FRC Balance - Chapter 11 DIP Terms

DIP Terms

Borrower(s) / Guarantor(s)

• All nine debtors are borrowers, jointly and severally liable for the DIP obligations.
• The term sheet names True Food Kitchen Investco LLC and True Food Kitchen Holdings LLC as non-debtor guarantors, though both are among the nine debtors and so are borrowers under the proposed interim order. The term sheet also makes any other non-debtor parent or subsidiary identified by agreement before interim entry a guarantor granting liens on substantially all of its assets, with non-debtor guarantor liens and their priority established under non-bankruptcy law rather than section 364 and requiring separate instruments and perfection steps.

Lender

• HumanCo TFK IV, LLC, an investment vehicle managed by partners of HumanCo and an affiliate of HumanCo TFK III, LLC, which holds convertible notes, holds roughly 42.1% of Investco's fully diluted units with its affiliates, and has the right to designate certain members of Investco's board of managers; because of that relationship, the facility was reviewed and approved on the debtors' behalf by their chief restructuring officer, Nathan Cook, who signed the term sheet for the debtors
• There is no long-form credit agreement: the executed DIP term sheet dated Oct. 2, 2026 becomes the operative financing document once incorporated into the interim order, and execution of any definitive agreement is not a condition to borrowing. The interim order had not been entered when the motion was filed; the order terms described here are those of the proposed form, which controls over any inconsistent term sheet provision.

DIP Commitments

• $20 million senior secured, superpriority, multiple-draw term loan facility, entirely new money, with the full commitment becoming binding on the lender upon entry of the interim order and no further lender or investor commitment approval required for later tranches:
  • Tranche A: $5 million available upon entry of the interim order, in one or more borrowings
  • Tranche B: $15 million available upon entry of the final order in six sequential advances, each conditioned on funding of the preceding advance: $2 million on entry of the final order; $2 million on entry of a bidding procedures order incorporating the competing-bid requirements; $2 million on execution of a binding stalking-horse purchase agreement; $2.5 million on selection or designation of the successful bidder; $3 million on entry of the sale order or plan confirmation order providing for payment in full of the DIP obligations; and the remaining undrawn commitment on funding of the fifth advance
• The motion's borrowing-conditions row repeats the Tranche B schedule but lists the fourth advance at $3 million rather than the $2.5 million carried in the commitment row and the term sheet.
• Capitalized interest and fees are additional DIP obligations but do not reduce the $20 million cash commitment; each cash advance permanently reduces undrawn availability, and amounts repaid or prepaid may not be reborrowed.
• No investor funding failure, additional fundraising requirement, or renewed approval process excuses the lender from funding a required borrowing.

Interest Rate

• Rate: 10.00% per annum on funded principal, computed on a 360-day year and actual days elapsed, paid in kind and capitalized monthly and on the maturity date; capitalized interest then becomes principal and itself bears interest
• Default Rate Increase: 5.00% per annum, payable in kind or in cash at the lender's election, upon written notice during a continuing event of default

Fees

• Commitment Fee: 3.00% of the $20 million commitment, or $600,000, fully earned and non-refundable upon entry of the interim order, paid in kind and capitalized
• Funding Fee: 3.00% of each advance, fully earned on the applicable funding date, paid in kind and capitalized, aggregating $600,000 if the full commitment funds
• Exit Fee: a true-up equal to the positive difference, if any, between the target return amount and the sum of accrued interest, the commitment fee and all funding fees, payable on the maturity date or on earlier repayment, prepayment, refinancing, sale closing or the effective date of a plan including a recapitalization (either of which may include a credit bid)
  • The target return amount is $1.9 million at a funded DIP balance of up to $5 million, increasing pro rata to a maximum of $4 million at a $20 million balance, with the term sheet illustrating $2.25 million at $7.5 million, $2.6 million at $10 million, $2.95 million at $12.5 million, $3.3 million at $15 million and $3.65 million at $17.5 million
  • "DIP Balance" means the aggregate principal funded in cash and outstanding, excluding capitalized interest and fees; the exit fee is determined cumulatively with credit for any amount previously paid or capitalized, and no previously capitalized fee is charged again on repayment or credit bid
  • The debtors contrast the competing proposal, which required a 10% commitment fee on the full commitment and a separate 9% exit fee on the outstanding balance including capitalized interest and fees
• Lender expenses: reasonable and documented fees and expenses of the lender's counsel and advisors, pre- and postpetition, exempt from U.S. Trustee fee guidelines but subject to a 10-day review period for the debtors, the U.S. Trustee and any committee, with objections limited to reasonableness and due within five days after that period; under the term sheet, expenses through initial funding are paid in the initial funds flow and amounts not paid in cash when due may be capitalized as DIP obligations
• The commitment and funding fees are fully earned and non-refundable, but the interim order preserves the debtors' claims, defenses, setoff and recoupment rights arising from any failure by the lender to fund, and the indemnity excludes losses from any such failure.

