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MEMORANDUM

PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT

TO: Ian Blackwood, Partner, Banking & Finance

FROM: Sophie Tremblay, Lead Associate, Banking & Finance

CC: Stephanie Okafor, Billing Partner; Daniel Obi, Associate

DATE: June 10, 2022

RE: Verimark Hospitality Group Inc. — $700,000,000 Senior Secured Term Loan B — "Most Favored Nation" Provision: Detailed Analysis and Market Comparison

Engagement No.: 1016-00009

Client: Verimark Hospitality Group Inc. ("VHG")

Counterparty: Crescent Harbor Bank, N.A. ("Crescent Harbor" or the "Administrative Agent")

Counterparty Counsel: Whitfield Gage & Partridge LLP ("WGP") (Harrison Whitfield III, partner; Megan Yeung, associate)

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I. Executive Summary

The purpose of this memorandum is to provide a detailed analysis of the "most favored nation" (MFN) provision as negotiated in the Credit Agreement (as defined below) governing Verimark Hospitality Group Inc.'s ("VHG" or the "Borrower") $700,000,000 senior secured Term Loan B facility (the "Initial TLB"), and to compare the agreed terms against recent market precedents in the hospitality and real estate leveraged lending sectors. This memorandum is intended to serve as a comprehensive reference for the deal team and for VHG's in-house counsel and treasury function as they evaluate the practical implications of the MFN clause in the context of VHG's near-term acquisition pipeline and longer-term capital structure strategy.

Key Conclusion. The negotiated MFN provision — featuring a 50 basis point threshold (the "MFN Threshold") and an 18-month sunset period running from the anticipated Closing Date of July 21, 2022, through January 21, 2024 (the "MFN Sunset Date") — is borrower-favorable relative to current market norms, which have recently trended toward shorter sunset periods and, in some cases, narrower thresholds. Nevertheless, the negotiated terms fall within the range of recent precedent transactions in the hospitality and real estate leveraged lending sectors and represent a commercially reasonable outcome for VHG.

The MFN provision applies exclusively to incremental term loans incurred under the Credit Agreement's incremental facility provisions during the 18-month MFN sunset window. After January 21, 2024, VHG may incur incremental term loans at any yield without triggering a margin ratchet on the Initial TLB, thereby providing VHG with full pricing flexibility for later-stage capital needs. The provision is further qualified by a negotiated carve-out for incremental term loans incurred to fund "Permitted Acquisitions" with an aggregate purchase price exceeding $100,000,000, which preserves VHG's ability to execute on larger strategic transactions during the sunset period without repricing the existing facility.

This memorandum also addresses the yield calculation methodology embedded in the Credit Agreement's "Effective Yield" definition, the interaction between the MFN clause and the incremental facility provisions (including the Free-and-Clear Basket and the Ratio Basket), the relationship between the MFN provision and the separate 6-month repricing protection (soft call) provision, and practical strategic implications and recommendations for VHG's acquisition pipeline and capital markets strategy. The analysis is supported by a review of 15 leveraged TLB facilities in the hospitality and real estate sectors closed between Q3 2021 and Q2 2022, with detailed comparable transaction data presented in Appendix A.

II. Background and Transaction Overview

A. The Borrower

VHG is a publicly traded hospitality and real estate company listed on the New York Stock Exchange under the ticker symbol VMRK. The company is headquartered at 8200 West Palmetto Park Road, Suite 1500, Boca Raton, Florida 33433. VHG operates a diversified portfolio of 74 full-service and select-service hotels across 18 states, with an aggregate appraised value of approximately $3.1 billion as of the most recent independent appraisal conducted in connection with the refinancing. The portfolio is geographically diversified, with significant concentrations in Florida, California, Texas, and the mid-Atlantic region, and includes properties operating under both proprietary and third-party franchise brands.

For its fiscal year ended December 31, 2021, VHG reported consolidated revenue of approximately $1.42 billion and Adjusted EBITDA (as defined in VHG's public filings and reconciled in the Confidential Information Memorandum dated April 2022 prepared by Meridian Strauss Advisory LLC) of approximately $341 million. These figures represent a substantial recovery from the pandemic-era trough in FY2020 and are broadly consistent with pre-pandemic operating performance. The company's revenue per available room (RevPAR) and average daily rate (ADR) metrics have returned to approximately 92% and 97% of 2019 levels, respectively, reflecting the strong recovery trajectory in the hospitality sector.

B. The Refinancing Transaction

The $700,000,000 senior secured Term Loan B facility refinances VHG's existing $625,000,000 Term Loan B, which was originated on February 14, 2020, with Greystone Federal Credit Corp. serving as administrative agent. The existing facility was priced at LIBOR + 425 basis points with a 1.00% LIBOR floor and was scheduled to mature on February 14, 2027. The refinancing achieves a 50 basis point spread reduction, transitioning VHG from LIBOR + 425 bps to Adjusted Term SOFR + 375 bps, reflecting both the improvement in VHG's credit profile since the pandemic and the broader tightening of leveraged loan spreads in the hospitality sector. The facility also transitions VHG's benchmark rate from LIBOR to Adjusted Term SOFR, with a SOFR floor of 0.50%, consistent with the industry-wide transition away from LIBOR-based facilities.

The incremental $75,000,000 in net proceeds (representing the difference between the $700,000,000 new facility and the $625,000,000 existing facility) will be used to fund VHG's near-term acquisition pipeline and for general corporate purposes, as described in the Confidential Information Memorandum and in discussions with VHG's Treasurer, Glenn Fischbach, and Chief Financial Officer, Renata Haines.

C. Agent, Arrangers, and Syndicate

Crescent Harbor Bank, N.A. serves as Administrative Agent, Collateral Agent, Lead Arranger, and Sole Bookrunner for the facility. Crescent Harbor is represented by Whitfield Gage & Partridge LLP, with Harrison Whitfield III serving as the lead partner and Megan Yeung as the primary associate on the transaction. The facility has been syndicated to a group of eight institutional lenders, with final allocations confirmed as of June 30, 2022, totaling $700,000,000. The syndicate composition includes a mix of commercial banks, CLO vehicles, and institutional investors, reflecting a healthy demand profile consistent with the current favorable conditions in the broadly syndicated loan market.

D. Credit Metrics and Ratings

Pro forma for the refinancing and the application of proceeds, VHG's net leverage stands at approximately 2.52x, calculated as net funded debt of approximately $858,000,000 divided by LTM Adjusted EBITDA of $341,000,000. This leverage level is well within the Credit Agreement's springing financial covenant — a maximum Total Net Leverage Ratio of 4.5x, tested only when revolving credit facility utilization exceeds 35% of commitments. The 2.52x pro forma leverage represents meaningful headroom of approximately 2.0x turns below the covenant threshold, positioning VHG with substantial financial flexibility.

VHG's corporate family credit ratings are BB- from Kellaway Ratings Group and Ba3 from Pinnacle Credit Services, both with a stable outlook. The Initial TLB is rated B+ by Kellaway and B1 by Pinnacle, reflecting its position in the capital structure below the $400,000,000 senior secured revolving credit facility (which has priority claims on certain collateral under the applicable intercreditor arrangements).

E. Key Facility Terms

The material terms of the Initial TLB facility are summarized below for reference:

III. Description of the Negotiated MFN Provision

A. Operative Mechanics

The MFN provision is set forth in Section 2.20 of the Credit Agreement (the incremental facility section), initially drafted by Drummond & Fenwick LLP ("C&H") in the first draft of the Credit Agreement circulated to WGP on May 16, 2022. The provision was the subject of extensive negotiation through multiple iterations, including the WGP First Response (May 23, 2022), the C&H Second Draft (May 31, 2022), the WGP Second Response (June 3, 2022), and the C&H Third Draft (June 8, 2022), which reflects the current agreed position on substantially all open points relating to the MFN clause. A limited number of conforming and definitional refinements remain open and are expected to be resolved in the final execution version of the Credit Agreement.

The operative mechanics of the MFN provision function as follows: if VHG incurs any incremental term loans under the Credit Agreement during the MFN sunset period (from the Closing Date through January 21, 2024), and the "Effective Yield" (as defined in Section 1.01 of the Credit Agreement and discussed in detail in Section V of this memorandum) on such incremental term loans exceeds the Effective Yield on the Initial TLB by more than 50 basis points (the MFN Threshold), then the applicable margin on the Initial TLB shall be automatically increased by an amount necessary to ensure that the Effective Yield on the Initial TLB is within 50 basis points of the Effective Yield on such incremental term loans.

Critically, the MFN adjustment operates as a one-way ratchet upward only. The applicable margin on the Initial TLB cannot be decreased as a result of the operation of the MFN provision. This means that if VHG incurs incremental term loans at an Effective Yield lower than or equal to the Initial TLB's Effective Yield, the MFN provision has no effect. The provision is designed solely to address the scenario in which VHG issues new pari passu term loan debt at a higher yield, which could otherwise dilute the economic terms enjoyed by the initial syndicate lenders.

The margin adjustment, when triggered, takes effect automatically upon the incurrence of the applicable incremental term loans and applies prospectively to interest periods commencing on or after the date of such incurrence. The Credit Agreement does not require a vote of the initial lenders or any affirmative consent mechanism — the adjustment is self-executing, provided that the Administrative Agent determines (based on the yield calculations furnished by the Borrower) that the MFN Threshold has been exceeded.

B. MFN Threshold

The MFN Threshold was negotiated at 50 basis points. This threshold provides VHG with a 50 basis point "cushion," meaning that VHG may price incremental term loans at an Effective Yield up to 50 basis points above the Initial TLB's Effective Yield without triggering any margin adjustment on the Initial TLB. This cushion is designed to provide VHG with reasonable flexibility to respond to changing market conditions when pricing incremental debt, while still protecting the initial syndicate against material yield dilution.

To place this threshold in the context of the Initial TLB's economics: the Initial TLB carries an applicable margin of Adjusted Term SOFR + 375 bps, with a SOFR floor of 0.50% and a 1.00% OID. When the OID is amortized over a deemed 4-year period (consistent with the Credit Agreement's yield calculation methodology, discussed further in Section V), the annualized OID component is approximately 25 basis points. At current market rates (with 1-month Term SOFR at approximately 2.29% as of the date of this memorandum, well above the 0.50% SOFR floor), the SOFR floor contributes zero basis points to the Effective Yield differential. Accordingly, the estimated Effective Yield of the Initial TLB is approximately SOFR + 400 basis points (375 bps margin plus 25 bps annualized OID).

Given the 50 basis point MFN Threshold, an incremental term loan would trigger the MFN ratchet only if its Effective Yield exceeds approximately SOFR + 450 basis points. A more detailed analysis of the yield calculation methodology and illustrative scenarios is set forth in Section V below.

C. MFN Sunset Period

The MFN provision is subject to a temporal limitation: it applies only during the 18-month period commencing on the Closing Date (anticipated to be July 21, 2022) and ending on January 21, 2024 (the MFN Sunset Date). After the MFN Sunset Date, VHG may incur incremental term loans at any Effective Yield without triggering the MFN adjustment, providing the Borrower with full pricing flexibility for later-stage capital needs.

The length of the MFN sunset period was a key negotiation point between C&H (on behalf of VHG) and WGP (on behalf of Crescent Harbor and the syndicate lenders). VHG initially proposed a 12-month sunset period, consistent with the then-prevailing market median, which would have allowed VHG to price incremental term loans freely as early as July 21, 2023. WGP, on behalf of the syndicate, initially demanded a 24-month sunset period, arguing that the initial lenders were entitled to a longer period of yield protection given the competitive pricing achieved in the syndication and the potential for market volatility in the hospitality sector. The 18-month compromise was agreed in principle during the May 2022 negotiation sessions, as documented in the internal Memorandum on MFN Sunset and Repricing Protection Negotiation Strategy dated May 10, 2022 (prepared by Sophie Tremblay and circulated to Ian Blackwood and the VHG in-house legal team).

From VHG's perspective, the 18-month sunset was deemed acceptable for several reasons. First, VHG's management team anticipated that the initial $75,000,000 in incremental proceeds would be sufficient to fund near-term acquisition activity through the first 12 months post-closing, reducing the likelihood of needing to access the incremental facility during the MFN sunset window. Second, VHG's favorable credit profile — with pro forma net leverage of only 2.52x and strong EBITDA recovery trends — suggested that any incremental term loan incurrence during the sunset period would likely be priced within or near the 50 basis point MFN Threshold, limiting the practical impact of the provision. Third, VHG retains the ability to use its $400,000,000 undrawn revolving credit facility or the unsecured notes market as alternative funding sources that would not implicate the MFN clause.

