1021-00002 · Verimark Hospitality Group · Post-Closing

post-closing-letter-to-client.docx DOCUMENT Capital Markets

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PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION

CALDERWOOD & HARKNESS LLP Counselors at Law

One Liberty Plaza, 45th Floor New York, New York 10006

Telephone: (212) 455-7200 Facsimile: (212) 455-7201 www.calderwoodharkness.com

July 5, 2024

David K. Moretti, Esq. General Counsel & Secretary Verimark Hospitality Group Inc. 2400 Brickell Bay Drive, Suite 3100 Miami, Florida 33129

Re: Closing of $500,000,000 Aggregate Principal Amount of 8.250% Senior Notes due 2031 — Post-Closing Confirmation and Summary of Ongoing Obligations

Dear David:

We are writing to confirm the successful closing of the offering described above and to provide Verimark Hospitality Group Inc. and its management team with a comprehensive summary of the transaction, the key terms of the Notes, and the ongoing obligations of the Company and the Guarantors following the closing. This letter is intended to serve as a practical reference guide for the Company's legal, finance, and treasury departments and should be reviewed in conjunction with, but not as a substitute for, the definitive transaction documents enclosed herewith.

1. Confirmation of Successful Closing

We are pleased to confirm that the closing (the "Closing") of the offering of $500,000,000 aggregate principal amount of 8.250% Senior Notes due 2031 (the "Notes") occurred on June 25, 2024 (the "Closing Date"). All conditions precedent to the Closing were satisfied or waived, and all deliverables required under the Purchase Agreement were timely provided by the applicable parties.

The Notes were issued by Verimark Hospitality Group Inc., a Delaware corporation ("VHG" or the "Company"), and are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by the following subsidiaries of VHG (collectively, the "Guarantors"):

(a) Verimark Resort Holdings LLC, a Delaware limited liability company;

(b) VHG Properties Inc., a Delaware corporation;

(d) Verimark Capital Holdings LLC, a Delaware limited liability company; and

(e) Pinnacle Lodging Enterprises Inc., a Nevada corporation.

The Notes were issued pursuant to that certain Indenture, dated as of June 25, 2024 (the "Indenture"), by and among VHG, each of the Guarantors, and Fidelitas Trust Company, N.A., a national banking association, as trustee (the "Trustee"). The Indenture governs all rights, obligations, and remedies of the parties with respect to the Notes and the Guarantees.

The Notes were placed with the initial purchasers (collectively, the "Initial Purchasers") pursuant to the Purchase Agreement, dated June 18, 2024 (the "Purchase Agreement"), among VHG, the Guarantors, and the following Initial Purchasers:

• Kensington Barrow & Co., acting as representative of the Initial Purchasers (the "Representative");

• Ridgeline Capital Markets LLC; and

• Stonebridge Marvelo Securities Inc.

The offering was conducted as a private placement exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon Rule 144A under the Securities Act to qualified institutional buyers and Regulation S under the Securities Act to non-U.S. persons in offshore transactions. The Notes have been assigned the following identifiers:

The Notes were issued at an issue price of 98.500% of par, reflecting an original issue discount ("OID") of 1.500% ($7,500,000 in the aggregate). Based on an aggregate principal amount of $500,000,000, the gross proceeds of the offering were $492,500,000. After deduction of the Initial Purchasers' discount of 1.750% of the aggregate principal amount, or $8,750,000, the net proceeds delivered to VHG on the Closing Date were $483,750,000.

All conditions to the obligations of the Initial Purchasers under the Purchase Agreement were satisfied, including without limitation the delivery of the legal opinions, officers' certificates, comfort letters, and other closing deliverables specified therein. No bring-down conditions remain outstanding with respect to the Purchase Agreement, and the obligations of the parties thereunder have been fully performed, subject only to the surviving representations, warranties, and indemnification obligations set forth in the Purchase Agreement.

2. Use of Proceeds and Existing Credit Facility Payoff

In accordance with the Use of Proceeds disclosure set forth in the Final Offering Memorandum dated June 18, 2024, the net proceeds of the offering in the amount of $483,750,000 were applied as follows on the Closing Date:

The term loans under that certain Amended and Restated Credit Agreement, dated as of March 15, 2021 (the "Existing Credit Facility"), by and among VHG, as borrower, the several lenders from time to time party thereto, and Greystone National Bank, N.A., as administrative agent (Loan No. GNB-SYN-2021-04417), have been repaid in full. Formal notice of termination of the Existing Credit Facility was delivered by our office on behalf of VHG to Greystone National Bank, N.A., in its capacity as administrative agent, on June 25, 2024. Greystone National Bank, N.A. has acknowledged receipt of such notice and confirmed that all term loan obligations under the Existing Credit Facility have been satisfied in full and that the Existing Credit Facility has been terminated in accordance with its terms.

In connection with the termination of the Existing Credit Facility, UCC-3 termination statements are being prepared and filed in the applicable jurisdictions (including Delaware, Florida, and Nevada) to release the security interests previously granted by VHG and the Guarantors in favor of the lenders under the Existing Credit Facility. In addition, releases of the mortgages and deeds of trust encumbering certain real property assets of VHG Properties Inc. are being prepared for recording in the applicable county recording offices. Calderwood & Harkness LLP is overseeing these filings and will confirm their completion to you under separate cover. These items are being tracked as post-closing items, as described in Section 9 of this letter.

For the avoidance of doubt, the $150,000,000 senior secured revolving credit facility (the "Revolving Credit Facility") under the Credit Agreement dated as of March 15, 2021, as amended, among VHG, the revolving lenders party thereto, and Greystone National Bank, N.A., as administrative agent, was not affected by the transactions described herein and remains in full force and effect, available and undrawn as of the Closing Date. VHG should be mindful of any cross-default or cross-acceleration provisions in the Revolving Credit Facility that reference the Notes or the Indenture, and we are available to discuss those provisions with you at your convenience.

3. Summary of Key Terms of the Notes

Set forth below is a summary of the key economic and structural terms of the Notes. This summary is qualified in its entirety by reference to the Indenture and the Notes themselves, copies of which are included in the enclosed closing binder.

Issuer: Verimark Hospitality Group Inc.

Guarantors: Verimark Resort Holdings LLC, VHG Properties Inc., Bayshore Hotel Management LLC, Verimark Capital Holdings LLC, and Pinnacle Lodging Enterprises Inc.

Aggregate Principal Amount: $500,000,000

Maturity Date: July 1, 2031

Interest Rate: 8.250% per annum, payable semi-annually in arrears on January 1 and July 1 of each year. Each semi-annual interest payment will be $20,625,000 (based on the full principal amount of $500,000,000), resulting in aggregate annual interest expense of $41,250,000.

First Interest Accrual Date: July 1, 2024

First Interest Payment Date: January 1, 2025. The first interest payment will cover the period from July 1, 2024 through and including December 31, 2024 (approximately 184 days).

Ranking: The Notes are senior unsecured obligations of VHG and rank pari passu in right of payment with all existing and future senior indebtedness of VHG. The Notes are effectively subordinated to all existing and future secured indebtedness of VHG to the extent of the value of the assets securing such indebtedness, and structurally subordinated to all existing and future indebtedness and other liabilities of VHG's non-guarantor subsidiaries.

Governing Law: State of New York

3.1 Optional Redemption Schedule

The Notes are redeemable at VHG's option, in whole or in part, at any time on or after July 1, 2027, at the redemption prices set forth below (expressed as percentages of the principal amount), plus accrued and unpaid interest to, but not including, the redemption date, during the twelve-month period beginning on the date indicated:

Prior to July 1, 2027, the Notes may be redeemed, in whole but not in part, at VHG's option, at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest to, but not including, the redemption date, plus a "make-whole" premium based on the applicable Treasury Rate plus 50 basis points, as more fully described in Section 3.07 of the Indenture.

