1021-00001 · Verimark Hospitality Group · Engagement & Preliminary

engagement-letter-vhg.docx DOCUMENT Finance & Banking

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CALDERWOOD & HARKNESS LLP Counselors at Law

One Liberty Plaza, 52nd Floor New York, NY 10006

Telephone: (212) 554-7000 Facsimile: (212) 554-7001 www.calderwoodharkness.com

April 8, 2022

Priya Narayanan, Esq. General Counsel & Corporate Secretary Verimark Hospitality Group Inc. 8200 West Palmetto Park Road, Suite 1500 Boca Raton, FL 33433

Re: Engagement of Calderwood & Harkness LLP as Borrower's Counsel — Verimark Hospitality Group Inc. $700,000,000 Senior Secured Term Loan B Refinancing

Engagement Number: 1016-00009

Dear Ms. Narayanan:

1. Introduction and Engagement

We are pleased that Verimark Hospitality Group Inc. ("VHG" or the "Company") has selected Calderwood & Harkness LLP (the "Firm," "we," or "us") to serve as its legal counsel in connection with the matter described below. We appreciate the confidence you and your colleagues have placed in the Firm, and we look forward to working closely with you and your team throughout this engagement.

This letter sets forth the terms and conditions on which the Firm will represent VHG, a Delaware corporation whose common shares are listed on the New York Stock Exchange under the ticker symbol "VMRK," as borrower's counsel in connection with the proposed refinancing of the Company's existing term loan indebtedness through a new $700,000,000 senior secured Term Loan B credit facility (the "Transaction" or the "Refinancing"). We have had the benefit of initial discussions with you and with Glenn Fischbach, Treasurer of VHG, regarding the background, timing, and objectives of the Refinancing, and this engagement letter reflects our mutual understanding of the scope and terms of our representation.

This engagement letter, together with the enclosed Standard Terms of Engagement, which are incorporated herein by reference, constitutes the agreement between VHG and the Firm with respect to this engagement and supersedes any prior oral or written understanding, proposal, correspondence, or communication regarding the scope, terms, or conditions of this engagement. We ask that you review this letter carefully and contact us with any questions before countersigning.

2. Scope of Representation

2.1 General Description of the Engagement

The Firm will represent VHG as Borrower in connection with the following:

(a) The negotiation, documentation, and closing of a $700,000,000 senior secured Term Loan B credit facility (the "New Facility") with Crescent Harbor Bank, N.A. serving as Administrative Agent, Collateral Agent, Lead Arranger, and Bookrunner (in such capacities, the "Agent");

(b) The refinancing and full repayment of VHG's existing $625,000,000 Term Loan B credit facility (the "Existing Facility"), which was originated on February 14, 2020, and for which Greystone Federal Credit Corp. serves as administrative agent, together with the termination and release of all liens and security interests granted in connection therewith; and

(c) The application of the incremental proceeds of the Refinancing, being approximately $75,000,000 (representing the difference between the $700,000,000 New Facility and the outstanding principal balance under the Existing Facility), toward permitted acquisitions and general corporate purposes of VHG and its subsidiaries, as contemplated by the term sheet and commitment letter for the New Facility.

2.2 Specific Tasks Within Scope

Without limiting the generality of Section 2.1 above, the Firm's representation in connection with the Transaction will include the following specific tasks and deliverables:

(a) Term Sheet and Commitment Letter. Review, negotiation, and preparation of the term sheet and commitment letter between VHG and Crescent Harbor Bank, N.A. setting forth the principal economic and structural terms of the New Facility, including pricing, maturity, amortization, financial and negative covenants, collateral coverage requirements, and syndication mechanics.

(b) Loan Documentation. Drafting and negotiation of the definitive transaction documents for the New Facility, including the Credit Agreement, the Guarantee Agreement (pursuant to which VHG's material subsidiaries will guarantee the obligations of VHG under the Credit Agreement), the Pledge and Security Agreement (pursuant to which VHG and the Guarantors will grant security interests in substantially all of their respective assets), the Intercreditor Agreement (to the extent required to address the relative rights and priorities of the lenders under the New Facility and holders of other secured indebtedness), and all other ancillary loan documents, including promissory notes, perfection certificates, joinder agreements, and lender assignment and assumption agreements.

(c) Corporate Authorizations. Preparation of all corporate authorizations required in connection with the Refinancing, including board resolutions (or equivalent organizational authorizations) for VHG and each of its material subsidiaries that will serve as Guarantors under the loan documents, including:

(i) Verimark Resort Properties LLC, a Delaware limited liability company;

(ii) VHG Management Services Inc., a Delaware corporation;

(iii) Verimark Convention Holdings LLC, a Delaware limited liability company;

(iv) Palmetto Beachfront Hotels LLC, a Florida limited liability company; and

(v) Cascadia Hospitality Corp., a Washington corporation.

(d) Real Property Collateral. Coordination of mortgage, title, and real property deliverables across multiple states for the collateral portfolio of forty-two (42) hotel properties owned or leased by VHG and its subsidiaries (the "Collateral Properties"), including the preparation and negotiation of mortgage instruments, deeds of trust, and fixture filings, the ordering and review of title commitments, surveys, environmental reports, and flood certifications, and the coordination of title insurance policy issuances to the Agent and the lenders.

(e) UCC Filings and Lien Perfection. Preparation and filing of UCC-1 financing statements and UCC-3 amendments and continuation statements as applicable, and coordination of lien filings with the Delaware Secretary of State and applicable state registries to perfect the security interests granted under the Pledge and Security Agreement.

(f) Payoff and Release Documentation. Negotiation and preparation of payoff letters, lien release instruments, mortgage satisfaction documents, UCC-3 termination statements, and related documentation with Greystone Federal Credit Corp. and its counsel in connection with the full repayment of the Existing Facility and the release of all liens and encumbrances securing the Existing Facility.

(g) Legal Opinions. Preparation and delivery of legal opinions to the Agent and the lenders as customarily required in transactions of this nature, including a borrower's counsel opinion and an enforceability opinion covering the due authorization, execution, delivery, and enforceability of the loan documents against VHG and the Guarantors, and such other opinion matters as may be required by the commitment letter or the Credit Agreement.