D. Scope — What Is Covered

The MFN clause applies to all "Incremental Term Loans" incurred under the Credit Agreement's incremental facility provisions (Section 2.20), whether such incremental term loans are structured as fungible tranches (carrying the same CUSIP and identical terms as the Initial TLB) or non-fungible tranches (carrying a separate CUSIP and potentially different maturity, amortization, or other terms). The breadth of this coverage is consistent with market practice, as lenders generally expect MFN protection to apply to all new pari passu term loan debt issued under the same credit agreement, regardless of structural form.

The MFN provision does not apply to the following categories of indebtedness:

(i) Incremental Revolving Commitments. Any increase in the revolving credit facility commitments under the Credit Agreement is excluded from the MFN calculation. This is standard market practice, as revolving credit facilities are priced on a fundamentally different basis than term loans and serve a different capital structure function (working capital and liquidity rather than permanent financing).

(ii) Refinancing Term Loans. Term loans incurred to refinance or replace the Initial TLB in whole or in part (i.e., "Refinancing Term Loans" as defined in the Credit Agreement) are excluded from the MFN clause. Such refinancings are instead subject to the separate repricing protection (soft call) provision discussed in Section VII of this memorandum. The exclusion reflects the principle that the MFN is designed to protect against yield dilution from new incremental debt, not from a refinancing of the existing facility itself.

(iii) Debt Outside the Credit Agreement. Indebtedness incurred under separate credit facilities, indentures, or other instruments — including any unsecured notes, second-lien facilities, or mezzanine financing — is not subject to the MFN clause. The MFN is limited to the "four corners" of the Credit Agreement. This is a significant distinction, as VHG retains the ability to raise additional debt capital through alternative structures (including the unsecured notes market) without implicating the MFN provision.

E. Carve-Outs and Exceptions

In addition to the categorical exclusions described above, the MFN clause is subject to a negotiated carve-out for acquisition-related incremental term loans. Specifically, incremental term loans incurred in connection with a "Permitted Acquisition" (as defined in the Credit Agreement) with an aggregate purchase price exceeding $100,000,000 are excluded from the MFN adjustment (the "Acquisition Carve-Out"). This carve-out was proposed by C&H in the first draft of the Credit Agreement and was the subject of significant negotiation with WGP.

The purpose of the Acquisition Carve-Out is to protect VHG's ability to fund larger strategic acquisitions with incremental term loan financing at then-prevailing market rates without being constrained by the MFN's yield ceiling or, conversely, without triggering a potentially costly margin ratchet on the full $700,000,000 Initial TLB. In the context of acquisition financing, borrowers frequently need to offer competitive pricing to attract lenders to an incremental facility on an expedited timeline, and the ability to do so without repricing the entire existing term loan facility is a material commercial consideration.

The $100,000,000 purchase price threshold represents a negotiated compromise. VHG initially proposed a threshold of $50,000,000, which would have covered a broader range of acquisitions and provided greater flexibility. WGP, on behalf of the syndicate, initially sought either no acquisition carve-out at all or, alternatively, a threshold of $200,000,000 — a level that would have rendered the carve-out largely theoretical given VHG's typical acquisition size profile. After multiple rounds of negotiation, the parties agreed on the $100,000,000 threshold, which is above VHG's median historical acquisition size (approximately $60,000,000–$80,000,000 per transaction based on management representations) but within the range of VHG's larger strategic transactions.

This carve-out is strategically important given VHG's stated intention to deploy the incremental $75,000,000 in TLB proceeds for acquisition pipeline purposes and the possibility that additional, larger acquisitions may require incremental term loan funding within the 18-month MFN sunset window. The interaction between the Acquisition Carve-Out and VHG's acquisition strategy is discussed further in Section VIII.A below.

IV. Market Comparison and Precedent Analysis

A. Methodology

To assess the market positioning of VHG's negotiated MFN provision, we reviewed 15 leveraged Term Loan B facilities in the hospitality and real estate sectors that closed between Q3 2021 and Q2 2022. The data was sourced from publicly available credit agreements filed with the U.S. Securities and Exchange Commission (SEC) on EDGAR, supplemented by market reports and deal summaries published by Meridian Strauss Advisory LLC and by syndicate-level lender presentations shared in the normal course of syndication. Our analysis focused on four key parameters: (i) the MFN Threshold (measured in basis points), (ii) the MFN sunset period (measured in months from closing), (iii) the presence or absence of acquisition-related carve-outs and the applicable threshold amount, and (iv) the yield calculation methodology employed (i.e., "all-in yield" vs. "margin-only" vs. "yield to maturity").

From this broader data set, we selected eight transactions as the most directly comparable to VHG's facility based on similarity of sector, credit profile, facility size, and vintage. These comparable transactions are summarized in the table below and are presented in full detail in Appendix A.

B. Summary of Market Precedents

Summary Statistics:

C. Key Observations

MFN Threshold. The 50 basis point MFN Threshold negotiated for VHG's Initial TLB is precisely at the market median of the comparable transaction data set. Among the eight transactions reviewed in detail, four featured a 50 basis point threshold, two featured a 75 basis point threshold (which is more borrower-friendly, as it allows a wider pricing range before the ratchet is triggered), and one featured a more lender-protective 25 basis point threshold. The remaining transaction (Harrington Leisure Properties) also used a 50 basis point threshold. Recent trend data suggests that thresholds in the hospitality sector have generally ranged from 25 bps (at the more lender-protective end of the spectrum) to 75 bps (at the more borrower-friendly end), with the 50 bps level representing a well-established market norm that strikes a balance between protecting existing lenders from material yield dilution and preserving the borrower's incremental financing flexibility.

It is worth noting that the two transactions with 75 basis point thresholds (Bayside Realty Holdings Corp. and Summit Ridge Hotels LLC) were both Q2 2022 transactions, potentially reflecting the continuing shift in negotiating leverage toward borrowers in the most recent period. Conversely, the lone 25 basis point threshold (Redstone Hotel Group Inc.) was a Q3 2021 transaction involving a smaller, single-B rated borrower with higher leverage, where the syndicate was in a stronger position to demand more protective terms.

MFN Sunset Period. The 18-month sunset period negotiated for VHG's facility is longer than the current market median of approximately 12 months and is borrower-favorable in the sense that it provides a longer window during which the initial lenders benefit from MFN protection. In the comparable data set, six of eight transactions featured sunset periods of 12 months or less, with two transactions (Bayside Realty and Summit Ridge) featuring notably short 6-month sunset periods. Only two of the eight comparable transactions featured sunset periods exceeding 12 months: Redstone Hotel Group at 18 months and Harrington Leisure Properties at 24 months.

The longer sunset period benefits VHG in a somewhat counterintuitive sense. While a longer MFN sunset restricts VHG's pricing flexibility for a longer period, it also provides the initial syndicate lenders with more comfort — which was an important consideration in achieving the overall economic terms (including the 375 bps spread and 99.00 OID) that VHG obtained. In the aggregate deal negotiations, the 18-month sunset was part of a broader package of terms that VHG viewed as favorable, and the company assessed the practical likelihood of needing to incur incremental term loans at materially higher yields during the sunset window as relatively low given VHG's strong credit profile (2.52x closing leverage), the availability of alternative funding sources (including the undrawn $400,000,000 revolving credit facility), and the current interest rate environment.

It is also notable that the broader market trend post-2021 has been toward shorter MFN sunset periods — from the 18–24 month range that was common in 2019–2020 to the 6–12 month range that has become more prevalent in 2021–2022. This trend reflects the stronger bargaining position of borrowers in a competitive leveraged lending market with abundant liquidity. VHG's 18-month sunset is at the upper end of the current market range but is not an outlier, and we believe it was a reasonable concession in the context of the overall negotiation.

Acquisition Carve-Out. Approximately half of the comparable transactions (four of eight) included some form of acquisition-related carve-out from the MFN clause. Among those that included a carve-out, the purchase price thresholds ranged from $75,000,000 (Grandview Resorts) to $200,000,000 (Bayside Realty Holdings), with a median of approximately $112,500,000. VHG's $100,000,000 threshold is within this range and is well-positioned relative to comparables. The presence of an acquisition carve-out is strategically important for active acquirers in the hospitality sector, where bolt-on acquisitions are a core component of growth strategy and where the ability to price incremental financing competitively on an expedited basis is a practical necessity.

The four transactions that did not include an acquisition carve-out (Pinnacle Lodging, Redstone Hotel Group, Oakmont Hospitality, and Harrington Leisure) generally either had shorter sunset periods (mitigating the need for a carve-out) or were structured for borrowers with less active acquisition pipelines. In VHG's case, given management's stated intention to pursue additional acquisitions during the 18-month sunset window, the Acquisition Carve-Out was a critical negotiation priority.

Market Trend. The overall trend in the MFN market since 2021 reflects a shift toward more borrower-favorable terms. MFN sunset periods have shortened from the 18–24 month range common in 2019–2020 to the 6–12 month range increasingly typical in 2022 transactions. At the same time, MFN thresholds have widened slightly, with 50–75 bps becoming the standard range, compared to 25–50 bps in earlier periods. These trends are consistent with broader market dynamics — including strong CLO formation, abundant institutional demand for leveraged loans, and relatively low default rates — that have tilted negotiating leverage toward borrowers and sponsors. VHG's negotiated terms (50 bps threshold, 18-month sunset, $100M acquisition carve-out) are within the current market range, though the sunset period is at the longer end of the distribution.

V. Yield Calculation Methodology

A. Definition of "Effective Yield" in the Credit Agreement

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

(i) the applicable margin (i.e., the spread over Adjusted Term SOFR) applicable to such term loans;

(ii) the impact of any original issue discount ("OID") or upfront fees paid to the lenders of such term loans (but excluding arrangement, structuring, or commitment fees paid solely to arrangers and not to all lenders), in each case as amortized on a straight-line basis over a deemed period equal to the lesser of (x) four years and (y) the remaining weighted average life to maturity of such term loans; and

(iii) the SOFR floor, but only to the extent that the SOFR floor applicable to such term loans exceeds the then-current Adjusted Term SOFR rate by more than the amount by which the SOFR floor on the Initial TLB exceeds the then-current Adjusted Term SOFR rate (i.e., the floor differential is calculated on a net basis, reflecting only the incremental yield benefit of a higher floor on the new term loans relative to the Initial TLB).

The following items are expressly excluded from the Effective Yield calculation:

(a) arrangement, structuring, or commitment fees paid solely to arrangers or lead lenders (and not to all participating lenders), on the basis that such fees compensate arrangers for syndication risk and services rather than reflecting the yield to the broader syndicate;

(b) any default interest (on the basis that default interest is a penalty triggered by a borrower's failure to perform and does not reflect the arms-length market yield on the facility); and

(c) any SOFR floor differential where Adjusted Term SOFR is at or above the applicable SOFR floor (because in such circumstances the floor is "out of the money" and does not contribute to actual yield).

This "all-in yield" approach, which encompasses the applicable margin, OID amortization, and floor differentials, is the most comprehensive and most commonly employed methodology in the current leveraged loan market. As noted in the comparable transaction analysis above, approximately 75% of the transactions in our data set (six of eight) employed an all-in yield methodology. The principal alternative — a "margin-only" approach that considers only the applicable spread and ignores OID and floor impacts — was used in one transaction (Bayside Realty Holdings Corp.) and is generally viewed as more borrower-friendly, as it excludes components that can materially affect the total cost of the facility. VHG proposed a margin-only approach during early-stage negotiations, but this approach was rejected by WGP and the syndicate lenders, who insisted on the all-in yield methodology as a condition of the agreed pricing.

B. Illustrative Calculation for the Initial TLB

To establish the baseline against which incremental term loan yields will be compared, we set forth below the Effective Yield calculation for the Initial TLB as of the anticipated Closing Date:

Applicable Margin: 375 bps (Adjusted Term SOFR + 3.75%)

OID: 1.00% of face amount ($7,000,000 on the $700,000,000 facility). Amortized on a straight-line basis over a deemed 4-year life (the lesser of 4 years and the approximately 7-year remaining weighted average life to maturity), this equates to approximately 25 basis points per annum (1.00% ÷ 4 years = 0.25% per year).

SOFR Floor: The Initial TLB has a SOFR floor of 0.50%. As of the date of this memorandum, 1-month Term SOFR is approximately 2.29%, which materially exceeds the 0.50% floor. Accordingly, the SOFR floor is currently "out of the money" and contributes 0 basis points to the Effective Yield calculation. This component would become relevant only in a scenario where Adjusted Term SOFR falls below 0.50%, which is not anticipated in the near term given current Federal Reserve monetary policy guidance but could occur in a future easing cycle.

