Contract analysis

I. PURPOSE AND OVERVIEW This memorandum is prepared for the purpose of organizing and guiding the preparation of Marcus Ellsworth, Chief Executive Officer of Verimark Hospitality Group Inc. ("VHG" or the "Company"), for his deposition noticed by defendants and scheduled for Monday, August 7, 2023. The deposition will be taken pursuant to Florida Rules of Civil Procedure, Rule 1.310, at our offices in Miami. This memo

II. GENERAL DEPOSITION GUIDELINES AND INSTRUCTIONS A. Conduct Rules The following rules of conduct are standard deposition instructions that should be reviewed carefully with Mr. Ellsworth during the preparation session. Adherence to these rules is critical to minimizing the risk that defense counsel will extract damaging testimony.

1. Listen to the full question before answering. Mr. Ellsworth should not anticipate where a question is going or begin formulating a response before the question is complete. Interrupting the examiner or answering a question before it is fully stated can result in Mr. Ellsworth answering a different—and potentially more harmful—question than the one the examiner intended to ask.

2. Answer only the question asked. Mr. Ellsworth should not volunteer information beyond the scope of the question. A deposition is not a narrative opportunity; it is a question-and-answer proceeding. Each answer should be responsive, concise, and complete—but no more than that. If the examiner wants additional detail, he or she will ask follow-up questions.

3. If the question is unclear or compound, ask for clarification. Mr. Ellsworth should not attempt to interpret an ambiguous question or answer a compound question that embeds multiple inquiries. He should simply state, "I don't understand the question. Could you rephrase it?" or "That question seems to contain several parts. Could you break it down?"

4. Avoid speculation. If Mr. Ellsworth does not know the answer to a question, he should say, "I don't know." If he does not recall a specific fact, he should say, "I don't recall." He should not guess, estimate, or speculate. This is particularly important when asked about specific dates, dollar amounts, contract terms, or engineering or technical matters. A truthful "I don't know" or "I don't recall" is always pref

5. Do not guess at dates, dollar amounts, or other specifics unless certain. If Mr. Ellsworth is asked about a specific date, amount, or other quantitative fact and is not certain of the answer, he should say so. He may provide an approximation only if he clearly qualifies it as an approximation (e.g., "I believe it was sometime in late October, but I'm not certain of the exact date"). Even then, caution is warranted

6. Refer to documents only when shown them. Mr. Ellsworth should not quote from memory or paraphrase documents he believes he has seen. If the examiner wishes to question Mr. Ellsworth about a particular document, the examiner should produce the document and allow Mr. Ellsworth to review it. Testifying about document contents from memory creates a risk of inaccuracy and may inadvertently disclose privileged documents

7. Pause briefly before answering. After the examiner completes each question, Mr. Ellsworth should pause for approximately two to three seconds before beginning his response. This pause serves two purposes: it allows defending counsel to interpose objections where appropriate, and it provides Mr. Ellsworth with time to consider the question carefully before committing to an answer.

8. Beware of compound questions, questions with embedded factual premises, and characterizations. Defense counsel will frequently attempt to embed factual assertions into their questions (e.g., "Given that VHG delayed restoration for several months, why…"). Mr. Ellsworth should not accept the factual premise of a question if it is inaccurate or misleading. He should challenge the premise (e.g., "I don't agree with th

1. Do not disclose any communications with Calderwood & Harkness LLP. This includes any conversations, memoranda, emails, or other communications with Elaine Forsythe, Tiffany Rosenthal, Howard Bellamy, Andrew Fitzpatrick, or any other attorney or employee of Calderwood & Harkness.

2. Do not disclose privileged communications with in-house counsel. Nathaniel Driscoll serves as VHG's General Counsel and, in that capacity, provides legal advice to Mr. Ellsworth and other VHG executives. Communications with Mr. Driscoll in his capacity as legal counsel are privileged and should not be disclosed. If a question asks about a communication with Mr. Driscoll, Mr. Ellsworth should pause to allow defendi

3. If a question seeks privileged information, pause. Defending counsel will object and, where appropriate, instruct Mr. Ellsworth not to answer. Mr. Ellsworth should not attempt to determine on his own whether a question invades the privilege; that is counsel's role.

