1021-00008 · Client 1021 · Engagement

kovel-retention-letter-crestline.docx DOCUMENT Litigation

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CALDERWOOD & HARKNESS LLP 200 South Biscayne Boulevard, Suite 4400 Miami, Florida 33131

Telephone: (305) 712-4000 Facsimile: (305) 712-4001 www.calderwoodharkness.com

July 21, 2023

VIA EMAIL AND OVERNIGHT COURIER

Douglas Reinhardt, CPA, CFF Engagement Partner Crestline Forensic Advisory LLC 1330 Avenue of the Americas, 28th Floor New York, NY 10019

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT

Re: Retention of Crestline Forensic Advisory LLC as Forensic Accounting Advisor — Kovel Engagement Crestline Engagement No.: CFA-VHG-2023-0089 C&H Matter No.: 1021-00008

Dear Mr. Reinhardt:

KOVEL ENGAGEMENT LETTER

1. Introduction and Purpose of Engagement

Calderwood & Harkness LLP ("C&H" or the "Firm") writes to confirm the retention of Crestline Forensic Advisory LLC ("Crestline") as forensic accounting advisor to C&H in connection with the matter described below. This letter sets forth the terms and conditions governing Crestline's engagement and the relationship between Crestline and C&H. We ask that you review this letter carefully and, if the terms are acceptable, execute the acknowledgment and agreement on the signature page below and return one fully executed original to this Firm.

This retention is made at the direction of the Audit Committee (the "Audit Committee") of the Board of Directors (the "Board") of Verimark Hospitality Group Inc. ("VHG"), a corporation organized under the laws of the State of Delaware and publicly traded on the Nasdaq Stock Market (ticker symbol: VMRK), with its principal executive offices located at 4100 Bayshore Boulevard, Suite 1200, Tampa, Florida 33611. VHG is a diversified hospitality and leisure company with operations spanning resort management, timeshare development, and branded hotel services across the southeastern United States and the Caribbean.

C&H has been engaged by the Audit Committee, pursuant to a separate engagement letter dated July 17, 2023, executed by Diane Kowalski in her capacity as Chair of the Audit Committee, to conduct an independent internal investigation (the "Investigation") into potential financial irregularities at Verimark Coastal Resorts LLC ("VCR"), a wholly owned Florida limited liability company subsidiary of VHG with its principal office at 7820 Gulf Breeze Parkway, Suite 400, Destin, Florida 32541. VCR operates VHG's timeshare development and sales business along the Gulf Coast of Florida and is a material subsidiary of VHG, accounting for approximately twenty-three percent (23%) of VHG's consolidated revenues in fiscal year 2022.

The Investigation concerns the following matters, which were initially identified through a combination of internal whistleblower reports received by the Audit Committee and preliminary inquiries conducted by VHG's internal audit function:

(1) Premature Revenue Recognition of Timeshare-Interest Deposits. Concerns that VCR recognized revenue from timeshare-interest purchase deposits prior to the expiration of the statutory ten (10)-day rescission period mandated by Florida Statute § 721.10, thereby potentially overstating VCR's reported revenue and, in turn, VHG's consolidated financial results for the affected periods; and

(2) Expense-Reporting Irregularities Involving Potentially Fictitious Vendor Invoices. Concerns that certain vendor invoices submitted for payment within VCR's capital-improvement budgets may be fictitious or otherwise fraudulent, and that payments made pursuant to such invoices may have been diverted to the personal benefit of one or more VCR personnel.

Crestline is being retained to provide forensic accounting analysis and advisory services under the supervision and direction of C&H counsel in connection with the Investigation. The nature, scope, and terms of Crestline's engagement are set forth in detail in this letter.

2. Kovel Doctrine — Privilege Framework

The parties acknowledge and agree that Crestline's engagement is structured as a "Kovel" retention, pursuant to and in accordance with the principles established by the United States Court of Appeals for the Second Circuit in United States v. Kovel, 296 F.2d 918 (2d Cir. 1961), and its progeny. The Kovel doctrine recognizes that the attorney-client privilege may extend to communications involving non-lawyer agents retained by counsel to assist in the provision of legal advice, where the agent's specialized expertise is necessary to enable the attorney to understand and render informed legal advice to the client.

In furtherance of the Kovel framework, the parties agree as follows:

(a) Agency Relationship. Crestline will function as an agent of C&H for the purpose of assisting C&H in rendering legal advice to the Audit Committee of VHG in connection with the Investigation. Crestline's forensic accounting services are essential to C&H's ability to understand the financial and accounting issues at the core of the Investigation and to provide sound and informed legal counsel to the Audit Committee.

(b) Privileged Status of Work Product. All work product, communications, analyses, memoranda, reports (whether in draft or final form), deliverables, notes, working papers, spreadsheets, databases, schedules, charts, exhibits, correspondence, and all other materials prepared by or on behalf of Crestline in connection with this engagement, in whatever medium (collectively, "Crestline Work Product"), shall be treated as protected by the attorney-client privilege and/or the attorney work-product doctrine, to the fullest extent permitted by applicable law.

(c) Privilege Markings. Crestline shall mark all written Crestline Work Product, including all drafts and all electronic files, with the following legend or a substantially similar legend:

"PRIVILEGED AND CONFIDENTIAL — PREPARED AT THE DIRECTION OF COUNSEL — ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT"

(d) No Unauthorized Disclosure. Crestline shall not disclose any Crestline Work Product or any information obtained in connection with this engagement to any third party, whether orally, in writing, or by any other means, without the prior written consent of C&H. This prohibition extends to disclosure in connection with any judicial, administrative, regulatory, or other proceeding, and to disclosure to any governmental authority, regulatory body, law enforcement agency, or private party.

(e) Ownership of Privilege. Crestline acknowledges and agrees that the attorney-client privilege with respect to the Investigation belongs to VHG, acting through its Audit Committee, and not to C&H, Crestline, or any other person or entity. Only VHG, acting through its Audit Committee (or such other authorized body as may succeed the Audit Committee in the exercise of this authority), may waive the attorney-client privilege. Neither C&H nor Crestline has the authority to waive the privilege, and neither party shall take any action that could constitute or be construed as a waiver of the privilege without the express prior written authorization of the Audit Committee.

(f) Restrictions on Direct Communications. Crestline personnel shall not communicate directly with any of the following persons or entities regarding the substance of the Investigation, the scope of Crestline's engagement, or any information obtained in connection with this engagement, without prior written authorization from the C&H engagement team (specifically, Howard Quinn, Partner, or Liam Donahue, Associate):

(i) VHG management (including, without limitation, any officer, director, or employee of VHG other than the Audit Committee members acting in their capacity as such);

(ii) VCR personnel (including, without limitation, any officer, director, employee, contractor, or agent of VCR);

(iii) Hargrove, Steen & Aldrich LLP ("HSA"), VHG's independent registered public accounting firm;

(iv) Westlake Burris & Holt LLP, VHG's outside securities counsel; and

(v) Any other third party, including but not limited to governmental or regulatory authorities, law enforcement agencies, the Nasdaq Stock Market, or any member of the media.

(g) Training and Awareness. Crestline shall ensure that all personnel assigned to this engagement are informed of and understand the Kovel privilege framework, the restrictions on communications set forth in this Section 2, and the importance of maintaining the confidentiality of all information related to the Investigation. Crestline shall conduct an initial briefing for all assigned personnel and shall provide supplemental training if additional personnel are assigned during the course of the engagement.

3. Client Identification

The parties acknowledge and agree that the client in this matter is the Audit Committee of the Board of Directors of VHG, acting in its capacity as an independent committee of the Board. The client is not VHG management, not any individual officer or director of VHG or VCR (whether in his or her individual or official capacity), and not VCR or any other subsidiary or affiliate of VHG. This distinction is critical to the integrity of the Investigation and to the preservation of the applicable privileges.

The current members of the Audit Committee are as follows:

• Diane Kowalski (Chair)

• Reginald Faulkner

• Sandra Yeung

It is important that Crestline understand the following with respect to its relationship to the various parties involved in this matter: Crestline is retained by C&H, not directly by VHG or the Audit Committee. C&H is responsible for directing Crestline's work and for the day-to-day management of the Crestline engagement. C&H is also responsible for compensating Crestline for its services and expenses in accordance with the terms set forth in Section 7 of this letter, from funds provided by VHG at the direction of the Audit Committee. Notwithstanding the foregoing, the source of funding for Crestline's fees and expenses does not create an attorney-client or other professional relationship between Crestline and VHG, and Crestline shall not represent or hold itself out as having been retained by or providing services to VHG directly.

4. Scope of Services

Crestline shall provide the forensic accounting analysis and advisory services described in this Section 4, under the supervision and at the direction of C&H counsel. The scope of services may be adjusted by C&H from time to time as the Investigation progresses, and any material expansion of scope will be confirmed in writing. Crestline shall not undertake any work outside the scope described herein, or as subsequently authorized by C&H, without C&H's prior written approval.