(h) Syndication Materials. Review and comment on syndication materials prepared by the Agent and its advisors, including the Confidential Information Memorandum and lender presentation materials, to the extent such materials contain descriptions of the legal terms and structure of the New Facility or representations attributable to VHG.

(i) Coordination with Advisors. Coordination, as necessary, with VHG's financial advisor, Meridian Strauss Advisory LLC, and VHG's independent auditor, Clearmont & Wharton LLP, including with respect to the delivery of financial information, certificates, and other materials required by the loan documents or the commitment letter.

(j) Coordination with Lender's Counsel. Coordination with Whitfield Gage & Partridge LLP, which has been retained by Crescent Harbor Bank, N.A. as lender's counsel in connection with the Transaction, regarding the negotiation, execution, and delivery of the loan documents and all related closing deliverables.

(k) Post-Closing Deliverables. Completion of post-closing deliverables as required by the Credit Agreement or closing checklist, including mortgage recordings in applicable county recording offices, title policy issuances (including final marked-up title commitments and pro forma policies), delivery of recorded originals, and any additional UCC filings or lien perfection deliverables identified during the post-closing period.

2.3 Scope Exclusions and Limitations

The following matters are not within the scope of this engagement unless separately agreed to in writing:

(a) Securities Law Matters. This engagement does not cover advice on securities law matters related to VHG's public reporting obligations under the Securities Exchange Act of 1934, as amended, or its obligations as a listed company on the New York Stock Exchange (NYSE: VMRK), including any current report on Form 8-K or other disclosure obligations that may arise in connection with the Refinancing. If VHG desires that the Firm provide securities law advice in connection with the Transaction, the scope and terms of such additional representation will be set forth in a separate engagement letter or amendment to this letter.

(b) Tax Advice. Tax advice in connection with this engagement will be provided by Leonard Cross, Specialist Partner (Tax), and will be limited to United States federal income tax considerations directly related to the Refinancing, including the analysis of original issue discount ("OID") treatment, the application of the applicable high yield discount obligation ("AHYDO") rules under Section 163(i) of the Internal Revenue Code of 1986, as amended, and the deductibility of any prepayment premium payable in connection with the repayment of the Existing Facility. State, local, and international tax advice is not within the scope of this engagement.

(c) Regulatory Proceedings and Litigation. This engagement does not extend to representation of VHG or any of its subsidiaries in any regulatory proceeding, investigation, enforcement action, litigation, arbitration, or dispute of any kind arising from, or related to, the Transaction, whether commenced by a governmental authority, a counterparty to the Transaction, or any third party, unless separately agreed to in a separate engagement letter.

(d) Local Counsel. To the extent that local counsel opinions are required in jurisdictions other than New York and Delaware in connection with the Collateral Properties or other aspects of the Transaction, the Firm will coordinate the engagement and work product of such local counsel on behalf of VHG. However, such local counsel will be separately retained by VHG pursuant to their own engagement agreements, and the Firm shall not be responsible for the legal fees, expenses, or work product of any local counsel engaged in connection with this Transaction.

3. Engagement Team

The following attorneys will constitute the core engagement team for this matter. Each team member has been selected on the basis of his or her experience with leveraged finance transactions, real estate secured lending, and the hospitality industry, and each is available to commence work on the Transaction immediately.

Responsible Partner: Ian Blackwood, Partner, Banking & Finance. Mr. Blackwood will serve as the primary partner responsible for the overall conduct of the Firm's representation of VHG in this matter. He will be the principal client contact for strategic, substantive, and relationship matters and will have ultimate supervisory responsibility for all work product generated by the engagement team. Mr. Blackwood has over twenty-five years of experience in syndicated lending, leveraged finance, and restructuring transactions, including extensive experience in the hospitality and real estate sectors.

Billing Partner: Stephanie Okafor, Partner, Banking & Finance. Ms. Okafor will serve as the billing partner for this engagement and will be responsible for the preparation and issuance of monthly invoices, the administration of the engagement budget, and all billing-related communications with VHG. Ms. Okafor will also provide substantive support on the Transaction as needed.

Lead Associate: Sophie Tremblay, Associate, Banking & Finance. Ms. Tremblay will serve as the day-to-day lead on the Transaction and will have primary responsibility for the drafting and negotiation of the Credit Agreement and ancillary loan documents. Ms. Tremblay will also coordinate internal workflow among the engagement team members and serve as a primary point of contact for Whitfield Gage & Partridge LLP and Meridian Strauss Advisory LLC.

Working Associate: Daniel Obi, Associate, Banking & Finance. Mr. Obi will serve as the supporting associate on the Transaction, with primary responsibility for due diligence, lien and judgment searches, UCC filings, mortgage coordination, preparation of the closing checklist and closing sets, and overall closing logistics.

Tax Specialist: Leonard Cross, Specialist Partner, Tax. Mr. Cross will be responsible for the analysis of the U.S. federal income tax implications of the Refinancing, including OID, AHYDO, and prepayment premium deductibility matters as described in Section 2.3(b) above.

We may, from time to time, assign additional attorneys, paralegals, and support staff to this engagement as the demands of the matter require. Any such additional team members will be assigned at billing rates comparable to those of other attorneys and staff within their respective categories, as set forth in Section 4 below. We will endeavor to ensure continuity and efficiency in our staffing of this matter and to minimize the involvement of individuals who are not familiar with the Transaction.

4. Billing Rates and Fee Arrangements

4.1 Standard Hourly Rates

The Firm's current standard hourly billing rates for the engagement team members assigned to this matter, effective for calendar year 2022, are as follows:

These rates are subject to annual adjustment, which typically takes effect on January 1 of each calendar year. The Firm will provide VHG with advance written notice of any changes to the billing rates applicable to this engagement. Any such adjusted rates will apply to services rendered on or after the effective date of the adjustment.

