Hronis - Chapter 11 DIP Terms

DIP Terms

Borrower(s) / Guarantor(s)

• Hronis Capital Assets, LP; Hronis Capital Management, LLC; Hronis Citrus, LLC; Hronis Farming, LP; Hronis Fruit Company LLC; Hronis, Inc.; Hronis Land Company; Hronis Ranch, LLC; Hronis Resource Management, LLC; and The Hronis Family Limited Partnership, as Borrowers
• Peter John Hronis, Kosta James Hronis, Demetrius Albert Hronis, Kosta Hronis (Trustee of the Kosta Hronis Living Trust Dated February 12, 2014), Peter John Hronis (Trustee of the Peter John Hronis Living Trust Dated February 28, 2006), and Kosta Hronis and Peter J. Hronis (Trustees of the Sophia Hronis Irrevocable Trust One Dated December 27, 2012), as Prepetition Guarantors

Agent / Lender(s)

• Conterra Agricultural Capital, LLC, as DIP Lender
• The DIP Lender is also the prepetition lender under the Prepetition Revolver Agreement (dated October 29, 2024) and the Prepetition Term Loan Agreement (dated December 29, 2023), by succession-in-interest to AgAmerica Lending LLC and AG REIT TWO, LLC

Mandatory Prepayments

• Until the DIP facility is repaid in full and subject to the carve-out, the following prepayments are required within three business days of receipt (unless waived by the DIP lender):
  • 100% of net cash proceeds in excess of $100,000 from any asset disposition outside the ordinary course not contemplated by the approved budget
  • 100% of insurance or condemnation proceeds in excess of $100,000
  • 100% of net cash proceeds from any debt or equity issuance; provided that no debtor shall incur postpetition superpriority indebtedness unless sufficient to prepay the DIP facility in full
  • 100% of any non-ordinary-course cash receipts in excess of $100,000 (including tax refunds, pension reversions, indemnity payments, and purchase price adjustments)
• Sale proceeds waterfall: (1) approved sale costs, (2) permitted priority lien obligations, (3) unfunded carve-out, (4) DIP obligations, (5) adequate protection lien obligations, (6) prepetition secured obligations, (7) other secured obligations, (8) the debtors' estate
• Prepetition cash collateral must be applied to prepetition secured obligations within three business days of receipt

DIP Commitments

• $22,303,000 senior secured superpriority delayed multi-draw term loan facility
  • Up to $10 million available on an interim basis
  • The remaining balance available upon entry of the final order
• Amounts repaid or prepaid under the facility may not be reborrowed

Prepetition Obligations

• As of the petition date, the debtors were indebted under the Prepetition Revolver Documents in the aggregate outstanding amount of not less than $74,355,654.61, plus all accrued and accruing unpaid interest, fees, and costs
• As of the petition date, the Prepetition Term Borrowers were indebted under the Prepetition Term Loan Documents in the aggregate outstanding amount of not less than $74,837,875.01, plus all accrued and accruing unpaid interest, fees, and costs

Cash Collateral

• The debtors are authorized to use cash collateral, defined as all cash of the debtors, wherever located, including cash in deposit accounts, in accordance with the approved budget.
• All cash of the debtors, including cash in deposit accounts, whether as original collateral or proceeds of other prepetition collateral, constitutes cash collateral of the DIP Lender.
• Prepetition collateral consisting of cash or cash proceeds of any prepetition collateral consisting of accounts, payment intangibles, or inventory may be used (i) first to fund the carve-out, (ii) second for application to the balance of the prepetition secured obligations, and (iii) as may otherwise be ordered by the court.

Maturity

• The earliest to occur of:
  • July 1, 2026
  • The date of termination of the commitments under the DIP facility and/or acceleration of any outstanding borrowings under the DIP facility by the DIP lender following the occurrence of an event of default and upon delivery of a termination notice
  • The first business day on which the interim order expires by its terms or is terminated, unless the final order has been entered and become effective prior thereto
  • The conversion of any of the chapter 11 cases to a case under chapter 7 of the Bankruptcy Code unless otherwise consented to in writing by the DIP lender
  • The dismissal of any of the chapter 11 cases, unless otherwise consented to in writing by the DIP lender
  • The repayment in full in cash of all DIP obligations and termination of all commitments under the DIP facility, unless extended with the prior written consent of the DIP lender
  • Closing of the sale
  • Five days after entry of the sale order, unless extended with the prior written consent of the DIP lender