Maturity

• The earliest to occur of:
  • March 31, 2027
  • Three business days after closing of a sale of all or substantially all of the debtors' assets or equity
  • The effective date of a Chapter 11 plan for any debtor
  • Conversion of any case to Chapter 7
  • Dismissal of any case
  • Acceleration following an event of default
• All DIP obligations are due and payable in full at maturity, except to the extent validly credit bid.
• The borrowers may prepay in whole or in part on three business days' notice without premium or penalty beyond accrued interest, earned fees including the exit fee, reimbursable expenses and other amounts then due; prepaid amounts may not be reborrowed. Partial prepayments apply first to documented expenses within the agreed cap, then to earned fees, then to accrued interest not already capitalized, then to principal including capitalized interest and fees, and last to other obligations.
• Mandatory prepayment from 100% of net cash proceeds of asset sales or dispositions of core assets outside the ordinary course including any section 363 sale, casualty or condemnation recoveries not reinvested within 90 days, non-permitted debt or equity issuances, and other extraordinary receipts, in each case excluding proceeds the budget permits the debtors to retain; sale proceeds apply at closing, refinancing proceeds within two business days of receipt and other covered proceeds promptly on receipt. Where a third party is the winning bidder, application of transaction proceeds is subject to funding of the wind-down amount required under the fifth Tranche B advance condition.

Conditions to Borrowing

• The sole conditions to the initial draw are entry of the interim order, unstayed and unmodified without the lender's consent; the approved budget; delivery of the term sheet executed by the debtors; accuracy in all material respects of the representations in the order; and satisfaction or waiver of the minimum-liquidity and maximum-cash-balance conditions.
• Minimum liquidity: after giving effect to each borrowing and application of proceeds, projected unrestricted cash may not fall below $1 million at any time during the succeeding four-week period, based on the approved budget and the projections delivered with the funding notice.
• Maximum cash balance: no borrowing may leave unrestricted cash above the amount reasonably necessary to fund operations through the next scheduled borrowing date, together with the cash needed for minimum liquidity, professional fee reserve deposits and other court-approved reserves; the limitation does not itself prevent a draw needed to satisfy minimum liquidity.
• Borrowings require three business days' written notice, may be requested no more than once per calendar week, and must be at least $500,000 and in integral multiples of $100,000 above that, unless the lender approves otherwise or the remaining commitment is smaller. At the lender's election, advances may be funded directly to designated vendors, landlords, professionals or other approved recipients under the approved funds-flow memorandum, provided no direct payment bypasses the Carve-Out, agreed priorities or required court approval.
• Each Tranche B advance also requires that budget testing be completed not less than three days before the proposed funding date, and that the bidding procedures order require any bid competing with the lender's or its designee's credit bid to include a binding, evidenced commitment to provide replacement financing equal to the remaining undrawn Tranche B commitment. Selection of a competing bidder does not by itself terminate or reduce the lender's remaining Tranche B obligation, which continues until court-approved replacement financing is available for borrowing, at which point the remaining commitment terminates only to the extent replaced. A competing transaction must also provide for repayment of the DIP obligations and funding of the remaining liquidating-plan and wind-down needs under a wind-down budget reasonably acceptable to the lender and approved by the court.
• The interim order approves no bidding procedures, bid-qualification requirement, stalking-horse designation or bid protections, all of which remain subject to further order after notice and a hearing, without modifying the Tranche B funding conditions.

