1021-00006 · Client 1021 · Mediation & Settlement

final-settlement-agreement-execution.docx DOCUMENT Litigation

42 / 75 ← → ✕

SETTLEMENT AGREEMENT AND MUTUAL RELEASE

(Execution Version)

April 22, 2024

Verimark Hospitality Group Inc. v. Coastal Palms Franchise Holdings LLC, et al. Case No. 1021-00006 Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida

CONFIDENTIAL — SUBJECT TO CONFIDENTIALITY PROVISIONS OF ARTICLE XII

Right-click to update Table of Contents

SETTLEMENT AGREEMENT AND MUTUAL RELEASE

This SETTLEMENT AGREEMENT AND MUTUAL RELEASE (this "Agreement") is entered into and made effective as of April 22, 2024 (the "Effective Date"), by and among the following parties:

VERIMARK HOSPITALITY GROUP INC., a Delaware corporation, with its principal place of business at 2400 East Las Olas Boulevard, Suite 3100, Fort Lauderdale, Florida 33301, and whose common stock is listed on the Nasdaq Stock Market under the ticker symbol "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, Florida 34108 (hereinafter referred to as "Coastal Palms" or "CPFH");

RANDALL "RANDY" BRECKER, an individual residing in the State of Florida, who serves as the Managing Member and holds a sixty percent (60%) equity interest in Coastal Palms, and who also serves as the President of Suncoast Room Management Inc. (hereinafter referred to as "R. Brecker");

THERESA BRECKER, an individual residing in the State of Florida, who is a Member of and holds a fifteen percent (15%) equity interest in Coastal Palms (hereinafter referred to as "T. Brecker");

NOLAN PRESCOTT, an individual residing in the State of Florida, who is a Member of and holds a twenty-five percent (25%) equity interest in Coastal Palms (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");

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 collectively referred to herein as the "Coastal Palms Parties." Verimark and the Coastal Palms Parties are collectively referred to herein as the "Parties" and each individually as a "Party."

RECITALS

WHEREAS:

A. Franchise Relationship. Verimark operates and franchises approximately 340 branded hotel properties across the southeastern United States under the "Verimark Suites," "Verimark Select," and "Verimark Grand" flags. For fiscal year 2021, Verimark reported consolidated revenue of approximately $1.42 billion, of which the franchise segment contributed approximately $218 million. Coastal Palms is the operator of twenty-two (22) franchised hotel properties — eighteen (18) operating under the Verimark Suites flag and four (4) operating under the Verimark Select flag — located across the States of Florida and Georgia, comprising approximately 3,740 total guest rooms. The first Franchise License Agreement ("FLA") between Verimark and Coastal Palms was executed on June 15, 2007, for a Verimark Suites property located in Naples, Florida. Over the following years, Coastal Palms and its affiliates executed a total of twenty-two (22) individual FLAs with Verimark, the most recent of which was dated September 3, 2019. 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 disputes in Broward County, Florida. Under each FLA, Coastal Palms is required to pay the following fees: (i) a royalty 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, adjusted annually for changes in the Consumer Price Index, with such adjustment capped at three percent (3%) per year (FLA § 4.3). Late-payment interest under the FLAs accrues at a rate of one and one-half percent (1.5%) per month, compounded monthly (FLA § 4.6). Additionally, FLA § 15.3 provides for liquidated damages upon termination for cause in an amount equal to three times (3×) the trailing-twelve-month royalties per property.

B. The Litigation. On November 8, 2021, a former Coastal Palms regional controller, Janet Kerrigan, reported to Verimark's compliance hotline allegations of systematic revenue underreporting by the Coastal Palms Parties. In response, Verimark retained Thornbury & Associates CPAs LLP to conduct a franchise-compliance audit of the Coastal Palms properties. Thornbury's preliminary findings, delivered to Verimark on January 18, 2022, indicated that the audited properties had underreported GRR by approximately twenty-six percent (26%) for the period spanning fiscal years 2019 through 2021. Verimark issued a Notice of Material Breach to Coastal Palms on February 4, 2022, demanding that Coastal Palms cure the identified breaches within thirty (30) days in accordance with FLA § 14.1. Coastal Palms, through its counsel Whitfield, Barrow & Crane LLP, responded by letter dated February 28, 2022, denying any material breach and contesting the methodology and conclusions of the Thornbury audit. No cure was tendered by Coastal Palms within the thirty (30)-day period, which expired on March 6, 2022. On March 7, 2022, Verimark filed a ten-count Complaint in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida, bearing Case Number 1021-00006 (the "Litigation"), asserting claims for: (i) breach of contract — royalties; (ii) breach of contract — marketing fund; (iii) breach of contract — technology fees; (iv) breach of the implied covenant of good faith and fair dealing; (v) fraudulent concealment; (vi) negligent misrepresentation; (vii) unjust enrichment; (viii) declaratory judgment; (ix) accounting; and (x) civil conspiracy. In the Complaint, Verimark claimed damages in the approximate aggregate amount of $150,000,000, consisting of: (a) $16,095,000 in direct underpayments of royalties, marketing-fund contributions, and technology fees; (b) $28,400,000 in contractual late-payment interest calculated in accordance with FLA § 4.6; and (c) $105,500,000 in liquidated damages calculated in accordance with FLA § 15.3. On April 18, 2022, Coastal Palms filed its Answer, Affirmative Defenses, and Counterclaim, asserting a counterclaim in the amount of $12,000,000 for alleged brand-standard violations by Verimark and alleged over-billing for technology services. During discovery, Verimark's forensic accounting expert, Dr. Sharon Kettlewell, CPA/CFF, CFE, of Ridgeline Forensic Advisory LLC, prepared an expert report estimating cumulative underreported GRR of $197,800,000 over the period from 2013 through 2021. Coastal Palms' damages expert, Professor Grant Hargrove, PhD, CPA, of Hargrove Economic Consulting Inc., prepared a competing expert report opining that any underpayment totaled no more than $6,200,000.

C. Summary Judgment Ruling. On February 9, 2024, the Court (the Honorable Richard M. Calloway, Circuit Judge) 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 as a matter of law that Coastal Palms' exclusion of revenues collected by Suncoast Room Management Inc. from its calculation and reporting of GRR constituted a material breach of FLA §§ 4.1 and 4.2. The Court denied Coastal Palms' Cross-Motion for Summary Judgment on all counts and deferred the determination of damages to trial.

D. Mediation and Settlement. On February 23, 2024, the Parties agreed to submit their dispute to mediation before the Honorable Patricia Everwood (Retired), of Everwood Dispute Resolution PLLC. A two-day mediation session was conducted on March 14 and 15, 2024, at 396 Alhambra Circle, Suite 800, Coral Gables, Florida 33134. A tentative settlement was reached on the second day of mediation, March 15, 2024, and the Parties executed a written term sheet memorializing the principal terms of the settlement on March 22, 2024. The Parties now desire to fully and finally resolve all claims and counterclaims in the Litigation, and all related disputes among the Parties, on the terms and conditions set forth in this Agreement.

E. Desire to Settle. The Parties acknowledge the uncertainty, risk, and expense inherent in continued litigation and trial, and each Party has made an independent assessment of the merits and risks of its respective claims and defenses. The Parties desire to avoid the further burden and expense of trial and to resolve their disputes amicably and in full. Entry into this Agreement is not, and shall not be construed as, an admission of liability, wrongdoing, or the validity of any claim or defense by any Party. Each Party has been represented by competent legal counsel of its choosing in the negotiation and execution of this Agreement, and each Party has had a full and fair opportunity to review, analyze, and negotiate the terms set forth herein.

NOW, THEREFORE, in consideration of the mutual promises, covenants, releases, 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 "Agreement" means this Settlement Agreement and Mutual Release, together with all Exhibits and Schedules attached hereto, which are incorporated herein by reference and made a part hereof.

1.2 "Closing" means the consummation of the transactions contemplated by this Agreement on the Closing Date, including the execution and delivery of this Agreement by all Parties, the payment of the Initial Payment, and the execution and delivery of all ancillary documents required to be delivered at or prior to the Closing.

1.3 "Closing Date" means April 22, 2024.

1.4 "Collateral Properties" means the eight (8) unencumbered hotel properties identified in Schedule 3.1 hereto, which serve as collateral for the security interest granted to Verimark pursuant to Article III.

1.5 "Complaint" means the ten-count Complaint filed by Verimark on March 7, 2022, in Case No. 1021-00006, in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida, together with all amendments thereto.

1.6 "Counterclaim" means the $12,000,000 counterclaim filed by Coastal Palms on April 18, 2022, in the Litigation, asserting claims for alleged brand-standard violations and over-billing.

1.7 "Court" means the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida.

1.8 "De-Identification Deadline" means August 20, 2024, which is one hundred twenty (120) days from the Closing Date.

1.9 "Enhanced Audit Protocol" means the enhanced audit and reporting requirements applicable to the Retained Properties, as set forth in Article VIII of this Agreement and as more fully described in Exhibit D attached hereto.

1.10 "Event of Default" has the meaning set forth in Section 2.7 of this Agreement.

1.11 "Existing FLAs" means the twenty-two (22) Franchise License Agreements between Verimark and Coastal Palms and/or its affiliates (including Gulf Breeze and Savannah Lodging), the first of which was executed on June 15, 2007, and the most recent of which was executed on September 3, 2019, governing the operation of the Properties under the Verimark Brands.

1.12 "GRR" or "Gross Room Revenue" has the meaning ascribed to such term in Section 4.1 of each FLA, which generally includes all revenue derived from or attributable to the rental of guest rooms at the applicable Property, regardless of the method of collection, booking channel, or collecting entity.

1.13 "Initial Payment" means the cash payment of Twenty-Five Million Dollars ($25,000,000) payable by Coastal Palms to Verimark at Closing in accordance with Section 2.2 of this Agreement.

1.14 "Ironclad" means Ironclad National Bank, a national banking association, which holds first-lien mortgage loans on eighteen (18) of the twenty-two (22) Properties, with an aggregate outstanding principal balance of approximately Ninety-Four Million Dollars ($94,000,000) as of the date hereof.

1.15 "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, including all claims, counterclaims, cross-claims, and third-party claims asserted therein.

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

1.17 "Payment Schedule" means the schedule of payments set forth in Article II and as more fully described in Exhibit A attached hereto.

1.18 "Personal Guaranties" means the individual guaranty agreements to be executed by R. Brecker and Prescott, each substantially in the form attached hereto as Exhibit E, pursuant to which R. Brecker and Prescott jointly and severally guarantee all obligations of the Coastal Palms Parties under this Agreement.

1.19 "Properties" means the twenty-two (22) hotel properties operated by the Coastal Palms Parties under the Existing FLAs.

1.20 "Retained Properties" means the eight (8) Properties identified in Section 7.1 of this Agreement and in Exhibit C that will continue to be franchised under the New FLAs, consisting of four (4) properties in Naples, Florida; two (2) properties on Marco Island, Florida; and two (2) properties in Tampa, Florida.

1.21 "Security Agreement" means the security agreement to be executed by Coastal Palms in favor of Verimark, substantially in the form attached hereto as Exhibit F, granting Verimark a first-priority security interest in the Collateral Properties to secure the Structured Payments and other obligations under this Agreement.

1.22 "Settlement Amount" means the aggregate sum of Eighty-Seven Million Five Hundred Thousand Dollars ($87,500,000), payable by the Coastal Palms Parties to Verimark in accordance with Article II of this Agreement.

1.23 "Structured Payments" means the eight (8) semi-annual payments of Seven Million Eight Hundred Twelve Thousand Five Hundred Dollars ($7,812,500) each, totaling Sixty-Two Million Five Hundred Thousand Dollars ($62,500,000), payable in accordance with Section 2.3 of this Agreement, the first such payment being due on October 22, 2024, and the last such payment being due on April 22, 2028, as more fully described in the Payment Schedule attached hereto as Exhibit A.

1.24 "Surrendered Properties" means the fourteen (14) Properties identified in Section 7.1 and Exhibit B of this Agreement that are subject to franchise surrender, de-identification, and termination of the applicable Existing FLAs.