3.2 Equity Clawback

Prior to July 1, 2027, VHG may redeem up to 40% of the original aggregate principal amount of the Notes (i.e., up to $200,000,000 in aggregate principal amount) at a redemption price equal to 108.250% of the principal amount thereof, plus accrued and unpaid interest to, but not including, the redemption date, with the net cash proceeds of one or more qualifying equity offerings, provided that:

(a) at least 60% of the original aggregate principal amount of the Notes (i.e., at least $300,000,000) remains outstanding immediately after each such redemption; and

(b) each such redemption occurs within 180 days after the closing of the related equity offering.

The equity clawback provision is a valuable tool should VHG pursue an equity capital raise prior to the first optional redemption date and wish to reduce its outstanding indebtedness. VHG should consult with outside counsel before initiating any equity clawback redemption to ensure compliance with all procedural requirements under the Indenture.

3.3 Change of Control

Upon the occurrence of a Change of Control (as defined in Section 1.01 of the Indenture), VHG is required to make an offer (a "Change of Control Offer") to repurchase all outstanding Notes at a purchase price equal to 101.000% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of repurchase. If the full $500,000,000 in aggregate principal amount were outstanding at the time of a Change of Control, the aggregate repurchase price (exclusive of accrued interest) would be $505,000,000. This obligation is set forth in Section 4.14 of the Indenture.

VHG should be aware that the definition of "Change of Control" in the Indenture includes, among other triggering events, (i) the acquisition by any "person" or "group" (within the meaning of Sections 13(d) and 14(d) of the Exchange Act) of beneficial ownership of more than 50% of the total voting power of VHG's voting stock, (ii) the sale, lease, or other disposition of all or substantially all of the assets of VHG and its Restricted Subsidiaries, taken as a whole, and (iii) the adoption of a plan of liquidation or dissolution of VHG. Any transaction that may implicate the Change of Control provisions should be reviewed with counsel well in advance of execution.

4. Ongoing Obligations Under the Indenture — Incurrence Covenants

The Indenture contains a series of covenants that restrict the ability of VHG and its Restricted Subsidiaries to take certain actions. Importantly, these covenants are incurrence-based rather than maintenance-based, meaning that compliance is tested only at the time VHG proposes to take a specified action (e.g., incurring additional indebtedness or making a restricted payment), rather than on an ongoing periodic basis. This distinction is significant: the failure to satisfy a given financial ratio at any particular measurement date does not, by itself, constitute a Default or Event of Default under the Indenture, so long as VHG does not take an action that requires satisfaction of such ratio while it is not met.

The principal covenants are set forth in Article 4 of the Indenture and are summarized below. The following summaries are for reference purposes only and are qualified in their entirety by the full text of the Indenture.

4.1 Fixed Charge Coverage Ratio

The Indenture provides that VHG may not, and may not permit any Restricted Subsidiary to, incur additional Indebtedness (other than Permitted Indebtedness, as discussed in Section 4.3 below) unless, at the time of and after giving pro forma effect to such incurrence, the pro forma Fixed Charge Coverage Ratio ("FCCR") of VHG and its Restricted Subsidiaries on a consolidated basis is at least 2.00 to 1.00.

The FCCR is generally calculated as the ratio of (x) Adjusted EBITDA for the most recently ended four fiscal quarters (the "Reference Period") to (y) Fixed Charges for the same Reference Period, in each case determined on a pro forma basis giving effect to the proposed incurrence of Indebtedness and the application of proceeds therefrom as if such transactions had occurred at the beginning of the Reference Period. The definitions of "Adjusted EBITDA" and "Fixed Charges" are set forth in Section 1.01 of the Indenture and should be reviewed carefully in connection with any compliance calculation.

As of the Closing Date, VHG's pro forma FCCR is approximately 8.83x, based on last-twelve-months ("LTM") Adjusted EBITDA of approximately $412,000,000 and pro forma annual Fixed Charges of approximately $41,250,000 (consisting principally of annual interest expense on the Notes at the 8.250% coupon rate). This ratio provides VHG with significant headroom above the 2.00x incurrence threshold. However, we note that LTM Adjusted EBITDA is subject to fluctuation based on VHG's operating performance, and VHG should ensure that the FCCR test is run and documented in advance of any proposed incurrence of Indebtedness that exceeds the Permitted Indebtedness baskets.

4.2 Limitation on Restricted Payments

Section 4.07 of the Indenture restricts the ability of VHG and its Restricted Subsidiaries to make "Restricted Payments," which include, among other things:

(a) the declaration or payment of dividends or other distributions on equity interests of VHG (other than dividends payable solely in additional equity interests or in Qualified Stock);

(b) the purchase, redemption, or other acquisition of equity interests of VHG or any direct or indirect parent thereof;

(c) the making of principal payments on, or the purchase, redemption, defeasance, or other acquisition for value of, any subordinated indebtedness prior to its stated maturity; and

(d) the making of any Investment in any Unrestricted Subsidiary.

VHG may not make any Restricted Payment unless, at the time of and after giving effect thereto:

(i) no Default or Event of Default has occurred and is continuing (or would result therefrom);

(ii) VHG could incur at least $1.00 of additional Indebtedness pursuant to the FCCR incurrence test described in Section 4.1 above (i.e., the pro forma FCCR is at least 2.00 to 1.00); and

(iii) the aggregate amount of all Restricted Payments made since July 1, 2024 does not exceed the sum of (A) $50,000,000, plus (B) 50% of Consolidated Net Income for the period from July 1, 2024 to the end of the most recently ended fiscal quarter for which financial statements are available (or, if Consolidated Net Income for such period is a loss, minus 100% of such loss), plus (C) certain other amounts as specified in the Indenture (including net proceeds from certain equity issuances and the value of Investments in Unrestricted Subsidiaries that are redesignated as Restricted Subsidiaries).

The "builder basket" described in clause (iii) above commences building from July 1, 2024. We strongly recommend that VHG's finance and treasury departments maintain a running, contemporaneous ledger tracking (x) cumulative Consolidated Net Income since July 1, 2024 and (y) cumulative Restricted Payments made since July 1, 2024. Such a ledger will be essential for demonstrating compliance with this covenant in the event of any proposed Restricted Payment, and will also be useful for purposes of responding to any inquiries from holders or the Trustee.

Certain exceptions to the Restricted Payments covenant (the "Permitted Payments") are set forth in the Indenture and should be reviewed in advance of any proposed transaction that may constitute a Restricted Payment.

4.3 Limitation on Indebtedness

In addition to the FCCR incurrence test described in Section 4.1 above, the Indenture contains a series of "Permitted Indebtedness" baskets that allow VHG and its Restricted Subsidiaries to incur specified categories and amounts of Indebtedness without regard to the FCCR test. The principal Permitted Indebtedness baskets include:

(a) a general basket of $75,000,000 in aggregate principal amount outstanding at any time;

(b) Indebtedness under Credit Facilities (including the Revolving Credit Facility) in an aggregate principal amount not to exceed the greater of (x) $150,000,000 and (y) the Borrowing Base (as defined in the Indenture);

(c) Refinancing Indebtedness incurred to refinance, renew, or extend existing Indebtedness, subject to the conditions set forth in the Indenture;

(d) Purchase Money Obligations and Capital Lease Obligations in an aggregate principal amount not to exceed $30,000,000 at any time outstanding;

(e) Intercompany Indebtedness between VHG and its Restricted Subsidiaries, subject to subordination requirements;

(f) Indebtedness arising from hedging obligations entered into in the ordinary course of business; and

(g) certain other categories as defined in Section 4.09 of the Indenture.

Any proposed incurrence of Indebtedness that does not fall within a Permitted Indebtedness basket will require satisfaction of the FCCR incurrence test at the time of, and after giving pro forma effect to, such incurrence. VHG should consult with counsel before incurring any material Indebtedness to confirm compliance with the applicable provisions of the Indenture.

