[slide 1]
Confidential — Attorney-Client Privileged
Presentation to the Audit Committee of the Board of Directors
Verimark Hospitality Group Inc. (Nasdaq: VMHG)
Prepared by Calderwood & Harkness LLP — Matter No. 1021-00005
Presented by Bernard Crawford, Responsible Partner, and Nadia Petrov, Lead Associate, Labor & Employment
Date: February 2026
ATTORNEY-CLIENT PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
[slide 2]
Executive Summary
On January 14, 2026, VHG received a demand letter from Garza, Linden & Okafor LLP on behalf of former front-desk associate Daniela M. Serrano threatening a collective/class action for systemic wage-and-hour violations
Demand seeks $18.5 million (back pay, liquidated damages, and attorneys' fees) on behalf of a putative collective of 4,100–5,900 current and former hourly employees across seven Verimark-branded Florida properties
Calderwood & Harkness's preliminary mid-range exposure estimate: $22–$38 million (inclusive of liquidated damages, exclusive of attorneys' fees)
Immediate priorities: verify litigation hold, complete data collection, tender EPL insurance claim, respond to demand letter, and define scope of pre-litigation audit
Response deadline: February 28, 2026 (extension request in process); EPL tender deadline: March 15, 2026
[slide 3]
Overview of Allegations
1. Failure to pay overtime at 1.5× the regular rate for hours worked over 40/week in violation of FLSA § 207(a)
2. Illegal automatic meal-break deductions of 30 minutes per shift despite employees being required to remain on-call and perform duties during meal periods
3. Failure to compensate pre-shift and post-shift work (donning/doffing uniforms, booting up computers, shift-handover briefings) — estimated 15–25 minutes per shift
4. Failure to pay Florida minimum wage for tipped employees under Art. X, § 24, Florida Constitution (applicable to front-desk and concierge roles receiving pooled tips)
5. Willful misclassification of certain 'lead' and 'senior' hourly roles as exempt under the FLSA administrative exemption
[slide 4]
Properties and Workforce in Scope
Seven Verimark-branded hotel/resort properties across Tampa Bay, Orlando, and South Florida markets
Verimark Regency Tampa — 320 rooms, ~410 employees (~295 hourly)
Verimark Grand Orlando — 485 rooms, ~580 employees (~420 hourly)
Verimark Shores Clearwater — 210 rooms, ~260 employees (~190 hourly) [managed property; owned by Palomar Realty Partners LLC]
Verimark Bayfront St. Petersburg — 275 rooms, ~340 employees (~245 hourly)
Verimark Resort & Spa Boca Raton — 390 rooms, ~470 employees (~340 hourly)
Verimark Oceanview Fort Lauderdale — 305 rooms, ~365 employees (~265 hourly)
Verimark Key West Collection — 150 rooms, ~195 employees (~140 hourly)
Total across 7 properties: ~2,620 employees, of whom ~1,895 are hourly non-exempt
Putative collective (per demand letter): 4,100–5,900 individuals (includes former employees over the lookback period)
[slide 5]
Applicable Statutes of Limitations and Lookback Periods
FLSA (non-willful): 2-year lookback → January 14, 2024 to present
FLSA (willful violation): 3-year lookback → January 14, 2023 to present
Florida minimum-wage claims (Art. X, § 24, Fla. Const.): 5-year statute of limitations under Fla. Stat. § 95.11(2)(b) → lookback to January 14, 2021
Putative collective period per demand letter: January 2023 to present (assumes willful violation)
Willfulness standard is a critical battleground — plaintiff must show VHG knew or showed reckless disregard for FLSA requirements
[slide 6]
Preliminary Exposure Analysis — Three Scenarios
Scenario A (Narrowest): Overtime claims only, 2-year lookback, 1,895 current hourly employees → $8.1 million (including liquidated damages)
Demand Letter Amount: $18.5 million (back pay, liquidated damages, attorneys' fees per Garza, Linden & Okafor)
Calderwood & Harkness Working Mid-Range Estimate: $22–$38 million (inclusive of liquidated damages, exclusive of attorneys' fees)
Scenario B (Broadest — Theoretical Ceiling): All five claim categories, 3-year willful lookback, 5,900 putative collective members → approximately $202.4 million (before attorneys' fees)
Scenario B is a theoretical maximum; actual exposure depends on opt-in rates, proof of individual violations, and available defenses
[slide 7]
Key Assumptions Underlying Exposure Estimates