Securities and Priorities

• Automatically perfected liens effective on entry of the interim order, without further filings, on substantially all property of the debtors and their estates, now owned or hereafter acquired, and all proceeds, in each case subject to the Carve-Out and excluding the excluded assets, with the following priorities:
  • First-priority liens under section 364(c)(2) on DIP collateral not subject to a valid, perfected, unavoidable lien existing on the petition date or perfected thereafter under section 546(b)
  • Junior liens under section 364(c)(3) on DIP collateral subject to such a lien other than a primed lien, junior only to that permitted prior lien
  • Senior priming liens under section 364(d)(1) on DIP collateral subject to the primed liens identified on the agreed priority schedule attached as Exhibit 3 to the interim order
• Allowed superpriority administrative expense claims under section 364(c)(1) against each borrower, subject only to the Carve-Out, with priority over all other administrative and unsecured claims, including those under sections 105, 326, 328, 330, 331, 503(b), 507(a), 507(b), 546(c), 726, 1113 and 1114 and, only upon entry of the final order, sections 506(c) and 552(b); the claims are treated as section 503(b) administrative expenses for purposes of section 1129(a)(9)(A), and the liens and obligations are enforceable against any trustee, in any successor Chapter 7 case and upon dismissal.
• Excluded assets: avoidance actions under Chapter 5 and state-law equivalents and their proceeds; fiduciary-duty and similar claims against current or former directors, officers and managers and their proceeds; the professional fee reserve, the Carve-Out reserves and estate escrow accounts, including adequate-assurance and buyer-deposit escrows, until funds are released to a debtor; and PACA/PASA trust assets not property of the estates. Released escrow funds become DIP collateral only to the extent otherwise included and not required for the Carve-Out or another exclusion.
• Leasehold interests are excluded where a lien is prohibited by the express terms of the lease or applicable non-bankruptcy law, though all proceeds, rents, profits, designation-rights payments and lease termination or buyout payments remain collateral; after expiration of the remedies notice period, the lender may enter leased premises only under the lease, by written agreement with the landlord, or on further order after notice to that landlord.
• Postpetition card, delivery-platform, loyalty-program and gift-card receivables and collections are DIP collateral to the extent they are estate property, and payment processors, delivery platforms and rewards-program providers must remit postpetition proceeds through the court-approved cash management system and may not continue any prepetition remittance, lockbox, reserve, sweep or control instruction, in each case only from and after receipt of notice of the interim order. Processor reserves, holdbacks, restricted cash, letter-of-credit collateral and similar amounts released after the petition date become DIP collateral to the extent released to a debtor.
• No cross-collateralization as to any non-debtor party, no roll-up, and no liens on avoidance actions or their proceeds. Nothing in the motion or interim order is a stipulation or admission as to the validity, priority, extent or amount of any prepetition claim or lien, or as to whether any receivable or payment stream was sold or transferred before the petition date, including to any merchant cash advance counterparty; inclusion of a lien on the agreed priority schedule is likewise not a finding or stipulation as to its validity, priority, extent or enforceability.

Cash Collateral

• The DIP liens attach to each borrower's cash other than excluded-asset cash, and the lender consents under section 363(c)(2)(A) to use of that cash collateral solely in accordance with the approved budget, subject to termination or revocation during a continuing event of default.
• The holders of the primed liens have consented to the priming of their liens and to the use of their cash collateral: Kingswood Partners LLC and MTN C203 Holdings, LLC as lenders under the multi-draw loan, and HumanCo TFK III, LLC and MTN C203 Holdings, LLC as holders of the convertible notes.
• Other parties that have or may assert an interest in cash collateral include InKind, Rewards Network, Parafin Inc. and any party asserting a control, pledge or setoff interest; to the extent any such party does not consent, the debtors seek authority under section 363(c)(2)(B), and that party receives the adequate protection described below without prejudice to seeking additional or different protection at the final hearing.
• The lender may not exercise cash dominion over any account before an event of default and expiration of the remedies notice period. Nothing grants any lien on or authorizes use of assets held in trust under PACA or the Packers and Stockyards Act to the extent not estate property.

Adequate Protection

• Solely to the extent of any postpetition diminution in value resulting from the priming of their interests, the use of cash collateral, the use, sale or lease of other prepetition collateral, or imposition of the automatic stay, each prepetition secured party, including the primed-lien holders and the other parties on the agreed priority schedule, receives automatically perfected replacement liens on the DIP collateral, junior to the DIP liens, the Carve-Out and any permitted prior lien and with the same relative priority among the prepetition secured parties as their prepetition liens; and allowed section 507(b) claims, junior and subordinate to the DIP superpriority claims and the Carve-Out.
• Neither the adequate protection liens nor the claims attach to or are payable from the excluded assets, and nothing determines the validity, priority, extent, amount or enforceability of any prepetition claim or lien.

