personal Guaranties, or any ancillary document delivered in connection herewith;

(b) Any third-party claim, demand, action, or proceeding arising from or relating to Coastal

SETTLEMENT AGREEMENT AND MUTUAL RELEASE
DRAFT — Version 1 — April 2, 2024
Prepared by: Calderwood & Harkness LLP 110 SE 6th Street, Suite 2800 Fort Lauderdale, FL 33301
Circulated to: Whitfield, Barrow & Crane LLP 1221 Brickell Avenue, Suite 3000 Miami, FL 33131
Submitted for review and comment. Please return redline by April 10, 2024.
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement and Mutual Release (this "Agreement") is entered into as of ___, 2024 (the "Effective Date"), by and among:
VERIMARK HOSPITALITY GROUP INC., a Delaware corporation, with its principal place of business at 2400 East Las Olas Boulevard, Suite 3100, Fort Lauderdale, FL 33301 (Nasdaq: VHMK) (hereinafter referred to as "Verimark" or "VHG");
and
COASTAL PALMS FRANCHISE HOLDINGS LLC, a Florida limited liability company, with its principal office at 9500 Gulf Shore Drive, Suite 450, Naples, FL 34108 (hereinafter referred to as "Coastal Palms" or "CPFH");
RANDALL "RANDY" BRECKER, an individual, Managing Member of Coastal Palms (60% equity holder) and President of Suncoast Room Management Inc., residing in Naples, Florida (hereinafter referred to as "R. Brecker");
THERESA BRECKER, an individual, Member of Coastal Palms (15% equity holder), residing in Naples, Florida (hereinafter referred to as "T. Brecker");
NOLAN PRESCOTT, an individual, Member of Coastal Palms (25% equity holder), residing in Naples, Florida (hereinafter referred to as "Prescott");
GULF BREEZE HOSPITALITY LLC, a Florida limited liability company (hereinafter referred to as "Gulf Breeze");
SAVANNAH LODGING PARTNERS LLC, a Georgia limited liability company (hereinafter referred to as "Savannah Lodging"); and
SUNCOAST ROOM MANAGEMENT INC., a Florida corporation (hereinafter referred to as "Suncoast").
Coastal Palms, R. Brecker, T. Brecker, Prescott, Gulf Breeze, Savannah Lodging, and Suncoast are hereinafter collectively referred to as the "Coastal Palms Parties." Verimark and the Coastal Palms Parties are hereinafter collectively referred to as the "Parties" and individually as a "Party."
RECITALS
WHEREAS:
A. Franchise Relationship. Coastal Palms and Verimark are parties to twenty-two (22) individual Franchise License Agreements (collectively, the "FLAs"), the first of which was executed on June 15, 2007, pertaining to a hotel property located in Naples, Florida, and the most recent of which was executed on September 3, 2019. The FLAs govern the operation of twenty-two (22) franchised hotel properties, of which eighteen (18) are branded "Verimark Suites" and four (4) are branded "Verimark Select," located across the States of Florida and Georgia, comprising approximately 3,740 total guest rooms. Each FLA provides for a twenty (20)-year initial term and is governed by the laws of the State of Florida, with mandatory venue for any dispute in Broward County, Florida. Under the terms of each FLA, Coastal Palms is obligated to pay to Verimark: (i) a royalty fee equal to five percent (5%) of Gross Room Revenue ("GRR") (FLA § 4.1); (ii) a marketing-fund contribution equal to two and one-half percent (2.5%) of GRR (FLA § 4.2); and (iii) a technology fee of Twelve Dollars and Fifty Cents ($12.50) per available room per month (FLA § 4.3).
B. The Dispute. An internal audit conducted by Verimark, triggered by a whistleblower report received on November 8, 2021, together with a compliance audit performed by Thornbury & Associates CPAs LLP (whose preliminary findings were delivered on January 18, 2022), revealed that Coastal Palms had systematically underreported GRR over the period from 2013 through 2021. The underreporting was accomplished by diverting guest-room revenues through Suncoast Room Management Inc. and an unbranded website (gulfcoastrooms.com), and by improperly netting revenues received through online travel agencies ("OTAs"). Verimark estimated total underreported GRR at approximately One Hundred Ninety-Seven Million Eight Hundred Thousand Dollars ($197,800,000), resulting in underpayment of royalties of approximately Nine Million Eight Hundred Ninety Thousand Dollars ($9,890,000), underpayment of marketing-fund contributions of approximately Four Million Nine Hundred Forty-Five Thousand Dollars ($4,945,000), and underpayment of technology fees of approximately One Million Two Hundred Sixty Thousand Dollars ($1,260,000), plus contractual late-payment interest of approximately Twenty-Eight Million Four Hundred Thousand Dollars ($28,400,000) and liquidated damages of approximately One Hundred Five Million Five Hundred Thousand Dollars ($105,500,000), for total claimed damages of approximately One Hundred Fifty Million Dollars ($150,000,000). On February 4, 2022, Verimark issued a Notice of Material Breach to Coastal Palms; no cure was tendered within the thirty (30)-day cure period prescribed by the FLAs.
C. The Litigation. On March 7, 2022, Verimark filed a ten (10)-count Complaint in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida, styled Verimark Hospitality Group Inc. v. Coastal Palms Franchise Holdings LLC, et al., Case No. 1021-00006 (the "Litigation"), before the Honorable Richard M. Calloway, Circuit Judge. The Complaint asserted claims for, among other things, breach of contract (royalties), breach of contract (marketing-fund contributions), breach of contract (technology fees), breach of the implied covenant of good faith and fair dealing, fraudulent concealment, negligent misrepresentation, unjust enrichment, declaratory judgment, accounting, and civil conspiracy. On April 18, 2022, Coastal Palms filed an Answer, Affirmative Defenses, and a Counterclaim seeking approximately Twelve Million Dollars ($12,000,000) in damages for alleged brand-standard violations and over-billing by Verimark. Extensive discovery was conducted over the course of the Litigation, including the processing and review of approximately 2.3 million documents, the taking of fourteen (14) fact depositions, and the completion of two (2) expert depositions.
D. Summary Judgment. On February 9, 2024, the Court entered an Order granting Verimark's Motion for Partial Summary Judgment on Count I (Breach of Contract — Royalties) and Count II (Breach of Contract — Marketing Fund), finding that Coastal Palms' exclusion of revenues collected through Suncoast Room Management Inc. from its calculation of GRR constituted a material breach of FLA §§ 4.1 and 4.2 as a matter of law. The Court denied Coastal Palms' Cross-Motion for Summary Judgment and deferred the determination of damages to trial.