4.2 Disbursements and Expenses

In addition to professional fees for legal services, VHG will be responsible for the reimbursement of all reasonable out-of-pocket expenses and disbursements incurred by the Firm in connection with this engagement, including without limitation:

(a) Filing fees, including fees for UCC financing statement filings, UCC and judgment lien searches, mortgage recordings, and other governmental filings;

(b) Travel expenses, including airfare, ground transportation, lodging, and meals, incurred by engagement team members in connection with in-person meetings, closings, and site visits related to the Collateral Properties;

(d) Database and online research charges, including charges for Westmark Data Systems, Sundial Solutions, Cascade Services Inc., and other electronic research services;

(e) Photocopying, scanning, printing, and document reproduction charges at standard rates; and

(f) Other customary disbursements associated with the conduct of a transaction of this nature.

Third-party costs, including fees payable to title search companies, lien search providers, survey companies, and similar vendors, will be passed through to VHG at cost, without mark-up by the Firm.

4.3 Billing Frequency and Payment Terms

The Firm will issue invoices to VHG on a monthly basis. Each invoice will itemize the professional fees and disbursements incurred during the preceding calendar month, together with a description of the services rendered. Payment is due within thirty (30) days of the date of each invoice. If VHG has any questions or concerns regarding any invoice, we ask that VHG contact Stephanie Okafor promptly so that the matter can be addressed in a timely manner.

4.4 Fee Estimate

Based on our initial review of the Transaction and our experience with comparable senior secured term loan refinancing transactions, including those involving multi-property hospitality collateral portfolios, we currently estimate that total legal fees and closing costs for this engagement will be approximately $3,200,000. This estimate is provided for informational and budgeting purposes only and is not a cap, fixed fee, or guarantee. Actual fees will depend on a number of factors, including:

(a) The complexity and duration of the negotiation of the Credit Agreement and ancillary documents, including the number of rounds of document negotiation between VHG, Crescent Harbor Bank, N.A., and their respective counsel;

(b) The scope and complexity of the mortgage and title work required across the forty-two (42) Collateral Properties, including any title defects, survey issues, or environmental matters that may arise;

(c) The number of Guarantors and jurisdictions involved in the Transaction, and the nature and extent of organizational and corporate authorization deliverables;

(d) The nature and extent of OID, AHYDO, and other tax analysis required in connection with the Refinancing; and

(e) The extent of post-closing work required following the closing of the Transaction.

The Firm does not guarantee that actual fees and expenses will not exceed this estimate. We will keep VHG apprised of the status of fees and expenses throughout the engagement and will promptly advise VHG if it appears that the estimate may be materially exceeded.

4.5 Retainer. No retainer deposit is required for this engagement.

5. Client Identification and Conflicts

5.1 Identity of the Client

The Firm's client in this engagement is Verimark Hospitality Group Inc. only. The Firm does not, by virtue of this engagement, represent any subsidiary, affiliate, parent, or related entity of VHG, or any officer, director, employee, or shareholder of VHG or any such entity, in his or her individual capacity, except to the extent expressly provided in this Section 5.

To the extent that subsidiaries of VHG (including Verimark Resort Properties LLC, VHG Management Services Inc., Verimark Convention Holdings LLC, Palmetto Beachfront Hotels LLC, and Cascadia Hospitality Corp.) serve as Guarantors under the loan documents for the New Facility, the Firm's representation of such subsidiaries is coextensive with, and limited to, the representation of VHG's interests as Borrower in connection with the Transaction. In the event that the interests of any Guarantor subsidiary diverge from or become adverse to the interests of VHG as Borrower, the Firm will promptly advise VHG, and such subsidiary may be required to retain separate counsel.

5.2 Conflicts Check

The Firm conducted a conflicts-of-interest check on April 5, 2022, in accordance with its standard procedures and the applicable Rules of Professional Conduct. Based on that review, the Firm has confirmed that no conflict of interest exists with respect to VHG, Crescent Harbor Bank, N.A. (in its capacity as Administrative Agent, Collateral Agent, Lead Arranger, and Bookrunner), Greystone Federal Credit Corp. (in its capacity as administrative agent under the Existing Facility), or the identified syndicate lenders and their respective affiliates, that would preclude the Firm from undertaking this engagement.

5.3 Consent to Representation in Unrelated Matters

VHG acknowledges that the Firm is a large, full-service law firm that represents a broad range of clients in diverse matters. The Firm may currently represent, or may in the future represent, other clients in matters unrelated to this Transaction that involve one or more parties to this Transaction, including Crescent Harbor Bank, N.A., any syndicate lender, Greystone Federal Credit Corp., or any of their respective affiliates. By countersigning this engagement letter, VHG consents to such representations by the Firm in unrelated matters, provided that such representations (a) do not involve the same transaction or subject matter as this engagement and (b) are not substantially related to this engagement or adverse to VHG's interests in this engagement. Nothing in this paragraph shall be construed as a waiver of VHG's right to object to any specific future representation that VHG reasonably believes presents an actual conflict of interest.

6. Confidentiality

The Firm will maintain the confidentiality of all information provided by VHG, or obtained by the Firm on VHG's behalf, in connection with this engagement, in accordance with the applicable Rules of Professional Conduct governing the confidentiality of client information. Such information will not be disclosed by the Firm to any third party except:

(a) as required by applicable law, regulation, court order, or valid legal process;

(b) to the extent reasonably necessary for the Firm to perform its duties under this engagement, including the sharing of information with Whitfield Gage & Partridge LLP (lender's counsel), Crescent Harbor Bank, N.A., and the syndicate lenders in the ordinary course of negotiating, documenting, and closing the Transaction, in each case subject to customary confidentiality protections, including the terms of any confidentiality agreement or non-disclosure agreement applicable to the Transaction;

(c) to the extent reasonably necessary to coordinate with Meridian Strauss Advisory LLC, Clearmont & Wharton LLP, or any local counsel retained in connection with the Transaction, subject to customary confidentiality undertakings; or

(d) as expressly authorized by VHG in writing.

The Firm's obligations under this Section 6 are subject to, and supplemented by, the Firm's obligations under the applicable professional responsibility rules in all jurisdictions in which the Firm is admitted to practice, including Rule 1.6 of the New York Rules of Professional Conduct.

7. Document Retention

Following the completion of this engagement, the Firm will retain the client file (including paper and electronic documents) for a period of seven (7) years, in accordance with the Firm's standard document retention policy. After the expiration of such seven-year period, the Firm may destroy or dispose of the file and its contents in accordance with its standard record retention and destruction procedures, without further notice to VHG, unless VHG has, prior to such destruction, requested the return of documents or provided the Firm with alternative instructions regarding the disposition of the file.

