[sheet: Cover & Summary]

[sheet: Cover & Summary]
Field | Detail
Document Title | Funds Flow Memorandum
Date | July 20, 2022
Prepared By | Sophie Tremblay, Lead Associate, Calderwood & Harkness LLP
Reviewed By | Ian Blackwood, Responsible Partner, Calderwood & Harkness LLP
Engagement Number | 1016-00009
Transaction | $700,000,000 Senior Secured Term Loan B Refinancing
Borrower | Verimark Hospitality Group Inc.
Administrative Agent / Lead Arranger | Crescent Harbor Bank, N.A.
Collateral Agent | Crescent Harbor Bank, N.A.
Existing Agent (Payoff) | Greystone Federal Credit Corp.
CUSIP (New TLB) | 92347LAB8
CUSIP (Existing TLB) | 92347LAA0
Crescent Harbor Loan Number | CHB-LF-2022-07814
Closing Date / Funding Date | July 21, 2022 (simultaneous sign-and-close)
Governing Law | State of New York
Status | DRAFT — Subject to final confirmation of wire instructions
Confidential | This memorandum is confidential and prepared solely for the use of the parties to the Credit Agreement
[sheet: Sources]
Line # | Source Description | Entity | Gross Amount ($) | OID / Discount ($) | Net Funding Amount ($) | Notes
1 | Term Loan B — Gross Facility Amount | Syndicate Lenders (via Crescent Harbor Bank, N.A. as Administrative Agent) | 700000000.00 | -7000000.00 | 693000000.00 | OID of 1.00% ($7,000,000); net funding at 99.00% of par
Syndicate Lender Detail:
1a | Crescent Harbor Bank, N.A. (retained) | Crescent Harbor Bank, N.A. | 50000000.00 | -500000.00 | 49500000.00 | Pro rata share of 1.00% OID
1b | Ridgeline Capital Partners, LP | Ridgeline Capital Partners, LP | 125000000.00 | -1250000.00 | 123750000.00 | CLO fund; contact: Jerome Alston
1c | Beacon Atlantic Credit Fund III | Beacon Atlantic Credit Fund III | 100000000.00 | -1000000.00 | 99000000.00 | Credit fund; contact: Lina Marchenko
1d | Tidewater Institutional Investors, Inc. | Tidewater Institutional Investors, Inc. | 75000000.00 | -750000.00 | 74250000.00 | Insurance company investment arm; contact: Douglas Nettles
1e | Ironbridge Loan Management LLC | Ironbridge Loan Management LLC | 100000000.00 | -1000000.00 | 99000000.00 | CLO manager; contact: Catherine Volpe
1f | Northway Savings Bank | Northway Savings Bank | 75000000.00 | -750000.00 | 74250000.00 | Regional bank; contact: Brian Kowalski
1g | Copperleaf Asset Management, LP | Copperleaf Asset Management, LP | 100000000.00 | -1000000.00 | 99000000.00 | Credit hedge fund; contact: Samara Patel
1h | Harborview Mutual Life Insurance Company | Harborview Mutual Life Insurance Company | 75000000.00 | -750000.00 | 74250000.00 | Life insurer; contact: Franklin Yee
TOTAL SOURCES | 700000000.00 | -7000000.00 | 693000000.00 | Net proceeds available for disbursement
[sheet: Uses]
Line # | Use Description | Payee / Recipient | Amount ($) | Calculation / Reference | Wire Ref # | Notes
A. PAYOFF OF EXISTING TERM LOAN B
1 | Principal Payoff — Existing $625M TLB | Greystone Federal Credit Corp. | 621875000.00 | $625,000,000 original principal − $3,125,000 scheduled amortization paid since Feb 14, 2020 origination = $621,875,000 | Wire-001 | Per payoff letter dated July 19, 2022 (Marion Stillwell, VP Agency Services)
2 | Accrued and Unpaid Interest — Existing TLB | Greystone Federal Credit Corp. | 2916667.00 | Estimated accrued interest through July 21, 2022 payoff date | Wire-001 | Included in single wire to Greystone per payoff letter
3 | Prepayment Premium — Existing TLB | Greystone Federal Credit Corp. | 3125000.00 | $625,000,000 × 0.50% = $3,125,000 | Wire-001 | 0.50% premium per existing credit agreement prepayment provisions