E. Mediation and Settlement. On March 14 and 15, 2024, the Parties participated in a two-day mediation before the Honorable Patricia Everwood (Ret.) at Everwood Dispute Resolution PLLC, 396 Alhambra Circle, Suite 800, Coral Gables, FL 33134. A tentative settlement was reached at the conclusion of the mediation on March 15, 2024, and a binding Term Sheet was executed by the Parties on March 22, 2024. The Parties now desire to enter into this Agreement to fully and finally resolve all disputes, claims, counterclaims, and controversies between them arising from or related to the FLAs and the Litigation, upon the terms and conditions set forth herein.
F. Consideration. The Parties acknowledge and agree that the mutual covenants, promises, releases, and undertakings contained herein, including the payment of the Settlement Amount, the surrender and retention of franchise rights, and the mutual releases, constitute good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each Party.
NOW, THEREFORE, in consideration of the foregoing recitals (which are incorporated herein by reference), the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I — DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set forth below. Capitalized terms used but not defined in this Article I shall have the meanings ascribed to them elsewhere in this Agreement.
1.1 "Affiliate" means, with respect to any Party, any entity that directly or indirectly controls, is controlled by, or is under common control with such Party. For purposes of this definition, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of an entity, whether through the ownership of voting securities, by contract, or otherwise.
1.2 "Closing" means the date on which the Initial Payment is made and this Agreement becomes effective in accordance with its terms.
1.3 "Closing Date" means the Effective Date of this Agreement, targeted for April 22, 2024.
1.4 "Collateral Properties" means the eight (8) unencumbered hotel properties described in Exhibit F hereto, which shall serve as collateral to secure the Structured Payment obligations of the Coastal Palms Parties, and which have an aggregate appraised value of approximately Seventy-One Million Two Hundred Thousand Dollars ($71,200,000).
1.5 "Confidential Information" means the terms, amount, and existence of this Agreement, the negotiations leading to this Agreement, and all documents and communications exchanged in connection therewith, subject to the exceptions set forth in Section 9.2 of this Agreement, including but not limited to disclosures required by applicable securities laws and regulations (including Verimark's SEC disclosure obligations), legal or regulatory requirements, disclosures compelled by valid legal process, and disclosures to professional advisors bound by confidentiality obligations.
1.6 "Counterclaim" means the counterclaim filed by Coastal Palms on April 18, 2022, in the Litigation, seeking approximately Twelve Million Dollars ($12,000,000) in damages for alleged brand-standard violations and over-billing.
1.7 "De-Identification Deadline" means the date that is one hundred twenty (120) calendar days after the Closing Date (i.e., August 20, 2024, assuming a Closing Date of April 22, 2024).
1.8 "Enhanced Audit Protocol" means the enhanced audit and reporting requirements set forth in Exhibit D hereto, as further described in Article VI of this Agreement.
1.9 "FLA" or "Franchise License Agreement" means each of the twenty-two (22) individual Franchise License Agreements entered into between Verimark and Coastal Palms, governing the operation of Coastal Palms' franchised hotel properties under the Verimark Suites and Verimark Select brands.
1.10 "GRR" or "Gross Room Revenue" means, as defined in Section 4.1 of each FLA, "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."
1.11 "Initial Payment" means the sum of Twenty-Five Million Dollars ($25,000,000) payable by the Coastal Palms Parties to Verimark on the Closing Date by wire transfer of immediately available funds, as set forth in Section 2.2 of this Agreement.
1.12 "Ironclad" means Ironclad National Bank, the commercial lender holding first-lien mortgage loans on eighteen (18) of the twenty-two (22) Coastal Palms hotel properties, with an aggregate outstanding principal balance of approximately Ninety-Four Million Dollars ($94,000,000) as of the date hereof.
1.13 "Litigation" means the action styled Verimark Hospitality Group Inc. v. Coastal Palms Franchise Holdings LLC, et al., Case No. 1021-00006, pending in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida, before the Honorable Richard M. Calloway, Circuit Judge.
1.14 "New FLAs" means the new ten (10)-year Franchise License Agreements to be entered into between Verimark and Coastal Palms for each of the Retained Properties, substantially in the form attached hereto as Exhibit C.
1.15 "Payment Schedule" means the schedule of payments set forth in Exhibit A hereto.
1.16 "Personal Guarantors" means Randall Brecker and Nolan Prescott, each of whom shall execute a personal guaranty in accordance with Article IV of this Agreement.
1.17 "Released Claims" has the meaning set forth in Article VII of this Agreement.
1.18 "Retained Properties" means the eight (8) hotel properties listed in Section 5.2 of this Agreement that Coastal Palms shall continue to operate under new Franchise License Agreements with Verimark, located in Naples, Florida (4 properties), Marco Island, Florida (2 properties), and Tampa, Florida (2 properties).
1.19 "Security Agreement" means the form of security agreement and UCC-1 financing statement attached hereto as Exhibit F.
1.20 "Settlement Amount" means the aggregate sum of Eighty-Seven Million Five Hundred Thousand Dollars ($87,500,000), comprising the Initial Payment and the Structured Payments.
1.21 "Structured Payments" means the aggregate sum of Sixty-Two Million Five Hundred Thousand Dollars ($62,500,000), payable in eight (8) equal semi-annual installments of Seven Million Eight Hundred Twelve Thousand Five Hundred Dollars ($7,812,500) each, commencing on October 22, 2024, and ending on April 22, 2028, as more fully described in Section 2.3 and the Payment Schedule attached as Exhibit A.
1.22 "Surrendered Properties" means the fourteen (14) hotel properties listed in Exhibit B hereto that Coastal Palms shall de-identify and cease operating under Verimark branding in accordance with Section 5.4 of this Agreement.
ARTICLE II — SETTLEMENT PAYMENT
2.1 Total Settlement Amount. In full and final settlement of all claims, counterclaims, causes of action, and controversies between the Parties arising from or related to the FLAs and the Litigation, the Coastal Palms Parties shall pay to Verimark the aggregate sum of Eighty-Seven Million Five Hundred Thousand Dollars ($87,500,000) (the "Settlement Amount"), payable in accordance with this Article II and the Payment Schedule attached hereto as Exhibit A. The Settlement Amount represents a negotiated compromise of all disputed matters, and no Party admits liability or wrongdoing by entering into this Agreement or agreeing to the payment of the Settlement Amount.