4.4 Limitation on Liens

Section 4.12 of the Indenture restricts the ability of VHG and its Restricted Subsidiaries to create, incur, or suffer to exist any Lien securing Indebtedness on any asset or property of VHG or any Restricted Subsidiary, except for "Permitted Liens" as defined in the Indenture. The Permitted Liens include, among others, a general basket permitting Liens securing Indebtedness in an aggregate principal amount not to exceed $50,000,000 at any time outstanding.

Liens securing Indebtedness in excess of the Permitted Liens baskets require compliance with the Lien covenant, which generally requires that the Notes be equally and ratably secured by such Liens. VHG should be mindful of this covenant in connection with any proposed secured financing transaction and should consult with counsel before granting any Liens on its assets or the assets of any Restricted Subsidiary.

4.5 Asset Sale Covenant

Section 4.10 of the Indenture restricts the ability of VHG and its Restricted Subsidiaries to consummate Asset Sales (as defined in the Indenture). If VHG or any Restricted Subsidiary consummates an Asset Sale, the Net Proceeds thereof must be applied within 365 days of the receipt thereof to one or more of the following uses:

(a) repayment of Senior Indebtedness (including the Notes);

(b) acquisition of Replacement Assets (i.e., assets of a nature or type used or useful in a Permitted Business); or

To the extent any Net Proceeds from Asset Sales are not applied within the 365-day period as described above, such unapplied Net Proceeds constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $25,000,000, VHG is required to make an offer (an "Asset Sale Offer") to repurchase the Notes at a purchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of repurchase.

VHG should track all Asset Sales and the application of Net Proceeds therefrom on a cumulative basis and should consult with counsel before entering into any transaction that may constitute an Asset Sale under the Indenture.

4.6 Reporting Obligations

Section 4.03 of the Indenture requires VHG to furnish to the Trustee and, upon written request, to holders and prospective holders of the Notes, the following reports and information:

(a) Annual Reports. Within 90 days after the end of each fiscal year of VHG, annual reports containing audited consolidated financial statements of VHG and its consolidated subsidiaries, prepared in accordance with GAAP and accompanied by a report thereon from an independent registered public accounting firm.

(b) Quarterly Reports. Within 45 days after the end of each of the first three fiscal quarters of each fiscal year of VHG, quarterly reports containing unaudited condensed consolidated financial statements of VHG and its consolidated subsidiaries, prepared in accordance with GAAP (subject to normal year-end audit adjustments).

(c) Event of Default Notices. Promptly upon becoming aware of any Default or Event of Default under the Indenture, written notice thereof to the Trustee, specifying the nature of such Default or Event of Default and the actions VHG is taking or proposes to take with respect thereto.

Since VHG is a publicly traded company listed on the Nasdaq Global Select Market (ticker symbol: VMRK; SEC Central Index Key (CIK) No. 0001847293), VHG's periodic filings with the Securities and Exchange Commission (the "SEC") — including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K — will satisfy the financial reporting obligations under the Indenture, provided that copies of such filings are delivered to or made available to the Trustee in accordance with Section 4.03 of the Indenture. We recommend that VHG establish a standing practice of delivering (or causing its filing agent to deliver) copies of all SEC filings to the Trustee contemporaneously with their filing with the SEC, or alternatively confirming with the Trustee that it monitors the SEC's EDGAR system for such filings.

5. Ongoing Obligations Under the Registration Rights Agreement

The Registration Rights Agreement, dated as of June 25, 2024 (the "Registration Rights Agreement"), among VHG, the Guarantors, and the Initial Purchasers, imposes certain obligations on VHG with respect to the registration of the Notes under the Securities Act. A summary of the key obligations follows.

5.1 Registration Statement Filing Deadline

Pursuant to Section 2(a) of the Registration Rights Agreement, VHG is obligated to file with the SEC a registration statement on an appropriate form (the "Exchange Offer Registration Statement") covering an offer to exchange the Notes for a new series of notes with identical terms (except for transfer restrictions and registration rights) (the "Exchange Notes"). If, for the reasons specified in the Registration Rights Agreement, VHG is unable to effect the exchange offer, VHG is alternatively required to file a shelf registration statement covering resales of the Notes by holders thereof.

The filing deadline for the Exchange Offer Registration Statement (or shelf registration statement, as applicable) is 180 days after the Closing Date, which is January 4, 2025 (since December 22, 2024 falls on a Sunday, and the following Monday, December 23, would be the 181st day, we have calculated the 180th day as falling on Saturday, December 21, 2024, and accordingly advise a filing no later than Friday, January 3, 2025, or as early as practicable before the deadline, though the contractual deadline is January 4, 2025).

Given the lead times involved in preparing a registration statement, including the preparation and audit/review of financial statements, the drafting of the prospectus, internal review cycles, and SEC staff review, Calderwood & Harkness strongly recommends that preparation of the Exchange Offer Registration Statement commence no later than October 2024. We would be pleased to coordinate with VHG's finance team and independent auditors to develop a detailed timeline and work plan for the registration statement preparation process.

5.2 Exchange Offer Effectiveness Deadline

Pursuant to Section 2(b) of the Registration Rights Agreement, the Exchange Offer Registration Statement must be declared effective by the SEC, and the exchange offer must be consummated, within 365 days after the Closing Date. The applicable deadline is July 8, 2025 (taking into account the fact that June 25, 2025 falls on a Wednesday and adding the relevant calendar days).

VHG should anticipate at least one round of SEC comments on the Exchange Offer Registration Statement and should build sufficient time into the schedule to respond to such comments and obtain effectiveness by this deadline.

5.3 Additional Interest for Non-Compliance

The Registration Rights Agreement provides that if VHG fails to satisfy either the filing deadline or the effectiveness/consummation deadline described above (each, a "Registration Default"), additional interest (the "Additional Interest") will accrue on the Notes at the following rates:

(a) 0.25% per annum for the first 90 days during which a Registration Default is continuing; and

(b) 0.50% per annum for each subsequent day during which a Registration Default is continuing.

The maximum rate of Additional Interest that may accrue under the Registration Rights Agreement is capped at 1.00% per annum, regardless of the number of Registration Defaults.

To illustrate the potential financial impact:

Given the magnitude of the potential Additional Interest, timely compliance with the registration obligations is strongly recommended. We will work closely with VHG to ensure that all filing and effectiveness deadlines are met.

6. Key Dates Calendar

The following table sets forth a calendar of key dates and obligations arising from the transaction. We recommend that these dates be entered into VHG's corporate compliance calendar system and that responsibility for monitoring each item be assigned to the appropriate member of VHG's legal, finance, or treasury team.

7. Trustee and Paying Agent Information

The following information should be maintained in VHG's records for purposes of all communications and notices under the Indenture:

Indenture Trustee, Registrar, Paying Agent, and Transfer Agent:

Fidelitas Trust Company, N.A. 100 Wall Street, Suite 1500 New York, New York 10005

Attention: Rebecca A. Marsden, Vice President, Corporate Trust Administration

Trustee Account No.: 7841-0293-551

All notices to the Trustee required or permitted under the Indenture should be directed to Ms. Marsden at the above address, with a copy to such other persons as the Trustee may designate from time to time. We recommend that VHG confirm contact information with the Trustee periodically to ensure that notices are properly directed.

A DTC Letter of Representations was delivered on the Closing Date, and the Notes are DTC-eligible and maintained in book-entry form through the facilities of The Depository Trust Company ("DTC"), with Cede & Co. as nominee. Beneficial interests in the Notes are recorded in the book-entry system maintained by DTC and its direct and indirect participants. Interest payments and any redemption or repurchase proceeds will be made through DTC in accordance with its customary procedures.