1.25 "Verimark Brands" means "Verimark Suites," "Verimark Select," and "Verimark Grand," together with all associated trademarks, service marks, logos, trade dress, proprietary systems (including reservation systems, property management systems, and revenue management systems), and all other intellectual property owned, licensed, or controlled by Verimark in connection with the branding and operation of its franchised hotel properties.

ARTICLE II — SETTLEMENT PAYMENT

Section 2.1 — Total Settlement Amount. In full and final settlement of all claims, counterclaims, causes of action, and disputes among the Parties, whether asserted or unasserted, known or unknown, arising from or relating to the Existing FLAs, the Litigation, or the subject matter thereof, the Coastal Palms Parties shall pay to Verimark a total Settlement Amount of Eighty-Seven Million Five Hundred Thousand Dollars ($87,500,000), payable as follows:

(a) The Initial Payment of Twenty-Five Million Dollars ($25,000,000), payable at the Closing in accordance with Section 2.2 below; and

(b) The Structured Payments totaling Sixty-Two Million Five Hundred Thousand Dollars ($62,500,000), payable in eight (8) semi-annual installments of Seven Million Eight Hundred Twelve Thousand Five Hundred Dollars ($7,812,500) each, in accordance with Section 2.3 below.

The Payment Schedule setting forth the dates, amounts, and interest calculations for all payments under this Article II is attached hereto as Exhibit A and incorporated herein by reference.

Section 2.2 — Initial Payment. On the Closing Date, Coastal Palms shall pay to Verimark the Initial Payment of Twenty-Five Million Dollars ($25,000,000) by wire transfer of immediately available funds from the escrow account established at Ironclad National Bank for the purposes of this settlement to Verimark's designated account. Verimark shall provide Coastal Palms with complete wire-transfer instructions for the designated receiving account no later than three (3) business days prior to the Closing Date. Upon receipt of the Initial Payment, Verimark's counsel, Calderwood & Harkness LLP, at 110 SE 6th Street, Suite 2800, Fort Lauderdale, Florida 33301, shall promptly issue a written confirmation of receipt to counsel for the Coastal Palms Parties. The obligation to make the Initial Payment is unconditional and shall not be subject to any right of setoff, counterclaim, defense, or deduction.

Section 2.3 — Structured Payments. Following the payment of the Initial Payment, Coastal Palms shall pay to Verimark the remaining Sixty-Two Million Five Hundred Thousand Dollars ($62,500,000) in eight (8) equal semi-annual installments of Seven Million Eight Hundred Twelve Thousand Five Hundred Dollars ($7,812,500) each, on the following schedule:

(a) The first installment shall be due and payable on October 22, 2024.

(b) The second installment shall be due and payable on April 22, 2025.

(d) The fourth installment shall be due and payable on April 22, 2026.

(e) The fifth installment shall be due and payable on October 22, 2026.

(f) The sixth installment shall be due and payable on April 22, 2027.

(g) The seventh installment shall be due and payable on October 22, 2027.

(h) The eighth and final installment shall be due and payable on April 22, 2028.

All Structured Payments shall be made by wire transfer of immediately available funds to the account designated by Verimark in accordance with the wire-transfer instructions provided pursuant to Section 2.2, or to such other account as Verimark may designate in writing from time to time upon not less than ten (10) business days' prior notice to Coastal Palms.

Section 2.4 — Interest on Structured Payments. Interest shall accrue on the outstanding principal balance of the Structured Payments at a rate of six and one-half percent (6.5%) per annum, simple interest, calculated on the basis of a 365-day year and the actual number of days elapsed. Interest shall begin to accrue on the Closing Date and shall be calculated on the then-outstanding principal balance of the Structured Payments. Interest payments shall be due and payable concurrently with each semi-annual installment payment. The amount of interest due with each installment shall be calculated by multiplying the outstanding principal balance as of the first day of the applicable interest period by the annual interest rate of 6.5%, and then multiplying the result by a fraction, the numerator of which is the actual number of days elapsed during such interest period and the denominator of which is 365. A detailed schedule setting forth the estimated interest amounts due with each installment is set forth in Exhibit A.

Section 2.5 — Late Payments. Any Structured Payment (including any concurrent interest payment) 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 on the overdue amount, calculated from the original due date until the date on which such overdue amount is received by Verimark in full. This default interest shall be in addition to, and not in substitution for, the interest otherwise payable under Section 2.4. If Coastal Palms fails to cure a late payment within thirty (30) days after written notice from Verimark specifying the overdue payment and the amount due, such failure shall constitute an Event of Default under Section 2.7 of this Agreement. Nothing in this Section 2.5 shall be construed to extend the due date for any Structured Payment or to waive Verimark's right to declare an Event of Default following the expiration of the applicable cure period.

Section 2.6 — Prepayment. Coastal Palms may, at its option, prepay all or any portion of the Structured Payments at any time without premium, penalty, or additional charge of any kind. Any partial prepayment shall be applied first to any accrued and unpaid interest on the outstanding principal balance of the Structured Payments, and second to the scheduled installments in inverse order of maturity (i.e., applied first to the most distant scheduled installment, then to the next most distant, and so on), thereby reducing the total interest obligation over the remaining term. Coastal Palms shall provide Verimark with not less than five (5) business days' prior written notice of any prepayment, specifying the amount and intended date of such prepayment. Verimark shall recalculate the interest amounts due on any remaining installments following any partial prepayment and shall provide an updated Payment Schedule to Coastal Palms within ten (10) business days of receipt of any such prepayment.

Section 2.7 — Events of Default and Acceleration. An "Event of Default" shall be deemed to have occurred upon the happening of any of the following:

(a) Payment Default. Failure by any Coastal Palms Party to make any payment of the Structured Payments, accrued interest, or any other monetary obligation under this Agreement within thirty (30) days of the date on which Verimark delivers written notice to Coastal Palms specifying such payment default;

(b) Covenant Default. Breach by any Coastal Palms Party of any material covenant, agreement, or obligation under this Agreement (other than a payment obligation, which is governed by clause (a) above) that remains uncured for thirty (30) days after Verimark delivers written notice to Coastal Palms specifying such breach in reasonable detail;

(c) Bankruptcy or Insolvency. The commencement of any voluntary or involuntary proceeding under the United States Bankruptcy Code, Title 11, United States Code, or under any state insolvency, receivership, dissolution, or similar statute, by or against any Coastal Palms Party, or the appointment of a receiver, trustee, custodian, or similar official for the business, assets, or property of any Coastal Palms Party, or the making of a general assignment for the benefit of creditors by any Coastal Palms Party;

(d) Breach of Representations and Warranties. Any representation or warranty made by any Coastal Palms Party in this Agreement or in any ancillary document delivered in connection herewith that is materially inaccurate, false, or misleading as of the date on which it was made, and such inaccuracy, falsity, or misleading character is not cured within thirty (30) days after written notice from Verimark specifying the same;

(e) De-Identification Failure. Failure by any Coastal Palms Party to comply with the de-identification requirements set forth in Article VII of this Agreement by the De-Identification Deadline.

Upon the occurrence of an Event of Default, Verimark may, at its sole election and upon written notice to Coastal Palms, declare the entire outstanding principal balance of the Structured Payments, together with all accrued and unpaid interest thereon and all other amounts owing under this Agreement, immediately due and payable in full, without further notice, demand, presentment, or protest, all of which are hereby waived by the Coastal Palms Parties. Acceleration of the Structured Payments pursuant to this Section 2.7 shall not constitute a waiver of, or limit, any other rights or remedies available to Verimark at law or in equity, including, without limitation, the right to enforce the Security Agreement, to seek collection under the Personal Guaranties, to pursue foreclosure on the Collateral Properties, and to seek injunctive or other equitable relief from the Court.

Section 2.8 — Tax Treatment. Each Party shall be solely responsible for the payment of all federal, state, and local taxes, and for the filing of all tax returns and reports, arising from or attributable to the payments received or made by such Party under this Agreement. The Parties agree that, for federal and state income-tax purposes, the Settlement Amount shall be treated by all Parties as compensatory damages and that no portion of the Settlement Amount shall be characterized as punitive damages, penalties, or interest for tax purposes, except to the extent required by applicable law. The Coastal Palms Parties shall be solely responsible for any and all withholding obligations, including but not limited to any obligation to withhold and remit taxes on behalf of Verimark, if any such obligation exists under applicable law. No Party shall take any position on any tax return or in any proceeding before any taxing authority that is inconsistent with the treatment described in this Section 2.8, unless required to do so by a final determination (as defined in Section 1313(a) of the Internal Revenue Code) of a court of competent jurisdiction or an applicable taxing authority.

ARTICLE III — SECURITY FOR STRUCTURED PAYMENTS

Section 3.1 — Security Interest. To secure the prompt and full payment and performance of all obligations of the Coastal Palms Parties under this Agreement, including, without limitation, the payment of all Structured Payments, accrued interest thereon, default interest, and any indemnification obligations arising under Article X, Coastal Palms hereby grants to Verimark a first-priority security interest in the eight (8) unencumbered hotel properties identified in Schedule 3.1 attached hereto (the "Collateral Properties"), together with all improvements, fixtures, furnishings, equipment, accounts, general intangibles, and proceeds related thereto (collectively, the "Collateral"). The aggregate appraised value of the Collateral Properties, as determined by independent appraisals conducted by licensed commercial real-estate appraisers within the ninety (90)-day period preceding the Closing Date, is not less than Seventy-One Million Two Hundred Thousand Dollars ($71,200,000). The security interest granted hereunder shall be evidenced by the Security Agreement, which shall be substantially in the form attached hereto as Exhibit F and shall be executed and delivered concurrently with the execution of this Agreement.

Section 3.2 — UCC Filings. To perfect the security interest granted under Section 3.1, Coastal Palms hereby authorizes Verimark, and Verimark's counsel, Calderwood & Harkness LLP, to prepare, execute, and file on behalf of Coastal Palms UCC-1 Financing Statements with the Florida Secured Transaction Registry and with any other filing office in any jurisdiction where filing may be necessary or advisable to perfect or maintain Verimark's security interest in the Collateral. The UCC-1 Financing Statement shall identify the following:

Debtor: Coastal Palms Franchise Holdings LLC, 9500 Gulf Shore Drive, Suite 450, Naples, Florida 34108

Secured Party: Verimark Hospitality Group Inc., 2400 East Las Olas Boulevard, Suite 3100, Fort Lauderdale, Florida 33301

Coastal Palms shall execute and deliver all additional documents, instruments, and agreements, including without limitation continuation statements, amendments, and such other filings and recordings, as may be reasonably necessary or requested by Verimark from time to time to perfect, preserve, and maintain the first-priority status of Verimark's security interest in the Collateral. Coastal Palms shall bear all costs and expenses associated with such filings.

Section 3.3 — Personal Guaranties. Concurrently with the execution of this Agreement, R. Brecker and Prescott shall each execute and deliver to Verimark a Personal Guaranty, substantially in the form attached hereto as Exhibit E, pursuant to which R. Brecker and Prescott shall jointly and severally, absolutely, unconditionally, and irrevocably guarantee the full and prompt payment and performance of all obligations of the Coastal Palms Parties under this Agreement, including, without limitation, all Structured Payments, accrued interest, default interest, indemnification obligations, and any and all other amounts that may become due and owing under this Agreement. The Personal Guaranties shall remain in full force and effect until all Structured Payments, accrued interest, and all other obligations of the Coastal Palms Parties under this Agreement have been paid or performed in full to the complete satisfaction of Verimark.

Section 3.4 — Relationship with Ironclad National Bank. The Parties acknowledge and agree that Ironclad National Bank ("Ironclad") holds first-lien mortgage loans on eighteen (18) of the twenty-two (22) Properties, with an aggregate outstanding principal balance of approximately Ninety-Four Million Dollars ($94,000,000) as of the date hereof. The Parties further acknowledge that the eight (8) Collateral Properties identified in Schedule 3.1, which secure Verimark's security interest under this Agreement, are unencumbered by any mortgage, lien, or security interest held by Ironclad. Nothing in this Agreement shall be construed or interpreted so as to impair, subordinate, modify, or otherwise affect in any manner whatsoever the existing liens, security interests, or other rights of Ironclad under its mortgage-loan agreements with the Coastal Palms Parties. Coastal Palms represents and warrants that it has provided written notice to Ironclad of the existence and terms of this Agreement and the grant of the security interest to Verimark, and that Ironclad has not objected to the transactions contemplated hereby. Ironclad is an intended third-party beneficiary of this Section 3.4 and of Section 9.5 of this Agreement.

