Contract analysis

I. Executive Summary The purpose of this memorandum is to present a preliminary quantitative exposure analysis in connection with the demand letter dated January 14, 2026, transmitted by Marco A. Garza of Garza, Linden & Okafor LLP ("GLO"), 600 Brickell Avenue, Suite 2200, Miami, Florida 33131, on behalf of Daniela M. Serrano, a former front-desk associate (Employee ID VHG-EMP-20220314-5587) at the Verimark Regency T

1. Unpaid overtime in violation of the overtime provisions of the Fair Labor Standards Act, 29 U.S.C. § 207(a), arising from the Company's alleged failure to compensate non-exempt hourly employees for all hours worked in excess of forty (40) per workweek;

2. Illegal automatic meal-break deductions, whereby VHG's payroll system (Luminos TimeTrack) allegedly applies an automatic thirty-minute deduction per shift for meal breaks regardless of whether the employee actually received a bona fide, uninterrupted meal period;

3. Uncompensated pre-shift and post-shift work, including time spent on mandatory pre-shift briefings, uniform changes, workstation setup, end-of-shift cash-out procedures, and other compensable activities allegedly performed "off the clock";

4. Florida minimum wage violations for tipped employees in violation of Article X, Section 24 of the Florida Constitution, arising from the Company's alleged failure to satisfy the applicable minimum wage when the tip credit is applied to front-desk, concierge, and other tipped positions; and

5. Willful misclassification of "lead" and "senior" hourly roles as exempt under the FLSA, resulting in the denial of overtime compensation to employees who, despite holding supervisory titles, allegedly do not satisfy the duties tests for any FLSA exemption. Calderwood & Harkness LLP ("C&H") has prepared three exposure scenarios to frame VHG's potential financial risk: • Scenario A (Narrow / Conservative): Considers

II. Background A. The Demand Letter On January 14, 2026, the law firm of Garza, Linden & Okafor LLP transmitted a detailed demand letter to VHG General Counsel Devin K. Arroyo. The letter was received by VHG on January 16, 2026. The demand letter identifies Marco A. Garza as lead attorney and Priya N. Chandrasekaran as the associate attorney handling the matter. GLO is a Miami-based plaintiff-side employment litigati

III. Methodology and Key Assumptions This Section sets forth the data sources, analytical methodology, and key assumptions underlying the exposure calculations presented in Sections IV through VII below. Because this is a preliminary assessment, the assumptions described herein are necessarily generalized and will be subject to refinement as additional data becomes available. A. Data Sources Calderwood & Harkness's p

1. The GLO Demand Letter (dated January 14, 2026): The demand letter provides the factual allegations, the identification of the putative collective/class, and the stated basis for the $18.5 million demand.

2. Preliminary Payroll Data from Luminos Payroll Solutions Inc.: VHG utilizes Luminos Payroll Solutions Inc. ("Luminos") as its third-party payroll processor. The Company's payroll data is maintained in the Luminos TimeTrack system under account number LTT-VHG-2022-0041. Calderwood & Harkness has conducted a preliminary review of payroll summary data for the seven at-issue properties, with particular attention to the

3. VHG Employee Handbook (v.7.2, effective January 1, 2025): The current version of the Employee Handbook contains the Company's written policies on overtime authorization, meal and rest breaks, timekeeping procedures, tip pooling, and job classifications. Earlier versions of the Handbook have been requested but not yet received.

4. VHG HR Headcount Reports: Workforce data, including headcount by property, job code, exempt/non-exempt status, and hire/termination dates, has been provided by Carla S. Whitfield, VP, Human Resources, and Enrique J. Fuentes, Director, Payroll & Workforce Compliance. These reports form the basis for the affected-population estimates used in this memorandum.