Use of Proceeds

• Solely as permitted by the approved budget and subject to the Carve-Out, for working capital and general corporate purposes; costs of the Chapter 11 cases, including any section 363 sale and allowed professional and U.S. Trustee fees; interest, fees, costs and expenses of the facility, including the lender professionals' fees; the adequate protection obligations; other purposes set forth in the budget; and such other purposes as the lender approves in writing and, if required, the court authorizes

Carve Out

• Consists of:
  • Statutory fees of the U.S. Trustee and the Clerk, plus applicable statutory interest, without regard to delivery of a trigger notice
  • Up to $50,000 of Chapter 7 trustee fees under section 726(b), also without regard to a trigger notice
  • Allowed unpaid fees of professionals retained by the debtors and any statutory committee incurred through the second business day after delivery of a Carve-Out trigger notice, capped at the cumulative amounts budgeted for those professionals
  • Up to $650,000 of allowed unpaid fees of those professionals incurred thereafter
• The debtors fund budgeted weekly professional fees into a segregated professional fee reserve at initial funding and weekly thereafter until a trigger notice; deposits are deemed used when made and disbursable only under applicable court orders, and any balance released to a debtor after payment or reservation of allowed fees becomes DIP collateral.
• On delivery of a trigger notice, the debtors must fund reserves for unpaid pre-trigger professional fees, net of amounts already held in the reserve, and for the $650,000 post-trigger cap from cash on hand including cash collateral; to the extent cash on hand is insufficient, the lender must fund the shortfall from the undrawn commitment then authorized by the applicable DIP order, notwithstanding any default, event of default, failure of a funding condition or termination notice, though after an event of default the lender need make no other advance. The reserves are held in trust for the professionals entitled to payment and are not subject to the DIP or adequate protection liens until paid in full.
• Neither reserve caps the Carve-Out other than the post-trigger cap, and the Carve-Out survives termination of the commitment and the exercise of remedies. The debtors note that, to the extent Tranche A has been drawn before entry of the final order, the lender backstop is available principally after the final order authorizes Tranche B, with the weekly reserve deposits the primary funding source before then.

Budget and Permitted Variance

• The approved budget, prepared with Teneo and approved by the lender, is attached as Exhibit 1 to the interim order; the motion and order describe it as a 13-week cash-flow budget, though the exhibit as filed covers only three weeks, through the week ending Oct. 25, 2026.
• Permitted variances: aggregate actual disbursements may not exceed budget by more than 15%, and receipts may not fall below 85% of budget, measured on each testing date for the applicable testing period. Statutory fees of the U.S. Trustee and the Clerk, the lender professionals' fees and expenses, court-approved employee retention or incentive payments, and government penalties or fines are protected line items excluded from the calculation, and no variance in a protected line item can give rise to an event of default. Favorable variances may be carried forward as the debtors and lender agree.
• Testing occurs bi-weekly on a rolling cumulative basis, first on Wednesday, Oct. 21, 2026 for the period from the petition date through the week ending Oct. 18, 2026, and on the Wednesday of every other week thereafter, measured cumulatively from the petition date until four weeks have elapsed and on a trailing four-week basis thereafter, plus as required for a Tranche B funding request.
• Beginning Oct. 30, 2026 and on the Friday of every fourth week thereafter, the debtors must deliver an updated 13-week forecast to the lender and any committee; a proposed budget supersedes the prior approved budget only on the lender's written approval, or is deemed approved three business days after delivery absent a written objection, with the parties to reconcile in good faith if the lender objects. Delivery of a proposed budget does not itself modify the approved budget.
• Where the debtors and the lender dispute a variance, the court may determine after notice and an expedited hearing whether it constitutes an event of default.
• Reporting obligations run to the lender, any committee and, as to the first three items, the U.S. Trustee: bi-weekly cash reports within three business days of every other week-end showing beginning and ending cash, receipts, disbursements and liquidity; a rolling 13-week forecast updated at least every four weeks with a proposed revised budget; bi-weekly budget-to-actual variance reports with line-item and cumulative analyses and management explanations; monthly unaudited financials within 30 days of month-end and annual financials when available; prompt notice of any event of default, material litigation, governmental investigation, casualty, material adverse development or challenge asserted by or against any prepetition secured party; and reasonable access to management, advisors, books, records and properties.

Covenants

• Without the lender's prior written consent, the debtors may not incur additional indebtedness, new merchant cash advances or similar fast alternative financing, liens, superpriority claims or guarantees, or make investments, restricted payments, asset sales, affiliate transactions or amendments to material agreements, except as the DIP documents, the approved budget or the DIP orders permit; may not change the nature of the business, fiscal year, organizational structure or cash-management system, or form or acquire subsidiaries; may not pay prepetition claims except as authorized by the court, provided in the budget and approved in the DIP documents; may not seek any order or transaction that would prime, surcharge, subordinate or impair the DIP liens, superpriority claims, obligations, remedies or credit-bid rights; and may not use DIP collateral or cash collateral outside the approved budget and the DIP orders.
• The debtors must comply with the budget, the DIP orders and the milestones; preserve their existence, permits, franchises and insurance; pay postpetition taxes and administrative expenses when due, subject to permitted contests; operate in the ordinary course; use commercially reasonable efforts to pursue the approved sale or plan process; and maintain first-priority perfection of the DIP liens and cooperate with collateral audits and appraisals the lender reasonably requests. Within five business days after interim entry, they must deliver a schedule of all deposit and securities accounts identifying any account subject to a control agreement, pledge or third-party setoff right.
• Each borrower represents, on execution and at each borrowing, among other things that financial information supplied is accurate in all material respects and that material liabilities, liens, litigation and contracts have been disclosed; no debtor makes a balance-sheet solvency representation.