2.2 Initial Payment. On the Closing Date, the Coastal Palms Parties shall pay to Verimark the sum of Twenty-Five Million Dollars ($25,000,000) (the "Initial Payment") by wire transfer of immediately available funds to a bank account designated in writing by Verimark. The Initial Payment shall be funded from an escrow account maintained at Ironclad National Bank, which has been established for this purpose. Verimark shall provide complete wire transfer instructions to Coastal Palms no later than five (5) business days prior to the Closing Date. Upon receipt of the Initial Payment by Verimark, Verimark shall promptly confirm such receipt in writing to Coastal Palms' counsel.
2.3 Structured Payments. Following the Closing Date, the Coastal Palms Parties shall pay to Verimark the sum of Sixty-Two Million Five Hundred Thousand Dollars ($62,500,000), payable in eight (8) equal semi-annual installments of Seven Million Eight Hundred Twelve Thousand Five Hundred Dollars ($7,812,500) each (each, a "Structured Payment"), in accordance with the following schedule:
(a) The first Structured Payment shall be due and payable on October 22, 2024;
(b) Subsequent Structured Payments shall be due and payable on April 22 and October 22 of each succeeding year thereafter; and
(c) The final Structured Payment shall be due and payable on April 22, 2028.
All Structured Payments shall be made by wire transfer of immediately available funds to a bank account designated in writing by Verimark. The complete Payment Schedule, including estimated interest calculations, is set forth in Exhibit A hereto.
2.4 Interest on Structured Payments. Interest shall accrue on the outstanding principal balance of the Structured Payments at the rate of six and one-half percent (6.5%) per annum, calculated as simple interest on the basis of a three hundred sixty-five (365)-day year and the actual number of days elapsed. Interest shall commence accruing on the Closing Date and shall be payable semi-annually concurrently with each Structured Payment. The estimated interest amounts for each payment period are set forth in the Payment Schedule attached as Exhibit A.
2.5 Prepayment. The Coastal Palms Parties may, at any time and from time to time, prepay all or any portion of the outstanding principal balance of the Structured Payments without premium, penalty, or additional charge. Any partial prepayment shall be applied first to all accrued and unpaid interest on the outstanding principal balance and then to principal in inverse order of maturity (i.e., applied to the latest-maturing Structured Payment first). Coastal Palms shall provide Verimark with at least five (5) business days' prior written notice of any intended prepayment, specifying the amount and intended payment date.
2.6 Late Payment. Any Structured Payment (or portion thereof) not received by Verimark within ten (10) business days of its scheduled due date shall bear additional default interest at the rate of one and one-half percent (1.5%) per month, compounded monthly, on the overdue amount from the original due date until such overdue amount is paid in full. The assessment of default interest under this Section 2.6 shall be in addition to, and not in lieu of, any other rights or remedies available to Verimark under this Agreement, at law, or in equity. Any late payment shall also constitute an Event of Default under Section 2.8 of this Agreement.
2.7 Taxes. Each Party shall be solely responsible for its own tax obligations arising from or in connection with the Settlement Amount, including any federal, state, or local income taxes, franchise taxes, or other taxes attributable to the receipt or payment of any portion of the Settlement Amount. No Party shall have any obligation to withhold taxes from any payment made under this Agreement absent a legal obligation to do so under applicable law. In the event any Party determines that withholding is legally required with respect to any payment, such Party shall provide prompt written notice to the other Party and shall withhold only the minimum amount required by applicable law. The Parties shall cooperate in good faith in the preparation and filing of any tax forms or returns relating to the settlement payments.
2.8 Events of Default and Acceleration. An "Event of Default" shall be deemed to have occurred upon the happening of any of the following events:
(a) Failure to Pay. Failure by any Coastal Palms Party to make any Structured Payment within ten (10) business days of its scheduled due date;
(b) Breach of Covenant. Breach by any Coastal Palms Party of any material covenant, obligation, or undertaking under this Agreement (other than a payment obligation) that remains uncured for a period of thirty (30) calendar days after written notice of such breach is delivered by Verimark to the breaching Coastal Palms Party;
(c) Bankruptcy or Insolvency. The filing by any Coastal Palms Party of a voluntary petition in bankruptcy, or the commencement of any proceeding under any federal or state bankruptcy, insolvency, reorganization, receivership, or similar law, or the making of a general assignment for the benefit of creditors by any Coastal Palms Party, or the entry of an order for relief against any Coastal Palms Party in an involuntary bankruptcy case that is not dismissed within sixty (60) days;
(d) Material Misrepresentation. Any representation or warranty made by any Coastal Palms Party under this Agreement or any document delivered in connection herewith proves to have been materially false or misleading when made; and
(e) Unauthorized Transfer of Collateral. The sale, transfer, conveyance, encumbrance, or other disposition of any Collateral Property (or any interest therein) by any Coastal Palms Party without the prior written consent of Verimark.
Upon the occurrence of an Event of Default, Verimark may, at its sole election and upon written notice to the Coastal Palms Parties, declare all remaining unpaid Structured Payments, together with all accrued and unpaid interest (including default interest), immediately due and payable in full (an "Acceleration"). The exercise of Acceleration shall not constitute a waiver of any other rights or remedies available to Verimark under this Agreement, the Security Agreement, the Personal Guaranties, or applicable law.
[Note to Whitfield, Barrow & Crane LLP: Acceleration triggers to be discussed. Coastal Palms may seek extended cure periods for certain non-payment defaults under subsection (b), and may request that the cure period for subsection (a) be extended from 10 business days to 15 business days. Verimark is prepared to discuss reasonable cure provisions but considers the payment-default trigger in subsection (a) to be firm.]
ARTICLE III — SECURITY
3.1 Security Interest in Collateral Properties. To secure the timely and complete payment and performance of all obligations of the Coastal Palms Parties under Article II of this Agreement, including all Structured Payments, accrued interest, default interest, and any costs or expenses arising from enforcement, Coastal Palms and the applicable property-level entities owning the Collateral Properties shall grant to Verimark a first-priority lien and security interest in the eight (8) Collateral Properties identified in Exhibit F hereto. The Collateral Properties have an aggregate appraised value of approximately Seventy-One Million Two Hundred Thousand Dollars ($71,200,000), as determined by independent appraisals conducted within the twelve (12) months preceding the date of this Agreement. Each of the Collateral Properties is represented to be unencumbered by any mortgage, deed of trust, or similar lien as of the Closing Date. The security interest granted under this Section 3.1 shall be documented by the Security Agreement and related instruments in the forms attached as Exhibit F.
