1021-00001 · Verimark Hospitality Group · Closing

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MEMORANDUM

TO: Ian Blackwood, Responsible Partner, Banking & Finance Sophie Tremblay, Lead Associate, Banking & Finance

FROM: Daniel Obi, Working Associate, Banking & Finance

DATE: July 19, 2022

RE: Review of Certificates of Insurance — Verimark Hospitality Group Inc. $700,000,000 Senior Secured Term Loan B Refinancing

CLIENT/MATTER: Verimark Hospitality Group Inc. / 1016-00009

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum is protected by the attorney-client privilege and the work product doctrine. It has been prepared at the direction of counsel in connection with anticipated legal representation and should not be disclosed to any third party without the prior written consent of the undersigned.

I. Purpose and Executive Summary

This memorandum summarizes the results of the review of certificates of insurance provided by Verimark Hospitality Group Inc. ("VHG" or the "Borrower") in connection with the $700,000,000 Senior Secured Term Loan B Credit Agreement dated July 21, 2022 (the "Credit Agreement") among VHG, as Borrower, the Guarantors party thereto, Crescent Harbor Bank, N.A., as Administrative Agent and Collateral Agent (in such capacities, the "Agent" or "Collateral Agent"), and the Lenders party thereto.

The review was conducted to confirm compliance with the insurance covenants set forth in Section 6.07 (Maintenance of Insurance) of the Credit Agreement, which constitutes an affirmative covenant requiring the Borrower and each Guarantor to maintain insurance meeting specified minimum requirements as a condition to the effectiveness of the Credit Agreement and the initial borrowing thereunder. The simultaneous sign-and-close of the Credit Agreement is currently scheduled for July 21, 2022. Confirmation of insurance compliance is a condition precedent to closing under Section 4.01(j) of the Credit Agreement, and accordingly this review was undertaken in advance of the closing date in order to identify any deficiencies requiring remediation.

VHG provided certificates of insurance in standard Acord 25 (Certificate of Liability Insurance) and Acord 28 (Evidence of Commercial Property Insurance) forms covering its portfolio of 74 full-service and select-service hotel properties located across 18 states, with an aggregate appraised portfolio value of approximately $3.1 billion as determined by the independent appraisals conducted by Stanton Hospitality Valuation Group in connection with this financing. The certificates were delivered to our office on July 14, 2022 via electronic transmission from VHG's insurance broker, Hartwell & Associates Insurance Brokerage LLC, and supplemented with additional certificates received on July 17, 2022.

Overall Conclusion. Based on our review, the certificates of insurance, taken as a whole, are substantially compliant with the Credit Agreement's insurance requirements, subject to certain minor observations and action items identified in Section VI below. These observations are administrative in nature and do not, in our view, constitute material deficiencies that would prevent closing. Specifically, certain certificates continue to reflect the prior collateral agent (Greystone Federal Credit Corp.) as loss payee and additional insured, rather than Crescent Harbor Bank, N.A. in its capacity as Collateral Agent, and a small number of certificates require confirmation of named insured designations for certain Guarantor subsidiaries. We recommend that updated certificates and endorsements be obtained on or before the closing date, with final mortgagee endorsements to be delivered during the post-closing period as contemplated by the Post-Closing Letter Agreement.

We note that the 42 mortgaged hotel properties (owned primarily by Verimark Resort Properties LLC, together with certain properties held by Palmetto Beachfront Hotels LLC and Cascadia Hospitality Corp.) with an aggregate appraised value of approximately $2.18 billion, were subject to heightened review given the mortgage and collateral requirements applicable to those properties under the Credit Agreement and the related Mortgage, Deed of Trust, Assignment of Leases and Rents, and Security Agreement (the "Mortgage"). Our review of the insurance coverage for these mortgaged properties is addressed in detail in Sections IV and V below.

II. Background — Insurance Requirements Under the Credit Agreement

A. Affirmative Covenant — Insurance

Section 6.07 of the Credit Agreement contains an affirmative covenant requiring VHG and each Guarantor to maintain, at their own expense, insurance with financially sound and reputable insurance companies (rated at least "A-" by A.M. Best Company or an equivalent rating agency) covering their properties and assets against loss or damage of the kinds customarily insured against by companies of similar size and financial condition engaged in the same or similar businesses and operating in the same or similar locations.

The Credit Agreement requires the following specific coverage types, at minimum:

(i) Property/Casualty (All-Risk) Insurance. All-risk property insurance covering all owned and leased real and personal property of VHG and its subsidiaries, written on a replacement cost basis, in amounts sufficient to avoid application of any co-insurance penalty, and covering standard perils including fire, lightning, wind, hail, explosion, smoke, water damage, vandalism, malicious mischief, and such other risks as are customarily covered by all-risk policies in the hospitality industry.

(ii) General Commercial Liability Insurance. Commercial general liability insurance covering bodily injury, property damage, personal and advertising injury, and contractual liability, with minimum per-occurrence and aggregate limits specified in the Credit Agreement.

(iii) Business Interruption Insurance. Business interruption and loss of rental income coverage with an indemnity period of not less than twelve (12) months.

(iv) Flood Insurance. Flood insurance for all properties located in special flood hazard areas as designated by the Federal Emergency Management Agency ("FEMA"), in amounts at least equal to the lesser of (a) the outstanding principal balance of indebtedness allocable to such property and (b) the maximum coverage available under the National Flood Insurance Program ("NFIP"), as required by the Flood Disaster Protection Act of 1973, as amended, and applicable federal banking regulations.

(v) Earthquake Insurance. Earthquake insurance for all properties located in the State of California, in amounts and with deductibles customary for properties of similar size and value in the applicable seismic zones.

(vi) Workers' Compensation Insurance. Workers' compensation insurance in statutory amounts as required by applicable law in each state in which VHG and its subsidiaries conduct business, together with employers' liability insurance with customary limits.

(vii) Umbrella/Excess Liability Insurance. Umbrella or excess liability insurance providing coverage above the primary general liability, automobile liability, and employers' liability policies, with aggregate limits reasonably satisfactory to the Administrative Agent.

(viii) Other Insurance. Such other insurance as is customary for companies of similar size engaged in the hospitality industry, including, without limitation, liquor liability insurance for hotel food and beverage operations and automobile liability insurance.

The Credit Agreement further requires that Crescent Harbor Bank, N.A., in its capacity as Collateral Agent, be named as "additional insured" on all liability policies and as "loss payee" (or, with respect to mortgaged properties, "mortgagee loss payee") on all property policies, in each case using standard mortgagee clause endorsements in form and substance reasonably satisfactory to the Collateral Agent.

Section 6.07(c) of the Credit Agreement requires that each insurance policy maintained in accordance with the foregoing provisions contain a provision requiring the insurer to give not less than thirty (30) days' advance written notice of cancellation or material modification to the Collateral Agent (with a ten (10) day notice period for cancellation due to nonpayment of premium being customary and acceptable under the Agent's insurance requirements letter dated June 28, 2022).

B. Mortgage Requirements — Insurance for Mortgaged Properties

The form of Mortgage, Deed of Trust, Assignment of Leases and Rents, and Security Agreement (the "Mortgage"), which is being executed by Verimark Resort Properties LLC, Palmetto Beachfront Hotels LLC, and Cascadia Hospitality Corp. with respect to the 42 mortgaged hotel properties, imposes specific insurance requirements in addition to those contained in the Credit Agreement. Section 4.01 of the Mortgage requires the applicable Grantor to maintain property insurance on each mortgaged property on a replacement cost basis, without deduction for depreciation, in an amount not less than the full insurable value of each such property. The Mortgage further requires that each property policy include a standard non-contributory, non-reporting mortgagee clause (New York Standard Mortgagee Clause or equivalent) naming the Collateral Agent as mortgagee loss payee.

With respect to flood insurance, the Mortgage cross-references the Credit Agreement's requirements and further requires compliance with the National Flood Insurance Program and applicable federal banking regulations, including the provisions of the Flood Disaster Protection Act of 1973, as amended by the National Flood Insurance Reform Act of 1994 and the Biggert-Waters Flood Insurance Reform Act of 2012. As noted in the Survey and Flood Certification Summary Memorandum prepared by the undersigned (dated July 2022), flood zone determinations have been obtained from Sundial Systems for each of the 42 mortgaged properties. Properties identified as being located in FEMA-designated Special Flood Hazard Areas ("SFHAs") are required to carry flood insurance meeting the requirements of both the Credit Agreement and applicable federal law.

C. Collateral Agent / Secured Party Protections

Section 2.05(b)(ii) of the Credit Agreement provides that insurance proceeds relating to a casualty event affecting any property constituting Collateral under the Security Documents shall, subject to certain reinvestment rights set forth therein, constitute mandatory prepayment proceeds and be applied to prepay the Term Loans in accordance with the Credit Agreement's mandatory prepayment waterfall. The Borrower has a reinvestment right for a period of 365 days (or 545 days if a binding commitment to reinvest is entered into within 365 days) following receipt of such proceeds, provided that no Event of Default has occurred and is continuing at the time of such reinvestment.

These provisions underscore the importance of confirming that the Collateral Agent is properly named as loss payee and mortgagee loss payee on all applicable property insurance policies, so that insurance proceeds are directed in accordance with the Credit Agreement's mandatory prepayment and reinvestment framework.

III. Insurance Certificates Reviewed

A. Listing of Certificates

The following certificates of insurance were reviewed in connection with this memorandum, organized by coverage type and insurer:

1. Property / Casualty (All-Risk) Program — Policy issued by Atlantic Meridian Insurance Company (A.M. Best Rating: A, XV), covering all 74 hotel properties in the VHG portfolio. Business interruption and loss of rental income coverage are included within this program as sub-coverages. Coverage also includes time element coverage and extra expense provisions.

2. General Commercial Liability Policy — Policy issued by Sentinel Indemnity Corporation (A.M. Best Rating: A+, XIV), providing primary commercial general liability coverage for VHG and all subsidiaries across the 74-property portfolio.

3. Umbrella / Excess Liability Policy — Policy issued by Pinnacle Re Insurance Group Ltd. (A.M. Best Rating: A, XV), providing excess liability coverage above the primary general liability, automobile liability, and employers' liability layers.

4. Workers' Compensation Policies — Policies issued by Covenant Mutual Assurance Company (A.M. Best Rating: A-, XII), providing statutory workers' compensation coverage and employers' liability insurance on a state-by-state basis for all 18 states in which VHG and its subsidiaries operate hotel properties.

5. Flood Insurance Policies — A combination of NFIP policies (written through WYO carrier Homestead Flood Insurance Services) and private excess flood insurance issued by Atlantic Meridian Insurance Company, covering properties identified as being located in FEMA-designated SFHAs.

6. Earthquake Insurance — Policy issued by Pacific Seismic Underwriters, Inc. (A.M. Best Rating: A, XI), covering the 5 California hotel properties owned by Verimark Resort Properties LLC.

7. Liquor Liability Coverage — Endorsement to the commercial general liability policy issued by Sentinel Indemnity Corporation, providing liquor liability coverage for all hotel food and beverage operations across the portfolio.

8. Automobile Liability Insurance — Policy issued by Sentinel Indemnity Corporation, covering owned, non-owned, and hired vehicles (reviewed for completeness but not a primary focus of this memorandum).

B. Named Insureds

We have confirmed that the named insureds on the certificates of insurance include VHG and each of the five Guarantor entities that are party to the Credit Agreement, as follows:

• Verimark Hospitality Group Inc. — the Borrower and parent holding company.

• Verimark Resort Properties LLC — the principal property-owning subsidiary, which holds fee title to 42 hotel properties across 12 states and is the Grantor under the Mortgage for those properties.

• VHG Management Services Inc. — the management subsidiary providing hotel management and operational services across the portfolio.

• Verimark Convention Holdings LLC — the subsidiary that owns and operates three convention center hotels (in Atlanta, Chicago, and Denver).

• Palmetto Beachfront Hotels LLC — the subsidiary that owns 12 coastal resort properties located in Florida (primarily along the Gulf Coast and Southeast Atlantic coast).

• Cascadia Hospitality Corp. — the subsidiary that owns 8 hotel properties in the Pacific Northwest states of Washington and Oregon.

As noted in Section VI.A below, we identified a small number of certificates where one or more of the Guarantor entities was not expressly listed as a named insured, and we have recommended that updated certificates be obtained to confirm blanket inclusion of all entities.

C. Certificate Dates and Policy Periods

We have reviewed the effective dates and expiration dates for each policy reflected on the certificates of insurance. All policies reviewed are currently in force as of the date of this memorandum and have policy periods extending beyond the closing date of July 21, 2022. The following table summarizes the policy periods:

We note that the annual renewal date for the core insurance program (property, liability, umbrella, earthquake, and liquor liability) is October 1, 2022. In connection with such renewal, updated certificates and endorsements reflecting the Collateral Agent's interests should be obtained and delivered to the Agent. The Credit Agreement requires delivery of updated certificates of insurance to the Administrative Agent on an annual basis not later than thirty (30) days following each policy renewal date.