Case Milestones

• Interim order entered by Oct. 15, 2026
• Final order entered by Oct. 31, 2026
• Bidding procedures order entered by Nov. 7, 2026
• Stalking-horse agreement executed, if applicable, by Nov. 30, 2026
• Bid deadline of Dec. 10, 2026
• Auction completed by Dec. 17, 2026
• Transaction order, approving the sale of all or substantially all of the debtors' assets under section 363 or a plan, entered by Dec. 22, 2026
• Sale closing by Jan. 22, 2027
• Plan effective date or repayment of the DIP obligations in full by March 31, 2027
• Each deadline extends automatically day-for-day where satisfaction is delayed solely by the court's calendar or scheduling, provided the debtors timely sought the relief and are diligently prosecuting it, and a deadline falling on a non-business day rolls to the next business day. Milestones requiring entry of an order, including the transaction order, are satisfied on entry without the order becoming final and non-appealable. The lender may extend or waive any milestone in writing in its discretion, without further court order and outside the amendment notice-and-objection procedures.

Events of Default

• Failure to pay principal when due, or failure to pay fees, expenses or other DIP obligations continuing for three business days after written notice, in each case subject to the agreed capitalization provisions
• Breach of a budget variance covenant, or a materially inaccurate representation or warranty or material breach of another covenant or DIP document that, if capable of cure, continues for five business days after written notice
• Any DIP order being stayed, reversed, vacated, modified or amended without the lender's consent; a borrower's material non-compliance with a DIP order continuing five business days after written notice; or the DIP liens or superpriority claims ceasing to be valid, perfected, enforceable or of the required priority
• Dismissal, conversion, or appointment of a trustee or examiner with expanded powers; termination of exclusivity in a manner materially adverse to the lender; or entry of an order granting stay relief as to material DIP collateral
• Filing, support or confirmation of a plan, sale, financing or other transaction that fails to provide for payment in full in cash of the DIP obligations at closing or on its effective date, except to the extent the lender elects to credit bid or otherwise agrees
• Support by a borrower for a challenge to the lender's credit-bid rights, or payment from DIP collateral to fund such a challenge, other than an investigation, objection, challenge or request for relief expressly permitted; seeking to enforce the lender's funding obligations alone is not a default
• A final judgment or a casualty, regulatory action or other event having a material adverse effect on the business, assets or financial condition of the debtors taken as a whole or on the DIP collateral; invalidity of a material DIP document; or default under a material postpetition obligation after any grace period reasonably expected to materially impair repayment or collateral value, excluding a good-faith dispute contested as permitted
• Failure to satisfy any case milestone by the applicable date, as extended

Remedies and Stay Modification

• Remedies are not self-executing. On an event of default, the lender may suspend further advances and impose the default rate by written notice without further order; termination of the undrawn commitment, acceleration, and collateral-enforcement or cash-collateral remedies require a docketed termination notice to the debtors, their counsel, committee counsel, the U.S. Trustee, any trustee and counsel to the prepetition secured parties, and do not become effective until five business days later unless the court approves a shorter period.
• During that remedies notice period, the debtors may continue to use cash collateral under an emergency operating budget approved by the lender or as otherwise authorized by the court, and may make necessary preservation expenditures within the approved budget pending agreement or a court determination; no payments may be made on prepetition claims and no funds transferred outside the ordinary course; professional fees may be paid under the Carve-Out, which no emergency operating budget may reduce or condition; and the debtors, any committee or any other party in interest may seek an emergency hearing on whether a default has occurred, the proposed remedies, the Carve-Out or continued cash collateral use. A timely request for a hearing stays the disputed remedies until the court rules.
• Under the term sheet, the emergency operating budget is a limited budget the lender approves after an event of default, covering only expenditures necessary to preserve the business and the DIP collateral, including payroll, taxes, insurance, utilities and critical vendor payments, plus other expenditures the lender approves in writing.
• Before exercising any remedy against DIP collateral, including setoff, sweep or foreclosure, the lender must file a stay relief motion; the debtors will not object to hearing it on shortened notice and may continue to use cash collateral under the emergency operating budget or as the court authorizes until it is adjudicated. All remedies remain subject to the Carve-Out and do not extend to the excluded assets.
• Suspension of advances during a continuing default is distinct from termination of the commitment.