8. Enclosed Closing Binder

Enclosed with this letter is one complete closing binder containing executed counterparts and conformed copies of all transaction documents. The closing binder is organized as reflected in the Closing Index dated July 2, 2024, which is included as the first item in the binder. The closing binder includes the following principal documents:

1. Purchase Agreement, dated June 18, 2024, among VHG, the Guarantors, and the Initial Purchasers

2. Indenture, dated June 25, 2024, among VHG, the Guarantors, and Fidelitas Trust Company, N.A., as Trustee

3. Forms of Global Notes (Rule 144A Global Note and Regulation S Global Note)

4. Registration Rights Agreement, dated June 25, 2024, among VHG, the Guarantors, and the Initial Purchasers

5. Escrow Agreement, dated June 18, 2024

6. Guarantor Joinder Agreements (each dated June 25, 2024) for each of the Guarantors

7. Officer's Certificate of VHG, dated June 25, 2024

8. Secretary's Certificate of VHG, dated June 25, 2024

9. Board Resolutions of VHG, dated June 14, 2024

10. Board Resolutions (or equivalent authorizing actions) of each Guarantor Subsidiary, each dated June 14, 2024

11. Good Standing Certificates for VHG and each Guarantor from their respective jurisdictions of formation

12. Legal Opinion of Calderwood & Harkness LLP, dated June 25, 2024

13. Tax Opinion of Calderwood & Harkness LLP, dated June 25, 2024

14. 10b-5 Negative Assurance Letter of Calderwood & Harkness LLP, dated June 25, 2024

15. Payoff Letter from Greystone National Bank, N.A., dated June 21, 2024

16. Lien Release and Termination Request Letter, dated June 24, 2024

17. Notice of Termination of Existing Credit Agreement, dated June 25, 2024

18. Final Offering Memorandum, dated June 18, 2024

19. DTC Letter of Representations, dated June 25, 2024

20. Funds Flow Memorandum, dated June 24, 2024

Additional copies of the closing binder or any individual document included therein are available upon request. Electronic copies of all documents can also be made available through our secure document portal.

9. Post-Closing Items

Certain post-closing items remain in process and are being tracked by our office. Specifically:

(a) UCC-3 Termination Statements. UCC-3 termination statements are being prepared and filed in the applicable jurisdictions (including the Delaware Secretary of State, the Florida Secured Transaction Registry, and the Nevada Secretary of State) to terminate the financing statements previously filed in connection with the Existing Credit Facility. We anticipate that all UCC-3 filings will be submitted and acknowledged within ten business days of the Closing Date.

(b) Mortgage and Deed of Trust Releases. Releases of the mortgages and deeds of trust encumbering certain real property assets of VHG Properties Inc. are being prepared for recording in the applicable county recording offices. Our real estate colleagues are coordinating with local counsel as necessary to ensure proper form and recording.

(c) DTC FAST Agent Eligibility. We are confirming DTC FAST (Fast Automated Securities Transfer) agent eligibility with Fidelitas Trust Company, N.A. in its capacity as Transfer Agent for the Notes.

We anticipate that all post-closing items will be completed on or before July 8, 2024, and we will provide you with written confirmation upon the completion of each item and a final post-closing completion certificate when all items have been resolved.

10. Ratings

For your records, the Notes have been assigned the following credit ratings:

These ratings are current as of the Closing Date and reflect the rating agencies' assessment of VHG's creditworthiness and the terms and conditions of the Notes. VHG should be aware that any material changes in the Company's financial condition, business strategy, capital structure, or other factors that could affect creditworthiness should be communicated to the rating agencies in a timely manner, in accordance with VHG's ongoing rating agency relationships and any applicable rating agency engagement letters. Material corporate actions — including significant acquisitions or dispositions, material changes in leverage, or changes in dividend policy — may trigger a review of the ratings and should be discussed with the rating agencies in advance, to the extent practicable and consistent with applicable securities laws.

11. Continuing Availability of Counsel

Calderwood & Harkness LLP remains available to assist VHG with all matters arising from the Notes offering and the ongoing obligations described in this letter. Our areas of continuing availability include, without limitation:

• Preparation of the Exchange Offer Registration Statement and all related SEC filings, correspondence, and compliance matters;

• Analysis of covenant compliance questions under the Indenture, including calculations of the Fixed Charge Coverage Ratio, Restricted Payments basket availability, Permitted Indebtedness capacity, and other covenant-related computations;

• Preparation of supplemental indentures, including guarantor joinder agreements for any future subsidiaries that are required to become Guarantors under the Indenture;

• Negotiation and documentation of any amendments, waivers, or consents under the Indenture or the Registration Rights Agreement;

• Advice on optional redemptions, equity clawback transactions, and Change of Control Offers; and

• General capital markets advisory and corporate governance matters.

For questions regarding the Indenture, the Registration Rights Agreement, or any other aspect of the Notes offering, please do not hesitate to contact Theodore Langston (direct: 212-455-7215; tlangston@calderwoodharkness.com) or Claire Dempsey (direct: 212-455-7332; cdempsey@calderwoodharkness.com). For tax-related questions regarding the Notes, including questions regarding the treatment of original issue discount, please contact Sylvia Hartwell (direct: 212-455-7489; shartwell@calderwoodharkness.com).

We are pleased to have assisted Verimark Hospitality Group Inc. with this transaction and look forward to continuing our work together. We believe the Notes offering was executed efficiently and on favorable terms, and we commend the VHG team for their professionalism and diligence throughout the process. Please do not hesitate to reach out to us with any questions regarding this letter or any of the matters discussed herein.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Theodore Langston Partner, Capital Markets One Liberty Plaza, 45th Floor New York, New York 10006

cc: Marcus J. Delano, Chief Executive Officer, Verimark Hospitality Group Inc. Patricia R. Henning, Chief Financial Officer, Verimark Hospitality Group Inc. Vivienne St. Claire, Calderwood & Harkness LLP Claire Dempsey, Calderwood & Harkness LLP

Enclosure: Closing Binder (per Closing Index dated July 2, 2024)

144A Notes	Regulation S Notes
CUSIP	923847 AA 5	U92384 AA 8
ISIN	US923847AA52	USU92384AA83
Application	Amount
Repayment of Term Loan A under the Existing Credit Facility	$280,142,819.16
Repayment of Term Loan B under the Existing Credit Facility	$187,200,000.00
Subtotal — Principal Repayment	$467,342,819.16
Accrued and unpaid interest on the Existing Credit Facility through June 25, 2024	$4,207,180.84
Prepayment premium (0.50% of outstanding principal)	$2,336,714.10
Transaction fees and expenses (legal, trustee, rating agencies, printing, and miscellaneous)	$6,863,285.90
Retained for general corporate purposes	$3,000,000.00
Total Application of Net Proceeds	$483,750,000.00
Redemption Period Beginning	Redemption Price
July 1, 2027	104.125%
July 1, 2028	102.063%
July 1, 2029 and thereafter	100.000%
Rate of Additional Interest	Annual Cost (on $500,000,000)
0.25%	$1,250,000
0.50%	$2,500,000
1.00% (cap)	$5,000,000
Date	Obligation / Event
July 1, 2024	First interest accrual date for the Notes
January 1, 2025	First semi-annual interest payment on the Notes ($20,625,000)
January 4, 2025	Deadline to file Exchange Offer Registration Statement (or shelf registration statement) with the SEC (180 days post-Closing)
July 1, 2025	Second semi-annual interest payment on the Notes ($20,625,000)

July 8, 2025	Deadline for Exchange Offer Registration Statement to be declared effective and exchange offer to be consummated (365 days post-Closing)
July 1, 2027	First optional redemption date (at 104.125% of principal); equity clawback right expires on this date
July 1, 2028	Second step-down optional redemption date (at 102.063% of principal)
July 1, 2029	Par call date — Notes redeemable at 100.000% of principal
July 1, 2031	Maturity date — repayment of $500,000,000 aggregate principal amount
Ongoing — within 90 days after each fiscal year-end	Delivery of annual report (audited financial statements) to the Trustee
Ongoing — within 45 days after each of the first three fiscal quarters	Delivery of quarterly report (unaudited financial statements) to the Trustee
Rating Agency	Rating	Outlook
Crestline Ratings Group	B1	Stable
Broadmark Rating Services Inc.	B+	Stable