IV. Coverage Analysis — Compliance with Credit Agreement Requirements

A. Property / Casualty (All-Risk) Insurance

The all-risk property/casualty insurance program maintained by VHG and its subsidiaries is placed through Atlantic Meridian Insurance Company under Policy No. AMP-VHG-2021-074511. Coverage is written on a blanket, replacement cost basis covering all 74 hotel properties in the VHG portfolio, without deduction for depreciation. The aggregate insured value reflected on the certificate is $3,245,000,000, which exceeds the aggregate appraised portfolio value of approximately $3.1 billion and therefore satisfies the replacement cost requirement and avoids application of any co-insurance penalty.

The policy provides coverage for standard perils including fire, lightning, wind, hail, explosion, aircraft damage, vehicle damage, smoke, riot, civil commotion, water damage, vandalism, malicious mischief, sprinkler leakage, collapse, and such other perils as are customarily covered by all-risk policies in the hospitality industry. We have confirmed that the policy covers building structures, tenant improvements, furniture, fixtures and equipment ("FF&E"), and personal property at each insured location.

The following sublimits and deductibles are applicable and have been reviewed for reasonableness in light of the size and geographic distribution of the portfolio:

With respect to the named windstorm sublimit, we note that this sublimit is particularly relevant for the 12 Florida coastal resort properties held by Palmetto Beachfront Hotels LLC. The $500,000,000 named windstorm sublimit represents significant capacity and is consistent with market terms for hospitality portfolios of this size with coastal Florida exposure. The 5% of total insured value ("TIV") deductible at affected locations for named windstorm is standard for coastal Florida properties.

We have reviewed the deductible levels across all coverage categories and believe them to be reasonable and consistent with industry practice for a hospitality portfolio of this scale and geographic diversity. The deductible levels are consistent with the Credit Agreement's requirement that deductibles be in amounts customary for companies of similar size in the hospitality industry.

B. Flood Insurance

Reference is made to the Survey and Flood Certification Summary Memorandum prepared by the undersigned (dated July 2022), which identifies the properties in the VHG portfolio that are located in FEMA-designated Special Flood Hazard Areas. As described in that memorandum, flood zone determinations were obtained from Sundial Systems for each of the 74 hotel properties in the portfolio, with particular attention to the 42 mortgaged properties.

Based on those determinations, a total of 26 properties across the portfolio are located in or partially within FEMA-designated SFHAs (Zones A, AE, AH, AO, V, or VE), including 22 properties that are among the 42 mortgaged properties. The states in which mortgaged properties are located in flood zones include Florida (12 properties, all held by Palmetto Beachfront Hotels LLC), New York (6 properties), Texas (4 properties), and Virginia (2 properties, with partial SFHA encroachment). A complete listing of these properties, together with their corresponding flood insurance details, is set forth in Appendix C to this memorandum.

We have confirmed that each of the 26 properties located in SFHAs carries flood insurance in amounts at least equal to the lesser of (a) the outstanding principal balance of indebtedness reasonably allocable to such property (as determined by reference to the individual property appraised values and their proportional share of the total loan amount) and (b) the maximum coverage available under the NFIP for commercial properties, which is currently $500,000 per building. Because the NFIP maximum of $500,000 is significantly below the replacement cost value and allocable loan balance for each property, VHG has procured excess flood insurance through the private market (Atlantic Meridian Insurance Company) to supplement the NFIP coverage.

The excess flood insurance program provides an aggregate per-occurrence sublimit of $100,000,000 and an annual aggregate sublimit of $200,000,000, with a $500,000 per-occurrence deductible. This excess flood program sits above the NFIP coverage and responds to flood losses in excess of the NFIP policy limits. We believe this coverage satisfies the Credit Agreement's flood insurance requirements and is consistent with the applicable federal banking regulations, including the Flood Disaster Protection Act of 1973, as amended, and the regulatory guidance issued by the Office of the Comptroller of the Currency.

We note that the 12 Florida coastal resort properties held by Palmetto Beachfront Hotels LLC carry both NFIP policies (maximum available coverage) and participation in the excess flood insurance program, given their exposure to storm surge and hurricane-related flooding. Six of these 12 properties are located in FEMA Zone VE (coastal high hazard area), and the remaining six are located in Zone AE.

C. Earthquake Insurance

VHG maintains a dedicated earthquake insurance policy through Pacific Seismic Underwriters, Inc. (Policy No. PSU-EQ-2021-8834) covering the 5 California hotel properties owned by Verimark Resort Properties LLC. These properties are located in San Francisco (2 properties), Los Angeles (2 properties), and San Diego (1 property), and are situated in seismic zones with moderate to high exposure.

The earthquake policy provides the following coverage:

The earthquake insurance is not placed through the California Earthquake Authority ("CEA"), as CEA policies are generally available only for residential properties. The coverage through Pacific Seismic Underwriters, Inc. is a commercial earthquake policy customary for hospitality and commercial real estate portfolios. We have confirmed that the deductible of 10% of TIV is within the range customary for California commercial earthquake policies and is consistent with market practice for properties of this size and seismic exposure.

We believe the earthquake coverage satisfies the requirements of Section 6.07(a)(v) of the Credit Agreement.

D. General Commercial Liability

VHG maintains a commercial general liability policy through Sentinel Indemnity Corporation (Policy No. SIC-CGL-2021-55920) providing the following coverage:

The policy covers premises liability, products-completed operations, personal and advertising injury, and contractual liability, including liability assumed under insured contracts. Coverage extends to all 74 hotel properties and all operations of VHG and its subsidiaries. We have confirmed that the per-occurrence and aggregate limits meet or exceed the minimum limits specified in the Credit Agreement's insurance requirements letter from the Agent dated June 28, 2022, which required minimum per-occurrence limits of $1,000,000 and minimum general aggregate limits of $2,000,000.

We have confirmed that Crescent Harbor Bank, N.A., in its capacity as Collateral Agent under the Credit Agreement, is named as additional insured on the commercial general liability policy, subject to the observations noted in Section VI.A below regarding the transition from the prior collateral agent designation.

E. Umbrella / Excess Liability

VHG maintains an umbrella/excess liability policy through Pinnacle Re Insurance Group Ltd. (Policy No. PRIG-UMB-2021-07744) providing excess coverage above the primary commercial general liability, automobile liability, and employers' liability policies. The umbrella policy provides the following coverage:

The umbrella policy is written on a follow-form basis, following the terms and conditions of the underlying primary policies, with drop-down coverage in the event of exhaustion of the underlying limits. We have confirmed that the umbrella policy's aggregate limits are consistent with the Credit Agreement's requirements and are appropriate for a hospitality portfolio of this size.

We have confirmed that Crescent Harbor Bank, N.A., in its capacity as Collateral Agent, is named as additional insured on the umbrella/excess liability policy, subject to the same observations noted in Section VI.A below regarding the loss payee and additional insured designation update.

F. Business Interruption / Loss of Rents

Business interruption and loss of rental income coverage are included within the all-risk property/casualty program maintained through Atlantic Meridian Insurance Company (Policy No. AMP-VHG-2021-074511). The certificate confirms that the business interruption indemnity period is twelve (12) months, which satisfies the minimum requirement under Section 6.07(a)(iii) of the Credit Agreement.

Business interruption coverage extends to loss of gross revenue resulting from the interruption of hotel operations due to physical loss or damage caused by a covered peril. The coverage also includes extra expense provisions to cover additional costs incurred to resume or continue operations following a covered loss. Loss of rental income coverage is specifically included, which is relevant given the Assignment of Leases and Rents component of the Mortgage security. A number of the mortgaged hotel properties are subject to ground leases, management agreements, or franchise agreements under which rental income or management fees are generated, and the business interruption coverage extends to the loss of such income streams during the period of restoration following a covered casualty.

We have confirmed that the business interruption sublimit is the full policy limit (i.e., there is no separate sublimit for business interruption coverage), subject to the twelve-month indemnity period and an extended period of indemnity of an additional ninety (90) days following the completion of repairs.

G. Workers' Compensation

VHG maintains workers' compensation insurance through Covenant Mutual Assurance Company (Policy No. CMA-WC-2022-33180) providing statutory workers' compensation coverage in each of the 18 states in which VHG and its subsidiaries operate hotel properties. The policy provides coverage on a guaranteed cost basis, with statutory benefits as required by the applicable workers' compensation laws of each state.

The following states are covered under the workers' compensation program:

Arizona, California, Colorado, Florida, Georgia, Illinois, Maryland, Nevada, New Jersey, New York, North Carolina, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, and Washington.

Employers' liability coverage is included within the workers' compensation policy with the following limits:

We note that Texas is a state in which workers' compensation coverage is elective rather than mandatory. VHG has elected to provide workers' compensation coverage for its Texas hotel employees, which is confirmed on the certificate. We also note that Washington state requires coverage through the Washington State Department of Labor & Industries for certain categories of employees; the certificate confirms that VHG participates in the state fund for its Washington properties. The policy provides coverage in compliance with the monopolistic state fund requirements, where applicable.

We have confirmed that the workers' compensation coverage satisfies the requirements of Section 6.07(a)(vi) of the Credit Agreement.

H. Liquor Liability

VHG maintains liquor liability coverage as an endorsement to the commercial general liability policy issued by Sentinel Indemnity Corporation (Policy No. SIC-CGL-2021-55920, Endorsement No. LL-004). The liquor liability endorsement provides coverage for bodily injury and property damage arising out of the selling, serving, or furnishing of any alcoholic beverage in connection with the hotel food and beverage operations conducted at VHG's hotel properties.

The liquor liability coverage is subject to a per-occurrence limit of $2,000,000 and shares the general aggregate limit of the commercial general liability policy ($5,000,000). Coverage extends to all hotel properties with food and beverage operations, including restaurants, bars, lounges, banquet facilities, and catering operations. We have confirmed that all 74 hotel properties in the VHG portfolio maintain active liquor licenses and food and beverage operations.

We believe the liquor liability coverage satisfies the requirement under Section 6.07(a)(viii) of the Credit Agreement that VHG maintain such other insurance as is customary for companies of similar size in the hospitality industry.

V. Additional Insured / Loss Payee Designations

A. Loss Payee Endorsements (Property Policies)

We have reviewed the loss payee designations on the certificates of insurance for the property/casualty (all-risk) program, the flood insurance policies, and the earthquake insurance policy. The Credit Agreement requires that Crescent Harbor Bank, N.A., in its capacity as Collateral Agent under the Credit Agreement, be named as loss payee on all property/casualty policies covering Collateral, using a standard mortgagee clause (New York Standard Mortgagee Clause or equivalent). For the 42 mortgaged hotel properties, the Mortgage further requires that the loss payee endorsement include the standard non-contributory, non-reporting mortgagee clause providing that the interest of the Collateral Agent in the insurance coverage shall not be invalidated by any act or neglect of the insured or the owner of the property.

We have confirmed that the certificates for the all-risk property program (Atlantic Meridian Insurance Company), the earthquake program (Pacific Seismic Underwriters, Inc.), and the NFIP and excess flood policies identify a loss payee. However, as discussed in Section VI.A below, certain certificates continue to reflect the former collateral agent, Greystone Federal Credit Corp., as the designated loss payee rather than Crescent Harbor Bank, N.A. This is a result of the refinancing transaction, as the existing credit facilities were previously administered by Greystone Federal Credit Corp., and the loss payee designations have not yet been updated to reflect the new Collateral Agent.

The correct loss payee designation, which should appear on all property policies and endorsements following the update, is as follows:

Crescent Harbor Bank, N.A. as Collateral Agent under that certain Credit Agreement dated as of July 21, 2022 600 Lexington Avenue, 34th Floor New York, New York 10022

Attention: Agency Services — Verimark Hospitality Group Inc.

With respect to the 42 mortgaged hotel properties, the loss payee endorsement should include the standard non-contributory, non-reporting mortgagee clause (New York Standard Mortgagee Clause or equivalent) providing that:

(a) the interest of the Collateral Agent (as mortgagee) in the insurance shall not be invalidated by any act or neglect of the mortgagor or owner of the insured property;

(b) the insurer shall give at least thirty (30) days' prior written notice to the Collateral Agent of any cancellation, non-renewal, or material change in coverage; and

(c) in the event of payment of any loss to the Collateral Agent, the insurer shall be subrogated to the rights of the Collateral Agent to the extent of such payment.

The status of the loss payee designation for each policy type is set forth in detail in the table included as Appendix B to this memorandum.