Estimated Effective Yield of the Initial TLB: SOFR + 400 bps (375 bps margin + 25 bps annualized OID + 0 bps floor contribution at current rates).

Based on this calculation, and applying the 50 basis point MFN Threshold, an incremental term loan would trigger the MFN ratchet only if its Effective Yield exceeds SOFR + 450 bps (i.e., the Initial TLB's Effective Yield of SOFR + 400 bps plus the 50 bps threshold).

C. Sensitivity Analysis

The question of whether a particular incremental term loan incurrence triggers the MFN ratchet depends on the specific pricing terms of the incremental facility and the prevailing SOFR rate at the time of incurrence. To illustrate the operation of the MFN provision under various pricing scenarios, we present the following sensitivity analysis. (A more detailed version of this analysis, with additional scenarios, is set forth in Appendix B.)

Scenario 1: Incremental TL at SOFR + 425 bps with 0.50% OID

Applicable margin: 425 bps OID amortization: 0.50% ÷ 4 years = 12.5 bps per annum SOFR floor: assume same 0.50% floor as Initial TLB; no floor differential Effective Yield: SOFR + 437.5 bps Differential vs. Initial TLB: 437.5 – 400 = 37.5 bps Result: MFN NOT triggered (37.5 bps is below the 50 bps threshold)

Scenario 2: Incremental TL at SOFR + 450 bps with 1.00% OID

Applicable margin: 450 bps OID amortization: 1.00% ÷ 4 years = 25 bps per annum SOFR floor: assume same 0.50% floor as Initial TLB; no floor differential Effective Yield: SOFR + 475 bps Differential vs. Initial TLB: 475 – 400 = 75 bps Result: MFN TRIGGERED (75 bps exceeds the 50 bps threshold) Margin Adjustment: The Initial TLB margin would be increased from SOFR + 375 bps to SOFR + 425 bps (so that the Initial TLB's adjusted Effective Yield of SOFR + 450 bps [425 margin + 25 OID] is within 50 bps of the incremental's Effective Yield of SOFR + 475 bps). Annual Cost of Ratchet: The 50 bps increase in the Initial TLB margin, applied to the outstanding principal balance of $700,000,000 (less any amortization), would result in incremental annual interest expense of approximately $3,500,000.

Scenario 3: Incremental TL at SOFR + 400 bps with 0% OID but 1.00% SOFR floor (assuming SOFR at 0.40%)

Applicable margin: 400 bps OID amortization: 0 bps (no OID) SOFR floor analysis: The incremental TL has a 1.00% SOFR floor. If Adjusted Term SOFR is 0.40%, the incremental TL's floor is in the money by 60 bps (1.00% – 0.40%). The Initial TLB's 0.50% floor is in the money by 10 bps (0.50% – 0.40%). The net floor differential is 50 bps (60 bps – 10 bps). Effective Yield: SOFR + 400 bps margin + 0 bps OID + 50 bps floor differential = SOFR + 450 bps Differential vs. Initial TLB: 450 – 400 = 50 bps Result: MFN TRIGGERED (50 bps meets the threshold, and the provision is triggered when the differential exceeds 50 bps; at exactly 50 bps, under the Credit Agreement's formulation using "exceeds ... by more than 50 basis points," the MFN would not be triggered). We note, however, that this is a borderline case, and the precise result depends on whether the Credit Agreement's threshold is stated as "exceeds by more than 50 bps" (not triggered at exactly 50 bps) or "equals or exceeds 50 bps" (triggered). The current draft uses the former formulation, so the MFN would not be triggered in this precise scenario.

This scenario analysis highlights the importance of careful yield calculation prior to any incremental term loan incurrence during the MFN sunset period. We recommend that VHG prepare a detailed yield calculation worksheet in consultation with C&H before launching any incremental facility process.

D. Observations on Yield Calculation Approach

The "all-in yield" methodology adopted in the Credit Agreement — encompassing applicable margin, OID amortization, and SOFR floor differentials — represents the most comprehensive approach to yield measurement and is consistent with the methodology employed in the majority (approximately 70%) of the comparable transactions reviewed in our market analysis. This approach provides the initial syndicate lenders with the broadest protection, as it captures yield components that are economically meaningful but might be overlooked under a simpler margin-only framework.

The principal alternative, the "margin-only" approach (which considers only the applicable spread over the benchmark rate and disregards OID and floor impacts), was proposed by VHG during early-stage negotiations as a more borrower-favorable framework. Under a margin-only approach, VHG could potentially structure incremental term loans with a relatively modest spread but a deep OID (e.g., SOFR + 400 bps with a 3.00% OID), achieving a high all-in yield for incremental lenders without triggering the MFN based solely on the stated margin. WGP correctly identified this structural arbitrage risk and successfully insisted on the all-in yield approach. The rejection of the margin-only methodology was consistent with the clear market trend toward comprehensive yield definitions in MFN provisions.

The 4-year deemed amortization period for OID represents the market standard convention. This period serves as a proxy for the expected life of the term loan, recognizing that most Term Loan B facilities — despite having contractual maturities of 5–7 years — are typically refinanced or repriced within 3–5 years. The 4-year convention provides a reasonable approximation of the annualized cost of OID over the expected holding period without requiring complex actuarial calculations or assumptions about prepayment behavior.

A third methodology — "yield to maturity" — was used in one of the comparable transactions (Harrington Leisure Properties Inc.) and represents the most theoretically precise approach, as it calculates the internal rate of return on the term loan cash flows over the contractual life of the facility, accounting for OID, amortization payments, and bullet maturity. However, the yield to maturity approach introduces computational complexity and requires assumptions about future amortization schedules and prepayment behavior that may not be available at the time of yield comparison. For these reasons, the all-in yield approach (with deemed 4-year OID amortization) has emerged as the market-preferred methodology, and we believe the approach adopted in VHG's Credit Agreement is appropriate and market-standard.

VI. Interaction with Incremental Facility Provisions

A. Overview of Incremental Facility Basket

The Credit Agreement permits VHG to incur incremental term loans and/or incremental revolving commitments in an aggregate principal amount up to the greater of:

(i) a fixed dollar basket of $200,000,000 (the "Free-and-Clear Basket"), which may be incurred without regard to any financial ratio test and provides VHG with a guaranteed minimum amount of incremental capacity; and

(ii) an amount that would not cause the pro forma Total Net Leverage Ratio to exceed 3.5x, calculated on a pro forma basis after giving effect to the incurrence and the application of proceeds (the "Ratio Basket"). The 3.5x ratio is set at 1.0x turn inside the 4.5x financial covenant level, providing a meaningful buffer.

At closing, with pro forma net leverage of 2.52x and LTM Adjusted EBITDA of $341,000,000, the Ratio Basket would permit VHG to incur incremental term loans in an amount sufficient to increase total net funded debt by approximately $334,000,000 (i.e., to reach 3.5x × $341M = $1,193.5M total net funded debt, less the existing $858M pro forma net funded debt = approximately $335.5M of incremental capacity under the ratio test, subject to rounding and other adjustments). The Free-and-Clear Basket of $200,000,000 is available regardless of leverage levels. The two baskets are typically used in a "greater of" construct, meaning VHG can incur up to the higher of $200,000,000 or the ratio-based amount at any given time. In practice, the Ratio Basket currently provides substantially more capacity than the Free-and-Clear Basket.

Incremental term loans may be incurred from existing lenders in the syndicate, from new lenders meeting the eligibility requirements in the Credit Agreement, or from a combination of existing and new lenders. Customary conditions to incurrence include: (a) no Event of Default exists or would result from the incurrence, (b) pro forma compliance with the financial covenant (if applicable), (c) delivery of an officer's certificate from a Responsible Officer of VHG certifying compliance with the incurrence conditions, and (d) delivery of a legal opinion from VHG's counsel (expected to be C&H) confirming the due authorization and enforceability of the incremental term loan documentation.

B. Interplay Between MFN and Incremental Baskets

The MFN clause applies to all incremental term loans incurred under the Credit Agreement during the MFN sunset period, regardless of whether such term loans are incurred under the Free-and-Clear Basket or the Ratio Basket. There is no distinction in the Credit Agreement between incremental term loans funded from different baskets for purposes of MFN analysis. This is consistent with market practice, as the yield protection rationale underlying the MFN provision applies equally to all new pari passu term loan debt, irrespective of the incurrence basket utilized.

The sole exception to MFN coverage during the sunset period is the Acquisition Carve-Out described in Section III.E above, which excludes incremental term loans incurred to fund Permitted Acquisitions with purchase prices exceeding $100,000,000.

After the MFN Sunset Date of January 21, 2024, incremental term loans incurred under either the Free-and-Clear Basket or the Ratio Basket may be priced at any Effective Yield without triggering the MFN ratchet, providing VHG with full pricing flexibility.

Strategic Implications for Timing. The interplay between the MFN provision and the incremental facility provisions creates an important strategic consideration for VHG's treasury and corporate development teams. If VHG anticipates needing to incur incremental term loans at yields that would exceed the MFN trigger level (e.g., in a rising rate environment or in the event of a deterioration in VHG's credit profile), VHG has a clear economic incentive to defer such incurrence until after January 21, 2024, to avoid triggering the MFN ratchet on the full $700,000,000 Initial TLB. The cost of triggering the MFN can be substantial — as illustrated in Scenario 2 of the sensitivity analysis above, a 50 basis point margin ratchet on a $700,000,000 term loan translates to approximately $3,500,000 per annum in additional interest expense, which compounds over the remaining life of the facility.

Alternatively, VHG could structure individual acquisitions to meet the $100,000,000 Acquisition Carve-Out threshold, thereby avoiding MFN triggering even during the sunset period. This approach requires careful deal structuring and may not always be commercially feasible, but it represents a valuable planning tool. We discuss these strategic considerations in more detail in Section VIII below.

C. Fungibility Considerations

Incremental term loans incurred under the Credit Agreement may be structured as either "fungible" or "non-fungible" with the Initial TLB. Fungible incremental term loans carry the same CUSIP as the Initial TLB, have identical terms (including maturity, amortization, applicable margin, and other pricing terms), and trade interchangeably with the Initial TLB in the secondary market. Non-fungible incremental term loans carry a separate CUSIP and may have different maturity dates, amortization schedules, applicable margins, or other terms.

The MFN provision applies regardless of whether the incremental term loans are structured as fungible or non-fungible with the Initial TLB. This is an important point, as borrowers sometimes argue that fungible incremental term loans — which by definition carry the same margin as the existing facility — should be excluded from MFN analysis. In this case, however, the Credit Agreement's Effective Yield definition captures OID and floor differentials in addition to the stated margin, meaning that even a nominally "fungible" incremental term loan could have a higher Effective Yield than the Initial TLB if it is issued at a deeper OID or with a higher SOFR floor. The MFN provision appropriately addresses this possibility.

If the MFN is triggered and the Initial TLB's applicable margin is ratcheted upward, the Initial TLB and the incremental term loan may become fungible if all other terms (maturity, amortization, etc.) are identical and the adjusted margins are the same. Whether the parties elect to treat the facilities as fungible in such circumstances is a practical matter that would be addressed in the incremental facility documentation at the time of incurrence, in consultation with the Administrative Agent and the transfer agent for the applicable CUSIP.

VII. Repricing Protection Interaction

The Credit Agreement includes a separate repricing protection provision (commonly referred to as a "soft call" provision) in addition to the MFN clause. Under this provision, if VHG reprices or refinances the Initial TLB at a lower Effective Yield — whether through a direct amendment reducing the applicable margin, a refinancing with new term loans at lower pricing, or any other transaction that has the primary purpose and effect of reducing the yield on the facility — within six months of the Closing Date (i.e., before January 21, 2023), a prepayment premium of 1.00% of the principal amount repriced or refinanced is payable to the Initial TLB lenders. On the full $700,000,000 facility, this premium would amount to $7,000,000 if the entire facility were repriced.

It is important to distinguish the conceptual function of the repricing protection provision from that of the MFN clause, as the two provisions address different risks and operate independently:

• Repricing Protection (Soft Call): Protects the initial syndicate lenders against downside yield compression — i.e., the risk that the borrower will take advantage of improving market conditions to refinance or reprice the facility at a lower yield shortly after closing, depriving the lenders of the economic bargain they expected when they committed to the facility. The soft call premium compensates lenders for this "call risk" during the initial post-closing period.

• MFN Provision: Protects the initial syndicate lenders against upside yield dilution — i.e., the risk that the borrower will issue new incremental term loans at a materially higher yield, creating a "second class" of pari passu lenders who enjoy better economics than the initial lenders who committed at a lower spread. The MFN ratchet ensures that the initial lenders share in any meaningful yield improvement available in the market.