4.1 Revenue-Recognition Analysis

Crestline shall perform a comprehensive forensic analysis of VCR's timeshare-interest sales transactions for the four (4) fiscal quarters beginning with Q3 FY 2022 (the fiscal quarter ending September 30, 2022) and extending through Q2 FY 2023 (the fiscal quarter ending June 30, 2023). This analysis shall encompass, but shall not necessarily be limited to, the following tasks:

(a) Rescission-Period Compliance. Evaluate whether timeshare-interest purchase deposits were prematurely recognized as completed-sale revenue in VCR's books and records prior to the expiration of the statutory ten (10)-day rescission period mandated by Florida Statute § 721.10. This evaluation shall include a transaction-by-transaction analysis, to the extent feasible, of the timing of revenue recognition relative to the date of execution of the purchase agreement and the expiration of the applicable rescission period.

(b) Quantification of Revenue Overstatement. Quantify the aggregate amount of revenue overstatement, if any, attributable to premature recognition of timeshare-interest purchase deposits, presented on a quarter-by-quarter basis for each of the four fiscal quarters within the scope of this engagement.

(c) Impact Assessment — VCR and VHG Financial Statements. Assess the impact of any identified revenue overstatement on VCR's reported revenue (noting that VCR's FY 2022 reported revenue was approximately $438.7 million) and on VHG's consolidated financial statements, including VHG's consolidated revenue (FY 2022: approximately $1.87 billion) and consolidated net income (FY 2022: approximately $142.3 million). This assessment should identify whether any identified overstatement would be material to VHG's consolidated financial statements under applicable accounting standards and SEC materiality guidance.

(d) Property-Level Analysis. Analyze relevant timeshare-interest sales transactions at the following VCR properties, which have been identified as the primary properties of concern based on preliminary information available to C&H:

(i) Coral Dune Resort & Residences, located at 14200 Emerald Coast Parkway, Destin, Florida 32541; and

(ii) Palmetto Bluff Club, located at 3950 Longboat Key Drive, Sarasota, Florida 34228.

(e) ASC 606 Compliance. Evaluate VCR's revenue-recognition practices in connection with timeshare-interest sales for compliance with the Financial Accounting Standards Board's Accounting Standards Codification Topic 606 (Revenue from Contracts with Customers) ("ASC 606"), as applied to timeshare-interest sales, including the specific guidance set forth in ASC 606-10-55-69 through 55-71 regarding the impact of rescission rights on the identification and satisfaction of performance obligations.

(f) Rescission-Rate Analysis. Analyze the actual rescission rates at VCR properties during the investigated period and compare those rates to (i) VCR's historical rescission rates for prior fiscal periods and (ii) industry norms for timeshare-interest rescission rates, as published by the American Resort Development Association (ARDA) or other recognized industry sources. This analysis should address whether any observed deviations from historical or industry norms are indicative of accounting manipulation, changes in sales practices, or other factors.

4.2 Expense-Reimbursement Analysis

Crestline shall perform a comprehensive forensic analysis of VCR's capital-improvement expenditures and vendor payments for the twenty-four (24)-month period from July 1, 2021 through June 30, 2023. This analysis shall encompass, but shall not necessarily be limited to, the following tasks:

(a) Vendor Invoice Analysis. Identify and analyze purchase orders, invoices, payment requisitions, and actual payments to vendors suspected of being fictitious, shell entities, or entities affiliated with VCR personnel (including but not limited to officers, employees, contractors, and family members or associates of such individuals). Crestline shall apply recognized forensic accounting techniques, including but not limited to Benford's Law analysis, duplicate-payment detection, vendor master file analysis, and public records searches, to identify anomalous or suspicious transactions.

(b) Fund-Flow Tracing. Trace the flow of funds from VCR bank accounts through identified vendor entities to the ultimate recipients of such funds, including any subsequent transfers, disbursements, or applications of funds by the vendor entities. This analysis shall encompass a review of bank records, wire-transfer documentation, check images, and such other financial records as may be obtained in connection with the Investigation.

(c) Identification of Personal Expenditures. Identify the nature and character of any personal expenditures funded through suspect vendor payments, including but not limited to expenditures for personal travel, luxury goods, real estate, automobiles, home improvements, or other items of personal benefit to any VCR personnel or their associates.

(d) Documentation Analysis. Analyze the supporting documentation (or the absence thereof) for capital-improvement work purportedly performed by the identified vendors, including an assessment of whether work orders, inspection reports, progress photographs, building permits, contractor licenses, insurance certificates, and other customary documentation exist and are consistent with the nature and scope of the purported work.

4.3 General Forensic Support

In addition to the specific tasks described in Sections 4.1 and 4.2 above, Crestline shall provide the following general forensic accounting support services to C&H in connection with the Investigation:

(a) Witness Interview Support. Assist C&H in preparation for, and analysis related to, interviews of witnesses conducted by C&H counsel, including the preparation of background memoranda, financial summaries, and suggested lines of questioning related to accounting and financial matters. For the avoidance of doubt, all witness interviews will be conducted by C&H counsel; Crestline personnel may attend interviews at the invitation and under the direction of C&H counsel.

(b) Analytical Deliverables. Prepare analytical summaries, charts, schedules, exhibits, timelines, and other illustrative materials as directed by C&H to support C&H's analysis of the issues under investigation and C&H's reporting to the Audit Committee.

(c) Internal Controls Assessment. Provide forensic accounting expertise to support C&H's evaluation of VCR's and VHG's internal controls over financial reporting, including controls relevant to the areas under investigation and controls relevant to management's obligations under Sections 302 and 404 of the Sarbanes-Oxley Act of 2002 ("SOX") and the rules and regulations promulgated thereunder. This assessment shall be designed to assist C&H in advising the Audit Committee on the adequacy of existing controls and any remedial measures that may be warranted.

(d) Other Services. Provide such other forensic accounting services as C&H may reasonably request from time to time within the scope of the Investigation, subject to Crestline's agreement (which shall not be unreasonably withheld) and any necessary adjustments to the fee arrangements set forth in Section 7.

5. Crestline Engagement Team

Crestline shall assign the following professionals to serve as the core members of the Crestline engagement team for this matter:

• Engagement Partner: Douglas Reinhardt, CPA, CFF

• Senior Manager: Priya Venkatesh, CPA

C&H has selected Crestline for this engagement in significant part based on the qualifications, experience, and availability of Mr. Reinhardt and Ms. Venkatesh, who will bear primary responsibility for the day-to-day execution of Crestline's work. Crestline may assign additional professional staff, including senior associates, associates, and analysts, as needed to fulfill the scope of services described in Section 4, subject to prior notification to C&H (specifically, to Liam Donahue) identifying the proposed additional personnel by name, title, and relevant qualifications.

All Crestline personnel assigned to this engagement, including Mr. Reinhardt, Ms. Venkatesh, and any additional personnel subsequently assigned, must execute the Confidentiality Undertaking in the form attached hereto as Exhibit A prior to commencing any work on this engagement or receiving any information related to the Investigation. Crestline shall deliver fully executed copies of each Confidentiality Undertaking to C&H promptly upon execution and in any event before the individual commences work.

Crestline shall not substitute the Engagement Partner (Mr. Reinhardt) or the Senior Manager (Ms. Venkatesh) without the prior written consent of C&H, which consent may be withheld in C&H's sole discretion. In the event that either Mr. Reinhardt or Ms. Venkatesh becomes unavailable due to illness, departure from Crestline, or other unforeseen circumstances, Crestline shall promptly notify C&H and shall propose a replacement of comparable qualifications and experience for C&H's approval.

6. C&H Engagement Team / Points of Contact

The C&H professionals responsible for this matter are as follows:

• Responsible Partner: Howard Quinn

• Billing Partner: Conrad Ashby

• Lead Associate: Liam Donahue

• Working Associate: Steven Hollander

Day-to-day direction of Crestline's work will be provided primarily by Howard Quinn and Liam Donahue. Crestline should direct substantive questions, requests for authorization, and status updates to Mr. Quinn or Mr. Donahue. Mr. Quinn may be reached at (305) 712-4112 or hquinn@calderwoodharkness.com; Mr. Donahue may be reached at (305) 712-4287 or ldonahue@calderwoodharkness.com.

All Crestline deliverables, including but not limited to draft and final reports, analytical summaries, memoranda, charts, schedules, and exhibits, shall be submitted in draft form to Liam Donahue for review and comment before finalization. No Crestline Work Product shall be treated as final or distributed to any person outside of the C&H engagement team without the express approval of Howard Quinn.

7. Fees and Billing Arrangements

7.1 Flat Fee

Crestline shall perform the services described in Section 4 of this letter for a flat fee of $1,150,000 (one million one hundred fifty thousand dollars) (the "Flat Fee"). The Flat Fee covers all professional time expended by Crestline personnel on this engagement up to a maximum of 4,500 professional hours across all Crestline personnel assigned to the engagement, regardless of the billing rates that would otherwise be applicable to such personnel. The Flat Fee represents a negotiated amount that reflects the anticipated scope and complexity of the engagement, the experience and qualifications of the Crestline engagement team, and the anticipated duration of the engagement.