Credit Bid

• The lender expressly reserves the right, subject to section 363(k), to credit bid all or any portion of its allowed secured DIP obligations, including principal, accrued and capitalized interest, fees, expense reimbursements, indemnification obligations and protective advances to the extent allowed, secured and credit-biddable, in any sale under section 363, under a plan or otherwise, including any sale under court-approved bidding procedures. It may not credit bid on any excluded asset.
• The lender may assign its credit-bid rights to an acquisition vehicle or related designee, no cash deposit is required for the valid credit-bid portion of a bid subject to the approved bidding procedures, and its ability to be designated stalking-horse bidder is preserved. Amounts validly credit bid reduce the corresponding DIP obligations and may not be recovered again.
• Covenants bar any bidding procedures, bid protections, stalking-horse agreement, purchase agreement, sale order, plan, disclosure statement or other transaction document that discriminates against the lender, impairs or conditions its ability to bid or credit bid, requires a cash deposit on the credit-bid portion, restricts assignment of its bid, or imposes conditions not imposed on similarly situated bidders, in each case without the lender's consent and subject to the court's authority under section 363(k), the approved bidding procedures and any bidder-information protocol; the bar does not dispense with a deposit or other qualification applicable to a cash-funded portion of a bid.

Challenge Period and Investigation Budget

• Any committee has 60 days from its formation, and any other party in interest with requisite standing 75 days from entry of the interim order, to investigate and commence a challenge to prepetition liens, claims, transfers and causes of action, subject to extension by written agreement of the lender or court order. Where a case converts or a Chapter 11 trustee is appointed before the period expires, the trustee's period runs to the later of the original expiration and 30 days after appointment.
• A timely challenge is preserved until finally resolved, and any transaction order entered before the period expires must preserve timely challenges, including by reserving the disputed amount from transaction proceeds or excluding it from any credit bid pending final resolution. Expiration without a timely challenge binds affected parties only to the extent the DIP orders expressly provide, and the proposed interim order contains no debtor stipulations as to prepetition liens or claims.
• The budget includes up to $50,000 for committee professionals' investigation fees, which is in addition to and does not reduce the Carve-Out but sits within the DIP commitment and may be used only to investigate and prosecute a challenge brought before the period expires.
• Apart from that allowance, no DIP proceeds, DIP collateral, cash collateral or Carve-Out may be used to investigate or prosecute any claim against the lender in its capacity as such or relating to the facility, the obligations, the liens, the superpriority claims, the DIP fees or the credit-bid rights, absent further order. Preserved are timely objections to final relief, enforcement of the lender's funding obligations and the DIP documents, claims arising from future conduct, claims against the lender or its affiliates arising from prepetition conduct in any capacity other than as DIP lender, and relief reserved under the remedies paragraph of the interim order.

Waivers, Releases and Indemnification

• The interim order waives nothing under section 506(c) or the section 552(b) "equities of the case" exception and grants no waiver of marshaling; the term sheet contemplates those waivers, along with a bar on surcharge of the DIP collateral, but they will be considered at the final hearing and take effect, if at all, only on entry of the final order.
• No releases in the interim order, and nothing in it releases any estate claim. Any release of the lender and its directors, officers, investors, participants, employees, subsidiaries, affiliates, attorneys, agents, representatives, successors and assigns will be considered at the final hearing and limited to estate claims arising from acts or omissions in connection with the negotiation and implementation of the facility occurring on or before entry of the final order, excluding unrelated prepetition conduct, future performance, enforcement of the term sheet and DIP orders, and gross negligence, bad faith, willful misconduct or material breach. No release will be granted on behalf of any party other than a borrower.
• Joint and several indemnity of the lender and its related parties for losses arising out of or relating to the DIP documents and the debtors' use of the financing, excluding losses finally determined to result from the indemnified party's gross negligence, bad faith, willful misconduct, fraud or material breach, disputes solely among indemnified persons not resulting from a borrower's act or omission, and losses arising from the lender's failure to obtain investor funding or to fund a required borrowing. The interim order's indemnity is exclusive and supersedes the term sheet's indemnification provision where inconsistent.
• Section 364(e) protection applies to obligations incurred and liens granted before the lender's actual receipt of written notice of the effective date of any reversal, modification, vacatur or stay.