B. Additional Insured Endorsements (Liability Policies)

We have confirmed that the certificates for the commercial general liability policy (Sentinel Indemnity Corporation) and the umbrella/excess liability policy (Pinnacle Re Insurance Group Ltd.) each include an additional insured endorsement. As with the loss payee designations, certain certificates continue to reference the former collateral agent (Greystone Federal Credit Corp.) rather than Crescent Harbor Bank, N.A. Updated additional insured endorsements are required to reflect the following designation:

Crescent Harbor Bank, N.A. as Collateral Agent under that certain Credit Agreement dated as of July 21, 2022 600 Lexington Avenue, 34th Floor New York, New York 10022

The additional insured endorsement should be on ISO Form CG 20 11 or equivalent, providing that the Collateral Agent is included as an additional insured with respect to liability arising out of the ownership, maintenance, or use of the insured premises and operations of VHG and its subsidiaries. We have confirmed that the additional insured coverage is on a primary and non-contributory basis, as required by the Credit Agreement.

C. Notice of Cancellation / Material Change

We have reviewed the cancellation notice provisions on each certificate of insurance. All certificates reviewed include a provision for thirty (30) days' prior written notice of cancellation or material modification to the Collateral Agent (or, on certain certificates, to the loss payee/additional insured), which satisfies the requirement of Section 6.07(c) of the Credit Agreement.

We note that several certificates include standard Acord form language providing for only ten (10) days' notice of cancellation due to nonpayment of premium. This is standard market practice and is expressly contemplated as acceptable under the Agent's insurance requirements letter dated June 28, 2022. Accordingly, we do not consider the ten-day notice for nonpayment of premium to be a deficiency.

The 30-day cancellation notice provision should be addressed to:

Crescent Harbor Bank, N.A., as Collateral Agent 600 Lexington Avenue, 34th Floor New York, New York 10022

Attention: Agency Services — Insurance Notifications

As noted, certain certificates currently direct the cancellation notice to Greystone Federal Credit Corp. at its former address. This should be corrected as part of the updated certificate and endorsement process described in Section VI below.

VI. Observations, Exceptions, and Recommended Action Items

A. Minor Observations

Based on our review, we have identified the following minor discrepancies and items requiring follow-up. None of these items constitutes a material deficiency that would, in our view, prevent closing of the Credit Agreement, but each should be addressed in the ordinary course:

1. Loss Payee and Additional Insured Designation — Prior Collateral Agent. The certificates for the all-risk property program (Atlantic Meridian Insurance Company, Policy No. AMP-VHG-2021-074511), the earthquake program (Pacific Seismic Underwriters, Inc., Policy No. PSU-EQ-2021-8834), and two of the NFIP flood policies continue to reflect Greystone Federal Credit Corp. as loss payee and/or additional insured, rather than Crescent Harbor Bank, N.A. as the new Collateral Agent. This is consistent with the fact that the refinancing has not yet closed, and the existing loss payee designations reflect the incumbent agent under the facilities being refinanced. Updated endorsements must be obtained on or before the closing date of July 21, 2022, or promptly thereafter during the post-closing period.

2. Policy Number Confirmation — Workers' Compensation. The certificate for the workers' compensation policy (Covenant Mutual Assurance Company) references Policy No. CMA-WC-2022-33180, but a supplemental certificate received on July 17, 2022 references a slightly different policy number (CMA-WC-2022-33180-A), which may reflect a state-specific endorsement. We recommend that VHG's insurance broker confirm the correct policy number and issue a corrected certificate if necessary.

3. Named Insured Confirmation — Guarantor Entities. On the commercial general liability certificate and the umbrella/excess liability certificate, the named insured section lists "Verimark Hospitality Group Inc. and all subsidiaries and affiliated entities." While this broad language likely encompasses all five Guarantor subsidiaries, we recommend that the certificates be updated to expressly list each Guarantor entity by name (i.e., Verimark Resort Properties LLC, VHG Management Services Inc., Verimark Convention Holdings LLC, Palmetto Beachfront Hotels LLC, and Cascadia Hospitality Corp.) to eliminate any ambiguity and to satisfy the Administrative Agent's request that all named insureds be specifically identified.

4. Effective Date Confirmation — NFIP Policies. Two of the NFIP flood policies covering properties in Texas reflect effective dates of October 15, 2021, with expiration dates of October 15, 2022. The remaining NFIP policies reflect effective dates that are staggered throughout the year. We have confirmed that all NFIP policies are currently in force; however, we recommend that VHG's broker confirm the renewal schedule for all NFIP policies and ensure that renewed policies are promptly delivered to the Collateral Agent with updated loss payee endorsements.

B. Post-Closing Insurance Items

Certain insurance deliverables may be addressed during the post-closing period pursuant to the Post-Closing Letter Agreement dated July 21, 2022, which provides a deadline of August 5, 2022 (fifteen (15) calendar days following the closing date) for delivery of the following items:

1. Updated Mortgagee Endorsements for Newly Recorded Mortgages. The Mortgage is being recorded in twelve (12) states (Florida, New York, California, Texas, Georgia, Colorado, Arizona, Illinois, Washington, Oregon, Nevada, and Virginia) with respect to the 42 mortgaged hotel properties. Following recording of the Mortgages and receipt of recorded copies, updated mortgagee endorsements should be obtained from each insurer reflecting the specific recording information (book, page, instrument number, and recording date) for each Mortgage. These endorsements should be delivered to the Collateral Agent within the post-closing period.

2. Coordination with Title Insurance. Replacement title insurance endorsements and mortgagee insurance endorsements for the mortgaged properties should be coordinated with Continental Fidelity Title Company, which is issuing the lender's title insurance policies in connection with the closing. We have been in communication with Continental Fidelity regarding the sequencing of mortgage recording and endorsement delivery, and we anticipate that the title insurance endorsements and the corresponding insurance mortgagee endorsements can be delivered concurrently within the post-closing period.

3. Final Excess Flood Insurance Endorsements. Updated loss payee endorsements for the excess flood insurance program (Atlantic Meridian Insurance Company) reflecting the Collateral Agent's interest as mortgagee loss payee should be delivered within the post-closing period.

C. Recommended Actions

Based on the foregoing, we recommend the following actions:

1. Immediate Action — Pre-Closing. VHG should instruct its insurance broker, Hartwell & Associates Insurance Brokerage LLC, to issue updated certificates of insurance reflecting the following changes, to be delivered to Crescent Harbor Bank, N.A. on or before the closing date of July 21, 2022:

(a) Crescent Harbor Bank, N.A. (as Collateral Agent under the Credit Agreement) designated as loss payee and mortgagee loss payee on all property/casualty, flood, and earthquake policies, in place of Greystone Federal Credit Corp.;

(b) Crescent Harbor Bank, N.A. (as Collateral Agent) designated as additional insured on all general commercial liability and umbrella/excess liability policies, in place of Greystone Federal Credit Corp.;

(c) All five Guarantor entities (Verimark Resort Properties LLC, VHG Management Services Inc., Verimark Convention Holdings LLC, Palmetto Beachfront Hotels LLC, and Cascadia Hospitality Corp.) expressly listed as named insureds on each relevant policy certificate;

(d) The 30-day cancellation notice provision addressed to Crescent Harbor Bank, N.A. at its New York office: 600 Lexington Avenue, 34th Floor, New York, New York 10022, Attention: Agency Services — Insurance Notifications; and

(e) Confirmation of the correct policy number for the workers' compensation policy.

2. Post-Closing Action. Updated formal endorsements (as distinguished from certificates of insurance) for the 42 mortgaged properties should be obtained from each insurer and delivered to Crescent Harbor Bank, N.A. within the post-closing period ending August 5, 2022. These endorsements should include:

(a) Standard mortgagee clause endorsements (New York Standard Mortgagee Clause or equivalent) for each mortgaged property, reflecting the specific Mortgage recording information;

(b) Loss payee endorsements for the excess flood insurance program; and

3. Annual Renewal Coordination. Given that the core insurance program renews on October 1, 2022, VHG should coordinate with its insurance broker to ensure that renewed policies are issued with endorsements reflecting the Collateral Agent's interests, and that updated certificates are delivered to the Administrative Agent within thirty (30) days following the renewal date, as required by the Credit Agreement.

VII. Intercreditor Considerations

In addition to the $700,000,000 Senior Secured Term Loan B facility being closed under the Credit Agreement, VHG maintains a $400,000,000 Senior Secured Revolving Credit Facility (the "RCF") for which Crescent Harbor Bank, N.A. also serves as Administrative Agent and Collateral Agent. The RCF is governed by the Revolving Credit Agreement dated as of July 21, 2022, among VHG, the Guarantors, Crescent Harbor Bank, N.A. as Administrative Agent and Collateral Agent, and the Revolving Lenders party thereto.

The Term Loan B and the RCF share the same first-lien collateral package — including the 42 mortgaged hotel properties — on a pari passu basis pursuant to the terms of the Amended and Restated Intercreditor Agreement dated as of the closing date (the "Intercreditor Agreement"). The Intercreditor Agreement provides that insurance proceeds relating to Collateral shall be applied in accordance with the respective credit agreements, with the Collateral Agent acting as the single secured party for purposes of receiving insurance proceeds and administering the distribution thereof.

We have reviewed the insurance requirements under the RCF credit agreement and confirm that they are substantively identical to the insurance requirements under the Term Loan B Credit Agreement. Because Crescent Harbor Bank, N.A. serves as Collateral Agent under both facilities, a single set of insurance certificates and endorsements naming Crescent Harbor Bank, N.A. as Collateral Agent (without reference to a specific credit agreement) is sufficient to satisfy the insurance requirements of both the Term Loan B and the RCF. The loss payee and additional insured designations should reference Crescent Harbor Bank, N.A. "as Collateral Agent" generally, which will ensure coverage of the Agent's interests under both facilities without the need for separate endorsements.

We note that the Intercreditor Agreement provides that, in the event of a casualty loss, insurance proceeds shall be distributed to the respective Lender groups under the Term Loan B and the RCF on a pro rata basis (based on the outstanding principal balances under each facility at the time of the casualty), subject to the reinvestment rights set forth in each credit agreement. The Collateral Agent's role as the single point of contact for insurers simplifies the claims administration process and is consistent with market practice for pari passu first-lien structures.

VIII. Conclusion

Based on our review of the certificates of insurance provided by VHG, we conclude that VHG's insurance program is substantially compliant with the requirements of Section 6.07 of the Credit Agreement and the related Mortgage and security documents. The insurance program provides comprehensive coverage for the 74-property hotel portfolio across all required coverage categories, with limits, deductibles, and insurer financial strength ratings that satisfy the Credit Agreement's requirements.

The action items identified in Section VI above should be completed as follows:

• Pre-Closing (by July 21, 2022): Delivery of updated certificates of insurance reflecting Crescent Harbor Bank, N.A. (as Collateral Agent) as loss payee and additional insured, with all Guarantor entities listed as named insureds and cancellation notice provisions addressed to the Collateral Agent at its New York address.

• Post-Closing (by August 5, 2022): Delivery of formal mortgagee endorsements for the 42 mortgaged properties, updated excess flood endorsements, and earthquake policy endorsements for the 5 California properties, coordinated with Continental Fidelity Title Company's delivery of title insurance endorsements.

This memorandum should be read in conjunction with the following related deliverables and work product:

• Survey and Flood Certification Summary Memorandum (Daniel Obi, July 2022)

• Mortgage and Title Deliverables Checklist (revised June 20, 2022)

• Master Closing Checklist for the $700,000,000 Senior Secured Term Loan B Credit Agreement

• Agent's Insurance Requirements Letter (Crescent Harbor Bank, N.A., dated June 28, 2022)

We will update this memorandum upon receipt of the final updated certificates and endorsements from VHG's insurance broker, and we will confirm compliance with the post-closing insurance deliverables upon expiration of the post-closing period on August 5, 2022. Please do not hesitate to contact me with any questions regarding this review or if additional analysis is required.

Appendix A — Schedule of Insurance Policies Reviewed

The following table sets forth the details of each insurance policy reviewed in connection with this memorandum:

Appendix B — Additional Insured / Loss Payee Designation Status

The following table summarizes the status of loss payee and additional insured designations for Crescent Harbor Bank, N.A. (as Collateral Agent) on each policy type:

Summary: Of the eight policy categories requiring loss payee or additional insured designations, four have been confirmed as reflecting the correct designation for Crescent Harbor Bank, N.A. (as Collateral Agent), and four require updates to replace the prior collateral agent (Greystone Federal Credit Corp.). Additionally, two of the twenty-six individual NFIP flood policies require loss payee updates. All updates should be completed on or before the closing date, with formal endorsements for mortgaged properties to follow during the post-closing period.

Appendix C — Properties in Special Flood Hazard Areas

The following table identifies the properties in the VHG portfolio that are located in FEMA-designated Special Flood Hazard Areas, together with the corresponding flood insurance details and compliance status. This table is based on the flood zone determinations set forth in the Survey and Flood Certification Summary Memorandum (Daniel Obi, July 2022) and the flood insurance certificates reviewed in connection with this memorandum.

Summary: All 26 properties identified as being located in FEMA-designated Special Flood Hazard Areas carry flood insurance at or above the minimum levels required by the Credit Agreement and applicable federal banking regulations. Of these 26 properties, 22 are among the 42 mortgaged properties. Each property carries primary NFIP coverage at the maximum available amount ($500,000 per building) supplemented by the portfolio-wide excess flood program through Atlantic Meridian Insurance Company.

