Contract analysis

I. Executive Summary The purpose of this memorandum is to analyze the repricing protection provision (commonly referred to as a "soft call") proposed in connection with Verimark Hospitality Group Inc.'s ("VHG") $700,000,000 senior secured Term Loan B refinancing (the "New TLB"), with Crescent Harbor Bank, N.A. acting as Administrative Agent and Lead Arranger. This analysis is being prepared at the direction of Ian Bl

II. Background A. Transaction Overview VHG is refinancing its existing $625,000,000 Term Loan B (CUSIP 92347LAA0) originally issued on February 14, 2020, with Greystone Federal Credit Corp. ("Greystone") serving as administrative agent, with a new $700,000,000 Term Loan B (CUSIP 92347LAB8) to be arranged by Crescent Harbor Bank, N.A. ("Crescent Harbor" or the "Administrative Agent"). The existing Greystone facility h

III. Mechanics of the Repricing Protection Provision A. Basic Structure The repricing protection (soft call) provision, as reflected in Section 2.05(a)(iv) of the draft Credit Agreement circulated on May 16, 2022, establishes a time-limited premium payable by VHG in connection with certain downward repricing events. The core mechanics of the provision are as follows: Protection Period. The soft call provision applies

IV. Market Comparison — Hospitality-Sector TLB Transactions A. Methodology To benchmark the proposed repricing protection terms against prevailing market practice, we reviewed a sample of recent leveraged Term Loan B transactions in the hospitality and lodging sector executed between January 2021 and May 2022. Our review encompassed both new-money and refinancing transactions and included issuances in the broadly syn

V. Interaction with the Most Favored Nation (MFN) Provision A. Overview of MFN Provision In addition to the repricing protection provision, the Credit Agreement includes a most favored nation ("MFN") clause applicable to incremental term loan facilities incurred after closing. The MFN provision is found in Section 2.14(d) of the draft Credit Agreement and operates as follows: Applicability Period. The MFN clause appl

VI. Interaction with the SOFR Transition The transition from the LIBOR-based benchmark in the existing Greystone facility to the Adjusted Term SOFR benchmark in the New TLB introduces certain technical considerations for the repricing protection provision. These considerations relate primarily to the consistency of Effective Yield comparisons and the treatment of benchmark transition events. Benchmark Structure. The

VII. Economic Impact Analysis for VHG A. Cost of the Soft Call Premium in Context The maximum Soft Call Premium exposure of $7,000,000 should be evaluated in the context of the overall economics of the refinancing transaction and VHG's financial profile: Relative to Annual Interest Savings. The estimated annual interest savings from the 50 basis point margin reduction achieved in the refinancing are approximately $3,

VIII. Negotiation Points and Recommendations Based on the foregoing analysis, we set forth below our specific recommendations for VHG's negotiating position with respect to the repricing protection provision. These recommendations should be discussed with Ian Blackwood and, as appropriate, shared with VHG's in-house team (Priya Narayanan and Glenn Fischbach) for client alignment before we engage with WGP on the marku