1021-00006 · Client 1021 · Mediation & Settlement

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SETTLEMENT TERM SHEET

NON-BINDING EXCEPT AS SET FORTH IN SECTIONS 12 AND 13 BELOW

March 22, 2024

In connection with Verimark Hospitality Group Inc. v. Coastal Palms Franchise Holdings LLC et al., Case No. 1021-00006, Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida.

PREAMBLE AND RECITALS

This Settlement Term Sheet (this "Term Sheet") sets forth the principal terms upon which the Parties (as defined below) intend to resolve the above-captioned action and all related claims, counterclaims, cross-claims, and third-party claims arising therefrom or related thereto.

The Parties to this Term Sheet are:

Verimark Hospitality Group Inc. ("Verimark" or "VHG"), a corporation duly organized and existing under the laws of the State of Delaware, publicly traded on the Nasdaq Stock Market under the ticker symbol VHMK, with its principal executive offices located at 2400 East Las Olas Boulevard, Suite 3100, Fort Lauderdale, Florida 33301, acting by and through its duly authorized officer and its counsel of record, Calderwood & Harkness LLP (Priya Anand, Responsible Partner);

Coastal Palms Franchise Holdings LLC ("Coastal Palms" or "CPFH"), a limited liability company organized and existing under the laws of the State of Florida, with its principal offices located at 9500 Gulf Shore Drive, Suite 450, Naples, Florida 34108, acting by and through its Managing Member and its counsel of record, Whitfield, Barrow & Crane LLP (Nathan Whitfield III, Senior Partner);

Randall "Randy" Brecker ("Brecker"), individually, a resident of the State of Florida, in his capacity as Managing Member and sixty percent (60%) equity holder of Coastal Palms Franchise Holdings LLC and in his capacity as President of Suncoast Room Management Inc., a Florida corporation; and

Nolan Prescott ("Prescott"), individually, a resident of the State of Florida, in his capacity as a Member and twenty-five percent (25%) equity holder of Coastal Palms Franchise Holdings LLC.

(Each, a "Party" and collectively, the "Parties.")

WHEREAS, the Litigation (as defined herein) arises from Verimark's claims that Coastal Palms, under the direction and control of Brecker and Prescott, engaged in systematic and deliberate underreporting of Gross Room Revenue ("GRR") across twenty-two (22) franchised hotel properties — consisting of eighteen (18) Verimark Suites–branded properties and four (4) Verimark Select–branded properties — over the period from January 1, 2013 through December 31, 2021, resulting in alleged material underpayment of royalties, marketing-fund contributions, and technology fees owed to Verimark under the individual Franchise License Agreements ("FLAs") governing each such property;

WHEREAS, Verimark's Complaint, as amended, asserts claims for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, fraudulent concealment, and violations of the Florida Deceptive and Unfair Trade Practices Act, Chapter 501, Part II, Florida Statutes, and seeks damages in excess of $125,000,000, together with attorneys' fees, costs, pre-judgment interest, and equitable relief;

WHEREAS, Coastal Palms filed a Counterclaim on April 18, 2022, in the amount of Twelve Million Dollars ($12,000,000), alleging that Verimark committed brand-standard violations by failing to maintain adequate reservation-system infrastructure, and further alleging that Verimark engaged in systematic over-billing of technology fees across all twenty-two (22) franchised properties;

WHEREAS, on February 9, 2024, the Court (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 and through Suncoast Room Management Inc. from the calculation of Gross Room Revenue constituted a material breach of Sections 4.1 and 4.2 of the FLAs, with the determination of damages deferred to trial;

WHEREAS, the Parties participated in a two-day mediation on March 14–15, 2024, before the Honorable Patricia Everwood (Ret.) at Everwood Dispute Resolution PLLC, Coral Gables, Florida, and reached a tentative agreement on the principal settlement terms memorialized herein; and

WHEREAS, except as expressly provided in Section 12 (Exclusivity) and Section 13 (Confidentiality) below, this Term Sheet is non-binding and is intended solely to facilitate the negotiation and execution of a definitive Settlement Agreement and Mutual Release (the "Definitive Agreement").

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties set forth the following principal settlement terms:

SECTION 1: SETTLEMENT AMOUNT

1.1 Total Settlement Consideration. The total settlement consideration shall be Eighty-Seven Million Five Hundred Thousand Dollars ($87,500,000) (the "Settlement Amount"). The Settlement Amount represents a negotiated compromise of the Parties' respective claims and counterclaims and does not constitute an admission of liability by any Party.

1.2 Cash Payment at Closing. Twenty-Five Million Dollars ($25,000,000) of the Settlement Amount shall be payable on the Closing Date (as defined in Section 2 below) by wire transfer of immediately available funds to an account designated in writing by Verimark no fewer than five (5) business days prior to the Closing Date (the "Cash Payment at Closing"). The Cash Payment at Closing shall be sourced from the escrow account currently maintained by Coastal Palms at Ironclad National Bank, Account No. [to be provided], and shall be initiated and completed on the Closing Date.

1.3 Structured Payments. The remaining Sixty-Two Million Five Hundred Thousand Dollars ($62,500,000) of the Settlement Amount shall be payable in eight (8) equal semi-annual installments of Seven Million Eight Hundred Twelve Thousand Five Hundred Dollars ($7,812,500) each (each, a "Structured Payment"), in accordance with the following payment schedule:

The first Structured Payment shall be due and payable on October 22, 2024, which is six (6) months after the anticipated Closing Date. Each subsequent Structured Payment shall be due and payable on the 22nd day of each successive six-month period thereafter, with the final Structured Payment due on April 22, 2028.

1.4 Interest. Simple interest shall accrue on the outstanding unpaid principal balance of the Structured Payments at a rate of six and one-half percent (6.5%) per annum (the "Contract Rate"), calculated from the Closing Date. Interest shall be payable concurrently with each Structured Payment. For the avoidance of doubt, interest shall be calculated on a 365-day year basis, and each interest payment shall cover the six-month period immediately preceding the applicable Structured Payment due date. The interest component of each payment shall be in addition to, and not inclusive of, the principal installment amount set forth in the schedule above.

1.5 Method of Payment. All payments of principal and interest shall be made by wire transfer of immediately available funds to an account or accounts designated by Verimark in writing. Verimark shall provide wiring instructions to Coastal Palms no fewer than ten (10) business days prior to the Closing Date, and such wiring instructions shall remain in effect for all subsequent Structured Payments unless Verimark provides updated instructions in writing at least five (5) business days prior to any payment due date.

1.6 Joint and Several Liability. All payment obligations under this Section 1, including the Cash Payment at Closing, the Structured Payments, and all accrued interest thereon, shall be the joint and several obligation of (a) Coastal Palms Franchise Holdings LLC, (b) Gulf Breeze Hospitality LLC, a Florida limited liability company and affiliate of Coastal Palms, (c) Savannah Lodging Partners LLC, a Georgia limited liability company and affiliate of Coastal Palms, and (d) Suncoast Room Management Inc., a Florida corporation. The joint and several liability of the foregoing entities shall be set forth in detail in the Definitive Agreement and shall be in addition to the personal guaranties described in Section 3 below.

SECTION 2: CLOSING DATE

2.1 Closing Date. The "Closing Date" shall be the date on which the Definitive Agreement is fully executed and delivered by all Parties. The Parties shall use their respective best efforts to cause the Closing Date to occur on or before April 22, 2024, which is thirty (30) calendar days from the date of this Term Sheet.

2.2 Exchange of Closing Deliverables. On or before the Closing Date, all closing deliverables identified in Section 10 below shall be exchanged simultaneously, or in such order as the Parties may agree. No closing deliverable shall be deemed effective until all closing deliverables have been exchanged and the Cash Payment at Closing has been received by Verimark in immediately available funds.

2.3 Extension of Closing Date. The Closing Date may be extended by mutual written agreement of the Parties, provided that in no event shall the Closing Date be extended beyond the expiration of the Exclusivity Period (as defined in Section 12 below) without the prior written consent of all Parties.

SECTION 3: SECURITY FOR STRUCTURED PAYMENTS

3.1 First-Priority Lien on Collateral Properties. As security for the full and timely payment of all Structured Payments and interest thereon, Coastal Palms shall grant to Verimark a first-priority security interest and lien on eight (8) hotel properties that are currently unencumbered by any mortgage, deed of trust, or other lien (collectively, the "Collateral Properties"). The Collateral Properties have an aggregate appraised value of approximately Seventy-One Million Two Hundred Thousand Dollars ($71,200,000), based on appraisals conducted within the twelve (12) months preceding the date of this Term Sheet. The specific identity, address, legal description, and appraised value of each Collateral Property shall be set forth in a schedule to be attached as an exhibit to the Definitive Agreement.

3.2 Perfection of Security Interest. The security interest in the Collateral Properties shall be perfected by (a) the filing of a UCC-1 Financing Statement with the Florida Secured Transaction Registry, and (b) as applicable to each Collateral Property, the recordation of a mortgage or deed of trust in the official records of the county in which such Collateral Property is situated. All filing fees, recording fees, documentary stamp taxes, and related costs associated with the perfection of Verimark's security interest shall be borne by Coastal Palms. Coastal Palms shall cooperate fully with Verimark and its counsel in connection with the preparation, execution, and filing of all instruments and documents necessary or desirable to perfect and maintain Verimark's first-priority security interest in the Collateral Properties.

