Contract analysis

From: Sophie Tremblay <stremblay@calderwoodharkness.com> To: Megan Yeung <myeung@whitfieldgage.com> Cc: Ian Blackwood <iblackwood@calderwoodharkness.com> Date: Mon, 16 May 2022 10:30:00 -0000 Subject: Verimark Hospitality Group — $700M Term Loan B Refinancing — Credit Agreement First Draft and MFN/Repricing Discussion

I hope you had a good weekend. Please find attached the first draft of the Credit Agreement (dated May 16, 2022) for the Verimark Hospitality Group, Inc. $700,000,000 Term Loan B refinancing.

The draft reflects the term sheet as agreed in the revised second draft dated May 6, 2022, including the following key economic terms:

- **Interest Rate**: Adjusted Term SOFR (CME Term SOFR + 0.10% credit spread adjustment for 1-month tenor) + 375 bps applicable margin, with a 0.50% SOFR floor - **Amortization**: 1.00% per annum, payable quarterly - **Maturity**: 7 years (July 21, 2029) - **Financial Covenant**: Springing maximum total net leverage ratio of 4.50x

As you know, the new $700M facility will be used to refinance VHG's existing $625,000,000 Term Loan B held by Greystone Federal Credit Corp., with the approximately $75,000,000 in incremental proceeds available for VHG's acquisition pipeline and general corporate purposes. For context, pro forma net leverage at closing is approximately 2.52x, well within the 4.50x covenant threshold. VHG Board authorization for the r

I want to flag two provisions in particular where we anticipate the parties' positions will diverge from the preliminary term sheet discussions and will require substantive negotiation:

1. **Most Favored Nation Provision (Article II, Section 2.14(e))**: Our draft reflects VHG's position of an 18-month sunset period from closing with a 50 basis point threshold. As drafted, the MFN applies only to pari passu incremental term loans incurred under the incremental facility — it does not apply to the existing $400,000,000 revolving credit facility or any junior or unsecured indebtedness (including the $24

2. **Repricing Protection (Article II, Section 2.11(b))**: Our draft reflects a 6-month soft call period at a 1.00% prepayment premium, applicable to any prepayment or repricing of the Term Loan B at a lower effective yield within 6 months of closing.

These two provisions will be the focus of our issues list, which I plan to circulate later this week.

- The borrower is Verimark Hospitality Group, Inc., a Delaware corporation listed on the NYSE (ticker: VMRK). - The Credit Agreement is governed by New York law, with jurisdiction in the Supreme Court of the State of New York, County of New York, and the United States District Court for the Southern District of New York. The mutual jury trial waiver is set forth in Section 10.10.

We would appreciate it if WGP could review and return comments within two weeks, with particular focus on the MFN and repricing provisions. We are happy to schedule a call to walk through the draft in advance of your markup if that would be helpful.

Sophie Tremblay Calderwood Harkness LLP Direct: (212) 555-4138 stremblay@calderwoodharkness.com

From: Sophie Tremblay To: Megan Yeung Cc: Ian Blackwood ; Harrison Whitfield III ; Priya Narayanan Date: Friday, May 20, 2022, 2:15 PM EDT Subject: RE: Verimark Hospitality Group — $700M Term Loan B Refinancing — Credit Agreement First Draft and MFN/Repricing Discussion

Following up on the first draft circulated on Monday, please find attached Calderwood Harkness's issues list and summary of open points dated May 20, 2022, focused on the MFN and repricing protection provisions.

1. **MFN Sunset Period**: C&H/VHG position is 18 months from closing. Awaiting WGP/Crescent Harbor's counter-proposal.

2. **MFN Threshold**: C&H/VHG position is 50 basis points. Awaiting counter-proposal.

3. **Definition of "All-In Yield"**: The yield calculation methodology for MFN comparison purposes remains to be agreed. The key question is whether the definition should include only the applicable margin and original issue discount (amortized over an assumed life), or whether it should also capture the SOFR floor differential and/or upfront fees paid to lenders.

4. **Repricing Protection Duration**: C&H/VHG position is 6 months from closing. Both sides appear to agree on the 1.00% premium level, but the duration is open.

5. **MFN Scope — Interaction with Incremental Facility**: Our draft applies the MFN only to pari passu incremental term loans. We want to confirm whether WGP/Crescent Harbor takes the position that the MFN should apply to all incremental tranches or only to those that are pari passu with the initial Term Loan B.

