Contract analysis

I. Purpose and Executive Summary This memorandum summarizes the results of the review of certificates of insurance provided by Verimark Hospitality Group Inc. ("VHG" or the "Borrower") in connection with the $700,000,000 Senior Secured Term Loan B Credit Agreement dated July 21, 2022 (the "Credit Agreement") among VHG, as Borrower, the Guarantors party thereto, Crescent Harbor Bank, N.A., as Administrative Agent and

II. Background — Insurance Requirements Under the Credit Agreement A. Affirmative Covenant — Insurance

Section 6.07 of the Credit Agreement contains an affirmative covenant requiring VHG and each Guarantor to maintain, at their own expense, insurance with financially sound and reputable insurance companies (rated at least "A-" by A.M. Best Company or an equivalent rating agency) covering their properties and assets against loss or damage of the kinds customarily insured against by companies of similar size and financi

Section 6.07(c) of the Credit Agreement requires that each insurance policy maintained in accordance with the foregoing provisions contain a provision requiring the insurer to give not less than thirty (30) days' advance written notice of cancellation or material modification to the Collateral Agent (with a ten (10) day notice period for cancellation due to nonpayment of premium being customary and acceptable under t

Section 2.05(b)(ii) of the Credit Agreement provides that insurance proceeds relating to a casualty event affecting any property constituting Collateral under the Security Documents shall, subject to certain reinvestment rights set forth therein, constitute mandatory prepayment proceeds and be applied to prepay the Term Loans in accordance with the Credit Agreement's mandatory prepayment waterfall. The Borrower has a

III. Insurance Certificates Reviewed A. Listing of Certificates The following certificates of insurance were reviewed in connection with this memorandum, organized by coverage type and insurer:

1. Property / Casualty (All-Risk) Program — Policy issued by Atlantic Meridian Insurance Company (A.M. Best Rating: A, XV), covering all 74 hotel properties in the VHG portfolio. Business interruption and loss of rental income coverage are included within this program as sub-coverages. Coverage also includes time element coverage and extra expense provisions.

2. General Commercial Liability Policy — Policy issued by Sentinel Indemnity Corporation (A.M. Best Rating: A+, XIV), providing primary commercial general liability coverage for VHG and all subsidiaries across the 74-property portfolio.

3. Umbrella / Excess Liability Policy — Policy issued by Pinnacle Re Insurance Group Ltd. (A.M. Best Rating: A, XV), providing excess liability coverage above the primary general liability, automobile liability, and employers' liability layers.

4. Workers' Compensation Policies — Policies issued by Covenant Mutual Assurance Company (A.M. Best Rating: A-, XII), providing statutory workers' compensation coverage and employers' liability insurance on a state-by-state basis for all 18 states in which VHG and its subsidiaries operate hotel properties.

5. Flood Insurance Policies — A combination of NFIP policies (written through WYO carrier Homestead Flood Insurance Services) and private excess flood insurance issued by Atlantic Meridian Insurance Company, covering properties identified as being located in FEMA-designated SFHAs.

6. Earthquake Insurance — Policy issued by Pacific Seismic Underwriters, Inc. (A.M. Best Rating: A, XI), covering the 5 California hotel properties owned by Verimark Resort Properties LLC.

7. Liquor Liability Coverage — Endorsement to the commercial general liability policy issued by Sentinel Indemnity Corporation, providing liquor liability coverage for all hotel food and beverage operations across the portfolio.

8. Automobile Liability Insurance — Policy issued by Sentinel Indemnity Corporation, covering owned, non-owned, and hired vehicles (reviewed for completeness but not a primary focus of this memorandum). B. Named Insureds We have confirmed that the named insureds on the certificates of insurance include VHG and each of the five Guarantor entities that are party to the Credit Agreement, as follows: • Verimark Hospitali

IV. Coverage Analysis — Compliance with Credit Agreement Requirements A. Property / Casualty (All-Risk) Insurance The all-risk property/casualty insurance program maintained by VHG and its subsidiaries is placed through Atlantic Meridian Insurance Company under Policy No. AMP-VHG-2021-074511. Coverage is written on a blanket, replacement cost basis covering all 74 hotel properties in the VHG portfolio, without deduct

V. Additional Insured / Loss Payee Designations A. Loss Payee Endorsements (Property Policies) We have reviewed the loss payee designations on the certificates of insurance for the property/casualty (all-risk) program, the flood insurance policies, and the earthquake insurance policy. The Credit Agreement requires that Crescent Harbor Bank, N.A., in its capacity as Collateral Agent under the Credit Agreement, be name