Electronic files maintained by the Firm in connection with this engagement will be stored and protected in accordance with the Firm's information security protocols, which include encryption, access controls, and regular security audits. VHG may request a copy of the Firm's current information security policy upon written request to the Billing Partner.

8. Termination of Engagement

Either VHG or the Firm may terminate this engagement at any time upon written notice to the other party. Such notice may be delivered by email, overnight courier, or first-class mail to the addresses set forth in Section 11 below.

In the event that this engagement is terminated by either party, VHG will remain responsible for the payment of all fees, disbursements, and expenses incurred by the Firm through the effective date of termination, in accordance with the terms of Section 4 above. The Firm will issue a final invoice within thirty (30) days following the effective date of termination.

Upon termination, the Firm will take such steps as are reasonably practicable to protect VHG's interests in the Transaction and to facilitate an orderly transition of the matter to successor counsel designated by VHG, including the prompt transfer of all relevant files, documents, and work product to which VHG is entitled. The Firm's obligation to cooperate in such transition shall survive the termination of this engagement.

9. Limitation of Liability

The Firm's aggregate liability to VHG arising out of or relating to this engagement, whether based in contract, tort (including negligence), or otherwise, shall not exceed the total amount of professional fees actually paid by VHG to the Firm under this engagement letter. This limitation of liability shall not apply to claims arising out of the Firm's willful misconduct or gross negligence.

In no event shall the Firm be liable to VHG for any consequential, incidental, indirect, special, exemplary, or punitive damages arising out of or in connection with this engagement, regardless of whether such damages are foreseeable and regardless of whether the Firm has been advised of the possibility of such damages.

10. Governing Law and Dispute Resolution

This engagement letter shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to any choice-of-law or conflict-of-law rules or provisions that would cause the application of the laws of any other jurisdiction.

Any dispute, controversy, or claim arising out of or relating to this engagement letter, or the breach, termination, or validity thereof, shall be resolved by binding arbitration administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules then in effect. The arbitration shall take place in the Borough of Manhattan, New York, New York, before a single arbitrator selected in accordance with the applicable rules. The decision of the arbitrator shall be final and binding upon the parties and may be entered as a judgment in any court of competent jurisdiction. Notwithstanding the foregoing, the parties may, by mutual written agreement, elect to resolve any such dispute by alternative means, including mediation or litigation, in lieu of binding arbitration.

11. Communication and Contact Information

11.1 VHG Contacts

All communications from the Firm to VHG in connection with this engagement should be directed to:

Priya Narayanan, Esq. General Counsel & Corporate Secretary Verimark Hospitality Group Inc. 8200 West Palmetto Park Road, Suite 1500 Boca Raton, FL 33433 Telephone: (561) 220-4400

Email: pnarayanan@verimarkhospitality.com

with a copy to:

Glenn Fischbach Treasurer Verimark Hospitality Group Inc. 8200 West Palmetto Park Road, Suite 1500 Boca Raton, FL 33433 Telephone: (561) 220-4425

Email: gfischbach@verimarkhospitality.com

11.2 Firm Contacts

All communications from VHG to the Firm in connection with this engagement should be directed to:

Ian Blackwood Partner, Banking & Finance (Responsible Partner) Calderwood & Harkness LLP One Liberty Plaza, 52nd Floor New York, NY 10006 Telephone: (212) 554-7150

Email: iblackwood@calderwoodharkness.com

Stephanie Okafor Partner, Banking & Finance (Billing Partner) Calderwood & Harkness LLP One Liberty Plaza, 52nd Floor New York, NY 10006 Telephone: (212) 554-7212

Email: sokafor@calderwoodharkness.com

11.3 Preferred Communication Methods

The parties agree that email and telephone shall be the preferred methods of communication for routine matters relating to the engagement. Sensitive or privileged communications, including draft legal opinions, privileged memoranda, and communications relating to material non-public information concerning VHG, may be transmitted via secure, encrypted channels as agreed between the parties from time to time. The Firm maintains a secure document sharing platform for the exchange of confidential transaction materials, access to which will be provided to authorized representatives of VHG upon request.

12. Acceptance and Execution

If the foregoing terms are acceptable to VHG, we respectfully request that you, on behalf of Verimark Hospitality Group Inc., countersign and return a copy of this engagement letter to the undersigned at your earliest convenience to confirm VHG's agreement to the terms set forth herein. An executed copy may be returned by email (in PDF format) to Ian Blackwood at iblackwood@calderwoodharkness.com, with a hard copy original to follow by mail or courier.

This engagement letter, together with the enclosed Standard Terms of Engagement (Enclosure 1), constitutes the entire agreement between VHG and the Firm with respect to this engagement and supersedes all prior and contemporaneous negotiations, representations, understandings, and agreements, whether oral or written, relating to this subject matter. No amendment or modification of this engagement letter shall be effective unless in writing and signed by both parties.

We look forward to working with you and your team on this important transaction and to delivering the highest quality legal services in connection with the Refinancing.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Ian Blackwood Partner, Banking & Finance

Date: ________

AGREED AND ACCEPTED

The undersigned, on behalf of Verimark Hospitality Group Inc., hereby agrees to and accepts the terms of engagement set forth in this letter, including the enclosed Standard Terms of Engagement incorporated herein by reference.

VERIMARK HOSPITALITY GROUP INC.

