Contract analysis

I. INTRODUCTION AND EXECUTIVE SUMMARY Verimark Hospitality Group Inc. ("Verimark" or "VHG") respectfully submits this Confidential Mediation Statement to the Honorable Patricia Everwood (Ret.) in advance of the mediation sessions scheduled for March 14–15, 2024 at the offices of Everwood Dispute Resolution PLLC in Coral Gables, Florida. This statement is submitted for the Mediator's eyes only, pursuant to Florida Sta

II. PARTIES A. Plaintiff: Verimark Hospitality Group Inc. Verimark Hospitality Group Inc. is a Delaware corporation that is publicly traded on the Nasdaq exchange under the ticker symbol VHMK. Verimark's principal offices are located at 2400 East Las Olas Boulevard, Suite 3100, Fort Lauderdale, Florida 33301. Verimark is engaged in the hospitality and real estate industry, operating and franchising approximately 340

III. FACTUAL BACKGROUND A. The Franchise Relationship The franchise relationship between Verimark and Coastal Palms began on June 15, 2007, when the parties executed their first Franchise License Agreement for a single Verimark Suites property located in Naples, Florida. At that time, Coastal Palms was a relatively small operation, and the initial FLA reflected the standard form agreement that Verimark offers to all

IV. PROCEDURAL HISTORY A. Complaint and Initial Pleadings On March 7, 2022 — the day after the expiration of the cure period — Verimark filed its Complaint in the Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida, initiating this action under Case No. 1021-00006. The case was assigned to the Honorable Richard M. Calloway, Circuit Judge. The Complaint asserts ten counts against the defendan

V. DAMAGES ANALYSIS A. Overview of Verimark's Damages Claim ($150 Million) Verimark's total damages claim is approximately $150 million, comprising three distinct categories: (1) direct underpayments of royalties, marketing-fund contributions, and technology fees totaling $16.095 million; (2) contractual late-payment interest of $28.4 million, calculated under FLA § 4.6 at the contractual rate of 1.5% per month, comp

VI. THE COURT'S SUMMARY JUDGMENT RULING On February 9, 2024, the Honorable Richard M. Calloway, Circuit Judge, entered an Order on the parties' cross-motions for summary judgment. A copy of the Order is appended as Exhibit 1 to this Mediation Statement. The Court's ruling represents the most significant development in this litigation to date and fundamentally alters the landscape in which the parties approach mediati

VII. COASTAL PALMS' DEFENSES AND COUNTERCLAIM A. GRR Ambiguity Defense (Rejected by Court) The cornerstone of Coastal Palms' litigation strategy has been its contention that FLA § 4.1's definition of Gross Room Revenue was ambiguous as applied to revenues collected by Suncoast Room Management Inc. — a separate legal entity from the franchisee. Coastal Palms argued that the GRR definition could reasonably be interpret