Contract analysis

I. EXECUTIVE SUMMARY This memorandum outlines the proposed scope, methodology, phased work plan, and timeline for a comprehensive pre-litigation wage-and-hour audit of Verimark Hospitality Group Inc. ("VHG" or the "Company"). Calderwood & Harkness LLP ("C&H" or the "Firm") has prepared this proposal at the direction of VHG's General Counsel and in anticipation of potential collective and class action litigation under

1. Assess the merits and magnitude of the allegations contained in the GLO demand letter, based on a rigorous analysis of VHG's payroll data, timekeeping practices, employment policies, and actual workplace conditions at the seven at-issue properties.

2. Identify potential compliance gaps across VHG's wage-and-hour practices, including overtime calculation methodology, automatic meal-break deductions, compensable pre-shift and post-shift activities, tipped-employee minimum-wage compliance, and exemption classifications.

3. Evaluate defensive positions available to VHG under the FLSA and Florida law, including good-faith defenses, statute-of-limitations arguments, the de minimis doctrine, and potential challenges to collective-action conditional certification.

4. Develop remediation recommendations to address identified compliance deficiencies, reduce ongoing legal exposure, and strengthen the Company's position in any future regulatory examination or litigation proceeding.

5. Inform the Company's litigation-avoidance and settlement strategy, including assessment of pre-suit settlement feasibility, a reasonable settlement range, and, if litigation cannot be avoided, a comprehensive litigation-response strategy. Preliminary Exposure Estimates. Based on the information currently available and the assumptions discussed in Section IV of this memorandum, our working preliminary exposure esti

II. BACKGROUND A. The Company Verimark Hospitality Group Inc. ("VHG" or the "Company") is a Delaware corporation, publicly traded on the Nasdaq Stock Market under the ticker symbol VMHG. The Company's corporate headquarters are located at 2400 Bayshore Boulevard, Suite 1100, Tampa, Florida 33629. VHG operates in the hospitality and real estate sectors, focusing on the ownership, management, and operation of upscale h

1. Overtime Violations (29 U.S.C. § 207(a)). GLO alleges that VHG has systematically failed to pay overtime compensation at one and one-half times the regular rate of pay for all hours worked in excess of forty hours per workweek. The demand letter asserts that VHG's overtime calculation methodology fails to account for all components of remuneration required to be included in the regular rate under the FLSA, and tha

2. Automatic Meal-Break Deductions. GLO alleges that VHG, through its Luminos TimeTrack platform, automatically deducts thirty minutes from each shift of six hours or longer for a purported meal break, regardless of whether the employee actually received a bona fide, duty-free meal period. The demand letter asserts that employees are routinely required to remain on-call during their designated meal periods and are fr

3. Pre-Shift and Post-Shift Off-the-Clock Work. GLO alleges that VHG fails to compensate employees for compensable work performed before and after their recorded shift times. Specifically, the demand letter identifies three categories of uncompensated pre-shift and post-shift activities: (a) donning and doffing required uniforms and grooming to VHG standards; (b) booting up computer systems at workstations prior to t

4. Tipped-Employee Minimum Wage (Art. X, § 24, Florida Constitution). GLO alleges that VHG has failed to pay the applicable Florida minimum wage for tipped employees in front-desk and concierge roles who participate in tip pools at VHG properties. Specifically, GLO contends that VHG applies a tip credit of $3.02 per hour but fails to ensure that the direct cash wage paid to tipped employees equals or exceeds the stat

5. Misclassification Under the FLSA Administrative Exemption. GLO alleges that VHG has willfully misclassified certain "lead" and "senior" hourly roles as exempt from overtime under the FLSA administrative exemption, 29 C.F.R. § 541.200. The demand letter identifies "lead front-desk associates," "senior housekeeping supervisors," "lead food & beverage associates," and similar titles as positions where employees perfo

III. PROPERTIES WITHIN SCOPE OF AUDIT A. Identification of Seven At-Issue Properties The GLO demand letter identifies seven VHG-branded hotel and resort properties as the locations where the alleged wage-and-hour violations occurred. The following table provides summary information for each of these properties: B. Summary Totals Across the seven at-issue properties, VHG currently employs a total of approximately 2,62

IV. CATEGORIES OF ALLEGED VIOLATIONS — AUDIT FOCUS AREAS This section describes each of the five categories of alleged violations identified in the GLO demand letter, together with the specific audit objectives, key data sources, and relevant statistics for each category. A. Category 1: Overtime Compensation (29 U.S.C. § 207(a)) Allegation. GLO alleges that VHG has systematically failed to pay overtime compensation a

V. DATA AND DOCUMENT COLLECTION PLAN A. Data Sources The audit will require collection and analysis of data and documents from the following five principal sources. For each source, we identify the specific categories of data to be collected and the key contacts responsible for production.

1. Luminos Payroll Solutions Inc. (Luminos TimeTrack — Account LTT-VHG-2022-0041) Luminos is the primary source for payroll and timekeeping data. The following categories of data will be requested from Luminos through the existing preservation-request framework, coordinated with Shannon D. Prewitt, Senior Account Manager: • Time-punch records: Complete clock-in, clock-out, and all amendment records for all non-exempt

2. VHG Corporate Human Resources (Carla S. Whitfield, Enrique J. Fuentes) VHG's corporate Human Resources and Payroll & Workforce Compliance departments are the primary source for corporate policies, employee records, and HR-related documentation. The following categories of documents and data will be requested: • Employee Handbook: The current version (v.7.2, effective January 1, 2025) and all prior versions in effe

3. VHG Corporate IT (Malik P. Jefferson) VHG's Corporate IT department will be the source for technology-related data relevant to the pre-shift and post-shift off-the-clock work allegations. The following categories of data will be requested: • Computer system login logs: Login and logout records for workstations and point-of-sale systems used by front-desk associates, concierge staff, and other hourly employees at t

4. Property-Level Records (Seven Property HR Managers and General Managers) Each of the seven at-issue properties maintains certain records at the property level that may supplement or differ from corporate-level records. The following categories of property-level records will be requested: • Property-specific scheduling records (shift schedules, staffing plans, and coverage assignments) • Shift-handover logs and che

5. Palomar Realty Partners LLC (for Verimark Shores Clearwater) In connection with the joint-employer analysis for the Verimark Shores Clearwater property, the following documents will be requested from Palomar Realty Partners LLC, subject to the execution of an appropriate common interest agreement: • Hotel Management Agreement HMA-2021-0601-PC and any amendments, supplements, or side letters • All correspondence be

VI. AUDIT METHODOLOGY — PHASED APPROACH The audit will be conducted in five overlapping phases, designed to progress from data collection through analysis to actionable recommendations within approximately twelve weeks. The phased approach allows for parallel work streams that maintain momentum while ensuring that each subsequent phase builds upon the findings of the preceding phase. Phase 1: Document Collection and