By: ________

Priya Narayanan, Esq. General Counsel & Corporate Secretary

Date: April _, 2022

Enclosures:

Enclosure 1: Standard Terms of Engagement (incorporated by reference) Enclosure 2: Engagement Team Contact Information Sheet

cc: Glenn Fischbach, Treasurer, Verimark Hospitality Group Inc. cc: Stephanie Okafor, Partner, Calderwood & Harkness LLP

Category	Rate
Partners (including Ian Blackwood and Stephanie Okafor)	$1,450 per hour
Tax Specialist Partner (Leonard Cross)	$1,550 per hour
Associates (including Sophie Tremblay and Daniel Obi)	$825 per hour

CALDERWOOD & HARKNESS LLP Counselors at Law
One Liberty Plaza, 52nd Floor New York, NY 10006
Telephone: (212) 554-7000 Facsimile: (212) 554-7001 www.calderwoodharkness.com
April 8, 2022
Priya Narayanan, Esq. General Counsel & Corporate Secretary Verimark Hospitality Group Inc. 8200 West Palmetto Park Road, Suite 1500 Boca Raton, FL 33433
Re: Engagement of Calderwood & Harkness LLP as Borrower's Counsel — Verimark Hospitality Group Inc. $700,000,000 Senior Secured Term Loan B Refinancing
Engagement Number: 1016-00009
Dear Ms. Narayanan:
1. Introduction and Engagement
We are pleased that Verimark Hospitality Group Inc. ("VHG" or the "Company") has selected Calderwood & Harkness LLP (the "Firm," "we," or "us") to serve as its legal counsel in connection with the matter described below. We appreciate the confidence you and your colleagues have placed in the Firm, and we look forward to working closely with you and your team throughout this engagement.
This letter sets forth the terms and conditions on which the Firm will represent VHG, a Delaware corporation whose common shares are listed on the New York Stock Exchange under the ticker symbol "VMRK," as borrower's counsel in connection with the proposed refinancing of the Company's existing term loan indebtedness through a new $700,000,000 senior secured Term Loan B credit facility (the "Transaction" or the "Refinancing"). We have had the benefit of initial discussions with you and with Glenn Fischbach, Treasurer of VHG, regarding the background, timing, and objectives of the Refinancing, and this engagement letter reflects our mutual understanding of the scope and terms of our representation.
This engagement letter, together with the enclosed Standard Terms of Engagement, which are incorporated herein by reference, constitutes the agreement between VHG and the Firm with respect to this engagement and supersedes any prior oral or written understanding, proposal, correspondence, or communication regarding the scope, terms, or conditions of this engagement. We ask that you review this letter carefully and contact us with any questions before countersigning.
2. Scope of Representation
2.1 General Description of the Engagement
The Firm will represent VHG as Borrower in connection with the following:
(a) The negotiation, documentation, and closing of a $700,000,000 senior secured Term Loan B credit facility (the "New Facility") with Crescent Harbor Bank, N.A. serving as Administrative Agent, Collateral Agent, Lead Arranger, and Bookrunner (in such capacities, the "Agent");
(b) The refinancing and full repayment of VHG's existing $625,000,000 Term Loan B credit facility (the "Existing Facility"), which was originated on February 14, 2020, and for which Greystone Federal Credit Corp. serves as administrative agent, together with the termination and release of all liens and security interests granted in connection therewith; and
(c) The application of the incremental proceeds of the Refinancing, being approximately $75,000,000 (representing the difference between the $700,000,000 New Facility and the outstanding principal balance under the Existing Facility), toward permitted acquisitions and general corporate purposes of VHG and its subsidiaries, as contemplated by the term sheet and commitment letter for the New Facility.
2.2 Specific Tasks Within Scope
Without limiting the generality of Section 2.1 above, the Firm's representation in connection with the Transaction will include the following specific tasks and deliverables:
(a) Term Sheet and Commitment Letter. Review, negotiation, and preparation of the term sheet and commitment letter between VHG and Crescent Harbor Bank, N.A. setting forth the principal economic and structural terms of the New Facility, including pricing, maturity, amortization, financial and negative covenants, collateral coverage requirements, and syndication mechanics.
(b) Loan Documentation. Drafting and negotiation of the definitive transaction documents for the New Facility, including the Credit Agreement, the Guarantee Agreement (pursuant to which VHG's material subsidiaries will guarantee the obligations of VHG under the Credit Agreement), the Pledge and Security Agreement (pursuant to which VHG and the Guarantors will grant security interests in substantially all of their respective assets), the Intercreditor Agreement (to the extent required to address the relative rights and priorities of the lenders under the New Facility and holders of other secured indebtedness), and all other ancillary loan documents, including promissory notes, perfection certificates, joinder agreements, and lender assignment and assumption agreements.
(c) Corporate Authorizations. Preparation of all corporate authorizations required in connection with the Refinancing, including board resolutions (or equivalent organizational authorizations) for VHG and each of its material subsidiaries that will serve as Guarantors under the loan documents, including:
(i) Verimark Resort Properties LLC, a Delaware limited liability company;
(ii) VHG Management Services Inc., a Delaware corporation;
(iii) Verimark Convention Holdings LLC, a Delaware limited liability company;
(iv) Palmetto Beachfront Hotels LLC, a Florida limited liability company; and
(v) Cascadia Hospitality Corp., a Washington corporation.
(d) Real Property Collateral. Coordination of mortgage, title, and real property deliverables across multiple states for the collateral portfolio of forty-two (42) hotel properties owned or leased by VHG and its subsidiaries (the "Collateral Properties"), including the preparation and negotiation of mortgage instruments, deeds of trust, and fixture filings, the ordering and review of title commitments, surveys, environmental reports, and flood certifications, and the coordination of title insurance policy issuances to the Agent and the lenders.
(e) UCC Filings and Lien Perfection. Preparation and filing of UCC-1 financing statements and UCC-3 amendments and continuation statements as applicable, and coordination of lien filings with the Delaware Secretary of State and applicable state registries to perfect the security interests granted under the Pledge and Security Agreement.
(f) Payoff and Release Documentation. Negotiation and preparation of payoff letters, lien release instruments, mortgage satisfaction documents, UCC-3 termination statements, and related documentation with Greystone Federal Credit Corp. and its counsel in connection with the full repayment of the Existing Facility and the release of all liens and encumbrances securing the Existing Facility.
(g) Legal Opinions. Preparation and delivery of legal opinions to the Agent and the lenders as customarily required in transactions of this nature, including a borrower's counsel opinion and an enforceability opinion covering the due authorization, execution, delivery, and enforceability of the loan documents against VHG and the Guarantors, and such other opinion matters as may be required by the commitment letter or the Credit Agreement.