5. Ridgepoint Advisory Group LLC — Proposed but Not Yet Engaged: Calderwood & Harkness has identified Ridgepoint Advisory Group LLC as the appropriate forensic accounting firm to conduct granular, employee-level damages modeling. Ridgepoint's principal, Dr. Alicia Tran, CPA, CFF, has extensive experience in FLSA collective-action damages analysis in the hospitality industry. The Ridgepoint engagement has been propose

IV. Scenario A: Narrow Exposure (Conservative) A. Scope and Assumptions Scenario A represents the floor of VHG's exposure under the most conservative set of assumptions reasonably supported by the allegations in the demand letter. This scenario is designed to answer the question: What is VHG's minimum likely exposure if the litigation proceeds on the narrowest viable theory and with the most limited affected populati

V. The GLO Demand Amount: $18.5 Million A. Basis as Stated in the Demand Letter The GLO demand letter seeks $18.5 million in aggregate relief on behalf of the named claimant and the putative collective/class. The demand letter does not provide a granular calculation methodology or a line-by-line breakdown of the $18.5 million figure. Based on the structure and language of the demand letter, Calderwood & Harkness infe

1. GLO has used more conservative assumptions than C&H regarding opt-in rates, the scope of the affected population, or the per-employee damage figures;

2. The demand is designed as an opening settlement position — a number intended to initiate negotiations rather than to reflect the full theoretical exposure, with the expectation that VHG will negotiate downward from the $18.5 million figure; or

3. GLO's fee component is netted differently — the $18.5 million may include a substantial component for attorneys' fees, and the underlying damages figure net of fees may be lower than C&H's mid-range estimate. It is also notable that $18.5 million exceeds Scenario A by more than two times ($18.5M / $8.1M ≈ 2.27x), which strongly suggests that GLO is pricing in multiple claim categories beyond overtime alone. The in

VI. Scenario B: Broad Theoretical Ceiling (Maximum Exposure) A. Scope and Assumptions Scenario B is designed to present the theoretical maximum of VHG's exposure under the most adverse assumptions that could reasonably be applied. This is not a prediction of the likely outcome; rather, it is an outer boundary intended to provide the VHG Board and Audit Committee with a comprehensive understanding of the full scope of

3. Willfulness is assumed but not proven. The scenario assumes that the court finds VHG's violations to be willful, extending the lookback period to three years. A willfulness finding requires that the employer either knew or showed reckless disregard for the fact that its conduct was prohibited by the FLSA. If VHG can demonstrate that it made good-faith efforts to comply, the lookback may be limited to two years, re

4. No defenses are applied. The scenario does not discount for any applicable defenses, including the good-faith defense under § 260 (which could reduce or eliminate liquidated damages), the de minimis doctrine (which could eliminate the pre-/post-shift claim), the fluctuating workweek method (which could reduce overtime damages), or other affirmative defenses that may be available.

5. Tipped-employee claims are not separately quantified. The tipped-employee minimum-wage claim affects only a subset of the workforce (primarily front-desk, concierge, and certain food-and-beverage positions). The exposure from this claim category is subsumed into the combined calculation at straight-time rates, which may overstate or understate the actual tipped-employee exposure depending on the number of affected

6. Misclassification exposure is not separately quantified. The demand letter alleges that certain "lead" and "senior" hourly employees have been misclassified as exempt. These employees are included within the 5,900-person putative collective, and their exposure is calculated at the same blended rate as other hourly employees. In practice, misclassified employees may have higher individual hourly rates and greater o

7. Longer lookback for Florida claims. Additional exposure from Florida constitutional minimum-wage claims under the five-year statute of limitations (extending to January 14, 2021) could further expand the theoretical ceiling if tipped-employee claims are added for the longer period. This extended lookback would primarily affect a smaller subset of employees in tipped positions and would also require the retrieval a

VII. Working Mid-Range Estimate: $22–$38 Million A. Methodology The working mid-range estimate represents Calderwood & Harkness's current best assessment of VHG's realistic exposure range, incorporating more nuanced and defensible assumptions than either Scenario A (which is artificially narrow) or Scenario B (which is a theoretical maximum). The mid-range estimate is constructed using the following analytical approa

VIII. Insurance Coverage Considerations A. Pinnacle Indemnity Corp. EPL Policy VHG maintains an Employment Practices Liability ("EPL") insurance policy with Pinnacle Indemnity Corp. The key terms of the policy relevant to this matter are as follows: The policy is currently in force and covers the period during which the demand was received. The policy's retroactive date and prior-acts coverage will be relevant to the

IX. Key Defenses and Mitigating Factors This Section identifies the principal legal defenses and mitigating factors that may reduce VHG's exposure below the levels modeled in Sections IV through VII. Each of these defenses will be analyzed in greater detail in a supplemental legal research memorandum to be prepared by Nadia Petrov and James Underwood. A. Willfulness / Good-Faith Defense The good-faith defense under 2