3.3 Personal Guaranties. As additional security for the full and timely payment of all obligations under the Definitive Agreement, each of Randall Brecker and Nolan Prescott shall execute and deliver to Verimark a personal, unconditional, and irrevocable guaranty of all payment obligations of Coastal Palms and the other jointly and severally liable entities under the Definitive Agreement (each, a "Personal Guaranty" and collectively, the "Personal Guaranties"). The form, scope, and specific terms of the Personal Guaranties, including any limitations on liability, subordination provisions, and notice requirements, shall be negotiated in good faith and set forth in the Definitive Agreement or in a separate guaranty agreement attached thereto as an exhibit.

3.4 Acknowledgment by Ironclad National Bank. Coastal Palms shall use commercially reasonable efforts to obtain, on or before the Closing Date, a written acknowledgment and consent from Ironclad National Bank (attention: Devon Schultz, Senior Vice President, Commercial Real Estate Lending) regarding Verimark's security interest and lien position on the Collateral Properties. The Parties acknowledge that Ironclad National Bank currently holds first-lien mortgage loans on eighteen (18) of the twenty-two (22) hotel properties operated by Coastal Palms, with an aggregate outstanding principal balance of approximately Ninety-Four Million Dollars ($94,000,000); however, the eight (8) Collateral Properties identified for purposes of this Section 3 are unencumbered by any Ironclad National Bank liens. The acknowledgment and consent of Ironclad National Bank is being sought to confirm the bank's awareness of, and non-objection to, Verimark's lien position on the Collateral Properties and to address any potential cross-collateralization or cross-default provisions that may exist in Coastal Palms' loan agreements with Ironclad National Bank. The failure to obtain such acknowledgment and consent shall not, by itself, constitute a condition to closing, unless the Parties otherwise agree in the Definitive Agreement.

SECTION 4: ACCELERATION AND DEFAULT

4.1 Events of Default. An "Event of Default" shall include, without limitation, the occurrence of any of the following:

(a) The failure by Coastal Palms, or any jointly and severally liable entity, to make any Structured Payment or interest payment within fifteen (15) calendar days of the applicable due date;

(b) The breach of any material term, covenant, representation, or warranty contained in the Definitive Agreement, the Personal Guaranties, the security instruments, or the New FLAs (as defined in Section 6 below), subject to a reasonable cure period to be specified in the Definitive Agreement (anticipated to be thirty (30) days from written notice of such breach for non-monetary defaults);

(c) The filing by or against Coastal Palms, any affiliate of Coastal Palms (including Gulf Breeze Hospitality LLC, Savannah Lodging Partners LLC, and Suncoast Room Management Inc.), or any guarantor (including Randall Brecker and Nolan Prescott) of a voluntary or involuntary petition under Title 11 of the United States Code (the Bankruptcy Code), or any state-law insolvency proceeding, assignment for the benefit of creditors, or appointment of a receiver, trustee, or custodian for all or substantially all of such Party's assets;

(d) Any material adverse change in the condition, value, or encumbrance status of the Collateral Properties that materially impairs Verimark's security interest therein, including without limitation the imposition of any lien, encumbrance, or claim on the Collateral Properties without Verimark's prior written consent; and

(e) Any other events of default as the Parties may agree upon in the Definitive Agreement.

4.2 Acceleration. Upon the occurrence and during the continuance of an Event of Default, Verimark shall have the right, in its sole discretion, upon written notice to Coastal Palms and the guarantors, to accelerate all remaining Structured Payments, together with all accrued and unpaid interest thereon, which amounts shall thereupon become immediately due and payable in full, without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived to the fullest extent permitted by applicable law.

4.3 Default Interest Rate. Upon the occurrence of an Event of Default, the interest rate applicable to all outstanding obligations shall increase to a default rate to be specified in the Definitive Agreement (anticipated to be the lesser of (i) the Contract Rate plus four percent (4%) per annum, or (ii) the maximum rate permitted by applicable Florida law).

4.4 Additional Remedies. In addition to acceleration, Verimark shall be entitled to exercise all rights and remedies available to it under the Definitive Agreement, the security instruments, applicable law (including Article 9 of the Uniform Commercial Code), and equity, including without limitation foreclosure on the Collateral Properties, enforcement of the Personal Guaranties, and recovery of all reasonable attorneys' fees and costs incurred in connection with the enforcement of its rights. All remedies shall be cumulative and not exclusive.

SECTION 5: FRANCHISE SURRENDER

5.1 Surrendered Properties. Coastal Palms shall surrender its franchise rights with respect to fourteen (14) of the twenty-two (22) hotel properties currently operated under the Verimark Suites and Verimark Select brands (collectively, the "Surrendered Properties"). The Surrendered Properties are located in the following markets:

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

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

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

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

The specific name, address, and FLA reference number for each Surrendered Property shall be set forth in a schedule to be attached as an exhibit to the Definitive Agreement.

5.2 Termination of FLAs. All Franchise License Agreements associated with the Surrendered Properties shall be terminated effective as of the Closing Date, provided that Coastal Palms' de-identification obligations under Section 5.3 below shall survive such termination and remain in full force and effect during the De-Identification Period.

5.3 De-Identification Obligations. Coastal Palms shall, at its sole cost and expense, complete the de-identification of all Surrendered Properties within one hundred twenty (120) calendar days of the Closing Date (the "De-Identification Period"). Assuming a Closing Date of April 22, 2024, the deadline for completion of de-identification shall be August 20, 2024. De-identification shall include, without limitation:

(a) The removal of all Verimark branding, including all exterior and interior signage bearing the "Verimark Suites" and "Verimark Select" names, logos, and trade dress;

(b) The removal or disabling of all proprietary Verimark systems, including but not limited to reservation systems, property management system interfaces, guest loyalty program terminals, and revenue-management software;

(c) The removal of all Verimark trade dress, including branded linens, amenity packages, room collateral, in-room directories, key cards, and uniforms bearing the Verimark name, logo, or any related marks;

(d) The de-listing of all Surrendered Properties from Verimark's online booking platforms, mobile applications, and third-party distribution channels operating under Verimark's brand umbrella; and

(e) Such other de-identification steps as Verimark may reasonably require consistent with its standard franchise termination procedures.

5.4 Consequences of Failure to De-Identify. The specific consequences of Coastal Palms' failure to complete de-identification of any Surrendered Property within the De-Identification Period, including liquidated damages, injunctive relief, and Verimark's right to enter the property to effect de-identification at Coastal Palms' expense, shall be set forth in the Definitive Agreement.

SECTION 6: RETAINED PROPERTIES AND ENHANCED AUDIT PROTOCOL

6.1 Retained Properties. Coastal Palms shall retain its franchise rights with respect to eight (8) hotel properties (the "Retained Properties"), located in the following markets:

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

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

The specific name, address, and room count for each Retained Property shall be set forth in a schedule to be attached as an exhibit to the Definitive Agreement.

6.2 New Franchise License Agreements. On the Closing Date, Coastal Palms and Verimark shall execute new Franchise License Agreements for each of the eight (8) Retained Properties (collectively, the "New FLAs"). Each New FLA shall have an initial term of ten (10) years commencing on the Closing Date and shall incorporate all standard terms and conditions of Verimark's then-current form Franchise License Agreement, as supplemented by the enhanced provisions described in Sections 6.3 through 6.6 below.

6.3 Quarterly Audit Rights. For a period of five (5) years from the Closing Date (the "Enhanced Audit Period"), Verimark and its duly authorized designees (including independent auditors, forensic accountants, and revenue-assurance consultants) shall have the right to conduct quarterly audits of Gross Room Revenue at each Retained Property. This enhanced audit frequency replaces the standard annual audit right provided under Verimark's form FLA and is being implemented in light of the revenue-reporting deficiencies that gave rise to the Litigation. Coastal Palms shall make available all books, records, documents, and electronic data reasonably requested by Verimark or its designees in connection with each quarterly audit, and shall provide Verimark's auditors with reasonable access to each Retained Property and its on-site personnel during normal business hours upon not fewer than five (5) business days' prior written notice. Following the expiration of the Enhanced Audit Period, audit rights shall revert to the standard annual frequency provided under the New FLAs.

6.4 Real-Time Point-of-Sale Integration. Coastal Palms shall implement and maintain real-time point-of-sale ("POS") integration with Verimark's centralized revenue-management system ("VeriConnect RMS") at each Retained Property within ninety (90) calendar days of the Closing Date. Such integration shall enable Verimark to monitor and verify Gross Room Revenue data on a continuous, real-time basis, and shall include connectivity with all front-desk property management systems, online booking engines, and third-party channel managers utilized at each Retained Property. Coastal Palms shall bear all costs associated with the initial implementation and ongoing maintenance of the POS integration, including hardware, software licensing, connectivity, and training expenses.

6.5 Audit Cost Allocation. Coastal Palms shall bear all costs and expenses associated with the quarterly audits during the initial five-year Enhanced Audit Period, regardless of the findings of any such audit. Such costs shall include, without limitation, the fees and expenses of independent auditors and forensic accountants engaged by Verimark, travel and lodging expenses, and data extraction and analysis costs. This allocation of audit costs differs from Verimark's standard FLA, under which audit costs are borne by the franchisor unless the audit reveals an underreporting variance of five percent (5%) or more, in which case such costs are charged to the franchisee.

6.6 Standard Economic Terms. All other economic terms of the New FLAs shall be consistent with Verimark's standard form Franchise License Agreement, including:

(a) Royalty fee: five percent (5%) of Gross Room Revenue;

(b) Marketing-fund contribution: two and one-half percent (2.5%) of Gross Room Revenue; and

6.7 Form of New FLAs. The form of New FLA, incorporating the enhanced provisions described in this Section 6, shall be attached as an exhibit to the Definitive Agreement and shall be executed simultaneously with the Definitive Agreement on the Closing Date.

