Contract analysis

I. Introduction and Purpose of This Letter This firm represents Verimark Hospitality Group Inc. ("VHG"), a Delaware corporation publicly traded on the Nasdaq Stock Market under the ticker symbol VMRK, with its principal offices located at 1900 Brickell Avenue, Suite 3200, Miami, Florida 33129. We have been retained in connection with VHG's business-interruption insurance claim arising from the devastating impact of H

II. The Insured and the Insurance Program A. Verimark Hospitality Group Inc. VHG is a publicly traded hospitality and real-estate company that develops, owns, and operates luxury resort hotels, conference centers, and related hospitality facilities throughout the State of Florida. VHG is widely recognized as one of the premier luxury hospitality operators in the southeastern United States, and its properties cater to

III. Hurricane Callista and the Covered Loss A. The Storm Hurricane Callista was identified as a tropical depression in the eastern Caribbean Sea on September 9, 2022, and was formally named by the National Hurricane Center ("NHC") on September 12, 2022, upon reaching tropical storm strength. The storm rapidly intensified over the warm waters of the Caribbean and the Straits of Florida. By September 17, 2022, Hurrica

1. Verimark Grand Key Resort — Mile Marker 48, Marathon, FL 33050. The Verimark Grand Key Resort is a 312-room luxury resort and full-service marina located at Mile Marker 48 in Marathon, Florida, in the heart of the Florida Keys. The Grand Key Resort is VHG's flagship property and its highest-grossing asset. Prior to Hurricane Callista, the Grand Key Resort operated at an average daily rate ("ADR") of $389 and maint

2. Verimark Harborview Hotel & Conference Center — 1400 Estero Boulevard, Fort Myers Beach, FL 33931. The Verimark Harborview Hotel & Conference Center is a 224-room hotel with an integrated 40,000-square-foot conference and events facility located on Fort Myers Beach, Florida. The Harborview is a significant revenue generator for VHG, serving both the leisure travel market and the corporate meetings and events secto

3. Verimark Sunset Shores — 7200 Gulf Boulevard, St. Pete Beach, FL 33706. The Verimark Sunset Shores is a 186-room boutique resort located on St. Pete Beach, Florida. Although situated further north than VHG's other two properties, the Sunset Shores was well within the destructive wind field of Hurricane Callista and sustained significant damage. Prior to Hurricane Callista, the Sunset Shores operated at an ADR of $

IV. VHG's Compliance with Policy Conditions VHG has fully complied with all conditions precedent and policy requirements under the Policy, including but not limited to the following: Timely Notice of Loss. VHG submitted its initial notice of loss to Ironclad on September 22, 2022, just four days after Hurricane Callista's landfall. Given the catastrophic nature of the storm and the widespread disruption it caused thr

V. Response to Ironclad's Reservation of Rights By letter dated October 12, 2022, Ironclad issued a reservation of rights letter to VHG, purporting to identify several grounds upon which Ironclad might seek to limit or deny coverage for VHG's Hurricane Callista losses. Calderwood & Harkness responded to Ironclad's reservation of rights letter on October 25, 2022, disputing each stated basis in detail. A copy of our O

VI. Demand for Payment Based on the foregoing, VHG hereby formally demands that Ironclad Indemnity Corporation pay the full primary layer policy limit of Twenty-Five Million Dollars ($25,000,000) under Policy No. IIC-PRP-2022-07541, less the applicable per-occurrence deductible of Five Hundred Thousand Dollars ($500,000), for a net payment of: $24,500,000.00 Payment shall be made by wire transfer to the trust account

VII. Bad-Faith Warning and Reservation of Rights We are compelled to advise Ironclad that its continued failure to pay VHG's covered business-interruption losses may expose Ironclad to statutory and common-law bad-faith liability under the laws of the State of Florida. Under Florida Statutes § 624.155, an insurer may be liable in a civil action for damages caused by its failure to attempt in good faith to settle clai

VIII. Request for Ongoing Good-Faith Adjustment Notwithstanding the serious concerns set forth above, VHG remains willing to engage constructively with Ironclad in the adjustment of this claim. Accordingly, VHG respectfully requests the following:

1. That Ironclad immediately resume good-faith adjustment of VHG's business-interruption claim, including the prompt evaluation and payment of undisputed amounts;

2. That Ironclad provide VHG and its counsel with a complete and specific description of any additional documentation or information Ironclad requires to complete its evaluation of the claim, so that VHG may respond promptly and cooperatively;

3. That Ironclad identify, with specificity, any coverage defense or objection it intends to assert, together with the factual and policy-language basis for each such defense or objection; and

4. That all future communications regarding this claim, including any communications from Ironclad's claims department, adjusting firm, coverage counsel, or any other representative, be directed to the undersigned at the following address: Elaine Forsythe, Partner Calderwood & Harkness LLP 333 SE 2nd Avenue, Suite 4400 Miami, FL 33131 Telephone: (305) 884-7214 Email: eforsythe@calderwoodharkness.com VHG reiterates it

IX. Closing VHG expects prompt resolution of this matter and full payment of its primary layer claim. The losses sustained by VHG as a result of Hurricane Callista are real, documented, and devastating. VHG purchased comprehensive all-risk property and business-interruption insurance from Ironclad — and paid substantial premiums for that coverage — precisely so that it would be protected in the event of a catastrophi

1. Copy of VHG's Sworn Statement in Proof of Loss dated November 15, 2022

2. Copy of Calderwood & Harkness LLP's Response to Ironclad's Reservation of Rights Letter dated October 25, 2022

3. Summary of Business-Interruption Loss Calculations by Property Layer | Carrier | Limit | Attachment | Policy Number | Annual Premium Primary | Ironclad Indemnity Corporation | $25,000,000 per occurrence | $500,000 deductible | IIC-PRP-2022-07541 | $980,000 First Excess | Pinnacle Surplus Lines Inc. | $15,000,000 | $25,000,000 xs | PSL-XS1-2022-3390 | $410,000 Second Excess | Montclair Assurance Company | $10,000,0