7.2 Overage Provisions

In the event that the engagement requires professional hours in excess of 4,500 hours, Crestline shall comply with the following procedures:

(a) Advance Notice. Crestline shall notify C&H promptly, in writing, upon reaching 4,000 professional hours on the engagement and shall provide, concurrently with such notice, a written estimate of the anticipated number of overage hours and the reasons therefor.

(b) Blended Overage Rate. Professional hours incurred in excess of 4,500 hours shall be billed at a blended rate of $375 per hour, regardless of the seniority or standard billing rate of the personnel performing the work.

(c) Prior Written Approval. C&H must approve any overage hours in writing before Crestline incurs them. Crestline shall not perform work in excess of 4,500 hours without such prior written approval, and C&H shall have no obligation to pay for overage hours that were not approved in advance.

(d) Periodic Updates. Throughout the engagement, Crestline shall provide C&H with monthly summaries of hours expended to date, broken down by task category (i.e., revenue-recognition analysis, expense-reimbursement analysis, and general forensic support), to facilitate C&H's monitoring of progress toward the 4,500-hour threshold.

7.3 Expenses. Reasonable out-of-pocket expenses incurred by Crestline in connection with this engagement, including but not limited to travel, lodging, meals, ground transportation, copying, printing, data processing, database access, courier, and delivery charges, shall be reimbursed by C&H at cost, without markup, subject to compliance with C&H's standard expense guidelines, a copy of which will be provided to Crestline under separate cover. The following specific provisions shall apply:

(a) All air travel shall be at coach or economy class for flights under four (4) hours in duration; business class may be used for flights of four (4) hours or longer with prior approval from C&H.

(b) Hotel accommodations shall be at moderately priced hotels consistent with the locale; nightly rates in excess of $350 require prior approval from C&H.

(c) Any individual expense item in excess of $5,000 requires prior written approval from C&H before it is incurred. For purposes of this provision, related expenses (e.g., multiple nights of lodging at the same hotel during a single trip) shall be aggregated.

7.4 Invoicing and Payment

Crestline shall submit monthly invoices to C&H in arrears, covering services rendered and expenses incurred during the preceding calendar month. Each invoice shall contain sufficient detail to permit C&H's review and approval, including a summary of hours expended by personnel category, a description of the tasks performed (in a manner consistent with the preservation of applicable privileges), and an itemized list of expenses with supporting receipts for individual items in excess of $100.

Invoices shall be payable within thirty (30) days of C&H's receipt of a complete and properly submitted invoice. Late payments shall bear interest at the rate of one percent (1.0%) per month, or the maximum rate permitted by applicable law, whichever is less.

All invoices shall be directed to:

Conrad Ashby, Billing Partner Calderwood & Harkness LLP 200 South Biscayne Boulevard, Suite 4400 Miami, FL 33131 cashby@calderwoodharkness.com

Each invoice shall reference both C&H Matter No. 1021-00008 and Crestline Engagement No. CFA-VHG-2023-0089.

C&H shall arrange for payment of all amounts due to Crestline from funds provided by VHG at the direction of the Audit Committee. Notwithstanding the source of such funds, C&H shall remain responsible for all payment obligations to Crestline under this engagement letter.

8. Document Handling and Data Security

The Investigation will involve the collection, review, and analysis of substantial volumes of documents, data, and electronically stored information ("ESI"), much of which may be sensitive, proprietary, or subject to legal privilege. Crestline acknowledges the critical importance of maintaining the security and integrity of such materials and agrees to comply with the following requirements:

(a) Secure Maintenance. Crestline shall maintain all documents, data, and ESI received from or through C&H, or obtained by Crestline in the course of performing services under this engagement, in a secure manner consistent with industry best practices for forensic accounting engagements, including but not limited to the use of encrypted storage, access controls limited to authorized personnel, secure transmission protocols (e.g., encrypted email, secure file transfer), and physical security measures for hardcopy documents.

(b) No Unauthorized Removal. Crestline shall not remove documents or data from secure storage, copy documents or data to unsecured media or locations, or transmit documents or data through unsecured channels, without C&H's prior written authorization.

(c) Document-Preservation Obligations. Crestline shall comply with all document-preservation obligations applicable to this engagement as communicated by C&H from time to time, including but not limited to any litigation hold or preservation directive issued by C&H. Crestline shall not destroy, delete, alter, or dispose of any documents, data, or ESI related to this engagement without C&H's prior written authorization.

(d) Return or Destruction Upon Conclusion. Upon the conclusion or termination of this engagement, Crestline shall, as directed by C&H, either (i) return all documents, data, and ESI (including all copies, whether in hardcopy or electronic form) to C&H, or (ii) destroy all such materials in a secure manner, and in either case shall certify compliance in writing, in a form satisfactory to C&H, within thirty (30) days of C&H's direction. Crestline may retain one archival copy of its work papers solely for professional regulatory compliance purposes, provided that such archival copy remains subject to the confidentiality and privilege protections set forth in this letter.

(e) Coordination with E-discovery Vendor. Crestline acknowledges that certain data and ESI may be subject to collection, processing, and review by Triton discovery Solutions Inc. ("Triton"), located at 500 Seventh Avenue, 14th Floor, New York, New York 10018, which has been retained by C&H as the e-discovery vendor for the Investigation. Crestline shall coordinate with Triton as directed by C&H with respect to the exchange of data, the use of shared review platforms, and the implementation of search and analytical protocols. All communications between Crestline and Triton regarding the substance of the Investigation shall be conducted under the supervision and at the direction of C&H.

9. Confidentiality Obligations

All information provided to Crestline in connection with this engagement, whether provided by C&H, by VHG (through C&H), or obtained by Crestline in the course of performing services hereunder, including without limitation all financial data, accounting records, business information, strategic plans, employee information, legal analyses, investigation findings, and Crestline Work Product (collectively, "Confidential Information"), is confidential and proprietary. Crestline agrees to the following confidentiality obligations:

(a) Crestline shall not disclose any Confidential Information to any person or entity other than C&H without C&H's prior written consent. This prohibition extends to disclosure regarding the existence of this engagement, the scope of the Investigation, and the substance of any findings or analyses.

(b) Crestline shall limit access to Confidential Information within its own organization to those personnel who (i) have been assigned to this engagement, (ii) have executed the Confidentiality Undertaking attached as Exhibit A, and (iii) have a need to know the information in order to perform their assigned tasks.

(c) These confidentiality obligations shall survive the termination or expiration of this engagement, regardless of the reason for termination, and shall remain in full force and effect until such time as C&H notifies Crestline in writing that the obligations have been released.

(d) In the event that Crestline or any Crestline personnel receives a subpoena, court order, governmental investigation demand, regulatory request, or other legal process requiring or purporting to require disclosure of Confidential Information or information related to this engagement, Crestline shall: (i) promptly notify C&H of the receipt of such process, and in no event later than forty-eight (48) hours after receipt; (ii) provide C&H with a copy of the process and any related correspondence; (iii) cooperate fully with C&H in seeking appropriate protective relief, including but not limited to motions to quash or for a protective order; and (iv) not produce or disclose any Confidential Information in response to such process without first providing C&H a reasonable opportunity to seek protective relief and to consult with the Audit Committee.

10. Independence and Conflicts

Crestline represents and warrants to C&H as follows:

(a) Crestline has conducted a thorough conflicts check in accordance with its standard policies and procedures with respect to the following entities and individuals: VHG and its subsidiaries and affiliates (including VCR); each member of VHG's Board of Directors; each named executive officer of VHG and VCR; HSA; Westlake Burris & Holt LLP; and any individual identified to Crestline by C&H as a subject of the Investigation.

(b) Based on the results of such conflicts check, neither Crestline nor any member of its engagement team has any current client relationship, business relationship, financial interest, or personal relationship with any of the foregoing entities or individuals that would impair or reasonably appear to impair Crestline's objectivity, independence, or ability to provide unbiased forensic accounting analysis and advisory services in connection with this engagement.

(c) Crestline confirms that it has no current engagement or pending engagement proposal with HSA, VHG's independent registered public accounting firm, and that no member of the Crestline engagement team has been employed by HSA within the past three (3) years.

(d) Crestline shall promptly notify C&H if any conflict of interest or potential conflict of interest arises during the course of this engagement, whether due to changes in Crestline's client base, personnel changes, or any other circumstances. C&H shall have the right, in its sole discretion, to determine whether any such conflict is waivable and, if not waivable, to terminate this engagement in accordance with Section 12.

11. Limitations on Testimony and Expert Retention

Crestline is retained under this engagement letter as a consulting forensic accounting advisor, and not as a testifying expert. The distinction between consulting and testifying roles is critical to the preservation of the privilege protections described in Section 2. Accordingly, the parties agree as follows:

(a) Crestline shall not provide testimony, whether by deposition, at trial, at hearing, or in any other judicial, administrative, regulatory, or arbitral proceeding relating to or arising out of this engagement, without the prior written consent of both C&H and the Audit Committee.