Subtotal — Greystone Payoff | Greystone Federal Credit Corp. | 627916667.00 | Sum of Lines 1–3 | Single wire transfer; see Wire Transfer Instructions dated July 21, 2022
B. TRANSACTION FEES
4 | Arrangement Fee — Lead Arranger | Crescent Harbor Bank, N.A. | 3500000.00 | $700,000,000 × 0.50% = $3,500,000 | Wire-002 | Per Fee Letter dated May 27, 2022; payable at closing
5 | Financial Advisory Fee | Meridian Strauss Advisory LLC | 1400000.00 | $700,000,000 × 0.20% = $1,400,000 | Wire-003 | Per engagement with Elise Cavanaugh, Managing Director; 299 Park Avenue, 16th Floor, New York, NY 10171
Subtotal — Transaction Fees | 4900000.00 | Sum of Lines 4–5
C. LEGAL AND CLOSING COSTS (ESTIMATED)
6 | Borrower's Counsel Fees and Expenses | Calderwood & Harkness LLP | 1750000.00 | Estimated; engagement 1016-00009; final invoice to follow | Wire-004 | One Liberty Plaza, 52nd Floor, New York, NY 10006
7 | Agent's / Lenders' Counsel Fees and Expenses | Whitfield Gage & Partridge LLP | 850000.00 | Estimated; per WGP fee estimate | Wire-005 | 383 Madison Avenue, 28th Floor, New York, NY 10179
8 | Title Insurance Premiums and Recording Fees | Continental Fidelity Title Company (and various county recorders) | 425000.00 | Estimated; covers 42 mortgaged properties across 12 states | Wire-006 | 1221 Brickell Avenue, Suite 900, Miami, FL 33131; includes mortgagee title policies and endorsements
9 | UCC Filing Fees, Search Fees, and Miscellaneous Closing Costs | Various (Delaware SOS, Florida SOS, county offices) | 175000.00 | Estimated; UCC-1 filings for VHG and subsidiaries; UCC-3 terminations of Greystone liens | Wire-007 | Includes IP security agreement filings with USPTO / Copyright Office
Subtotal — Legal and Closing Costs | 3200000.00 | Sum of Lines 6–9 (estimated) | Subject to final invoicing; variance to be reconciled post-closing
D. ORIGINAL ISSUE DISCOUNT (MEMO — NON-CASH)
10 | OID — Withheld by Lenders at Funding | N/A — retained by Lenders | 7000000.00 | $700,000,000 × 1.00% = $7,000,000; not a cash disbursement — already netted from Sources | N/A | Reflected in net funding of $693,000,000; no separate wire required
E. NET PROCEEDS TO BORROWER
11 | Net Proceeds — General Corporate Purposes and Acquisition Pipeline | Verimark Hospitality Group Inc. | 56983333.00 | $693,000,000 (net funding) − $627,916,667 (payoff) − $4,900,000 (fees) − $3,200,000 (est. legal/closing) = $56,983,333 | Wire-008 | To VHG operating account; 8200 West Palmetto Park Road, Suite 1500, Boca Raton, FL 33433
TOTAL USES (CASH DISBURSEMENTS) | 693000000.00 | Sum of Subtotals A + B + C + E = $627,916,667 + $4,900,000 + $3,200,000 + $56,983,333 = $693,000,000 | Ties to Total Net Funding (Sources)
TOTAL USES (GROSS, INCLUDING OID MEMO) | 700000000.00 | Cash disbursements ($693,000,000) + OID ($7,000,000) = $700,000,000 | Ties to Total Gross Facility Amount
[sheet: Reconciliation]
Item | Amount ($) | Reference
SOURCES
Gross Facility Amount | 700000000.00 | Term Loan B — 8 syndicate lenders
Less: Original Issue discount (1.00%) | -7000000.00 | $700M × 1.00%
Net Cash Available | 693000000.00 | Wired by lenders to Administrative Agent for disbursement
USES
Greystone Payoff — Principal | 621875000.00 | Existing TLB outstanding; CUSIP 92347LAA0
Greystone Payoff — Accrued Interest | 2916667.00 | Estimated through July 21, 2022
Greystone Payoff — Prepayment Premium (0.50%) | 3125000.00 | $625,000,000 × 0.50%
Total Greystone Payoff | 627916667.00 | Per Payoff Letter dated July 19, 2022
Arrangement Fee (Crescent Harbor Bank, N.A.) | 3500000.00 | $700M × 0.50%; per Fee Letter dated May 27, 2022