[Note to Whitfield, Barrow & Crane LLP: Need to confirm that all 8 Collateral Properties are indeed unencumbered. Ironclad National Bank holds first-lien mortgages on 18 of the 22 properties. Please verify that there is no overlap between the 8 designated Collateral Properties and the 18 Ironclad-encumbered properties, and confirm that no cross-collateralization or negative-pledge provisions in Ironclad's loan documentation extend to any of the 8 Collateral Properties.]
3.2 UCC-1 Financing Statements. Within five (5) business days of the Closing Date, the Coastal Palms Parties shall execute and deliver to Verimark duly completed UCC-1 financing statements, substantially in the form attached as Exhibit F, for filing with the Florida Secured Transaction Registry and any other applicable filing offices, including the office of the Secretary of State of the State of Florida and the appropriate county recorder's offices in each county in which a Collateral Property is located. The Coastal Palms Parties shall cooperate fully and in all respects with Verimark in the perfection and maintenance of Verimark's security interest, including by executing and delivering any additional instruments, amendments, continuation statements, or other documents that Verimark may reasonably request in connection with the perfection or continuation of such security interest.
3.3 Maintenance of Collateral. Throughout the period during which any Structured Payment obligations remain outstanding, the Coastal Palms Parties shall:
(a) Maintain each Collateral Property in good condition and repair, consistent with prudent industry standards for comparable hotel properties;
(b) Maintain adequate property, casualty, and liability insurance on each Collateral Property, with coverage amounts and insurance carriers reasonably acceptable to Verimark, and naming Verimark as an additional insured and loss payee, as its interests may appear;
(c) Pay all real-property taxes, assessments, and other governmental charges or levies imposed upon each Collateral Property when due and before any penalty or interest accrues;
(d) Not create, incur, assume, or permit to exist any mortgage, lien, pledge, security interest, encumbrance, or other charge or restriction on any Collateral Property, except for liens in favor of Verimark under this Agreement and permitted liens (limited to current-year property tax liens not yet due and payable); and
(e) Not sell, transfer, lease (other than to hotel guests in the ordinary course of hotel operations), convey, or otherwise dispose of any Collateral Property or any interest therein without Verimark's prior written consent.
3.4 Release of Security Interest. Upon the payment in full of all Structured Payments, together with all accrued and unpaid interest, default interest (if any), and any other amounts due under this Agreement, Verimark shall, within thirty (30) calendar days of such payment in full, execute and deliver to the Coastal Palms Parties releases, satisfactions, and UCC-3 termination statements sufficient to release and terminate Verimark's security interest in each Collateral Property, and shall take all actions reasonably requested by the Coastal Palms Parties to evidence such release. Pro-rata partial releases of individual Collateral Properties prior to payment in full of all Structured Payments may be negotiated upon written request by the Coastal Palms Parties, at Verimark's sole and absolute discretion, and subject to such terms and conditions (including substitute collateral or additional payments) as Verimark may require.
3.5 Ironclad National Bank Consent. To the extent that Ironclad National Bank's existing loan documentation, including any credit agreements, mortgage instruments, inter-creditor agreements, or ancillary documents, contains negative-pledge covenants, cross-collateralization provisions, or other restrictions that affect or purport to affect any of the eight (8) designated Collateral Properties, the Parties shall use commercially reasonable efforts to obtain Ironclad's written consent or acknowledgment prior to the Closing Date. The Coastal Palms Parties shall initiate contact with Devon Schultz, Senior Vice President, Commercial Real Estate Lending, Ironclad National Bank, promptly following execution of this Agreement and shall keep Verimark reasonably informed of the status of such efforts.
[Note to Whitfield, Barrow & Crane LLP: Although the 8 Collateral Properties are believed to be unencumbered, coordination with Ironclad is prudent. Please confirm Coastal Palms' current relationship status with Ironclad and whether any consent process has been initiated.]
ARTICLE IV — PERSONAL GUARANTIES
4.1 Guaranty by Randall Brecker. Concurrently with the execution and delivery of this Agreement, Randall Brecker shall execute and deliver to Verimark an unconditional, continuing, and irrevocable personal guaranty of all obligations of the Coastal Palms Parties under this Agreement, including without limitation all Structured Payment obligations, accrued interest, default interest, indemnification obligations, and any costs and expenses arising from the enforcement of this Agreement (the "R. Brecker Guaranty"), substantially in the form attached hereto as Exhibit E-1. The R. Brecker Guaranty shall be a guaranty of payment and performance, and not merely a guaranty of collection, and Verimark shall not be required to proceed first against any Coastal Palms Party or any collateral before seeking recovery from R. Brecker under the R. Brecker Guaranty.
4.2 Guaranty by Nolan Prescott. Concurrently with the execution and delivery of this Agreement, Nolan Prescott shall execute and deliver to Verimark an unconditional, continuing, and irrevocable personal guaranty of all obligations of the Coastal Palms Parties under this Agreement, including without limitation all Structured Payment obligations, accrued interest, default interest, indemnification obligations, and any costs and expenses arising from the enforcement of this Agreement (the "Prescott Guaranty"), substantially in the form attached hereto as Exhibit E-2. The Prescott Guaranty shall be a guaranty of payment and performance, and not merely a guaranty of collection, and Verimark shall not be required to proceed first against any Coastal Palms Party or any collateral before seeking recovery from Prescott under the Prescott Guaranty.
[Note to Whitfield, Barrow & Crane LLP: Coastal Palms may seek to cap the personal guaranty exposure of both R. Brecker and Prescott. Verimark is prepared to discuss whether a reasonable cap may be appropriate but considers uncapped guaranties to be the default position given the magnitude of the Structured Payments. Please indicate Coastal Palms' position on guaranty caps and any proposed cap amounts.]
4.3 Joint and Several Liability. The obligations of R. Brecker and Prescott under their respective personal guaranties shall be joint and several with the obligations of the Coastal Palms Parties under this Agreement. Without limiting the generality of the foregoing, Verimark may, at its election, proceed against R. Brecker, Prescott, any one or more of the Coastal Palms Parties, or the Collateral Properties, in any order and in any combination, without exhausting remedies against any other obligor or collateral.
