Contract analysis

I. Executive Summary The purpose of this memorandum is to analyze the key U.S. federal income tax considerations arising from Verimark Hospitality Group Inc.'s ("VHG" or the "Company") proposed refinancing of its existing $625,000,000 Senior Secured Term Loan B facility (the "Existing TLB"), for which Greystone Federal Credit Corp. serves as administrative agent (CUSIP 92347LAA0; originally closed February 14, 2020),

1. Original Issue discount. Whether and to what extent the New TLB gives rise to original issue discount ("OID") under Internal Revenue Code ("IRC" or the "Code") Sections 1271 through 1275, and the tax treatment of such OID for VHG as issuer.

2. Applicable High Yield discount Obligation. Whether the New TLB constitutes an "applicable high yield discount obligation" ("AHYDO") within the meaning of IRC Section 163(i), which would result in deferral or disallowance of a portion of the issuer's interest deductions.

3. Deductibility of the Prepayment Premium. The deductibility of the $3,125,000 prepayment premium that VHG will pay to retire the Existing TLB, including the timing and character of such deduction.

4. Treatment of Unamortized Costs. The proper treatment of unamortized debt issuance costs and any remaining unamortized OID from the 2020 Greystone financing upon its retirement. Summary of Conclusions. Based on our analysis, the proposed refinancing is generally tax-efficient for VHG. The New TLB is not expected to constitute an AHYDO. The $7,000,000 of OID on the New TLB falls below the de minimis threshold under

II. Background and Transaction Overview A. Existing Capital Structure VHG's existing capital structure, as relevant to this analysis, consists of the following principal funded-debt obligations: Existing $625,000,000 Senior Secured Term Loan B. The Existing TLB was originated on February 14, 2020, with Greystone Federal Credit Corp. serving as administrative agent on behalf of a syndicate of institutional lenders. Th

III. Original Issue discount — New $700,000,000 Term Loan B A. OID Determination Under IRC Sections 1271–1275

1. General Principles Under IRC Section 1273(a)(1), original issue discount arises when a debt instrument is issued for a price below its "stated redemption price at maturity" ("SRPM"). OID is defined as the excess of the SRPM over the "issue price" of the debt instrument. For purposes of this analysis, the SRPM is the sum of all payments provided by the debt instrument other than "qualified stated interest" — i.e.,

2. Application to the New TLB The New TLB is being issued at 99.00% of par value, resulting in an issue price of $693,000,000 ($700,000,000 × 99.00%). The stated principal amount of the New TLB is $700,000,000. Interest on the New TLB accrues at Adjusted Term SOFR plus 375 basis points and is payable quarterly in cash. Because the interest payments constitute qualified stated interest (they are unconditionally payabl

3. De Minimis OID Analysis Treasury Regulation Section 1.1273-1(d) provides that OID is treated as "de minimis" if it is less than the product of 0.25% of the SRPM multiplied by the number of complete years from the issue date to maturity. The purpose of the de minimis rule is to relieve issuers and holders of the administrative burden of accruing immaterial amounts of discount over the life of a debt instrument. For

4. Consequences of De Minimis Characterization The de minimis classification has the following principal consequences for VHG as the issuer of the New TLB: No current accrual obligation. Because the OID is de minimis, VHG is not required to accrue OID as a deduction on a current basis under IRC Section 163(e). Instead, the de minimis OID is treated essentially as a capital expenditure and would be deductible only upo

5. Characterization of Arrangement Fee and Lender Fees The $3,500,000 arrangement fee payable to Crescent Harbor Bank, N.A. and any upfront lender fees embedded in the pricing of the New TLB require careful characterization. Under Treasury Regulation Section 1.1273-2(g), fees paid to a lender in connection with the issuance of a debt instrument may reduce the issue price of the instrument (thereby increasing OID) if

IV. Applicable High Yield discount Obligation (AHYDO) Analysis A. Overview of AHYDO Rules — IRC Section 163(i) and Section 163(e)(5) The AHYDO provisions of the Code were enacted to limit the tax benefits of deeply discounted, high-yield debt instruments used in leveraged buyouts and other highly leveraged transactions. Under IRC Section 163(i)(1), a debt instrument is classified as an AHYDO if it satisfies three cum

1. Maturity Test. The instrument has a maturity date more than five years from the date of issuance.

2. Yield Test. The instrument has a yield to maturity ("YTM") that equals or exceeds the sum of the applicable federal rate ("AFR") in effect for the calendar month in which the instrument is issued, plus five percentage points.

3. Significant OID Test. The instrument has "significant original issue discount," meaning the aggregate amount of OID that would accrue on the instrument through the end of the accrual period ending after the date five years from the issue date exceeds the sum of (a) the aggregate amount of interest to be paid on the instrument during the first five accrual periods, plus (b) the product of the issue price and the in

V. Deductibility of the $3,125,000 Prepayment Premium on the Existing Greystone Facility A. Character of the Prepayment Premium In connection with the retirement of the Existing TLB, VHG will pay a prepayment premium of $3,125,000 to Greystone Federal Credit Corp. (as administrative agent for the existing lender syndicate). The premium is calculated as 0.50% of the $625,000,000 original principal amount of the Existi

VI. Treatment of Unamortized Debt Issuance Costs and OID from the 2020 Greystone Financing A. Existing Unamortized Costs The Existing TLB was originated on February 14, 2020. In connection with that origination, VHG incurred debt issuance costs that were required to be capitalized and amortized over the seven-year term of the facility (February 14, 2020 through February 14, 2027, or approximately 84 months). Based on