4. Do not waive privilege by summarizing legal advice. Mr. Ellsworth should not describe the "gist" or "substance" of legal advice he received, even in general terms. Statements such as "My lawyers told me that…" or "Based on legal advice, I decided to…" may constitute waiver of the privilege. If asked why VHG took a particular action, Mr. Ellsworth should explain the business reasons for the action without reference

1. Read documents carefully before answering. If the examiner places a document before Mr. Ellsworth and asks questions about it, Mr. Ellsworth should take the time to read the document thoroughly—or at least the relevant portions—before answering any question about its contents. He should not allow the examiner to rush him through this process.

2. Do not assume documents are complete or authentic. If a document appears to be missing pages, appears to be a partial excerpt, or otherwise appears incomplete, Mr. Ellsworth should note that on the record. He should not assume that the document the examiner shows him is the complete document.

3. If you have not seen a document before, say so. Mr. Ellsworth should not pretend familiarity with a document he has never seen. If the examiner shows him a document and asks about it, and Mr. Ellsworth does not recognize the document, he should say, "I don't believe I've seen this document before" or "I don't recall seeing this document."

III. ANTICIPATED TOPIC AREAS Based on our review of the defendants' deposition notice, the prior depositions in this case (Victor Haddon, July 10, 2023; Denise Whitford, July 24, 2023), and the issues raised in Ironclad's coverage denial letter of February 3, 2023, we anticipate that defense counsel will examine Mr. Ellsworth on the following topic areas. For each topic area, we provide background, anticipated lines

1. Verimark Grand Key Resort — Located at Mile Marker 48, Marathon, Florida 33050. This is VHG's flagship Florida Keys property, featuring 312 rooms in a luxury resort setting with a full-service marina, spa, multiple restaurants, and water-sports facilities. The property's pre-loss average daily rate ("ADR") was $389, with an occupancy rate of approximately 82%. The Grand Key Resort is VHG's most profitable Florida

2. Verimark Harborview Hotel & Conference Center — Located at 1400 Estero Boulevard, Fort Myers Beach, Florida 33931. This property features 224 guest rooms and a 40,000-square-foot conference and events facility. The Harborview is a significant venue for corporate retreats, regional conferences, and group events. Its pre-loss ADR was $295, with an occupancy rate of approximately 74%. The conference facility generate

3. Verimark Sunset Shores — Located at 7200 Gulf Boulevard, St. Pete Beach, Florida 33706. This is a 186-room boutique resort catering to leisure travelers. Its pre-loss ADR was $342, with an occupancy rate of approximately 79%. Although the smallest of the three affected properties, Sunset Shores is a high-margin asset due to its boutique positioning and premium pricing. Defense counsel may also ask about VHG's orga

1. Verimark Grand Key Resort: Closed for 178 days, from September 18, 2022, through March 15, 2023. Grand Key sustained the most severe damage of the three properties. The storm surge of 8 to 14 feet in Monroe County caused catastrophic flooding of the ground-floor guest rooms, lobby, restaurants, and spa facilities. The marina was substantially destroyed, with piers, docks, and fuel facilities rendered inoperable. H

2. Verimark Harborview Hotel & Conference Center: Closed for 135 days, from September 18, 2022, through January 31, 2023. The primary damage to the Harborview property was wind damage to the roofing systems, the building envelope (including curtain wall and window systems), and the conference facility. The 40,000-square-foot conference center sustained particularly significant damage, including loss of the roof membr

3. Verimark Sunset Shores: Partially closed. The property was fully closed for 73 days, from September 18, 2022, through November 30, 2022. Beginning on November 30, 2022, VHG partially reopened the property, operating at reduced capacity while restoration continued on damaged areas. The property reached full operational capacity on February 28, 2023. The estimated BI loss for Sunset Shores is $9.9 million. The total

1. The scope of physical damage at each property. As described above, the Grand Key Resort sustained catastrophic damage from both wind and storm surge; the Harborview sustained significant wind damage, particularly to the roofing and conference facility; and Sunset Shores sustained more moderate damage, primarily to exterior cladding, landscaping, and certain guest rooms on the upper floors.

