Contract analysis

1. As to the allegations of Paragraph 1 of the Counterclaim, Verimark admits that Counterclaim Plaintiff Coastal Palms Franchise Holdings LLC is a Florida limited liability company organized and existing under the laws of the State of Florida, with its principal office located at 9500 Gulf Shore Drive, Suite 450, Naples, Florida 34108. Verimark further admits that Counterclaim Defendant Verimark Hospitality Group Inc

2. As to the allegations of Paragraph 2 of the Counterclaim, Verimark admits that this Court has subject matter jurisdiction over this action and personal jurisdiction over the parties. Verimark further admits that venue is proper in Broward County, Florida, pursuant to the mandatory forum-selection and venue provisions contained in Section 18.3 of each of the Franchise License Agreements ("FLAs") executed between Ve

3. As to the allegations of Paragraph 3 of the Counterclaim, Verimark admits that Coastal Palms and Verimark entered into twenty-two (22) individual Franchise License Agreements for hotel properties operating under the "Verimark Suites" and "Verimark Select" brand flags. Verimark further admits that the first FLA was executed on June 15, 2007, for a Verimark Suites property located in Naples, Florida, and that the mo

4. As to the allegations of Paragraph 4 of the Counterclaim, Verimark admits that Coastal Palms operates twenty-two (22) franchised hotel properties, consisting of eighteen (18) properties under the Verimark Suites flag and four (4) properties under the Verimark Select flag, located across the States of Florida and Georgia, comprising a total of approximately 3,740 guest rooms. Verimark denies any allegations contain

5. As to the allegations of Paragraph 5 of the Counterclaim, Verimark denies that it failed to maintain brand standards as required under the FLAs or any other agreement between the parties. Verimark specifically denies that it engaged in "deferred maintenance at the corporate level" or that it failed to adequately support, invest in, or maintain the Verimark Suites and Verimark Select brands. To the contrary, Verima

6. As to the allegations of Paragraph 6 of the Counterclaim, Verimark denies that it provided "inadequate reservation-system uptime" or that its reservation and central booking systems failed to meet the performance standards required under the FLAs. Verimark affirmatively states that the Verimark Central Reservation System ("VCRS") met or exceeded industry-standard uptime benchmarks throughout the relevant period, a

7. As to the allegations of Paragraph 7 of the Counterclaim, Verimark denies that Coastal Palms suffered twelve million dollars ($12,000,000.00) in damages or any other amount of damages arising from any alleged brand-standard violations, reservation-system performance issues, or any other acts or omissions of Verimark. Verimark denies that Coastal Palms has any evidentiary, documentary, or factual basis for the twel

8. As to the allegations of Paragraph 8 of the Counterclaim, Verimark denies each and every allegation regarding Verimark's alleged failure to provide adequate marketing support to Coastal Palms and its franchised hotel properties. Verimark affirmatively states that it maintained robust national and regional marketing programs for the Verimark Suites and Verimark Select brands throughout the relevant period, includin

9. As to the allegations of Paragraph 9 of the Counterclaim, Verimark denies each and every allegation regarding Verimark's alleged failure to provide adequate technology upgrades to Coastal Palms and its franchised hotel properties. Verimark affirmatively states that it invested substantial resources in the development, enhancement, and maintenance of its proprietary technology platforms, including the Verimark Cent

10. As to the allegations of Paragraph 10 of the Counterclaim, Verimark denies each and every allegation regarding Verimark's alleged failure to enforce brand-consistency standards across the Verimark franchise system. Verimark affirmatively states that it maintained and enforced comprehensive brand-consistency standards through its Quality Assurance Division, including regular property inspections, guest satisfactio

11. As to the allegations of Paragraph 11 of the Counterclaim, Verimark denies each and every allegation regarding Verimark's alleged failure to provide adequate property-inspection services to Coastal Palms and its franchised hotel properties. Verimark affirmatively states that it conducted regular property inspections of Coastal Palms' franchised hotels in accordance with the inspection schedule and procedures set

12. As to the allegations of Paragraph 12 of the Counterclaim, Verimark denies each and every remaining allegation set forth therein. Verimark affirmatively states that, to the extent Paragraph 12 contains allegations regarding the cumulative impact of the purported brand-standard violations described in Paragraphs 5 through 11, such allegations are conclusory, speculative, and unsupported by competent evidence. Veri

13. As to the allegations of Paragraph 13 of the Counterclaim, Verimark denies that it over-billed Coastal Palms for royalties, marketing-fund contributions, technology fees, or any other amounts owed under the FLAs. Verimark affirmatively states that all billings issued to Coastal Palms were calculated in strict accordance with the applicable provisions of the FLAs, including but not limited to: (a) A royalty fee eq

14. As to the allegations of Paragraph 14 of the Counterclaim, Verimark denies each and every specific allegation of over-billing contained therein. Verimark affirmatively states that all royalty, marketing-fund, and technology-fee billings were computed based on GRR figures as reported by Coastal Palms itself through the monthly revenue-reporting procedures required under Section 5.2 of each FLA. To the extent that

15. As to the allegations of Paragraph 15 of the Counterclaim, Verimark denies each and every allegation contained therein. To the extent that Paragraph 15 alleges that Verimark applied incorrect royalty rates, improperly calculated marketing-fund contributions, or assessed technology fees in excess of the contractually permitted amounts, Verimark denies each such allegation and affirmatively states that all fee calc

16. As to the allegations of Paragraph 16 of the Counterclaim, Verimark denies each and every allegation contained therein. To the extent that Paragraph 16 seeks to aggregate or summarize the alleged over-billing damages across the twenty-two FLAs, Verimark denies that any overbilling occurred with respect to any individual FLA or in the aggregate. Verimark reiterates that all fee calculations were based on Coastal P

17. Verimark denies each and every allegation of the Counterclaim not specifically and expressly admitted in this Answer.

18. Verimark denies that Coastal Palms is entitled to any relief whatsoever on its Counterclaim, whether in the form of compensatory damages, consequential damages, incidental damages, special damages, punitive damages, injunctive relief, declaratory relief, attorneys' fees, costs, pre-judgment or post-judgment interest, or any other form of relief.

19. Verimark denies that Coastal Palms has suffered any cognizable damages as a result of any act, omission, representation, or course of conduct by Verimark, and denies that any act or omission of Verimark constitutes a breach of any FLA or any other duty, obligation, or responsibility owed to Coastal Palms. AFFIRMATIVE DEFENSES TO COUNTERCLAIM Without waiving or diminishing its denials, and without assuming any bur

1. Dismissing the Counterclaim of Coastal Palms Franchise Holdings LLC in its entirety, with prejudice, and denying all relief sought therein;

2. Entering judgment in favor of Verimark Hospitality Group Inc. and against Coastal Palms Franchise Holdings LLC on all counts of the Counterclaim;

3. Awarding Verimark Hospitality Group Inc. its reasonable attorneys' fees and costs incurred in defending against the Counterclaim, to the extent permitted by applicable law, equity, or contract, including but not limited to the attorneys'-fees provisions set forth in Section 17.1 of each FLA; and

4. Granting such other and further relief as this Court deems just, proper, and equitable under the circumstances. DEMAND FOR JURY TRIAL Counterclaim Defendant Verimark Hospitality Group Inc. hereby demands a trial by jury on all issues so triable in connection with the Counterclaim, pursuant to the Florida Constitution and Rule 1.430, Florida Rules of Civil Procedure. Respectfully submitted, CALDERWOOD & HARKNESS LL