As noted in the draft, VHG's new facility uses Adjusted Term SOFR (CME Term SOFR + 0.10% credit spread adjustment for the 1-month tenor). Because the existing facility was LIBOR-based, the yield comparison under the MFN provision needs to account for benchmark consistency — the issues list addresses this in further detail at Item 3.

Could you confirm WGP's anticipated timeline for returning a marked draft of the Credit Agreement? We are targeting a call the week of June 6 to discuss open points, if that works on your end.

Sophie Tremblay Calderwood Harkness LLP Direct: (212) 555-4138 stremblay@calderwoodharkness.com

From: Megan Yeung To: Sophie Tremblay Cc: Harrison Whitfield III ; Ian Blackwood Date: Friday, May 27, 2022, 11:05 AM EDT Subject: RE: Verimark Hospitality Group — $700M Term Loan B Refinancing — Credit Agreement First Draft and MFN/Repricing Discussion

Thank you for the issues list. I can confirm that the commitment letter was executed earlier this morning, and the fee letter has been finalized — $3,500,000 arrangement fee, $7,000,000 OID (reflecting the 1.00% discount on the $700M facility), and $150,000 annual administrative agent fee.

Turning to the MFN and repricing provisions:

**MFN Sunset and Threshold**: Crescent Harbor's position, per Ted Marchetti, is a 24-month sunset period from closing with a 25 basis point threshold. Ted's rationale is that CLO and institutional lenders in the anticipated syndicate will require robust MFN protection in the current rate environment, particularly given the ongoing LIBOR-to-SOFR transition and the attendant uncertainty around spread adjustments. A 24-

**Repricing Protection**: Crescent Harbor proposes a 12-month soft call period at a 1.00% premium. The arrangers need to protect lender economics during the initial syndication and the secondary trading period that follows — a 6-month window, in Crescent Harbor's view, is too short to provide adequate protection, especially given the current pace of repricing activity in the leveraged loan market.

**Marked Draft**: WGP's marked-up draft of the Credit Agreement will follow on Monday, May 30. We have focused our markup on the MFN and repricing provisions, though we have also included comments on several other provisions which we can address separately.

**Scope of MFN**: On the question of MFN scope, we are aligned that the MFN should apply to pari passu incremental term loans only. No dispute there.

We are available the week of June 6 for a call. Harrison's schedule is most open on Tuesday and Wednesday afternoons. Please confirm what works on your side.

Megan Yeung Whitfield, Gage & Proulx LLP Direct: (212) 555-7291 myeung@whitfieldgage.com

From: Ian Blackwood To: Priya Narayanan Cc: Sophie Tremblay Date: Thursday, June 2, 2022, 4:12 PM EDT Subject: RE: Verimark Hospitality — MFN and Repricing — Status Update

Wanted to update you on the state of negotiations following our issues list (May 20) and the subsequent exchanges with WGP.

As expected, Crescent Harbor's opening positions are above-market:

- **MFN Sunset**: 24 months from closing. Our market survey of recent comparable hospitality Term Loan B transactions (which Sophie is compiling into a formal comparison memo) shows a median MFN sunset of 12–18 months for credits rated BB-/Ba3. Twenty-four months is at the outer edge and typically reserved for lower-rated or more stressed credits.

- **MFN Threshold**: 25 basis points. A 25 bps threshold would mean that virtually any incremental term loan incurred at even a modestly higher spread would trigger an automatic upward adjustment to the initial TLB margin. This effectively limits VHG's flexibility to incur incremental debt at any meaningfully different pricing, which undercuts the commercial purpose of the incremental facility basket. The market stan

- **Repricing Protection**: 12 months at 1.00% premium. The median soft call period in recent comparable deals is 6 months. Given that VHG is already achieving a 50 bps spread reduction in this refinancing (from LIBOR + 425 bps to SOFR + 375 bps on an adjusted basis), a 12-month lockout is excessive and inconsistent with the borrower's need to preserve repricing optionality.

Our recommended counter-positions, which we discussed briefly with you and Glenn last week, are:

- **MFN Sunset**: 18 months (a measured concession from our starting preference of 12 months, intended to reflect the constructive relationship with Crescent Harbor) - **MFN Threshold**: 50 bps (firm) - **Repricing Protection**: 6 months at 1.00% (firm)

These are well-supported by the negotiation strategy memo we prepared on May 10, which anticipated Crescent Harbor's likely opening positions.