Together, these two provisions create a comprehensive yield protection framework for the initial syndicate during the early post-closing period. The repricing protection addresses the downside (borrower refinances at lower yields), while the MFN addresses the upside (borrower issues new debt at higher yields). This dual framework is standard in the broadly syndicated leveraged loan market and reflects the lenders' expectation of yield stability during the initial holding period.

Timeline Overlap. The 6-month soft call period (July 21, 2022 through January 21, 2023) falls entirely within the 18-month MFN sunset period (July 21, 2022 through January 21, 2024). However, the two provisions do not interact mechanically — they address different scenarios and cannot be simultaneously triggered by the same transaction. A repricing at a lower yield would trigger the soft call premium but would not trigger the MFN (since the MFN applies only to higher yield incremental term loans). Conversely, an incremental term loan at a higher yield would trigger the MFN but would not trigger the soft call (since the soft call applies only to lower yield repricings or refinancings).

The overlap in timing creates a practical window analysis for VHG's capital markets planning:

VIII. Strategic Implications and Recommendations for VHG

A. Near-Term Acquisition Pipeline

VHG's Treasurer, Glenn Fischbach, and Chief Financial Officer, Renata Haines, have indicated in recent discussions with the deal team that VHG expects to deploy the incremental $75,000,000 in TLB proceeds (net of transaction expenses) within the first 12 months following the Closing Date, primarily to fund identified acquisition targets in VHG's near-term pipeline. Beyond this initial deployment, VHG's corporate development team has indicated that additional acquisition opportunities — some of which may exceed $100,000,000 in purchase price — are under evaluation and may require incremental term loan financing during the 18-month MFN sunset period.

Recommendation. For acquisitions contemplated during the MFN sunset period (through January 21, 2024), VHG should consider the following strategies to manage the potential impact of the MFN provision:

(i) Utilize the Acquisition Carve-Out. Where feasible, VHG should structure acquisitions to exceed the $100,000,000 purchase price threshold required to qualify for the Acquisition Carve-Out. Incremental term loans incurred to fund qualifying acquisitions are fully exempt from the MFN ratchet, providing VHG with unrestricted pricing flexibility. This approach may require careful structuring of multi-property or portfolio transactions to aggregate purchase prices above the threshold. VHG should consult with C&H on the definitional requirements and documentation needed to confirm that a particular acquisition qualifies as a "Permitted Acquisition" under the Credit Agreement.

(ii) Price Within the MFN Threshold. For incremental term loans that do not qualify for the Acquisition Carve-Out, VHG should endeavor to price such facilities at an Effective Yield not exceeding approximately SOFR + 450 bps (i.e., within 50 bps of the Initial TLB's estimated Effective Yield of SOFR + 400 bps). This ceiling limits VHG's pricing flexibility but avoids the cost of triggering the MFN ratchet on the full $700,000,000 Initial TLB. VHG's financial advisors at Meridian Strauss Advisory LLC (Elise Cavanaugh) should be engaged early in any incremental facility process to assess market clearing levels and advise on whether pricing within the MFN-safe range is achievable.

(iii) Utilize Alternative Funding Sources. VHG maintains a $400,000,000 senior secured revolving credit facility (currently undrawn as of the date of this memorandum) that is available for acquisition funding and general corporate purposes. Borrowings under the revolving credit facility are not subject to the MFN clause. Similarly, VHG could consider accessing the unsecured notes market or other financing structures that fall outside the "four corners" of the Credit Agreement and therefore do not implicate the MFN provision. The choice between revolving credit utilization, unsecured notes, and incremental term loans involves a range of considerations — including cost, maturity profile, security, and covenant flexibility — that should be evaluated on a case-by-case basis in consultation with VHG's financial advisors and counsel.

B. Refinancing and Repricing Strategy

VHG may wish to pursue a repricing or refinancing of the Initial TLB if market conditions improve and leveraged loan spreads tighten during the post-closing period. Any such transaction should be evaluated in light of both the 6-month repricing protection (soft call) provision and the 18-month MFN sunset period.

During the first six months post-closing (through January 21, 2023), a repricing at a lower Effective Yield would require payment of the 1.00% soft call premium, which would amount to approximately $7,000,000 on the full $700,000,000 facility. Unless the spread reduction achievable in the market is substantial enough to offset this premium over a reasonable payback period, a repricing during this window is unlikely to be economically attractive. As a general rule of thumb, a minimum spread reduction of approximately 25–50 bps would be required to achieve a payback period of approximately 2–4 years on the $7,000,000 premium, depending on VHG's expected holding period and discount rate.

After January 21, 2023 (when the soft call period expires), VHG can reprice the facility freely without incurring any premium. The MFN provision would remain in effect until January 21, 2024, but a repricing at a lower yield would not trigger the MFN clause, as the MFN applies only to incremental term loans incurred at higher yields. Accordingly, there is no MFN-related impediment to a repricing after the soft call sunset.

Recommendation. Any future repricing should ideally be pursued after January 21, 2023, to avoid the 1.00% soft call premium. VHG should coordinate with Meridian Strauss Advisory LLC (Elise Cavanaugh) on an ongoing basis to monitor secondary market trading levels for the Initial TLB and to assess the optimal timing for a repricing transaction. C&H should be engaged to prepare the amendment documentation and to confirm compliance with the procedural requirements of the Credit Agreement (including any required consent thresholds for a margin reduction).

C. Documentation Monitoring

Given the complexity of the MFN mechanics and the material financial consequences of an inadvertent trigger, C&H recommends that the following documentation monitoring protocols be implemented during the MFN sunset period:

(i) Pre-Incurrence Yield Calculation. Any request for incremental term loans during the MFN sunset period should be accompanied by a detailed yield calculation worksheet, prepared by C&H in coordination with VHG's treasury team and financial advisors, analyzing whether the proposed pricing would trigger the MFN ratchet. The worksheet should follow the Effective Yield methodology set forth in Section 1.01 of the Credit Agreement, as described in Section V of this memorandum, and should include the applicable margin, OID amortization, and SOFR floor differential analysis.

(ii) Acquisition Carve-Out Confirmation. If VHG intends to rely on the $100,000,000 Acquisition Carve-Out, C&H should review the acquisition documentation to confirm that the proposed transaction satisfies the definition of "Permitted Acquisition" under the Credit Agreement and that the aggregate purchase price meets the $100,000,000 threshold. Any ambiguity in the application of the carve-out should be addressed proactively with the Administrative Agent and WGP.

(iii) Periodic Market Monitoring. C&H and Meridian Strauss Advisory LLC should periodically review prevailing market conditions, including leveraged loan new issue spreads, secondary trading levels, and SOFR rate movements, to advise VHG on the likely pricing range for any contemplated incremental facility and the associated MFN risk.

(iv) Administrative Agent Coordination. In the event that the MFN ratchet is triggered, C&H should coordinate with Crescent Harbor (through WGP) on the implementation of the automatic margin adjustment, including the determination of the adjusted applicable margin, the effective date of the adjustment, and the notification to syndicate lenders. While the adjustment is self-executing under the Credit Agreement, practical coordination with the Administrative Agent is advisable to ensure smooth implementation and accurate interest calculations.

IX. Conclusion

The MFN provision negotiated in VHG's $700,000,000 Senior Secured Term Loan B Credit Agreement — featuring a 50 basis point threshold, an 18-month sunset period running from the Closing Date through January 21, 2024, and a $100,000,000 acquisition-related carve-out — is at or slightly above market median terms for the hospitality and real estate leveraged lending market as of mid-2022. The 50 basis point threshold is precisely at the market median, while the 18-month sunset period is longer than the current median of approximately 12 months but within the range of recent precedent transactions. The Acquisition Carve-Out, with its $100,000,000 threshold, is consistent with comparable transactions and is strategically important given VHG's active acquisition pipeline.

The provision represents a reasonable compromise between protecting the initial syndicate lenders' yield expectations and preserving VHG's incremental financing flexibility. The all-in yield calculation methodology — encompassing applicable margin, OID amortization over a deemed 4-year life, and SOFR floor differentials — is comprehensive and market-standard, and provides a clear framework for determining whether any future incremental term loan incurrence triggers the MFN ratchet.

VHG should be mindful of the MFN mechanics when planning any incremental term loan incurrence prior to January 21, 2024. In particular, VHG should evaluate whether proposed transactions qualify for the Acquisition Carve-Out, whether incremental term loans can be priced within the 50 basis point MFN-safe range, and whether alternative funding sources (including the revolving credit facility or unsecured notes) may offer a more efficient path to capital without implicating the MFN provision. VHG should consult with C&H and Meridian Strauss Advisory LLC before launching any incremental facility process during the sunset period.

Drummond & Fenwick LLP is available to assist with yield calculations, compliance analysis, documentation preparation, and strategic advice as needed throughout the MFN sunset period and beyond.

Please do not hesitate to contact the undersigned with any questions or comments regarding the analysis set forth in this memorandum.

Sophie Tremblay Lead Associate, Banking & Finance Drummond & Fenwick LLP Direct: (212) 558-XXXX stremblay@sullcrom.com

Appendix A — Market Precedent Summary Table

The following table presents the full set of eight comparable hospitality and real estate sector Term Loan B transactions used in the market precedent analysis described in Section IV of this memorandum. Data has been sourced from publicly available credit agreements filed with the SEC and from market reports published by Meridian Strauss Advisory LLC.

Notes:

(a) "L+" denotes LIBOR-based facilities (Q3/Q4 2021 vintage); "S+" denotes SOFR-based facilities (Q1/Q2 2022 vintage).

(b) Acquisition carve-out thresholds represent the minimum aggregate purchase price required for the carve-out to apply.

(d) Yield methodology refers to the approach used in the credit agreement's Effective Yield definition for purposes of the MFN provision.

Summary Statistics (Excluding VHG):

Among transactions with acquisition carve-outs only (n=4).

Appendix B — Illustrative MFN Trigger Scenarios

The following scenarios illustrate the operation of the MFN provision under various hypothetical incremental term loan pricing assumptions. All scenarios assume incurrence during the MFN sunset period (prior to January 21, 2024) and assume that the Acquisition Carve-Out does not apply.

Baseline: Initial TLB Effective Yield = SOFR + 400 bps (375 bps margin + 25 bps annualized OID; SOFR floor out of the money at current rates)

MFN Trigger Level: Effective Yield > SOFR + 450 bps (400 bps + 50 bps threshold)

Scenario 1: Below Threshold — No MFN Trigger

Scenario 2: Above Threshold — MFN Triggered

Scenario 3: Floor Differential Impact — Borderline Case

Scenario 4: Deep OID with Moderate Spread — MFN Triggered

Note: This scenario illustrates why the syndicate insisted on an all-in yield methodology — a margin-only approach would have shown no differential (both at SOFR + 400 bps), despite the incremental term loan having a materially higher all-in cost to the borrower and higher return to lenders.

Scenario 5: High Spread, No OID — MFN Triggered

Appendix C — Relevant Credit Agreement Provisions (Excerpts)

The following excerpts are taken from the Second C&H Revised Draft of the Credit Agreement dated June 8, 2022. These excerpts are provided for reference only and are subject to change in the final execution version. All section references are to the Credit Agreement unless otherwise indicated.

Excerpt 1: MFN Provision (Section 2.20(b)(iv))

From Section 2.20(b)(iv) — Incremental Term Loans:

> (iv) Most Favored Nation Protection. If, prior to the date that is eighteen (18) months after the Closing Date (the "MFN Sunset Date"), the Borrower incurs Incremental Term Loans (other than Incremental Term Loans incurred in connection with a Permitted Acquisition for which the aggregate purchase price exceeds $100,000,000), and the Effective Yield applicable to such Incremental Term Loans exceeds the Effective Yield applicable to the Initial Term Loans by more than 50 basis points (the "MFN Threshold"), then the Applicable Rate with respect to the Initial Term Loans shall be automatically increased to the extent necessary so that the Effective Yield on the Initial Term Loans is equal to the Effective Yield on such Incremental Term Loans minus the MFN Threshold. For the avoidance of doubt, (A) the Applicable Rate on the Initial Term Loans may only be increased (and not decreased) pursuant to this Section 2.20(b)(iv), and (B) this Section 2.20(b)(iv) shall have no further force or effect from and after the MFN Sunset Date.