This memorandum has been prepared by Daniel Obi, Working Associate, Banking & Finance, for the internal use of the deal team in connection with the Verimark Hospitality Group Inc. $700,000,000 Senior Secured Term Loan B Refinancing. This memorandum is privileged and confidential attorney work product and should not be distributed outside the firm or to any third party without the prior written consent of the responsible partner. Please direct any questions to Daniel Obi (ext. 4287) or Sophie Tremblay (ext. 3915).

Coverage Type	Effective Date	Expiration Date	Status
Property / Casualty (All-Risk)	October 1, 2021	October 1, 2022	In Force
General Commercial Liability	October 1, 2021	October 1, 2022	In Force
Umbrella / Excess Liability	October 1, 2021	October 1, 2022	In Force
Workers' Compensation	January 1, 2022	January 1, 2023	In Force
Flood Insurance (NFIP)	Various (see Appendix C)	Various (see Appendix C)	In Force
Earthquake Insurance	October 1, 2021	October 1, 2022	In Force
Liquor Liability	October 1, 2021	October 1, 2022	In Force
Automobile Liability	October 1, 2021	October 1, 2022	In Force
Peril / Coverage	Sublimit	Deductible
All Perils (except as noted)	Blanket Limit	$250,000 per occurrence
Named Windstorm (FL, TX, coastal)	$500,000,000 per occurrence	5% of TIV at affected location(s), min. $500,000
Flood (non-NFIP excess)	$100,000,000 per occurrence / $200,000,000 annual aggregate	$500,000 per occurrence
Earthquake (non-CA)	$75,000,000 per occurrence / $150,000,000 annual aggregate	5% of TIV at affected location(s)
Terrorism (TRIA certified)	Full policy limits	$250,000 per occurrence
Equipment Breakdown	$50,000,000 per occurrence	$100,000 per occurrence
Coverage Element	Detail
Per-Occurrence Limit	$200,000,000
Annual Aggregate Limit	$200,000,000
Deductible	10% of TIV at affected location(s), subject to a minimum deductible of $1,000,000
Coverage Basis	Replacement Cost
Building & Contents	Included
Business Interruption	Included (12-month indemnity period)
Coverage Element	Limit
Per-Occurrence Limit	$2,000,000

General Aggregate Limit	$5,000,000
Products-Completed Operations Aggregate	$2,000,000
Personal & Advertising Injury	$2,000,000 per occurrence
Damage to Premises Rented to You	$1,000,000 per occurrence
Medical Expense (any one person)	$10,000
Coverage Element	Limit
Per-Occurrence Limit	$50,000,000
General Aggregate Limit	$50,000,000
Coverage Element	Limit
Bodily Injury by Accident	$1,000,000 each accident
Bodily Injury by Disease — Policy Limit	$1,000,000
Bodily Injury by Disease — Each Employee	$1,000,000
Coverage Type	Carrier	Policy No.	Effective Date	Expiration Date	Per-Occurrence Limit	Aggregate Limit	Deductible	Named Insured(s)
Property / Casualty (All-Risk)	Atlantic Meridian Insurance Co.	AMP-VHG-2021-074511	10/1/2021	10/1/2022	$3,245,000,000 (blanket)	$3,245,000,000	$250,000 (std. perils); 5% TIV (windstorm)	VHG and all subsidiaries
General Commercial Liability	Sentinel Indemnity Corp.	SIC-CGL-2021-55920	10/1/2021	10/1/2022	$2,000,000	$5,000,000	N/A	VHG and all subsidiaries
Umbrella / Excess Liability	Pinnacle Re Insurance Group Ltd.	PRIG-UMB-2021-07744	10/1/2021	10/1/2022	$50,000,000	$50,000,000	$10,000 SIR	VHG and all subsidiaries
Workers' Compensation	Covenant Mutual Assurance Co.	CMA-WC-2022-33180	1/1/2022	1/1/2023	Statutory	Statutory	N/A	VHG and all subsidiaries
Employers' Liability	Covenant Mutual Assurance Co.	CMA-WC-2022-33180	1/1/2022	1/1/2023	$1,000,000 each accident	$1,000,000	N/A	VHG and all subsidiaries
Flood (NFIP — Primary)	Homestead Flood Insurance Services (WYO)	Various (26 policies)	Various	Various	$500,000 per building (max.)	N/A	$5,000	Individual property entities
Flood (Excess — Private)	Atlantic Meridian Insurance Co.	AMP-XFL-2021-074512	10/1/2021	10/1/2022	$100,000,000	$200,000,000 (ann. agg.)	$500,000	VHG and all subsidiaries
Earthquake (California)	Pacific Seismic Underwriters, Inc.	PSU-EQ-2021-8834	10/1/2021	10/1/2022	$200,000,000	$200,000,000	10% TIV (min. $1,000,000)	Verimark Resort Properties LLC
Liquor Liability	Sentinel Indemnity Corp.	SIC-CGL-2021-55920 (End. LL-004)	10/1/2021	10/1/2022	$2,000,000	Shared w/ CGL ($5,000,000)	N/A	VHG and all subsidiaries
Automobile Liability	Sentinel Indemnity Corp.	SIC-AL-2021-55921	10/1/2021	10/1/2022	$1,000,000 CSL	N/A	N/A	VHG and all subsidiaries
Policy / Coverage Type	Carrier	Designation Type	Designee Reflected on Certificate	Status
Property / Casualty (All-Risk)	Atlantic Meridian Insurance Co.	Loss Payee / Mortgagee Loss Payee	Greystone Federal Credit Corp.	Pending Update — to be updated to Crescent Harbor Bank, N.A. (as Collateral Agent) at closing

General Commercial Liability	Sentinel Indemnity Corp.	Additional Insured	Crescent Harbor Bank, N.A. (as Collateral Agent)	Confirmed
Umbrella / Excess Liability	Pinnacle Re Insurance Group Ltd.	Additional Insured	Greystone Federal Credit Corp.	Pending Update — to be updated to Crescent Harbor Bank, N.A. (as Collateral Agent) at closing
Flood (NFIP — Primary)	Homestead Flood Insurance Services	Loss Payee	Greystone Federal Credit Corp. (on 2 of 26 policies); Crescent Harbor Bank, N.A. (on 24 of 26 policies)	Partially Confirmed — 2 policies pending update
Flood (Excess — Private)	Atlantic Meridian Insurance Co.	Loss Payee	Greystone Federal Credit Corp.	Pending Update — to be updated at closing
Earthquake (California)	Pacific Seismic Underwriters, Inc.	Loss Payee / Mortgagee Loss Payee	Greystone Federal Credit Corp.	Pending Update — to be updated at closing
Workers' Compensation	Covenant Mutual Assurance Co.	N/A (not applicable)	N/A	N/A — no loss payee or additional insured designation required
Liquor Liability	Sentinel Indemnity Corp.	Additional Insured (via CGL endorsement)	Crescent Harbor Bank, N.A. (as Collateral Agent)	Confirmed
Automobile Liability	Sentinel Indemnity Corp.	Additional Insured	Crescent Harbor Bank, N.A. (as Collateral Agent)	Confirmed
Property Name	Location	Owner	FEMA Flood Zone	Community / Panel No.	NFIP Policy No.	NFIP Coverage Amount	Excess Flood Coverage	Mortgaged Property	Compliance Status
Palmetto Gulf Resort	Naples, FL	Palmetto Beachfront Hotels LLC	VE	12021C-0445G	HFIS-FL-001	$500,000	Yes — AMP-XFL	Yes	Compliant
Palmetto Sands Hotel	Clearwater Beach, FL	Palmetto Beachfront Hotels LLC	VE	12103C-0182H	HFIS-FL-002	$500,000	Yes — AMP-XFL	Yes	Compliant
Palmetto Shores Inn	Sarasota, FL	Palmetto Beachfront Hotels LLC	VE	12115C-0516G	HFIS-FL-003	$500,000	Yes — AMP-XFL	Yes	Compliant
Verimark Bayfront Hotel	Tampa, FL	Palmetto Beachfront Hotels LLC	AE	12057C-0390H	HFIS-FL-004	$500,000	Yes — AMP-XFL	Yes	Compliant
Palmetto Beach Club Resort	Fort Lauderdale, FL	Palmetto Beachfront Hotels LLC	VE	12011C-0302H	HFIS-FL-005	$500,000	Yes — AMP-XFL	Yes	Compliant
Verimark Oceanfront Hotel	Miami Beach, FL	Palmetto Beachfront Hotels LLC	VE	12086C-0564G	HFIS-FL-006	$500,000	Yes — AMP-XFL	Yes	Compliant
Palmetto Keys Resort	Key West, FL	Palmetto Beachfront Hotels LLC	VE	12087C-0710G	HFIS-FL-007	$500,000	Yes — AMP-XFL	Yes	Compliant
Palmetto Harbor Inn	Jacksonville Beach, FL	Palmetto Beachfront Hotels LLC	AE	12031C-0277H	HFIS-FL-008	$500,000	Yes — AMP-XFL	Yes	Compliant
Verimark Palm Coast Hotel	Palm Beach, FL	Palmetto Beachfront Hotels LLC	AE	12099C-0305G	HFIS-FL-009	$500,000	Yes — AMP-XFL	Yes	Compliant
Palmetto Island Resort	Amelia Island, FL	Palmetto Beachfront Hotels LLC	AE	12089C-0125G	HFIS-FL-010	$500,000	Yes — AMP-XFL	Yes	Compliant
Palmetto Emerald Hotel	Destin, FL	Palmetto Beachfront Hotels LLC	AE	12091C-0365H	HFIS-FL-011	$500,000	Yes — AMP-XFL	Yes	Compliant
Verimark Panhandle Inn	Panama City Beach, FL	Palmetto Beachfront Hotels LLC	AE	12005C-0200G	HFIS-FL-012	$500,000	Yes — AMP-XFL	Yes	Compliant
Verimark Hudson River Hotel	Manhattan, NY	Verimark Resort Properties LLC	AE	36061C-0040F	HFIS-NY-001	$500,000	Yes — AMP-XFL	Yes	Compliant
Verimark Brooklyn Waterfront	Brooklyn, NY	Verimark Resort Properties LLC	AE	36047C-0294G	HFIS-NY-002	$500,000	Yes — AMP-XFL	Yes	Compliant
Verimark Long Island Resort	Long Beach, NY	Verimark Resort Properties LLC	VE	36059C-0328G	HFIS-NY-003	$500,000	Yes — AMP-XFL	Yes	Compliant
Verimark Harbor Hotel	Staten Island, NY	Verimark Resort Properties LLC	AE	36085C-0186G	HFIS-NY-004	$500,000	Yes — AMP-XFL	Yes	Compliant

Verimark Rockaway Suites	Queens, NY	Verimark Resort Properties LLC	VE	36081C-0353G	HFIS-NY-005	$500,000	Yes — AMP-XFL	Yes	Compliant
Verimark Westchester Inn	Rye, NY	Verimark Resort Properties LLC	AE	36119C-0081F	HFIS-NY-006	$500,000	Yes — AMP-XFL	Yes	Compliant
Verimark Galveston Resort	Galveston, TX	Verimark Resort Properties LLC	VE	48167C-0495G	HFIS-TX-001	$500,000	Yes — AMP-XFL	Yes	Compliant
Verimark Bayou Hotel	Houston, TX	Verimark Resort Properties LLC	AE	48201C-0590K	HFIS-TX-002	$500,000	Yes — AMP-XFL	Yes	Compliant
Verimark Riverwalk Inn	San Antonio, TX	Verimark Resort Properties LLC	AE	48029C-0430G	HFIS-TX-003	$500,000	Yes — AMP-XFL	Yes	Compliant
Verimark Corpus Christi Hotel	Corpus Christi, TX	Verimark Resort Properties LLC	AE	48355C-0210H	HFIS-TX-004	$500,000	Yes — AMP-XFL	Yes	Compliant
Verimark Norfolk Waterfront	Norfolk, VA	Verimark Resort Properties LLC	AE (partial)	51710C-0185G	HFIS-VA-001	$500,000	Yes — AMP-XFL	Yes	Compliant
Verimark Virginia Beach Hotel	Virginia Beach, VA	Verimark Resort Properties LLC	AE (partial)	51810C-0472H	HFIS-VA-002	$500,000	Yes — AMP-XFL	Yes	Compliant
Cascadia Waterfront Hotel	Seattle, WA	Cascadia Hospitality Corp.	AE	53033C-0815G	HFIS-WA-001	$500,000	Yes — AMP-XFL	No	Compliant
Cascadia Riverfront Inn	Portland, OR	Cascadia Hospitality Corp.	AE	41051C-0090G	HFIS-OR-001	$500,000	Yes — AMP-XFL	No	Compliant