VI. Observations, Exceptions, and Recommended Action Items A. Minor Observations Based on our review, we have identified the following minor discrepancies and items requiring follow-up. None of these items constitutes a material deficiency that would, in our view, prevent closing of the Credit Agreement, but each should be addressed in the ordinary course:

1. Loss Payee and Additional Insured Designation — Prior Collateral Agent. The certificates for the all-risk property program (Atlantic Meridian Insurance Company, Policy No. AMP-VHG-2021-074511), the earthquake program (Pacific Seismic Underwriters, Inc., Policy No. PSU-EQ-2021-8834), and two of the NFIP flood policies continue to reflect Greystone Federal Credit Corp. as loss payee and/or additional insured, rather

2. Policy Number Confirmation — Workers' Compensation. The certificate for the workers' compensation policy (Covenant Mutual Assurance Company) references Policy No. CMA-WC-2022-33180, but a supplemental certificate received on July 17, 2022 references a slightly different policy number (CMA-WC-2022-33180-A), which may reflect a state-specific endorsement. We recommend that VHG's insurance broker confirm the correct

3. Named Insured Confirmation — Guarantor Entities. On the commercial general liability certificate and the umbrella/excess liability certificate, the named insured section lists "Verimark Hospitality Group Inc. and all subsidiaries and affiliated entities." While this broad language likely encompasses all five Guarantor subsidiaries, we recommend that the certificates be updated to expressly list each Guarantor enti

4. Effective Date Confirmation — NFIP Policies. Two of the NFIP flood policies covering properties in Texas reflect effective dates of October 15, 2021, with expiration dates of October 15, 2022. The remaining NFIP policies reflect effective dates that are staggered throughout the year. We have confirmed that all NFIP policies are currently in force; however, we recommend that VHG's broker confirm the renewal schedul

1. Updated Mortgagee Endorsements for Newly Recorded Mortgages. The Mortgage is being recorded in twelve (12) states (Florida, New York, California, Texas, Georgia, Colorado, Arizona, Illinois, Washington, Oregon, Nevada, and Virginia) with respect to the 42 mortgaged hotel properties. Following recording of the Mortgages and receipt of recorded copies, updated mortgagee endorsements should be obtained from each insu

2. Coordination with Title Insurance. Replacement title insurance endorsements and mortgagee insurance endorsements for the mortgaged properties should be coordinated with Continental Fidelity Title Company, which is issuing the lender's title insurance policies in connection with the closing. We have been in communication with Continental Fidelity regarding the sequencing of mortgage recording and endorsement delive

3. Final Excess Flood Insurance Endorsements. Updated loss payee endorsements for the excess flood insurance program (Atlantic Meridian Insurance Company) reflecting the Collateral Agent's interest as mortgagee loss payee should be delivered within the post-closing period. C. Recommended Actions Based on the foregoing, we recommend the following actions:

1. Immediate Action — Pre-Closing. VHG should instruct its insurance broker, Hartwell & Associates Insurance Brokerage LLC, to issue updated certificates of insurance reflecting the following changes, to be delivered to Crescent Harbor Bank, N.A. on or before the closing date of July 21, 2022: (a) Crescent Harbor Bank, N.A. (as Collateral Agent under the Credit Agreement) designated as loss payee and mortgagee loss p

2. Post-Closing Action. Updated formal endorsements (as distinguished from certificates of insurance) for the 42 mortgaged properties should be obtained from each insurer and delivered to Crescent Harbor Bank, N.A. within the post-closing period ending August 5, 2022. These endorsements should include: (a) Standard mortgagee clause endorsements (New York Standard Mortgagee Clause or equivalent) for each mortgaged pro

3. Annual Renewal Coordination. Given that the core insurance program renews on October 1, 2022, VHG should coordinate with its insurance broker to ensure that renewed policies are issued with endorsements reflecting the Collateral Agent's interests, and that updated certificates are delivered to the Administrative Agent within thirty (30) days following the renewal date, as required by the Credit Agreement.

VII. Intercreditor Considerations In addition to the $700,000,000 Senior Secured Term Loan B facility being closed under the Credit Agreement, VHG maintains a $400,000,000 Senior Secured Revolving Credit Facility (the "RCF") for which Crescent Harbor Bank, N.A. also serves as Administrative Agent and Collateral Agent. The RCF is governed by the Revolving Credit Agreement dated as of July 21, 2022, among VHG, the Guar

VIII. Conclusion Based on our review of the certificates of insurance provided by VHG, we conclude that VHG's insurance program is substantially compliant with the requirements of Section 6.07 of the Credit Agreement and the related Mortgage and security documents. The insurance program provides comprehensive coverage for the 74-property hotel portfolio across all required coverage categories, with limits, deductible