(h) Syndication Materials. Review and comment on syndication materials prepared by the Agent and its advisors, including the Confidential Information Memorandum and lender presentation materials, to the extent such materials contain descriptions of the legal terms and structure of the New Facility or representations attributable to VHG.
(i) Coordination with Advisors. Coordination, as necessary, with VHG's financial advisor, Meridian Strauss Advisory LLC, and VHG's independent auditor, Clearmont & Wharton LLP, including with respect to the delivery of financial information, certificates, and other materials required by the loan documents or the commitment letter.
(j) Coordination with Lender's Counsel. Coordination with Whitfield Gage & Partridge LLP, which has been retained by Crescent Harbor Bank, N.A. as lender's counsel in connection with the Transaction, regarding the negotiation, execution, and delivery of the loan documents and all related closing deliverables.
(k) Post-Closing Deliverables. Completion of post-closing deliverables as required by the Credit Agreement or closing checklist, including mortgage recordings in applicable county recording offices, title policy issuances (including final marked-up title commitments and pro forma policies), delivery of recorded originals, and any additional UCC filings or lien perfection deliverables identified during the post-closing period.
2.3 Scope Exclusions and Limitations
The following matters are not within the scope of this engagement unless separately agreed to in writing:
(a) Securities Law Matters. This engagement does not cover advice on securities law matters related to VHG's public reporting obligations under the Securities Exchange Act of 1934, as amended, or its obligations as a listed company on the New York Stock Exchange (NYSE: VMRK), including any current report on Form 8-K or other disclosure obligations that may arise in connection with the Refinancing. If VHG desires that the Firm provide securities law advice in connection with the Transaction, the scope and terms of such additional representation will be set forth in a separate engagement letter or amendment to this letter.
(b) Tax Advice. Tax advice in connection with this engagement will be provided by Leonard Cross, Specialist Partner (Tax), and will be limited to United States federal income tax considerations directly related to the Refinancing, including the analysis of original issue discount ("OID") treatment, the application of the applicable high yield discount obligation ("AHYDO") rules under Section 163(i) of the Internal Revenue Code of 1986, as amended, and the deductibility of any prepayment premium payable in connection with the repayment of the Existing Facility. State, local, and international tax advice is not within the scope of this engagement.
(c) Regulatory Proceedings and Litigation. This engagement does not extend to representation of VHG or any of its subsidiaries in any regulatory proceeding, investigation, enforcement action, litigation, arbitration, or dispute of any kind arising from, or related to, the Transaction, whether commenced by a governmental authority, a counterparty to the Transaction, or any third party, unless separately agreed to in a separate engagement letter.
(d) Local Counsel. To the extent that local counsel opinions are required in jurisdictions other than New York and Delaware in connection with the Collateral Properties or other aspects of the Transaction, the Firm will coordinate the engagement and work product of such local counsel on behalf of VHG. However, such local counsel will be separately retained by VHG pursuant to their own engagement agreements, and the Firm shall not be responsible for the legal fees, expenses, or work product of any local counsel engaged in connection with this Transaction.
3. Engagement Team
The following attorneys will constitute the core engagement team for this matter. Each team member has been selected on the basis of his or her experience with leveraged finance transactions, real estate secured lending, and the hospitality industry, and each is available to commence work on the Transaction immediately.
Responsible Partner: Ian Blackwood, Partner, Banking & Finance. Mr. Blackwood will serve as the primary partner responsible for the overall conduct of the Firm's representation of VHG in this matter. He will be the principal client contact for strategic, substantive, and relationship matters and will have ultimate supervisory responsibility for all work product generated by the engagement team. Mr. Blackwood has over twenty-five years of experience in syndicated lending, leveraged finance, and restructuring transactions, including extensive experience in the hospitality and real estate sectors.
Billing Partner: Stephanie Okafor, Partner, Banking & Finance. Ms. Okafor will serve as the billing partner for this engagement and will be responsible for the preparation and issuance of monthly invoices, the administration of the engagement budget, and all billing-related communications with VHG. Ms. Okafor will also provide substantive support on the Transaction as needed.
Lead Associate: Sophie Tremblay, Associate, Banking & Finance. Ms. Tremblay will serve as the day-to-day lead on the Transaction and will have primary responsibility for the drafting and negotiation of the Credit Agreement and ancillary loan documents. Ms. Tremblay will also coordinate internal workflow among the engagement team members and serve as a primary point of contact for Whitfield Gage & Partridge LLP and Meridian Strauss Advisory LLC.
Working Associate: Daniel Obi, Associate, Banking & Finance. Mr. Obi will serve as the supporting associate on the Transaction, with primary responsibility for due diligence, lien and judgment searches, UCC filings, mortgage coordination, preparation of the closing checklist and closing sets, and overall closing logistics.
Tax Specialist: Leonard Cross, Specialist Partner, Tax. Mr. Cross will be responsible for the analysis of the U.S. federal income tax implications of the Refinancing, including OID, AHYDO, and prepayment premium deductibility matters as described in Section 2.3(b) above.
We may, from time to time, assign additional attorneys, paralegals, and support staff to this engagement as the demands of the matter require. Any such additional team members will be assigned at billing rates comparable to those of other attorneys and staff within their respective categories, as set forth in Section 4 below. We will endeavor to ensure continuity and efficiency in our staffing of this matter and to minimize the involvement of individuals who are not familiar with the Transaction.
4. Billing Rates and Fee Arrangements
4.1 Standard Hourly Rates
The Firm's current standard hourly billing rates for the engagement team members assigned to this matter, effective for calendar year 2022, are as follows:
These rates are subject to annual adjustment, which typically takes effect on January 1 of each calendar year. The Firm will provide VHG with advance written notice of any changes to the billing rates applicable to this engagement. Any such adjusted rates will apply to services rendered on or after the effective date of the adjustment.
4.2 Disbursements and Expenses
In addition to professional fees for legal services, VHG will be responsible for the reimbursement of all reasonable out-of-pocket expenses and disbursements incurred by the Firm in connection with this engagement, including without limitation:
(a) Filing fees, including fees for UCC financing statement filings, UCC and judgment lien searches, mortgage recordings, and other governmental filings;
(b) Travel expenses, including airfare, ground transportation, lodging, and meals, incurred by engagement team members in connection with in-person meetings, closings, and site visits related to the Collateral Properties;
(c) Messenger and courier charges, including overnight delivery services;
(d) Database and online research charges, including charges for Westmark Data Systems, Sundial Solutions, Cascade Services Inc., and other electronic research services;
(e) Photocopying, scanning, printing, and document reproduction charges at standard rates; and
(f) Other customary disbursements associated with the conduct of a transaction of this nature.
Third-party costs, including fees payable to title search companies, lien search providers, survey companies, and similar vendors, will be passed through to VHG at cost, without mark-up by the Firm.
4.3 Billing Frequency and Payment Terms
The Firm will issue invoices to VHG on a monthly basis. Each invoice will itemize the professional fees and disbursements incurred during the preceding calendar month, together with a description of the services rendered. Payment is due within thirty (30) days of the date of each invoice. If VHG has any questions or concerns regarding any invoice, we ask that VHG contact Stephanie Okafor promptly so that the matter can be addressed in a timely manner.
4.4 Fee Estimate
Based on our initial review of the Transaction and our experience with comparable senior secured term loan refinancing transactions, including those involving multi-property hospitality collateral portfolios, we currently estimate that total legal fees and closing costs for this engagement will be approximately $3,200,000. This estimate is provided for informational and budgeting purposes only and is not a cap, fixed fee, or guarantee. Actual fees will depend on a number of factors, including:
(a) The complexity and duration of the negotiation of the Credit Agreement and ancillary documents, including the number of rounds of document negotiation between VHG, Crescent Harbor Bank, N.A., and their respective counsel;
(b) The scope and complexity of the mortgage and title work required across the forty-two (42) Collateral Properties, including any title defects, survey issues, or environmental matters that may arise;
(c) The number of Guarantors and jurisdictions involved in the Transaction, and the nature and extent of organizational and corporate authorization deliverables;
(d) The nature and extent of OID, AHYDO, and other tax analysis required in connection with the Refinancing; and
(e) The extent of post-closing work required following the closing of the Transaction.
The Firm does not guarantee that actual fees and expenses will not exceed this estimate. We will keep VHG apprised of the status of fees and expenses throughout the engagement and will promptly advise VHG if it appears that the estimate may be materially exceeded.
4.5 Retainer.  No retainer deposit is required for this engagement.
5. Client Identification and Conflicts
5.1 Identity of the Client
The Firm's client in this engagement is Verimark Hospitality Group Inc. only. The Firm does not, by virtue of this engagement, represent any subsidiary, affiliate, parent, or related entity of VHG, or any officer, director, employee, or shareholder of VHG or any such entity, in his or her individual capacity, except to the extent expressly provided in this Section 5.
To the extent that subsidiaries of VHG (including Verimark Resort Properties LLC, VHG Management Services Inc., Verimark Convention Holdings LLC, Palmetto Beachfront Hotels LLC, and Cascadia Hospitality Corp.) serve as Guarantors under the loan documents for the New Facility, the Firm's representation of such subsidiaries is coextensive with, and limited to, the representation of VHG's interests as Borrower in connection with the Transaction. In the event that the interests of any Guarantor subsidiary diverge from or become adverse to the interests of VHG as Borrower, the Firm will promptly advise VHG, and such subsidiary may be required to retain separate counsel.
5.2 Conflicts Check
The Firm conducted a conflicts-of-interest check on April 5, 2022, in accordance with its standard procedures and the applicable Rules of Professional Conduct. Based on that review, the Firm has confirmed that no conflict of interest exists with respect to VHG, Crescent Harbor Bank, N.A. (in its capacity as Administrative Agent, Collateral Agent, Lead Arranger, and Bookrunner), Greystone Federal Credit Corp. (in its capacity as administrative agent under the Existing Facility), or the identified syndicate lenders and their respective affiliates, that would preclude the Firm from undertaking this engagement.
5.3 Consent to Representation in Unrelated Matters
VHG acknowledges that the Firm is a large, full-service law firm that represents a broad range of clients in diverse matters. The Firm may currently represent, or may in the future represent, other clients in matters unrelated to this Transaction that involve one or more parties to this Transaction, including Crescent Harbor Bank, N.A., any syndicate lender, Greystone Federal Credit Corp., or any of their respective affiliates. By countersigning this engagement letter, VHG consents to such representations by the Firm in unrelated matters, provided that such representations (a) do not involve the same transaction or subject matter as this engagement and (b) are not substantially related to this engagement or adverse to VHG's interests in this engagement. Nothing in this paragraph shall be construed as a waiver of VHG's right to object to any specific future representation that VHG reasonably believes presents an actual conflict of interest.
6. Confidentiality
The Firm will maintain the confidentiality of all information provided by VHG, or obtained by the Firm on VHG's behalf, in connection with this engagement, in accordance with the applicable Rules of Professional Conduct governing the confidentiality of client information. Such information will not be disclosed by the Firm to any third party except:
(a) as required by applicable law, regulation, court order, or valid legal process;
(b) to the extent reasonably necessary for the Firm to perform its duties under this engagement, including the sharing of information with Whitfield Gage & Partridge LLP (lender's counsel), Crescent Harbor Bank, N.A., and the syndicate lenders in the ordinary course of negotiating, documenting, and closing the Transaction, in each case subject to customary confidentiality protections, including the terms of any confidentiality agreement or non-disclosure agreement applicable to the Transaction;
(c) to the extent reasonably necessary to coordinate with Meridian Strauss Advisory LLC, Clearmont & Wharton LLP, or any local counsel retained in connection with the Transaction, subject to customary confidentiality undertakings; or
(d) as expressly authorized by VHG in writing.
The Firm's obligations under this Section 6 are subject to, and supplemented by, the Firm's obligations under the applicable professional responsibility rules in all jurisdictions in which the Firm is admitted to practice, including Rule 1.6 of the New York Rules of Professional Conduct.
7. Document Retention