MEMORANDUM
TO: Ian Blackwood, Responsible Partner, Banking & Finance Sophie Tremblay, Lead Associate, Banking & Finance
FROM: Daniel Obi, Working Associate, Banking & Finance
DATE: July 19, 2022
RE: Review of Certificates of Insurance — Verimark Hospitality Group Inc. $700,000,000 Senior Secured Term Loan B Refinancing
CLIENT/MATTER: Verimark Hospitality Group Inc. / 1016-00009
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum is protected by the attorney-client privilege and the work product doctrine. It has been prepared at the direction of counsel in connection with anticipated legal representation and should not be disclosed to any third party without the prior written consent of the undersigned.
I. Purpose and Executive Summary
This memorandum summarizes the results of the review of certificates of insurance provided by Verimark Hospitality Group Inc. ("VHG" or the "Borrower") in connection with the $700,000,000 Senior Secured Term Loan B Credit Agreement dated July 21, 2022 (the "Credit Agreement") among VHG, as Borrower, the Guarantors party thereto, Crescent Harbor Bank, N.A., as Administrative Agent and Collateral Agent (in such capacities, the "Agent" or "Collateral Agent"), and the Lenders party thereto.
The review was conducted to confirm compliance with the insurance covenants set forth in Section 6.07 (Maintenance of Insurance) of the Credit Agreement, which constitutes an affirmative covenant requiring the Borrower and each Guarantor to maintain insurance meeting specified minimum requirements as a condition to the effectiveness of the Credit Agreement and the initial borrowing thereunder. The simultaneous sign-and-close of the Credit Agreement is currently scheduled for July 21, 2022. Confirmation of insurance compliance is a condition precedent to closing under Section 4.01(j) of the Credit Agreement, and accordingly this review was undertaken in advance of the closing date in order to identify any deficiencies requiring remediation.
VHG provided certificates of insurance in standard Acord 25 (Certificate of Liability Insurance) and Acord 28 (Evidence of Commercial Property Insurance) forms covering its portfolio of 74 full-service and select-service hotel properties located across 18 states, with an aggregate appraised portfolio value of approximately $3.1 billion as determined by the independent appraisals conducted by Stanton Hospitality Valuation Group in connection with this financing. The certificates were delivered to our office on July 14, 2022 via electronic transmission from VHG's insurance broker, Hartwell & Associates Insurance Brokerage LLC, and supplemented with additional certificates received on July 17, 2022.
Overall Conclusion. Based on our review, the certificates of insurance, taken as a whole, are substantially compliant with the Credit Agreement's insurance requirements, subject to certain minor observations and action items identified in Section VI below. These observations are administrative in nature and do not, in our view, constitute material deficiencies that would prevent closing. Specifically, certain certificates continue to reflect the prior collateral agent (Greystone Federal Credit Corp.) as loss payee and additional insured, rather than Crescent Harbor Bank, N.A. in its capacity as Collateral Agent, and a small number of certificates require confirmation of named insured designations for certain Guarantor subsidiaries. We recommend that updated certificates and endorsements be obtained on or before the closing date, with final mortgagee endorsements to be delivered during the post-closing period as contemplated by the Post-Closing Letter Agreement.
We note that the 42 mortgaged hotel properties (owned primarily by Verimark Resort Properties LLC, together with certain properties held by Palmetto Beachfront Hotels LLC and Cascadia Hospitality Corp.) with an aggregate appraised value of approximately $2.18 billion, were subject to heightened review given the mortgage and collateral requirements applicable to those properties under the Credit Agreement and the related Mortgage, Deed of Trust, Assignment of Leases and Rents, and Security Agreement (the "Mortgage"). Our review of the insurance coverage for these mortgaged properties is addressed in detail in Sections IV and V below.
II. Background — Insurance Requirements Under the Credit Agreement
A. Affirmative Covenant — Insurance
Section 6.07 of the Credit Agreement contains an affirmative covenant requiring VHG and each Guarantor to maintain, at their own expense, insurance with financially sound and reputable insurance companies (rated at least "A-" by A.M. Best Company or an equivalent rating agency) covering their properties and assets against loss or damage of the kinds customarily insured against by companies of similar size and financial condition engaged in the same or similar businesses and operating in the same or similar locations.
The Credit Agreement requires the following specific coverage types, at minimum:
(i) Property/Casualty (All-Risk) Insurance. All-risk property insurance covering all owned and leased real and personal property of VHG and its subsidiaries, written on a replacement cost basis, in amounts sufficient to avoid application of any co-insurance penalty, and covering standard perils including fire, lightning, wind, hail, explosion, smoke, water damage, vandalism, malicious mischief, and such other risks as are customarily covered by all-risk policies in the hospitality industry.
(ii) General Commercial Liability Insurance. Commercial general liability insurance covering bodily injury, property damage, personal and advertising injury, and contractual liability, with minimum per-occurrence and aggregate limits specified in the Credit Agreement.
(iii) Business Interruption Insurance. Business interruption and loss of rental income coverage with an indemnity period of not less than twelve (12) months.
(iv) Flood Insurance. Flood insurance for all properties located in special flood hazard areas as designated by the Federal Emergency Management Agency ("FEMA"), in amounts at least equal to the lesser of (a) the outstanding principal balance of indebtedness allocable to such property and (b) the maximum coverage available under the National Flood Insurance Program ("NFIP"), as required by the Flood Disaster Protection Act of 1973, as amended, and applicable federal banking regulations.
(v) Earthquake Insurance. Earthquake insurance for all properties located in the State of California, in amounts and with deductibles customary for properties of similar size and value in the applicable seismic zones.
(vi) Workers' Compensation Insurance. Workers' compensation insurance in statutory amounts as required by applicable law in each state in which VHG and its subsidiaries conduct business, together with employers' liability insurance with customary limits.
(vii) Umbrella/Excess Liability Insurance. Umbrella or excess liability insurance providing coverage above the primary general liability, automobile liability, and employers' liability policies, with aggregate limits reasonably satisfactory to the Administrative Agent.
(viii) Other Insurance. Such other insurance as is customary for companies of similar size engaged in the hospitality industry, including, without limitation, liquor liability insurance for hotel food and beverage operations and automobile liability insurance.
The Credit Agreement further requires that Crescent Harbor Bank, N.A., in its capacity as Collateral Agent, be named as "additional insured" on all liability policies and as "loss payee" (or, with respect to mortgaged properties, "mortgagee loss payee") on all property policies, in each case using standard mortgagee clause endorsements in form and substance reasonably satisfactory to the Collateral Agent.
Section 6.07(c) of the Credit Agreement requires that each insurance policy maintained in accordance with the foregoing provisions contain a provision requiring the insurer to give not less than thirty (30) days' advance written notice of cancellation or material modification to the Collateral Agent (with a ten (10) day notice period for cancellation due to nonpayment of premium being customary and acceptable under the Agent's insurance requirements letter dated June 28, 2022).
B. Mortgage Requirements — Insurance for Mortgaged Properties
The form of Mortgage, Deed of Trust, Assignment of Leases and Rents, and Security Agreement (the "Mortgage"), which is being executed by Verimark Resort Properties LLC, Palmetto Beachfront Hotels LLC, and Cascadia Hospitality Corp. with respect to the 42 mortgaged hotel properties, imposes specific insurance requirements in addition to those contained in the Credit Agreement. Section 4.01 of the Mortgage requires the applicable Grantor to maintain property insurance on each mortgaged property on a replacement cost basis, without deduction for depreciation, in an amount not less than the full insurable value of each such property. The Mortgage further requires that each property policy include a standard non-contributory, non-reporting mortgagee clause (New York Standard Mortgagee Clause or equivalent) naming the Collateral Agent as mortgagee loss payee.
With respect to flood insurance, the Mortgage cross-references the Credit Agreement's requirements and further requires compliance with the National Flood Insurance Program and applicable federal banking regulations, including the provisions of the Flood Disaster Protection Act of 1973, as amended by the National Flood Insurance Reform Act of 1994 and the Biggert-Waters Flood Insurance Reform Act of 2012. As noted in the Survey and Flood Certification Summary Memorandum prepared by the undersigned (dated July 2022), flood zone determinations have been obtained from Sundial Systems for each of the 42 mortgaged properties. Properties identified as being located in FEMA-designated Special Flood Hazard Areas ("SFHAs") are required to carry flood insurance meeting the requirements of both the Credit Agreement and applicable federal law.
C. Collateral Agent / Secured Party Protections
Section 2.05(b)(ii) of the Credit Agreement provides that insurance proceeds relating to a casualty event affecting any property constituting Collateral under the Security Documents shall, subject to certain reinvestment rights set forth therein, constitute mandatory prepayment proceeds and be applied to prepay the Term Loans in accordance with the Credit Agreement's mandatory prepayment waterfall. The Borrower has a reinvestment right for a period of 365 days (or 545 days if a binding commitment to reinvest is entered into within 365 days) following receipt of such proceeds, provided that no Event of Default has occurred and is continuing at the time of such reinvestment.
These provisions underscore the importance of confirming that the Collateral Agent is properly named as loss payee and mortgagee loss payee on all applicable property insurance policies, so that insurance proceeds are directed in accordance with the Credit Agreement's mandatory prepayment and reinvestment framework.
III. Insurance Certificates Reviewed
A. Listing of Certificates
The following certificates of insurance were reviewed in connection with this memorandum, organized by coverage type and insurer:
1. Property / Casualty (All-Risk) Program — Policy issued by Atlantic Meridian Insurance Company (A.M. Best Rating: A, XV), covering all 74 hotel properties in the VHG portfolio. Business interruption and loss of rental income coverage are included within this program as sub-coverages. Coverage also includes time element coverage and extra expense provisions.
2. General Commercial Liability Policy — Policy issued by Sentinel Indemnity Corporation (A.M. Best Rating: A+, XIV), providing primary commercial general liability coverage for VHG and all subsidiaries across the 74-property portfolio.
3. Umbrella / Excess Liability Policy — Policy issued by Pinnacle Re Insurance Group Ltd. (A.M. Best Rating: A, XV), providing excess liability coverage above the primary general liability, automobile liability, and employers' liability layers.
4. Workers' Compensation Policies — Policies issued by Covenant Mutual Assurance Company (A.M. Best Rating: A-, XII), providing statutory workers' compensation coverage and employers' liability insurance on a state-by-state basis for all 18 states in which VHG and its subsidiaries operate hotel properties.
5. Flood Insurance Policies — A combination of NFIP policies (written through WYO carrier Homestead Flood Insurance Services) and private excess flood insurance issued by Atlantic Meridian Insurance Company, covering properties identified as being located in FEMA-designated SFHAs.
6. Earthquake Insurance — Policy issued by Pacific Seismic Underwriters, Inc. (A.M. Best Rating: A, XI), covering the 5 California hotel properties owned by Verimark Resort Properties LLC.
7. Liquor Liability Coverage — Endorsement to the commercial general liability policy issued by Sentinel Indemnity Corporation, providing liquor liability coverage for all hotel food and beverage operations across the portfolio.
8. Automobile Liability Insurance — Policy issued by Sentinel Indemnity Corporation, covering owned, non-owned, and hired vehicles (reviewed for completeness but not a primary focus of this memorandum).
B. Named Insureds
We have confirmed that the named insureds on the certificates of insurance include VHG and each of the five Guarantor entities that are party to the Credit Agreement, as follows:
• Verimark Hospitality Group Inc. — the Borrower and parent holding company.
• Verimark Resort Properties LLC — the principal property-owning subsidiary, which holds fee title to 42 hotel properties across 12 states and is the Grantor under the Mortgage for those properties.
• VHG Management Services Inc. — the management subsidiary providing hotel management and operational services across the portfolio.
• Verimark Convention Holdings LLC — the subsidiary that owns and operates three convention center hotels (in Atlanta, Chicago, and Denver).
• Palmetto Beachfront Hotels LLC — the subsidiary that owns 12 coastal resort properties located in Florida (primarily along the Gulf Coast and Southeast Atlantic coast).
• Cascadia Hospitality Corp. — the subsidiary that owns 8 hotel properties in the Pacific Northwest states of Washington and Oregon.