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION
CALDERWOOD & HARKNESS LLP Counselors at Law
One Liberty Plaza, 45th Floor New York, New York 10006
Telephone: (212) 455-7200 Facsimile: (212) 455-7201 www.calderwoodharkness.com
July 5, 2024
David K. Moretti, Esq. General Counsel & Secretary Verimark Hospitality Group Inc. 2400 Brickell Bay Drive, Suite 3100 Miami, Florida 33129
Re: Closing of $500,000,000 Aggregate Principal Amount of 8.250% Senior Notes due 2031 — Post-Closing Confirmation and Summary of Ongoing Obligations
Dear David:
We are writing to confirm the successful closing of the offering described above and to provide Verimark Hospitality Group Inc. and its management team with a comprehensive summary of the transaction, the key terms of the Notes, and the ongoing obligations of the Company and the Guarantors following the closing. This letter is intended to serve as a practical reference guide for the Company's legal, finance, and treasury departments and should be reviewed in conjunction with, but not as a substitute for, the definitive transaction documents enclosed herewith.
1. Confirmation of Successful Closing
We are pleased to confirm that the closing (the "Closing") of the offering of $500,000,000 aggregate principal amount of 8.250% Senior Notes due 2031 (the "Notes") occurred on June 25, 2024 (the "Closing Date"). All conditions precedent to the Closing were satisfied or waived, and all deliverables required under the Purchase Agreement were timely provided by the applicable parties.
The Notes were issued by Verimark Hospitality Group Inc., a Delaware corporation ("VHG" or the "Company"), and are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by the following subsidiaries of VHG (collectively, the "Guarantors"):
(a) Verimark Resort Holdings LLC, a Delaware limited liability company;
(b) VHG Properties Inc., a Delaware corporation;
(c) Bayshore Hotel Management LLC, a Florida limited liability company;
(d) Verimark Capital Holdings LLC, a Delaware limited liability company; and
(e) Pinnacle Lodging Enterprises Inc., a Nevada corporation.
The Notes were issued pursuant to that certain Indenture, dated as of June 25, 2024 (the "Indenture"), by and among VHG, each of the Guarantors, and Fidelitas Trust Company, N.A., a national banking association, as trustee (the "Trustee"). The Indenture governs all rights, obligations, and remedies of the parties with respect to the Notes and the Guarantees.
The Notes were placed with the initial purchasers (collectively, the "Initial Purchasers") pursuant to the Purchase Agreement, dated June 18, 2024 (the "Purchase Agreement"), among VHG, the Guarantors, and the following Initial Purchasers:
•  Kensington Barrow & Co., acting as representative of the Initial Purchasers (the "Representative");
•  Ridgeline Capital Markets LLC; and
•  Stonebridge Marvelo Securities Inc.
The offering was conducted as a private placement exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon Rule 144A under the Securities Act to qualified institutional buyers and Regulation S under the Securities Act to non-U.S. persons in offshore transactions. The Notes have been assigned the following identifiers:
The Notes were issued at an issue price of 98.500% of par, reflecting an original issue discount ("OID") of 1.500% ($7,500,000 in the aggregate). Based on an aggregate principal amount of $500,000,000, the gross proceeds of the offering were $492,500,000. After deduction of the Initial Purchasers' discount of 1.750% of the aggregate principal amount, or $8,750,000, the net proceeds delivered to VHG on the Closing Date were $483,750,000.
All conditions to the obligations of the Initial Purchasers under the Purchase Agreement were satisfied, including without limitation the delivery of the legal opinions, officers' certificates, comfort letters, and other closing deliverables specified therein. No bring-down conditions remain outstanding with respect to the Purchase Agreement, and the obligations of the parties thereunder have been fully performed, subject only to the surviving representations, warranties, and indemnification obligations set forth in the Purchase Agreement.
2. Use of Proceeds and Existing Credit Facility Payoff
In accordance with the Use of Proceeds disclosure set forth in the Final Offering Memorandum dated June 18, 2024, the net proceeds of the offering in the amount of $483,750,000 were applied as follows on the Closing Date:
The term loans under that certain Amended and Restated Credit Agreement, dated as of March 15, 2021 (the "Existing Credit Facility"), by and among VHG, as borrower, the several lenders from time to time party thereto, and Greystone National Bank, N.A., as administrative agent (Loan No. GNB-SYN-2021-04417), have been repaid in full. Formal notice of termination of the Existing Credit Facility was delivered by our office on behalf of VHG to Greystone National Bank, N.A., in its capacity as administrative agent, on June 25, 2024. Greystone National Bank, N.A. has acknowledged receipt of such notice and confirmed that all term loan obligations under the Existing Credit Facility have been satisfied in full and that the Existing Credit Facility has been terminated in accordance with its terms.
In connection with the termination of the Existing Credit Facility, UCC-3 termination statements are being prepared and filed in the applicable jurisdictions (including Delaware, Florida, and Nevada) to release the security interests previously granted by VHG and the Guarantors in favor of the lenders under the Existing Credit Facility. In addition, releases of the mortgages and deeds of trust encumbering certain real property assets of VHG Properties Inc. are being prepared for recording in the applicable county recording offices. Calderwood & Harkness LLP is overseeing these filings and will confirm their completion to you under separate cover. These items are being tracked as post-closing items, as described in Section 9 of this letter.
For the avoidance of doubt, the $150,000,000 senior secured revolving credit facility (the "Revolving Credit Facility") under the Credit Agreement dated as of March 15, 2021, as amended, among VHG, the revolving lenders party thereto, and Greystone National Bank, N.A., as administrative agent, was not affected by the transactions described herein and remains in full force and effect, available and undrawn as of the Closing Date. VHG should be mindful of any cross-default or cross-acceleration provisions in the Revolving Credit Facility that reference the Notes or the Indenture, and we are available to discuss those provisions with you at your convenience.
3. Summary of Key Terms of the Notes
Set forth below is a summary of the key economic and structural terms of the Notes. This summary is qualified in its entirety by reference to the Indenture and the Notes themselves, copies of which are included in the enclosed closing binder.
Issuer: Verimark Hospitality Group Inc.
Guarantors: Verimark Resort Holdings LLC, VHG Properties Inc., Bayshore Hotel Management LLC, Verimark Capital Holdings LLC, and Pinnacle Lodging Enterprises Inc.
Aggregate Principal Amount: $500,000,000
Maturity Date: July 1, 2031
Interest Rate: 8.250% per annum, payable semi-annually in arrears on January 1 and July 1 of each year. Each semi-annual interest payment will be $20,625,000 (based on the full principal amount of $500,000,000), resulting in aggregate annual interest expense of $41,250,000.
First Interest Accrual Date: July 1, 2024
First Interest Payment Date: January 1, 2025. The first interest payment will cover the period from July 1, 2024 through and including December 31, 2024 (approximately 184 days).
Ranking: The Notes are senior unsecured obligations of VHG and rank pari passu in right of payment with all existing and future senior indebtedness of VHG. The Notes are effectively subordinated to all existing and future secured indebtedness of VHG to the extent of the value of the assets securing such indebtedness, and structurally subordinated to all existing and future indebtedness and other liabilities of VHG's non-guarantor subsidiaries.
Governing Law: State of New York
3.1 Optional Redemption Schedule
The Notes are redeemable at VHG's option, in whole or in part, at any time on or after July 1, 2027, at the redemption prices set forth below (expressed as percentages of the principal amount), plus accrued and unpaid interest to, but not including, the redemption date, during the twelve-month period beginning on the date indicated:
Prior to July 1, 2027, the Notes may be redeemed, in whole but not in part, at VHG's option, at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest to, but not including, the redemption date, plus a "make-whole" premium based on the applicable Treasury Rate plus 50 basis points, as more fully described in Section 3.07 of the Indenture.
3.2 Equity Clawback
