Contract analysis

I. PURPOSE AND BACKGROUND The purpose of this memorandum is to memorialize the revisions to the fee arrangement agreed upon between Calderwood & Harkness LLP (the "Firm") and Verimark Hospitality Group Inc. ("VHG" or the "Client"), and to update the staffing expectations and expense projections in connection with the anticipated transition from the pre-litigation and coverage-analysis phase of this engagement to acti

II. SUMMARY OF ORIGINAL FEE ARRANGEMENT For reference and as a baseline against which the revised arrangement should be understood, the terms of the Original Engagement Letter dated August 30, 2022 are summarized below. The Original Engagement Letter established a blended hourly rate structure for the engagement team. The blended rate applicable to all timekeepers on the engagement was set at $785.00 per hour. The in

III. REVISED FEE ARRANGEMENT — CONTINGENCY ENHANCEMENT A. Rationale for Contingency Enhancement During discussions conducted in late December 2022 and early January 2023, VHG's General Counsel, Nathaniel Driscoll, and its Vice President of Risk Management, Sandra Pellegrini, requested that the fee arrangement be revised to include a success-based component. The expressed rationale for this request was to better align

IV. UPDATED STAFFING PLAN FOR LITIGATION PHASE A. Current Team Composition The engagement team remains as constituted at the outset of the engagement in August 2022. The members of the team and their respective roles are as follows: Elaine Forsythe — Responsible Partner. Ms. Forsythe will maintain overall strategic direction of the engagement and serve as the primary relationship contact for Nathaniel Driscoll and VH

V. EXPENSE BUDGET PROJECTIONS In addition to the professional fee projections set forth in Section IV above, the Firm has developed the following preliminary expense budget for the litigation phase. All expenses will be advanced by the Firm and billed to VHG at cost, consistent with the terms of the Original Engagement Letter. Expert Fees: $200,000–$300,000+. Expert witness costs are expected to constitute the single

VI. DEFENDANTS' COUNSEL AND LITIGATION LANDSCAPE In anticipation of the filing of litigation, the Firm has identified the defense counsel retained by the defendant insurers and has assessed the likely defense strategies, which will inform the Firm's litigation planning and resource allocation. Ironclad Indemnity Corporation and Pinnacle Surplus Lines Inc. are represented jointly by Fendowell Rourke & Stanton LLP, wit

1. Windstorm Sub-Limit. The insurers are expected to assert that the policies are subject to a $15,000,000 windstorm sub-limit, which would cap VHG's recovery for wind-related losses. VHG contends that this sub-limit was deleted at the July 2022 policy renewal pursuant to broker negotiations conducted by VHG's broker, Tidewater Risk Advisors, and that the policies as issued reflect the removal of the sub-limit. This

2. Flood Exclusion / Concurrent Causation at Grand Key Resort. The insurers are expected to invoke the flood exclusion with respect to the Grand Key Resort losses ($31.4 million), arguing that a significant portion of the damage at that property was caused by storm surge and flooding rather than covered windstorm perils. Under the concurrent causation doctrine as applied in Florida, this defense raises complex questi

3. Period of Restoration Disputes. The insurers are expected to challenge VHG's claimed period of restoration — the period during which business-interruption coverage applies — arguing that VHG's properties could have been restored to operational status more quickly than VHG contends. This defense will require detailed factual development regarding the actual restoration timeline, construction contractor availability

4. Failure to Mitigate. The insurers may assert that VHG failed to take reasonable steps to mitigate its business-interruption losses, such as by arranging temporary alternative facilities, implementing accelerated repair schedules, or redirecting bookings to unaffected properties. The Firm is prepared to demonstrate through documentary and testimonial evidence that VHG's mitigation efforts were reasonable and consis

VII. CLIENT COMMUNICATION AND APPROVAL PROCESS A copy of this memorandum will be shared with Nathaniel Driscoll, General Counsel of VHG, for his records and for the records of VHG's legal department. This memorandum is intended to serve as an internal Firm document memorializing the revised fee arrangement and updated staffing plan, and is designated as Privileged and Confidential, Attorney-Client Communication, and

VIII. CONCLUSION In summary, the key terms of the revised fee arrangement and updated staffing plan are as follows: • The blended hourly rate of $785.00 per hour established by the Original Engagement Letter dated August 30, 2022 remains unchanged and continues to apply to all professional services rendered by the engagement team. • A contingency enhancement of 5% of net recovery above $30,000,000 has been agreed upo