Section 3.5 — Release of Security Interest. Upon the payment in full of all Structured Payments, accrued interest, default interest (if any), and all other obligations of the Coastal Palms Parties under this Agreement, Verimark shall, within thirty (30) days of such payment in full: (a) file UCC-3 Termination Statements with the Florida Secured Transaction Registry and all other applicable filing offices; and (b) execute and deliver to Coastal Palms such releases, satisfactions, and other documents and instruments as may be reasonably necessary to evidence the termination and release of Verimark's security interest in the Collateral. Verimark shall bear its own costs associated with the preparation and filing of such termination statements and releases.

ARTICLE IV — MUTUAL RELEASE

Section 4.1 — Release by Verimark. Effective upon the Closing Date and upon Verimark's receipt of the Initial Payment in accordance with Section 2.2, Verimark, on behalf of itself, its parent companies, subsidiaries, affiliates, successors, assigns, and each of their respective officers, directors, shareholders, employees, agents, representatives, attorneys, insurers, and any other persons or entities claiming by, through, or under Verimark (collectively, the "Verimark Releasors"), hereby fully, finally, irrevocably, and unconditionally releases and forever discharges the Coastal Palms Parties and each of their respective successors, assigns, affiliates, members, managers, officers, directors, shareholders, employees, agents, representatives, attorneys, insurers, heirs, and personal representatives (collectively, the "Coastal Palms Releasees") from any and all claims, demands, actions, causes of action, suits, debts, sums of money, accounts, covenants, contracts, agreements, promises, damages, judgments, executions, liabilities, losses, costs, and expenses of every kind and nature whatsoever, whether at law or in equity, whether known or unknown, suspected or unsuspected, contingent or matured, liquidated or unliquidated, that the Verimark Releasors now have, have ever had, or may hereafter have against the Coastal Palms Releasees, arising from, related to, or in connection with:

(a) the Existing FLAs, except to the extent that the obligations at issue are expressly preserved under the New FLAs or this Agreement;

(b) the Litigation, including the Complaint and all claims asserted or that could have been asserted therein;

(c) the revenue-reporting practices, accounting methods, and fee-payment practices of the Coastal Palms Parties at any time through the Effective Date;

(d) the operation, management, and conduct of the Coastal Palms Parties and their affiliates in connection with the Properties through the Effective Date; and

(e) any other acts, omissions, events, transactions, or occurrences involving the Coastal Palms Releasees through the Effective Date that were or could have been asserted as claims or causes of action by the Verimark Releasors in the Litigation.

Carve-Outs from Release: Notwithstanding the foregoing, this release shall not apply to, and nothing herein shall release or discharge: (i) the obligations of any Party under this Agreement, including, without limitation, the obligation to make the Structured Payments and the obligations arising under the Security Agreement and the Personal Guaranties; (ii) the obligations of the Coastal Palms Parties under the New FLAs for the Retained Properties; or (iii) any claim for fraud committed by any Coastal Palms Party in connection with the negotiation, execution, or performance of this Agreement.

Section 4.2 — Release by Coastal Palms Parties. Effective upon the Closing Date, the Coastal Palms Parties, jointly and severally, on behalf of themselves, their successors, assigns, affiliates, members, managers, officers, directors, shareholders, employees, agents, representatives, attorneys, insurers, heirs, and personal representatives, and any other persons or entities claiming by, through, or under the Coastal Palms Parties (collectively, the "Coastal Palms Releasors"), hereby fully, finally, irrevocably, and unconditionally release and forever discharge Verimark and its parent companies, subsidiaries, affiliates, successors, assigns, and each of their respective officers, directors, shareholders, employees, agents, representatives, attorneys, and insurers (collectively, the "Verimark Releasees") from any and all claims, demands, actions, causes of action, suits, debts, sums of money, accounts, covenants, contracts, agreements, promises, damages, judgments, executions, liabilities, losses, costs, and expenses of every kind and nature whatsoever, whether at law or in equity, whether known or unknown, suspected or unsuspected, contingent or matured, liquidated or unliquidated, that the Coastal Palms Releasors now have, have ever had, or may hereafter have against the Verimark Releasees, arising from, related to, or in connection with:

(a) the Existing FLAs, except to the extent that the obligations at issue are expressly preserved under the New FLAs or this Agreement;

(b) the Litigation, including the Counterclaim and all claims, counterclaims, and cross-claims asserted or that could have been asserted therein;

(c) any alleged brand-standard violations by Verimark, alleged over-billing for technology services, or any other claims relating to the performance of Verimark's obligations under the Existing FLAs;

(d) the conduct, policies, and practices of Verimark and its affiliates in connection with the franchise relationship at any time through the Effective Date; and

(e) any other acts, omissions, events, transactions, or occurrences involving the Verimark Releasees through the Effective Date that were or could have been asserted as claims, counterclaims, or causes of action by the Coastal Palms Releasors in the Litigation or in any other proceeding.

Carve-Outs from Release: Notwithstanding the foregoing, this release shall not apply to, and nothing herein shall release or discharge: (i) the obligations of any Party under this Agreement; (ii) the obligations of Verimark under the New FLAs for the Retained Properties; or (iii) any claim for fraud committed by Verimark in connection with the negotiation, execution, or performance of this Agreement.

Section 4.3 — Waiver of Unknown Claims. Each Party expressly acknowledges and agrees that this Agreement is intended to and does include a release of claims that are currently unknown to, unsuspected by, or unanticipated by such Party. Each Party expressly waives, to the fullest extent permitted by applicable law, any and all rights and benefits conferred by any statute, regulation, or common-law principle of any jurisdiction that would otherwise limit the scope of a general release to claims that are known or suspected at the time of execution of such release. Without limiting the generality of the foregoing, each Party understands and acknowledges that such Party may discover facts or claims different from, or in addition to, those that such Party now knows or believes to exist with respect to the subject matter of this Agreement, and such Party agrees that the releases set forth in this Article IV shall remain in full force and effect notwithstanding the discovery of any such additional or different facts or claims.

Section 4.4 — No Admission. This Agreement, the releases set forth herein, and the payment of the Settlement Amount shall not be, and shall not be construed as, deemed, or treated as: (a) an admission or concession by any Party of the truth or validity of any claim, defense, or allegation asserted in the Litigation or otherwise; (b) an admission or concession by any Party of any liability, fault, wrongdoing, or violation of any law, regulation, contract, or standard of conduct; or (c) an admission or concession by any Party of the amount or measure of damages. The Parties enter into this Agreement solely to avoid the burden, expense, inconvenience, distraction, and uncertainty of continued litigation and trial. This Agreement may not be offered or received in evidence in any proceeding as an admission of liability or wrongdoing by any Party, except in a proceeding to enforce the terms of this Agreement.

ARTICLE V — DISMISSAL OF LITIGATION

Section 5.1 — Counterclaim Dismissal. Within five (5) business days of the Closing Date, Coastal Palms, through its counsel of record, shall file with the Court a notice of voluntary dismissal with prejudice of all claims asserted in its Counterclaim in Case No. 1021-00006, with each party to bear its own attorneys' fees and costs. The dismissal shall be at no cost or expense to Verimark.

Section 5.2 — Joint Stipulation of Dismissal. Within five (5) business days of the Closing Date, counsel for the Parties — Priya Anand, Florida Bar No. 0087451, of Calderwood & Harkness LLP, on behalf of Verimark, and Nathan Whitfield III, of Whitfield, Barrow & Crane LLP, on behalf of the Coastal Palms Parties — shall jointly prepare, execute, and file a Joint Stipulation of Dismissal with Prejudice of all claims and counterclaims in Case No. 1021-00006, before the Honorable Richard M. Calloway, in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida. The Joint Stipulation of Dismissal shall provide that each Party shall bear its own attorneys' fees and costs incurred in connection with the Litigation. The Joint Stipulation of Dismissal may reference the fact that the Litigation has been resolved by settlement, but shall not disclose the specific terms, conditions, or amounts set forth in this Agreement.

Section 5.3 — Court Retains Jurisdiction. The Parties shall include in the Joint Stipulation of Dismissal, or file separately, a stipulation providing that the Court shall retain jurisdiction over the Parties and the subject matter of the Litigation solely for the limited purpose of enforcing the terms and conditions of this Agreement upon motion by any Party. The Parties consent to the Court's continuing jurisdiction for such purpose and agree that any motion to enforce this Agreement may be filed in and decided by the Court in Case No. 1021-00006.

ARTICLE VI — REPRESENTATIONS AND WARRANTIES

Section 6.1 — Representations and Warranties of All Parties. Each Party hereby represents and warrants to the other Parties as follows, as of the Effective Date:

(a) Authority. Such Party has full corporate, entity, or individual power and authority to execute, deliver, and perform this Agreement and all ancillary documents required to be executed and delivered by such Party in connection herewith.

(b) Due Authorization. The execution, delivery, and performance of this Agreement by such Party have been duly authorized by all necessary corporate or entity action, including, with respect to Verimark, any required approval of its Board of Directors, and with respect to Coastal Palms, the written consent of its members holding the requisite membership interests under its operating agreement. No further corporate, entity, or individual action is required for the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby.

(c) Binding Obligation. This Agreement constitutes a valid, binding, and legally enforceable 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 the enforcement of creditors' rights generally, and to general principles of equity.

(d) Legal Counsel. Such Party has been represented by competent legal counsel of its own choosing throughout the negotiation and preparation of this Agreement. Such Party's counsel has reviewed this Agreement with such Party and has explained its terms and consequences. Such Party has not relied upon any representation or statement of any other Party or such other Party's counsel regarding the meaning, effect, or consequences of this Agreement.

(e) Voluntary Execution. Such Party has read this Agreement in its entirety, understands its terms and provisions, and executes this Agreement voluntarily, without duress, coercion, or undue influence.

Section 6.2 — Additional Representations and Warranties of the Coastal Palms Parties. In addition to the representations and warranties set forth in Section 6.1, the Coastal Palms Parties, jointly and severally, hereby represent and warrant to Verimark as follows, as of the Effective Date:

(a) Financial Information. The financial information provided by the Coastal Palms Parties to Verimark, Verimark's counsel, the mediator, and the Court during the course of the Litigation and the mediation is materially accurate and complete as of the respective dates indicated therein. The Coastal Palms Parties have not knowingly withheld, concealed, or misrepresented any material financial information.

(b) Collateral Properties Unencumbered. The eight (8) Collateral Properties identified in Schedule 3.1 are owned by the applicable Coastal Palms Party and are free and clear of all liens, mortgages, pledges, encumbrances, security interests, claims, and charges of any kind, other than liens for real-property taxes and assessments not yet due and payable. No other person or entity holds or claims any lien, security interest, or encumbrance on any Collateral Property.

(c) No Bankruptcy or Insolvency Proceedings. No proceeding in bankruptcy, insolvency, receivership, dissolution, or any similar proceeding is pending or, to the knowledge of any Coastal Palms Party, threatened against any Coastal Palms Party. No Coastal Palms Party is insolvent or unable to pay its debts as they become due in the ordinary course of business.

(d) Appraised Value. The aggregate appraised value of the eight (8) Collateral Properties is not less than Seventy-One Million Two Hundred Thousand Dollars ($71,200,000), as determined by independent appraisals conducted by licensed commercial real-estate appraisers within the ninety (90)-day period preceding the Effective Date.

(e) Capacity for Personal Guaranties. R. Brecker and Prescott each have the individual financial capacity, including sufficient assets and net worth, to perform the obligations set forth in their respective Personal Guaranties.