As noted in Section VI.A below, we identified a small number of certificates where one or more of the Guarantor entities was not expressly listed as a named insured, and we have recommended that updated certificates be obtained to confirm blanket inclusion of all entities.
C. Certificate Dates and Policy Periods
We have reviewed the effective dates and expiration dates for each policy reflected on the certificates of insurance. All policies reviewed are currently in force as of the date of this memorandum and have policy periods extending beyond the closing date of July 21, 2022. The following table summarizes the policy periods:
We note that the annual renewal date for the core insurance program (property, liability, umbrella, earthquake, and liquor liability) is October 1, 2022. In connection with such renewal, updated certificates and endorsements reflecting the Collateral Agent's interests should be obtained and delivered to the Agent. The Credit Agreement requires delivery of updated certificates of insurance to the Administrative Agent on an annual basis not later than thirty (30) days following each policy renewal date.
IV. Coverage Analysis — Compliance with Credit Agreement Requirements
A. Property / Casualty (All-Risk) Insurance
The all-risk property/casualty insurance program maintained by VHG and its subsidiaries is placed through Atlantic Meridian Insurance Company under Policy No. AMP-VHG-2021-074511. Coverage is written on a blanket, replacement cost basis covering all 74 hotel properties in the VHG portfolio, without deduction for depreciation. The aggregate insured value reflected on the certificate is $3,245,000,000, which exceeds the aggregate appraised portfolio value of approximately $3.1 billion and therefore satisfies the replacement cost requirement and avoids application of any co-insurance penalty.
The policy provides coverage for standard perils including fire, lightning, wind, hail, explosion, aircraft damage, vehicle damage, smoke, riot, civil commotion, water damage, vandalism, malicious mischief, sprinkler leakage, collapse, and such other perils as are customarily covered by all-risk policies in the hospitality industry. We have confirmed that the policy covers building structures, tenant improvements, furniture, fixtures and equipment ("FF&E"), and personal property at each insured location.
The following sublimits and deductibles are applicable and have been reviewed for reasonableness in light of the size and geographic distribution of the portfolio:
With respect to the named windstorm sublimit, we note that this sublimit is particularly relevant for the 12 Florida coastal resort properties held by Palmetto Beachfront Hotels LLC. The $500,000,000 named windstorm sublimit represents significant capacity and is consistent with market terms for hospitality portfolios of this size with coastal Florida exposure. The 5% of total insured value ("TIV") deductible at affected locations for named windstorm is standard for coastal Florida properties.
We have reviewed the deductible levels across all coverage categories and believe them to be reasonable and consistent with industry practice for a hospitality portfolio of this scale and geographic diversity. The deductible levels are consistent with the Credit Agreement's requirement that deductibles be in amounts customary for companies of similar size in the hospitality industry.
B. Flood Insurance
Reference is made to the Survey and Flood Certification Summary Memorandum prepared by the undersigned (dated July 2022), which identifies the properties in the VHG portfolio that are located in FEMA-designated Special Flood Hazard Areas. As described in that memorandum, flood zone determinations were obtained from Sundial Systems for each of the 74 hotel properties in the portfolio, with particular attention to the 42 mortgaged properties.
Based on those determinations, a total of 26 properties across the portfolio are located in or partially within FEMA-designated SFHAs (Zones A, AE, AH, AO, V, or VE), including 22 properties that are among the 42 mortgaged properties. The states in which mortgaged properties are located in flood zones include Florida (12 properties, all held by Palmetto Beachfront Hotels LLC), New York (6 properties), Texas (4 properties), and Virginia (2 properties, with partial SFHA encroachment). A complete listing of these properties, together with their corresponding flood insurance details, is set forth in Appendix C to this memorandum.
We have confirmed that each of the 26 properties located in SFHAs carries flood insurance in amounts at least equal to the lesser of (a) the outstanding principal balance of indebtedness reasonably allocable to such property (as determined by reference to the individual property appraised values and their proportional share of the total loan amount) and (b) the maximum coverage available under the NFIP for commercial properties, which is currently $500,000 per building. Because the NFIP maximum of $500,000 is significantly below the replacement cost value and allocable loan balance for each property, VHG has procured excess flood insurance through the private market (Atlantic Meridian Insurance Company) to supplement the NFIP coverage.
The excess flood insurance program provides an aggregate per-occurrence sublimit of $100,000,000 and an annual aggregate sublimit of $200,000,000, with a $500,000 per-occurrence deductible. This excess flood program sits above the NFIP coverage and responds to flood losses in excess of the NFIP policy limits. We believe this coverage satisfies the Credit Agreement's flood insurance requirements and is consistent with the applicable federal banking regulations, including the Flood Disaster Protection Act of 1973, as amended, and the regulatory guidance issued by the Office of the Comptroller of the Currency.
We note that the 12 Florida coastal resort properties held by Palmetto Beachfront Hotels LLC carry both NFIP policies (maximum available coverage) and participation in the excess flood insurance program, given their exposure to storm surge and hurricane-related flooding. Six of these 12 properties are located in FEMA Zone VE (coastal high hazard area), and the remaining six are located in Zone AE.
C. Earthquake Insurance
VHG maintains a dedicated earthquake insurance policy through Pacific Seismic Underwriters, Inc. (Policy No. PSU-EQ-2021-8834) covering the 5 California hotel properties owned by Verimark Resort Properties LLC. These properties are located in San Francisco (2 properties), Los Angeles (2 properties), and San Diego (1 property), and are situated in seismic zones with moderate to high exposure.
The earthquake policy provides the following coverage:
The earthquake insurance is not placed through the California Earthquake Authority ("CEA"), as CEA policies are generally available only for residential properties. The coverage through Pacific Seismic Underwriters, Inc. is a commercial earthquake policy customary for hospitality and commercial real estate portfolios. We have confirmed that the deductible of 10% of TIV is within the range customary for California commercial earthquake policies and is consistent with market practice for properties of this size and seismic exposure.
We believe the earthquake coverage satisfies the requirements of Section 6.07(a)(v) of the Credit Agreement.
D. General Commercial Liability
VHG maintains a commercial general liability policy through Sentinel Indemnity Corporation (Policy No. SIC-CGL-2021-55920) providing the following coverage:
The policy covers premises liability, products-completed operations, personal and advertising injury, and contractual liability, including liability assumed under insured contracts. Coverage extends to all 74 hotel properties and all operations of VHG and its subsidiaries. We have confirmed that the per-occurrence and aggregate limits meet or exceed the minimum limits specified in the Credit Agreement's insurance requirements letter from the Agent dated June 28, 2022, which required minimum per-occurrence limits of $1,000,000 and minimum general aggregate limits of $2,000,000.
We have confirmed that Crescent Harbor Bank, N.A., in its capacity as Collateral Agent under the Credit Agreement, is named as additional insured on the commercial general liability policy, subject to the observations noted in Section VI.A below regarding the transition from the prior collateral agent designation.
E. Umbrella / Excess Liability
VHG maintains an umbrella/excess liability policy through Pinnacle Re Insurance Group Ltd. (Policy No. PRIG-UMB-2021-07744) providing excess coverage above the primary commercial general liability, automobile liability, and employers' liability policies. The umbrella policy provides the following coverage:
The umbrella policy is written on a follow-form basis, following the terms and conditions of the underlying primary policies, with drop-down coverage in the event of exhaustion of the underlying limits. We have confirmed that the umbrella policy's aggregate limits are consistent with the Credit Agreement's requirements and are appropriate for a hospitality portfolio of this size.
We have confirmed that Crescent Harbor Bank, N.A., in its capacity as Collateral Agent, is named as additional insured on the umbrella/excess liability policy, subject to the same observations noted in Section VI.A below regarding the loss payee and additional insured designation update.
F. Business Interruption / Loss of Rents
Business interruption and loss of rental income coverage are included within the all-risk property/casualty program maintained through Atlantic Meridian Insurance Company (Policy No. AMP-VHG-2021-074511). The certificate confirms that the business interruption indemnity period is twelve (12) months, which satisfies the minimum requirement under Section 6.07(a)(iii) of the Credit Agreement.
Business interruption coverage extends to loss of gross revenue resulting from the interruption of hotel operations due to physical loss or damage caused by a covered peril. The coverage also includes extra expense provisions to cover additional costs incurred to resume or continue operations following a covered loss. Loss of rental income coverage is specifically included, which is relevant given the Assignment of Leases and Rents component of the Mortgage security. A number of the mortgaged hotel properties are subject to ground leases, management agreements, or franchise agreements under which rental income or management fees are generated, and the business interruption coverage extends to the loss of such income streams during the period of restoration following a covered casualty.
We have confirmed that the business interruption sublimit is the full policy limit (i.e., there is no separate sublimit for business interruption coverage), subject to the twelve-month indemnity period and an extended period of indemnity of an additional ninety (90) days following the completion of repairs.
G. Workers' Compensation
VHG maintains workers' compensation insurance through Covenant Mutual Assurance Company (Policy No. CMA-WC-2022-33180) providing statutory workers' compensation coverage in each of the 18 states in which VHG and its subsidiaries operate hotel properties. The policy provides coverage on a guaranteed cost basis, with statutory benefits as required by the applicable workers' compensation laws of each state.
The following states are covered under the workers' compensation program:
Arizona, California, Colorado, Florida, Georgia, Illinois, Maryland, Nevada, New Jersey, New York, North Carolina, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, and Washington.
Employers' liability coverage is included within the workers' compensation policy with the following limits:
We note that Texas is a state in which workers' compensation coverage is elective rather than mandatory. VHG has elected to provide workers' compensation coverage for its Texas hotel employees, which is confirmed on the certificate. We also note that Washington state requires coverage through the Washington State Department of Labor & Industries for certain categories of employees; the certificate confirms that VHG participates in the state fund for its Washington properties. The policy provides coverage in compliance with the monopolistic state fund requirements, where applicable.
We have confirmed that the workers' compensation coverage satisfies the requirements of Section 6.07(a)(vi) of the Credit Agreement.
H. Liquor Liability
VHG maintains liquor liability coverage as an endorsement to the commercial general liability policy issued by Sentinel Indemnity Corporation (Policy No. SIC-CGL-2021-55920, Endorsement No. LL-004). The liquor liability endorsement provides coverage for bodily injury and property damage arising out of the selling, serving, or furnishing of any alcoholic beverage in connection with the hotel food and beverage operations conducted at VHG's hotel properties.
The liquor liability coverage is subject to a per-occurrence limit of $2,000,000 and shares the general aggregate limit of the commercial general liability policy ($5,000,000). Coverage extends to all hotel properties with food and beverage operations, including restaurants, bars, lounges, banquet facilities, and catering operations. We have confirmed that all 74 hotel properties in the VHG portfolio maintain active liquor licenses and food and beverage operations.
We believe the liquor liability coverage satisfies the requirement under Section 6.07(a)(viii) of the Credit Agreement that VHG maintain such other insurance as is customary for companies of similar size in the hospitality industry.
V. Additional Insured / Loss Payee Designations
A. Loss Payee Endorsements (Property Policies)
We have reviewed the loss payee designations on the certificates of insurance for the property/casualty (all-risk) program, the flood insurance policies, and the earthquake insurance policy. The Credit Agreement requires that Crescent Harbor Bank, N.A., in its capacity as Collateral Agent under the Credit Agreement, be named as loss payee on all property/casualty policies covering Collateral, using a standard mortgagee clause (New York Standard Mortgagee Clause or equivalent). For the 42 mortgaged hotel properties, the Mortgage further requires that the loss payee endorsement include the standard non-contributory, non-reporting mortgagee clause providing that the interest of the Collateral Agent in the insurance coverage shall not be invalidated by any act or neglect of the insured or the owner of the property.