Excerpt 2: "Effective Yield" Definition (Section 1.01)

From Section 1.01 — Defined Terms:

> "Effective Yield" means,

MEMORANDUM
PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
TO: Ian Blackwood, Partner, Banking & Finance
FROM: Sophie Tremblay, Lead Associate, Banking & Finance
CC: Stephanie Okafor, Billing Partner; Daniel Obi, Associate
DATE: June 10, 2022
RE: Verimark Hospitality Group Inc. — $700,000,000 Senior Secured Term Loan B — "Most Favored Nation" Provision: Detailed Analysis and Market Comparison
Engagement No.: 1016-00009
Client: Verimark Hospitality Group Inc. ("VHG")
Counterparty: Crescent Harbor Bank, N.A. ("Crescent Harbor" or the "Administrative Agent")
Counterparty Counsel: Whitfield Gage & Partridge LLP ("WGP") (Harrison Whitfield III, partner; Megan Yeung, associate)
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I. Executive Summary
The purpose of this memorandum is to provide a detailed analysis of the "most favored nation" (MFN) provision as negotiated in the Credit Agreement (as defined below) governing Verimark Hospitality Group Inc.'s ("VHG" or the "Borrower") $700,000,000 senior secured Term Loan B facility (the "Initial TLB"), and to compare the agreed terms against recent market precedents in the hospitality and real estate leveraged lending sectors. This memorandum is intended to serve as a comprehensive reference for the deal team and for VHG's in-house counsel and treasury function as they evaluate the practical implications of the MFN clause in the context of VHG's near-term acquisition pipeline and longer-term capital structure strategy.
Key Conclusion. The negotiated MFN provision — featuring a 50 basis point threshold (the "MFN Threshold") and an 18-month sunset period running from the anticipated Closing Date of July 21, 2022, through January 21, 2024 (the "MFN Sunset Date") — is borrower-favorable relative to current market norms, which have recently trended toward shorter sunset periods and, in some cases, narrower thresholds. Nevertheless, the negotiated terms fall within the range of recent precedent transactions in the hospitality and real estate leveraged lending sectors and represent a commercially reasonable outcome for VHG.
The MFN provision applies exclusively to incremental term loans incurred under the Credit Agreement's incremental facility provisions during the 18-month MFN sunset window. After January 21, 2024, VHG may incur incremental term loans at any yield without triggering a margin ratchet on the Initial TLB, thereby providing VHG with full pricing flexibility for later-stage capital needs. The provision is further qualified by a negotiated carve-out for incremental term loans incurred to fund "Permitted Acquisitions" with an aggregate purchase price exceeding $100,000,000, which preserves VHG's ability to execute on larger strategic transactions during the sunset period without repricing the existing facility.
This memorandum also addresses the yield calculation methodology embedded in the Credit Agreement's "Effective Yield" definition, the interaction between the MFN clause and the incremental facility provisions (including the Free-and-Clear Basket and the Ratio Basket), the relationship between the MFN provision and the separate 6-month repricing protection (soft call) provision, and practical strategic implications and recommendations for VHG's acquisition pipeline and capital markets strategy. The analysis is supported by a review of 15 leveraged TLB facilities in the hospitality and real estate sectors closed between Q3 2021 and Q2 2022, with detailed comparable transaction data presented in Appendix A.
II. Background and Transaction Overview
A. The Borrower
VHG is a publicly traded hospitality and real estate company listed on the New York Stock Exchange under the ticker symbol VMRK. The company is headquartered at 8200 West Palmetto Park Road, Suite 1500, Boca Raton, Florida 33433. VHG operates a diversified portfolio of 74 full-service and select-service hotels across 18 states, with an aggregate appraised value of approximately $3.1 billion as of the most recent independent appraisal conducted in connection with the refinancing. The portfolio is geographically diversified, with significant concentrations in Florida, California, Texas, and the mid-Atlantic region, and includes properties operating under both proprietary and third-party franchise brands.
For its fiscal year ended December 31, 2021, VHG reported consolidated revenue of approximately $1.42 billion and Adjusted EBITDA (as defined in VHG's public filings and reconciled in the Confidential Information Memorandum dated April 2022 prepared by Meridian Strauss Advisory LLC) of approximately $341 million. These figures represent a substantial recovery from the pandemic-era trough in FY2020 and are broadly consistent with pre-pandemic operating performance. The company's revenue per available room (RevPAR) and average daily rate (ADR) metrics have returned to approximately 92% and 97% of 2019 levels, respectively, reflecting the strong recovery trajectory in the hospitality sector.
B. The Refinancing Transaction
The $700,000,000 senior secured Term Loan B facility refinances VHG's existing $625,000,000 Term Loan B, which was originated on February 14, 2020, with Greystone Federal Credit Corp. serving as administrative agent. The existing facility was priced at LIBOR + 425 basis points with a 1.00% LIBOR floor and was scheduled to mature on February 14, 2027. The refinancing achieves a 50 basis point spread reduction, transitioning VHG from LIBOR + 425 bps to Adjusted Term SOFR + 375 bps, reflecting both the improvement in VHG's credit profile since the pandemic and the broader tightening of leveraged loan spreads in the hospitality sector. The facility also transitions VHG's benchmark rate from LIBOR to Adjusted Term SOFR, with a SOFR floor of 0.50%, consistent with the industry-wide transition away from LIBOR-based facilities.
The incremental $75,000,000 in net proceeds (representing the difference between the $700,000,000 new facility and the $625,000,000 existing facility) will be used to fund VHG's near-term acquisition pipeline and for general corporate purposes, as described in the Confidential Information Memorandum and in discussions with VHG's Treasurer, Glenn Fischbach, and Chief Financial Officer, Renata Haines.
C. Agent, Arrangers, and Syndicate
Crescent Harbor Bank, N.A. serves as Administrative Agent, Collateral Agent, Lead Arranger, and Sole Bookrunner for the facility. Crescent Harbor is represented by Whitfield Gage & Partridge LLP, with Harrison Whitfield III serving as the lead partner and Megan Yeung as the primary associate on the transaction. The facility has been syndicated to a group of eight institutional lenders, with final allocations confirmed as of June 30, 2022, totaling $700,000,000. The syndicate composition includes a mix of commercial banks, CLO vehicles, and institutional investors, reflecting a healthy demand profile consistent with the current favorable conditions in the broadly syndicated loan market.
D. Credit Metrics and Ratings
Pro forma for the refinancing and the application of proceeds, VHG's net leverage stands at approximately 2.52x, calculated as net funded debt of approximately $858,000,000 divided by LTM Adjusted EBITDA of $341,000,000. This leverage level is well within the Credit Agreement's springing financial covenant — a maximum Total Net Leverage Ratio of 4.5x, tested only when revolving credit facility utilization exceeds 35% of commitments. The 2.52x pro forma leverage represents meaningful headroom of approximately 2.0x turns below the covenant threshold, positioning VHG with substantial financial flexibility.
VHG's corporate family credit ratings are BB- from Kellaway Ratings Group and Ba3 from Pinnacle Credit Services, both with a stable outlook. The Initial TLB is rated B+ by Kellaway and B1 by Pinnacle, reflecting its position in the capital structure below the $400,000,000 senior secured revolving credit facility (which has priority claims on certain collateral under the applicable intercreditor arrangements).
E. Key Facility Terms
The material terms of the Initial TLB facility are summarized below for reference:
III. Description of the Negotiated MFN Provision
A. Operative Mechanics
The MFN provision is set forth in Section 2.20 of the Credit Agreement (the incremental facility section), initially drafted by Drummond & Fenwick LLP ("C&H") in the first draft of the Credit Agreement circulated to WGP on May 16, 2022. The provision was the subject of extensive negotiation through multiple iterations, including the WGP First Response (May 23, 2022), the C&H Second Draft (May 31, 2022), the WGP Second Response (June 3, 2022), and the C&H Third Draft (June 8, 2022), which reflects the current agreed position on substantially all open points relating to the MFN clause. A limited number of conforming and definitional refinements remain open and are expected to be resolved in the final execution version of the Credit Agreement.
The operative mechanics of the MFN provision function as follows: if VHG incurs any incremental term loans under the Credit Agreement during the MFN sunset period (from the Closing Date through January 21, 2024), and the "Effective Yield" (as defined in Section 1.01 of the Credit Agreement and discussed in detail in Section V of this memorandum) on such incremental term loans exceeds the Effective Yield on the Initial TLB by more than 50 basis points (the MFN Threshold), then the applicable margin on the Initial TLB shall be automatically increased by an amount necessary to ensure that the Effective Yield on the Initial TLB is within 50 basis points of the Effective Yield on such incremental term loans.
Critically, the MFN adjustment operates as a one-way ratchet upward only. The applicable margin on the Initial TLB cannot be decreased as a result of the operation of the MFN provision. This means that if VHG incurs incremental term loans at an Effective Yield lower than or equal to the Initial TLB's Effective Yield, the MFN provision has no effect. The provision is designed solely to address the scenario in which VHG issues new pari passu term loan debt at a higher yield, which could otherwise dilute the economic terms enjoyed by the initial syndicate lenders.
The margin adjustment, when triggered, takes effect automatically upon the incurrence of the applicable incremental term loans and applies prospectively to interest periods commencing on or after the date of such incurrence. The Credit Agreement does not require a vote of the initial lenders or any affirmative consent mechanism — the adjustment is self-executing, provided that the Administrative Agent determines (based on the yield calculations furnished by the Borrower) that the MFN Threshold has been exceeded.
B. MFN Threshold
The MFN Threshold was negotiated at 50 basis points. This threshold provides VHG with a 50 basis point "cushion," meaning that VHG may price incremental term loans at an Effective Yield up to 50 basis points above the Initial TLB's Effective Yield without triggering any margin adjustment on the Initial TLB. This cushion is designed to provide VHG with reasonable flexibility to respond to changing market conditions when pricing incremental debt, while still protecting the initial syndicate against material yield dilution.
To place this threshold in the context of the Initial TLB's economics: the Initial TLB carries an applicable margin of Adjusted Term SOFR + 375 bps, with a SOFR floor of 0.50% and a 1.00% OID. When the OID is amortized over a deemed 4-year period (consistent with the Credit Agreement's yield calculation methodology, discussed further in Section V), the annualized OID component is approximately 25 basis points. At current market rates (with 1-month Term SOFR at approximately 2.29% as of the date of this memorandum, well above the 0.50% SOFR floor), the SOFR floor contributes zero basis points to the Effective Yield differential. Accordingly, the estimated Effective Yield of the Initial TLB is approximately SOFR + 400 basis points (375 bps margin plus 25 bps annualized OID).
Given the 50 basis point MFN Threshold, an incremental term loan would trigger the MFN ratchet only if its Effective Yield exceeds approximately SOFR + 450 basis points. A more detailed analysis of the yield calculation methodology and illustrative scenarios is set forth in Section V below.
C. MFN Sunset Period
The MFN provision is subject to a temporal limitation: it applies only during the 18-month period commencing on the Closing Date (anticipated to be July 21, 2022) and ending on January 21, 2024 (the MFN Sunset Date). After the MFN Sunset Date, VHG may incur incremental term loans at any Effective Yield without triggering the MFN adjustment, providing the Borrower with full pricing flexibility for later-stage capital needs.
The length of the MFN sunset period was a key negotiation point between C&H (on behalf of VHG) and WGP (on behalf of Crescent Harbor and the syndicate lenders). VHG initially proposed a 12-month sunset period, consistent with the then-prevailing market median, which would have allowed VHG to price incremental term loans freely as early as July 21, 2023. WGP, on behalf of the syndicate, initially demanded a 24-month sunset period, arguing that the initial lenders were entitled to a longer period of yield protection given the competitive pricing achieved in the syndication and the potential for market volatility in the hospitality sector. The 18-month compromise was agreed in principle during the May 2022 negotiation sessions, as documented in the internal Memorandum on MFN Sunset and Repricing Protection Negotiation Strategy dated May 10, 2022 (prepared by Sophie Tremblay and circulated to Ian Blackwood and the VHG in-house legal team).
From VHG's perspective, the 18-month sunset was deemed acceptable for several reasons. First, VHG's management team anticipated that the initial $75,000,000 in incremental proceeds would be sufficient to fund near-term acquisition activity through the first 12 months post-closing, reducing the likelihood of needing to access the incremental facility during the MFN sunset window. Second, VHG's favorable credit profile — with pro forma net leverage of only 2.52x and strong EBITDA recovery trends — suggested that any incremental term loan incurrence during the sunset period would likely be priced within or near the 50 basis point MFN Threshold, limiting the practical impact of the provision. Third, VHG retains the ability to use its $400,000,000 undrawn revolving credit facility or the unsecured notes market as alternative funding sources that would not implicate the MFN clause.
D. Scope — What Is Covered