(f) Disclosure of Indebtedness. The Coastal Palms Parties have fully and accurately disclosed to Verimark all outstanding indebtedness of the Coastal Palms Parties, including, without limitation, the approximately Ninety-Four Million Dollars ($94,000,000) in first-lien mortgage loans from Ironclad National Bank secured by eighteen (18) of the twenty-two (22) Properties. There is no other material indebtedness, contingent liability, or off-balance-sheet obligation of any Coastal Palms Party that has not been disclosed to Verimark.

Section 6.3 — Additional Representations and Warranties of Verimark. In addition to the representations and warranties set forth in Section 6.1, Verimark hereby represents and warrants to the Coastal Palms Parties as follows, as of the Effective Date:

(a) SEC Disclosure. Verimark will comply with all applicable disclosure obligations imposed by the Securities and Exchange Commission ("SEC") and the securities laws with respect to the settlement of the Litigation, including, without limitation, disclosure of this settlement as a "material litigation settlement" in its Quarterly Report on Form 10-Q for the second quarter of fiscal year 2024 and in such subsequent periodic and current reports as may be required by applicable SEC rules and regulations.

(b) Good-Faith Execution of New FLAs. Verimark will negotiate and execute the New FLAs for the Retained Properties in good faith and in accordance with the terms and conditions set forth in this Agreement and in the form of New FLA attached hereto as Exhibit C, and will not unreasonably delay or withhold its execution of the New FLAs.

(c) Consent to De-Identification. Verimark will not unreasonably withhold, condition, or delay its consent to any reasonable request from the Coastal Palms Parties in connection with the de-identification of the Surrendered Properties, including requests for reasonable extensions of interim operational arrangements during the de-identification period, provided that such requests do not extend beyond the De-Identification Deadline.

ARTICLE VII — FRANCHISE SURRENDER AND DE-IDENTIFICATION

Section 7.1 — Surrendered Properties. Effective as of the Closing Date, Coastal Palms hereby surrenders and relinquishes all franchise rights under the Existing FLAs with respect to the fourteen (14) Surrendered Properties identified in Exhibit B attached hereto. The Surrendered Properties, grouped by geographic location, are as follows:

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

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

(d) Savannah, Georgia — three (3) properties (operated by Savannah Lodging Partners LLC); and

(e) Brunswick, Georgia — two (2) properties (operated by Savannah Lodging Partners LLC).

The surrender of franchise rights with respect to the Surrendered Properties shall be effective immediately upon execution of this Agreement, and the Existing FLAs applicable to the Surrendered Properties shall be terminated as provided in Section 7.4 below. Gulf Breeze Hospitality LLC operates certain of the Southwest Florida Surrendered Properties, and Savannah Lodging Partners LLC operates the Georgia Surrendered Properties.

Section 7.2 — De-Identification Requirements. Within one hundred twenty (120) days of the Closing Date (i.e., no later than August 20, 2024, the De-Identification Deadline), the Coastal Palms Parties shall, at their sole cost and expense, complete the following de-identification actions with respect to each of the fourteen (14) Surrendered Properties:

(a) Remove all Verimark signage, logos, trade dress, branded materials, and branding elements from the exterior and interior of each Surrendered Property, including, without limitation, building signage, monument signs, directional signs, lobby signage, room-key cards, guest-room collateral, stationery, printed materials, and uniforms;

(b) disconnect from and permanently cease using Verimark's proprietary reservation system, property management system ("PMS"), and revenue management system ("RMS"), and return or destroy all access credentials, software licenses, and hardware provided by Verimark in connection therewith;

(c) Permanently cease using the "Verimark Suites," "Verimark Select," and all other Verimark Brands in any form of advertising, marketing, promotion, website, social-media account, directory listing, or booking channel, whether online or offline;

(d) Return to Verimark, or destroy and certify in writing the destruction of, all Verimark proprietary materials, operational manuals, brand-standard guidelines, training materials, and any other confidential or proprietary documents or materials of Verimark in the possession of the Coastal Palms Parties;

(e) Remove all references to Verimark Brands from all online travel agency ("OTA") listings, third-party distribution channels (including, without limitation, Aldermere Technologies, Bramwell Holdings, Drayton Software, and Kestrel Group), the gulfcoastrooms.com website, and any other website or digital platform operated by or on behalf of the Coastal Palms Parties.

During the de-identification period, Coastal Palms shall provide Verimark with monthly written progress reports detailing the status of de-identification activities at each Surrendered Property. Such progress reports shall be submitted no later than the fifteenth (15th) day of each calendar month following the Closing Date and shall continue until de-identification has been fully completed and confirmed in writing by Verimark.

Section 7.3 — Consequences of Non-Compliance. Failure by any Coastal Palms Party to complete the de-identification requirements set forth in Section 7.2 with respect to any Surrendered Property by the De-Identification Deadline shall constitute an Event of Default under Section 2.7(e) of this Agreement. In addition to, and without limiting, any other remedies available to Verimark under this Agreement or at law or in equity, Verimark shall be entitled to liquidated damages in the amount of Five Thousand Dollars ($5,000) per day per Surrendered Property for each day of non-compliance beyond the De-Identification Deadline. The Parties agree that such liquidated damages represent a reasonable estimate of the harm to Verimark from continued unauthorized use of the Verimark Brands and are not intended as a penalty. Furthermore, Verimark shall be entitled to seek temporary and permanent injunctive relief from the Court to compel de-identification, and the Coastal Palms Parties consent to the entry of such injunctive relief and waive any requirement for the posting of a bond or other security in connection therewith.

Section 7.4 — Termination of Existing FLAs for Surrendered Properties. The Existing FLAs applicable to each of the fourteen (14) Surrendered Properties are hereby terminated effective as of the Closing Date. Such termination shall be without further payment of liquidated damages, early-termination fees, or any other charges or penalties beyond the Settlement Amount payable under this Agreement. The Coastal Palms Parties acknowledge and agree that the Settlement Amount includes full and adequate compensation for the termination of the Existing FLAs applicable to the Surrendered Properties.

ARTICLE VIII — RETAINED PROPERTIES AND ENHANCED AUDIT PROTOCOL

Section 8.1 — Retained Properties. Eight (8) Properties shall continue to be franchised under the Verimark Brands pursuant to new ten (10)-year Franchise License Agreements. The Retained Properties are located as follows:

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

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

The New FLAs for the Retained Properties shall be substantially in the form attached hereto as Exhibit C and shall be executed and delivered by both Verimark and the applicable Coastal Palms Party within thirty (30) days of the Closing Date. The New FLAs shall have an initial term of ten (10) years commencing on the Closing Date and expiring on April 22, 2034, unless sooner terminated in accordance with their terms. The New FLAs shall incorporate by reference, and be subject to, all terms of the Enhanced Audit Protocol set forth in Exhibit D.

Section 8.2 — Enhanced Audit Protocol. For a period of five (5) years from the Closing Date (i.e., through April 22, 2029), the following enhanced audit and reporting requirements shall apply to each of the Retained Properties, in addition to the standard audit and compliance provisions of the New FLAs:

(a) Quarterly Audits. In lieu of the annual audits provided for under the standard FLA provisions, audits of all GRR reporting, booking-channel reconciliation, and fee calculations for each Retained Property shall be conducted on a quarterly basis by an independent auditor selected by Verimark in its sole discretion. Such quarterly audits shall be conducted at the sole cost and expense of Coastal Palms, regardless of the audit findings.

(b) Real-Time POS Integration. Coastal Palms shall install and maintain at each Retained Property a point-of-sale ("POS") system that is fully integrated with Verimark's proprietary revenue management system. Verimark shall have direct, real-time, read-only electronic access to daily revenue data for each Retained Property through such integrated POS system. Installation and integration shall be completed within sixty (60) days of the Closing Date, and Coastal Palms shall bear all costs of installation, maintenance, and operation.

(c) Monthly Revenue Reports. Coastal Palms shall submit to Verimark detailed monthly revenue reports for each Retained Property within fifteen (15) days of the end of each calendar month. Such reports shall include, at a minimum, breakdowns of GRR by booking channel (including direct bookings, online travel agency bookings, corporate-direct bookings, walk-in bookings, group bookings, and all other booking channels), identification of the collecting entity for each revenue stream, and bank-deposit reconciliations demonstrating that all GRR has been properly reported.

(d) Annual Certification. On or before March 31 of each year during the Enhanced Audit Protocol period, R. Brecker and the Coastal Palms chief financial officer (or equivalent officer) shall each execute and deliver to Verimark a written certification, under penalty of perjury, that all GRR reports submitted during the preceding calendar year are complete, accurate, and in full compliance with FLA § 4.1 and with the reporting requirements of this Agreement.

(e) Enhanced Access to Records. Verimark shall be entitled to audit the books, records, accounts, and financial data of Coastal Palms and its affiliates related to any Retained Property upon five (5) business days' written notice, which represents a reduction from the ten (10) business days' notice required under the Existing FLAs. Such access shall include, without limitation, access to all bank accounts, merchant-services accounts, and payment-processing accounts receiving or processing guest-room revenue for any Retained Property.

(f) Prohibition on Off-Platform Channels. During the Enhanced Audit Protocol period, no Coastal Palms Party shall use, engage, or permit any off-platform booking channel, management company, or affiliated entity to collect, process, manage, or otherwise handle guest-room revenue for any Retained Property without the prior written consent of Verimark. Any request for such consent must be submitted in writing to Verimark at least thirty (30) days in advance and must include a complete description of the proposed arrangement, including the identity of the proposed entity, the scope of its responsibilities, and the compensation to be paid.

Section 8.3 — Audit Costs. All costs associated with the quarterly audits and all other audit activities conducted pursuant to the Enhanced Audit Protocol during the five (5)-year period from the Closing Date through April 22, 2029, shall be borne solely by Coastal Palms, regardless of whether the audits reveal any underpayment, discrepancy, or non-compliance. After the expiration of the five (5)-year Enhanced Audit Protocol period, audit-cost allocation shall revert to the standard provision set forth in FLA § 8.2 of the New FLAs, pursuant to which the franchisee shall bear the costs of any audit that reveals an underpayment exceeding two percent (2%) of reported GRR for the audited period.

Section 8.4 — Suncoast Room Management. The Coastal Palms Parties covenant and agree that neither Suncoast Room Management Inc. nor any successor, affiliate, or related entity of Suncoast shall be used, engaged, or permitted to collect, process, manage, or otherwise handle guest-room revenue, room bookings, or any related operational activities for any Retained Property, at any time. This prohibition is absolute and shall survive the expiration of the Enhanced Audit Protocol period and shall remain in effect for the full term of the New FLAs. Furthermore, the gulfcoastrooms.com website, which was operated by or on behalf of the Coastal Palms Parties and through which guest-room bookings were accepted outside of Verimark's authorized reservation system, shall be permanently taken down, disabled, and removed from the internet within thirty (30) days of the Closing Date. The domain name "gulfcoastrooms.com" shall not be used, registered, or held by any Coastal Palms Party for any purpose following such takedown. Any future arrangement by any Coastal Palms Party with any management company, booking service, or third-party entity for the collection, processing, or management of guest-room revenue at any Retained Property must be pre-approved in writing by Verimark prior to the commencement of any such arrangement.

ARTICLE IX — COVENANTS

Section 9.1 — Cooperation. The Parties shall cooperate with each other in good faith to implement all terms, conditions, and provisions of this Agreement, including, without limitation, the execution and delivery of all ancillary documents, instruments, and agreements, the making of all governmental and regulatory filings, and the provision of all notices and consents required to effectuate the transactions contemplated hereby. Each Party shall designate a representative to serve as its primary point of contact for purposes of coordinating the implementation of this Agreement.