(b) Crestline shall not issue any report, opinion, or other written communication intended for use as, or that could reasonably be construed as, expert testimony or an expert report under Federal Rule of Civil Procedure 26(a)(2) or any analogous state or federal rule, without the prior written consent of C&H and the Audit Committee.

(c) If at any point during the Investigation C&H determines that testifying expert services are required in connection with any proceeding related to the matters under investigation, the parties will discuss in good faith whether Crestline or a separate firm should serve in the testifying expert capacity, recognizing that designation of Crestline or any Crestline personnel as a testifying expert may materially affect the privilege protections applicable to Crestline Work Product and to communications between Crestline and C&H. C&H reserves the right, in its sole discretion and in consultation with the Audit Committee, to retain a separate firm for testifying expert purposes.

12. Term and Termination

This engagement shall commence on the date of Crestline's countersignature below (the "Effective Date") and shall continue until the earliest to occur of the following:

(a) completion of all services described in this letter, as determined by mutual agreement of the parties;

(b) written notice of termination delivered by C&H to Crestline, which may be given by C&H at any time, with or without cause, upon not less than five (5) business days' prior written notice; or

Upon termination of this engagement for any reason, Crestline shall be entitled to payment for services rendered and expenses incurred through the date of termination, subject to and in accordance with the fee provisions set forth in Section 7. In the event of termination prior to completion of the engagement, the Flat Fee shall be pro-rated based on the ratio of professional hours expended through the date of termination to the total anticipated hours (4,500 hours), provided that in no event shall the pro-rated amount be less than the sum of hours actually expended multiplied by the blended rate of $375 per hour.

The following provisions of this engagement letter shall survive the termination or expiration of this engagement and shall remain in full force and effect: Section 2 (Kovel Doctrine — Privilege Framework); Section 8 (Document Handling and Data Security); Section 9 (Confidentiality Obligations); and Section 11 (Limitations on Testimony and Expert Retention). The survival of these provisions is essential to the protection of the privileges and confidences at the core of this engagement, and Crestline acknowledges that a breach of any surviving obligation could cause irreparable harm for which monetary damages would be an inadequate remedy.

13. No Third-Party Beneficiaries

This engagement letter is entered into solely for the benefit of C&H and Crestline. No third party, including without limitation VHG, the Audit Committee, any member of the Board, any officer or employee of VHG or VCR, HSA, Westlake Burris & Holt LLP, or any other person or entity, is an intended third-party beneficiary of this letter, and no such third party shall have any rights, claims, or causes of action hereunder. Nothing in this letter shall be construed to create any duty, obligation, or liability of Crestline to any third party, or to confer upon any third party any right to enforce any provision of this letter.

14. Governing Law

This engagement letter shall be governed by and construed in accordance with the laws of the State of New York, without regard to its conflict-of-laws principles. Any dispute arising out of or relating to this engagement letter or the services provided hereunder shall be subject to the exclusive jurisdiction of the state and federal courts located in the Borough of Manhattan, City and State of New York, and each party hereby consents to the personal jurisdiction of such courts and waives any objection based on forum non conveniens or any other basis.

15. Entire Agreement / Amendments

This letter, together with Exhibit A (Form of Confidentiality Undertaking) attached hereto and incorporated herein by reference, constitutes the entire agreement between C&H and Crestline with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, discussions, negotiations, representations, and understandings, whether oral or written, relating to the subject matter hereof.

No amendment, modification, supplement, or waiver of any provision of this engagement letter shall be effective unless set forth in a writing signed by authorized representatives of both C&H and Crestline. No failure or delay by either party in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy.

16. Counterparts and Electronic Signatures

This engagement letter may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Execution and delivery of this letter by facsimile, PDF, or other electronic transmission shall be deemed to be, and shall have the same legal effect as, execution and delivery of an original signed copy.

We appreciate the opportunity to work with Crestline on this important matter and look forward to a productive and collaborative engagement. Please do not hesitate to contact me or Liam Donahue if you have any questions regarding the terms of this letter.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Name: Howard Quinn

Title: Partner

Date: ________

ACKNOWLEDGED AND AGREED:

CRESTLINE FORENSIC ADVISORY LLC

By: ________

Name: Douglas Reinhardt, CPA, CFF

Title: Engagement Partner

Date: ________

EXHIBIT A

FORM OF CONFIDENTIALITY UNDERTAKING

Individual Confidentiality Undertaking In Connection with the Kovel Engagement of Crestline Forensic Advisory LLC by Calderwood & Harkness LLP C&H Matter No. 1021-00008 / Crestline Engagement No. CFA-VHG-2023-0089

PRIVILEGED AND CONFIDENTIAL — PREPARED AT THE DIRECTION OF COUNSEL — ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT

I, the undersigned, am a professional employed by or affiliated with Crestline Forensic Advisory LLC ("Crestline") and have been assigned to work on the engagement described in the Engagement Letter dated July 21, 2023 (the "Engagement Letter") between Calderwood & Harkness LLP ("C&H") and Crestline, relating to the internal investigation being conducted by C&H at the direction of the Audit Committee of the Board of Directors of Verimark Hospitality Group Inc. ("VHG") (the "Investigation").

In consideration of my assignment to this engagement, and as a condition of my access to information related to the Investigation, I hereby acknowledge, agree, and undertake as follows:

1. Kovel Privilege Framework. I acknowledge that Crestline has been retained by C&H as a forensic accounting advisor under the Kovel privilege framework, as described in Section 2 of the Engagement Letter. I understand that all work performed by Crestline in connection with this engagement is conducted under the supervision and at the direction of C&H counsel for the purpose of assisting C&H in rendering legal advice to the Audit Committee of VHG. I understand that communications and work product related to this engagement are intended to be protected by the attorney-client privilege and/or the attorney work-product doctrine, and that the maintenance of such protections depends in part on the conduct of each individual assigned to the engagement.

2. Privilege Markings. I acknowledge my obligation to mark all written work product that I prepare or contribute to in connection with this engagement, including all drafts, notes, working papers, memoranda, analyses, schedules, spreadsheets, charts, exhibits, electronic files, and correspondence, with the following legend or a substantially similar legend:

"PRIVILEGED AND CONFIDENTIAL — PREPARED AT THE DIRECTION OF COUNSEL — ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT"

I will apply this legend to all such materials, whether in hardcopy or electronic form, at the time of creation, and will not distribute or transmit any such materials without the legend.

3. Prohibition on Unauthorized Disclosure. I acknowledge and agree that I shall not disclose any information related to this engagement, including without limitation the existence, scope, or substance of the Investigation, any Crestline Work Product, any documents or data received from or through C&H, or any information obtained through witness interviews or document review, to any person or entity other than authorized members of the C&H and Crestline engagement teams. This prohibition extends to:

(a) VHG management, VCR personnel, and any officer, director, or employee of VHG or its subsidiaries (other than communications authorized by C&H);

(b) Hargrove, Steen & Aldrich LLP, Westlake Burris & Holt LLP, or any other outside advisor of VHG;

(d) Any member of the media, any analyst, any investor, or any member of the public;

(e) Any colleague at Crestline who has not been assigned to this engagement and who has not executed this Confidentiality Undertaking; and

(f) Any family member, friend, or personal associate.

I understand that any unauthorized disclosure could result in the waiver of applicable privileges, could cause irreparable harm to VHG and the Audit Committee, and could expose both Crestline and me personally to legal liability.

4. Compliance with Engagement Letter. I have read and understand the terms of the Engagement Letter, including without limitation the provisions relating to the Kovel privilege framework (Section 2), document handling and data security (Section 8), confidentiality obligations (Section 9), and limitations on testimony (Section 11). I agree to comply fully with all such provisions in the performance of my duties on this engagement.

5. Survival. I acknowledge that my obligations under this Confidentiality Undertaking shall survive the termination or expiration of the engagement and my departure from Crestline, and shall remain in full force and effect unless and until C&H notifies Crestline in writing that such obligations have been released.

6. Notification of Compelled Disclosure. In the event that I receive a subpoena, court order, or other legal process requiring or purporting to require disclosure of information related to this engagement, I shall immediately notify my supervisor at Crestline and shall not produce or disclose any information until Crestline and C&H have had a reasonable opportunity to seek appropriate protective relief.

IN WITNESS WHEREOF, I have executed this Confidentiality Undertaking as of the date set forth below.

Signature: ________

Printed Name: ________

Title: ________

Date: ________

Please return the executed original of this Confidentiality Undertaking to Liam Donahue, Calderwood & Harkness LLP, 200 South Biscayne Boulevard, Suite 4400, Miami, FL 33131 (ldonahue@calderwoodharkness.com).