SECTION 7: MUTUAL RELEASE

7.1 Scope of Mutual Release. Effective as of the Closing Date, each Party, on behalf of itself and its respective affiliates, subsidiaries, parent companies, predecessors, successors, assigns, officers, directors, members, managers, employees, agents, representatives, attorneys, heirs, executors, administrators, and insurers, shall release and forever discharge each other Party and such other Party's respective affiliates, subsidiaries, parent companies, predecessors, successors, assigns, officers, directors, members, managers, employees, agents, representatives, attorneys, heirs, executors, administrators, and insurers, from any and all claims, counterclaims, demands, actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, executions, liabilities, and obligations of every kind and nature whatsoever, whether known or unknown, suspected or unsuspected, contingent or matured, liquidated or unliquidated, at law or in equity, arising from or related to the FLAs, the Litigation (Case No. 1021-00006), and the subject matter thereof, from the beginning of time through and including the Closing Date.

7.2 Specific Released Parties. Without limiting the generality of Section 7.1, the mutual release shall expressly extend to, and shall be for the benefit of, the following entities and individuals:

(a) Gulf Breeze Hospitality LLC, a Florida limited liability company;

(b) Savannah Lodging Partners LLC, a Georgia limited liability company;

(d) Theresa Brecker, individually;

(e) All current and former officers, directors, managers, members, employees, agents, and representatives of each of the foregoing entities; and

(f) All affiliates, subsidiaries, and related entities of Verimark Hospitality Group Inc.

7.3 Carve-Out from Release. Notwithstanding the foregoing, the mutual release shall not extend to, and shall expressly exclude, any obligations, covenants, or commitments arising under or pursuant to (a) the Definitive Agreement, (b) the New FLAs, (c) the Personal Guaranties, (d) the security instruments (including the security agreements, mortgages, deeds of trust, and UCC-1 Financing Statements), and (e) any other agreements or instruments executed and delivered in connection with the Definitive Agreement on or after the Closing Date. The Parties' rights and obligations under such instruments shall survive the mutual release and shall remain in full force and effect in accordance with their respective terms.

SECTION 8: COUNTERCLAIM DISMISSAL

8.1 Dismissal with Prejudice. Coastal Palms shall dismiss its Counterclaim, originally filed on April 18, 2022, in the Circuit Court of the 17th Judicial Circuit, Broward County, Florida, in Case No. 1021-00006, with prejudice, simultaneously with the filing of the Joint Stipulation of Dismissal described in Section 9 below. The Counterclaim, which asserts claims for Twelve Million Dollars ($12,000,000) in alleged damages arising from brand-standard violations and over-billing, shall be dismissed in its entirety as to all counts and all claims for relief asserted therein.

8.2 Waiver. By executing this Term Sheet and the Definitive Agreement, Coastal Palms, Brecker, and Prescott hereby waive any and all rights to refile, reassert, or otherwise pursue the claims set forth in the Counterclaim or any claims substantially similar thereto, in any forum, against Verimark or any of the released parties identified in Section 7 above.

SECTION 9: DISMISSAL OF LITIGATION

9.1 Joint Stipulation of Dismissal. Upon execution of the Definitive Agreement and confirmation of receipt by Verimark of the Cash Payment at Closing in immediately available funds, the Parties shall cause their respective counsel to execute and file a Joint Stipulation of Dismissal with Prejudice of all claims and counterclaims in the Litigation, Case No. 1021-00006, in the Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida. The Joint Stipulation of Dismissal shall dismiss all claims and counterclaims with prejudice, shall provide that the Court shall retain jurisdiction solely for the purpose of enforcing the terms of the Definitive Agreement if the Parties so agree, and shall be in a form reasonably acceptable to the Court and to all Parties.

9.2 Attorneys' Fees and Costs. Each Party shall bear its own attorneys' fees, costs, and expenses incurred in connection with the Litigation, the mediation, the negotiation and execution of this Term Sheet, and the negotiation and execution of the Definitive Agreement and all related instruments and documents.

SECTION 10: CLOSING DELIVERABLES

10.1 Deliverables. On or before the Closing Date, the following deliverables shall be executed, delivered, or exchanged, as applicable:

(a) The Definitive Agreement (Settlement Agreement and Mutual Release), duly executed by all Parties;

(b) Wire transfer of the Cash Payment at Closing in the amount of Twenty-Five Million Dollars ($25,000,000) to the account designated by Verimark;

(d) Security agreements granting Verimark a first-priority security interest and lien on the eight (8) Collateral Properties, duly executed by Coastal Palms and such other entities as may hold title to the Collateral Properties;

(e) UCC-1 Financing Statements, in form ready for filing with the Florida Secured Transaction Registry, together with any amendments thereto as may be required;

(f) Mortgages or deeds of trust, as applicable, covering each Collateral Property, in recordable form;

(g) New Franchise License Agreements for each of the eight (8) Retained Properties, duly executed by Coastal Palms and Verimark;

(h) Franchise-surrender notices, in the form required by the FLAs, for each of the fourteen (14) Surrendered Properties;

(i) Written acknowledgment and consent from Ironclad National Bank regarding Verimark's security interest in the Collateral Properties, if obtained;

(j) Joint Stipulation of Dismissal with Prejudice, fully executed by counsel for all Parties, in form suitable for filing with the Court;

(k) Good-standing certificates or certificates of status for Coastal Palms, Gulf Breeze Hospitality LLC, Savannah Lodging Partners LLC, and Suncoast Room Management Inc., dated within thirty (30) days of the Closing Date;

(l) Officers' or managers' certificates certifying that all necessary corporate, partnership, or limited liability company authorizations have been obtained for the execution and delivery of the Definitive Agreement and all related instruments; and

(m) Such other customary closing documents, certificates, opinions, instruments, and deliverables as may be reasonably required by any Party in connection with the consummation of the transactions contemplated by this Term Sheet and the Definitive Agreement.

SECTION 11: NON-DISPARAGEMENT

11.1 Mutual Non-Disparagement. Each Party agrees that, for a period of three (3) years from the Closing Date (the "Non-Disparagement Period"), it shall not, and shall cause its officers, directors, managers, members, employees, agents, and representatives not to, make, publish, or disseminate any statement, whether oral, written, or electronic, that disparages, defames, or places in a false light any other Party or any of such other Party's affiliates, subsidiaries, officers, directors, managers, members, employees, agents, or representatives, in any forum, including without limitation in public statements, press releases, social media posts, communications with franchisees or prospective franchisees, industry contacts, trade associations, trade publications, media outlets, online review platforms, and similar channels.

11.2 Carve-Outs. The non-disparagement obligations set forth in Section 11.1 shall not apply to:

(a) Truthful testimony or statements compelled by law, regulation, subpoena, civil investigative demand, court order, or other legal process;

(b) Disclosures required by Verimark in connection with its obligations as a publicly traded company, including but not limited to disclosures required under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the rules and regulations of the U.S. Securities and Exchange Commission and the Nasdaq Stock Market; and

(c) Statements made in connection with the enforcement of any Party's rights under the Definitive Agreement, the New FLAs, the Personal Guaranties, or the security instruments.

SECTION 12: EXCLUSIVITY (BINDING PROVISION)

THIS SECTION 12 IS BINDING AND ENFORCEABLE UPON EXECUTION OF THIS TERM SHEET.

12.1 Exclusive Negotiation Period. From and after the date of execution of this Term Sheet through the earlier of (a) the Closing Date or (b) May 22, 2024 (the "Exclusivity Period"), no Party shall, directly or indirectly, solicit, initiate, encourage, entertain, or engage in any discussions, negotiations, or communications with any third party (including any alternative mediator, arbitrator, or settlement intermediary) regarding any alternative resolution, settlement, compromise, or disposition of the Litigation or any of the claims or counterclaims asserted therein.

12.2 Preservation of Collateral. During the Exclusivity Period, Coastal Palms shall not enter into any transaction, agreement, or arrangement that would materially impair, encumber, or diminish the value of the Collateral Properties or that would otherwise materially impair Coastal Palms' ability to perform its obligations under the contemplated Definitive Agreement. Without limiting the foregoing, Coastal Palms shall not, during the Exclusivity Period, (a) sell, transfer, convey, or dispose of any Collateral Property or any interest therein, (b) grant any lien, mortgage, deed of trust, security interest, or other encumbrance on any Collateral Property, or (c) enter into any lease or occupancy agreement with respect to any Collateral Property on terms materially different from the terms of existing leases and occupancy agreements.

12.3 Remedies for Breach. Any breach of this Section 12 shall entitle the non-breaching Party to seek specific performance, injunctive relief, and all other remedies available at law or in equity, in addition to the termination of this Term Sheet.

SECTION 13: CONFIDENTIALITY (BINDING PROVISION)

THIS SECTION 13 IS BINDING AND ENFORCEABLE UPON EXECUTION OF THIS TERM SHEET.

13.1 Confidentiality Obligation. The terms and conditions of this Term Sheet and of the contemplated settlement, including but not limited to the Settlement Amount, the payment structure, and the identity of the Collateral Properties (collectively, "Confidential Information"), shall be treated as strictly confidential by all Parties and shall not be disclosed, disseminated, or made available to any third party without the prior written consent of the other Parties, except as expressly set forth in Section 13.2 below.