Section 9.2 — No Assignment. No Party may assign, transfer, delegate, or otherwise convey any of its rights or obligations under this Agreement to any third party without the prior written consent of all other Parties; provided, however, that Verimark may, without the consent of the Coastal Palms Parties, assign its rights to receive payments under Article II and its rights to enforce the Security Agreement and the Personal Guaranties to any successor-in-interest, affiliate, or wholly owned subsidiary of Verimark,

SETTLEMENT AGREEMENT AND MUTUAL RELEASE
(Execution Version)
April 22, 2024
Verimark Hospitality Group Inc. v. Coastal Palms Franchise Holdings LLC, et al. Case No. 1021-00006 Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida
CONFIDENTIAL — SUBJECT TO CONFIDENTIALITY PROVISIONS OF ARTICLE XII
Right-click to update Table of Contents
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This SETTLEMENT AGREEMENT AND MUTUAL RELEASE (this "Agreement") is entered into and made effective as of April 22, 2024 (the "Effective Date"), by and among the following parties:
VERIMARK HOSPITALITY GROUP INC., a Delaware corporation, with its principal place of business at 2400 East Las Olas Boulevard, Suite 3100, Fort Lauderdale, Florida 33301, and whose common stock is listed on the Nasdaq Stock Market under the ticker symbol "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, Florida 34108 (hereinafter referred to as "Coastal Palms" or "CPFH");
RANDALL "RANDY" BRECKER, an individual residing in the State of Florida, who serves as the Managing Member and holds a sixty percent (60%) equity interest in Coastal Palms, and who also serves as the President of Suncoast Room Management Inc. (hereinafter referred to as "R. Brecker");
THERESA BRECKER, an individual residing in the State of Florida, who is a Member of and holds a fifteen percent (15%) equity interest in Coastal Palms (hereinafter referred to as "T. Brecker");
NOLAN PRESCOTT, an individual residing in the State of Florida, who is a Member of and holds a twenty-five percent (25%) equity interest in Coastal Palms (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");
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 collectively referred to herein as the "Coastal Palms Parties." Verimark and the Coastal Palms Parties are collectively referred to herein as the "Parties" and each individually as a "Party."
RECITALS
WHEREAS:
A. Franchise Relationship. Verimark operates and franchises approximately 340 branded hotel properties across the southeastern United States under the "Verimark Suites," "Verimark Select," and "Verimark Grand" flags. For fiscal year 2021, Verimark reported consolidated revenue of approximately $1.42 billion, of which the franchise segment contributed approximately $218 million. Coastal Palms is the operator of twenty-two (22) franchised hotel properties — eighteen (18) operating under the Verimark Suites flag and four (4) operating under the Verimark Select flag — located across the States of Florida and Georgia, comprising approximately 3,740 total guest rooms. The first Franchise License Agreement ("FLA") between Verimark and Coastal Palms was executed on June 15, 2007, for a Verimark Suites property located in Naples, Florida. Over the following years, Coastal Palms and its affiliates executed a total of twenty-two (22) individual FLAs with Verimark, the most recent of which was dated September 3, 2019. 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 disputes in Broward County, Florida. Under each FLA, Coastal Palms is required to pay the following fees: (i) a royalty 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, adjusted annually for changes in the Consumer Price Index, with such adjustment capped at three percent (3%) per year (FLA § 4.3). Late-payment interest under the FLAs accrues at a rate of one and one-half percent (1.5%) per month, compounded monthly (FLA § 4.6). Additionally, FLA § 15.3 provides for liquidated damages upon termination for cause in an amount equal to three times (3×) the trailing-twelve-month royalties per property.
B. The Litigation. On November 8, 2021, a former Coastal Palms regional controller, Janet Kerrigan, reported to Verimark's compliance hotline allegations of systematic revenue underreporting by the Coastal Palms Parties. In response, Verimark retained Thornbury & Associates CPAs LLP to conduct a franchise-compliance audit of the Coastal Palms properties. Thornbury's preliminary findings, delivered to Verimark on January 18, 2022, indicated that the audited properties had underreported GRR by approximately twenty-six percent (26%) for the period spanning fiscal years 2019 through 2021. Verimark issued a Notice of Material Breach to Coastal Palms on February 4, 2022, demanding that Coastal Palms cure the identified breaches within thirty (30) days in accordance with FLA § 14.1. Coastal Palms, through its counsel Whitfield, Barrow & Crane LLP, responded by letter dated February 28, 2022, denying any material breach and contesting the methodology and conclusions of the Thornbury audit. No cure was tendered by Coastal Palms within the thirty (30)-day period, which expired on March 6, 2022. On March 7, 2022, Verimark filed a ten-count Complaint in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida, bearing Case Number 1021-00006 (the "Litigation"), asserting claims for: (i) breach of contract — royalties; (ii) breach of contract — marketing fund; (iii) breach of contract — technology fees; (iv) breach of the implied covenant of good faith and fair dealing; (v) fraudulent concealment; (vi) negligent misrepresentation; (vii) unjust enrichment; (viii) declaratory judgment; (ix) accounting; and (x) civil conspiracy. In the Complaint, Verimark claimed damages in the approximate aggregate amount of $150,000,000, consisting of: (a) $16,095,000 in direct underpayments of royalties, marketing-fund contributions, and technology fees; (b) $28,400,000 in contractual late-payment interest calculated in accordance with FLA § 4.6; and (c) $105,500,000 in liquidated damages calculated in accordance with FLA § 15.3. On April 18, 2022, Coastal Palms filed its Answer, Affirmative Defenses, and Counterclaim, asserting a counterclaim in the amount of $12,000,000 for alleged brand-standard violations by Verimark and alleged over-billing for technology services. During discovery, Verimark's forensic accounting expert, Dr. Sharon Kettlewell, CPA/CFF, CFE, of Ridgeline Forensic Advisory LLC, prepared an expert report estimating cumulative underreported GRR of $197,800,000 over the period from 2013 through 2021. Coastal Palms' damages expert, Professor Grant Hargrove, PhD, CPA, of Hargrove Economic Consulting Inc., prepared a competing expert report opining that any underpayment totaled no more than $6,200,000.
C. Summary Judgment Ruling. On February 9, 2024, the Court (the Honorable Richard M. Calloway, Circuit Judge) 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 as a matter of law that Coastal Palms' exclusion of revenues collected by Suncoast Room Management Inc. from its calculation and reporting of GRR constituted a material breach of FLA §§ 4.1 and 4.2. The Court denied Coastal Palms' Cross-Motion for Summary Judgment on all counts and deferred the determination of damages to trial.
D. Mediation and Settlement. On February 23, 2024, the Parties agreed to submit their dispute to mediation before the Honorable Patricia Everwood (Retired), of Everwood Dispute Resolution PLLC. A two-day mediation session was conducted on March 14 and 15, 2024, at 396 Alhambra Circle, Suite 800, Coral Gables, Florida 33134. A tentative settlement was reached on the second day of mediation, March 15, 2024, and the Parties executed a written term sheet memorializing the principal terms of the settlement on March 22, 2024. The Parties now desire to fully and finally resolve all claims and counterclaims in the Litigation, and all related disputes among the Parties, on the terms and conditions set forth in this Agreement.
E. Desire to Settle. The Parties acknowledge the uncertainty, risk, and expense inherent in continued litigation and trial, and each Party has made an independent assessment of the merits and risks of its respective claims and defenses. The Parties desire to avoid the further burden and expense of trial and to resolve their disputes amicably and in full. Entry into this Agreement is not, and shall not be construed as, an admission of liability, wrongdoing, or the validity of any claim or defense by any Party. Each Party has been represented by competent legal counsel of its choosing in the negotiation and execution of this Agreement, and each Party has had a full and fair opportunity to review, analyze, and negotiate the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual promises, covenants, releases, 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 "Agreement" means this Settlement Agreement and Mutual Release, together with all Exhibits and Schedules attached hereto, which are incorporated herein by reference and made a part hereof.
1.2 "Closing" means the consummation of the transactions contemplated by this Agreement on the Closing Date, including the execution and delivery of this Agreement by all Parties, the payment of the Initial Payment, and the execution and delivery of all ancillary documents required to be delivered at or prior to the Closing.
1.3 "Closing Date" means April 22, 2024.
1.4 "Collateral Properties" means the eight (8) unencumbered hotel properties identified in Schedule 3.1 hereto, which serve as collateral for the security interest granted to Verimark pursuant to Article III.
1.5 "Complaint" means the ten-count Complaint filed by Verimark on March 7, 2022, in Case No. 1021-00006, in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida, together with all amendments thereto.
1.6 "Counterclaim" means the $12,000,000 counterclaim filed by Coastal Palms on April 18, 2022, in the Litigation, asserting claims for alleged brand-standard violations and over-billing.
1.7 "Court" means the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida.
1.8 "De-Identification Deadline" means August 20, 2024, which is one hundred twenty (120) days from the Closing Date.
1.9 "Enhanced Audit Protocol" means the enhanced audit and reporting requirements applicable to the Retained Properties, as set forth in Article VIII of this Agreement and as more fully described in Exhibit D attached hereto.
1.10 "Event of Default" has the meaning set forth in Section 2.7 of this Agreement.
1.11 "Existing FLAs" means the twenty-two (22) Franchise License Agreements between Verimark and Coastal Palms and/or its affiliates (including Gulf Breeze and Savannah Lodging), the first of which was executed on June 15, 2007, and the most recent of which was executed on September 3, 2019, governing the operation of the Properties under the Verimark Brands.
1.12 "GRR" or "Gross Room Revenue" has the meaning ascribed to such term in Section 4.1 of each FLA, which generally includes all revenue derived from or attributable to the rental of guest rooms at the applicable Property, regardless of the method of collection, booking channel, or collecting entity.
1.13 "Initial Payment" means the cash payment of Twenty-Five Million Dollars ($25,000,000) payable by Coastal Palms to Verimark at Closing in accordance with Section 2.2 of this Agreement.
1.14 "Ironclad" means Ironclad National Bank, a national banking association, which holds first-lien mortgage loans on eighteen (18) of the twenty-two (22) Properties, with an aggregate outstanding principal balance of approximately Ninety-Four Million Dollars ($94,000,000) as of the date hereof.
1.15 "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, including all claims, counterclaims, cross-claims, and third-party claims asserted therein.
1.16 "New FLAs" means the new ten (10)-year Franchise License Agreements to be executed by Verimark and the applicable Coastal Palms Party for each of the Retained Properties, substantially in the form attached hereto as Exhibit C.
1.17 "Payment Schedule" means the schedule of payments set forth in Article II and as more fully described in Exhibit A attached hereto.
1.18 "Personal Guaranties" means the individual guaranty agreements to be executed by R. Brecker and Prescott, each substantially in the form attached hereto as Exhibit E, pursuant to which R. Brecker and Prescott jointly and severally guarantee all obligations of the Coastal Palms Parties under this Agreement.
1.19 "Properties" means the twenty-two (22) hotel properties operated by the Coastal Palms Parties under the Existing FLAs.
1.20 "Retained Properties" means the eight (8) Properties identified in Section 7.1 of this Agreement and in Exhibit C that will continue to be franchised under the New FLAs, consisting of four (4) properties in Naples, Florida; two (2) properties on Marco Island, Florida; and two (2) properties in Tampa, Florida.
1.21 "Security Agreement" means the security agreement to be executed by Coastal Palms in favor of Verimark, substantially in the form attached hereto as Exhibit F, granting Verimark a first-priority security interest in the Collateral Properties to secure the Structured Payments and other obligations under this Agreement.
1.22 "Settlement Amount" means the aggregate sum of Eighty-Seven Million Five Hundred Thousand Dollars ($87,500,000), payable by the Coastal Palms Parties to Verimark in accordance with Article II of this Agreement.
1.23 "Structured Payments" means the eight (8) semi-annual payments of Seven Million Eight Hundred Twelve Thousand Five Hundred Dollars ($7,812,500) each, totaling Sixty-Two Million Five Hundred Thousand Dollars ($62,500,000), payable in accordance with Section 2.3 of this Agreement, the first such payment being due on October 22, 2024, and the last such payment being due on April 22, 2028, as more fully described in the Payment Schedule attached hereto as Exhibit A.
1.24 "Surrendered Properties" means the fourteen (14) Properties identified in Section 7.1 and Exhibit B of this Agreement that are subject to franchise surrender, de-identification, and termination of the applicable Existing FLAs.
1.25 "Verimark Brands" means "Verimark Suites," "Verimark Select," and "Verimark Grand," together with all associated trademarks, service marks, logos, trade dress, proprietary systems (including reservation systems, property management systems, and revenue management systems), and all other intellectual property owned, licensed, or controlled by Verimark in connection with the branding and operation of its franchised hotel properties.