Amendments and Assignment

• The debtors and lender may amend, waive or modify the term sheet without further court approval where the change does not materially and adversely affect the debtors and does not shorten maturity, increase the principal amount or interest rate, change any event of default, add covenants or make covenants materially more restrictive; material changes and any fee payable in connection with an amendment require court approval. Copies of all amendments, regardless of materiality, go to the U.S. Trustee and any committee before taking effect, and a noticed non-material amendment becomes effective five business days after filing absent a written objection, in which case it takes effect only on resolution or further order.
• The lender may assign or sell participations in all or any part of the facility, and may pledge its interests without relief from its funding obligations, provided no assignment adds funding conditions or releases the assigning lender from its undrawn commitment without the debtors' written consent, and no participation confers direct enforcement rights against a borrower or alters the funding obligation. No assignment may be made to a competitor of the debtors, a sanctioned person or a disqualified institution the debtors identify in writing before entry of the final order.
• Governing law: Delaware, subject to the court's retained jurisdiction; the debtors and the lender waive jury trial in any action arising out of the facility.

Approved Budget Economics

• The three-week budget period attached to the interim order projects net receipts of $9.6 million against total operating disbursements of $5.7 million, non-operating disbursements of $141,000 and restructuring disbursements of $5.4 million, for a cumulative net cash outflow of $1.7 million.
• Book cash opens at $1.7 million and, after a single $5 million Tranche A draw in week one, closes the period at $5 million, with the trough in the week ending Oct. 18, 2026, when a $2.8 million net outflow driven by $2.9 million of payroll and benefits takes book cash to $4.7 million.
• Restructuring disbursements are led by $3.4 million of PACA/PASA payments and $1.1 million of professional fees, with $565,000 to critical vendors and a $365,000 utility deposit.
• Non-operating lines budget $187,000 of payments to Rewards Network and $107,000 of InKind funding inflows over the period, with no amount shown for DoorDash Capital.
• The DIP balance builds from the $5 million draw plus $750,000 of PIK fees in week one and $22,000 of PIK interest over the period, ending at $5.8 million.

Need for Financing and Marketing Process

• The debtors held approximately $1.6 million of unrestricted cash on the petition date, enough to support operations and case administration for roughly two weeks without postpetition financing and cash collateral. Tranche A was sized to bridge the debtors from the petition date to the final hearing while maintaining the $1 million minimum liquidity required under the term sheet.
• SOLIC Capital Advisors, LLC, the debtors' investment banker, retained on or about Sept. 10, 2026, contacted 38 potential lenders, including established DIP lenders, distressed-debt investors and specialty finance companies; 11 executed confidentiality agreements and received data room access and 27 declined. SOLIC requested term sheets by Sept. 28, 2026 and funding commitments by Oct. 2, 2026, and received two proposals. Both required superpriority administrative expense status and liens on substantially all assets, including priming liens, and no party was willing to lend unsecured, on an administrative-priority basis under section 364(a) or (b), or secured solely by section 364(c) liens.
• The competing $20 million proposal conditioned funding beyond an initial $2 million on a qualifying stalking-horse agreement and a purchaser-funded 10% deposit, carried a 10% commitment fee on the full commitment and a separate 9% exit fee on the outstanding balance including capitalized interest and fees, and had a Feb. 5, 2027 outside maturity that could precede its own proposed closing milestone.
• The term sheet was negotiated over approximately four days, from Sept. 29 through Oct. 2, 2026, with the debtors represented by Reed Smith LLP, SOLIC and Teneo and the lender by Michael Best & Friedrich LLP. The debtors say those negotiations produced the binding full commitment at interim approval, funding without a long-form credit agreement, protection against a funding gap if a competing bidder prevails, court-calendar extensions of the milestones and the notice-and-hearing protections before remedies, and replaced the lender's original fixed $3.6 million target return with the graduated structure, lowering the cost at lower funded balances and raising it at full funding.