13.2 Permitted Disclosures. Notwithstanding Section 13.1, the following disclosures of Confidential Information shall be permitted:

(a) Disclosures required by applicable law, regulation, or court order, provided that the disclosing Party shall, to the extent legally permissible, provide the other Parties with prompt written notice of any such required disclosure and shall cooperate with the other Parties in seeking a protective order or other appropriate remedy to limit the scope of such disclosure;

(b) Disclosures to the Parties' respective legal, financial, tax, and accounting advisors who have a bona fide need to know the Confidential Information in connection with the performance of their professional duties and who agree to be bound by confidentiality obligations no less restrictive than those set forth in this Section 13;

(c) Disclosures by Verimark as required by its obligations as a publicly traded company on the Nasdaq Stock Market (ticker: VHMK), including without limitation disclosures required in connection with SEC filing obligations, including the disclosure of the settlement as a "material litigation settlement" in Verimark's Quarterly Report on Form 10-Q for the fiscal quarter ending June 30, 2024, and any current report on Form 8-K as may be required;

(d) Disclosures to Ironclad National Bank as necessary to obtain the acknowledgment and consent described in Section 3.4 above; and

(e) Disclosures to Pinnacle Indemnity Insurance Co. as necessary in connection with litigation-cost coverage and indemnification claims under Policy No. PLI-VHG-2021-08874, or as otherwise required by the terms and conditions of such policy.

13.3 Survival. The confidentiality obligations set forth in this Section 13 shall survive the termination of this Term Sheet (whether by execution of the Definitive Agreement, expiration of the Exclusivity Period, or otherwise) for a period of two (2) years from the date of such termination.

SECTION 14: GOVERNING LAW AND DISPUTE RESOLUTION

14.1 Governing Law. This Term Sheet and the Definitive Agreement shall be governed by and construed in accordance with the laws of the State of Florida, without giving effect to any choice-of-law or conflict-of-laws rules or provisions (whether of the State of Florida or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Florida.

14.2 Exclusive Jurisdiction. Any dispute, controversy, or claim arising under or in connection with this Term Sheet or the Definitive Agreement, including any dispute regarding the validity, interpretation, enforceability, performance, or breach thereof, shall be subject to the exclusive jurisdiction and venue of the Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida, or, to the extent federal subject-matter jurisdiction exists, the United States District Court for the Southern District of Florida, Fort Lauderdale Division. Each Party hereby irrevocably consents and submits to the personal jurisdiction of such courts, waives any objection to venue or jurisdiction, and waives any defense of inconvenient forum.

14.3 Service of Process. Each Party agrees that service of process in any action or proceeding arising under this Term Sheet or the Definitive Agreement may be made by certified mail, return receipt requested, to the addresses set forth in the preamble of this Term Sheet, or to such other address as a Party may designate in writing.

SECTION 15: NON-BINDING NATURE; DEFINITIVE AGREEMENT

15.1 Non-Binding Nature. Except as expressly provided in Sections 12 and 13 above, this Term Sheet is non-binding and does not create any legally enforceable rights or obligations on the part of any Party. No Party shall have any liability to any other Party based upon, arising from, or relating to this Term Sheet (other than under Sections 12 and 13), whether by reason of promissory estoppel, detrimental reliance, unjust enrichment, or otherwise.

15.2 Definitive Agreement Required. The Parties' respective rights and obligations with respect to the settlement of the Litigation shall arise solely upon the execution and delivery of the Definitive Agreement by all Parties. The Definitive Agreement shall contain customary representations, warranties, covenants, conditions, and indemnification provisions, including but not limited to the terms outlined in this Term Sheet, and such additional terms as the Parties may mutually agree upon in the course of good-faith negotiations.

15.3 Good-Faith Negotiation. The Parties shall negotiate in good faith and use commercially reasonable efforts to execute and deliver the Definitive Agreement within thirty (30) calendar days of the date hereof. Each Party shall designate a senior representative with authority to make decisions regarding the terms of the Definitive Agreement and shall make such representative available for negotiations on a timely basis.

15.4 Automatic Termination. If the Definitive Agreement is not executed and delivered by all Parties on or before the expiration of the Exclusivity Period (May 22, 2024, unless extended by mutual written agreement), this Term Sheet shall terminate automatically and shall be of no further force or effect, except that Section 13 (Confidentiality) shall survive such termination for a period of two (2) years in accordance with Section 13.3 above. Upon such termination, neither Party shall have any liability to any other Party arising from this Term Sheet or the failure to execute the Definitive Agreement, except as provided in Section 13.

SECTION 16: MISCELLANEOUS

16.1 Counterparts. This Term Sheet may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Execution and delivery of this Term Sheet by facsimile or electronic transmission (including in .pdf format) shall be deemed to be, and shall have the same force and effect as, execution and delivery of an original.

16.2 Entire Understanding. This Term Sheet constitutes the entire understanding of the Parties with respect to the subject matter hereof and supersedes all prior and contemporaneous discussions, negotiations, term sheets, letters of intent, memoranda of understanding, mediator's proposals, and correspondence related to the settlement of the Litigation, including without limitation all written and oral proposals exchanged during or in connection with the two-day mediation conducted on March 14–15, 2024 before the Honorable Patricia Everwood (Ret.) at Everwood Dispute Resolution PLLC, Coral Gables, Florida.

16.3 Amendments. No amendment, modification, supplement, or waiver of any provision of this Term Sheet shall be effective unless in writing and signed by all Parties hereto. No failure or delay by any Party in exercising any right, power, or privilege under this Term Sheet shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power, or privilege.

16.4 No Admission. This Term Sheet and the contemplated settlement do not constitute and shall not be construed or interpreted as an admission of liability, fault, wrongdoing, or violation of any law, regulation, contract, or duty by any Party. This Term Sheet is entered into solely for the purpose of compromising and settling disputed claims and shall not be admissible in evidence in any proceeding for any purpose, except as necessary to enforce the terms of Sections 12, 13, or the Definitive Agreement, or as otherwise permitted by Florida Rule of Evidence 90.408 and Federal Rule of Evidence 408.

16.5 Notices. All notices, requests, demands, and other communications required or permitted under this Term Sheet shall be in writing and shall be delivered by hand, by nationally recognized overnight courier, or by certified mail, return receipt requested, to the Parties at the addresses set forth in the preamble of this Term Sheet, or to such other addresses as a Party may designate by written notice to the other Parties.

16.6 Headings. The section headings in this Term Sheet are for convenience of reference only and shall not affect the interpretation or construction of any provision of this Term Sheet.

SIGNATURES

IN WITNESS WHEREOF, the Parties have caused this Term Sheet to be executed by their duly authorized representatives as of the date first written above.

VERIMARK HOSPITALITY GROUP INC.

By: ________

Name: Renata Solis-Vega

Title: Senior Vice President & General Counsel

Date: March 22, 2024

COASTAL PALMS FRANCHISE HOLDINGS LLC

By: ________

Name: Randall Brecker

Title: Managing Member

Date: March 22, 2024

RANDALL "RANDY" BRECKER, Individually

________________________________________

Randall Brecker

Date: March 22, 2024

NOLAN PRESCOTT, Individually

________________________________________

Nolan Prescott

Date: March 22, 2024

ACKNOWLEDGED BY COUNSEL

The undersigned counsel of record hereby acknowledge the terms of this Term Sheet and confirm that they have discussed the terms hereof with their respective clients.

CALDERWOOD & HARKNESS LLP Counsel for Verimark Hospitality Group Inc.

By: ________

Name: Priya Anand

Title: Partner

Florida Bar No. 0087451 110 SE 6th Street, Suite 2800 Fort Lauderdale, Florida 33301

Date: March 22, 2024

WHITFIELD, BARROW & CRANE LLP Counsel for Coastal Palms Franchise Holdings LLC

By: ________

Name: Nathan Whitfield III

Title: Senior Partner

1221 Brickell Avenue, Suite 3000 Miami, Florida 33131

Date: March 22, 2024

Installment No.	Due Date	Principal Amount
1	October 22, 2024	$7,812,500
2	April 22, 2025	$7,812,500
3	October 22, 2025	$7,812,500
4	April 22, 2026	$7,812,500
5	October 22, 2026	$7,812,500
6	April 22, 2027	$7,812,500
7	October 22, 2027	$7,812,500
8	April 22, 2028	$7,812,500
Total	$62,500,000