ARTICLE II — SETTLEMENT PAYMENT
Section 2.1 — Total Settlement Amount. In full and final settlement of all claims, counterclaims, causes of action, and disputes among the Parties, whether asserted or unasserted, known or unknown, arising from or relating to the Existing FLAs, the Litigation, or the subject matter thereof, the Coastal Palms Parties shall pay to Verimark a total Settlement Amount of Eighty-Seven Million Five Hundred Thousand Dollars ($87,500,000), payable as follows:
(a) The Initial Payment of Twenty-Five Million Dollars ($25,000,000), payable at the Closing in accordance with Section 2.2 below; and
(b) The Structured Payments totaling Sixty-Two Million Five Hundred Thousand Dollars ($62,500,000), payable in eight (8) semi-annual installments of Seven Million Eight Hundred Twelve Thousand Five Hundred Dollars ($7,812,500) each, in accordance with Section 2.3 below.
The Payment Schedule setting forth the dates, amounts, and interest calculations for all payments under this Article II is attached hereto as Exhibit A and incorporated herein by reference.
Section 2.2 — Initial Payment. On the Closing Date, Coastal Palms shall pay to Verimark the Initial Payment of Twenty-Five Million Dollars ($25,000,000) by wire transfer of immediately available funds from the escrow account established at Ironclad National Bank for the purposes of this settlement to Verimark's designated account. Verimark shall provide Coastal Palms with complete wire-transfer instructions for the designated receiving account no later than three (3) business days prior to the Closing Date. Upon receipt of the Initial Payment, Verimark's counsel, Calderwood & Harkness LLP, at 110 SE 6th Street, Suite 2800, Fort Lauderdale, Florida 33301, shall promptly issue a written confirmation of receipt to counsel for the Coastal Palms Parties. The obligation to make the Initial Payment is unconditional and shall not be subject to any right of setoff, counterclaim, defense, or deduction.
Section 2.3 — Structured Payments. Following the payment of the Initial Payment, Coastal Palms shall pay to Verimark the remaining Sixty-Two Million Five Hundred Thousand Dollars ($62,500,000) in eight (8) equal semi-annual installments of Seven Million Eight Hundred Twelve Thousand Five Hundred Dollars ($7,812,500) each, on the following schedule:
(a) The first installment shall be due and payable on October 22, 2024.
(b) The second installment shall be due and payable on April 22, 2025.
(c) The third installment shall be due and payable on October 22, 2025.
(d) The fourth installment shall be due and payable on April 22, 2026.
(e) The fifth installment shall be due and payable on October 22, 2026.
(f) The sixth installment shall be due and payable on April 22, 2027.
(g) The seventh installment shall be due and payable on October 22, 2027.
(h) The eighth and final installment shall be due and payable on April 22, 2028.
All Structured Payments shall be made by wire transfer of immediately available funds to the account designated by Verimark in accordance with the wire-transfer instructions provided pursuant to Section 2.2, or to such other account as Verimark may designate in writing from time to time upon not less than ten (10) business days' prior notice to Coastal Palms.
Section 2.4 — Interest on Structured Payments. Interest shall accrue on the outstanding principal balance of the Structured Payments at a rate of six and one-half percent (6.5%) per annum, simple interest, calculated on the basis of a 365-day year and the actual number of days elapsed. Interest shall begin to accrue on the Closing Date and shall be calculated on the then-outstanding principal balance of the Structured Payments. Interest payments shall be due and payable concurrently with each semi-annual installment payment. The amount of interest due with each installment shall be calculated by multiplying the outstanding principal balance as of the first day of the applicable interest period by the annual interest rate of 6.5%, and then multiplying the result by a fraction, the numerator of which is the actual number of days elapsed during such interest period and the denominator of which is 365. A detailed schedule setting forth the estimated interest amounts due with each installment is set forth in Exhibit A.
Section 2.5 — Late Payments. Any Structured Payment (including any concurrent interest payment) 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 on the overdue amount, calculated from the original due date until the date on which such overdue amount is received by Verimark in full. This default interest shall be in addition to, and not in substitution for, the interest otherwise payable under Section 2.4. If Coastal Palms fails to cure a late payment within thirty (30) days after written notice from Verimark specifying the overdue payment and the amount due, such failure shall constitute an Event of Default under Section 2.7 of this Agreement. Nothing in this Section 2.5 shall be construed to extend the due date for any Structured Payment or to waive Verimark's right to declare an Event of Default following the expiration of the applicable cure period.
Section 2.6 — Prepayment. Coastal Palms may, at its option, prepay all or any portion of the Structured Payments at any time without premium, penalty, or additional charge of any kind. Any partial prepayment shall be applied first to any accrued and unpaid interest on the outstanding principal balance of the Structured Payments, and second to the scheduled installments in inverse order of maturity (i.e., applied first to the most distant scheduled installment, then to the next most distant, and so on), thereby reducing the total interest obligation over the remaining term. Coastal Palms shall provide Verimark with not less than five (5) business days' prior written notice of any prepayment, specifying the amount and intended date of such prepayment. Verimark shall recalculate the interest amounts due on any remaining installments following any partial prepayment and shall provide an updated Payment Schedule to Coastal Palms within ten (10) business days of receipt of any such prepayment.
Section 2.7 — Events of Default and Acceleration. An "Event of Default" shall be deemed to have occurred upon the happening of any of the following:
(a) Payment Default. Failure by any Coastal Palms Party to make any payment of the Structured Payments, accrued interest, or any other monetary obligation under this Agreement within thirty (30) days of the date on which Verimark delivers written notice to Coastal Palms specifying such payment default;
(b) Covenant Default. Breach by any Coastal Palms Party of any material covenant, agreement, or obligation under this Agreement (other than a payment obligation, which is governed by clause (a) above) that remains uncured for thirty (30) days after Verimark delivers written notice to Coastal Palms specifying such breach in reasonable detail;
(c) Bankruptcy or Insolvency. The commencement of any voluntary or involuntary proceeding under the United States Bankruptcy Code, Title 11, United States Code, or under any state insolvency, receivership, dissolution, or similar statute, by or against any Coastal Palms Party, or the appointment of a receiver, trustee, custodian, or similar official for the business, assets, or property of any Coastal Palms Party, or the making of a general assignment for the benefit of creditors by any Coastal Palms Party;
(d) Breach of Representations and Warranties. Any representation or warranty made by any Coastal Palms Party in this Agreement or in any ancillary document delivered in connection herewith that is materially inaccurate, false, or misleading as of the date on which it was made, and such inaccuracy, falsity, or misleading character is not cured within thirty (30) days after written notice from Verimark specifying the same;
(e) De-Identification Failure. Failure by any Coastal Palms Party to comply with the de-identification requirements set forth in Article VII of this Agreement by the De-Identification Deadline.
Upon the occurrence of an Event of Default, Verimark may, at its sole election and upon written notice to Coastal Palms, declare the entire outstanding principal balance of the Structured Payments, together with all accrued and unpaid interest thereon and all other amounts owing under this Agreement, immediately due and payable in full, without further notice, demand, presentment, or protest, all of which are hereby waived by the Coastal Palms Parties. Acceleration of the Structured Payments pursuant to this Section 2.7 shall not constitute a waiver of, or limit, any other rights or remedies available to Verimark at law or in equity, including, without limitation, the right to enforce the Security Agreement, to seek collection under the Personal Guaranties, to pursue foreclosure on the Collateral Properties, and to seek injunctive or other equitable relief from the Court.
Section 2.8 — Tax Treatment. Each Party shall be solely responsible for the payment of all federal, state, and local taxes, and for the filing of all tax returns and reports, arising from or attributable to the payments received or made by such Party under this Agreement. The Parties agree that, for federal and state income-tax purposes, the Settlement Amount shall be treated by all Parties as compensatory damages and that no portion of the Settlement Amount shall be characterized as punitive damages, penalties, or interest for tax purposes, except to the extent required by applicable law. The Coastal Palms Parties shall be solely responsible for any and all withholding obligations, including but not limited to any obligation to withhold and remit taxes on behalf of Verimark, if any such obligation exists under applicable law. No Party shall take any position on any tax return or in any proceeding before any taxing authority that is inconsistent with the treatment described in this Section 2.8, unless required to do so by a final determination (as defined in Section 1313(a) of the Internal Revenue Code) of a court of competent jurisdiction or an applicable taxing authority.
ARTICLE III — SECURITY FOR STRUCTURED PAYMENTS
Section 3.1 — Security Interest. To secure the prompt and full payment and performance of all obligations of the Coastal Palms Parties under this Agreement, including, without limitation, the payment of all Structured Payments, accrued interest thereon, default interest, and any indemnification obligations arising under Article X, Coastal Palms hereby grants to Verimark a first-priority security interest in the eight (8) unencumbered hotel properties identified in Schedule 3.1 attached hereto (the "Collateral Properties"), together with all improvements, fixtures, furnishings, equipment, accounts, general intangibles, and proceeds related thereto (collectively, the "Collateral"). The aggregate appraised value of the Collateral Properties, as determined by independent appraisals conducted by licensed commercial real-estate appraisers within the ninety (90)-day period preceding the Closing Date, is not less than Seventy-One Million Two Hundred Thousand Dollars ($71,200,000). The security interest granted hereunder shall be evidenced by the Security Agreement, which shall be substantially in the form attached hereto as Exhibit F and shall be executed and delivered concurrently with the execution of this Agreement.
Section 3.2 — UCC Filings. To perfect the security interest granted under Section 3.1, Coastal Palms hereby authorizes Verimark, and Verimark's counsel, Calderwood & Harkness LLP, to prepare, execute, and file on behalf of Coastal Palms UCC-1 Financing Statements with the Florida Secured Transaction Registry and with any other filing office in any jurisdiction where filing may be necessary or advisable to perfect or maintain Verimark's security interest in the Collateral. The UCC-1 Financing Statement shall identify the following:
Debtor: Coastal Palms Franchise Holdings LLC, 9500 Gulf Shore Drive, Suite 450, Naples, Florida 34108
Secured Party: Verimark Hospitality Group Inc., 2400 East Las Olas Boulevard, Suite 3100, Fort Lauderdale, Florida 33301
Coastal Palms shall execute and deliver all additional documents, instruments, and agreements, including without limitation continuation statements, amendments, and such other filings and recordings, as may be reasonably necessary or requested by Verimark from time to time to perfect, preserve, and maintain the first-priority status of Verimark's security interest in the Collateral. Coastal Palms shall bear all costs and expenses associated with such filings.
Section 3.3 — Personal Guaranties. Concurrently with the execution of this Agreement, R. Brecker and Prescott shall each execute and deliver to Verimark a Personal Guaranty, substantially in the form attached hereto as Exhibit E, pursuant to which R. Brecker and Prescott shall jointly and severally, absolutely, unconditionally, and irrevocably guarantee the full and prompt payment and performance of all obligations of the Coastal Palms Parties under this Agreement, including, without limitation, all Structured Payments, accrued interest, default interest, indemnification obligations, and any and all other amounts that may become due and owing under this Agreement. The Personal Guaranties shall remain in full force and effect until all Structured Payments, accrued interest, and all other obligations of the Coastal Palms Parties under this Agreement have been paid or performed in full to the complete satisfaction of Verimark.
Section 3.4 — Relationship with Ironclad National Bank. The Parties acknowledge and agree that Ironclad National Bank ("Ironclad") holds first-lien mortgage loans on eighteen (18) of the twenty-two (22) Properties, with an aggregate outstanding principal balance of approximately Ninety-Four Million Dollars ($94,000,000) as of the date hereof. The Parties further acknowledge that the eight (8) Collateral Properties identified in Schedule 3.1, which secure Verimark's security interest under this Agreement, are unencumbered by any mortgage, lien, or security interest held by Ironclad. Nothing in this Agreement shall be construed or interpreted so as to impair, subordinate, modify, or otherwise affect in any manner whatsoever the existing liens, security interests, or other rights of Ironclad under its mortgage-loan agreements with the Coastal Palms Parties. Coastal Palms represents and warrants that it has provided written notice to Ironclad of the existence and terms of this Agreement and the grant of the security interest to Verimark, and that Ironclad has not objected to the transactions contemplated hereby. Ironclad is an intended third-party beneficiary of this Section 3.4 and of Section 9.5 of this Agreement.