One additional point worth flagging: the interaction between the MFN and the incremental facility basket. If the threshold is only 25 bps, it effectively creates a de facto pricing constraint on VHG's ability to access the incremental facility for future acquisitions — which is precisely the flexibility VHG needs to execute on its pipeline.

Can you confirm VHG's preferred positions on all three items so that Sophie and I can prepare and circulate the second revised draft? We are targeting circulation by June 8 to stay on track for the June 6 syndication launch.

Ian Blackwood Partner Calderwood Harkness LLP Direct: (212) 555-3802 iblackwood@calderwoodharkness.com

From: Priya Narayanan To: Ian Blackwood ; Sophie Tremblay Cc: Glenn Fischbach Date: Friday, June 3, 2022, 9:48 AM EDT Subject: RE: Verimark Hospitality — MFN and Repricing — Client Direction

Thank you for the detailed update. I discussed this with Renata Haines and Glenn Fischbach yesterday, and we are aligned on the following positions:

**MFN Sunset**: 18 months maximum. As you know, VHG anticipates potentially needing to incur incremental term loans in early 2024 to fund our acquisition pipeline. The $75M in incremental proceeds from this refinancing is a first step, but we have several potential targets in the select-service and extended-stay segments that may require additional financing in the $100–$200M range. An 18-month sunset (expiring in Ja

**MFN Threshold**: 50 bps minimum. We do not want the initial TLB margin automatically ratcheted upward if market conditions shift modestly. A 25 bps threshold is far too tight — it would effectively penalize us for any pricing adjustment, however minor.

**Repricing Protection**: 6 months is the outer limit. We want to preserve the ability to reprice further if spreads continue to tighten in the second half of 2022. Renata feels strongly about this — the 50 bps savings we're capturing in this refinancing is a good start, but we don't want to be locked out of further optimization.

For additional support, Elise Cavanaugh at Meridian Strauss Advisory has confirmed that the proposed 18-month sunset and 50 bps threshold are within market range based on recent comparable transactions. She can provide a written summary if that would be useful in discussions with WGP.

Please push firmly on all three points. We are comfortable with 1.00% as the premium level for the soft call — that part is not in dispute.

Priya Narayanan Deputy General Counsel Verimark Hospitality Group, Inc. Direct: (646) 555-2017 pnarayanan@verimark.com

From: Sophie Tremblay To: Megan Yeung Cc: Ian Blackwood ; Harrison Whitfield III ; Priya Narayanan Date: Wednesday, June 8, 2022, 6:15 PM EDT Subject: RE: Verimark Hospitality — MFN Sunset and Repricing Protection — Second C&H Revised Draft

Attached please find the second Calderwood Harkness revised draft of the Credit Agreement, dated June 8, 2022. This draft reflects the parties' discussions to date and VHG's positions on the key open provisions.

The principal changes to the MFN and repricing provisions in this draft are as follows:

1. **MFN Sunset Period**: Revised to 18 months from closing, reflecting VHG's position. As you know, Crescent Harbor's initial proposal was 24 months. VHG believes 18 months is well within market range and provides meaningful protection for lenders while preserving the borrower's flexibility to access the incremental facility when needed.

2. **MFN Threshold**: Set at 50 basis points, reflecting VHG's position. Crescent Harbor's initial proposal was 25 bps.

3. **Repricing Protection**: 6-month soft call period at a 1.00% prepayment premium, reflecting VHG's position. Crescent Harbor's initial proposal was 12 months at the same premium level.

- The MFN provision (Section 2.14(e)) applies to incremental term loans only. It does not apply to the existing $400,000,000 revolving credit facility or the $245,000,000 senior unsecured notes, which are structurally different obligations under separate documentation. - The repricing protection provision (Section 2.11(b)) applies to any voluntary prepayment, refinancing, or amendment that has the effect of reducing

I am also finalizing a market precedents comparison memo (to be circulated shortly — target date June 10) summarizing MFN sunset periods, thresholds, and repricing protection terms in recent hospitality-sector Term Loan B transactions. I believe this will be helpful context for your discussions with Crescent Harbor.

We would appreciate WGP's comments by Friday, June 17. Happy to schedule a call in advance if that would facilitate your review.