4.4 Theresa Brecker. Theresa Brecker, as a Member of Coastal Palms holding a fifteen percent (15%) equity interest, shall execute this Agreement and shall be bound by all of its terms and conditions, including without limitation the release provisions set forth in Article VII, the confidentiality provisions set forth in Article IX, and the non-disparagement provisions set forth in Article X. Notwithstanding the foregoing, T. Brecker shall not be required to provide a separate personal guaranty of the obligations of the Coastal Palms Parties under this Agreement.
[Note to Whitfield, Barrow & Crane LLP: Please confirm Coastal Palms' position on T. Brecker's obligations. Verimark's position is that T. Brecker must execute the Agreement as a Party and be bound by the release and confidentiality provisions, but a separate guaranty is not required at this time.]
ARTICLE V — FRANCHISE SURRENDER AND RETAINED PROPERTIES
5.1 Surrender of Franchise Rights — 14 Properties. Effective as of the Closing Date, Coastal Palms hereby irrevocably surrenders all franchise rights under the applicable FLAs for the fourteen (14) Surrendered Properties identified in Exhibit B hereto. Each FLA applicable to a Surrendered Property shall terminate in its entirety as of the Closing Date, and Coastal Palms shall have no further right to operate any Surrendered Property under the Verimark Suites or Verimark Select brand or to use any Verimark trademarks, trade names, service marks, or trade dress in connection with any Surrendered Property. The Surrendered Properties are located in the following markets:
(a) Sarasota, Florida: three (3) properties;
(b) Fort Myers, Florida: four (4) properties;
(c) Jacksonville, Florida: two (2) properties;
(d) Savannah, Georgia: three (3) properties; and
(e) Brunswick, Georgia: two (2) properties.
The specific property names, addresses, room counts, applicable FLA dates, and property-level entities for each Surrendered Property are set forth in Exhibit B.
5.2 Retained Properties — 8 Properties. Coastal Palms shall retain franchise rights for the following eight (8) hotel properties (the "Retained Properties"), subject to the execution of the New FLAs as provided in Section 5.3:
(a) Naples, Florida: four (4) properties;
(b) Marco Island, Florida: two (2) properties; and
(c) Tampa, Florida: two (2) properties.
The existing FLAs applicable to the Retained Properties shall terminate as of the Closing Date and shall be simultaneously replaced by the New FLAs described in Section 5.3 below, such that there shall be no interruption in the franchise relationship with respect to the Retained Properties.
5.3 New FLA Terms. The Parties shall execute new Franchise License Agreements for each of the eight (8) Retained Properties concurrently with the execution of this Agreement. Each New FLA shall be substantially in the form attached hereto as Exhibit C and shall include the following key terms:
(a) Term. Each New FLA shall have an initial term of ten (10) years, commencing on the Closing Date;
(b) Royalty Fee. Five percent (5%) of GRR, consistent with the royalty rate under the original FLAs (New FLA § 4.1);
(c) Marketing-Fund Contribution. Two and one-half percent (2.5%) of GRR, consistent with the contribution rate under the original FLAs (New FLA § 4.2);
(d) Technology Fee. Twelve Dollars and Fifty Cents ($12.50) per available room per month, subject to annual adjustment based on the Consumer Price Index for All Urban Consumers (CPI-U), as published by the Bureau of Labor Statistics, capped at three percent (3%) per year (New FLA § 4.3);
(e) Enhanced Audit Protocol. Each New FLA shall incorporate the Enhanced Audit Protocol set forth in Exhibit D hereto;
(f) Governing Law and Venue. Each New FLA shall be governed by the laws of the State of Florida, with exclusive venue in Broward County, Florida;
(g) Late-Payment Interest. Interest on overdue payments at the rate of one and one-half percent (1.5%) per month, compounded monthly (New FLA § 4.6);
(h) Liquidated Damages. Upon termination of any New FLA for cause, Coastal Palms shall pay to Verimark liquidated damages equal to three times (3×) the trailing-twelve-month royalty payments attributable to the applicable Retained Property (New FLA § 14.3); and
(i) Material Breach. The New FLAs shall provide that systematic underreporting of GRR shall constitute a material breach incapable of cure, entitling Verimark to terminate the applicable New FLA immediately upon written notice.
5.4 De-Identification of Surrendered Properties. Coastal Palms shall, at its sole cost and expense, complete the de-identification of all fourteen (14) Surrendered Properties no later than the De-Identification Deadline (i.e., one hundred twenty (120) calendar days after the Closing Date, which is August 20, 2024, assuming a Closing Date of April 22, 2024). De-identification shall include, without limitation, the following:
(a) Complete removal of all Verimark branding, signage, logos, trademarks, service marks, and trade dress from the interior and exterior of each Surrendered Property, including but not limited to building signage, monument signage, directional signage, lobby signage, room signage, and all branded amenities and collateral materials;
(b) Complete removal of all Verimark proprietary reservation systems, property-management systems, revenue-management systems, and any other Verimark-owned or Verimark-licensed technology systems from each Surrendered Property;
(c) Cessation of all use of the Verimark Suites and Verimark Select brand names, and any variations thereof, in all marketing materials, advertising, websites, social media accounts, online travel agency ("OTA") listings, and global distribution system ("GDS") listings associated with any Surrendered Property; and
(d) Return to Verimark of all Verimark-branded operating manuals, training materials, quality-assurance standards, and other proprietary materials in the possession or control of Coastal Palms or any of its Affiliates relating to the Surrendered Properties.
Failure to complete de-identification of all Surrendered Properties by the De-Identification Deadline shall constitute an Event of Default under Section 2.8 of this Agreement.
5.5 Cooperation During Transition. The Parties shall cooperate in good faith during the de-identification period to ensure minimal disruption to hotel guests, employees, and ongoing hotel operations at the Surrendered Properties. Without limiting the foregoing, the Parties agree that:
(a) All existing hotel guest reservations booked under the Verimark Suites or Verimark Select brands for stays at any Surrendered Property through the De-Identification Deadline shall be honored by Coastal Palms, and the Parties shall cooperate to ensure that guests experience a seamless transition;
(b) Verimark shall provide reasonable technical support to facilitate the removal of Verimark proprietary systems from the Surrendered Properties, provided that Coastal Palms shall bear all costs associated with such removal and any replacement systems; and
(c) The Parties shall coordinate on communications to OTAs, travel agents, and distribution partners to effectuate the orderly transition of the Surrendered Properties from Verimark branding.