The MFN clause applies to all "Incremental Term Loans" incurred under the Credit Agreement's incremental facility provisions (Section 2.20), whether such incremental term loans are structured as fungible tranches (carrying the same CUSIP and identical terms as the Initial TLB) or non-fungible tranches (carrying a separate CUSIP and potentially different maturity, amortization, or other terms). The breadth of this coverage is consistent with market practice, as lenders generally expect MFN protection to apply to all new pari passu term loan debt issued under the same credit agreement, regardless of structural form.
The MFN provision does not apply to the following categories of indebtedness:
(i) Incremental Revolving Commitments. Any increase in the revolving credit facility commitments under the Credit Agreement is excluded from the MFN calculation. This is standard market practice, as revolving credit facilities are priced on a fundamentally different basis than term loans and serve a different capital structure function (working capital and liquidity rather than permanent financing).
(ii) Refinancing Term Loans. Term loans incurred to refinance or replace the Initial TLB in whole or in part (i.e., "Refinancing Term Loans" as defined in the Credit Agreement) are excluded from the MFN clause. Such refinancings are instead subject to the separate repricing protection (soft call) provision discussed in Section VII of this memorandum. The exclusion reflects the principle that the MFN is designed to protect against yield dilution from new incremental debt, not from a refinancing of the existing facility itself.
(iii) Debt Outside the Credit Agreement. Indebtedness incurred under separate credit facilities, indentures, or other instruments — including any unsecured notes, second-lien facilities, or mezzanine financing — is not subject to the MFN clause. The MFN is limited to the "four corners" of the Credit Agreement. This is a significant distinction, as VHG retains the ability to raise additional debt capital through alternative structures (including the unsecured notes market) without implicating the MFN provision.
E. Carve-Outs and Exceptions
In addition to the categorical exclusions described above, the MFN clause is subject to a negotiated carve-out for acquisition-related incremental term loans. Specifically, incremental term loans incurred in connection with a "Permitted Acquisition" (as defined in the Credit Agreement) with an aggregate purchase price exceeding $100,000,000 are excluded from the MFN adjustment (the "Acquisition Carve-Out"). This carve-out was proposed by C&H in the first draft of the Credit Agreement and was the subject of significant negotiation with WGP.
The purpose of the Acquisition Carve-Out is to protect VHG's ability to fund larger strategic acquisitions with incremental term loan financing at then-prevailing market rates without being constrained by the MFN's yield ceiling or, conversely, without triggering a potentially costly margin ratchet on the full $700,000,000 Initial TLB. In the context of acquisition financing, borrowers frequently need to offer competitive pricing to attract lenders to an incremental facility on an expedited timeline, and the ability to do so without repricing the entire existing term loan facility is a material commercial consideration.
The $100,000,000 purchase price threshold represents a negotiated compromise. VHG initially proposed a threshold of $50,000,000, which would have covered a broader range of acquisitions and provided greater flexibility. WGP, on behalf of the syndicate, initially sought either no acquisition carve-out at all or, alternatively, a threshold of $200,000,000 — a level that would have rendered the carve-out largely theoretical given VHG's typical acquisition size profile. After multiple rounds of negotiation, the parties agreed on the $100,000,000 threshold, which is above VHG's median historical acquisition size (approximately $60,000,000–$80,000,000 per transaction based on management representations) but within the range of VHG's larger strategic transactions.
This carve-out is strategically important given VHG's stated intention to deploy the incremental $75,000,000 in TLB proceeds for acquisition pipeline purposes and the possibility that additional, larger acquisitions may require incremental term loan funding within the 18-month MFN sunset window. The interaction between the Acquisition Carve-Out and VHG's acquisition strategy is discussed further in Section VIII.A below.
IV. Market Comparison and Precedent Analysis
A. Methodology
To assess the market positioning of VHG's negotiated MFN provision, we reviewed 15 leveraged Term Loan B facilities in the hospitality and real estate sectors that closed between Q3 2021 and Q2 2022. The data was sourced from publicly available credit agreements filed with the U.S. Securities and Exchange Commission (SEC) on EDGAR, supplemented by market reports and deal summaries published by Meridian Strauss Advisory LLC and by syndicate-level lender presentations shared in the normal course of syndication. Our analysis focused on four key parameters: (i) the MFN Threshold (measured in basis points), (ii) the MFN sunset period (measured in months from closing), (iii) the presence or absence of acquisition-related carve-outs and the applicable threshold amount, and (iv) the yield calculation methodology employed (i.e., "all-in yield" vs. "margin-only" vs. "yield to maturity").
From this broader data set, we selected eight transactions as the most directly comparable to VHG's facility based on similarity of sector, credit profile, facility size, and vintage. These comparable transactions are summarized in the table below and are presented in full detail in Appendix A.
B. Summary of Market Precedents
Summary Statistics:
C. Key Observations
MFN Threshold. The 50 basis point MFN Threshold negotiated for VHG's Initial TLB is precisely at the market median of the comparable transaction data set. Among the eight transactions reviewed in detail, four featured a 50 basis point threshold, two featured a 75 basis point threshold (which is more borrower-friendly, as it allows a wider pricing range before the ratchet is triggered), and one featured a more lender-protective 25 basis point threshold. The remaining transaction (Harrington Leisure Properties) also used a 50 basis point threshold. Recent trend data suggests that thresholds in the hospitality sector have generally ranged from 25 bps (at the more lender-protective end of the spectrum) to 75 bps (at the more borrower-friendly end), with the 50 bps level representing a well-established market norm that strikes a balance between protecting existing lenders from material yield dilution and preserving the borrower's incremental financing flexibility.
It is worth noting that the two transactions with 75 basis point thresholds (Bayside Realty Holdings Corp. and Summit Ridge Hotels LLC) were both Q2 2022 transactions, potentially reflecting the continuing shift in negotiating leverage toward borrowers in the most recent period. Conversely, the lone 25 basis point threshold (Redstone Hotel Group Inc.) was a Q3 2021 transaction involving a smaller, single-B rated borrower with higher leverage, where the syndicate was in a stronger position to demand more protective terms.
MFN Sunset Period. The 18-month sunset period negotiated for VHG's facility is longer than the current market median of approximately 12 months and is borrower-favorable in the sense that it provides a longer window during which the initial lenders benefit from MFN protection. In the comparable data set, six of eight transactions featured sunset periods of 12 months or less, with two transactions (Bayside Realty and Summit Ridge) featuring notably short 6-month sunset periods. Only two of the eight comparable transactions featured sunset periods exceeding 12 months: Redstone Hotel Group at 18 months and Harrington Leisure Properties at 24 months.
The longer sunset period benefits VHG in a somewhat counterintuitive sense. While a longer MFN sunset restricts VHG's pricing flexibility for a longer period, it also provides the initial syndicate lenders with more comfort — which was an important consideration in achieving the overall economic terms (including the 375 bps spread and 99.00 OID) that VHG obtained. In the aggregate deal negotiations, the 18-month sunset was part of a broader package of terms that VHG viewed as favorable, and the company assessed the practical likelihood of needing to incur incremental term loans at materially higher yields during the sunset window as relatively low given VHG's strong credit profile (2.52x closing leverage), the availability of alternative funding sources (including the undrawn $400,000,000 revolving credit facility), and the current interest rate environment.
It is also notable that the broader market trend post-2021 has been toward shorter MFN sunset periods — from the 18–24 month range that was common in 2019–2020 to the 6–12 month range that has become more prevalent in 2021–2022. This trend reflects the stronger bargaining position of borrowers in a competitive leveraged lending market with abundant liquidity. VHG's 18-month sunset is at the upper end of the current market range but is not an outlier, and we believe it was a reasonable concession in the context of the overall negotiation.
Acquisition Carve-Out. Approximately half of the comparable transactions (four of eight) included some form of acquisition-related carve-out from the MFN clause. Among those that included a carve-out, the purchase price thresholds ranged from $75,000,000 (Grandview Resorts) to $200,000,000 (Bayside Realty Holdings), with a median of approximately $112,500,000. VHG's $100,000,000 threshold is within this range and is well-positioned relative to comparables. The presence of an acquisition carve-out is strategically important for active acquirers in the hospitality sector, where bolt-on acquisitions are a core component of growth strategy and where the ability to price incremental financing competitively on an expedited basis is a practical necessity.
The four transactions that did not include an acquisition carve-out (Pinnacle Lodging, Redstone Hotel Group, Oakmont Hospitality, and Harrington Leisure) generally either had shorter sunset periods (mitigating the need for a carve-out) or were structured for borrowers with less active acquisition pipelines. In VHG's case, given management's stated intention to pursue additional acquisitions during the 18-month sunset window, the Acquisition Carve-Out was a critical negotiation priority.
Market Trend. The overall trend in the MFN market since 2021 reflects a shift toward more borrower-favorable terms. MFN sunset periods have shortened from the 18–24 month range common in 2019–2020 to the 6–12 month range increasingly typical in 2022 transactions. At the same time, MFN thresholds have widened slightly, with 50–75 bps becoming the standard range, compared to 25–50 bps in earlier periods. These trends are consistent with broader market dynamics — including strong CLO formation, abundant institutional demand for leveraged loans, and relatively low default rates — that have tilted negotiating leverage toward borrowers and sponsors. VHG's negotiated terms (50 bps threshold, 18-month sunset, $100M acquisition carve-out) are within the current market range, though the sunset period is at the longer end of the distribution.
V. Yield Calculation Methodology
A. Definition of "Effective Yield" in the Credit Agreement
The operation of the MFN provision depends critically on the methodology used to calculate the "Effective Yield" on both the Initial TLB and any incremental term loans. The Credit Agreement's definition of "Effective Yield" (set forth in Section 1.01) provides that Effective Yield means the sum of the following components:
(i) the applicable margin (i.e., the spread over Adjusted Term SOFR) applicable to such term loans;
(ii) the impact of any original issue discount ("OID") or upfront fees paid to the lenders of such term loans (but excluding arrangement, structuring, or commitment fees paid solely to arrangers and not to all lenders), in each case as amortized on a straight-line basis over a deemed period equal to the lesser of (x) four years and (y) the remaining weighted average life to maturity of such term loans; and
(iii) the SOFR floor, but only to the extent that the SOFR floor applicable to such term loans exceeds the then-current Adjusted Term SOFR rate by more than the amount by which the SOFR floor on the Initial TLB exceeds the then-current Adjusted Term SOFR rate (i.e., the floor differential is calculated on a net basis, reflecting only the incremental yield benefit of a higher floor on the new term loans relative to the Initial TLB).
The following items are expressly excluded from the Effective Yield calculation:
(a) arrangement, structuring, or commitment fees paid solely to arrangers or lead lenders (and not to all participating lenders), on the basis that such fees compensate arrangers for syndication risk and services rather than reflecting the yield to the broader syndicate;
(b) any default interest (on the basis that default interest is a penalty triggered by a borrower's failure to perform and does not reflect the arms-length market yield on the facility); and
(c) any SOFR floor differential where Adjusted Term SOFR is at or above the applicable SOFR floor (because in such circumstances the floor is "out of the money" and does not contribute to actual yield).
This "all-in yield" approach, which encompasses the applicable margin, OID amortization, and floor differentials, is the most comprehensive and most commonly employed methodology in the current leveraged loan market. As noted in the comparable transaction analysis above, approximately 75% of the transactions in our data set (six of eight) employed an all-in yield methodology. The principal alternative — a "margin-only" approach that considers only the applicable spread and ignores OID and floor impacts — was used in one transaction (Bayside Realty Holdings Corp.) and is generally viewed as more borrower-friendly, as it excludes components that can materially affect the total cost of the facility. VHG proposed a margin-only approach during early-stage negotiations, but this approach was rejected by WGP and the syndicate lenders, who insisted on the all-in yield methodology as a condition of the agreed pricing.
B. Illustrative Calculation for the Initial TLB
To establish the baseline against which incremental term loan yields will be compared, we set forth below the Effective Yield calculation for the Initial TLB as of the anticipated Closing Date:
Applicable Margin: 375 bps (Adjusted Term SOFR + 3.75%)
OID: 1.00% of face amount ($7,000,000 on the $700,000,000 facility). Amortized on a straight-line basis over a deemed 4-year life (the lesser of 4 years and the approximately 7-year remaining weighted average life to maturity), this equates to approximately 25 basis points per annum (1.00% ÷ 4 years = 0.25% per year).