SETTLEMENT TERM SHEET
NON-BINDING EXCEPT AS SET FORTH IN SECTIONS 12 AND 13 BELOW
March 22, 2024
In connection with Verimark Hospitality Group Inc. v. Coastal Palms Franchise Holdings LLC et al., Case No. 1021-00006, Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida.
PREAMBLE AND RECITALS
This Settlement Term Sheet (this "Term Sheet") sets forth the principal terms upon which the Parties (as defined below) intend to resolve the above-captioned action and all related claims, counterclaims, cross-claims, and third-party claims arising therefrom or related thereto.
The Parties to this Term Sheet are:
Verimark Hospitality Group Inc. ("Verimark" or "VHG"), a corporation duly organized and existing under the laws of the State of Delaware, publicly traded on the Nasdaq Stock Market under the ticker symbol VHMK, with its principal executive offices located at 2400 East Las Olas Boulevard, Suite 3100, Fort Lauderdale, Florida 33301, acting by and through its duly authorized officer and its counsel of record, Calderwood & Harkness LLP (Priya Anand, Responsible Partner);
Coastal Palms Franchise Holdings LLC ("Coastal Palms" or "CPFH"), a limited liability company organized and existing under the laws of the State of Florida, with its principal offices located at 9500 Gulf Shore Drive, Suite 450, Naples, Florida 34108, acting by and through its Managing Member and its counsel of record, Whitfield, Barrow & Crane LLP (Nathan Whitfield III, Senior Partner);
Randall "Randy" Brecker ("Brecker"), individually, a resident of the State of Florida, in his capacity as Managing Member and sixty percent (60%) equity holder of Coastal Palms Franchise Holdings LLC and in his capacity as President of Suncoast Room Management Inc., a Florida corporation; and
Nolan Prescott ("Prescott"), individually, a resident of the State of Florida, in his capacity as a Member and twenty-five percent (25%) equity holder of Coastal Palms Franchise Holdings LLC.
(Each, a "Party" and collectively, the "Parties.")
WHEREAS, the Litigation (as defined herein) arises from Verimark's claims that Coastal Palms, under the direction and control of Brecker and Prescott, engaged in systematic and deliberate underreporting of Gross Room Revenue ("GRR") across twenty-two (22) franchised hotel properties — consisting of eighteen (18) Verimark Suites–branded properties and four (4) Verimark Select–branded properties — over the period from January 1, 2013 through December 31, 2021, resulting in alleged material underpayment of royalties, marketing-fund contributions, and technology fees owed to Verimark under the individual Franchise License Agreements ("FLAs") governing each such property;
WHEREAS, Verimark's Complaint, as amended, asserts claims for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, fraudulent concealment, and violations of the Florida Deceptive and Unfair Trade Practices Act, Chapter 501, Part II, Florida Statutes, and seeks damages in excess of $125,000,000, together with attorneys' fees, costs, pre-judgment interest, and equitable relief;
WHEREAS, Coastal Palms filed a Counterclaim on April 18, 2022, in the amount of Twelve Million Dollars ($12,000,000), alleging that Verimark committed brand-standard violations by failing to maintain adequate reservation-system infrastructure, and further alleging that Verimark engaged in systematic over-billing of technology fees across all twenty-two (22) franchised properties;
WHEREAS, on February 9, 2024, the Court (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 and through Suncoast Room Management Inc. from the calculation of Gross Room Revenue constituted a material breach of Sections 4.1 and 4.2 of the FLAs, with the determination of damages deferred to trial;
WHEREAS, the Parties participated in a two-day mediation on March 14–15, 2024, before the Honorable Patricia Everwood (Ret.) at Everwood Dispute Resolution PLLC, Coral Gables, Florida, and reached a tentative agreement on the principal settlement terms memorialized herein; and
WHEREAS, except as expressly provided in Section 12 (Exclusivity) and Section 13 (Confidentiality) below, this Term Sheet is non-binding and is intended solely to facilitate the negotiation and execution of a definitive Settlement Agreement and Mutual Release (the "Definitive Agreement").
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties set forth the following principal settlement terms:
SECTION 1: SETTLEMENT AMOUNT
1.1 Total Settlement Consideration. The total settlement consideration shall be Eighty-Seven Million Five Hundred Thousand Dollars ($87,500,000) (the "Settlement Amount"). The Settlement Amount represents a negotiated compromise of the Parties' respective claims and counterclaims and does not constitute an admission of liability by any Party.
1.2 Cash Payment at Closing. Twenty-Five Million Dollars ($25,000,000) of the Settlement Amount shall be payable on the Closing Date (as defined in Section 2 below) by wire transfer of immediately available funds to an account designated in writing by Verimark no fewer than five (5) business days prior to the Closing Date (the "Cash Payment at Closing"). The Cash Payment at Closing shall be sourced from the escrow account currently maintained by Coastal Palms at Ironclad National Bank, Account No. [to be provided], and shall be initiated and completed on the Closing Date.
1.3 Structured Payments. The remaining Sixty-Two Million Five Hundred Thousand Dollars ($62,500,000) of the Settlement Amount shall be payable in eight (8) equal semi-annual installments of Seven Million Eight Hundred Twelve Thousand Five Hundred Dollars ($7,812,500) each (each, a "Structured Payment"), in accordance with the following payment schedule:
The first Structured Payment shall be due and payable on October 22, 2024, which is six (6) months after the anticipated Closing Date. Each subsequent Structured Payment shall be due and payable on the 22nd day of each successive six-month period thereafter, with the final Structured Payment due on April 22, 2028.
1.4 Interest. Simple interest shall accrue on the outstanding unpaid principal balance of the Structured Payments at a rate of six and one-half percent (6.5%) per annum (the "Contract Rate"), calculated from the Closing Date. Interest shall be payable concurrently with each Structured Payment. For the avoidance of doubt, interest shall be calculated on a 365-day year basis, and each interest payment shall cover the six-month period immediately preceding the applicable Structured Payment due date. The interest component of each payment shall be in addition to, and not inclusive of, the principal installment amount set forth in the schedule above.
1.5 Method of Payment. All payments of principal and interest shall be made by wire transfer of immediately available funds to an account or accounts designated by Verimark in writing. Verimark shall provide wiring instructions to Coastal Palms no fewer than ten (10) business days prior to the Closing Date, and such wiring instructions shall remain in effect for all subsequent Structured Payments unless Verimark provides updated instructions in writing at least five (5) business days prior to any payment due date.
1.6 Joint and Several Liability. All payment obligations under this Section 1, including the Cash Payment at Closing, the Structured Payments, and all accrued interest thereon, shall be the joint and several obligation of (a) Coastal Palms Franchise Holdings LLC, (b) Gulf Breeze Hospitality LLC, a Florida limited liability company and affiliate of Coastal Palms, (c) Savannah Lodging Partners LLC, a Georgia limited liability company and affiliate of Coastal Palms, and (d) Suncoast Room Management Inc., a Florida corporation. The joint and several liability of the foregoing entities shall be set forth in detail in the Definitive Agreement and shall be in addition to the personal guaranties described in Section 3 below.
SECTION 2: CLOSING DATE
2.1 Closing Date. The "Closing Date" shall be the date on which the Definitive Agreement is fully executed and delivered by all Parties. The Parties shall use their respective best efforts to cause the Closing Date to occur on or before April 22, 2024, which is thirty (30) calendar days from the date of this Term Sheet.
2.2 Exchange of Closing Deliverables. On or before the Closing Date, all closing deliverables identified in Section 10 below shall be exchanged simultaneously, or in such order as the Parties may agree. No closing deliverable shall be deemed effective until all closing deliverables have been exchanged and the Cash Payment at Closing has been received by Verimark in immediately available funds.
2.3 Extension of Closing Date. The Closing Date may be extended by mutual written agreement of the Parties, provided that in no event shall the Closing Date be extended beyond the expiration of the Exclusivity Period (as defined in Section 12 below) without the prior written consent of all Parties.
SECTION 3: SECURITY FOR STRUCTURED PAYMENTS
3.1 First-Priority Lien on Collateral Properties. As security for the full and timely payment of all Structured Payments and interest thereon, Coastal Palms shall grant to Verimark a first-priority security interest and lien on eight (8) hotel properties that are currently unencumbered by any mortgage, deed of trust, or other lien (collectively, the "Collateral Properties"). The Collateral Properties have an aggregate appraised value of approximately Seventy-One Million Two Hundred Thousand Dollars ($71,200,000), based on appraisals conducted within the twelve (12) months preceding the date of this Term Sheet. The specific identity, address, legal description, and appraised value of each Collateral Property shall be set forth in a schedule to be attached as an exhibit to the Definitive Agreement.
3.2 Perfection of Security Interest. The security interest in the Collateral Properties shall be perfected by (a) the filing of a UCC-1 Financing Statement with the Florida Secured Transaction Registry, and (b) as applicable to each Collateral Property, the recordation of a mortgage or deed of trust in the official records of the county in which such Collateral Property is situated. All filing fees, recording fees, documentary stamp taxes, and related costs associated with the perfection of Verimark's security interest shall be borne by Coastal Palms. Coastal Palms shall cooperate fully with Verimark and its counsel in connection with the preparation, execution, and filing of all instruments and documents necessary or desirable to perfect and maintain Verimark's first-priority security interest in the Collateral Properties.
3.3 Personal Guaranties. As additional security for the full and timely payment of all obligations under the Definitive Agreement, each of Randall Brecker and Nolan Prescott shall execute and deliver to Verimark a personal, unconditional, and irrevocable guaranty of all payment obligations of Coastal Palms and the other jointly and severally liable entities under the Definitive Agreement (each, a "Personal Guaranty" and collectively, the "Personal Guaranties"). The form, scope, and specific terms of the Personal Guaranties, including any limitations on liability, subordination provisions, and notice requirements, shall be negotiated in good faith and set forth in the Definitive Agreement or in a separate guaranty agreement attached thereto as an exhibit.
3.4 Acknowledgment by Ironclad National Bank. Coastal Palms shall use commercially reasonable efforts to obtain, on or before the Closing Date, a written acknowledgment and consent from Ironclad National Bank (attention: Devon Schultz, Senior Vice President, Commercial Real Estate Lending) regarding Verimark's security interest and lien position on the Collateral Properties. The Parties acknowledge that Ironclad National Bank currently holds first-lien mortgage loans on eighteen (18) of the twenty-two (22) hotel properties operated by Coastal Palms, with an aggregate outstanding principal balance of approximately Ninety-Four Million Dollars ($94,000,000); however, the eight (8) Collateral Properties identified for purposes of this Section 3 are unencumbered by any Ironclad National Bank liens. The acknowledgment and consent of Ironclad National Bank is being sought to confirm the bank's awareness of, and non-objection to, Verimark's lien position on the Collateral Properties and to address any potential cross-collateralization or cross-default provisions that may exist in Coastal Palms' loan agreements with Ironclad National Bank. The failure to obtain such acknowledgment and consent shall not, by itself, constitute a condition to closing, unless the Parties otherwise agree in the Definitive Agreement.
SECTION 4: ACCELERATION AND DEFAULT
4.1 Events of Default. An "Event of Default" shall include, without limitation, the occurrence of any of the following:
(a) The failure by Coastal Palms, or any jointly and severally liable entity, to make any Structured Payment or interest payment within fifteen (15) calendar days of the applicable due date;
(b) The breach of any material term, covenant, representation, or warranty contained in the Definitive Agreement, the Personal Guaranties, the security instruments, or the New FLAs (as defined in Section 6 below), subject to a reasonable cure period to be specified in the Definitive Agreement (anticipated to be thirty (30) days from written notice of such breach for non-monetary defaults);
(c) The filing by or against Coastal Palms, any affiliate of Coastal Palms (including Gulf Breeze Hospitality LLC, Savannah Lodging Partners LLC, and Suncoast Room Management Inc.), or any guarantor (including Randall Brecker and Nolan Prescott) of a voluntary or involuntary petition under Title 11 of the United States Code (the Bankruptcy Code), or any state-law insolvency proceeding, assignment for the benefit of creditors, or appointment of a receiver, trustee, or custodian for all or substantially all of such Party's assets;
(d) Any material adverse change in the condition, value, or encumbrance status of the Collateral Properties that materially impairs Verimark's security interest therein, including without limitation the imposition of any lien, encumbrance, or claim on the Collateral Properties without Verimark's prior written consent; and
(e) Any other events of default as the Parties may agree upon in the Definitive Agreement.