Section 3.5 — Release of Security Interest. Upon the payment in full of all Structured Payments, accrued interest, default interest (if any), and all other obligations of the Coastal Palms Parties under this Agreement, Verimark shall, within thirty (30) days of such payment in full: (a) file UCC-3 Termination Statements with the Florida Secured Transaction Registry and all other applicable filing offices; and (b) execute and deliver to Coastal Palms such releases, satisfactions, and other documents and instruments as may be reasonably necessary to evidence the termination and release of Verimark's security interest in the Collateral. Verimark shall bear its own costs associated with the preparation and filing of such termination statements and releases.
ARTICLE IV — MUTUAL RELEASE
Section 4.1 — Release by Verimark. Effective upon the Closing Date and upon Verimark's receipt of the Initial Payment in accordance with Section 2.2, Verimark, on behalf of itself, its parent companies, subsidiaries, affiliates, successors, assigns, and each of their respective officers, directors, shareholders, employees, agents, representatives, attorneys, insurers, and any other persons or entities claiming by, through, or under Verimark (collectively, the "Verimark Releasors"), hereby fully, finally, irrevocably, and unconditionally releases and forever discharges the Coastal Palms Parties and each of their respective successors, assigns, affiliates, members, managers, officers, directors, shareholders, employees, agents, representatives, attorneys, insurers, heirs, and personal representatives (collectively, the "Coastal Palms Releasees") from any and all claims, demands, actions, causes of action, suits, debts, sums of money, accounts, covenants, contracts, agreements, promises, damages, judgments, executions, liabilities, losses, costs, and expenses of every kind and nature whatsoever, whether at law or in equity, whether known or unknown, suspected or unsuspected, contingent or matured, liquidated or unliquidated, that the Verimark Releasors now have, have ever had, or may hereafter have against the Coastal Palms Releasees, arising from, related to, or in connection with:
(a) the Existing FLAs, except to the extent that the obligations at issue are expressly preserved under the New FLAs or this Agreement;
(b) the Litigation, including the Complaint and all claims asserted or that could have been asserted therein;
(c) the revenue-reporting practices, accounting methods, and fee-payment practices of the Coastal Palms Parties at any time through the Effective Date;
(d) the operation, management, and conduct of the Coastal Palms Parties and their affiliates in connection with the Properties through the Effective Date; and
(e) any other acts, omissions, events, transactions, or occurrences involving the Coastal Palms Releasees through the Effective Date that were or could have been asserted as claims or causes of action by the Verimark Releasors in the Litigation.
Carve-Outs from Release: Notwithstanding the foregoing, this release shall not apply to, and nothing herein shall release or discharge: (i) the obligations of any Party under this Agreement, including, without limitation, the obligation to make the Structured Payments and the obligations arising under the Security Agreement and the Personal Guaranties; (ii) the obligations of the Coastal Palms Parties under the New FLAs for the Retained Properties; or (iii) any claim for fraud committed by any Coastal Palms Party in connection with the negotiation, execution, or performance of this Agreement.
Section 4.2 — Release by Coastal Palms Parties. Effective upon the Closing Date, the Coastal Palms Parties, jointly and severally, on behalf of themselves, their successors, assigns, affiliates, members, managers, officers, directors, shareholders, employees, agents, representatives, attorneys, insurers, heirs, and personal representatives, and any other persons or entities claiming by, through, or under the Coastal Palms Parties (collectively, the "Coastal Palms Releasors"), hereby fully, finally, irrevocably, and unconditionally release and forever discharge Verimark and its parent companies, subsidiaries, affiliates, successors, assigns, and each of their respective officers, directors, shareholders, employees, agents, representatives, attorneys, and insurers (collectively, the "Verimark Releasees") from any and all claims, demands, actions, causes of action, suits, debts, sums of money, accounts, covenants, contracts, agreements, promises, damages, judgments, executions, liabilities, losses, costs, and expenses of every kind and nature whatsoever, whether at law or in equity, whether known or unknown, suspected or unsuspected, contingent or matured, liquidated or unliquidated, that the Coastal Palms Releasors now have, have ever had, or may hereafter have against the Verimark Releasees, arising from, related to, or in connection with:
(a) the Existing FLAs, except to the extent that the obligations at issue are expressly preserved under the New FLAs or this Agreement;
(b) the Litigation, including the Counterclaim and all claims, counterclaims, and cross-claims asserted or that could have been asserted therein;
(c) any alleged brand-standard violations by Verimark, alleged over-billing for technology services, or any other claims relating to the performance of Verimark's obligations under the Existing FLAs;
(d) the conduct, policies, and practices of Verimark and its affiliates in connection with the franchise relationship at any time through the Effective Date; and
(e) any other acts, omissions, events, transactions, or occurrences involving the Verimark Releasees through the Effective Date that were or could have been asserted as claims, counterclaims, or causes of action by the Coastal Palms Releasors in the Litigation or in any other proceeding.
Carve-Outs from Release: Notwithstanding the foregoing, this release shall not apply to, and nothing herein shall release or discharge: (i) the obligations of any Party under this Agreement; (ii) the obligations of Verimark under the New FLAs for the Retained Properties; or (iii) any claim for fraud committed by Verimark in connection with the negotiation, execution, or performance of this Agreement.
Section 4.3 — Waiver of Unknown Claims. Each Party expressly acknowledges and agrees that this Agreement is intended to and does include a release of claims that are currently unknown to, unsuspected by, or unanticipated by such Party. Each Party expressly waives, to the fullest extent permitted by applicable law, any and all rights and benefits conferred by any statute, regulation, or common-law principle of any jurisdiction that would otherwise limit the scope of a general release to claims that are known or suspected at the time of execution of such release. Without limiting the generality of the foregoing, each Party understands and acknowledges that such Party may discover facts or claims different from, or in addition to, those that such Party now knows or believes to exist with respect to the subject matter of this Agreement, and such Party agrees that the releases set forth in this Article IV shall remain in full force and effect notwithstanding the discovery of any such additional or different facts or claims.
Section 4.4 — No Admission. This Agreement, the releases set forth herein, and the payment of the Settlement Amount shall not be, and shall not be construed as, deemed, or treated as: (a) an admission or concession by any Party of the truth or validity of any claim, defense, or allegation asserted in the Litigation or otherwise; (b) an admission or concession by any Party of any liability, fault, wrongdoing, or violation of any law, regulation, contract, or standard of conduct; or (c) an admission or concession by any Party of the amount or measure of damages. The Parties enter into this Agreement solely to avoid the burden, expense, inconvenience, distraction, and uncertainty of continued litigation and trial. This Agreement may not be offered or received in evidence in any proceeding as an admission of liability or wrongdoing by any Party, except in a proceeding to enforce the terms of this Agreement.
ARTICLE V — DISMISSAL OF LITIGATION
Section 5.1 — Counterclaim Dismissal. Within five (5) business days of the Closing Date, Coastal Palms, through its counsel of record, shall file with the Court a notice of voluntary dismissal with prejudice of all claims asserted in its Counterclaim in Case No. 1021-00006, with each party to bear its own attorneys' fees and costs. The dismissal shall be at no cost or expense to Verimark.
Section 5.2 — Joint Stipulation of Dismissal. Within five (5) business days of the Closing Date, counsel for the Parties — Priya Anand, Florida Bar No. 0087451, of Calderwood & Harkness LLP, on behalf of Verimark, and Nathan Whitfield III, of Whitfield, Barrow & Crane LLP, on behalf of the Coastal Palms Parties — shall jointly prepare, execute, and file a Joint Stipulation of Dismissal with Prejudice of all claims and counterclaims in Case No. 1021-00006, before the Honorable Richard M. Calloway, in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida. The Joint Stipulation of Dismissal shall provide that each Party shall bear its own attorneys' fees and costs incurred in connection with the Litigation. The Joint Stipulation of Dismissal may reference the fact that the Litigation has been resolved by settlement, but shall not disclose the specific terms, conditions, or amounts set forth in this Agreement.
Section 5.3 — Court Retains Jurisdiction. The Parties shall include in the Joint Stipulation of Dismissal, or file separately, a stipulation providing that the Court shall retain jurisdiction over the Parties and the subject matter of the Litigation solely for the limited purpose of enforcing the terms and conditions of this Agreement upon motion by any Party. The Parties consent to the Court's continuing jurisdiction for such purpose and agree that any motion to enforce this Agreement may be filed in and decided by the Court in Case No. 1021-00006.
ARTICLE VI — REPRESENTATIONS AND WARRANTIES
Section 6.1 — Representations and Warranties of All Parties. Each Party hereby represents and warrants to the other Parties as follows, as of the Effective Date:
(a) Authority. Such Party has full corporate, entity, or individual power and authority to execute, deliver, and perform this Agreement and all ancillary documents required to be executed and delivered by such Party in connection herewith.
(b) Due Authorization. The execution, delivery, and performance of this Agreement by such Party have been duly authorized by all necessary corporate or entity action, including, with respect to Verimark, any required approval of its Board of Directors, and with respect to Coastal Palms, the written consent of its members holding the requisite membership interests under its operating agreement. No further corporate, entity, or individual action is required for the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby.
(c) Binding Obligation. This Agreement constitutes a valid, binding, and legally enforceable 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 the enforcement of creditors' rights generally, and to general principles of equity.
(d) Legal Counsel. Such Party has been represented by competent legal counsel of its own choosing throughout the negotiation and preparation of this Agreement. Such Party's counsel has reviewed this Agreement with such Party and has explained its terms and consequences. Such Party has not relied upon any representation or statement of any other Party or such other Party's counsel regarding the meaning, effect, or consequences of this Agreement.
(e) Voluntary Execution. Such Party has read this Agreement in its entirety, understands its terms and provisions, and executes this Agreement voluntarily, without duress, coercion, or undue influence.
Section 6.2 — Additional Representations and Warranties of the Coastal Palms Parties. In addition to the representations and warranties set forth in Section 6.1, the Coastal Palms Parties, jointly and severally, hereby represent and warrant to Verimark as follows, as of the Effective Date:
(a) Financial Information. The financial information provided by the Coastal Palms Parties to Verimark, Verimark's counsel, the mediator, and the Court during the course of the Litigation and the mediation is materially accurate and complete as of the respective dates indicated therein. The Coastal Palms Parties have not knowingly withheld, concealed, or misrepresented any material financial information.
(b) Collateral Properties Unencumbered. The eight (8) Collateral Properties identified in Schedule 3.1 are owned by the applicable Coastal Palms Party and are free and clear of all liens, mortgages, pledges, encumbrances, security interests, claims, and charges of any kind, other than liens for real-property taxes and assessments not yet due and payable. No other person or entity holds or claims any lien, security interest, or encumbrance on any Collateral Property.
(c) No Bankruptcy or Insolvency Proceedings. No proceeding in bankruptcy, insolvency, receivership, dissolution, or any similar proceeding is pending or, to the knowledge of any Coastal Palms Party, threatened against any Coastal Palms Party. No Coastal Palms Party is insolvent or unable to pay its debts as they become due in the ordinary course of business.
(d) Appraised Value. The aggregate appraised value of the eight (8) Collateral Properties is not less than Seventy-One Million Two Hundred Thousand Dollars ($71,200,000), as determined by independent appraisals conducted by licensed commercial real-estate appraisers within the ninety (90)-day period preceding the Effective Date.
(e) Capacity for Personal Guaranties. R. Brecker and Prescott each have the individual financial capacity, including sufficient assets and net worth, to perform the obligations set forth in their respective Personal Guaranties.