SOFR Floor: The Initial TLB has a SOFR floor of 0.50%. As of the date of this memorandum, 1-month Term SOFR is approximately 2.29%, which materially exceeds the 0.50% floor. Accordingly, the SOFR floor is currently "out of the money" and contributes 0 basis points to the Effective Yield calculation. This component would become relevant only in a scenario where Adjusted Term SOFR falls below 0.50%, which is not anticipated in the near term given current Federal Reserve monetary policy guidance but could occur in a future easing cycle.
Estimated Effective Yield of the Initial TLB: SOFR + 400 bps (375 bps margin + 25 bps annualized OID + 0 bps floor contribution at current rates).
Based on this calculation, and applying the 50 basis point MFN Threshold, an incremental term loan would trigger the MFN ratchet only if its Effective Yield exceeds SOFR + 450 bps (i.e., the Initial TLB's Effective Yield of SOFR + 400 bps plus the 50 bps threshold).
C. Sensitivity Analysis
The question of whether a particular incremental term loan incurrence triggers the MFN ratchet depends on the specific pricing terms of the incremental facility and the prevailing SOFR rate at the time of incurrence. To illustrate the operation of the MFN provision under various pricing scenarios, we present the following sensitivity analysis. (A more detailed version of this analysis, with additional scenarios, is set forth in Appendix B.)
Scenario 1: Incremental TL at SOFR + 425 bps with 0.50% OID
Applicable margin: 425 bps OID amortization: 0.50% ÷ 4 years = 12.5 bps per annum SOFR floor: assume same 0.50% floor as Initial TLB; no floor differential Effective Yield: SOFR + 437.5 bps Differential vs. Initial TLB: 437.5 – 400 = 37.5 bps Result: MFN NOT triggered (37.5 bps is below the 50 bps threshold)
Scenario 2: Incremental TL at SOFR + 450 bps with 1.00% OID
Applicable margin: 450 bps OID amortization: 1.00% ÷ 4 years = 25 bps per annum SOFR floor: assume same 0.50% floor as Initial TLB; no floor differential Effective Yield: SOFR + 475 bps Differential vs. Initial TLB: 475 – 400 = 75 bps Result: MFN TRIGGERED (75 bps exceeds the 50 bps threshold) Margin Adjustment: The Initial TLB margin would be increased from SOFR + 375 bps to SOFR + 425 bps (so that the Initial TLB's adjusted Effective Yield of SOFR + 450 bps [425 margin + 25 OID] is within 50 bps of the incremental's Effective Yield of SOFR + 475 bps). Annual Cost of Ratchet: The 50 bps increase in the Initial TLB margin, applied to the outstanding principal balance of $700,000,000 (less any amortization), would result in incremental annual interest expense of approximately $3,500,000.
Scenario 3: Incremental TL at SOFR + 400 bps with 0% OID but 1.00% SOFR floor (assuming SOFR at 0.40%)
Applicable margin: 400 bps OID amortization: 0 bps (no OID) SOFR floor analysis: The incremental TL has a 1.00% SOFR floor. If Adjusted Term SOFR is 0.40%, the incremental TL's floor is in the money by 60 bps (1.00% – 0.40%). The Initial TLB's 0.50% floor is in the money by 10 bps (0.50% – 0.40%). The net floor differential is 50 bps (60 bps – 10 bps). Effective Yield: SOFR + 400 bps margin + 0 bps OID + 50 bps floor differential = SOFR + 450 bps Differential vs. Initial TLB: 450 – 400 = 50 bps Result: MFN TRIGGERED (50 bps meets the threshold, and the provision is triggered when the differential exceeds 50 bps; at exactly 50 bps, under the Credit Agreement's formulation using "exceeds ... by more than 50 basis points," the MFN would not be triggered). We note, however, that this is a borderline case, and the precise result depends on whether the Credit Agreement's threshold is stated as "exceeds by more than 50 bps" (not triggered at exactly 50 bps) or "equals or exceeds 50 bps" (triggered). The current draft uses the former formulation, so the MFN would not be triggered in this precise scenario.
This scenario analysis highlights the importance of careful yield calculation prior to any incremental term loan incurrence during the MFN sunset period. We recommend that VHG prepare a detailed yield calculation worksheet in consultation with C&H before launching any incremental facility process.
D. Observations on Yield Calculation Approach
The "all-in yield" methodology adopted in the Credit Agreement — encompassing applicable margin, OID amortization, and SOFR floor differentials — represents the most comprehensive approach to yield measurement and is consistent with the methodology employed in the majority (approximately 70%) of the comparable transactions reviewed in our market analysis. This approach provides the initial syndicate lenders with the broadest protection, as it captures yield components that are economically meaningful but might be overlooked under a simpler margin-only framework.
The principal alternative, the "margin-only" approach (which considers only the applicable spread over the benchmark rate and disregards OID and floor impacts), was proposed by VHG during early-stage negotiations as a more borrower-favorable framework. Under a margin-only approach, VHG could potentially structure incremental term loans with a relatively modest spread but a deep OID (e.g., SOFR + 400 bps with a 3.00% OID), achieving a high all-in yield for incremental lenders without triggering the MFN based solely on the stated margin. WGP correctly identified this structural arbitrage risk and successfully insisted on the all-in yield approach. The rejection of the margin-only methodology was consistent with the clear market trend toward comprehensive yield definitions in MFN provisions.
The 4-year deemed amortization period for OID represents the market standard convention. This period serves as a proxy for the expected life of the term loan, recognizing that most Term Loan B facilities — despite having contractual maturities of 5–7 years — are typically refinanced or repriced within 3–5 years. The 4-year convention provides a reasonable approximation of the annualized cost of OID over the expected holding period without requiring complex actuarial calculations or assumptions about prepayment behavior.
A third methodology — "yield to maturity" — was used in one of the comparable transactions (Harrington Leisure Properties Inc.) and represents the most theoretically precise approach, as it calculates the internal rate of return on the term loan cash flows over the contractual life of the facility, accounting for OID, amortization payments, and bullet maturity. However, the yield to maturity approach introduces computational complexity and requires assumptions about future amortization schedules and prepayment behavior that may not be available at the time of yield comparison. For these reasons, the all-in yield approach (with deemed 4-year OID amortization) has emerged as the market-preferred methodology, and we believe the approach adopted in VHG's Credit Agreement is appropriate and market-standard.
VI. Interaction with Incremental Facility Provisions
A. Overview of Incremental Facility Basket
The Credit Agreement permits VHG to incur incremental term loans and/or incremental revolving commitments in an aggregate principal amount up to the greater of:
(i) a fixed dollar basket of $200,000,000 (the "Free-and-Clear Basket"), which may be incurred without regard to any financial ratio test and provides VHG with a guaranteed minimum amount of incremental capacity; and
(ii) an amount that would not cause the pro forma Total Net Leverage Ratio to exceed 3.5x, calculated on a pro forma basis after giving effect to the incurrence and the application of proceeds (the "Ratio Basket"). The 3.5x ratio is set at 1.0x turn inside the 4.5x financial covenant level, providing a meaningful buffer.
At closing, with pro forma net leverage of 2.52x and LTM Adjusted EBITDA of $341,000,000, the Ratio Basket would permit VHG to incur incremental term loans in an amount sufficient to increase total net funded debt by approximately $334,000,000 (i.e., to reach 3.5x × $341M = $1,193.5M total net funded debt, less the existing $858M pro forma net funded debt = approximately $335.5M of incremental capacity under the ratio test, subject to rounding and other adjustments). The Free-and-Clear Basket of $200,000,000 is available regardless of leverage levels. The two baskets are typically used in a "greater of" construct, meaning VHG can incur up to the higher of $200,000,000 or the ratio-based amount at any given time. In practice, the Ratio Basket currently provides substantially more capacity than the Free-and-Clear Basket.
Incremental term loans may be incurred from existing lenders in the syndicate, from new lenders meeting the eligibility requirements in the Credit Agreement, or from a combination of existing and new lenders. Customary conditions to incurrence include: (a) no Event of Default exists or would result from the incurrence, (b) pro forma compliance with the financial covenant (if applicable), (c) delivery of an officer's certificate from a Responsible Officer of VHG certifying compliance with the incurrence conditions, and (d) delivery of a legal opinion from VHG's counsel (expected to be C&H) confirming the due authorization and enforceability of the incremental term loan documentation.
B. Interplay Between MFN and Incremental Baskets
The MFN clause applies to all incremental term loans incurred under the Credit Agreement during the MFN sunset period, regardless of whether such term loans are incurred under the Free-and-Clear Basket or the Ratio Basket. There is no distinction in the Credit Agreement between incremental term loans funded from different baskets for purposes of MFN analysis. This is consistent with market practice, as the yield protection rationale underlying the MFN provision applies equally to all new pari passu term loan debt, irrespective of the incurrence basket utilized.
The sole exception to MFN coverage during the sunset period is the Acquisition Carve-Out described in Section III.E above, which excludes incremental term loans incurred to fund Permitted Acquisitions with purchase prices exceeding $100,000,000.
After the MFN Sunset Date of January 21, 2024, incremental term loans incurred under either the Free-and-Clear Basket or the Ratio Basket may be priced at any Effective Yield without triggering the MFN ratchet, providing VHG with full pricing flexibility.
Strategic Implications for Timing. The interplay between the MFN provision and the incremental facility provisions creates an important strategic consideration for VHG's treasury and corporate development teams. If VHG anticipates needing to incur incremental term loans at yields that would exceed the MFN trigger level (e.g., in a rising rate environment or in the event of a deterioration in VHG's credit profile), VHG has a clear economic incentive to defer such incurrence until after January 21, 2024, to avoid triggering the MFN ratchet on the full $700,000,000 Initial TLB. The cost of triggering the MFN can be substantial — as illustrated in Scenario 2 of the sensitivity analysis above, a 50 basis point margin ratchet on a $700,000,000 term loan translates to approximately $3,500,000 per annum in additional interest expense, which compounds over the remaining life of the facility.
Alternatively, VHG could structure individual acquisitions to meet the $100,000,000 Acquisition Carve-Out threshold, thereby avoiding MFN triggering even during the sunset period. This approach requires careful deal structuring and may not always be commercially feasible, but it represents a valuable planning tool. We discuss these strategic considerations in more detail in Section VIII below.
C. Fungibility Considerations
Incremental term loans incurred under the Credit Agreement may be structured as either "fungible" or "non-fungible" with the Initial TLB. Fungible incremental term loans carry the same CUSIP as the Initial TLB, have identical terms (including maturity, amortization, applicable margin, and other pricing terms), and trade interchangeably with the Initial TLB in the secondary market. Non-fungible incremental term loans carry a separate CUSIP and may have different maturity dates, amortization schedules, applicable margins, or other terms.
The MFN provision applies regardless of whether the incremental term loans are structured as fungible or non-fungible with the Initial TLB. This is an important point, as borrowers sometimes argue that fungible incremental term loans — which by definition carry the same margin as the existing facility — should be excluded from MFN analysis. In this case, however, the Credit Agreement's Effective Yield definition captures OID and floor differentials in addition to the stated margin, meaning that even a nominally "fungible" incremental term loan could have a higher Effective Yield than the Initial TLB if it is issued at a deeper OID or with a higher SOFR floor. The MFN provision appropriately addresses this possibility.
If the MFN is triggered and the Initial TLB's applicable margin is ratcheted upward, the Initial TLB and the incremental term loan may become fungible if all other terms (maturity, amortization, etc.) are identical and the adjusted margins are the same. Whether the parties elect to treat the facilities as fungible in such circumstances is a practical matter that would be addressed in the incremental facility documentation at the time of incurrence, in consultation with the Administrative Agent and the transfer agent for the applicable CUSIP.
VII. Repricing Protection Interaction
The Credit Agreement includes a separate repricing protection provision (commonly referred to as a "soft call" provision) in addition to the MFN clause. Under this provision, if VHG reprices or refinances the Initial TLB at a lower Effective Yield — whether through a direct amendment reducing the applicable margin, a refinancing with new term loans at lower pricing, or any other transaction that has the primary purpose and effect of reducing the yield on the facility — within six months of the Closing Date (i.e., before January 21, 2023), a prepayment premium of 1.00% of the principal amount repriced or refinanced is payable to the Initial TLB lenders. On the full $700,000,000 facility, this premium would amount to $7,000,000 if the entire facility were repriced.
It is important to distinguish the conceptual function of the repricing protection provision from that of the MFN clause, as the two provisions address different risks and operate independently:
• Repricing Protection (Soft Call): Protects the initial syndicate lenders against downside yield compression — i.e., the risk that the borrower will take advantage of improving market conditions to refinance or reprice the facility at a lower yield shortly after closing, depriving the lenders of the economic bargain they expected when they committed to the facility. The soft call premium compensates lenders for this "call risk" during the initial post-closing period.