4.2 Acceleration. Upon the occurrence and during the continuance of an Event of Default, Verimark shall have the right, in its sole discretion, upon written notice to Coastal Palms and the guarantors, to accelerate all remaining Structured Payments, together with all accrued and unpaid interest thereon, which amounts shall thereupon become immediately due and payable in full, without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived to the fullest extent permitted by applicable law.
4.3 Default Interest Rate. Upon the occurrence of an Event of Default, the interest rate applicable to all outstanding obligations shall increase to a default rate to be specified in the Definitive Agreement (anticipated to be the lesser of (i) the Contract Rate plus four percent (4%) per annum, or (ii) the maximum rate permitted by applicable Florida law).
4.4 Additional Remedies. In addition to acceleration, Verimark shall be entitled to exercise all rights and remedies available to it under the Definitive Agreement, the security instruments, applicable law (including Article 9 of the Uniform Commercial Code), and equity, including without limitation foreclosure on the Collateral Properties, enforcement of the Personal Guaranties, and recovery of all reasonable attorneys' fees and costs incurred in connection with the enforcement of its rights. All remedies shall be cumulative and not exclusive.
SECTION 5: FRANCHISE SURRENDER
5.1 Surrendered Properties. Coastal Palms shall surrender its franchise rights with respect to fourteen (14) of the twenty-two (22) hotel properties currently operated under the Verimark Suites and Verimark Select brands (collectively, the "Surrendered Properties"). The Surrendered Properties are located in the following markets:
(a) Sarasota, Florida — three (3) properties;
(b) Fort Myers, Florida — four (4) properties;
(c) Jacksonville, Florida — two (2) properties;
(d) Savannah, Georgia — three (3) properties; and
(e) Brunswick, Georgia — two (2) properties.
The specific name, address, and FLA reference number for each Surrendered Property shall be set forth in a schedule to be attached as an exhibit to the Definitive Agreement.
5.2 Termination of FLAs. All Franchise License Agreements associated with the Surrendered Properties shall be terminated effective as of the Closing Date, provided that Coastal Palms' de-identification obligations under Section 5.3 below shall survive such termination and remain in full force and effect during the De-Identification Period.
5.3 De-Identification Obligations. Coastal Palms shall, at its sole cost and expense, complete the de-identification of all Surrendered Properties within one hundred twenty (120) calendar days of the Closing Date (the "De-Identification Period"). Assuming a Closing Date of April 22, 2024, the deadline for completion of de-identification shall be August 20, 2024. De-identification shall include, without limitation:
(a) The removal of all Verimark branding, including all exterior and interior signage bearing the "Verimark Suites" and "Verimark Select" names, logos, and trade dress;
(b) The removal or disabling of all proprietary Verimark systems, including but not limited to reservation systems, property management system interfaces, guest loyalty program terminals, and revenue-management software;
(c) The removal of all Verimark trade dress, including branded linens, amenity packages, room collateral, in-room directories, key cards, and uniforms bearing the Verimark name, logo, or any related marks;
(d) The de-listing of all Surrendered Properties from Verimark's online booking platforms, mobile applications, and third-party distribution channels operating under Verimark's brand umbrella; and
(e) Such other de-identification steps as Verimark may reasonably require consistent with its standard franchise termination procedures.
5.4 Consequences of Failure to De-Identify. The specific consequences of Coastal Palms' failure to complete de-identification of any Surrendered Property within the De-Identification Period, including liquidated damages, injunctive relief, and Verimark's right to enter the property to effect de-identification at Coastal Palms' expense, shall be set forth in the Definitive Agreement.
SECTION 6: RETAINED PROPERTIES AND ENHANCED AUDIT PROTOCOL
6.1 Retained Properties. Coastal Palms shall retain its franchise rights with respect to eight (8) hotel properties (the "Retained Properties"), located in the following markets:
(a) Naples, Florida — four (4) properties;
(b) Marco Island, Florida — two (2) properties; and
(c) Tampa, Florida — two (2) properties.
The specific name, address, and room count for each Retained Property shall be set forth in a schedule to be attached as an exhibit to the Definitive Agreement.
6.2 New Franchise License Agreements. On the Closing Date, Coastal Palms and Verimark shall execute new Franchise License Agreements for each of the eight (8) Retained Properties (collectively, the "New FLAs"). Each New FLA shall have an initial term of ten (10) years commencing on the Closing Date and shall incorporate all standard terms and conditions of Verimark's then-current form Franchise License Agreement, as supplemented by the enhanced provisions described in Sections 6.3 through 6.6 below.
6.3 Quarterly Audit Rights. For a period of five (5) years from the Closing Date (the "Enhanced Audit Period"), Verimark and its duly authorized designees (including independent auditors, forensic accountants, and revenue-assurance consultants) shall have the right to conduct quarterly audits of Gross Room Revenue at each Retained Property. This enhanced audit frequency replaces the standard annual audit right provided under Verimark's form FLA and is being implemented in light of the revenue-reporting deficiencies that gave rise to the Litigation. Coastal Palms shall make available all books, records, documents, and electronic data reasonably requested by Verimark or its designees in connection with each quarterly audit, and shall provide Verimark's auditors with reasonable access to each Retained Property and its on-site personnel during normal business hours upon not fewer than five (5) business days' prior written notice. Following the expiration of the Enhanced Audit Period, audit rights shall revert to the standard annual frequency provided under the New FLAs.
6.4 Real-Time Point-of-Sale Integration. Coastal Palms shall implement and maintain real-time point-of-sale ("POS") integration with Verimark's centralized revenue-management system ("VeriConnect RMS") at each Retained Property within ninety (90) calendar days of the Closing Date. Such integration shall enable Verimark to monitor and verify Gross Room Revenue data on a continuous, real-time basis, and shall include connectivity with all front-desk property management systems, online booking engines, and third-party channel managers utilized at each Retained Property. Coastal Palms shall bear all costs associated with the initial implementation and ongoing maintenance of the POS integration, including hardware, software licensing, connectivity, and training expenses.
6.5 Audit Cost Allocation. Coastal Palms shall bear all costs and expenses associated with the quarterly audits during the initial five-year Enhanced Audit Period, regardless of the findings of any such audit. Such costs shall include, without limitation, the fees and expenses of independent auditors and forensic accountants engaged by Verimark, travel and lodging expenses, and data extraction and analysis costs. This allocation of audit costs differs from Verimark's standard FLA, under which audit costs are borne by the franchisor unless the audit reveals an underreporting variance of five percent (5%) or more, in which case such costs are charged to the franchisee.
6.6 Standard Economic Terms. All other economic terms of the New FLAs shall be consistent with Verimark's standard form Franchise License Agreement, including:
(a) Royalty fee: five percent (5%) of Gross Room Revenue;
(b) Marketing-fund contribution: two and one-half percent (2.5%) of Gross Room Revenue; and
(c) Technology fee: Twelve Dollars and Fifty Cents ($12.50) per room per month.
6.7 Form of New FLAs. The form of New FLA, incorporating the enhanced provisions described in this Section 6, shall be attached as an exhibit to the Definitive Agreement and shall be executed simultaneously with the Definitive Agreement on the Closing Date.
SECTION 7: MUTUAL RELEASE
7.1 Scope of Mutual Release. Effective as of the Closing Date, each Party, on behalf of itself and its respective affiliates, subsidiaries, parent companies, predecessors, successors, assigns, officers, directors, members, managers, employees, agents, representatives, attorneys, heirs, executors, administrators, and insurers, shall release and forever discharge each other Party and such other Party's respective affiliates, subsidiaries, parent companies, predecessors, successors, assigns, officers, directors, members, managers, employees, agents, representatives, attorneys, heirs, executors, administrators, and insurers, from any and all claims, counterclaims, demands, actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, executions, liabilities, and obligations of every kind and nature whatsoever, whether known or unknown, suspected or unsuspected, contingent or matured, liquidated or unliquidated, at law or in equity, arising from or related to the FLAs, the Litigation (Case No. 1021-00006), and the subject matter thereof, from the beginning of time through and including the Closing Date.
7.2 Specific Released Parties. Without limiting the generality of Section 7.1, the mutual release shall expressly extend to, and shall be for the benefit of, the following entities and individuals:
(a) Gulf Breeze Hospitality LLC, a Florida limited liability company;
(b) Savannah Lodging Partners LLC, a Georgia limited liability company;
(c) Suncoast Room Management Inc., a Florida corporation;
(d) Theresa Brecker, individually;
(e) All current and former officers, directors, managers, members, employees, agents, and representatives of each of the foregoing entities; and
(f) All affiliates, subsidiaries, and related entities of Verimark Hospitality Group Inc.
7.3 Carve-Out from Release. Notwithstanding the foregoing, the mutual release shall not extend to, and shall expressly exclude, any obligations, covenants, or commitments arising under or pursuant to (a) the Definitive Agreement, (b) the New FLAs, (c) the Personal Guaranties, (d) the security instruments (including the security agreements, mortgages, deeds of trust, and UCC-1 Financing Statements), and (e) any other agreements or instruments executed and delivered in connection with the Definitive Agreement on or after the Closing Date. The Parties' rights and obligations under such instruments shall survive the mutual release and shall remain in full force and effect in accordance with their respective terms.
SECTION 8: COUNTERCLAIM DISMISSAL
8.1 Dismissal with Prejudice. Coastal Palms shall dismiss its Counterclaim, originally filed on April 18, 2022, in the Circuit Court of the 17th Judicial Circuit, Broward County, Florida, in Case No. 1021-00006, with prejudice, simultaneously with the filing of the Joint Stipulation of Dismissal described in Section 9 below. The Counterclaim, which asserts claims for Twelve Million Dollars ($12,000,000) in alleged damages arising from brand-standard violations and over-billing, shall be dismissed in its entirety as to all counts and all claims for relief asserted therein.
8.2 Waiver. By executing this Term Sheet and the Definitive Agreement, Coastal Palms, Brecker, and Prescott hereby waive any and all rights to refile, reassert, or otherwise pursue the claims set forth in the Counterclaim or any claims substantially similar thereto, in any forum, against Verimark or any of the released parties identified in Section 7 above.
SECTION 9: DISMISSAL OF LITIGATION
9.1 Joint Stipulation of Dismissal. Upon execution of the Definitive Agreement and confirmation of receipt by Verimark of the Cash Payment at Closing in immediately available funds, the Parties shall cause their respective counsel to execute and file a Joint Stipulation of Dismissal with Prejudice of all claims and counterclaims in the Litigation, Case No. 1021-00006, in the Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida. The Joint Stipulation of Dismissal shall dismiss all claims and counterclaims with prejudice, shall provide that the Court shall retain jurisdiction solely for the purpose of enforcing the terms of the Definitive Agreement if the Parties so agree, and shall be in a form reasonably acceptable to the Court and to all Parties.
9.2 Attorneys' Fees and Costs. Each Party shall bear its own attorneys' fees, costs, and expenses incurred in connection with the Litigation, the mediation, the negotiation and execution of this Term Sheet, and the negotiation and execution of the Definitive Agreement and all related instruments and documents.
SECTION 10: CLOSING DELIVERABLES
10.1 Deliverables. On or before the Closing Date, the following deliverables shall be executed, delivered, or exchanged, as applicable:
(a) The Definitive Agreement (Settlement Agreement and Mutual Release), duly executed by all Parties;
(b) Wire transfer of the Cash Payment at Closing in the amount of Twenty-Five Million Dollars ($25,000,000) to the account designated by Verimark;
(c) Personal Guaranties, duly executed by Randall Brecker and Nolan Prescott;
(d) Security agreements granting Verimark a first-priority security interest and lien on the eight (8) Collateral Properties, duly executed by Coastal Palms and such other entities as may hold title to the Collateral Properties;
(e) UCC-1 Financing Statements, in form ready for filing with the Florida Secured Transaction Registry, together with any amendments thereto as may be required;
(f) Mortgages or deeds of trust, as applicable, covering each Collateral Property, in recordable form;
(g) New Franchise License Agreements for each of the eight (8) Retained Properties, duly executed by Coastal Palms and Verimark;
(h) Franchise-surrender notices, in the form required by the FLAs, for each of the fourteen (14) Surrendered Properties;
(i) Written acknowledgment and consent from Ironclad National Bank regarding Verimark's security interest in the Collateral Properties, if obtained;