Following the completion of this engagement, the Firm will retain the client file (including paper and electronic documents) for a period of seven (7) years, in accordance with the Firm's standard document retention policy. After the expiration of such seven-year period, the Firm may destroy or dispose of the file and its contents in accordance with its standard record retention and destruction procedures, without further notice to VHG, unless VHG has, prior to such destruction, requested the return of documents or provided the Firm with alternative instructions regarding the disposition of the file.
Electronic files maintained by the Firm in connection with this engagement will be stored and protected in accordance with the Firm's information security protocols, which include encryption, access controls, and regular security audits. VHG may request a copy of the Firm's current information security policy upon written request to the Billing Partner.
8. Termination of Engagement
Either VHG or the Firm may terminate this engagement at any time upon written notice to the other party. Such notice may be delivered by email, overnight courier, or first-class mail to the addresses set forth in Section 11 below.
In the event that this engagement is terminated by either party, VHG will remain responsible for the payment of all fees, disbursements, and expenses incurred by the Firm through the effective date of termination, in accordance with the terms of Section 4 above. The Firm will issue a final invoice within thirty (30) days following the effective date of termination.
Upon termination, the Firm will take such steps as are reasonably practicable to protect VHG's interests in the Transaction and to facilitate an orderly transition of the matter to successor counsel designated by VHG, including the prompt transfer of all relevant files, documents, and work product to which VHG is entitled. The Firm's obligation to cooperate in such transition shall survive the termination of this engagement.
9. Limitation of Liability
The Firm's aggregate liability to VHG arising out of or relating to this engagement, whether based in contract, tort (including negligence), or otherwise, shall not exceed the total amount of professional fees actually paid by VHG to the Firm under this engagement letter. This limitation of liability shall not apply to claims arising out of the Firm's willful misconduct or gross negligence.
In no event shall the Firm be liable to VHG for any consequential, incidental, indirect, special, exemplary, or punitive damages arising out of or in connection with this engagement, regardless of whether such damages are foreseeable and regardless of whether the Firm has been advised of the possibility of such damages.
10. Governing Law and Dispute Resolution
This engagement letter shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to any choice-of-law or conflict-of-law rules or provisions that would cause the application of the laws of any other jurisdiction.
Any dispute, controversy, or claim arising out of or relating to this engagement letter, or the breach, termination, or validity thereof, shall be resolved by binding arbitration administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules then in effect. The arbitration shall take place in the Borough of Manhattan, New York, New York, before a single arbitrator selected in accordance with the applicable rules. The decision of the arbitrator shall be final and binding upon the parties and may be entered as a judgment in any court of competent jurisdiction. Notwithstanding the foregoing, the parties may, by mutual written agreement, elect to resolve any such dispute by alternative means, including mediation or litigation, in lieu of binding arbitration.
11. Communication and Contact Information
11.1 VHG Contacts
All communications from the Firm to VHG in connection with this engagement should be directed to:
Priya Narayanan, Esq. General Counsel & Corporate Secretary Verimark Hospitality Group Inc. 8200 West Palmetto Park Road, Suite 1500 Boca Raton, FL 33433 Telephone: (561) 220-4400
Email: pnarayanan@verimarkhospitality.com
with a copy to:
Glenn Fischbach Treasurer Verimark Hospitality Group Inc. 8200 West Palmetto Park Road, Suite 1500 Boca Raton, FL 33433 Telephone: (561) 220-4425
Email: gfischbach@verimarkhospitality.com
11.2 Firm Contacts
All communications from VHG to the Firm in connection with this engagement should be directed to:
Ian Blackwood Partner, Banking & Finance (Responsible Partner) Calderwood & Harkness LLP One Liberty Plaza, 52nd Floor New York, NY 10006 Telephone: (212) 554-7150
Email: iblackwood@calderwoodharkness.com
Stephanie Okafor Partner, Banking & Finance (Billing Partner) Calderwood & Harkness LLP One Liberty Plaza, 52nd Floor New York, NY 10006 Telephone: (212) 554-7212
Email: sokafor@calderwoodharkness.com
11.3 Preferred Communication Methods
The parties agree that email and telephone shall be the preferred methods of communication for routine matters relating to the engagement. Sensitive or privileged communications, including draft legal opinions, privileged memoranda, and communications relating to material non-public information concerning VHG, may be transmitted via secure, encrypted channels as agreed between the parties from time to time. The Firm maintains a secure document sharing platform for the exchange of confidential transaction materials, access to which will be provided to authorized representatives of VHG upon request.
12. Acceptance and Execution
If the foregoing terms are acceptable to VHG, we respectfully request that you, on behalf of Verimark Hospitality Group Inc., countersign and return a copy of this engagement letter to the undersigned at your earliest convenience to confirm VHG's agreement to the terms set forth herein. An executed copy may be returned by email (in PDF format) to Ian Blackwood at iblackwood@calderwoodharkness.com, with a hard copy original to follow by mail or courier.
This engagement letter, together with the enclosed Standard Terms of Engagement (Enclosure 1), constitutes the entire agreement between VHG and the Firm with respect to this engagement and supersedes all prior and contemporaneous negotiations, representations, understandings, and agreements, whether oral or written, relating to this subject matter. No amendment or modification of this engagement letter shall be effective unless in writing and signed by both parties.
We look forward to working with you and your team on this important transaction and to delivering the highest quality legal services in connection with the Refinancing.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Ian Blackwood Partner, Banking & Finance
Date: ________
AGREED AND ACCEPTED
The undersigned, on behalf of Verimark Hospitality Group Inc., hereby agrees to and accepts the terms of engagement set forth in this letter, including the enclosed Standard Terms of Engagement incorporated herein by reference.
VERIMARK HOSPITALITY GROUP INC.
By: ________
Priya Narayanan, Esq. General Counsel & Corporate Secretary
Date: April _, 2022
Enclosures:
Enclosure 1: Standard Terms of Engagement (incorporated by reference) Enclosure 2: Engagement Team Contact Information Sheet
cc: Glenn Fischbach, Treasurer, Verimark Hospitality Group Inc. cc: Stephanie Okafor, Partner, Calderwood & Harkness LLP
Category | Rate
Partners (including Ian Blackwood and Stephanie Okafor) | $1,450 per hour
Tax Specialist Partner (Leonard Cross) | $1,550 per hour
Associates (including Sophie Tremblay and Daniel Obi) | $825 per hour

CALDERWOOD & HARKNESS LLP Counselors at Law

CALDERWOOD & HARKNESS LLP

AGREED AND ACCEPTED

VERIMARK HOSPITALITY GROUP INC.

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