• MFN Provision: Protects the initial syndicate lenders against upside yield dilution — i.e., the risk that the borrower will issue new incremental term loans at a materially higher yield, creating a "second class" of pari passu lenders who enjoy better economics than the initial lenders who committed at a lower spread. The MFN ratchet ensures that the initial lenders share in any meaningful yield improvement available in the market.
Together, these two provisions create a comprehensive yield protection framework for the initial syndicate during the early post-closing period. The repricing protection addresses the downside (borrower refinances at lower yields), while the MFN addresses the upside (borrower issues new debt at higher yields). This dual framework is standard in the broadly syndicated leveraged loan market and reflects the lenders' expectation of yield stability during the initial holding period.
Timeline Overlap. The 6-month soft call period (July 21, 2022 through January 21, 2023) falls entirely within the 18-month MFN sunset period (July 21, 2022 through January 21, 2024). However, the two provisions do not interact mechanically — they address different scenarios and cannot be simultaneously triggered by the same transaction. A repricing at a lower yield would trigger the soft call premium but would not trigger the MFN (since the MFN applies only to higher yield incremental term loans). Conversely, an incremental term loan at a higher yield would trigger the MFN but would not trigger the soft call (since the soft call applies only to lower yield repricings or refinancings).
The overlap in timing creates a practical window analysis for VHG's capital markets planning:
VIII. Strategic Implications and Recommendations for VHG
A. Near-Term Acquisition Pipeline
VHG's Treasurer, Glenn Fischbach, and Chief Financial Officer, Renata Haines, have indicated in recent discussions with the deal team that VHG expects to deploy the incremental $75,000,000 in TLB proceeds (net of transaction expenses) within the first 12 months following the Closing Date, primarily to fund identified acquisition targets in VHG's near-term pipeline. Beyond this initial deployment, VHG's corporate development team has indicated that additional acquisition opportunities — some of which may exceed $100,000,000 in purchase price — are under evaluation and may require incremental term loan financing during the 18-month MFN sunset period.
Recommendation. For acquisitions contemplated during the MFN sunset period (through January 21, 2024), VHG should consider the following strategies to manage the potential impact of the MFN provision:
(i) Utilize the Acquisition Carve-Out. Where feasible, VHG should structure acquisitions to exceed the $100,000,000 purchase price threshold required to qualify for the Acquisition Carve-Out. Incremental term loans incurred to fund qualifying acquisitions are fully exempt from the MFN ratchet, providing VHG with unrestricted pricing flexibility. This approach may require careful structuring of multi-property or portfolio transactions to aggregate purchase prices above the threshold. VHG should consult with C&H on the definitional requirements and documentation needed to confirm that a particular acquisition qualifies as a "Permitted Acquisition" under the Credit Agreement.
(ii) Price Within the MFN Threshold. For incremental term loans that do not qualify for the Acquisition Carve-Out, VHG should endeavor to price such facilities at an Effective Yield not exceeding approximately SOFR + 450 bps (i.e., within 50 bps of the Initial TLB's estimated Effective Yield of SOFR + 400 bps). This ceiling limits VHG's pricing flexibility but avoids the cost of triggering the MFN ratchet on the full $700,000,000 Initial TLB. VHG's financial advisors at Meridian Strauss Advisory LLC (Elise Cavanaugh) should be engaged early in any incremental facility process to assess market clearing levels and advise on whether pricing within the MFN-safe range is achievable.
(iii) Utilize Alternative Funding Sources. VHG maintains a $400,000,000 senior secured revolving credit facility (currently undrawn as of the date of this memorandum) that is available for acquisition funding and general corporate purposes. Borrowings under the revolving credit facility are not subject to the MFN clause. Similarly, VHG could consider accessing the unsecured notes market or other financing structures that fall outside the "four corners" of the Credit Agreement and therefore do not implicate the MFN provision. The choice between revolving credit utilization, unsecured notes, and incremental term loans involves a range of considerations — including cost, maturity profile, security, and covenant flexibility — that should be evaluated on a case-by-case basis in consultation with VHG's financial advisors and counsel.
B. Refinancing and Repricing Strategy
VHG may wish to pursue a repricing or refinancing of the Initial TLB if market conditions improve and leveraged loan spreads tighten during the post-closing period. Any such transaction should be evaluated in light of both the 6-month repricing protection (soft call) provision and the 18-month MFN sunset period.
During the first six months post-closing (through January 21, 2023), a repricing at a lower Effective Yield would require payment of the 1.00% soft call premium, which would amount to approximately $7,000,000 on the full $700,000,000 facility. Unless the spread reduction achievable in the market is substantial enough to offset this premium over a reasonable payback period, a repricing during this window is unlikely to be economically attractive. As a general rule of thumb, a minimum spread reduction of approximately 25–50 bps would be required to achieve a payback period of approximately 2–4 years on the $7,000,000 premium, depending on VHG's expected holding period and discount rate.
After January 21, 2023 (when the soft call period expires), VHG can reprice the facility freely without incurring any premium. The MFN provision would remain in effect until January 21, 2024, but a repricing at a lower yield would not trigger the MFN clause, as the MFN applies only to incremental term loans incurred at higher yields. Accordingly, there is no MFN-related impediment to a repricing after the soft call sunset.
Recommendation. Any future repricing should ideally be pursued after January 21, 2023, to avoid the 1.00% soft call premium. VHG should coordinate with Meridian Strauss Advisory LLC (Elise Cavanaugh) on an ongoing basis to monitor secondary market trading levels for the Initial TLB and to assess the optimal timing for a repricing transaction. C&H should be engaged to prepare the amendment documentation and to confirm compliance with the procedural requirements of the Credit Agreement (including any required consent thresholds for a margin reduction).
C. Documentation Monitoring
Given the complexity of the MFN mechanics and the material financial consequences of an inadvertent trigger, C&H recommends that the following documentation monitoring protocols be implemented during the MFN sunset period:
(i) Pre-Incurrence Yield Calculation. Any request for incremental term loans during the MFN sunset period should be accompanied by a detailed yield calculation worksheet, prepared by C&H in coordination with VHG's treasury team and financial advisors, analyzing whether the proposed pricing would trigger the MFN ratchet. The worksheet should follow the Effective Yield methodology set forth in Section 1.01 of the Credit Agreement, as described in Section V of this memorandum, and should include the applicable margin, OID amortization, and SOFR floor differential analysis.
(ii) Acquisition Carve-Out Confirmation. If VHG intends to rely on the $100,000,000 Acquisition Carve-Out, C&H should review the acquisition documentation to confirm that the proposed transaction satisfies the definition of "Permitted Acquisition" under the Credit Agreement and that the aggregate purchase price meets the $100,000,000 threshold. Any ambiguity in the application of the carve-out should be addressed proactively with the Administrative Agent and WGP.
(iii) Periodic Market Monitoring. C&H and Meridian Strauss Advisory LLC should periodically review prevailing market conditions, including leveraged loan new issue spreads, secondary trading levels, and SOFR rate movements, to advise VHG on the likely pricing range for any contemplated incremental facility and the associated MFN risk.
(iv) Administrative Agent Coordination. In the event that the MFN ratchet is triggered, C&H should coordinate with Crescent Harbor (through WGP) on the implementation of the automatic margin adjustment, including the determination of the adjusted applicable margin, the effective date of the adjustment, and the notification to syndicate lenders. While the adjustment is self-executing under the Credit Agreement, practical coordination with the Administrative Agent is advisable to ensure smooth implementation and accurate interest calculations.
IX. Conclusion
The MFN provision negotiated in VHG's $700,000,000 Senior Secured Term Loan B Credit Agreement — featuring a 50 basis point threshold, an 18-month sunset period running from the Closing Date through January 21, 2024, and a $100,000,000 acquisition-related carve-out — is at or slightly above market median terms for the hospitality and real estate leveraged lending market as of mid-2022. The 50 basis point threshold is precisely at the market median, while the 18-month sunset period is longer than the current median of approximately 12 months but within the range of recent precedent transactions. The Acquisition Carve-Out, with its $100,000,000 threshold, is consistent with comparable transactions and is strategically important given VHG's active acquisition pipeline.
The provision represents a reasonable compromise between protecting the initial syndicate lenders' yield expectations and preserving VHG's incremental financing flexibility. The all-in yield calculation methodology — encompassing applicable margin, OID amortization over a deemed 4-year life, and SOFR floor differentials — is comprehensive and market-standard, and provides a clear framework for determining whether any future incremental term loan incurrence triggers the MFN ratchet.
VHG should be mindful of the MFN mechanics when planning any incremental term loan incurrence prior to January 21, 2024. In particular, VHG should evaluate whether proposed transactions qualify for the Acquisition Carve-Out, whether incremental term loans can be priced within the 50 basis point MFN-safe range, and whether alternative funding sources (including the revolving credit facility or unsecured notes) may offer a more efficient path to capital without implicating the MFN provision. VHG should consult with C&H and Meridian Strauss Advisory LLC before launching any incremental facility process during the sunset period.
Drummond & Fenwick LLP is available to assist with yield calculations, compliance analysis, documentation preparation, and strategic advice as needed throughout the MFN sunset period and beyond.
Please do not hesitate to contact the undersigned with any questions or comments regarding the analysis set forth in this memorandum.
Sophie Tremblay Lead Associate, Banking & Finance Drummond & Fenwick LLP Direct: (212) 558-XXXX stremblay@sullcrom.com
Appendix A — Market Precedent Summary Table
The following table presents the full set of eight comparable hospitality and real estate sector Term Loan B transactions used in the market precedent analysis described in Section IV of this memorandum. Data has been sourced from publicly available credit agreements filed with the SEC and from market reports published by Meridian Strauss Advisory LLC.
Notes:
(a) "L+" denotes LIBOR-based facilities (Q3/Q4 2021 vintage); "S+" denotes SOFR-based facilities (Q1/Q2 2022 vintage).
(b) Acquisition carve-out thresholds represent the minimum aggregate purchase price required for the carve-out to apply.
(c) Pro forma net leverage figures are as reported at closing and are based on publicly available information.
(d) Yield methodology refers to the approach used in the credit agreement's Effective Yield definition for purposes of the MFN provision.
Summary Statistics (Excluding VHG):
Among transactions with acquisition carve-outs only (n=4).
Appendix B — Illustrative MFN Trigger Scenarios
The following scenarios illustrate the operation of the MFN provision under various hypothetical incremental term loan pricing assumptions. All scenarios assume incurrence during the MFN sunset period (prior to January 21, 2024) and assume that the Acquisition Carve-Out does not apply.
Baseline: Initial TLB Effective Yield = SOFR + 400 bps (375 bps margin + 25 bps annualized OID; SOFR floor out of the money at current rates)
MFN Trigger Level: Effective Yield > SOFR + 450 bps (400 bps + 50 bps threshold)
Scenario 1: Below Threshold — No MFN Trigger
Scenario 2: Above Threshold — MFN Triggered
Scenario 3: Floor Differential Impact — Borderline Case
Scenario 4: Deep OID with Moderate Spread — MFN Triggered
Note: This scenario illustrates why the syndicate insisted on an all-in yield methodology — a margin-only approach would have shown no differential (both at SOFR + 400 bps), despite the incremental term loan having a materially higher all-in cost to the borrower and higher return to lenders.
Scenario 5: High Spread, No OID — MFN Triggered
Appendix C — Relevant Credit Agreement Provisions (Excerpts)
The following excerpts are taken from the Second C&H Revised Draft of the Credit Agreement dated June 8, 2022. These excerpts are provided for reference only and are subject to change in the final execution version. All section references are to the Credit Agreement unless otherwise indicated.
Excerpt 1: MFN Provision (Section 2.20(b)(iv))
From Section 2.20(b)(iv) — Incremental Term Loans:
> (iv) Most Favored Nation Protection. If, prior to the date that is eighteen (18) months after the Closing Date (the "MFN Sunset Date"), the Borrower incurs Incremental Term Loans (other than Incremental Term Loans incurred in connection with a Permitted Acquisition for which the aggregate purchase price exceeds $100,000,000), and the Effective Yield applicable to such Incremental Term Loans exceeds the Effective Yield applicable to the Initial Term Loans by more than 50 basis points (the "MFN Threshold"), then the Applicable Rate with respect to the Initial Term Loans shall be automatically increased to the extent necessary so that the Effective Yield on the Initial Term Loans is equal to the Effective Yield on such Incremental Term Loans minus the MFN Threshold. For the avoidance of doubt, (A) the Applicable Rate on the Initial Term Loans may only be increased (and not decreased) pursuant to this Section 2.20(b)(iv), and (B) this Section 2.20(b)(iv) shall have no further force or effect from and after the MFN Sunset Date.
Excerpt 2: "Effective Yield" Definition (Section 1.01)
From Section 1.01 — Defined Terms:
> "Effective Yield" means,

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