Contract analysis

I. PURPOSE AND EXECUTIVE SUMMARY The purpose of this memorandum is to recommend the scope, methodology, and data requirements for the expert report to be prepared by Dr. Sharon Kettlewell of Ridgeline Forensic Advisory LLC, in advance of the April 14, 2023 deadline for service of plaintiff Verimark Hospitality Group Inc.'s ("Verimark") expert disclosures under the Court's October 3, 2022 Case Management and Schedulin

II. COORDINATION WITH THORNBURY & ASSOCIATES' PRELIMINARY AUDIT FINDINGS A. Background on the Thornbury Engagement Before this litigation was commenced, Verimark engaged Thornbury & Associates CPAs LLP ("Thornbury") to perform a franchise-compliance audit of Coastal Palms' reporting obligations under the FLAs. Thornbury was engaged on November 22, 2021, following Verimark's receipt of a tip from a former Coastal Palm

III. RECOMMENDED SCOPE OF EXPERT REPORT A. GRR Reconstruction Methodology The cornerstone of Dr. Kettlewell's expert report must be the reconstruction of the true Gross Room Revenue for each of the twenty-two Coastal Palms franchised hotel properties — consisting of eighteen Verimark Suites-branded properties and four Verimark Select-branded properties — for each calendar year from 2013 through 2021. The primary obje

IV. KEY DATA SETS FOR DR. KETTLEWELL'S ANALYSIS Dr. Kettlewell's GRR reconstruction and damages analysis will draw upon multiple independent data sources. The convergence of multiple data sources pointing to the same conclusion — that Coastal Palms systematically underreported GRR — will significantly strengthen the credibility and defensibility of her opinions. This section identifies the key data sets, their proven

V. ANTICIPATED DEFENSE EXPERT CHALLENGES A. Expected Defense Position Coastal Palms has retained Hargrove Economic Consulting Inc., led by Professor Grant Hargrove, PhD, CPA, as its damages expert. Prof. Hargrove's report is due on May 15, 2023, approximately one month after the service of Dr. Kettlewell's report. While we do not yet have the benefit of reviewing Hargrove's report, the defense's litigation posture to

VI. REPORT STRUCTURE AND TIMELINE A. Recommended Report Structure I recommend that Dr. Kettlewell's expert report be organized as follows:

1. Qualifications and Engagement Background. Dr. Kettlewell's curriculum vitae, professional qualifications, prior expert testimony experience, and a description of her engagement in this matter (including the scope of her retention, the materials provided to her, and her billing rate).

2. Summary of Opinions and Conclusions. A concise summary of each of Dr. Kettlewell's principal opinions, including the grand total damages figure and the component figures for direct underpayments, late-payment interest, and liquidated damages. This section should be drafted to serve as a standalone summary that can be understood without reference to the remainder of the report.

3. Factual Background and Data Sources Relied Upon. A description of the factual background of the dispute, the FLA provisions relevant to the damages analysis, and a comprehensive list of all data sources, documents, and other materials reviewed by Dr. Kettlewell in forming her opinions.

4. GRR Reconstruction Methodology. A detailed description of the property-by-property, year-by-year GRR reconstruction methodology, including the three revenue categories captured (reported GRR baseline, Suncoast-collected revenues, and gross OTA revenues), the analytical steps performed, and the results for each property and year.

5. Underpaid Royalties Calculation. Calculation of underpaid royalties at 5% of underreported GRR, presented on a property-by-property and year-by-year basis.

6. Underpaid Marketing-Fund Contributions Calculation. Calculation of underpaid marketing-fund contributions at 2.5% of underreported GRR, presented on a property-by-property and year-by-year basis.

7. Underpaid Technology Fees Calculation. Calculation of underpaid technology fees for the 214 unreported rooms across four properties, applying the CPI-adjusted rates for each relevant year.

8. Late-Payment Interest Model. Description and results of the month-by-month compounding interest model (1.5% per month compounded, per FLA § 4.6), together with the simple-interest alternative calculation presented as a sensitivity analysis.

9. Liquidated Damages Computation Under FLA § 15.3. Calculation of liquidated damages upon termination for cause, equal to 3× trailing-twelve-month corrected royalties for each of the twenty-two properties.

10. Summary Damages Tables. Consolidated tables presenting the grand total damages and each component, in the layered format recommended in Section III.E above.

11. Exhibits and Appendices. Property-level detail tables for each of the twenty-two properties; data-source index with Bates ranges and production dates; sensitivity analyses (including simple-interest alternative and alternative GRR scenarios); methodology documentation for data gaps (2013–2015 PMS data); and supporting schedules. B. Timeline. The current date is March 28, 2023. The expert report service deadline i

VII. COORDINATION WITH ONGOING LITIGATION ACTIVITIES A. Rebuttal Report Planning Upon receipt of Prof. Hargrove's expert report on or about May 15, 2023, we will conduct an immediate and thorough review of his opinions, methodology, and data sources. Carlos Espinoza will prepare a detailed memorandum analyzing Hargrove's report and identifying the points on which rebuttal is warranted. That memorandum will be circula

VIII. BUDGET AND FEE CONSIDERATIONS Ridgeline Forensic Advisory LLC's total engagement budget for this matter is $1.85 million, encompassing the preparation of the opening expert report, any rebuttal report, deposition preparation and testimony, and trial preparation and testimony. This budget was established in the December 12, 2022 engagement letter and was approved by the client after consultation with Douglas Car