VII. Interest Expense Deductibility — Section 163(j) Overview IRC Section 163(j), as amended by the Tax Cuts and Jobs Act of 2017, imposes a limitation on the deduction of "business interest expense" for taxable years beginning after December 31, 2017. Under Section 163(j)(1), a taxpayer's deduction for business interest expense in any taxable year is limited to the sum of: (a) the taxpayer's business interest income

VIII. State and Local Tax Considerations (Brief Note) This memorandum addresses only U.S. federal income tax considerations. We note, however, that VHG operates hotel properties in 18 states across the United States, and state income and franchise tax treatment of the items discussed herein — including OID accrual, prepayment premium deductions, debt issuance cost amortization, and business interest expense limitatio

IX. Recommendations and Action Items Based on the analysis set forth in this memorandum, we recommend the following action items in connection with the proposed refinancing:

1. OID Treatment. Confirm the $7,000,000 of OID on the New TLB as de minimis under Treasury Regulation Section 1.1273-1(d). VHG may nonetheless elect to accrue the OID ratably over the seven-year term for book-tax conformity purposes. This election should be coordinated with Clearmont & Wharton LLP (Ronald Ashby, Engagement Partner) and VHG's internal accounting team.

2. AHYDO Classification. The New TLB does not constitute an AHYDO based on current pricing terms and the anticipated AFR for July 2022. If syndication flex is exercised and the pricing of the New TLB changes materially before closing, the AHYDO analysis should be re-run using the revised terms. Leonard Cross will update the AHYDO analysis in the supplemental tax opinion memorandum to be prepared in connection with cl

3. Prepayment Premium. VHG should deduct the $3,125,000 prepayment premium as interest expense in its taxable year ending December 31, 2022. The characterization of the premium as interest expense should be confirmed with VHG's Treasurer (Glenn Fischbach) and Chief Financial Officer (Renata Haines) to ensure consistent treatment for financial reporting and tax purposes.

4. Unamortized Issuance Costs. VHG should write off the remaining unamortized debt issuance costs from the 2020 Greystone financing as an accelerated deduction in FY2022. The exact unamortized balance should be confirmed with Clearmont & Wharton LLP based on VHG's books and records. If any unamortized OID from the 2020 financing exists, it should be written off on the same basis.

5. New Facility Costs. Capitalize approximately $8,100,000 in new debt issuance costs and amortize over the seven-year term of the New TLB (July 21, 2022 through July 21, 2029). Establish a separate amortization schedule for these costs, independent of any costs associated with the Existing TLB.

6. Section 163(j) Computation. No limitation on business interest expense deductions is anticipated for FY2022. VHG should include all interest-related items from the refinancing (prepayment premium, unamortized cost write-off, OID amortization if elected, and new debt issuance cost amortization) in its annual Section 163(j) computation worksheet.

7. State and Local Taxes. Flag the refinancing transaction for VHG's internal tax team and Clearmont & Wharton LLP for a multi-state review of state and local tax implications, with particular attention to conformity issues and states that have decoupled from IRC Section 163(j).

8. Subsequent Memorandum. Leonard Cross will prepare a more detailed tax opinion memorandum closer to closing (targeted for the first week of July 2022) to confirm the conclusions set forth herein based on final deal terms, the actual AFR in effect at the time of issuance, and any changes resulting from the syndication process.

X. Assumptions and Qualifications This memorandum is subject to the following assumptions and qualifications:

1. Legal Authority. The analysis set forth herein is based on the Internal Revenue Code of 1986, as amended, the Treasury Regulations promulgated thereunder, and judicial and administrative interpretations thereof, all as in effect as of the date of this memorandum (April 18, 2022). Changes in applicable law, regulations, or interpretive authority subsequent to the date hereof could alter the conclusions expressed in

2. Financial Data. The financial data and projections relied upon in this memorandum have been sourced from VHG management and Clearmont & Wharton LLP, including VHG's audited financial statements for the fiscal year ended December 31, 2021. We have not independently verified the accuracy or completeness of such data.

3. Transaction Structure. Our analysis assumes that the refinancing will close as currently structured — that is, as a simultaneous sign-and-close transaction in which VHG borrows $700,000,000 under the New TLB, uses a portion of the proceeds to retire the Existing TLB in full, and retains the balance for permitted acquisitions and general corporate purposes. If the material terms of the transaction change (including

4. Attorney Work Product / Privilege. This memorandum constitutes attorney work product prepared in anticipation of providing legal advice to VHG and is protected by the attorney work product doctrine and the attorney-client privilege. This memorandum is privileged and confidential and is not intended as tax advice to any party other than VHG. No third party should rely upon the analysis or conclusions set forth here

5. Scope Limitations. This memorandum addresses only U.S. federal income tax considerations. The analysis does not address: (a) state and local income, franchise, or other tax considerations (except to the limited extent noted in Section VIII above); (b) potential employment tax or excise tax implications; (c) withholding tax obligations with respect to payments of interest or principal to foreign lenders participati

6. No Guarantee of Outcome. The conclusions expressed in this memorandum represent our best professional judgment based on the facts, assumptions, and authorities described herein. We cannot guarantee that the Internal Revenue Service will agree with the positions described or that a court would sustain such positions if challenged. Prepared by: Leonard Cross, Specialist Partner, Tax Calderwood & Harkness LLP One Lib