Contract analysis

I. Executive Summary The purpose of this memorandum is to advise the Audit Committee of the Board of Directors of Verimark Hospitality Group Inc. ("VHG" or the "Company") on the strategic and legal considerations surrounding a voluntary production of non-privileged investigation materials to the Staff of the U.S. Securities and Exchange Commission ("SEC") Division of Enforcement in connection with its recently opened

II. Background A. The Internal Investigation On July 17, 2023, the Audit Committee of VHG's Board of Directors retained Calderwood & Harkness LLP to conduct an independent internal investigation into financial-reporting irregularities at VCR. The engagement letter, executed by Audit Committee Chair Diane Kowalski on behalf of the Committee, establishes that Calderwood & Harkness reports solely to the Audit Committee

III. Strategic Analysis: Voluntary Cooperation vs. Limited Response The Audit Committee faces a strategic decision with respect to VHG's posture toward the SEC Preliminary Inquiry: whether to proactively provide non-privileged materials to the SEC Staff on a voluntary basis, or to adopt a more limited, responsive approach in which VHG produces materials only in response to formal compulsory process. This section anal

IV. Privilege Considerations The privilege implications of a voluntary production to the SEC are among the most important considerations before the Audit Committee. This section addresses the applicable privilege doctrines, the current state of the selective-waiver doctrine in the relevant jurisdictions, and the practical measures that should be implemented to protect VHG's privileges throughout the production proces

V. Coordination with Westlake Burris & Holt LLP Westlake Burris & Holt LLP (lead partner Irene Castellanos) is VHG's regular outside securities counsel and has been advising the Company on SEC disclosure obligations since the Form 8-K filing on August 14, 2023. Westlake Burris also advises VHG on its ongoing periodic reporting obligations, including the preparation of the pending amended Form 10-K for fiscal year 202

VI. Coordination with VHG Management and General Counsel VHG General Counsel Patricia Navarro plays an important role in the Company's legal operations and will necessarily be involved in the implementation of any voluntary-production strategy. Ms. Navarro should be informed of the Audit Committee's decisions regarding the production strategy to the extent necessary for operational implementation — for example, coord

VII. D&O Insurance Considerations VHG maintains a directors' and officers' liability insurance program that is relevant to the SEC Preliminary Inquiry and any related proceedings. The current program includes the following coverages: Primary D&O Policy. Issued by North Atlantic Indemnity Corp., Policy No. NAI-DOL-2023-004891, with a policy period of January 1, 2023 through December 31, 2023. The policy provides cover

VIII. Impact on Ongoing Investigation The internal investigation is in an active phase, and the timing and sequencing of any voluntary production must be carefully calibrated to avoid compromising the investigation's fact-gathering process. Several considerations are relevant. Witness Interview Sequencing. The investigation is currently in its active witness-interview phase. Initial interviews of the three Subjects —

IX. Recommended Timeline and Action Items Based on the foregoing analysis, Calderwood & Harkness recommends the following timeline and action items:

1. Immediate (Week of September 18, 2023). Present this memorandum to the Audit Committee for discussion at its next executive session. Seek the Audit Committee's authorization to pursue the phased voluntary-production strategy outlined herein. Confer with Irene Castellanos at Westlake Burris & Holt LLP to align on the SEC engagement strategy, confirm the division of responsibilities between the two firms, and coordi

2. By September 29, 2023. Draft and negotiate a confidentiality agreement with the SEC Division of Enforcement Staff governing the use, handling, and disclosure of materials voluntarily produced by VHG. Prepare the Phase 1 production set, consisting of publicly available materials (SEC filings, press releases, and other publicly disclosed documents) and non-privileged corporate and financial records already identifie

3. By October 15, 2023. Complete the Phase 1 production to the SEC Division of Enforcement Staff. Accompany the production with a cover letter including express privilege-reservation language, a reference to the confidentiality agreement, and a statement that the production is voluntary and does not constitute a waiver of any