CALDERWOOD & HARKNESS LLP 200 South Biscayne Boulevard, Suite 4400 Miami, Florida 33131
Telephone: (305) 712-4000 Facsimile: (305) 712-4001 www.calderwoodharkness.com
July 21, 2023
VIA EMAIL AND OVERNIGHT COURIER
Douglas Reinhardt, CPA, CFF Engagement Partner Crestline Forensic Advisory LLC 1330 Avenue of the Americas, 28th Floor New York, NY 10019
PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT
Re: Retention of Crestline Forensic Advisory LLC as Forensic Accounting Advisor — Kovel Engagement Crestline Engagement No.: CFA-VHG-2023-0089 C&H Matter No.: 1021-00008
Dear Mr. Reinhardt:
KOVEL ENGAGEMENT LETTER
1. Introduction and Purpose of Engagement
Calderwood & Harkness LLP ("C&H" or the "Firm") writes to confirm the retention of Crestline Forensic Advisory LLC ("Crestline") as forensic accounting advisor to C&H in connection with the matter described below. This letter sets forth the terms and conditions governing Crestline's engagement and the relationship between Crestline and C&H. We ask that you review this letter carefully and, if the terms are acceptable, execute the acknowledgment and agreement on the signature page below and return one fully executed original to this Firm.
This retention is made at the direction of the Audit Committee (the "Audit Committee") of the Board of Directors (the "Board") of Verimark Hospitality Group Inc. ("VHG"), a corporation organized under the laws of the State of Delaware and publicly traded on the Nasdaq Stock Market (ticker symbol: VMRK), with its principal executive offices located at 4100 Bayshore Boulevard, Suite 1200, Tampa, Florida 33611. VHG is a diversified hospitality and leisure company with operations spanning resort management, timeshare development, and branded hotel services across the southeastern United States and the Caribbean.
C&H has been engaged by the Audit Committee, pursuant to a separate engagement letter dated July 17, 2023, executed by Diane Kowalski in her capacity as Chair of the Audit Committee, to conduct an independent internal investigation (the "Investigation") into potential financial irregularities at Verimark Coastal Resorts LLC ("VCR"), a wholly owned Florida limited liability company subsidiary of VHG with its principal office at 7820 Gulf Breeze Parkway, Suite 400, Destin, Florida 32541. VCR operates VHG's timeshare development and sales business along the Gulf Coast of Florida and is a material subsidiary of VHG, accounting for approximately twenty-three percent (23%) of VHG's consolidated revenues in fiscal year 2022.
The Investigation concerns the following matters, which were initially identified through a combination of internal whistleblower reports received by the Audit Committee and preliminary inquiries conducted by VHG's internal audit function:
(1) Premature Revenue Recognition of Timeshare-Interest Deposits. Concerns that VCR recognized revenue from timeshare-interest purchase deposits prior to the expiration of the statutory ten (10)-day rescission period mandated by Florida Statute § 721.10, thereby potentially overstating VCR's reported revenue and, in turn, VHG's consolidated financial results for the affected periods; and
(2) Expense-Reporting Irregularities Involving Potentially Fictitious Vendor Invoices. Concerns that certain vendor invoices submitted for payment within VCR's capital-improvement budgets may be fictitious or otherwise fraudulent, and that payments made pursuant to such invoices may have been diverted to the personal benefit of one or more VCR personnel.
Crestline is being retained to provide forensic accounting analysis and advisory services under the supervision and direction of C&H counsel in connection with the Investigation. The nature, scope, and terms of Crestline's engagement are set forth in detail in this letter.
2. Kovel Doctrine — Privilege Framework
The parties acknowledge and agree that Crestline's engagement is structured as a "Kovel" retention, pursuant to and in accordance with the principles established by the United States Court of Appeals for the Second Circuit in United States v. Kovel, 296 F.2d 918 (2d Cir. 1961), and its progeny. The Kovel doctrine recognizes that the attorney-client privilege may extend to communications involving non-lawyer agents retained by counsel to assist in the provision of legal advice, where the agent's specialized expertise is necessary to enable the attorney to understand and render informed legal advice to the client.
In furtherance of the Kovel framework, the parties agree as follows:
(a) Agency Relationship. Crestline will function as an agent of C&H for the purpose of assisting C&H in rendering legal advice to the Audit Committee of VHG in connection with the Investigation. Crestline's forensic accounting services are essential to C&H's ability to understand the financial and accounting issues at the core of the Investigation and to provide sound and informed legal counsel to the Audit Committee.
(b) Privileged Status of Work Product. All work product, communications, analyses, memoranda, reports (whether in draft or final form), deliverables, notes, working papers, spreadsheets, databases, schedules, charts, exhibits, correspondence, and all other materials prepared by or on behalf of Crestline in connection with this engagement, in whatever medium (collectively, "Crestline Work Product"), shall be treated as protected by the attorney-client privilege and/or the attorney work-product doctrine, to the fullest extent permitted by applicable law.
(c) Privilege Markings. Crestline shall mark all written Crestline Work Product, including all drafts and all electronic files, with the following legend or a substantially similar legend:
"PRIVILEGED AND CONFIDENTIAL — PREPARED AT THE DIRECTION OF COUNSEL — ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT"
(d) No Unauthorized Disclosure. Crestline shall not disclose any Crestline Work Product or any information obtained in connection with this engagement to any third party, whether orally, in writing, or by any other means, without the prior written consent of C&H. This prohibition extends to disclosure in connection with any judicial, administrative, regulatory, or other proceeding, and to disclosure to any governmental authority, regulatory body, law enforcement agency, or private party.
(e) Ownership of Privilege. Crestline acknowledges and agrees that the attorney-client privilege with respect to the Investigation belongs to VHG, acting through its Audit Committee, and not to C&H, Crestline, or any other person or entity. Only VHG, acting through its Audit Committee (or such other authorized body as may succeed the Audit Committee in the exercise of this authority), may waive the attorney-client privilege. Neither C&H nor Crestline has the authority to waive the privilege, and neither party shall take any action that could constitute or be construed as a waiver of the privilege without the express prior written authorization of the Audit Committee.
(f) Restrictions on Direct Communications. Crestline personnel shall not communicate directly with any of the following persons or entities regarding the substance of the Investigation, the scope of Crestline's engagement, or any information obtained in connection with this engagement, without prior written authorization from the C&H engagement team (specifically, Howard Quinn, Partner, or Liam Donahue, Associate):
(i) VHG management (including, without limitation, any officer, director, or employee of VHG other than the Audit Committee members acting in their capacity as such);
(ii) VCR personnel (including, without limitation, any officer, director, employee, contractor, or agent of VCR);
(iii) Hargrove, Steen & Aldrich LLP ("HSA"), VHG's independent registered public accounting firm;
(iv) Westlake Burris & Holt LLP, VHG's outside securities counsel; and
(v) Any other third party, including but not limited to governmental or regulatory authorities, law enforcement agencies, the Nasdaq Stock Market, or any member of the media.
(g) Training and Awareness. Crestline shall ensure that all personnel assigned to this engagement are informed of and understand the Kovel privilege framework, the restrictions on communications set forth in this Section 2, and the importance of maintaining the confidentiality of all information related to the Investigation. Crestline shall conduct an initial briefing for all assigned personnel and shall provide supplemental training if additional personnel are assigned during the course of the engagement.
3. Client Identification
The parties acknowledge and agree that the client in this matter is the Audit Committee of the Board of Directors of VHG, acting in its capacity as an independent committee of the Board. The client is not VHG management, not any individual officer or director of VHG or VCR (whether in his or her individual or official capacity), and not VCR or any other subsidiary or affiliate of VHG. This distinction is critical to the integrity of the Investigation and to the preservation of the applicable privileges.
The current members of the Audit Committee are as follows:
•  Diane Kowalski (Chair)
•  Reginald Faulkner
•  Sandra Yeung
It is important that Crestline understand the following with respect to its relationship to the various parties involved in this matter: Crestline is retained by C&H, not directly by VHG or the Audit Committee. C&H is responsible for directing Crestline's work and for the day-to-day management of the Crestline engagement. C&H is also responsible for compensating Crestline for its services and expenses in accordance with the terms set forth in Section 7 of this letter, from funds provided by VHG at the direction of the Audit Committee. Notwithstanding the foregoing, the source of funding for Crestline's fees and expenses does not create an attorney-client or other professional relationship between Crestline and VHG, and Crestline shall not represent or hold itself out as having been retained by or providing services to VHG directly.
4. Scope of Services
Crestline shall provide the forensic accounting analysis and advisory services described in this Section 4, under the supervision and at the direction of C&H counsel. The scope of services may be adjusted by C&H from time to time as the Investigation progresses, and any material expansion of scope will be confirmed in writing. Crestline shall not undertake any work outside the scope described herein, or as subsequently authorized by C&H, without C&H's prior written approval.
4.1 Revenue-Recognition Analysis
Crestline shall perform a comprehensive forensic analysis of VCR's timeshare-interest sales transactions for the four (4) fiscal quarters beginning with Q3 FY 2022 (the fiscal quarter ending September 30, 2022) and extending through Q2 FY 2023 (the fiscal quarter ending June 30, 2023). This analysis shall encompass, but shall not necessarily be limited to, the following tasks:
(a) Rescission-Period Compliance. Evaluate whether timeshare-interest purchase deposits were prematurely recognized as completed-sale revenue in VCR's books and records prior to the expiration of the statutory ten (10)-day rescission period mandated by Florida Statute § 721.10. This evaluation shall include a transaction-by-transaction analysis, to the extent feasible, of the timing of revenue recognition relative to the date of execution of the purchase agreement and the expiration of the applicable rescission period.
(b) Quantification of Revenue Overstatement. Quantify the aggregate amount of revenue overstatement, if any, attributable to premature recognition of timeshare-interest purchase deposits, presented on a quarter-by-quarter basis for each of the four fiscal quarters within the scope of this engagement.
(c) Impact Assessment — VCR and VHG Financial Statements. Assess the impact of any identified revenue overstatement on VCR's reported revenue (noting that VCR's FY 2022 reported revenue was approximately $438.7 million) and on VHG's consolidated financial statements, including VHG's consolidated revenue (FY 2022: approximately $1.87 billion) and consolidated net income (FY 2022: approximately $142.3 million). This assessment should identify whether any identified overstatement would be material to VHG's consolidated financial statements under applicable accounting standards and SEC materiality guidance.
(d) Property-Level Analysis. Analyze relevant timeshare-interest sales transactions at the following VCR properties, which have been identified as the primary properties of concern based on preliminary information available to C&H:
(i) Coral Dune Resort & Residences, located at 14200 Emerald Coast Parkway, Destin, Florida 32541; and
(ii) Palmetto Bluff Club, located at 3950 Longboat Key Drive, Sarasota, Florida 34228.
(e) ASC 606 Compliance. Evaluate VCR's revenue-recognition practices in connection with timeshare-interest sales for compliance with the Financial Accounting Standards Board's Accounting Standards Codification Topic 606 (Revenue from Contracts with Customers) ("ASC 606"), as applied to timeshare-interest sales, including the specific guidance set forth in ASC 606-10-55-69 through 55-71 regarding the impact of rescission rights on the identification and satisfaction of performance obligations.
(f) Rescission-Rate Analysis. Analyze the actual rescission rates at VCR properties during the investigated period and compare those rates to (i) VCR's historical rescission rates for prior fiscal periods and (ii) industry norms for timeshare-interest rescission rates, as published by the American Resort Development Association (ARDA) or other recognized industry sources. This analysis should address whether any observed deviations from historical or industry norms are indicative of accounting manipulation, changes in sales practices, or other factors.
4.2 Expense-Reimbursement Analysis
Crestline shall perform a comprehensive forensic analysis of VCR's capital-improvement expenditures and vendor payments for the twenty-four (24)-month period from July 1, 2021 through June 30, 2023. This analysis shall encompass, but shall not necessarily be limited to, the following tasks:
(a) Vendor Invoice Analysis. Identify and analyze purchase orders, invoices, payment requisitions, and actual payments to vendors suspected of being fictitious, shell entities, or entities affiliated with VCR personnel (including but not limited to officers, employees, contractors, and family members or associates of such individuals). Crestline shall apply recognized forensic accounting techniques, including but not limited to Benford's Law analysis, duplicate-payment detection, vendor master file analysis, and public records searches, to identify anomalous or suspicious transactions.
(b) Fund-Flow Tracing. Trace the flow of funds from VCR bank accounts through identified vendor entities to the ultimate recipients of such funds, including any subsequent transfers, disbursements, or applications of funds by the vendor entities. This analysis shall encompass a review of bank records, wire-transfer documentation, check images, and such other financial records as may be obtained in connection with the Investigation.
(c) Identification of Personal Expenditures. Identify the nature and character of any personal expenditures funded through suspect vendor payments, including but not limited to expenditures for personal travel, luxury goods, real estate, automobiles, home improvements, or other items of personal benefit to any VCR personnel or their associates.
(d) Documentation Analysis. Analyze the supporting documentation (or the absence thereof) for capital-improvement work purportedly performed by the identified vendors, including an assessment of whether work orders, inspection reports, progress photographs, building permits, contractor licenses, insurance certificates, and other customary documentation exist and are consistent with the nature and scope of the purported work.
4.3 General Forensic Support
In addition to the specific tasks described in Sections 4.1 and 4.2 above, Crestline shall provide the following general forensic accounting support services to C&H in connection with the Investigation:
(a) Witness Interview Support. Assist C&H in preparation for, and analysis related to, interviews of witnesses conducted by C&H counsel, including the preparation of background memoranda, financial summaries, and suggested lines of questioning related to accounting and financial matters. For the avoidance of doubt, all witness interviews will be conducted by C&H counsel; Crestline personnel may attend interviews at the invitation and under the direction of C&H counsel.
(b) Analytical Deliverables. Prepare analytical summaries, charts, schedules, exhibits, timelines, and other illustrative materials as directed by C&H to support C&H's analysis of the issues under investigation and C&H's reporting to the Audit Committee.
(c) Internal Controls Assessment. Provide forensic accounting expertise to support C&H's evaluation of VCR's and VHG's internal controls over financial reporting, including controls relevant to the areas under investigation and controls relevant to management's obligations under Sections 302 and 404 of the Sarbanes-Oxley Act of 2002 ("SOX") and the rules and regulations promulgated thereunder. This assessment shall be designed to assist C&H in advising the Audit Committee on the adequacy of existing controls and any remedial measures that may be warranted.
(d) Other Services. Provide such other forensic accounting services as C&H may reasonably request from time to time within the scope of the Investigation, subject to Crestline's agreement (which shall not be unreasonably withheld) and any necessary adjustments to the fee arrangements set forth in Section 7.
5. Crestline Engagement Team
Crestline shall assign the following professionals to serve as the core members of the Crestline engagement team for this matter:
•  Engagement Partner: Douglas Reinhardt, CPA, CFF
•  Senior Manager: Priya Venkatesh, CPA
C&H has selected Crestline for this engagement in significant part based on the qualifications, experience, and availability of Mr. Reinhardt and Ms. Venkatesh, who will bear primary responsibility for the day-to-day execution of Crestline's work. Crestline may assign additional professional staff, including senior associates, associates, and analysts, as needed to fulfill the scope of services described in Section 4, subject to prior notification to C&H (specifically, to Liam Donahue) identifying the proposed additional personnel by name, title, and relevant qualifications.
All Crestline personnel assigned to this engagement, including Mr. Reinhardt, Ms. Venkatesh, and any additional personnel subsequently assigned, must execute the Confidentiality Undertaking in the form attached hereto as Exhibit A prior to commencing any work on this engagement or receiving any information related to the Investigation. Crestline shall deliver fully executed copies of each Confidentiality Undertaking to C&H promptly upon execution and in any event before the individual commences work.
Crestline shall not substitute the Engagement Partner (Mr. Reinhardt) or the Senior Manager (Ms. Venkatesh) without the prior written consent of C&H, which consent may be withheld in C&H's sole discretion. In the event that either Mr. Reinhardt or Ms. Venkatesh becomes unavailable due to illness, departure from Crestline, or other unforeseen circumstances, Crestline shall promptly notify C&H and shall propose a replacement of comparable qualifications and experience for C&H's approval.
6. C&H Engagement Team / Points of Contact
The C&H professionals responsible for this matter are as follows:
•  Responsible Partner: Howard Quinn
•  Billing Partner: Conrad Ashby
•  Lead Associate: Liam Donahue
•  Working Associate: Steven Hollander
Day-to-day direction of Crestline's work will be provided primarily by Howard Quinn and Liam Donahue. Crestline should direct substantive questions, requests for authorization, and status updates to Mr. Quinn or Mr. Donahue. Mr. Quinn may be reached at (305) 712-4112 or hquinn@calderwoodharkness.com; Mr. Donahue may be reached at (305) 712-4287 or ldonahue@calderwoodharkness.com.
All Crestline deliverables, including but not limited to draft and final reports, analytical summaries, memoranda, charts, schedules, and exhibits, shall be submitted in draft form to Liam Donahue for review and comment before finalization. No Crestline Work Product shall be treated as final or distributed to any person outside of the C&H engagement team without the express approval of Howard Quinn.
7. Fees and Billing Arrangements
7.1 Flat Fee
Crestline shall perform the services described in Section 4 of this letter for a flat fee of $1,150,000 (one million one hundred fifty thousand dollars) (the "Flat Fee"). The Flat Fee covers all professional time expended by Crestline personnel on this engagement up to a maximum of 4,500 professional hours across all Crestline personnel assigned to the engagement, regardless of the billing rates that would otherwise be applicable to such personnel. The Flat Fee represents a negotiated amount that reflects the anticipated scope and complexity of the engagement, the experience and qualifications of the Crestline engagement team, and the anticipated duration of the engagement.
7.2 Overage Provisions
In the event that the engagement requires professional hours in excess of 4,500 hours, Crestline shall comply with the following procedures:
(a) Advance Notice. Crestline shall notify C&H promptly, in writing, upon reaching 4,000 professional hours on the engagement and shall provide, concurrently with such notice, a written estimate of the anticipated number of overage hours and the reasons therefor.
(b) Blended Overage Rate. Professional hours incurred in excess of 4,500 hours shall be billed at a blended rate of $375 per hour, regardless of the seniority or standard billing rate of the personnel performing the work.