We have confirmed that the certificates for the all-risk property program (Atlantic Meridian Insurance Company), the earthquake program (Pacific Seismic Underwriters, Inc.), and the NFIP and excess flood policies identify a loss payee. However, as discussed in Section VI.A below, certain certificates continue to reflect the former collateral agent, Greystone Federal Credit Corp., as the designated loss payee rather than Crescent Harbor Bank, N.A. This is a result of the refinancing transaction, as the existing credit facilities were previously administered by Greystone Federal Credit Corp., and the loss payee designations have not yet been updated to reflect the new Collateral Agent.
The correct loss payee designation, which should appear on all property policies and endorsements following the update, is as follows:
Crescent Harbor Bank, N.A. as Collateral Agent under that certain Credit Agreement dated as of July 21, 2022 600 Lexington Avenue, 34th Floor New York, New York 10022
Attention: Agency Services — Verimark Hospitality Group Inc.
With respect to the 42 mortgaged hotel properties, the loss payee endorsement should include the standard non-contributory, non-reporting mortgagee clause (New York Standard Mortgagee Clause or equivalent) providing that:
(a) the interest of the Collateral Agent (as mortgagee) in the insurance shall not be invalidated by any act or neglect of the mortgagor or owner of the insured property;
(b) the insurer shall give at least thirty (30) days' prior written notice to the Collateral Agent of any cancellation, non-renewal, or material change in coverage; and
(c) in the event of payment of any loss to the Collateral Agent, the insurer shall be subrogated to the rights of the Collateral Agent to the extent of such payment.
The status of the loss payee designation for each policy type is set forth in detail in the table included as Appendix B to this memorandum.
B. Additional Insured Endorsements (Liability Policies)
We have confirmed that the certificates for the commercial general liability policy (Sentinel Indemnity Corporation) and the umbrella/excess liability policy (Pinnacle Re Insurance Group Ltd.) each include an additional insured endorsement. As with the loss payee designations, certain certificates continue to reference the former collateral agent (Greystone Federal Credit Corp.) rather than Crescent Harbor Bank, N.A. Updated additional insured endorsements are required to reflect the following designation:
Crescent Harbor Bank, N.A. as Collateral Agent under that certain Credit Agreement dated as of July 21, 2022 600 Lexington Avenue, 34th Floor New York, New York 10022
The additional insured endorsement should be on ISO Form CG 20 11 or equivalent, providing that the Collateral Agent is included as an additional insured with respect to liability arising out of the ownership, maintenance, or use of the insured premises and operations of VHG and its subsidiaries. We have confirmed that the additional insured coverage is on a primary and non-contributory basis, as required by the Credit Agreement.
C. Notice of Cancellation / Material Change
We have reviewed the cancellation notice provisions on each certificate of insurance. All certificates reviewed include a provision for thirty (30) days' prior written notice of cancellation or material modification to the Collateral Agent (or, on certain certificates, to the loss payee/additional insured), which satisfies the requirement of Section 6.07(c) of the Credit Agreement.
We note that several certificates include standard Acord form language providing for only ten (10) days' notice of cancellation due to nonpayment of premium. This is standard market practice and is expressly contemplated as acceptable under the Agent's insurance requirements letter dated June 28, 2022. Accordingly, we do not consider the ten-day notice for nonpayment of premium to be a deficiency.
The 30-day cancellation notice provision should be addressed to:
Crescent Harbor Bank, N.A., as Collateral Agent 600 Lexington Avenue, 34th Floor New York, New York 10022
Attention: Agency Services — Insurance Notifications
As noted, certain certificates currently direct the cancellation notice to Greystone Federal Credit Corp. at its former address. This should be corrected as part of the updated certificate and endorsement process described in Section VI below.
VI. Observations, Exceptions, and Recommended Action Items
A. Minor Observations
Based on our review, we have identified the following minor discrepancies and items requiring follow-up. None of these items constitutes a material deficiency that would, in our view, prevent closing of the Credit Agreement, but each should be addressed in the ordinary course:
1. Loss Payee and Additional Insured Designation — Prior Collateral Agent. The certificates for the all-risk property program (Atlantic Meridian Insurance Company, Policy No. AMP-VHG-2021-074511), the earthquake program (Pacific Seismic Underwriters, Inc., Policy No. PSU-EQ-2021-8834), and two of the NFIP flood policies continue to reflect Greystone Federal Credit Corp. as loss payee and/or additional insured, rather than Crescent Harbor Bank, N.A. as the new Collateral Agent. This is consistent with the fact that the refinancing has not yet closed, and the existing loss payee designations reflect the incumbent agent under the facilities being refinanced. Updated endorsements must be obtained on or before the closing date of July 21, 2022, or promptly thereafter during the post-closing period.
2. Policy Number Confirmation — Workers' Compensation. The certificate for the workers' compensation policy (Covenant Mutual Assurance Company) references Policy No. CMA-WC-2022-33180, but a supplemental certificate received on July 17, 2022 references a slightly different policy number (CMA-WC-2022-33180-A), which may reflect a state-specific endorsement. We recommend that VHG's insurance broker confirm the correct policy number and issue a corrected certificate if necessary.
3. Named Insured Confirmation — Guarantor Entities. On the commercial general liability certificate and the umbrella/excess liability certificate, the named insured section lists "Verimark Hospitality Group Inc. and all subsidiaries and affiliated entities." While this broad language likely encompasses all five Guarantor subsidiaries, we recommend that the certificates be updated to expressly list each Guarantor entity by name (i.e., Verimark Resort Properties LLC, VHG Management Services Inc., Verimark Convention Holdings LLC, Palmetto Beachfront Hotels LLC, and Cascadia Hospitality Corp.) to eliminate any ambiguity and to satisfy the Administrative Agent's request that all named insureds be specifically identified.
4. Effective Date Confirmation — NFIP Policies. Two of the NFIP flood policies covering properties in Texas reflect effective dates of October 15, 2021, with expiration dates of October 15, 2022. The remaining NFIP policies reflect effective dates that are staggered throughout the year. We have confirmed that all NFIP policies are currently in force; however, we recommend that VHG's broker confirm the renewal schedule for all NFIP policies and ensure that renewed policies are promptly delivered to the Collateral Agent with updated loss payee endorsements.
B. Post-Closing Insurance Items
Certain insurance deliverables may be addressed during the post-closing period pursuant to the Post-Closing Letter Agreement dated July 21, 2022, which provides a deadline of August 5, 2022 (fifteen (15) calendar days following the closing date) for delivery of the following items:
1. Updated Mortgagee Endorsements for Newly Recorded Mortgages. The Mortgage is being recorded in twelve (12) states (Florida, New York, California, Texas, Georgia, Colorado, Arizona, Illinois, Washington, Oregon, Nevada, and Virginia) with respect to the 42 mortgaged hotel properties. Following recording of the Mortgages and receipt of recorded copies, updated mortgagee endorsements should be obtained from each insurer reflecting the specific recording information (book, page, instrument number, and recording date) for each Mortgage. These endorsements should be delivered to the Collateral Agent within the post-closing period.
2. Coordination with Title Insurance. Replacement title insurance endorsements and mortgagee insurance endorsements for the mortgaged properties should be coordinated with Continental Fidelity Title Company, which is issuing the lender's title insurance policies in connection with the closing. We have been in communication with Continental Fidelity regarding the sequencing of mortgage recording and endorsement delivery, and we anticipate that the title insurance endorsements and the corresponding insurance mortgagee endorsements can be delivered concurrently within the post-closing period.
3. Final Excess Flood Insurance Endorsements. Updated loss payee endorsements for the excess flood insurance program (Atlantic Meridian Insurance Company) reflecting the Collateral Agent's interest as mortgagee loss payee should be delivered within the post-closing period.
C. Recommended Actions
Based on the foregoing, we recommend the following actions:
1. Immediate Action — Pre-Closing. VHG should instruct its insurance broker, Hartwell & Associates Insurance Brokerage LLC, to issue updated certificates of insurance reflecting the following changes, to be delivered to Crescent Harbor Bank, N.A. on or before the closing date of July 21, 2022:
(a) Crescent Harbor Bank, N.A. (as Collateral Agent under the Credit Agreement) designated as loss payee and mortgagee loss payee on all property/casualty, flood, and earthquake policies, in place of Greystone Federal Credit Corp.;
(b) Crescent Harbor Bank, N.A. (as Collateral Agent) designated as additional insured on all general commercial liability and umbrella/excess liability policies, in place of Greystone Federal Credit Corp.;
(c) All five Guarantor entities (Verimark Resort Properties LLC, VHG Management Services Inc., Verimark Convention Holdings LLC, Palmetto Beachfront Hotels LLC, and Cascadia Hospitality Corp.) expressly listed as named insureds on each relevant policy certificate;
(d) The 30-day cancellation notice provision addressed to Crescent Harbor Bank, N.A. at its New York office: 600 Lexington Avenue, 34th Floor, New York, New York 10022, Attention: Agency Services — Insurance Notifications; and
(e) Confirmation of the correct policy number for the workers' compensation policy.
2. Post-Closing Action. Updated formal endorsements (as distinguished from certificates of insurance) for the 42 mortgaged properties should be obtained from each insurer and delivered to Crescent Harbor Bank, N.A. within the post-closing period ending August 5, 2022. These endorsements should include:
(a) Standard mortgagee clause endorsements (New York Standard Mortgagee Clause or equivalent) for each mortgaged property, reflecting the specific Mortgage recording information;
(b) Loss payee endorsements for the excess flood insurance program; and
(c) Updated earthquake policy endorsements for the 5 California properties.
3. Annual Renewal Coordination. Given that the core insurance program renews on October 1, 2022, VHG should coordinate with its insurance broker to ensure that renewed policies are issued with endorsements reflecting the Collateral Agent's interests, and that updated certificates are delivered to the Administrative Agent within thirty (30) days following the renewal date, as required by the Credit Agreement.
VII. Intercreditor Considerations
In addition to the $700,000,000 Senior Secured Term Loan B facility being closed under the Credit Agreement, VHG maintains a $400,000,000 Senior Secured Revolving Credit Facility (the "RCF") for which Crescent Harbor Bank, N.A. also serves as Administrative Agent and Collateral Agent. The RCF is governed by the Revolving Credit Agreement dated as of July 21, 2022, among VHG, the Guarantors, Crescent Harbor Bank, N.A. as Administrative Agent and Collateral Agent, and the Revolving Lenders party thereto.
The Term Loan B and the RCF share the same first-lien collateral package — including the 42 mortgaged hotel properties — on a pari passu basis pursuant to the terms of the Amended and Restated Intercreditor Agreement dated as of the closing date (the "Intercreditor Agreement"). The Intercreditor Agreement provides that insurance proceeds relating to Collateral shall be applied in accordance with the respective credit agreements, with the Collateral Agent acting as the single secured party for purposes of receiving insurance proceeds and administering the distribution thereof.
We have reviewed the insurance requirements under the RCF credit agreement and confirm that they are substantively identical to the insurance requirements under the Term Loan B Credit Agreement. Because Crescent Harbor Bank, N.A. serves as Collateral Agent under both facilities, a single set of insurance certificates and endorsements naming Crescent Harbor Bank, N.A. as Collateral Agent (without reference to a specific credit agreement) is sufficient to satisfy the insurance requirements of both the Term Loan B and the RCF. The loss payee and additional insured designations should reference Crescent Harbor Bank, N.A. "as Collateral Agent" generally, which will ensure coverage of the Agent's interests under both facilities without the need for separate endorsements.
We note that the Intercreditor Agreement provides that, in the event of a casualty loss, insurance proceeds shall be distributed to the respective Lender groups under the Term Loan B and the RCF on a pro rata basis (based on the outstanding principal balances under each facility at the time of the casualty), subject to the reinvestment rights set forth in each credit agreement. The Collateral Agent's role as the single point of contact for insurers simplifies the claims administration process and is consistent with market practice for pari passu first-lien structures.
VIII. Conclusion