2. Challenges in obtaining contractors and building materials. Hurricane Callista devastated the entire Florida Keys and Gulf Coast region. The demand for contractors, skilled construction labor, and building materials in the aftermath of the storm far exceeded available supply. VHG was competing with thousands of other property owners — residential, commercial, and governmental — for the same limited pool of contrac

3. Supply-chain delays for specialized materials. The restoration of luxury resort properties requires specialized materials that are not available from general building-supply distributors. Examples include hurricane-rated impact-resistant windows and glazing systems, commercial-grade roofing membranes rated for high-wind zones, marine-grade materials for marina reconstruction, and specialized interior finishes and

4. Permitting delays. The local building departments in Monroe County, Lee County, and Pinellas County were overwhelmed by the volume of permit applications following Hurricane Callista. Processing times for building permits, which normally require days to a few weeks, extended to many weeks or even months. VHG could not commence certain categories of restoration work without the requisite permits, and VHG had no abi

5. Labor shortages in the construction trades. The Category 4 hurricane displaced thousands of construction workers from the affected regions. Many construction workers themselves lost homes and were unable to work. The available labor pool was insufficient to meet the extraordinary demand for construction services across the region. VHG worked with its contractors to secure labor from outside the immediate area, but

6. VHG's affirmative efforts to accelerate restoration. Mr. Ellsworth should be prepared to testify that VHG did not passively wait for restoration to be completed. VHG took affirmative steps to accelerate the process, including: retaining additional contractors beyond its initial general contractor; engaging specialty subcontractors for specific scopes of work; expediting material procurement by sourcing from out-of

1. Immediate post-storm securing of properties. Within hours of the storm's passage, VHG deployed emergency response teams to each property to assess damage and secure the buildings. This included boarding broken windows and openings, tarping damaged roofs to prevent further water intrusion, initiating water extraction and dehumidification in flooded areas, and securing loose debris to prevent additional damage.

2. Engagement of emergency restoration contractors. VHG engaged professional emergency restoration contractors (water-damage remediation, debris removal, temporary stabilization) within the first week following the storm. These contractors were on-site at all three properties performing emergency stabilization work while VHG simultaneously worked to engage general contractors for the full restoration scope.

3. Redirection of group bookings and conference events. Where feasible, VHG's sales and events teams worked to redirect group bookings and conference events that had been scheduled at affected properties to non-affected VHG properties or to partner facilities operated by other hospitality companies with which VHG had existing relationships. Mr. Ellsworth should note that this effort was only partially successful, bec

4. Retention of key staff. VHG made the strategic decision to retain key management and operational staff at each property during the closure period, even though those employees were not generating revenue. This was done to ensure that each property would be able to reopen rapidly once restoration was complete, without the delays that would result from having to recruit, hire, and train new staff. Retaining experienc

5. Communication with guests. VHG's guest-services teams proactively communicated with guests who had existing reservations at affected properties, offering rebooking at other VHG properties, providing referrals to partner hotels, and processing refunds as appropriate. This effort helped preserve guest goodwill and protect VHG's brand reputation.

6. Procurement of temporary facilities. At the Harborview property, VHG explored the feasibility of erecting temporary conference facilities (e.g., tented or modular structures) to accommodate scheduled events during the restoration period. Ultimately, this option was determined to be impractical due to the cost, the limited availability of temporary-structure providers in the post-hurricane environment, and the logi

I. Financial Impact on VHG Defense counsel will explore the financial impact of Hurricane Callista on VHG, including the Company's financial condition during and after the closure period, the impact on VHG's stock price, and VHG's public disclosures regarding the hurricane losses. The purpose of this line of questioning is multifaceted: defense counsel may attempt to argue that VHG's BI claim is inflated, that VHG wa

IV. KEY DOCUMENTS FOR MR. ELLSWORTH TO REVIEW Mr. Ellsworth should review the following documents prior to the preparation session scheduled for August 5, 2023. We will make these documents available to Mr. Ellsworth in a secure document room at our offices. Some of these documents are confidential, privileged, or subject to the protective order entered in this case, and Mr. Ellsworth should not retain copies outside

1. Hurricane preparedness plans and emergency protocols for each of the three affected properties (Grand Key Resort, Harborview Hotel & Conference Center, Sunset Shores). These documents establish that VHG had pre-existing hurricane-response protocols and followed them.