(f) Disclosure of Indebtedness. The Coastal Palms Parties have fully and accurately disclosed to Verimark all outstanding indebtedness of the Coastal Palms Parties, including, without limitation, the approximately Ninety-Four Million Dollars ($94,000,000) in first-lien mortgage loans from Ironclad National Bank secured by eighteen (18) of the twenty-two (22) Properties. There is no other material indebtedness, contingent liability, or off-balance-sheet obligation of any Coastal Palms Party that has not been disclosed to Verimark.
Section 6.3 — Additional Representations and Warranties of Verimark. In addition to the representations and warranties set forth in Section 6.1, Verimark hereby represents and warrants to the Coastal Palms Parties as follows, as of the Effective Date:
(a) SEC Disclosure. Verimark will comply with all applicable disclosure obligations imposed by the Securities and Exchange Commission ("SEC") and the securities laws with respect to the settlement of the Litigation, including, without limitation, disclosure of this settlement as a "material litigation settlement" in its Quarterly Report on Form 10-Q for the second quarter of fiscal year 2024 and in such subsequent periodic and current reports as may be required by applicable SEC rules and regulations.
(b) Good-Faith Execution of New FLAs. Verimark will negotiate and execute the New FLAs for the Retained Properties in good faith and in accordance with the terms and conditions set forth in this Agreement and in the form of New FLA attached hereto as Exhibit C, and will not unreasonably delay or withhold its execution of the New FLAs.
(c) Consent to De-Identification. Verimark will not unreasonably withhold, condition, or delay its consent to any reasonable request from the Coastal Palms Parties in connection with the de-identification of the Surrendered Properties, including requests for reasonable extensions of interim operational arrangements during the de-identification period, provided that such requests do not extend beyond the De-Identification Deadline.
ARTICLE VII — FRANCHISE SURRENDER AND DE-IDENTIFICATION
Section 7.1 — Surrendered Properties. Effective as of the Closing Date, Coastal Palms hereby surrenders and relinquishes all franchise rights under the Existing FLAs with respect to the fourteen (14) Surrendered Properties identified in Exhibit B attached hereto. The Surrendered Properties, grouped by geographic location, are as follows:
(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 (operated by Savannah Lodging Partners LLC); and
(e) Brunswick, Georgia — two (2) properties (operated by Savannah Lodging Partners LLC).
The surrender of franchise rights with respect to the Surrendered Properties shall be effective immediately upon execution of this Agreement, and the Existing FLAs applicable to the Surrendered Properties shall be terminated as provided in Section 7.4 below. Gulf Breeze Hospitality LLC operates certain of the Southwest Florida Surrendered Properties, and Savannah Lodging Partners LLC operates the Georgia Surrendered Properties.
Section 7.2 — De-Identification Requirements. Within one hundred twenty (120) days of the Closing Date (i.e., no later than August 20, 2024, the De-Identification Deadline), the Coastal Palms Parties shall, at their sole cost and expense, complete the following de-identification actions with respect to each of the fourteen (14) Surrendered Properties:
(a) Remove all Verimark signage, logos, trade dress, branded materials, and branding elements from the exterior and interior of each Surrendered Property, including, without limitation, building signage, monument signs, directional signs, lobby signage, room-key cards, guest-room collateral, stationery, printed materials, and uniforms;
(b) disconnect from and permanently cease using Verimark's proprietary reservation system, property management system ("PMS"), and revenue management system ("RMS"), and return or destroy all access credentials, software licenses, and hardware provided by Verimark in connection therewith;
(c) Permanently cease using the "Verimark Suites," "Verimark Select," and all other Verimark Brands in any form of advertising, marketing, promotion, website, social-media account, directory listing, or booking channel, whether online or offline;
(d) Return to Verimark, or destroy and certify in writing the destruction of, all Verimark proprietary materials, operational manuals, brand-standard guidelines, training materials, and any other confidential or proprietary documents or materials of Verimark in the possession of the Coastal Palms Parties;
(e) Remove all references to Verimark Brands from all online travel agency ("OTA") listings, third-party distribution channels (including, without limitation, Aldermere Technologies, Bramwell Holdings, Drayton Software, and Kestrel Group), the gulfcoastrooms.com website, and any other website or digital platform operated by or on behalf of the Coastal Palms Parties.
During the de-identification period, Coastal Palms shall provide Verimark with monthly written progress reports detailing the status of de-identification activities at each Surrendered Property. Such progress reports shall be submitted no later than the fifteenth (15th) day of each calendar month following the Closing Date and shall continue until de-identification has been fully completed and confirmed in writing by Verimark.
Section 7.3 — Consequences of Non-Compliance. Failure by any Coastal Palms Party to complete the de-identification requirements set forth in Section 7.2 with respect to any Surrendered Property by the De-Identification Deadline shall constitute an Event of Default under Section 2.7(e) of this Agreement. In addition to, and without limiting, any other remedies available to Verimark under this Agreement or at law or in equity, Verimark shall be entitled to liquidated damages in the amount of Five Thousand Dollars ($5,000) per day per Surrendered Property for each day of non-compliance beyond the De-Identification Deadline. The Parties agree that such liquidated damages represent a reasonable estimate of the harm to Verimark from continued unauthorized use of the Verimark Brands and are not intended as a penalty. Furthermore, Verimark shall be entitled to seek temporary and permanent injunctive relief from the Court to compel de-identification, and the Coastal Palms Parties consent to the entry of such injunctive relief and waive any requirement for the posting of a bond or other security in connection therewith.
Section 7.4 — Termination of Existing FLAs for Surrendered Properties. The Existing FLAs applicable to each of the fourteen (14) Surrendered Properties are hereby terminated effective as of the Closing Date. Such termination shall be without further payment of liquidated damages, early-termination fees, or any other charges or penalties beyond the Settlement Amount payable under this Agreement. The Coastal Palms Parties acknowledge and agree that the Settlement Amount includes full and adequate compensation for the termination of the Existing FLAs applicable to the Surrendered Properties.
ARTICLE VIII — RETAINED PROPERTIES AND ENHANCED AUDIT PROTOCOL
Section 8.1 — Retained Properties. Eight (8) Properties shall continue to be franchised under the Verimark Brands pursuant to new ten (10)-year Franchise License Agreements. The Retained Properties are located as follows:
(a) Naples, Florida — four (4) properties;
(b) Marco Island, Florida — two (2) properties; and
(c) Tampa, Florida — two (2) properties.
The New FLAs for the Retained Properties shall be substantially in the form attached hereto as Exhibit C and shall be executed and delivered by both Verimark and the applicable Coastal Palms Party within thirty (30) days of the Closing Date. The New FLAs shall have an initial term of ten (10) years commencing on the Closing Date and expiring on April 22, 2034, unless sooner terminated in accordance with their terms. The New FLAs shall incorporate by reference, and be subject to, all terms of the Enhanced Audit Protocol set forth in Exhibit D.
Section 8.2 — Enhanced Audit Protocol. For a period of five (5) years from the Closing Date (i.e., through April 22, 2029), the following enhanced audit and reporting requirements shall apply to each of the Retained Properties, in addition to the standard audit and compliance provisions of the New FLAs:
(a) Quarterly Audits. In lieu of the annual audits provided for under the standard FLA provisions, audits of all GRR reporting, booking-channel reconciliation, and fee calculations for each Retained Property shall be conducted on a quarterly basis by an independent auditor selected by Verimark in its sole discretion. Such quarterly audits shall be conducted at the sole cost and expense of Coastal Palms, regardless of the audit findings.
(b) Real-Time POS Integration. Coastal Palms shall install and maintain at each Retained Property a point-of-sale ("POS") system that is fully integrated with Verimark's proprietary revenue management system. Verimark shall have direct, real-time, read-only electronic access to daily revenue data for each Retained Property through such integrated POS system. Installation and integration shall be completed within sixty (60) days of the Closing Date, and Coastal Palms shall bear all costs of installation, maintenance, and operation.
(c) Monthly Revenue Reports. Coastal Palms shall submit to Verimark detailed monthly revenue reports for each Retained Property within fifteen (15) days of the end of each calendar month. Such reports shall include, at a minimum, breakdowns of GRR by booking channel (including direct bookings, online travel agency bookings, corporate-direct bookings, walk-in bookings, group bookings, and all other booking channels), identification of the collecting entity for each revenue stream, and bank-deposit reconciliations demonstrating that all GRR has been properly reported.
(d) Annual Certification. On or before March 31 of each year during the Enhanced Audit Protocol period, R. Brecker and the Coastal Palms chief financial officer (or equivalent officer) shall each execute and deliver to Verimark a written certification, under penalty of perjury, that all GRR reports submitted during the preceding calendar year are complete, accurate, and in full compliance with FLA § 4.1 and with the reporting requirements of this Agreement.
(e) Enhanced Access to Records. Verimark shall be entitled to audit the books, records, accounts, and financial data of Coastal Palms and its affiliates related to any Retained Property upon five (5) business days' written notice, which represents a reduction from the ten (10) business days' notice required under the Existing FLAs. Such access shall include, without limitation, access to all bank accounts, merchant-services accounts, and payment-processing accounts receiving or processing guest-room revenue for any Retained Property.
(f) Prohibition on Off-Platform Channels. During the Enhanced Audit Protocol period, no Coastal Palms Party shall use, engage, or permit any off-platform booking channel, management company, or affiliated entity to collect, process, manage, or otherwise handle guest-room revenue for any Retained Property without the prior written consent of Verimark. Any request for such consent must be submitted in writing to Verimark at least thirty (30) days in advance and must include a complete description of the proposed arrangement, including the identity of the proposed entity, the scope of its responsibilities, and the compensation to be paid.
Section 8.3 — Audit Costs. All costs associated with the quarterly audits and all other audit activities conducted pursuant to the Enhanced Audit Protocol during the five (5)-year period from the Closing Date through April 22, 2029, shall be borne solely by Coastal Palms, regardless of whether the audits reveal any underpayment, discrepancy, or non-compliance. After the expiration of the five (5)-year Enhanced Audit Protocol period, audit-cost allocation shall revert to the standard provision set forth in FLA § 8.2 of the New FLAs, pursuant to which the franchisee shall bear the costs of any audit that reveals an underpayment exceeding two percent (2%) of reported GRR for the audited period.
Section 8.4 — Suncoast Room Management. The Coastal Palms Parties covenant and agree that neither Suncoast Room Management Inc. nor any successor, affiliate, or related entity of Suncoast shall be used, engaged, or permitted to collect, process, manage, or otherwise handle guest-room revenue, room bookings, or any related operational activities for any Retained Property, at any time. This prohibition is absolute and shall survive the expiration of the Enhanced Audit Protocol period and shall remain in effect for the full term of the New FLAs. Furthermore, the gulfcoastrooms.com website, which was operated by or on behalf of the Coastal Palms Parties and through which guest-room bookings were accepted outside of Verimark's authorized reservation system, shall be permanently taken down, disabled, and removed from the internet within thirty (30) days of the Closing Date. The domain name "gulfcoastrooms.com" shall not be used, registered, or held by any Coastal Palms Party for any purpose following such takedown. Any future arrangement by any Coastal Palms Party with any management company, booking service, or third-party entity for the collection, processing, or management of guest-room revenue at any Retained Property must be pre-approved in writing by Verimark prior to the commencement of any such arrangement.
ARTICLE IX — COVENANTS
Section 9.1 — Cooperation. The Parties shall cooperate with each other in good faith to implement all terms, conditions, and provisions of this Agreement, including, without limitation, the execution and delivery of all ancillary documents, instruments, and agreements, the making of all governmental and regulatory filings, and the provision of all notices and consents required to effectuate the transactions contemplated hereby. Each Party shall designate a representative to serve as its primary point of contact for purposes of coordinating the implementation of this Agreement.
Section 9.2 — No Assignment. No Party may assign, transfer, delegate, or otherwise convey any of its rights or obligations under this Agreement to any third party without the prior written consent of all other Parties; provided, however, that Verimark may, without the consent of the Coastal Palms Parties, assign its rights to receive payments under Article II and its rights to enforce the Security Agreement and the Personal Guaranties to any successor-in-interest, affiliate, or wholly owned subsidiary of Verimark,

SETTLEMENT AGREEMENT AND MUTUAL RELEASE

SETTLEMENT AGREEMENT AND MUTUAL RELEASE

RECITALS

WHEREAS:

Record

Parties

Dates

Amounts