Prior to July 1, 2027, VHG may redeem up to 40% of the original aggregate principal amount of the Notes (i.e., up to $200,000,000 in aggregate principal amount) at a redemption price equal to 108.250% of the principal amount thereof, plus accrued and unpaid interest to, but not including, the redemption date, with the net cash proceeds of one or more qualifying equity offerings, provided that:
(a) at least 60% of the original aggregate principal amount of the Notes (i.e., at least $300,000,000) remains outstanding immediately after each such redemption; and
(b) each such redemption occurs within 180 days after the closing of the related equity offering.
The equity clawback provision is a valuable tool should VHG pursue an equity capital raise prior to the first optional redemption date and wish to reduce its outstanding indebtedness. VHG should consult with outside counsel before initiating any equity clawback redemption to ensure compliance with all procedural requirements under the Indenture.
3.3 Change of Control
Upon the occurrence of a Change of Control (as defined in Section 1.01 of the Indenture), VHG is required to make an offer (a "Change of Control Offer") to repurchase all outstanding Notes at a purchase price equal to 101.000% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of repurchase. If the full $500,000,000 in aggregate principal amount were outstanding at the time of a Change of Control, the aggregate repurchase price (exclusive of accrued interest) would be $505,000,000. This obligation is set forth in Section 4.14 of the Indenture.
VHG should be aware that the definition of "Change of Control" in the Indenture includes, among other triggering events, (i) the acquisition by any "person" or "group" (within the meaning of Sections 13(d) and 14(d) of the Exchange Act) of beneficial ownership of more than 50% of the total voting power of VHG's voting stock, (ii) the sale, lease, or other disposition of all or substantially all of the assets of VHG and its Restricted Subsidiaries, taken as a whole, and (iii) the adoption of a plan of liquidation or dissolution of VHG. Any transaction that may implicate the Change of Control provisions should be reviewed with counsel well in advance of execution.
4. Ongoing Obligations Under the Indenture — Incurrence Covenants
The Indenture contains a series of covenants that restrict the ability of VHG and its Restricted Subsidiaries to take certain actions. Importantly, these covenants are incurrence-based rather than maintenance-based, meaning that compliance is tested only at the time VHG proposes to take a specified action (e.g., incurring additional indebtedness or making a restricted payment), rather than on an ongoing periodic basis. This distinction is significant: the failure to satisfy a given financial ratio at any particular measurement date does not, by itself, constitute a Default or Event of Default under the Indenture, so long as VHG does not take an action that requires satisfaction of such ratio while it is not met.
The principal covenants are set forth in Article 4 of the Indenture and are summarized below. The following summaries are for reference purposes only and are qualified in their entirety by the full text of the Indenture.
4.1 Fixed Charge Coverage Ratio
The Indenture provides that VHG may not, and may not permit any Restricted Subsidiary to, incur additional Indebtedness (other than Permitted Indebtedness, as discussed in Section 4.3 below) unless, at the time of and after giving pro forma effect to such incurrence, the pro forma Fixed Charge Coverage Ratio ("FCCR") of VHG and its Restricted Subsidiaries on a consolidated basis is at least 2.00 to 1.00.
The FCCR is generally calculated as the ratio of (x) Adjusted EBITDA for the most recently ended four fiscal quarters (the "Reference Period") to (y) Fixed Charges for the same Reference Period, in each case determined on a pro forma basis giving effect to the proposed incurrence of Indebtedness and the application of proceeds therefrom as if such transactions had occurred at the beginning of the Reference Period. The definitions of "Adjusted EBITDA" and "Fixed Charges" are set forth in Section 1.01 of the Indenture and should be reviewed carefully in connection with any compliance calculation.
As of the Closing Date, VHG's pro forma FCCR is approximately 8.83x, based on last-twelve-months ("LTM") Adjusted EBITDA of approximately $412,000,000 and pro forma annual Fixed Charges of approximately $41,250,000 (consisting principally of annual interest expense on the Notes at the 8.250% coupon rate). This ratio provides VHG with significant headroom above the 2.00x incurrence threshold. However, we note that LTM Adjusted EBITDA is subject to fluctuation based on VHG's operating performance, and VHG should ensure that the FCCR test is run and documented in advance of any proposed incurrence of Indebtedness that exceeds the Permitted Indebtedness baskets.
4.2 Limitation on Restricted Payments
Section 4.07 of the Indenture restricts the ability of VHG and its Restricted Subsidiaries to make "Restricted Payments," which include, among other things:
(a) the declaration or payment of dividends or other distributions on equity interests of VHG (other than dividends payable solely in additional equity interests or in Qualified Stock);
(b) the purchase, redemption, or other acquisition of equity interests of VHG or any direct or indirect parent thereof;
(c) the making of principal payments on, or the purchase, redemption, defeasance, or other acquisition for value of, any subordinated indebtedness prior to its stated maturity; and
(d) the making of any Investment in any Unrestricted Subsidiary.
VHG may not make any Restricted Payment unless, at the time of and after giving effect thereto:
(i) no Default or Event of Default has occurred and is continuing (or would result therefrom);
(ii) VHG could incur at least $1.00 of additional Indebtedness pursuant to the FCCR incurrence test described in Section 4.1 above (i.e., the pro forma FCCR is at least 2.00 to 1.00); and
(iii) the aggregate amount of all Restricted Payments made since July 1, 2024 does not exceed the sum of (A) $50,000,000, plus (B) 50% of Consolidated Net Income for the period from July 1, 2024 to the end of the most recently ended fiscal quarter for which financial statements are available (or, if Consolidated Net Income for such period is a loss, minus 100% of such loss), plus (C) certain other amounts as specified in the Indenture (including net proceeds from certain equity issuances and the value of Investments in Unrestricted Subsidiaries that are redesignated as Restricted Subsidiaries).
The "builder basket" described in clause (iii) above commences building from July 1, 2024. We strongly recommend that VHG's finance and treasury departments maintain a running, contemporaneous ledger tracking (x) cumulative Consolidated Net Income since July 1, 2024 and (y) cumulative Restricted Payments made since July 1, 2024. Such a ledger will be essential for demonstrating compliance with this covenant in the event of any proposed Restricted Payment, and will also be useful for purposes of responding to any inquiries from holders or the Trustee.
Certain exceptions to the Restricted Payments covenant (the "Permitted Payments") are set forth in the Indenture and should be reviewed in advance of any proposed transaction that may constitute a Restricted Payment.
4.3 Limitation on Indebtedness
In addition to the FCCR incurrence test described in Section 4.1 above, the Indenture contains a series of "Permitted Indebtedness" baskets that allow VHG and its Restricted Subsidiaries to incur specified categories and amounts of Indebtedness without regard to the FCCR test. The principal Permitted Indebtedness baskets include:
(a) a general basket of $75,000,000 in aggregate principal amount outstanding at any time;
(b) Indebtedness under Credit Facilities (including the Revolving Credit Facility) in an aggregate principal amount not to exceed the greater of (x) $150,000,000 and (y) the Borrowing Base (as defined in the Indenture);
(c) Refinancing Indebtedness incurred to refinance, renew, or extend existing Indebtedness, subject to the conditions set forth in the Indenture;
(d) Purchase Money Obligations and Capital Lease Obligations in an aggregate principal amount not to exceed $30,000,000 at any time outstanding;
(e) Intercompany Indebtedness between VHG and its Restricted Subsidiaries, subject to subordination requirements;
(f) Indebtedness arising from hedging obligations entered into in the ordinary course of business; and
(g) certain other categories as defined in Section 4.09 of the Indenture.
Any proposed incurrence of Indebtedness that does not fall within a Permitted Indebtedness basket will require satisfaction of the FCCR incurrence test at the time of, and after giving pro forma effect to, such incurrence. VHG should consult with counsel before incurring any material Indebtedness to confirm compliance with the applicable provisions of the Indenture.
4.4 Limitation on Liens