(j) Joint Stipulation of Dismissal with Prejudice, fully executed by counsel for all Parties, in form suitable for filing with the Court;
(k) Good-standing certificates or certificates of status for Coastal Palms, Gulf Breeze Hospitality LLC, Savannah Lodging Partners LLC, and Suncoast Room Management Inc., dated within thirty (30) days of the Closing Date;
(l) Officers' or managers' certificates certifying that all necessary corporate, partnership, or limited liability company authorizations have been obtained for the execution and delivery of the Definitive Agreement and all related instruments; and
(m) Such other customary closing documents, certificates, opinions, instruments, and deliverables as may be reasonably required by any Party in connection with the consummation of the transactions contemplated by this Term Sheet and the Definitive Agreement.
SECTION 11: NON-DISPARAGEMENT
11.1 Mutual Non-Disparagement. Each Party agrees that, for a period of three (3) years from the Closing Date (the "Non-Disparagement Period"), it shall not, and shall cause its officers, directors, managers, members, employees, agents, and representatives not to, make, publish, or disseminate any statement, whether oral, written, or electronic, that disparages, defames, or places in a false light any other Party or any of such other Party's affiliates, subsidiaries, officers, directors, managers, members, employees, agents, or representatives, in any forum, including without limitation in public statements, press releases, social media posts, communications with franchisees or prospective franchisees, industry contacts, trade associations, trade publications, media outlets, online review platforms, and similar channels.
11.2 Carve-Outs. The non-disparagement obligations set forth in Section 11.1 shall not apply to:
(a) Truthful testimony or statements compelled by law, regulation, subpoena, civil investigative demand, court order, or other legal process;
(b) Disclosures required by Verimark in connection with its obligations as a publicly traded company, including but not limited to disclosures required under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the rules and regulations of the U.S. Securities and Exchange Commission and the Nasdaq Stock Market; and
(c) Statements made in connection with the enforcement of any Party's rights under the Definitive Agreement, the New FLAs, the Personal Guaranties, or the security instruments.
SECTION 12: EXCLUSIVITY (BINDING PROVISION)
THIS SECTION 12 IS BINDING AND ENFORCEABLE UPON EXECUTION OF THIS TERM SHEET.
12.1 Exclusive Negotiation Period. From and after the date of execution of this Term Sheet through the earlier of (a) the Closing Date or (b) May 22, 2024 (the "Exclusivity Period"), no Party shall, directly or indirectly, solicit, initiate, encourage, entertain, or engage in any discussions, negotiations, or communications with any third party (including any alternative mediator, arbitrator, or settlement intermediary) regarding any alternative resolution, settlement, compromise, or disposition of the Litigation or any of the claims or counterclaims asserted therein.
12.2 Preservation of Collateral. During the Exclusivity Period, Coastal Palms shall not enter into any transaction, agreement, or arrangement that would materially impair, encumber, or diminish the value of the Collateral Properties or that would otherwise materially impair Coastal Palms' ability to perform its obligations under the contemplated Definitive Agreement. Without limiting the foregoing, Coastal Palms shall not, during the Exclusivity Period, (a) sell, transfer, convey, or dispose of any Collateral Property or any interest therein, (b) grant any lien, mortgage, deed of trust, security interest, or other encumbrance on any Collateral Property, or (c) enter into any lease or occupancy agreement with respect to any Collateral Property on terms materially different from the terms of existing leases and occupancy agreements.
12.3 Remedies for Breach. Any breach of this Section 12 shall entitle the non-breaching Party to seek specific performance, injunctive relief, and all other remedies available at law or in equity, in addition to the termination of this Term Sheet.
SECTION 13: CONFIDENTIALITY (BINDING PROVISION)
THIS SECTION 13 IS BINDING AND ENFORCEABLE UPON EXECUTION OF THIS TERM SHEET.
13.1 Confidentiality Obligation. The terms and conditions of this Term Sheet and of the contemplated settlement, including but not limited to the Settlement Amount, the payment structure, and the identity of the Collateral Properties (collectively, "Confidential Information"), shall be treated as strictly confidential by all Parties and shall not be disclosed, disseminated, or made available to any third party without the prior written consent of the other Parties, except as expressly set forth in Section 13.2 below.
13.2 Permitted Disclosures. Notwithstanding Section 13.1, the following disclosures of Confidential Information shall be permitted:
(a) Disclosures required by applicable law, regulation, or court order, provided that the disclosing Party shall, to the extent legally permissible, provide the other Parties with prompt written notice of any such required disclosure and shall cooperate with the other Parties in seeking a protective order or other appropriate remedy to limit the scope of such disclosure;
(b) Disclosures to the Parties' respective legal, financial, tax, and accounting advisors who have a bona fide need to know the Confidential Information in connection with the performance of their professional duties and who agree to be bound by confidentiality obligations no less restrictive than those set forth in this Section 13;
(c) Disclosures by Verimark as required by its obligations as a publicly traded company on the Nasdaq Stock Market (ticker: VHMK), including without limitation disclosures required in connection with SEC filing obligations, including the disclosure of the settlement as a "material litigation settlement" in Verimark's Quarterly Report on Form 10-Q for the fiscal quarter ending June 30, 2024, and any current report on Form 8-K as may be required;
(d) Disclosures to Ironclad National Bank as necessary to obtain the acknowledgment and consent described in Section 3.4 above; and
(e) Disclosures to Pinnacle Indemnity Insurance Co. as necessary in connection with litigation-cost coverage and indemnification claims under Policy No. PLI-VHG-2021-08874, or as otherwise required by the terms and conditions of such policy.
13.3 Survival. The confidentiality obligations set forth in this Section 13 shall survive the termination of this Term Sheet (whether by execution of the Definitive Agreement, expiration of the Exclusivity Period, or otherwise) for a period of two (2) years from the date of such termination.
SECTION 14: GOVERNING LAW AND DISPUTE RESOLUTION
14.1 Governing Law. This Term Sheet and the Definitive Agreement shall be governed by and construed in accordance with the laws of the State of Florida, without giving effect to any choice-of-law or conflict-of-laws rules or provisions (whether of the State of Florida or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Florida.
14.2 Exclusive Jurisdiction. Any dispute, controversy, or claim arising under or in connection with this Term Sheet or the Definitive Agreement, including any dispute regarding the validity, interpretation, enforceability, performance, or breach thereof, shall be subject to the exclusive jurisdiction and venue of the Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida, or, to the extent federal subject-matter jurisdiction exists, the United States District Court for the Southern District of Florida, Fort Lauderdale Division. Each Party hereby irrevocably consents and submits to the personal jurisdiction of such courts, waives any objection to venue or jurisdiction, and waives any defense of inconvenient forum.
14.3 Service of Process. Each Party agrees that service of process in any action or proceeding arising under this Term Sheet or the Definitive Agreement may be made by certified mail, return receipt requested, to the addresses set forth in the preamble of this Term Sheet, or to such other address as a Party may designate in writing.
SECTION 15: NON-BINDING NATURE; DEFINITIVE AGREEMENT
15.1 Non-Binding Nature. Except as expressly provided in Sections 12 and 13 above, this Term Sheet is non-binding and does not create any legally enforceable rights or obligations on the part of any Party. No Party shall have any liability to any other Party based upon, arising from, or relating to this Term Sheet (other than under Sections 12 and 13), whether by reason of promissory estoppel, detrimental reliance, unjust enrichment, or otherwise.
15.2 Definitive Agreement Required. The Parties' respective rights and obligations with respect to the settlement of the Litigation shall arise solely upon the execution and delivery of the Definitive Agreement by all Parties. The Definitive Agreement shall contain customary representations, warranties, covenants, conditions, and indemnification provisions, including but not limited to the terms outlined in this Term Sheet, and such additional terms as the Parties may mutually agree upon in the course of good-faith negotiations.
15.3 Good-Faith Negotiation. The Parties shall negotiate in good faith and use commercially reasonable efforts to execute and deliver the Definitive Agreement within thirty (30) calendar days of the date hereof. Each Party shall designate a senior representative with authority to make decisions regarding the terms of the Definitive Agreement and shall make such representative available for negotiations on a timely basis.
15.4 Automatic Termination. If the Definitive Agreement is not executed and delivered by all Parties on or before the expiration of the Exclusivity Period (May 22, 2024, unless extended by mutual written agreement), this Term Sheet shall terminate automatically and shall be of no further force or effect, except that Section 13 (Confidentiality) shall survive such termination for a period of two (2) years in accordance with Section 13.3 above. Upon such termination, neither Party shall have any liability to any other Party arising from this Term Sheet or the failure to execute the Definitive Agreement, except as provided in Section 13.
SECTION 16: MISCELLANEOUS
16.1 Counterparts. This Term Sheet may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Execution and delivery of this Term Sheet by facsimile or electronic transmission (including in .pdf format) shall be deemed to be, and shall have the same force and effect as, execution and delivery of an original.
16.2 Entire Understanding. This Term Sheet constitutes the entire understanding of the Parties with respect to the subject matter hereof and supersedes all prior and contemporaneous discussions, negotiations, term sheets, letters of intent, memoranda of understanding, mediator's proposals, and correspondence related to the settlement of the Litigation, including without limitation all written and oral proposals exchanged during or in connection with the two-day mediation conducted on March 14–15, 2024 before the Honorable Patricia Everwood (Ret.) at Everwood Dispute Resolution PLLC, Coral Gables, Florida.
16.3 Amendments. No amendment, modification, supplement, or waiver of any provision of this Term Sheet shall be effective unless in writing and signed by all Parties hereto. No failure or delay by any Party in exercising any right, power, or privilege under this Term Sheet shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power, or privilege.
16.4 No Admission. This Term Sheet and the contemplated settlement do not constitute and shall not be construed or interpreted as an admission of liability, fault, wrongdoing, or violation of any law, regulation, contract, or duty by any Party. This Term Sheet is entered into solely for the purpose of compromising and settling disputed claims and shall not be admissible in evidence in any proceeding for any purpose, except as necessary to enforce the terms of Sections 12, 13, or the Definitive Agreement, or as otherwise permitted by Florida Rule of Evidence 90.408 and Federal Rule of Evidence 408.
16.5 Notices. All notices, requests, demands, and other communications required or permitted under this Term Sheet shall be in writing and shall be delivered by hand, by nationally recognized overnight courier, or by certified mail, return receipt requested, to the Parties at the addresses set forth in the preamble of this Term Sheet, or to such other addresses as a Party may designate by written notice to the other Parties.
16.6 Headings. The section headings in this Term Sheet are for convenience of reference only and shall not affect the interpretation or construction of any provision of this Term Sheet.
SIGNATURES
IN WITNESS WHEREOF, the Parties have caused this Term Sheet to be executed by their duly authorized representatives as of the date first written above.
VERIMARK HOSPITALITY GROUP INC.
By: ________
Name: Renata Solis-Vega
Title: Senior Vice President & General Counsel
Date: March 22, 2024
COASTAL PALMS FRANCHISE HOLDINGS LLC
By: ________
Name: Randall Brecker
Title: Managing Member
Date: March 22, 2024
RANDALL "RANDY" BRECKER, Individually
________________________________________
Randall Brecker
Date: March 22, 2024
NOLAN PRESCOTT, Individually
________________________________________
Nolan Prescott
Date: March 22, 2024
ACKNOWLEDGED BY COUNSEL
The undersigned counsel of record hereby acknowledge the terms of this Term Sheet and confirm that they have discussed the terms hereof with their respective clients.
CALDERWOOD & HARKNESS LLP Counsel for Verimark Hospitality Group Inc.
By: ________
Name: Priya Anand
Title: Partner
Florida Bar No. 0087451 110 SE 6th Street, Suite 2800 Fort Lauderdale, Florida 33301
Date: March 22, 2024
WHITFIELD, BARROW & CRANE LLP Counsel for Coastal Palms Franchise Holdings LLC
By: ________
Name: Nathan Whitfield III
Title: Senior Partner
1221 Brickell Avenue, Suite 3000 Miami, Florida 33131
Date: March 22, 2024
Installment No. | Due Date | Principal Amount
1 | October 22, 2024 | $7,812,500
2 | April 22, 2025 | $7,812,500
3 | October 22, 2025 | $7,812,500
4 | April 22, 2026 | $7,812,500
5 | October 22, 2026 | $7,812,500
6 | April 22, 2027 | $7,812,500
7 | October 22, 2027 | $7,812,500
8 | April 22, 2028 | $7,812,500
Total | $62,500,000

