Contract analysis

I. Executive Summary The purpose of this memorandum is to provide a detailed analysis of the "most favored nation" (MFN) provision as negotiated in the Credit Agreement (as defined below) governing Verimark Hospitality Group Inc.'s ("VHG" or the "Borrower") $700,000,000 senior secured Term Loan B facility (the "Initial TLB"), and to compare the agreed terms against recent market precedents in the hospitality and real

II. Background and Transaction Overview A. The Borrower VHG is a publicly traded hospitality and real estate company listed on the New York Stock Exchange under the ticker symbol VMRK. The company is headquartered at 8200 West Palmetto Park Road, Suite 1500, Boca Raton, Florida 33433. VHG operates a diversified portfolio of 74 full-service and select-service hotels across 18 states, with an aggregate appraised value

III. Description of the Negotiated MFN Provision A. Operative Mechanics The MFN provision is set forth in Section 2.20 of the Credit Agreement (the incremental facility section), initially drafted by Drummond & Fenwick LLP ("C&H") in the first draft of the Credit Agreement circulated to WGP on May 16, 2022. The provision was the subject of extensive negotiation through multiple iterations, including the WGP First Res

IV. Market Comparison and Precedent Analysis A. Methodology To assess the market positioning of VHG's negotiated MFN provision, we reviewed 15 leveraged Term Loan B facilities in the hospitality and real estate sectors that closed between Q3 2021 and Q2 2022. The data was sourced from publicly available credit agreements filed with the U.S. Securities and Exchange Commission (SEC) on EDGAR, supplemented by market rep

V. Yield Calculation Methodology A. Definition of "Effective Yield" in the Credit Agreement The operation of the MFN provision depends critically on the methodology used to calculate the "Effective Yield" on both the Initial TLB and any incremental term loans. The Credit Agreement's definition of "Effective Yield" (set forth in Section 1.01) provides that Effective Yield means the sum of the following components: (i)

VI. Interaction with Incremental Facility Provisions A. Overview of Incremental Facility Basket The Credit Agreement permits VHG to incur incremental term loans and/or incremental revolving commitments in an aggregate principal amount up to the greater of: (i) a fixed dollar basket of $200,000,000 (the "Free-and-Clear Basket"), which may be incurred without regard to any financial ratio test and provides VHG with a g

VII. Repricing Protection Interaction The Credit Agreement includes a separate repricing protection provision (commonly referred to as a "soft call" provision) in addition to the MFN clause. Under this provision, if VHG reprices or refinances the Initial TLB at a lower Effective Yield — whether through a direct amendment reducing the applicable margin, a refinancing with new term loans at lower pricing, or any other

VIII. Strategic Implications and Recommendations for VHG A. Near-Term Acquisition Pipeline VHG's Treasurer, Glenn Fischbach, and Chief Financial Officer, Renata Haines, have indicated in recent discussions with the deal team that VHG expects to deploy the incremental $75,000,000 in TLB proceeds (net of transaction expenses) within the first 12 months following the Closing Date, primarily to fund identified acquisitio

IX. Conclusion The MFN provision negotiated in VHG's $700,000,000 Senior Secured Term Loan B Credit Agreement — featuring a 50 basis point threshold, an 18-month sunset period running from the Closing Date through January 21, 2024, and a $100,000,000 acquisition-related carve-out — is at or slightly above market median terms for the hospitality and real estate leveraged lending market as of mid-2022. The 50 basis poi