(c) Prior Written Approval. C&H must approve any overage hours in writing before Crestline incurs them. Crestline shall not perform work in excess of 4,500 hours without such prior written approval, and C&H shall have no obligation to pay for overage hours that were not approved in advance.
(d) Periodic Updates. Throughout the engagement, Crestline shall provide C&H with monthly summaries of hours expended to date, broken down by task category (i.e., revenue-recognition analysis, expense-reimbursement analysis, and general forensic support), to facilitate C&H's monitoring of progress toward the 4,500-hour threshold.
7.3 Expenses.  Reasonable out-of-pocket expenses incurred by Crestline in connection with this engagement, including but not limited to travel, lodging, meals, ground transportation, copying, printing, data processing, database access, courier, and delivery charges, shall be reimbursed by C&H at cost, without markup, subject to compliance with C&H's standard expense guidelines, a copy of which will be provided to Crestline under separate cover. The following specific provisions shall apply:
(a) All air travel shall be at coach or economy class for flights under four (4) hours in duration; business class may be used for flights of four (4) hours or longer with prior approval from C&H.
(b) Hotel accommodations shall be at moderately priced hotels consistent with the locale; nightly rates in excess of $350 require prior approval from C&H.
(c) Any individual expense item in excess of $5,000 requires prior written approval from C&H before it is incurred. For purposes of this provision, related expenses (e.g., multiple nights of lodging at the same hotel during a single trip) shall be aggregated.
7.4 Invoicing and Payment
Crestline shall submit monthly invoices to C&H in arrears, covering services rendered and expenses incurred during the preceding calendar month. Each invoice shall contain sufficient detail to permit C&H's review and approval, including a summary of hours expended by personnel category, a description of the tasks performed (in a manner consistent with the preservation of applicable privileges), and an itemized list of expenses with supporting receipts for individual items in excess of $100.
Invoices shall be payable within thirty (30) days of C&H's receipt of a complete and properly submitted invoice. Late payments shall bear interest at the rate of one percent (1.0%) per month, or the maximum rate permitted by applicable law, whichever is less.
All invoices shall be directed to:
Conrad Ashby, Billing Partner Calderwood & Harkness LLP 200 South Biscayne Boulevard, Suite 4400 Miami, FL 33131 cashby@calderwoodharkness.com
Each invoice shall reference both C&H Matter No. 1021-00008 and Crestline Engagement No. CFA-VHG-2023-0089.
C&H shall arrange for payment of all amounts due to Crestline from funds provided by VHG at the direction of the Audit Committee. Notwithstanding the source of such funds, C&H shall remain responsible for all payment obligations to Crestline under this engagement letter.
8. Document Handling and Data Security
The Investigation will involve the collection, review, and analysis of substantial volumes of documents, data, and electronically stored information ("ESI"), much of which may be sensitive, proprietary, or subject to legal privilege. Crestline acknowledges the critical importance of maintaining the security and integrity of such materials and agrees to comply with the following requirements:
(a) Secure Maintenance. Crestline shall maintain all documents, data, and ESI received from or through C&H, or obtained by Crestline in the course of performing services under this engagement, in a secure manner consistent with industry best practices for forensic accounting engagements, including but not limited to the use of encrypted storage, access controls limited to authorized personnel, secure transmission protocols (e.g., encrypted email, secure file transfer), and physical security measures for hardcopy documents.
(b) No Unauthorized Removal. Crestline shall not remove documents or data from secure storage, copy documents or data to unsecured media or locations, or transmit documents or data through unsecured channels, without C&H's prior written authorization.
(c) Document-Preservation Obligations. Crestline shall comply with all document-preservation obligations applicable to this engagement as communicated by C&H from time to time, including but not limited to any litigation hold or preservation directive issued by C&H. Crestline shall not destroy, delete, alter, or dispose of any documents, data, or ESI related to this engagement without C&H's prior written authorization.
(d) Return or Destruction Upon Conclusion. Upon the conclusion or termination of this engagement, Crestline shall, as directed by C&H, either (i) return all documents, data, and ESI (including all copies, whether in hardcopy or electronic form) to C&H, or (ii) destroy all such materials in a secure manner, and in either case shall certify compliance in writing, in a form satisfactory to C&H, within thirty (30) days of C&H's direction. Crestline may retain one archival copy of its work papers solely for professional regulatory compliance purposes, provided that such archival copy remains subject to the confidentiality and privilege protections set forth in this letter.
(e) Coordination with E-discovery Vendor. Crestline acknowledges that certain data and ESI may be subject to collection, processing, and review by Triton discovery Solutions Inc. ("Triton"), located at 500 Seventh Avenue, 14th Floor, New York, New York 10018, which has been retained by C&H as the e-discovery vendor for the Investigation. Crestline shall coordinate with Triton as directed by C&H with respect to the exchange of data, the use of shared review platforms, and the implementation of search and analytical protocols. All communications between Crestline and Triton regarding the substance of the Investigation shall be conducted under the supervision and at the direction of C&H.
9. Confidentiality Obligations
All information provided to Crestline in connection with this engagement, whether provided by C&H, by VHG (through C&H), or obtained by Crestline in the course of performing services hereunder, including without limitation all financial data, accounting records, business information, strategic plans, employee information, legal analyses, investigation findings, and Crestline Work Product (collectively, "Confidential Information"), is confidential and proprietary. Crestline agrees to the following confidentiality obligations:
(a) Crestline shall not disclose any Confidential Information to any person or entity other than C&H without C&H's prior written consent. This prohibition extends to disclosure regarding the existence of this engagement, the scope of the Investigation, and the substance of any findings or analyses.
(b) Crestline shall limit access to Confidential Information within its own organization to those personnel who (i) have been assigned to this engagement, (ii) have executed the Confidentiality Undertaking attached as Exhibit A, and (iii) have a need to know the information in order to perform their assigned tasks.
(c) These confidentiality obligations shall survive the termination or expiration of this engagement, regardless of the reason for termination, and shall remain in full force and effect until such time as C&H notifies Crestline in writing that the obligations have been released.
(d) In the event that Crestline or any Crestline personnel receives a subpoena, court order, governmental investigation demand, regulatory request, or other legal process requiring or purporting to require disclosure of Confidential Information or information related to this engagement, Crestline shall: (i) promptly notify C&H of the receipt of such process, and in no event later than forty-eight (48) hours after receipt; (ii) provide C&H with a copy of the process and any related correspondence; (iii) cooperate fully with C&H in seeking appropriate protective relief, including but not limited to motions to quash or for a protective order; and (iv) not produce or disclose any Confidential Information in response to such process without first providing C&H a reasonable opportunity to seek protective relief and to consult with the Audit Committee.
10. Independence and Conflicts
Crestline represents and warrants to C&H as follows:
(a) Crestline has conducted a thorough conflicts check in accordance with its standard policies and procedures with respect to the following entities and individuals: VHG and its subsidiaries and affiliates (including VCR); each member of VHG's Board of Directors; each named executive officer of VHG and VCR; HSA; Westlake Burris & Holt LLP; and any individual identified to Crestline by C&H as a subject of the Investigation.
(b) Based on the results of such conflicts check, neither Crestline nor any member of its engagement team has any current client relationship, business relationship, financial interest, or personal relationship with any of the foregoing entities or individuals that would impair or reasonably appear to impair Crestline's objectivity, independence, or ability to provide unbiased forensic accounting analysis and advisory services in connection with this engagement.
(c) Crestline confirms that it has no current engagement or pending engagement proposal with HSA, VHG's independent registered public accounting firm, and that no member of the Crestline engagement team has been employed by HSA within the past three (3) years.
(d) Crestline shall promptly notify C&H if any conflict of interest or potential conflict of interest arises during the course of this engagement, whether due to changes in Crestline's client base, personnel changes, or any other circumstances. C&H shall have the right, in its sole discretion, to determine whether any such conflict is waivable and, if not waivable, to terminate this engagement in accordance with Section 12.
11. Limitations on Testimony and Expert Retention
Crestline is retained under this engagement letter as a consulting forensic accounting advisor, and not as a testifying expert. The distinction between consulting and testifying roles is critical to the preservation of the privilege protections described in Section 2. Accordingly, the parties agree as follows:
(a) Crestline shall not provide testimony, whether by deposition, at trial, at hearing, or in any other judicial, administrative, regulatory, or arbitral proceeding relating to or arising out of this engagement, without the prior written consent of both C&H and the Audit Committee.
(b) Crestline shall not issue any report, opinion, or other written communication intended for use as, or that could reasonably be construed as, expert testimony or an expert report under Federal Rule of Civil Procedure 26(a)(2) or any analogous state or federal rule, without the prior written consent of C&H and the Audit Committee.