Prepetition Capital Structure

• The debtors report approximately $41.1 million of funded debt and debt-like obligations as of the petition date, a figure matching the sum of the agreed priority schedule's amounts; the itemized amounts in the motion's narrative total approximately $40.1 million.
• Multi-draw loan: FRC Balance, LLC and True Food Kitchen Parent, LLC as co-borrowers and the other debtors as guarantors are obligated under the fifth amended and restated multi-draw loan promissory note dated Aug. 27, 2026 with Kingswood Partners LLC and MTN C203 Holdings, LLC as lenders, with total commitments of $15 million. Of that, $10 million of existing advances including capitalized interest was outstanding before the amendment and $5 million of new advances funded on Aug. 27, 2026, with the borrowers acknowledging $1,989,041 of accrued and unpaid interest as of that date. As of Sept. 29, 2026, approximately $17.1 million of principal including capitalized interest and $204,636 of accrued interest were outstanding. Kingswood and MTN C203 each hold a 50% commitment percentage in the new advances. The loan bears interest at 15% per annum, which the lenders have elected to receive in kind, so no cash interest is being paid; it matures June 15, 2027 and is secured by senior liens on substantially all of the obligors' assets, which the agreed priority schedule describes as excluding certain Parafin future receivables.
• Convertible notes: True Food Kitchen Investco, LLC issued convertible promissory notes to HumanCo TFK III, LLC and MTN C203 as institutional investors under a note purchase agreement dated July 8, 2025, as amended, in an aggregate original principal amount of $10 million, including an initial $3 million note to HumanCo III and an initial $2 million note to MTN C203. Interest accrues at 15% per annum, capitalized quarterly, and as of Sept. 29, 2026 approximately $11.3 million of principal including capitalized interest and $427,884 of accrued interest were outstanding; the agreed priority schedule carries the convertible notes at approximately $12.4 million of principal and $147,387 of accrued interest. The notes mature July 8, 2027, subject to joint extension by the institutional investors to July 8, 2028. Originally unsecured, they were made secured by Amendment No. 3 dated Aug. 27, 2026, which added guarantees by each of the other multi-draw obligors and granted liens on substantially all of the obligors' assets junior to those securing the multi-draw loan, though the agreed priority schedule describes that collateral as fixtures and personal property; the notes remain contractually subordinated in right of payment to senior indebtedness, which expressly includes the multi-draw loan. Kingswood is party to the note purchase agreement only as to its right to exchange multi-draw obligations for convertible notes.
• Receivables and merchant financing: the multi-draw loan permits up to $22.5 million of aggregate outstanding principal under certain commercial transactions, within which existing or similar transactions with Parafin, InKind and Rewards Network are specifically permitted. As of Sept. 29, 2026, FRC Balance owed approximately $2.2 million of net liabilities to Parafin Inc. (DoorDash Capital), which asserts an interest in future delivery receivables, and approximately $1.65 million to Rewards Network under a facility secured by a lien on property, accounts and receivables; the agreed priority schedule carries the Rewards Network net liability at approximately $1.8 million and treats the Parafin interest as subject to dispute. InKind Cards Inc., InKind Credit Fund LP and InKind Warehouse Facility, LLC assert all-asset liens securing approximately $7.2 million of credit extended to FRC Balance as of Sept. 1, 2026.
• Equity: Investco is the ultimate parent, with approximately 1,116,668 preferred units, 1,233,692 common units and 756,400 incentive and profits interest units, or roughly 3,106,760 units fully diluted. HumanCo III and its affiliates hold approximately 42.1% of the fully diluted units and Manna Tree (MTN C203) approximately 26.9%. Investco holds 35,971.22 note investment preferred units in True Food Kitchen Holdings, LLC received in exchange for contributing $5 million of convertible note proceeds.

Case Background

• FRC Balance, LLC and eight affiliates filed Chapter 11 on Oct. 4, 2026 in the Southern District of Texas, Houston Division, and filed this financing motion the following day seeking relief by 1:00 p.m. Central on Oct. 5, 2026, with an interim hearing set for 2:30 p.m. Central that day. No committee had been appointed as of the motion's filing.
• True Food Kitchen was founded in Phoenix in 2008 by Dr. Andrew Weil and Sam Fox around a health-focused, anti-inflammatory restaurant concept, serving organic, 100% seed oil-free menus built on whole, minimally processed foods. As of the petition date the debtors operate 34 locations across the United States, having closed 12 restaurants concurrently with the filing. Elsewhere the motion describes the debtors as operating 46 restaurants, including in the passages on their liquidity need and the irreparable harm absent interim financing.
• The debtors attribute their financial position to management turnover, unsuccessful investments outside the core restaurant concept, the lingering effects of the COVID-19 pandemic and the underperformance of certain locations. Before filing they hired a new chief executive officer, engaged Teneo for restructuring advisory services and a chief restructuring officer, retained Gordon Brothers as real estate advisor, reduced headcount, renegotiated vendor arrangements and explored assignments of underperforming leases, ultimately concluding that a Chapter 11 filing and a sale of the business, whether under section 363 or through a plan, was the best path to maximize value.
• The final hearing date and objection deadline are left blank in the proposed interim order; if no timely objections are filed, the court may enter the final order without a hearing or further notice.