Advisory Fee (Meridian Strauss Advisory LLC) | 1400000.00 | $700M × 0.20%
Estimated Legal and Closing Costs | 3200000.00 | C&H + WGP + title + UCC + misc
Net Proceeds to VHG | 56983333.00 | Residual; to VHG operating account for acquisitions and general corporate purposes
Total Cash Uses | 693000000.00 | Must equal Net Cash Available
CROSS-CHECK (ALTERNATIVE PRESENTATION)
Gross Facility | 700000000.00
Less: Total Greystone Payoff | -627916667.00
Less: OID | -7000000.00
Less: Advisory Fee | -1400000.00
Less: Estimated Legal & Closing Costs | -3200000.00
Net Proceeds to VHG (per deal summary method) | 60483333.00 | This method treats the $3.5M arrangement fee as part of lender economics / embedded in OID structure rather than a separate cash use from VHG's perspective
VARIANCE NOTE | The $3,500,000 difference between the two net proceeds figures ($60,483,333 vs. $56,983,333) reflects whether the arrangement fee is treated as a separate cash disbursement by VHG or as a lender-side fee netted from funding. The arrangement fee is paid directly from loan proceeds to CHB at closing per the Fee Letter.
ADMINISTRATIVE AGENT FEE (ANNUAL — NOT A CLOSING DISBURSEMENT)
Annual Admin Agent Fee | 150000.00 | Payable annually to Crescent Harbor Bank, N.A.; first payment due July 21, 2023; not included in closing funds flow
[sheet: Wire Instructions]
Wire Ref # | Payee | Amount ($) | Bank Name | ABA Routing # | Account # | Account Name | Reference / Memo | Status
Wire-001 | Greystone Federal Credit Corp. | 627916667.00 | [Per Payoff Letter] | [TBD — per payoff letter dated July 19, 2022] | [TBD] | Greystone Federal Credit Corp. — Agency Services Account | Payoff — VHG Existing TLB / CUSIP 92347LAA0 | Pending — Awaiting final wire confirmation from Marion Stillwell
Wire-002 | Crescent Harbor Bank, N.A. | 3500000.00 | Crescent Harbor Bank, N.A. | [TBD] | [TBD] | CHB Leveraged Finance Fee Account | Arrangement Fee — CHB-LF-2022-07814 | Confirmed
Wire-003 | Meridian Strauss Advisory LLC | 1400000.00 | [TBD — per Meridian Strauss instructions] | [TBD] | [TBD] | Meridian Strauss Advisory LLC Operating Account | Advisory Fee — VHG TLB Refinancing | Pending
Wire-004 | Calderwood & Harkness LLP | 1750000.00 | [TBD] | [TBD] | [TBD] | Calderwood & Harkness LLP Trust Account | Legal Fees — Engagement 1016-00009 (estimated; subject to final invoice) | Pending
Wire-005 | Whitfield Gage & Partridge LLP | 850000.00 | [TBD] | [TBD] | [TBD] | WGP Client Trust Account | Legal Fees — Lender's Counsel (estimated) | Pending
Wire-006 | Continental Fidelity Title Company | 425000.00 | [TBD] | [TBD] | [TBD] | CFTC Escrow Account | Title Premiums & Recording Fees — VHG Mortgaged Properties | Pending
Wire-007 | Various — UCC / Filing Fees | 175000.00 | Various | Various | Various | Various state filing offices | UCC Filing Fees, Search Fees, Misc Closing Costs | Pending — May be disbursed from C&H trust account
Wire-008 | Verimark Hospitality Group Inc. | 56983333.00 | [Per VHG treasury instructions] | [TBD — per Glenn Fischbach, Treasurer] | [TBD] | VHG Operating Account | Net Proceeds — General Corporate / Acquisition Pipeline | Pending
TOTAL WIRES | 693000000.00 | Must equal Net Cash Available from Sources
[sheet: Key Terms Summary]
Term | Detail
Facility | Senior Secured Term Loan B
Borrower | Verimark Hospitality Group Inc. (NYSE: VMRK)
EIN | 82-3741956
Delaware File Number | 7291843
Borrower HQ | 8200 West Palmetto Park Road, Suite 1500, Boca Raton, FL 33433
Administrative Agent / Collateral Agent | Crescent Harbor Bank, N.A.
