Contract analysis

I. THE INSURED AND THE INSURANCE PROGRAM A. VHG's Business Verimark Hospitality Group Inc. is a publicly traded hospitality and real-estate company listed on the Nasdaq Stock Market under the ticker symbol VMRK. VHG owns and operates luxury resort hotels, marinas, and conference centers throughout the State of Florida. For the fiscal year ended December 31, 2021, VHG reported total revenues of approximately $412 mill

II. THE LOSS — HURRICANE CALLISTA A. Hurricane Facts Hurricane Callista was designated and named by the National Hurricane Center of the National Oceanic and Atmospheric Administration on September 12, 2022. Over the following six days, Hurricane Callista intensified rapidly as it moved across the warm waters of the Gulf of Mexico. On September 18, 2022, at approximately 1:30 PM Eastern Daylight Time, Hurricane Calli

1. Verimark Grand Key Resort (Marathon, Florida). The Verimark Grand Key Resort is located at Mile Marker 48, Marathon, Florida 33050. The property is a 312-room luxury resort and marina situated on the oceanfront in the Florida Keys. Prior to Hurricane Callista, the resort maintained an average daily rate ("ADR") of $389 and an average occupancy rate of 82%, reflecting strong demand and premium positioning in the Fl

2. Verimark Harborview Hotel & Conference Center (Fort Myers Beach, Florida). The Verimark Harborview Hotel & Conference Center is located at 1400 Estero Boulevard, Fort Myers Beach, Florida 33931. The property comprises a 224-room full-service hotel together with a 40,000-square-foot state-of-the-art conference and event facility. Prior to Hurricane Callista, the Harborview maintained an ADR of $295 and an average o

3. Verimark Sunset Shores (St. Pete Beach, Florida). The Verimark Sunset Shores is located at 7200 Gulf Boulevard, St. Pete Beach, Florida 33706. The property is a 186-room boutique resort situated on the Gulf of Mexico. Prior to Hurricane Callista, the Sunset Shores maintained an ADR of $342 and an average occupancy rate of 79%. Hurricane Callista caused significant wind and water damage to the Sunset Shores propert

III. NOTICE AND PROOF OF LOSS VHG has fully complied with all notice and proof-of-loss requirements under the applicable policies. VHG submitted its initial notice of loss to Ironclad Indemnity Corporation, as lead carrier under the primary policy, on September 22, 2022 — within four days of Hurricane Callista's landfall. Ironclad retained Arbor Claims Services LLC as the independent adjusting firm for the loss. Deni

IV. COVERAGE ANALYSIS — SOVEREIGN RE'S OBLIGATION TO PAY A. All-Risk Coverage Each policy in VHG's insurance tower, including Sovereign Re's third excess layer policy, provides "all risks" coverage for direct physical loss or damage, including business-interruption losses and extra expense. Under the well-established principles governing all-risk insurance policies, the insured bears only the burden of establishing t

V. DEMAND FOR PAYMENT Based on the foregoing, Verimark Hospitality Group Inc. hereby formally demands that Sovereign Re Ltd. pay the full Ten Million Dollars ($10,000,000) limit of liability under Policy No. SRL-XS3-2022-5102 for the business-interruption losses sustained as a result of Hurricane Callista. Payment should be made within thirty (30) days of the date of this letter — that is, on or before December 21, 2

VI. CONSEQUENCES OF FAILURE TO PAY VHG has suffered catastrophic losses as a direct result of Hurricane Callista. VHG is entitled to prompt and full payment under the terms of the Sovereign Re policy. The business-interruption losses are substantial, documented, and indisputable, and they clearly exhaust every layer of VHG's insurance tower. Should Sovereign Re fail or refuse to honor its contractual obligations unde

VII. RESERVATION OF RIGHTS Nothing in this demand letter shall be construed as a waiver, limitation, or relinquishment of any right, claim, remedy, or defense available to Verimark Hospitality Group Inc. under the Sovereign Re policy, under any other policy in the insurance tower, at law, or in equity. VHG expressly reserves all claims, including but not limited to claims for breach of contract, declaratory judgment,

VIII. REQUEST FOR RESPONSE AND CONTACT INFORMATION VHG requests a substantive written response to this demand within thirty (30) days of the date hereof. Any response should address Sovereign Re's position with respect to coverage, the amount of the claim, and the timeline for payment. All correspondence, notices, and communications regarding this matter should be directed to the undersigned at the following address:

1. Sworn Statement in Proof of Loss (dated November 15, 2022)

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