Contract analysis

I. Executive Summary This memorandum analyzes the transition from LIBOR-based pricing under Verimark Hospitality Group Inc.'s ("VHG" or the "Borrower") existing $625,000,000 Term Loan B (the "Existing TLB"), with Greystone Federal Credit Corp. ("Greystone") as administrative agent, originated on February 14, 2020, to Adjusted Term SOFR pricing under the proposed $700,000,000 Term Loan B (the "Proposed TLB" or the "Fa

II. Background A. The Existing Greystone Facility — LIBOR-Based Pricing VHG's Existing TLB is a $625,000,000 Senior Secured Term Loan B credit facility that closed on February 14, 2020, with Greystone Federal Credit Corp. serving as administrative agent and collateral agent (the "Existing Credit Agreement"). The facility is identified by CUSIP number 92347LAA0 and was originally syndicated to a group of approximately

III. Adjusted Term SOFR — Definition and Mechanics A. Term SOFR The primary benchmark under the Proposed TLB is "Term SOFR," defined in the Credit Agreement as the CME Term SOFR Reference Rate, as published by CME Group Benchmark Administration Limited (the "Term SOFR Administrator"), for the applicable interest period tenor (1-month, 3-month, or 6-month). Term SOFR is a forward-looking rate that is set at the beginn

IV. Hardwired Benchmark Replacement Fallback Provisions A. Overview of Approach — "Hardwired" vs. "Amendment" Fallback The Credit Agreement employs a "hardwired" fallback approach for benchmark replacement, consistent with the ARRC's March 2021 recommended "hardwired fallback" language for syndicated business loans (the "ARRC Hardwired Fallback Language"). Under the hardwired approach, the benchmark replacement rate

1. Administrator Cessation Announcement. A public statement or publication of information by or on behalf of the administrator of the then-current Benchmark (e.g., CME Group Benchmark Administration Limited, in the case of Term SOFR) announcing that the administrator has ceased or will cease to provide the Benchmark permanently or indefinitely, provided that, at the time of such statement or publication, there is no

2. Regulatory Supervisor or Government Authority Announcement. A public statement or publication of information by the regulatory supervisor of the administrator of the then-current Benchmark (e.g., the U.S. Commodity Futures Trading Commission, in the case of CME Group), the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the admin

3. Benchmark Replacement Date. A "Benchmark Replacement Date" has occurred, meaning the actual date on which the Benchmark ceases to be published by the administrator or is publicly declared by the regulatory supervisor to be no longer representative. The Benchmark Replacement Date is the date on which the transition to the replacement benchmark becomes effective. In addition, the Credit Agreement includes a "Pre-Ces

V. Comparison to the Existing Greystone Facility This section provides a detailed comparison of the benchmark-related provisions in the Existing TLB (Greystone) and the Proposed TLB (Crescent Harbor). A. Benchmark Existing (Greystone): USD LIBOR (ICE LIBOR), as published by IBA — a forward-looking, term rate, set at the beginning of each interest period based on submissions from panel banks reflecting their cost of u

VI. Interaction with Other Credit Agreement Provisions The SOFR benchmark mechanics interact with several other provisions of the Credit Agreement that warrant careful attention during the documentation process. A. Repricing Protection / Soft Call The Credit Agreement includes a 6-month repricing protection period running from the closing date (July 21, 2022) through January 21, 2023. During this period, any repricin

VII. ARRC Compliance and Regulatory Considerations The proposed SOFR provisions in the Credit Agreement are consistent with the ARRC's Updated Recommended Best Practices, most recently issued in January 2022, for new USD LIBOR loan originations. The ARRC has recommended that all new U.S. dollar-denominated loan originations use SOFR (or another alternative reference rate) rather than USD LIBOR, and that all SOFR-base

VIII. Practical Implementation Considerations for VHG A. Treasury Systems VHG's treasury function, led by Glenn Fischbach (Treasurer), should take the following steps to prepare for the transition from LIBOR-based pricing to Adjusted Term SOFR pricing: • Rate Source Update. VHG's interest rate tracking and cash management systems should be updated to reference CME Term SOFR as the applicable benchmark, rather than IC

IX. Open Issues and Recommendations The following open issues should be addressed during the upcoming negotiation sessions with WGP and resolved prior to finalization of the Credit Agreement:

1. CSA Rounding Convention. Confirm with WGP (Harrison Whitfield III) that the rounded CSA figures (0.10%, 0.15%, 0.25%) are acceptable to the lender group. The alternative would be to use the exact ISDA five-year historical median figures (0.11448%, 0.26161%, 0.42826%). While the exact figures could be argued to be more precise, the rounded figures have become the overwhelmingly prevalent convention in leveraged loa

2. Term SOFR Screen Reference. Confirm the specific Westmark Services Inc. screen page, Calderon Health IT screen page, or CME Group website URL to be referenced in the Credit Agreement as the authoritative source for determining Term SOFR rates. The C&H first draft currently references the CME Group website (https://www.cmegroup.com/market-data/cftc-reporting/sofr.html) as the primary source, with Westmark Services

3. Conforming Changes Authority. The current draft of the Credit Agreement grants the Administrative Agent broad authority to make Benchmark Replacement Conforming Changes in consultation with the Borrower but without Lender consent. This allocation of authority is favorable to VHG, as it allows necessary operational adjustments to be made efficiently without the delay and uncertainty of a lender consent process. We

4. Benchmark Replacement Adjustment for Daily Simple SOFR. If Daily Simple SOFR becomes the replacement benchmark under the first step of the waterfall, confirm whether the CSA currently applied to Term SOFR (0.10% for 1-month, etc.) is carried forward as the Benchmark Replacement Adjustment, or whether a separate, independently calculated adjustment is applied. The C&H first draft references the ISDA-recommended spr

5. Yield Definition Alignment. Ensure that the definitions of "yield" and "effective yield" used in the MFN provision (Section 2.14 of the C&H first draft) and the repricing protection provision (Section 2.05(b)) are drafted consistently with the SOFR benchmark framework. In particular, these definitions should: (a) specify that the CSA is excluded from the yield calculation (consistent with market convention); (b) p