SETTLEMENT TERM SHEET

NON-BINDING EXCEPT AS SET FORTH IN SECTIONS 12 AND 13 BELOW

PREAMBLE AND RECITALS

SECTION 1: SETTLEMENT AMOUNT

SECTION 2: CLOSING DATE

SECTION 3: SECURITY FOR STRUCTURED PAYMENTS

SECTION 4: ACCELERATION AND DEFAULT

SECTION 5: FRANCHISE SURRENDER

SECTION 6: RETAINED PROPERTIES AND ENHANCED AUDIT PROTOCOL

SECTION 7: MUTUAL RELEASE

SECTION 8: COUNTERCLAIM DISMISSAL

SECTION 9: DISMISSAL OF LITIGATION

SECTION 10: CLOSING DELIVERABLES

SECTION 11: NON-DISPARAGEMENT

SECTION 12: EXCLUSIVITY (BINDING PROVISION)

THIS SECTION 12 IS BINDING AND ENFORCEABLE UPON EXECUTION OF THIS TERM SHEET.

SECTION 13: CONFIDENTIALITY (BINDING PROVISION)

THIS SECTION 13 IS BINDING AND ENFORCEABLE UPON EXECUTION OF THIS TERM SHEET.

SECTION 14: GOVERNING LAW AND DISPUTE RESOLUTION

SECTION 16: MISCELLANEOUS

SIGNATURES

VERIMARK HOSPITALITY GROUP INC.

COASTAL PALMS FRANCHISE HOLDINGS LLC

ACKNOWLEDGED BY COUNSEL

Record

Parties

Dates

Amounts