Contract analysis

I. INTRODUCTION AND PURPOSE This memorandum presents a preliminary litigation budget estimate for Verimark Hospitality Group Inc.'s ("Verimark" or "VHG") breach-of-contract action against Coastal Palms Franchise Holdings LLC ("Coastal Palms"), Randall "Randy" Brecker ("Brecker"), and Suncoast Room Management Inc. ("Suncoast") (collectively, "Defendants"). The action was initiated by the filing of a ten-count Complain

II. MATTER OVERVIEW AND SCOPE A. Case Summary Client. Verimark Hospitality Group Inc. is a Delaware corporation publicly traded on the Nasdaq Stock Market under the ticker symbol VHMK. Verimark is headquartered at 2400 East Las Olas Boulevard, Suite 3100, Fort Lauderdale, Florida 33301. VHG is one of the nation's leading hospitality franchise companies, operating through its Verimark Suites and Verimark Select brand

III. CALDERWOOD & HARKNESS ENGAGEMENT TEAM AND BILLING RATES A. Attorney Staffing The following table sets forth the proposed engagement team, the role of each timekeeper, current hourly billing rates, and the anticipated scope of each team member's involvement in the matter. This staffing plan reflects our commitment to appropriate leverage — using senior attorneys for strategic and advocacy tasks while deploying as

IV. BUDGET ASSUMPTIONS AND METHODOLOGY The budget set forth in this memorandum is based on the following key assumptions and methodological principles. We encourage Verimark to review these assumptions carefully, as changes to any of them could materially affect the overall budget. Trial Timeline. The budget assumes that the matter proceeds through a full jury trial in Broward County Circuit Court in approximately Fe

V. PHASE-BY-PHASE BUDGET BREAKDOWN The following sections present a detailed breakdown of the anticipated litigation budget, organized into six discrete phases. For each phase, we identify the anticipated timeframe, the principal tasks to be performed, the estimated hours, the estimated attorney fees, the estimated expenses, and the phase subtotal. Where phases overlap in time, we have noted the overlap and have allo

VI. CONSOLIDATED BUDGET SUMMARY The following table consolidates the phase-by-phase budget estimates presented above. The rounded budget range of $4.5 million to $7.5 million reflects the all-in estimate inclusive of Calderwood & Harkness attorney fees, expert fees (principally Ridgeline Forensic Advisory LLC), e-discovery vendor costs, deposition and court reporter costs, travel expenses, and all other reasonably an

VII. KEY BUDGET DRIVERS AND VARIABLES The budget range presented above reflects our best estimate based on current information and assumptions. However, several variables could cause actual costs to move toward the high end or the low end of the range. We identify the most significant of these variables below. A. Factors That Could Push Costs Toward the High End Aggressive discovery Posture by Defense Counsel. Whitfi

VIII. BILLING AND REPORTING PROTOCOLS To ensure transparency, accountability, and effective cost management throughout the life of this matter, we propose the following billing and reporting protocols. Monthly Invoices. Calderwood & Harkness will submit monthly invoices with detailed time entries describing the work performed by each timekeeper. Time entries will be sufficiently detailed to allow Verimark's legal and

IX. RECOMMENDATIONS Based on the foregoing analysis, we respectfully make the following recommendations for Verimark's consideration.

1. Approve the Preliminary Budget Range. We recommend that Verimark approve the preliminary budget range of $4.5 million to $7.5 million for financial planning and reserve purposes. We suggest establishing reserves at the midpoint of approximately $6.0 million, with the understanding that the actual cost could fall at either end of the range depending on the factors discussed in Section VII.

2. Authorize Expert Engagement. We recommend that Verimark authorize the engagement of Ridgeline Forensic Advisory LLC, led by Dr. Sharon Kettlewell, CPA/CFF, CFE, as the forensic accounting and damages expert in this matter. We recommend this firm based on its demonstrated expertise in franchise revenue disputes, its familiarity with hospitality industry financial structures, and our positive experience with Dr. Ket

3. Authorize E-discovery Vendor Engagement. We recommend that Verimark authorize the engagement of an e-discovery vendor for processing, hosting, and analytics in connection with the anticipated large-volume document productions. We anticipate that the vendor engagement will be needed by summer 2022 in advance of the first document productions. We will circulate proposals from qualified vendors for Verimark's review

4. Schedule Quarterly Budget Review Calls. We recommend establishing a schedule of quarterly budget review calls, to be attended by Priya Anand, Douglas Carmichael, Renata Solis-Vega, and Martin Holcomb. These calls will serve as the primary forum for reviewing actual expenditures against the budget, discussing strategic developments that may affect the budget, and adjusting forward-looking estimates as appropriate.

5. Consider Mediation. We recommend that Verimark give preliminary consideration to whether and when to include potential mediation costs in a future budget update, depending on case developments and Verimark's settlement posture. While we do not recommend building a mediation phase into the current budget (given the early stage of the litigation), mediation may become strategically advantageous at a later stage — pa

X. CONTACT INFORMATION For questions regarding this memorandum, the budget estimates, or any other aspect of this matter, please contact: Priya Anand Partner, Calderwood & Harkness LLP 110 SE 6th Street, Suite 2800 Fort Lauderdale, Florida 33301 Email: priya.anand@calderwoodharkness.com Douglas Carmichael Partner, Calderwood & Harkness LLP 110 SE 6th Street, Suite 2800 Fort Lauderdale, Florida 33301 Email: douglas.ca