2. Internal communications (emails, memos) regarding the evacuation decision during the period September 16–18, 2022. These communications document the timeline of VHG's decision to evacuate and close the properties and the basis for that decision (mandatory evacuation orders, storm severity, guest and employee safety).

3. Board of directors minutes or presentations referencing Hurricane Callista, property damage, restoration progress, and the insurance claim. Defense counsel may seek to examine board-level discussions regarding the claim, the restoration timeline, and the decision to litigate. Mr. Ellsworth should be familiar with what was presented to the Board and what the Board discussed, recognizing that board-level discussions

4. SEC filings (10-K, 10-Q, 8-K) referencing Hurricane Callista losses, the insurance claim, or the business-interruption impact on VHG's financial results. Defense counsel will compare Mr. Ellsworth's deposition testimony against VHG's public disclosures, so consistency is essential.

5. Investor presentations or earnings-call transcripts discussing the hurricane impact. As with SEC filings, Mr. Ellsworth should review any statements he made on earnings calls or in investor presentations to ensure consistency with his deposition testimony. B. Insurance Documents

6. Sworn statement in proof of loss (November 15, 2022) — claiming $60 million in BI losses across the three properties. Mr. Ellsworth should review this document to understand what was represented to the insurers.

7. Initial notice of loss to Ironclad (September 22, 2022). Mr. Ellsworth should review the notice to confirm his familiarity with its contents and timing.

8. Ironclad reservation of rights letter (October 12, 2022). This letter identifies the coverage defenses Ironclad was investigating and provides important context for the subsequent denial.

9. Ironclad formal coverage denial letter (February 3, 2023). This is the operative denial document and identifies Ironclad's four bases for denial: (i) the $15 million named-windstorm sub-limit; (ii) the period of restoration / unreasonable delay; (iii) concurrent causation / flood exclusion; and (iv) failure to mitigate. Mr. Ellsworth should be thoroughly familiar with these four grounds so that he can respond effe

10. Pinnacle follow-on denial (February 10, 2023). This letter adopts Ironclad's denial and declines coverage under the first-excess layer.

11. Policy declarations page for Ironclad primary policy IIC-PRP-2022-07541. Mr. Ellsworth should review the declarations page to have a general familiarity with the policy structure, limits, and deductible, recognizing that detailed questions about policy terms should be deferred to Pellegrini.

12. Endorsements related to the named-windstorm sub-limit — specifically, the disputed deletion endorsement that VHG contends was issued at the July 2022 renewal. This is the central document in the coverage dispute. Mr. Ellsworth should review it to understand VHG's position but should defer specific questions about its negotiation to Pellegrini and Orde. C. Correspondence.

13. Direct correspondence between Mr. Ellsworth and Victor Haddon (Ironclad), Denise Whitford (Arbor Claims), or Franklin Orde (Tidewater). Any letters, emails, or other written communications between Mr. Ellsworth and insurer or adjuster representatives should be reviewed carefully. Defense counsel will likely mark these as exhibits and examine Mr. Ellsworth about them.

14. Communications with Montclair or Sovereign Re. These are likely limited, as VHG's communications with the upper-layer carriers were primarily conducted through Tidewater and, after counsel was engaged, through Calderwood & Harkness. D. Restoration and Contractor Records

15. Summary timeline of restoration activities at each property. Mr. Ellsworth should review a consolidated timeline showing key milestones in the restoration of each property, including dates of damage assessment, contractor engagement, material procurement, permit applications, commencement and completion of major work phases, and reopening dates.

16. Key contractor agreements or change orders — to the extent Mr. Ellsworth was involved in approving major contractor engagements or authorizing significant change orders during the restoration process.

17. Reports or updates Mr. Ellsworth received regarding restoration progress. These may include weekly or monthly progress reports from VHG's construction management team, property-level general managers, or third-party contractors. Mr. Ellsworth's receipt of these repor