ARTICLE VI — ENHANCED AUDIT PROTOCOL
6.1 Applicability. The Enhanced Audit Protocol, as set forth in detail in Exhibit D hereto, shall apply to all eight (8) Retained Properties for a period of five (5) years commencing on the Closing Date. The Enhanced Audit Protocol is designed to ensure the accurate and complete reporting of GRR by Coastal Palms and to provide Verimark with enhanced oversight and verification mechanisms in light of the revenue-underreporting practices that gave rise to the Litigation. The Enhanced Audit Protocol shall be incorporated into each New FLA by reference and shall be binding upon Coastal Palms as a material term thereof.
6.2 Key Terms of Enhanced Audit Protocol. The Enhanced Audit Protocol shall include, without limitation, the following requirements:
(a) Quarterly Audits. An independent auditor selected by Verimark shall conduct quarterly audits of GRR for each Retained Property. All audit costs, including auditor fees, travel expenses, and related costs, shall be borne exclusively by Coastal Palms for the full five (5)-year enhanced-audit period, regardless of the findings of any audit;
(b) Real-Time POS Integration. Within ninety (90) calendar days of the Closing Date, Coastal Palms shall integrate its point-of-sale ("POS") systems and property-management systems ("PMS") at all Retained Properties with Verimark's revenue-management platform, such that all booking and revenue data flows to Verimark in real time;
(c) Monthly GRR Reporting. Coastal Palms shall submit monthly GRR reports for each Retained Property within fifteen (15) calendar days of each month-end. Each monthly report shall be accompanied by supporting documentation, including bank-deposit reconciliations, OTA settlement statements, direct-booking channel summaries, and any other documentation reasonably requested by Verimark;
(d) Unrestricted Audit Access. Verimark and its designated auditors shall have unrestricted access to all financial records, bank statements, tax returns, OTA contracts, third-party booking data, and all other records related to the operation and revenues of each Retained Property, upon five (5) business days' prior written notice (shortened from the ten (10) business days' notice period provided under the original FLAs);
(e) Audit-Cost Allocation. All costs and expenses of the quarterly audits and any supplemental audits during the five (5)-year enhanced-audit period shall be borne exclusively by Coastal Palms, including fees of the independent auditor, travel costs, data-processing costs, and any costs associated with the real-time POS integration;
(f) Underreporting Threshold. Any underreporting of GRR exceeding two percent (2%) of reported GRR in any quarterly audit period shall constitute a material breach of the applicable New FLA, triggering the cure obligations and remedies set forth in the New FLA and this Agreement; and
(g) Annual Certification. Within ninety (90) calendar days of each fiscal year-end, Coastal Palms' Managing Member (currently Randall Brecker) shall deliver to Verimark a sworn written certification, under penalty of perjury, that all GRR has been accurately and completely reported for the preceding fiscal year in accordance with the terms of the applicable New FLAs and this Agreement.
6.3 Remedies for Audit Violations. In the event that any audit conducted pursuant to the Enhanced Audit Protocol reveals an underreporting of GRR, the following remedies shall apply:
(a) Payment of Deficiency. Coastal Palms shall pay to Verimark the full amount of the deficiency (calculated as the unpaid royalties, marketing-fund contributions, and technology fees attributable to the underreported GRR), together with interest on such deficiency at the rate of one and one-half percent (1.5%) per month, compounded monthly, from the date the payment was originally due until the date of payment in full. Payment shall be made within thirty (30) calendar days of Coastal Palms' receipt of written notice from Verimark specifying the deficiency amount and supporting calculations.
(b) Repeated Underreporting. If audits reveal underreporting of GRR in two (2) or more quarters within any twelve (12)-month period, such repeated underreporting shall constitute an Event of Default under Section 2.8 of this Agreement and shall constitute grounds for immediate termination of the applicable New FLA, without any further cure period.
ARTICLE VII — MUTUAL RELEASE
7.1 Release by Verimark. Effective upon the Closing, Verimark, on behalf of itself and its Affiliates, successors, assigns, parents, subsidiaries, officers, directors, employees, agents, attorneys, representatives, insurers, and all persons and entities claiming through or under any of them (collectively, the "Verimark Releasors"), hereby irrevocably and unconditionally releases and forever discharges the Coastal Palms Parties and their respective Affiliates, members, managers, officers, directors, employees, agents, attorneys, representatives, insurers, heirs, executors, administrators, successors, and assigns (collectively, the "Coastal Palms Releasees") from any and all claims, demands, actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, obligations, liabilities, losses, costs, expenses, and attorneys' fees of every kind and nature whatsoever, whether at law or in equity, whether known or unknown, suspected or unsuspected, asserted or unasserted, foreseen or unforeseen, accrued or unaccrued, contingent or non-contingent, direct or indirect, that the Verimark Releasors now have, have ever had, or may hereafter have against any of the Coastal Palms Releasees arising from, related to, or in connection with the FLAs, the Litigation (including all claims asserted or that could have been asserted in the Litigation), the conduct of Coastal Palms' franchise operations, and any acts, omissions, events, or transactions occurring through the Effective Date (collectively, the "Released Claims").
Notwithstanding the foregoing, the Released Claims shall not include: (i) any obligations arising under this Agreement; (ii) any obligations arising under the New FLAs; and (iii) any claims arising from acts, omissions, events, or transactions occurring after the Effective Date.
7.2 Release by Coastal Palms Parties. Effective upon the Closing, each of the Coastal Palms Parties, on behalf of itself, himself, or herself, as applicable, and on behalf of their respective Affiliates, members, managers, officers, directors, employees, agents, attorneys, representatives, insurers, heirs, executors, administrators, successors, and assigns (collectively, the "Coastal Palms Releasors"), hereby irrevocably and unconditionally releases and forever discharges Verimark and its Affiliates, parents, subsidiaries, officers, directors, employees, agents, attorneys, representatives, insurers, successors, and assigns (collectively, the "Verimark Releasees") from any and all Released Claims, including without limitation all claims, counterclaims, cross-claims, defenses, and causes of action asserted or that could have been asserted in the Counterclaim or otherwise in the Litigation.
Notwithstanding the foregoing, the Released Claims shall not include: (i) any obligations arising under this Agreement; (ii) any obligations arising under the New FLAs; and (iii) any claims arising from acts, omissions, events, or transactions occurring after the Effective Date.