Blended average hourly rate for affected workers: $16.50/hour
Average weekly hours: 42.5 (yielding 2.5 overtime hours/week)
Overtime premium rate: $24.75/hour (1.5× $16.50); overtime premium = $8.25/hour
Alleged weekly uncompensated meal-break time: 2.5 hours (30 min/shift × 5 shifts)
Alleged weekly uncompensated pre-/post-shift time: ~1.667 hours (20 min midpoint × 5 shifts)
Florida minimum wage: $14.00/hour; tipped minimum: $10.98/hour ($14.00 − $3.02 tip credit)
FLSA liquidated damages: equal to unpaid wages (effectively doubling back-pay exposure)
All figures are preliminary and subject to verification through audit data
[slide 8]
Insurance Coverage — Pinnacle Indemnity EPL Policy
Employment Practices Liability policy with Pinnacle Indemnity Corp. (Policy No. PIN-EPL-2025-44781)
Policy period: July 1, 2025 – June 30, 2026
Per-occurrence limit: $10 million; aggregate limit: $25 million
Self-insured retention (SIR): $500,000 per claim
Tender of claim: notice letter transmitted to Pinnacle (Lydia C. Bowman, Senior Claims Examiner) on February 7, 2026
Policy requires written notice 'as soon as practicable' but no later than 60 days after receipt of demand → deadline: March 15, 2026
Coverage analysis in progress — potential wage-and-hour exclusion requires careful review
[slide 9]
Joint-Employer Exposure — Palomar Realty Partners LLC
Verimark Shores Clearwater is owned by Palomar Realty Partners LLC (Ricardo E. Montalvo, Managing Member) and managed by VHG under Hotel Management Agreement HMA-2021-0601-PC (dated June 1, 2021)
VHG directly employs all ~260 on-site staff (including ~190 hourly) at this property
Potential joint-employer liability for Palomar under the FLSA economic-reality test
Indemnification provisions in the HMA require analysis — allocation of wage-and-hour liability between VHG and Palomar
Recommend negotiating a common interest / joint defense agreement with Palomar to protect privileged communications
[slide 10]
Litigation Hold and Document Preservation Status
Litigation hold triggered January 16, 2026 (date demand letter received by General Counsel Devin K. Arroyo)
Internal litigation-hold memorandum issued by VHG on January 17, 2026
Calderwood & Harkness issued supplemental litigation-hold advisory letter to VHG
23 custodians identified: 7 property-level HR managers, 7 property general managers, Carla S. Whitfield (VP HR), Enrique J. Fuentes (Director Payroll), Devin K. Arroyo (GC), Malik P. Jefferson (IT), and 5 department heads
Data preservation request sent to Luminos Payroll Solutions Inc. (Shannon D. Prewitt) covering account LTT-VHG-2022-0041
Preserved data categories: Luminos TimeTrack punch data, scheduling records, payroll registers, wage statements, employee handbooks, HR policies, tip-pool records, job descriptions, exemption classifications, internal audit reports, and electronic communications
[slide 11]
Proposed Audit Scope and Methodology
Phase 1 — Document Collection and Data Ingestion: Gather Luminos TimeTrack exports, payroll registers, employee handbooks (current v.7.2, eff. Jan. 1, 2025, and historical versions), HR policies (meal-break, uniform, overtime, tip-pool), scheduling records, and job descriptions for all seven properties
Phase 2 — Forensic Payroll Analytics: Engage Ridgepoint Advisory Group LLC (Dr. Alicia Tran) for statistical sampling of timekeeping data, identification of meal-break deduction anomalies, overtime calculation verification, and damages-model reconstruction
Phase 3 — Legal Analysis and Employee Interviews: Assess FLSA exemption classifications for lead/senior roles, evaluate meal-break and off-the-clock practices at each property, conduct targeted interviews of property-level HR managers and supervisors
Phase 4 — Remediation Recommendations and Litigation Strategy: Identify systemic compliance gaps, propose corrective actions, develop litigation-avoidance or settlement strategy, and prepare final report to Audit Committee
[slide 12]
Ridgepoint Advisory Group — Forensic Payroll Consultant Recommendation
Firm: Ridgepoint Advisory Group LLC (Fort Lauderdale, FL)
Principal: Dr. Alicia Tran, CPA, CFF — specialist in forensic accounting and payroll analytics
Proposed scope: statistical sampling of Luminos TimeTrack data, overtime calculation verification, meal-break deduction anomaly identification, tip-credit compliance review, and damages-model reconstruction