Section 4.12 of the Indenture restricts the ability of VHG and its Restricted Subsidiaries to create, incur, or suffer to exist any Lien securing Indebtedness on any asset or property of VHG or any Restricted Subsidiary, except for "Permitted Liens" as defined in the Indenture. The Permitted Liens include, among others, a general basket permitting Liens securing Indebtedness in an aggregate principal amount not to exceed $50,000,000 at any time outstanding.
Liens securing Indebtedness in excess of the Permitted Liens baskets require compliance with the Lien covenant, which generally requires that the Notes be equally and ratably secured by such Liens. VHG should be mindful of this covenant in connection with any proposed secured financing transaction and should consult with counsel before granting any Liens on its assets or the assets of any Restricted Subsidiary.
4.5 Asset Sale Covenant
Section 4.10 of the Indenture restricts the ability of VHG and its Restricted Subsidiaries to consummate Asset Sales (as defined in the Indenture). If VHG or any Restricted Subsidiary consummates an Asset Sale, the Net Proceeds thereof must be applied within 365 days of the receipt thereof to one or more of the following uses:
(a) repayment of Senior Indebtedness (including the Notes);
(b) acquisition of Replacement Assets (i.e., assets of a nature or type used or useful in a Permitted Business); or
(c) capital expenditures in respect of assets used or useful in a Permitted Business.
To the extent any Net Proceeds from Asset Sales are not applied within the 365-day period as described above, such unapplied Net Proceeds constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $25,000,000, VHG is required to make an offer (an "Asset Sale Offer") to repurchase the Notes at a purchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of repurchase.
VHG should track all Asset Sales and the application of Net Proceeds therefrom on a cumulative basis and should consult with counsel before entering into any transaction that may constitute an Asset Sale under the Indenture.
4.6 Reporting Obligations
Section 4.03 of the Indenture requires VHG to furnish to the Trustee and, upon written request, to holders and prospective holders of the Notes, the following reports and information:
(a) Annual Reports. Within 90 days after the end of each fiscal year of VHG, annual reports containing audited consolidated financial statements of VHG and its consolidated subsidiaries, prepared in accordance with GAAP and accompanied by a report thereon from an independent registered public accounting firm.
(b) Quarterly Reports. Within 45 days after the end of each of the first three fiscal quarters of each fiscal year of VHG, quarterly reports containing unaudited condensed consolidated financial statements of VHG and its consolidated subsidiaries, prepared in accordance with GAAP (subject to normal year-end audit adjustments).
(c) Event of Default Notices. Promptly upon becoming aware of any Default or Event of Default under the Indenture, written notice thereof to the Trustee, specifying the nature of such Default or Event of Default and the actions VHG is taking or proposes to take with respect thereto.
Since VHG is a publicly traded company listed on the Nasdaq Global Select Market (ticker symbol: VMRK; SEC Central Index Key (CIK) No. 0001847293), VHG's periodic filings with the Securities and Exchange Commission (the "SEC") — including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K — will satisfy the financial reporting obligations under the Indenture, provided that copies of such filings are delivered to or made available to the Trustee in accordance with Section 4.03 of the Indenture. We recommend that VHG establish a standing practice of delivering (or causing its filing agent to deliver) copies of all SEC filings to the Trustee contemporaneously with their filing with the SEC, or alternatively confirming with the Trustee that it monitors the SEC's EDGAR system for such filings.
5. Ongoing Obligations Under the Registration Rights Agreement
The Registration Rights Agreement, dated as of June 25, 2024 (the "Registration Rights Agreement"), among VHG, the Guarantors, and the Initial Purchasers, imposes certain obligations on VHG with respect to the registration of the Notes under the Securities Act. A summary of the key obligations follows.
5.1 Registration Statement Filing Deadline
Pursuant to Section 2(a) of the Registration Rights Agreement, VHG is obligated to file with the SEC a registration statement on an appropriate form (the "Exchange Offer Registration Statement") covering an offer to exchange the Notes for a new series of notes with identical terms (except for transfer restrictions and registration rights) (the "Exchange Notes"). If, for the reasons specified in the Registration Rights Agreement, VHG is unable to effect the exchange offer, VHG is alternatively required to file a shelf registration statement covering resales of the Notes by holders thereof.
The filing deadline for the Exchange Offer Registration Statement (or shelf registration statement, as applicable) is 180 days after the Closing Date, which is January 4, 2025 (since December 22, 2024 falls on a Sunday, and the following Monday, December 23, would be the 181st day, we have calculated the 180th day as falling on Saturday, December 21, 2024, and accordingly advise a filing no later than Friday, January 3, 2025, or as early as practicable before the deadline, though the contractual deadline is January 4, 2025).
Given the lead times involved in preparing a registration statement, including the preparation and audit/review of financial statements, the drafting of the prospectus, internal review cycles, and SEC staff review, Calderwood & Harkness strongly recommends that preparation of the Exchange Offer Registration Statement commence no later than October 2024. We would be pleased to coordinate with VHG's finance team and independent auditors to develop a detailed timeline and work plan for the registration statement preparation process.
5.2 Exchange Offer Effectiveness Deadline
Pursuant to Section 2(b) of the Registration Rights Agreement, the Exchange Offer Registration Statement must be declared effective by the SEC, and the exchange offer must be consummated, within 365 days after the Closing Date. The applicable deadline is July 8, 2025 (taking into account the fact that June 25, 2025 falls on a Wednesday and adding the relevant calendar days).
VHG should anticipate at least one round of SEC comments on the Exchange Offer Registration Statement and should build sufficient time into the schedule to respond to such comments and obtain effectiveness by this deadline.
5.3 Additional Interest for Non-Compliance
The Registration Rights Agreement provides that if VHG fails to satisfy either the filing deadline or the effectiveness/consummation deadline described above (each, a "Registration Default"), additional interest (the "Additional Interest") will accrue on the Notes at the following rates:
(a) 0.25% per annum for the first 90 days during which a Registration Default is continuing; and
(b) 0.50% per annum for each subsequent day during which a Registration Default is continuing.
The maximum rate of Additional Interest that may accrue under the Registration Rights Agreement is capped at 1.00% per annum, regardless of the number of Registration Defaults.
To illustrate the potential financial impact:
Given the magnitude of the potential Additional Interest, timely compliance with the registration obligations is strongly recommended. We will work closely with VHG to ensure that all filing and effectiveness deadlines are met.
6. Key Dates Calendar
The following table sets forth a calendar of key dates and obligations arising from the transaction. We recommend that these dates be entered into VHG's corporate compliance calendar system and that responsibility for monitoring each item be assigned to the appropriate member of VHG's legal, finance, or treasury team.
7. Trustee and Paying Agent Information
The following information should be maintained in VHG's records for purposes of all communications and notices under the Indenture:
Indenture Trustee, Registrar, Paying Agent, and Transfer Agent:
Fidelitas Trust Company, N.A. 100 Wall Street, Suite 1500 New York, New York 10005
Attention: Rebecca A. Marsden, Vice President, Corporate Trust Administration
Trustee Account No.: 7841-0293-551
All notices to the Trustee required or permitted under the Indenture should be directed to Ms. Marsden at the above address, with a copy to such other persons as the Trustee may designate from time to time. We recommend that VHG confirm contact information with the Trustee periodically to ensure that notices are properly directed.
A DTC Letter of Representations was delivered on the Closing Date, and the Notes are DTC-eligible and maintained in book-entry form through the facilities of The Depository Trust Company ("DTC"), with Cede & Co. as nominee. Beneficial interests in the Notes are recorded in the book-entry system maintained by DTC and its direct and indirect participants. Interest payments and any redemption or repurchase proceeds will be made through DTC in accordance with its customary procedures.
8. Enclosed Closing Binder