7.3 Covenant Not to Sue. Each Party hereby covenants and agrees, for itself and on behalf of its respective Releasors, that it will not commence, maintain, prosecute, encourage, or voluntarily participate in any action, suit, proceeding, complaint, charge, or other legal or administrative proceeding in any court, tribunal, agency, or other forum against any other Party or any other Released Party based upon, arising from, or related to any Released Claim. Any violation of this covenant not to sue shall entitle the non-breaching Party to recover from the breaching Party its reasonable attorneys' fees, costs, and expenses incurred in defending against such action, in addition to any other remedies available at law or in equity.
7.4 Waiver of Unknown Claims. Each Party expressly waives and relinquishes, to the fullest extent permitted by applicable law, all rights and benefits that such Party may have under any statute, regulation, or common-law principle (including, without limitation, Section 1542 of the California Civil Code and any analogous provision of the laws of any other state or jurisdiction) that limits or restricts a general release to those claims that the releasing party knows or suspects to exist in its favor at the time of executing the release. Each Party acknowledges that it may discover facts different from or in addition to those that it now knows or believes to be true with respect to the subject matter of this Agreement and the Released Claims, and each Party agrees that this release shall be and remain effective in all respects notwithstanding any such discovery and notwithstanding any change in law or fact that might otherwise affect or limit the scope of this release.
ARTICLE VIII — DISMISSAL OF LITIGATION
8.1 Joint Stipulation of Dismissal. Within five (5) business days following the Closing Date, the Parties shall jointly prepare, execute, and file with the Clerk of the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida, a Stipulation of Dismissal with Prejudice in the Litigation, Case No. 1021-00006, dismissing all claims and counterclaims with prejudice, with each Party bearing its own attorneys' fees, costs, and expenses. The Stipulation of Dismissal shall be signed by counsel for all Parties, including Priya Anand (FL Bar No. 0087451), Calderwood & Harkness LLP, on behalf of Verimark, and Nathan Whitfield III, Whitfield, Barrow & Crane LLP, on behalf of the Coastal Palms Parties. Counsel for the Parties shall cooperate in the preparation and filing of the Stipulation and any related documents required by the Court.
8.2 Counterclaim Dismissal. Coastal Palms hereby irrevocably agrees to dismiss its Counterclaim (filed April 18, 2022, in the Litigation, alleging approximately Twelve Million Dollars ($12,000,000) in damages for brand-standard violations and over-billing) with prejudice as of the Effective Date. The dismissal of the Counterclaim shall be incorporated into the Joint Stipulation of Dismissal filed pursuant to Section 8.1 and shall be effective regardless of whether the Joint Stipulation has been formally entered by the Court as of the Effective Date.
8.3 Court Retention of Jurisdiction.
[Note to Whitfield, Barrow & Crane LLP: The Parties should discuss whether to request that the Court retain jurisdiction to enforce the terms of this Settlement Agreement, or whether disputes arising under this Agreement should instead be resolved through binding arbitration or through a new action filed in the courts designated in Section 13.2. Verimark's preliminary view is that court retention of jurisdiction may be the more efficient mechanism, but is open to discussion.]
ARTICLE IX — CONFIDENTIALITY
9.1 Confidentiality Obligations. Subject to the exceptions set forth in Section 9.2, the Parties shall keep the terms, amount, and existence of this Agreement, as well as the substance and content of all negotiations leading to this Agreement, strictly confidential and shall not disclose, publish, or disseminate the same to any third party, whether directly or indirectly, voluntarily or involuntarily. The confidentiality obligations set forth in this Article IX shall survive the termination or expiration of this Agreement and shall continue in perpetuity.
9.2 Permitted Disclosures. Notwithstanding Section 9.1, disclosure of Confidential Information is permitted in the following circumstances:
(a) Professional Advisors. Disclosures to the Parties' respective legal counsel, accountants, tax advisors, and financial advisors, on a need-to-know basis, provided that such persons are bound by confidentiality obligations at least as restrictive as those contained in this Article IX and that the disclosing Party shall be responsible for any breach by its advisors;
(b) Legal and Regulatory Requirements. Disclosures required by applicable federal, state, or local law, regulation, or court order, including without limitation Verimark's disclosure obligations under the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Securities and Exchange Commission ("SEC") and the Nasdaq Stock Market, as a publicly traded company (Nasdaq: VHMK);
(c) Ironclad National Bank. Disclosures to Ironclad National Bank as reasonably necessary in connection with Coastal Palms' existing loan obligations, credit facilities, and the consent process contemplated by Section 3.5;
(d) Insurance. Disclosures to Pinnacle Indemnity Insurance Co. as reasonably necessary in connection with Verimark's insurance claims under Policy No. PLI-VHG-2021-08874; and
(e) Compulsory Legal Process. Disclosures made in response to a valid subpoena, civil investigative demand, or other compulsory legal process, provided that the disclosing Party (i) gives prompt written notice (and, where possible, advance notice) to the other Parties of the receipt of such process, (ii) cooperates with the other Parties in seeking a protective order or other appropriate remedy to limit or prevent the disclosure, and (iii) discloses only the minimum amount of Confidential Information necessary to comply with such process.
9.3 SEC Disclosure. The Parties acknowledge and agree that Verimark, as a publicly traded company listed on the Nasdaq Stock Market (Nasdaq: VHMK), may be required to disclose the settlement as a "material litigation settlement" in its filings with the SEC, including without limitation its Quarterly Report on Form 10-Q for the fiscal quarter ending June 30, 2024 (the "Q2 2024 10-Q"), its Current Report on Form 8-K, and any other periodic or current reports required by applicable securities laws and regulations. Any such disclosure shall be limited to the minimum information required by applicable securities laws and SEC regulations, and Verimark shall use reasonable efforts to seek confidential treatment of the specific financial terms of the settlement to the extent permitted by law.
9.4 Public Statements. If asked by any third party, including members of the press, media, industry analysts, business associates, or the general public, about the resolution of the Litigation, the Parties and their respective officers, directors, members, managers, employees, agents, and representatives shall state only that "the matter has been resolved to the mutual satisfaction of the parties" or substantially similar words to that effect, and shall not disclose the terms, amount, or specific conditions of the settlement. The Parties shall not issue any press release or public statement regarding this Agreement without the prior written consent of the other Parties, except as required by applicable securities laws or regulations.