Estimated fees: $85,000–$120,000
Engagement structured under attorney-client privilege and work-product protection (directed by Calderwood & Harkness)
Draft engagement letter prepared; awaiting VHG approval
Ridgepoint's work is essential to validate or challenge the exposure estimates and to develop defensible data for any settlement negotiation or litigation
[slide 13]
Budget Summary — Scoping Phase
Board-authorized budget cap (Audit Committee, January 29, 2026): $350,000
Calderwood & Harkness legal fees (scoping phase): $175,000–$225,000
— Bernard Crawford (Partner): $945/hour (10% courtesy discount from $1,050)
— Renata Vasquez (Partner): $895.50/hour (10% discount from $995)
— Nadia Petrov (Sr. Associate): $607.50/hour (10% discount from $675)
— James Underwood (Associate): $472.50/hour (10% discount from $525)
Ridgepoint Advisory Group (forensic payroll): $85,000–$120,000 (estimated)
Combined estimated range: $260,000–$345,000 (within $350,000 authorization)
Any amounts exceeding $350,000 will require additional Audit Committee approval
[slide 14]
Critical Deadlines and Timeline
January 14, 2026: Demand letter dated and sent by Garza, Linden & Okafor LLP
January 16, 2026: Demand letter received by VHG General Counsel Devin K. Arroyo
January 17, 2026: VHG internal litigation-hold memorandum issued
January 29, 2026: Audit Committee authorized engagement (up to $350,000)
January 30, 2026: Calderwood & Harkness engagement opened (1021-00005)
February 28, 2026: Demand-letter response deadline — draft response under review; requesting extension
March 15, 2026: EPL policy notice deadline (60 days from receipt) — tender submitted February 7, 2026
Target: Complete Phase 1 data collection by mid-March 2026
Target: Ridgepoint forensic analysis complete by end of April 2026
Target: Preliminary audit findings and remediation recommendations to Audit Committee by late May 2026
[slide 15]
Key Risks and Considerations
Collective-action certification risk: If certified, the putative collective could encompass 4,100–5,900 individuals, amplifying exposure dramatically
Willfulness finding: A court finding of willful FLSA violations extends the lookback from 2 to 3 years and increases the affected population
Automatic meal-break deduction practices (Luminos TimeTrack rule AR-MEAL-030) may be vulnerable if employees were not relieved of all duties
FLSA administrative-exemption misclassification of lead/senior hourly roles could generate additional back-pay claims
Tipped-employee minimum-wage compliance carries a 5-year lookback, extending exposure to January 2021
Public-company reputational and disclosure considerations — potential SEC reporting obligations if exposure is material relative to $1.42 billion FY 2025 revenue
Joint-employer liability at Verimark Shores Clearwater (Palomar) could complicate defense and settlement strategy
EPL insurance may not cover FLSA wage-and-hour claims due to potential policy exclusions
[slide 16]
Recommended Next Steps
1. Approve engagement of Ridgepoint Advisory Group LLC for forensic payroll analytics ($85,000–$120,000)
2. Authorize transmission of final response to Garza, Linden & Okafor demand letter (requesting extension of February 28 deadline)
3. Confirm litigation-hold compliance across all 23 custodians and VHG data systems
4. Expedite data collection from Luminos Payroll Solutions Inc. (time-punch records, auto-deduction configurations, payroll registers for account LTT-VHG-2022-0041)
5. Initiate outreach to Palomar Realty Partners LLC regarding common interest agreement for Verimark Shores Clearwater
6. Coordinate with Hargrove Kessler & Co. LLP and CFO Marguerite A. Dunning on contingent-liability disclosure assessment
7. Monitor Pinnacle Indemnity coverage response and complete coverage analysis
8. Calderwood & Harkness to present preliminary audit findings and remediation recommendations to Audit Committee by late May 2026
[slide 17]
Questions and Discussion
Calderwood & Harkness team available for questions
Bernard Crawford — bernard.crawford@calderwoodharkness.com
Nadia Petrov — nadia.petrov@calderwoodharkness.com
Calderwood & Harkness LLP, 100 Southeast Second Street, Suite 3400, Miami, FL 33131
Matter No. 1021-00005
PRIVILEGED AND CONFIDENTIAL — DO NOT DISTRIBUTE