(c) If at any point during the Investigation C&H determines that testifying expert services are required in connection with any proceeding related to the matters under investigation, the parties will discuss in good faith whether Crestline or a separate firm should serve in the testifying expert capacity, recognizing that designation of Crestline or any Crestline personnel as a testifying expert may materially affect the privilege protections applicable to Crestline Work Product and to communications between Crestline and C&H. C&H reserves the right, in its sole discretion and in consultation with the Audit Committee, to retain a separate firm for testifying expert purposes.
12. Term and Termination
This engagement shall commence on the date of Crestline's countersignature below (the "Effective Date") and shall continue until the earliest to occur of the following:
(a) completion of all services described in this letter, as determined by mutual agreement of the parties;
(b) written notice of termination delivered by C&H to Crestline, which may be given by C&H at any time, with or without cause, upon not less than five (5) business days' prior written notice; or
(c) mutual written agreement of C&H and Crestline to terminate the engagement.
Upon termination of this engagement for any reason, Crestline shall be entitled to payment for services rendered and expenses incurred through the date of termination, subject to and in accordance with the fee provisions set forth in Section 7. In the event of termination prior to completion of the engagement, the Flat Fee shall be pro-rated based on the ratio of professional hours expended through the date of termination to the total anticipated hours (4,500 hours), provided that in no event shall the pro-rated amount be less than the sum of hours actually expended multiplied by the blended rate of $375 per hour.
The following provisions of this engagement letter shall survive the termination or expiration of this engagement and shall remain in full force and effect: Section 2 (Kovel Doctrine — Privilege Framework); Section 8 (Document Handling and Data Security); Section 9 (Confidentiality Obligations); and Section 11 (Limitations on Testimony and Expert Retention). The survival of these provisions is essential to the protection of the privileges and confidences at the core of this engagement, and Crestline acknowledges that a breach of any surviving obligation could cause irreparable harm for which monetary damages would be an inadequate remedy.
13. No Third-Party Beneficiaries
This engagement letter is entered into solely for the benefit of C&H and Crestline. No third party, including without limitation VHG, the Audit Committee, any member of the Board, any officer or employee of VHG or VCR, HSA, Westlake Burris & Holt LLP, or any other person or entity, is an intended third-party beneficiary of this letter, and no such third party shall have any rights, claims, or causes of action hereunder. Nothing in this letter shall be construed to create any duty, obligation, or liability of Crestline to any third party, or to confer upon any third party any right to enforce any provision of this letter.
14. Governing Law
This engagement letter shall be governed by and construed in accordance with the laws of the State of New York, without regard to its conflict-of-laws principles. Any dispute arising out of or relating to this engagement letter or the services provided hereunder shall be subject to the exclusive jurisdiction of the state and federal courts located in the Borough of Manhattan, City and State of New York, and each party hereby consents to the personal jurisdiction of such courts and waives any objection based on forum non conveniens or any other basis.
15. Entire Agreement / Amendments
This letter, together with Exhibit A (Form of Confidentiality Undertaking) attached hereto and incorporated herein by reference, constitutes the entire agreement between C&H and Crestline with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, discussions, negotiations, representations, and understandings, whether oral or written, relating to the subject matter hereof.
No amendment, modification, supplement, or waiver of any provision of this engagement letter shall be effective unless set forth in a writing signed by authorized representatives of both C&H and Crestline. No failure or delay by either party in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy.
16. Counterparts and Electronic Signatures
This engagement letter may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Execution and delivery of this letter by facsimile, PDF, or other electronic transmission shall be deemed to be, and shall have the same legal effect as, execution and delivery of an original signed copy.
We appreciate the opportunity to work with Crestline on this important matter and look forward to a productive and collaborative engagement. Please do not hesitate to contact me or Liam Donahue if you have any questions regarding the terms of this letter.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Name: Howard Quinn
Title: Partner
Date: ________
ACKNOWLEDGED AND AGREED:
CRESTLINE FORENSIC ADVISORY LLC
By: ________
Name: Douglas Reinhardt, CPA, CFF
Title: Engagement Partner
Date: ________
EXHIBIT A
FORM OF CONFIDENTIALITY UNDERTAKING
Individual Confidentiality Undertaking In Connection with the Kovel Engagement of Crestline Forensic Advisory LLC by Calderwood & Harkness LLP C&H Matter No. 1021-00008 / Crestline Engagement No. CFA-VHG-2023-0089
PRIVILEGED AND CONFIDENTIAL — PREPARED AT THE DIRECTION OF COUNSEL — ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT
I, the undersigned, am a professional employed by or affiliated with Crestline Forensic Advisory LLC ("Crestline") and have been assigned to work on the engagement described in the Engagement Letter dated July 21, 2023 (the "Engagement Letter") between Calderwood & Harkness LLP ("C&H") and Crestline, relating to the internal investigation being conducted by C&H at the direction of the Audit Committee of the Board of Directors of Verimark Hospitality Group Inc. ("VHG") (the "Investigation").
In consideration of my assignment to this engagement, and as a condition of my access to information related to the Investigation, I hereby acknowledge, agree, and undertake as follows:
1. Kovel Privilege Framework. I acknowledge that Crestline has been retained by C&H as a forensic accounting advisor under the Kovel privilege framework, as described in Section 2 of the Engagement Letter. I understand that all work performed by Crestline in connection with this engagement is conducted under the supervision and at the direction of C&H counsel for the purpose of assisting C&H in rendering legal advice to the Audit Committee of VHG. I understand that communications and work product related to this engagement are intended to be protected by the attorney-client privilege and/or the attorney work-product doctrine, and that the maintenance of such protections depends in part on the conduct of each individual assigned to the engagement.
2. Privilege Markings. I acknowledge my obligation to mark all written work product that I prepare or contribute to in connection with this engagement, including all drafts, notes, working papers, memoranda, analyses, schedules, spreadsheets, charts, exhibits, electronic files, and correspondence, with the following legend or a substantially similar legend:
"PRIVILEGED AND CONFIDENTIAL — PREPARED AT THE DIRECTION OF COUNSEL — ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT"
I will apply this legend to all such materials, whether in hardcopy or electronic form, at the time of creation, and will not distribute or transmit any such materials without the legend.
3. Prohibition on Unauthorized Disclosure. I acknowledge and agree that I shall not disclose any information related to this engagement, including without limitation the existence, scope, or substance of the Investigation, any Crestline Work Product, any documents or data received from or through C&H, or any information obtained through witness interviews or document review, to any person or entity other than authorized members of the C&H and Crestline engagement teams. This prohibition extends to:
(a) VHG management, VCR personnel, and any officer, director, or employee of VHG or its subsidiaries (other than communications authorized by C&H);
(b) Hargrove, Steen & Aldrich LLP, Westlake Burris & Holt LLP, or any other outside advisor of VHG;
(c) Any governmental authority, regulatory body, law enforcement agency, or self-regulatory organization;
(d) Any member of the media, any analyst, any investor, or any member of the public;
(e) Any colleague at Crestline who has not been assigned to this engagement and who has not executed this Confidentiality Undertaking; and
(f) Any family member, friend, or personal associate.
I understand that any unauthorized disclosure could result in the waiver of applicable privileges, could cause irreparable harm to VHG and the Audit Committee, and could expose both Crestline and me personally to legal liability.
4. Compliance with Engagement Letter. I have read and understand the terms of the Engagement Letter, including without limitation the provisions relating to the Kovel privilege framework (Section 2), document handling and data security (Section 8), confidentiality obligations (Section 9), and limitations on testimony (Section 11). I agree to comply fully with all such provisions in the performance of my duties on this engagement.
5. Survival. I acknowledge that my obligations under this Confidentiality Undertaking shall survive the termination or expiration of the engagement and my departure from Crestline, and shall remain in full force and effect unless and until C&H notifies Crestline in writing that such obligations have been released.
6. Notification of Compelled Disclosure. In the event that I receive a subpoena, court order, or other legal process requiring or purporting to require disclosure of information related to this engagement, I shall immediately notify my supervisor at Crestline and shall not produce or disclose any information until Crestline and C&H have had a reasonable opportunity to seek appropriate protective relief.
IN WITNESS WHEREOF, I have executed this Confidentiality Undertaking as of the date set forth below.
Signature: ________
Printed Name: ________
Title: ________
Date: ________
Please return the executed original of this Confidentiality Undertaking to Liam Donahue, Calderwood & Harkness LLP, 200 South Biscayne Boulevard, Suite 4400, Miami, FL 33131 (ldonahue@calderwoodharkness.com).

CALDERWOOD & HARKNESS LLP 200 South Biscayne Boulevard, Suite 4400 Miami, Florida 33131

VIA EMAIL AND OVERNIGHT COURIER

KOVEL ENGAGEMENT LETTER

CALDERWOOD & HARKNESS LLP

ACKNOWLEDGED AND AGREED:

CRESTLINE FORENSIC ADVISORY LLC

EXHIBIT A

FORM OF CONFIDENTIALITY UNDERTAKING

Record

Parties

Dates

Amounts