Agent Address | 600 Lexington Avenue, 34th Floor, New York, NY 10022
Agent Contact — Leveraged Finance | Theodore "Ted" Marchetti, Managing Director
Agent Contact — Syndications | Anika Holm, Director
Lenders' Counsel | Whitfield Gage & Partridge LLP (Harrison Whitfield III)
Borrower's Counsel | Calderwood & Harkness LLP (Ian Blackwood, Stephanie Okafor)
Financial Advisor | Meridian Strauss Advisory LLC (Elise Cavanaugh)
Auditor | Clearmont & Wharton LLP (Ronald Ashby, CPA)
Existing Agent (Payoff) | Greystone Federal Credit Corp. (Marion Stillwell)
Facility Size | $700,000,000
CUSIP (New TLB) | 92347LAB8
Applicable Margin | Adjusted Term SOFR + 375 bps
SOFR Floor | 0.50%
SOFR Credit Spread Adjustments | 1-month: +0.10%; 3-month: +0.15%; 6-month: +0.25%
Illustrative All-In Rate | ~6.14% (1M Term SOFR 2.29% + 10 bps CSA + 375 bps)
Default Rate | Applicable Rate + 200 bps
OID | 1.00% ($7,000,000)
Maturity Date | July 21, 2029 (7-year tenor)
Amortization | 1.00% per annum ($1,750,000/quarter)
Balloon at Maturity | $651,000,000 ($700M − $49M cumulative amortization over 28 quarters)
Repricing Protection (Soft Call) | 1.00% premium for 6 months post-closing (through January 21, 2023)
MFN Provision | 50 bps threshold; 18-month sunset (through January 21, 2024)
Financial Covenant | Springing Max Total Net Leverage of 4.5x (when RCF > 35% drawn)
Pro Forma Net Leverage at Closing | 2.52x ($858M net debt ÷ $341M LTM Adjusted EBITDA)
Existing TLB Margin (Refinanced) | LIBOR + 425 bps — new facility achieves 50 bps spread savings
Estimated Annual Interest Savings | ~$3,500,000
Collateral | First-priority lien on substantially all assets; pari passu with $400M RCF per Intercreditor Agreement
Guarantors | Verimark Resort Properties LLC; VHG Management Services Inc.; Verimark Convention Holdings LLC; Palmetto Beachfront Hotels LLC; Cascadia Hospitality Corp.
Hotel Portfolio | 74 properties across 18 states; appraised at ~$3.1 billion
Mortgaged Properties | 42 properties (owned by VRP); appraised at ~$2.18 billion; across 12 states (FL, NY, CA, TX, GA, CO, AZ, IL, WA, OR, NV, VA)
Title Insurer | Continental Fidelity Title Company
Credit Ratings (Corporate) | BB- (Kellaway Ratings Group) / Ba3 (Pinnacle Credit Services)
Credit Ratings (TLB) | B+ (KRG) / B1 (PCS)
VHG FY2021 Revenue | $1,420,000,000
VHG FY2021 EBITDA | $318,000,000
VHG FY2021 Adjusted EBITDA | $341,000,000
Existing RCF | $400,000,000 (Crescent Harbor Bank, N.A. as agent; undrawn at closing)
Existing Senior Unsecured Notes | $245,000,000 due 2028 (Atlantic Standard Trust Company as indenture trustee)
Post-Closing Deadline | August 5, 2022 (mortgages, title policies, surveys)