9.5 Remedies for Breach. Any breach or threatened breach of the confidentiality obligations set forth in this Article IX shall entitle the non-breaching Party to seek immediate injunctive relief, specific performance, and any other equitable remedies available from a court of competent jurisdiction, without the necessity of posting a bond or proving actual damages. In addition, the non-breaching Party shall be entitled to recover from the breaching Party all actual damages suffered as a result of such breach, together with reasonable attorneys' fees, costs, and expenses incurred in enforcing the provisions of this Article IX.
ARTICLE X — NON-DISPARAGEMENT
10.1 Mutual Non-Disparagement. For a period of three (3) years from the Effective Date, no Party shall, and each Party shall cause its officers, directors, members, managers, employees, and agents not to, make or publish any statement, whether oral, written, or electronic (including on any social media platform, website, blog, or similar forum), that disparages, defames, impugns, or casts in a negative light any other Party, or any other Party's business, products, services, brands, reputation, officers, directors, members, managers, employees, or operations. This non-disparagement obligation shall apply to all public and private statements, except as set forth in Section 10.2.
10.2 Exceptions. The non-disparagement obligations set forth in Section 10.1 shall not restrict:
(a) Truthful testimony compelled by subpoena, court order, or other valid legal process in any judicial, administrative, or arbitral proceeding;
(b) Statements made in connection with the enforcement or defense of any right or obligation under this Agreement, the New FLAs, the Security Agreement, or the Personal Guaranties; or
(c) Statements made in confidence to a Party's legal counsel, tax advisors, or financial advisors in a confidential professional setting, provided that such advisors are informed of the non-disparagement obligations contained herein.
ARTICLE XI — REPRESENTATIONS AND WARRANTIES
11.1 Mutual Representations. Each Party hereby represents and warrants to the other Parties, as of the date hereof and as of the Closing Date, as follows:
(a) Authority. Such Party has full power, authority, and legal capacity to execute and deliver this Agreement and to perform all of its obligations hereunder. With respect to each entity Party, the execution, delivery, and performance of this Agreement has been duly authorized by all necessary corporate, limited liability company, or other organizational action, as applicable, including, with respect to Verimark, any required approvals of its board of directors or authorized committee thereof.
(b) Binding Obligation. This Agreement constitutes a valid and binding obligation of such Party, enforceable against such Party in accordance with its terms, subject only to applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
(c) No Conflict. The execution, delivery, and performance of this Agreement by such Party does not and will not (i) violate any provision of such Party's organizational documents (if applicable), (ii) conflict with, result in a breach of, or constitute a default under any material agreement, instrument, order, judgment, decree, or obligation to which such Party is a party or by which such Party or its assets are bound, or (iii) violate any applicable law, regulation, or order of any governmental authority.
(d) No Other Proceedings. Such Party is not aware of any pending or threatened claim, action, suit, or proceeding (other than the Litigation) that would materially affect such Party's ability to perform its obligations under this Agreement.
11.2 Representations by Coastal Palms Parties. Each of the Coastal Palms Parties hereby represents and warrants to Verimark, as of the date hereof and as of the Closing Date, as follows:
(a) Clear Title to Collateral. The Collateral Properties are free and clear of all liens, mortgages, deeds of trust, pledges, security interests, encumbrances, restrictions, easements, and other charges of any kind, other than as specifically disclosed in Exhibit F hereto and other than permitted liens consisting solely of current-year real-property tax liens not yet due and payable.
(b) No Insolvency. No Coastal Palms Party has filed, and no Coastal Palms Party intends to file or contemplates filing, any voluntary petition in bankruptcy or any petition or application seeking reorganization, arrangement, composition, readjustment, dissolution, liquidation, or similar relief under any federal or state bankruptcy, insolvency, or similar law. No involuntary petition in bankruptcy has been filed against any Coastal Palms Party, and no Coastal Palms Party has made or contemplates making a general assignment for the benefit of creditors.
(c) Accuracy of Financial Information. The financial information, data, statements, and projections provided by the Coastal Palms Parties to Verimark in connection with the settlement negotiations and the mediation are materially accurate and complete in all respects and do not contain any material misstatement or omission that would render such information misleading.
(d) Authority of Randall Brecker. Randall Brecker is the duly appointed Managing Member of Coastal Palms Franchise Holdings LLC, with full authority to execute this Agreement and all ancillary documents on behalf of Coastal Palms, and is further authorized to bind Gulf Breeze Hospitality LLC, Savannah Lodging Partners LLC, and Suncoast Room Management Inc. to the terms hereof in his capacities as Managing Member and President, respectively, of each such entity.
(e) No Undisclosed Liabilities. There are no undisclosed liabilities, judgments, liens, orders, injunctions, or pending or threatened litigation, arbitration, or administrative proceedings that would materially impair the ability of any Coastal Palms Party to perform its obligations under this Agreement or that would affect the Collateral Properties.
11.3 Representations by Verimark. Verimark hereby represents and warrants to the Coastal Palms Parties, as of the date hereof and as of the Closing Date, as follows:
(a) No Third-Party Interests. No third party (other than Verimark's insurers, to the extent of their subrogation rights, which have been discharged or will be discharged prior to or concurrently with Closing) has any right, title, or interest in or to the Released Claims that has not been discharged or assigned to Verimark.
(b) Board Approval. Verimark's board of directors (or a duly authorized committee thereof) has approved the execution, delivery, and performance of this Agreement and the transactions contemplated hereby, and no further corporate action is required for Verimark to consummate the settlement on the terms set forth herein.
ARTICLE XII — INDEMNIFICATION
12.1 Indemnification by Coastal Palms Parties. The Coastal Palms Parties shall, jointly and severally, indemnify, defend, and hold harmless Verimark and the Verimark Releasees (collectively, the "Verimark Indemnified Parties") from and against any and all losses, claims, damages, liabilities, obligations, penalties, judgments, awards, costs, fees, and expenses (including without limitation reasonable attorneys' fees, expert witness fees, and costs of investigation and litigation) of any kind or nature whatsoever (collectively, "Losses") arising from, relating to, or in connection with:
(a) Any breach of any representation, warranty, covenant, or obligation of any Coastal Palms Party under this Agreement, the Security Agreement, the Personal Guaranties, or any ancillary document delivered in connection herewith;
(b) Any third-party claim, demand, action, or proceeding arising from or relating to Coastal

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