Enclosed with this letter is one complete closing binder containing executed counterparts and conformed copies of all transaction documents. The closing binder is organized as reflected in the Closing Index dated July 2, 2024, which is included as the first item in the binder. The closing binder includes the following principal documents:
1.  Purchase Agreement, dated June 18, 2024, among VHG, the Guarantors, and the Initial Purchasers
2.  Indenture, dated June 25, 2024, among VHG, the Guarantors, and Fidelitas Trust Company, N.A., as Trustee
3.  Forms of Global Notes (Rule 144A Global Note and Regulation S Global Note)
4.  Registration Rights Agreement, dated June 25, 2024, among VHG, the Guarantors, and the Initial Purchasers
5.  Escrow Agreement, dated June 18, 2024
6.  Guarantor Joinder Agreements (each dated June 25, 2024) for each of the Guarantors
7.  Officer's Certificate of VHG, dated June 25, 2024
8.  Secretary's Certificate of VHG, dated June 25, 2024
9.  Board Resolutions of VHG, dated June 14, 2024
10.  Board Resolutions (or equivalent authorizing actions) of each Guarantor Subsidiary, each dated June 14, 2024
11.  Good Standing Certificates for VHG and each Guarantor from their respective jurisdictions of formation
12.  Legal Opinion of Calderwood & Harkness LLP, dated June 25, 2024
13.  Tax Opinion of Calderwood & Harkness LLP, dated June 25, 2024
14.  10b-5 Negative Assurance Letter of Calderwood & Harkness LLP, dated June 25, 2024
15.  Payoff Letter from Greystone National Bank, N.A., dated June 21, 2024
16.  Lien Release and Termination Request Letter, dated June 24, 2024
17.  Notice of Termination of Existing Credit Agreement, dated June 25, 2024
18.  Final Offering Memorandum, dated June 18, 2024
19.  DTC Letter of Representations, dated June 25, 2024
20.  Funds Flow Memorandum, dated June 24, 2024
Additional copies of the closing binder or any individual document included therein are available upon request. Electronic copies of all documents can also be made available through our secure document portal.
9. Post-Closing Items
Certain post-closing items remain in process and are being tracked by our office. Specifically:
(a) UCC-3 Termination Statements. UCC-3 termination statements are being prepared and filed in the applicable jurisdictions (including the Delaware Secretary of State, the Florida Secured Transaction Registry, and the Nevada Secretary of State) to terminate the financing statements previously filed in connection with the Existing Credit Facility. We anticipate that all UCC-3 filings will be submitted and acknowledged within ten business days of the Closing Date.
(b) Mortgage and Deed of Trust Releases. Releases of the mortgages and deeds of trust encumbering certain real property assets of VHG Properties Inc. are being prepared for recording in the applicable county recording offices. Our real estate colleagues are coordinating with local counsel as necessary to ensure proper form and recording.
(c) DTC FAST Agent Eligibility. We are confirming DTC FAST (Fast Automated Securities Transfer) agent eligibility with Fidelitas Trust Company, N.A. in its capacity as Transfer Agent for the Notes.
We anticipate that all post-closing items will be completed on or before July 8, 2024, and we will provide you with written confirmation upon the completion of each item and a final post-closing completion certificate when all items have been resolved.
10. Ratings
For your records, the Notes have been assigned the following credit ratings:
These ratings are current as of the Closing Date and reflect the rating agencies' assessment of VHG's creditworthiness and the terms and conditions of the Notes. VHG should be aware that any material changes in the Company's financial condition, business strategy, capital structure, or other factors that could affect creditworthiness should be communicated to the rating agencies in a timely manner, in accordance with VHG's ongoing rating agency relationships and any applicable rating agency engagement letters. Material corporate actions — including significant acquisitions or dispositions, material changes in leverage, or changes in dividend policy — may trigger a review of the ratings and should be discussed with the rating agencies in advance, to the extent practicable and consistent with applicable securities laws.
11. Continuing Availability of Counsel
Calderwood & Harkness LLP remains available to assist VHG with all matters arising from the Notes offering and the ongoing obligations described in this letter. Our areas of continuing availability include, without limitation:
•  Preparation of the Exchange Offer Registration Statement and all related SEC filings, correspondence, and compliance matters;
•  Analysis of covenant compliance questions under the Indenture, including calculations of the Fixed Charge Coverage Ratio, Restricted Payments basket availability, Permitted Indebtedness capacity, and other covenant-related computations;
•  Preparation of supplemental indentures, including guarantor joinder agreements for any future subsidiaries that are required to become Guarantors under the Indenture;
•  Negotiation and documentation of any amendments, waivers, or consents under the Indenture or the Registration Rights Agreement;
•  Advice on optional redemptions, equity clawback transactions, and Change of Control Offers; and
•  General capital markets advisory and corporate governance matters.
For questions regarding the Indenture, the Registration Rights Agreement, or any other aspect of the Notes offering, please do not hesitate to contact Theodore Langston (direct: 212-455-7215; tlangston@calderwoodharkness.com) or Claire Dempsey (direct: 212-455-7332; cdempsey@calderwoodharkness.com). For tax-related questions regarding the Notes, including questions regarding the treatment of original issue discount, please contact Sylvia Hartwell (direct: 212-455-7489; shartwell@calderwoodharkness.com).
We are pleased to have assisted Verimark Hospitality Group Inc. with this transaction and look forward to continuing our work together. We believe the Notes offering was executed efficiently and on favorable terms, and we commend the VHG team for their professionalism and diligence throughout the process. Please do not hesitate to reach out to us with any questions regarding this letter or any of the matters discussed herein.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Theodore Langston Partner, Capital Markets One Liberty Plaza, 45th Floor New York, New York 10006
cc: Marcus J. Delano, Chief Executive Officer, Verimark Hospitality Group Inc. Patricia R. Henning, Chief Financial Officer, Verimark Hospitality Group Inc. Vivienne St. Claire, Calderwood & Harkness LLP Claire Dempsey, Calderwood & Harkness LLP
Enclosure: Closing Binder (per Closing Index dated July 2, 2024)
144A Notes | Regulation S Notes
CUSIP | 923847 AA 5 | U92384 AA 8
ISIN | US923847AA52 | USU92384AA83
Application | Amount
Repayment of Term Loan A under the Existing Credit Facility | $280,142,819.16
Repayment of Term Loan B under the Existing Credit Facility | $187,200,000.00
Subtotal — Principal Repayment | $467,342,819.16
Accrued and unpaid interest on the Existing Credit Facility through June 25, 2024 | $4,207,180.84
Prepayment premium (0.50% of outstanding principal) | $2,336,714.10
Transaction fees and expenses (legal, trustee, rating agencies, printing, and miscellaneous) | $6,863,285.90
Retained for general corporate purposes | $3,000,000.00
Total Application of Net Proceeds | $483,750,000.00
Redemption Period Beginning | Redemption Price
July 1, 2027 | 104.125%
July 1, 2028 | 102.063%
July 1, 2029 and thereafter | 100.000%
Rate of Additional Interest | Annual Cost (on $500,000,000)
0.25% | $1,250,000
0.50% | $2,500,000
1.00% (cap) | $5,000,000
Date | Obligation / Event
July 1, 2024 | First interest accrual date for the Notes
January 1, 2025 | First semi-annual interest payment on the Notes ($20,625,000)
January 4, 2025 | Deadline to file Exchange Offer Registration Statement (or shelf registration statement) with the SEC (180 days post-Closing)
July 1, 2025 | Second semi-annual interest payment on the Notes ($20,625,000)
July 8, 2025 | Deadline for Exchange Offer Registration Statement to be declared effective and exchange offer to be consummated (365 days post-Closing)
July 1, 2027 | First optional redemption date (at 104.125% of principal); equity clawback right expires on this date
July 1, 2028 | Second step-down optional redemption date (at 102.063% of principal)
July 1, 2029 | Par call date — Notes redeemable at 100.000% of principal
July 1, 2031 | Maturity date — repayment of $500,000,000 aggregate principal amount
Ongoing — within 90 days after each fiscal year-end | Delivery of annual report (audited financial statements) to the Trustee
Ongoing — within 45 days after each of the first three fiscal quarters | Delivery of quarterly report (unaudited financial statements) to the Trustee
Rating Agency | Rating | Outlook
Crestline Ratings Group | B1 | Stable
Broadmark Rating Services Inc. | B+ | Stable

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