Based on our review of the certificates of insurance provided by VHG, we conclude that VHG's insurance program is substantially compliant with the requirements of Section 6.07 of the Credit Agreement and the related Mortgage and security documents. The insurance program provides comprehensive coverage for the 74-property hotel portfolio across all required coverage categories, with limits, deductibles, and insurer financial strength ratings that satisfy the Credit Agreement's requirements.
The action items identified in Section VI above should be completed as follows:
• Pre-Closing (by July 21, 2022): Delivery of updated certificates of insurance reflecting Crescent Harbor Bank, N.A. (as Collateral Agent) as loss payee and additional insured, with all Guarantor entities listed as named insureds and cancellation notice provisions addressed to the Collateral Agent at its New York address.
• Post-Closing (by August 5, 2022): Delivery of formal mortgagee endorsements for the 42 mortgaged properties, updated excess flood endorsements, and earthquake policy endorsements for the 5 California properties, coordinated with Continental Fidelity Title Company's delivery of title insurance endorsements.
This memorandum should be read in conjunction with the following related deliverables and work product:
• Survey and Flood Certification Summary Memorandum (Daniel Obi, July 2022)
• Mortgage and Title Deliverables Checklist (revised June 20, 2022)
• Master Closing Checklist for the $700,000,000 Senior Secured Term Loan B Credit Agreement
• Agent's Insurance Requirements Letter (Crescent Harbor Bank, N.A., dated June 28, 2022)
We will update this memorandum upon receipt of the final updated certificates and endorsements from VHG's insurance broker, and we will confirm compliance with the post-closing insurance deliverables upon expiration of the post-closing period on August 5, 2022. Please do not hesitate to contact me with any questions regarding this review or if additional analysis is required.
Appendix A — Schedule of Insurance Policies Reviewed
The following table sets forth the details of each insurance policy reviewed in connection with this memorandum:
Appendix B — Additional Insured / Loss Payee Designation Status
The following table summarizes the status of loss payee and additional insured designations for Crescent Harbor Bank, N.A. (as Collateral Agent) on each policy type:
Summary: Of the eight policy categories requiring loss payee or additional insured designations, four have been confirmed as reflecting the correct designation for Crescent Harbor Bank, N.A. (as Collateral Agent), and four require updates to replace the prior collateral agent (Greystone Federal Credit Corp.). Additionally, two of the twenty-six individual NFIP flood policies require loss payee updates. All updates should be completed on or before the closing date, with formal endorsements for mortgaged properties to follow during the post-closing period.
Appendix C — Properties in Special Flood Hazard Areas
The following table identifies the properties in the VHG portfolio that are located in FEMA-designated Special Flood Hazard Areas, together with the corresponding flood insurance details and compliance status. This table is based on the flood zone determinations set forth in the Survey and Flood Certification Summary Memorandum (Daniel Obi, July 2022) and the flood insurance certificates reviewed in connection with this memorandum.
Summary: All 26 properties identified as being located in FEMA-designated Special Flood Hazard Areas carry flood insurance at or above the minimum levels required by the Credit Agreement and applicable federal banking regulations. Of these 26 properties, 22 are among the 42 mortgaged properties. Each property carries primary NFIP coverage at the maximum available amount ($500,000 per building) supplemented by the portfolio-wide excess flood program through Atlantic Meridian Insurance Company.
This memorandum has been prepared by Daniel Obi, Working Associate, Banking & Finance, for the internal use of the deal team in connection with the Verimark Hospitality Group Inc. $700,000,000 Senior Secured Term Loan B Refinancing. This memorandum is privileged and confidential attorney work product and should not be distributed outside the firm or to any third party without the prior written consent of the responsible partner. Please direct any questions to Daniel Obi (ext. 4287) or Sophie Tremblay (ext. 3915).
Coverage Type | Effective Date | Expiration Date | Status
Property / Casualty (All-Risk) | October 1, 2021 | October 1, 2022 | In Force
General Commercial Liability | October 1, 2021 | October 1, 2022 | In Force
Umbrella / Excess Liability | October 1, 2021 | October 1, 2022 | In Force
Workers' Compensation | January 1, 2022 | January 1, 2023 | In Force
Flood Insurance (NFIP) | Various (see Appendix C) | Various (see Appendix C) | In Force
Earthquake Insurance | October 1, 2021 | October 1, 2022 | In Force
Liquor Liability | October 1, 2021 | October 1, 2022 | In Force
Automobile Liability | October 1, 2021 | October 1, 2022 | In Force
Peril / Coverage | Sublimit | Deductible
All Perils (except as noted) | Blanket Limit | $250,000 per occurrence
Named Windstorm (FL, TX, coastal) | $500,000,000 per occurrence | 5% of TIV at affected location(s), min. $500,000
Flood (non-NFIP excess) | $100,000,000 per occurrence / $200,000,000 annual aggregate | $500,000 per occurrence
Earthquake (non-CA) | $75,000,000 per occurrence / $150,000,000 annual aggregate | 5% of TIV at affected location(s)
Terrorism (TRIA certified) | Full policy limits | $250,000 per occurrence
Equipment Breakdown | $50,000,000 per occurrence | $100,000 per occurrence
Coverage Element | Detail
Per-Occurrence Limit | $200,000,000
Annual Aggregate Limit | $200,000,000
Deductible | 10% of TIV at affected location(s), subject to a minimum deductible of $1,000,000
Coverage Basis | Replacement Cost
Building & Contents | Included
Business Interruption | Included (12-month indemnity period)
Coverage Element | Limit
Per-Occurrence Limit | $2,000,000
General Aggregate Limit | $5,000,000
Products-Completed Operations Aggregate | $2,000,000
Personal & Advertising Injury | $2,000,000 per occurrence
Damage to Premises Rented to You | $1,000,000 per occurrence
Medical Expense (any one person) | $10,000
Coverage Element | Limit
Per-Occurrence Limit | $50,000,000
General Aggregate Limit | $50,000,000
Coverage Element | Limit
Bodily Injury by Accident | $1,000,000 each accident
Bodily Injury by Disease — Policy Limit | $1,000,000
Bodily Injury by Disease — Each Employee | $1,000,000
Coverage Type | Carrier | Policy No. | Effective Date | Expiration Date | Per-Occurrence Limit | Aggregate Limit | Deductible | Named Insured(s)
Property / Casualty (All-Risk) | Atlantic Meridian Insurance Co. | AMP-VHG-2021-074511 | 10/1/2021 | 10/1/2022 | $3,245,000,000 (blanket) | $3,245,000,000 | $250,000 (std. perils); 5% TIV (windstorm) | VHG and all subsidiaries
General Commercial Liability | Sentinel Indemnity Corp. | SIC-CGL-2021-55920 | 10/1/2021 | 10/1/2022 | $2,000,000 | $5,000,000 | N/A | VHG and all subsidiaries
Umbrella / Excess Liability | Pinnacle Re Insurance Group Ltd. | PRIG-UMB-2021-07744 | 10/1/2021 | 10/1/2022 | $50,000,000 | $50,000,000 | $10,000 SIR | VHG and all subsidiaries
Workers' Compensation | Covenant Mutual Assurance Co. | CMA-WC-2022-33180 | 1/1/2022 | 1/1/2023 | Statutory | Statutory | N/A | VHG and all subsidiaries
Employers' Liability | Covenant Mutual Assurance Co. | CMA-WC-2022-33180 | 1/1/2022 | 1/1/2023 | $1,000,000 each accident | $1,000,000 | N/A | VHG and all subsidiaries
Flood (NFIP — Primary) | Homestead Flood Insurance Services (WYO) | Various (26 policies) | Various | Various | $500,000 per building (max.) | N/A | $5,000 | Individual property entities
Flood (Excess — Private) | Atlantic Meridian Insurance Co. | AMP-XFL-2021-074512 | 10/1/2021 | 10/1/2022 | $100,000,000 | $200,000,000 (ann. agg.) | $500,000 | VHG and all subsidiaries
Earthquake (California) | Pacific Seismic Underwriters, Inc. | PSU-EQ-2021-8834 | 10/1/2021 | 10/1/2022 | $200,000,000 | $200,000,000 | 10% TIV (min. $1,000,000) | Verimark Resort Properties LLC
Liquor Liability | Sentinel Indemnity Corp. | SIC-CGL-2021-55920 (End. LL-004) | 10/1/2021 | 10/1/2022 | $2,000,000 | Shared w/ CGL ($5,000,000) | N/A | VHG and all subsidiaries
Automobile Liability | Sentinel Indemnity Corp. | SIC-AL-2021-55921 | 10/1/2021 | 10/1/2022 | $1,000,000 CSL | N/A | N/A | VHG and all subsidiaries
Policy / Coverage Type | Carrier | Designation Type | Designee Reflected on Certificate | Status
Property / Casualty (All-Risk) | Atlantic Meridian Insurance Co. | Loss Payee / Mortgagee Loss Payee | Greystone Federal Credit Corp. | Pending Update — to be updated to Crescent Harbor Bank, N.A. (as Collateral Agent) at closing
General Commercial Liability | Sentinel Indemnity Corp. | Additional Insured | Crescent Harbor Bank, N.A. (as Collateral Agent) | Confirmed
Umbrella / Excess Liability | Pinnacle Re Insurance Group Ltd. | Additional Insured | Greystone Federal Credit Corp. | Pending Update — to be updated to Crescent Harbor Bank, N.A. (as Collateral Agent) at closing
Flood (NFIP — Primary) | Homestead Flood Insurance Services | Loss Payee | Greystone Federal Credit Corp. (on 2 of 26 policies); Crescent Harbor Bank, N.A. (on 24 of 26 policies) | Partially Confirmed — 2 policies pending update
Flood (Excess — Private) | Atlantic Meridian Insurance Co. | Loss Payee | Greystone Federal Credit Corp. | Pending Update — to be updated at closing
Earthquake (California) | Pacific Seismic Underwriters, Inc. | Loss Payee / Mortgagee Loss Payee | Greystone Federal Credit Corp. | Pending Update — to be updated at closing
Workers' Compensation | Covenant Mutual Assurance Co. | N/A (not applicable) | N/A | N/A — no loss payee or additional insured designation required
Liquor Liability | Sentinel Indemnity Corp. | Additional Insured (via CGL endorsement) | Crescent Harbor Bank, N.A. (as Collateral Agent) | Confirmed
Automobile Liability | Sentinel Indemnity Corp. | Additional Insured | Crescent Harbor Bank, N.A. (as Collateral Agent) | Confirmed
Property Name | Location | Owner | FEMA Flood Zone | Community / Panel No. | NFIP Policy No. | NFIP Coverage Amount | Excess Flood Coverage | Mortgaged Property | Compliance Status
Palmetto Gulf Resort | Naples, FL | Palmetto Beachfront Hotels LLC | VE | 12021C-0445G | HFIS-FL-001 | $500,000 | Yes — AMP-XFL | Yes | Compliant
Palmetto Sands Hotel | Clearwater Beach, FL | Palmetto Beachfront Hotels LLC | VE | 12103C-0182H | HFIS-FL-002 | $500,000 | Yes — AMP-XFL | Yes | Compliant
Palmetto Shores Inn | Sarasota, FL | Palmetto Beachfront Hotels LLC | VE | 12115C-0516G | HFIS-FL-003 | $500,000 | Yes — AMP-XFL | Yes | Compliant
Verimark Bayfront Hotel | Tampa, FL | Palmetto Beachfront Hotels LLC | AE | 12057C-0390H | HFIS-FL-004 | $500,000 | Yes — AMP-XFL | Yes | Compliant
Palmetto Beach Club Resort | Fort Lauderdale, FL | Palmetto Beachfront Hotels LLC | VE | 12011C-0302H | HFIS-FL-005 | $500,000 | Yes — AMP-XFL | Yes | Compliant
Verimark Oceanfront Hotel | Miami Beach, FL | Palmetto Beachfront Hotels LLC | VE | 12086C-0564G | HFIS-FL-006 | $500,000 | Yes — AMP-XFL | Yes | Compliant
Palmetto Keys Resort | Key West, FL | Palmetto Beachfront Hotels LLC | VE | 12087C-0710G | HFIS-FL-007 | $500,000 | Yes — AMP-XFL | Yes | Compliant
Palmetto Harbor Inn | Jacksonville Beach, FL | Palmetto Beachfront Hotels LLC | AE | 12031C-0277H | HFIS-FL-008 | $500,000 | Yes — AMP-XFL | Yes | Compliant
Verimark Palm Coast Hotel | Palm Beach, FL | Palmetto Beachfront Hotels LLC | AE | 12099C-0305G | HFIS-FL-009 | $500,000 | Yes — AMP-XFL | Yes | Compliant
Palmetto Island Resort | Amelia Island, FL | Palmetto Beachfront Hotels LLC | AE | 12089C-0125G | HFIS-FL-010 | $500,000 | Yes — AMP-XFL | Yes | Compliant
Palmetto Emerald Hotel | Destin, FL | Palmetto Beachfront Hotels LLC | AE | 12091C-0365H | HFIS-FL-011 | $500,000 | Yes — AMP-XFL | Yes | Compliant
Verimark Panhandle Inn | Panama City Beach, FL | Palmetto Beachfront Hotels LLC | AE | 12005C-0200G | HFIS-FL-012 | $500,000 | Yes — AMP-XFL | Yes | Compliant
Verimark Hudson River Hotel | Manhattan, NY | Verimark Resort Properties LLC | AE | 36061C-0040F | HFIS-NY-001 | $500,000 | Yes — AMP-XFL | Yes | Compliant
Verimark Brooklyn Waterfront | Brooklyn, NY | Verimark Resort Properties LLC | AE | 36047C-0294G | HFIS-NY-002 | $500,000 | Yes — AMP-XFL | Yes | Compliant
Verimark Long Island Resort | Long Beach, NY | Verimark Resort Properties LLC | VE | 36059C-0328G | HFIS-NY-003 | $500,000 | Yes — AMP-XFL | Yes | Compliant
Verimark Harbor Hotel | Staten Island, NY | Verimark Resort Properties LLC | AE | 36085C-0186G | HFIS-NY-004 | $500,000 | Yes — AMP-XFL | Yes | Compliant
Verimark Rockaway Suites | Queens, NY | Verimark Resort Properties LLC | VE | 36081C-0353G | HFIS-NY-005 | $500,000 | Yes — AMP-XFL | Yes | Compliant
Verimark Westchester Inn | Rye, NY | Verimark Resort Properties LLC | AE | 36119C-0081F | HFIS-NY-006 | $500,000 | Yes — AMP-XFL | Yes | Compliant
Verimark Galveston Resort | Galveston, TX | Verimark Resort Properties LLC | VE | 48167C-0495G | HFIS-TX-001 | $500,000 | Yes — AMP-XFL | Yes | Compliant
Verimark Bayou Hotel | Houston, TX | Verimark Resort Properties LLC | AE | 48201C-0590K | HFIS-TX-002 | $500,000 | Yes — AMP-XFL | Yes | Compliant
Verimark Riverwalk Inn | San Antonio, TX | Verimark Resort Properties LLC | AE | 48029C-0430G | HFIS-TX-003 | $500,000 | Yes — AMP-XFL | Yes | Compliant
Verimark Corpus Christi Hotel | Corpus Christi, TX | Verimark Resort Properties LLC | AE | 48355C-0210H | HFIS-TX-004 | $500,000 | Yes — AMP-XFL | Yes | Compliant
Verimark Norfolk Waterfront | Norfolk, VA | Verimark Resort Properties LLC | AE (partial) | 51710C-0185G | HFIS-VA-001 | $500,000 | Yes — AMP-XFL | Yes | Compliant
Verimark Virginia Beach Hotel | Virginia Beach, VA | Verimark Resort Properties LLC | AE (partial) | 51810C-0472H | HFIS-VA-002 | $500,000 | Yes — AMP-XFL | Yes | Compliant
Cascadia Waterfront Hotel | Seattle, WA | Cascadia Hospitality Corp. | AE | 53033C-0815G | HFIS-WA-001 | $500,000 | Yes — AMP-XFL | No | Compliant
Cascadia Riverfront Inn | Portland, OR | Cascadia Hospitality Corp. | AE | 41051C-0090G | HFIS-OR-001 | $500,000 | Yes — AMP-XFL | No | Compliant

MEMORANDUM

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