Carve Out

• Cash collateral used to pay only:
  • Unpaid fees and expenses required to be paid by the debtors to the clerk of the court or to the Office of the United States Trustee under 28 U.S.C. § 1930(a)(6)
  • Reasonable fees and expenses incurred by a trustee in any successor case under section 726(b) of the Bankruptcy Code in an aggregate cumulative amount not to exceed $100,000
  • To the extent allowed by the court at any time before the first business day following delivery by the DIP lender of a carve-out trigger notice, all allowed professional fees of the debtor professionals and the committee professionals provided for in the approved budget
  • Allowed professional fees of the estate professionals in an aggregate amount not to exceed the post-carve-out trigger notice cap
• Starting with the first full calendar week following entry of the interim order, the debtors shall direct funds on a weekly basis to a segregated designated professional fee account maintained by Saul Ewing LLP in the amount equal to, but not to exceed, previously incurred fees for the estate professionals provided for in the approved budget.
• On the carve-out trigger date, the carve-out trigger notice shall constitute a demand to the debtors to utilize all cash on hand (including the proceeds of DIP loans) to fund into the professional fee account an amount equal to (i) the budgeted estate professional expenses (to the extent not previously funded to the professional fee account), and (ii) the post-carve-out trigger notice cap.
• No later than two business days after the delivery of a carve-out trigger notice, each of the estate professionals shall deliver one additional statement setting forth a good-faith estimate of the amount of their respective accrued but unpaid fees and expenses incurred during the period through and including the carve-out trigger date, and the debtors shall transfer such amounts to the professional fee account.
• Following delivery of a carve-out notice, the DIP lender shall not sweep or foreclose on cash of the debtors until the professional fee account has been fully funded in an amount equal to all respective obligations benefitting from the carve-out.

Use of Proceeds

• Fund post-petition working capital and for other general corporate purposes of the debtors
• Pay current fees and expenses under the DIP facility
• Pay allowed administrative costs and expenses of the chapter 11 cases, including professional fees and expenses
• Pay prepetition claims and expenses as authorized by the court
• Pay any forecasted cash outlays included in any approved budget

Credit Bid

• The DIP lender shall have the right to credit bid up to the full amount of all outstanding DIP obligations and all prepetition secured obligations in a sale of any DIP collateral, whether such sale is effectuated through sections 363 or 1129 of the Bankruptcy Code, or otherwise; provided that any such credit bid must provide for the immediate and indefeasible repayment in cash and in full of all then outstanding prepetition secured obligations upon the closing of such sale.
• The DIP lender shall have the right to credit bid (either directly or through one or more acquisition vehicles) up to the full amount of the DIP obligations in connection with any sale of all or any portion of the DIP collateral, including any sale occurring pursuant to section 363 of the Bankruptcy Code or included as part of any chapter 11 plan subject to confirmation under section 1129(b)(2)(A)(ii)-(iii) of the Bankruptcy Code, by the debtors, by a chapter 7 trustee under section 725 of the Bankruptcy Code, or otherwise, without the need for further court order authorizing the same.
• The debtors shall not object to any such credit bidding up to the full amount of the applicable outstanding DIP obligations, in each case including any accrued interest, fees, and expenses, in any sale of any DIP collateral, whether such sale is effectuated through sections 363 or 1129 of the Bankruptcy Code, by a chapter 7 trustee under section 725 of the Bankruptcy Code, or otherwise.
• If the DIP lender makes a credit bid in connection with any auction or other sale process relating to the sale or other disposition of any DIP collateral, then for purposes of such auction or sale process or any applicable order of the court, the DIP lender shall be deemed to be a "qualified bidder" and its bid shall be a "qualified bid" regardless of whether any qualified bidder or qualified bid requirements are satisfied.
• The DIP lender shall have the right to assign its respective rights to credit bid all or any portion of the applicable outstanding DIP obligations to a newly formed acquisition vehicle.

Avoidance Actions

• DIP collateral includes, subject to and effective upon the entry of the final order, all claims or causes of action of the debtors or their estates arising under sections 502(d), 542, 544, 545, 547, 548, 549, 550, and 553 of the Bankruptcy Code and any other avoidance or similar action under the Bankruptcy Code; provided that the lien on avoidance actions shall be limited to the proceeds and property recovered in connection therewith.
• Upon entry of the final order, DIP collateral will include claims and causes of action of the debtors or their estates under chapter 5 of the Bankruptcy Code, and the proceeds of any claims and causes of action under chapter 5 of the Bankruptcy Code of the debtors or their estates.

Securities and Priorities

• The DIP lender is granted the following security interests and liens, which shall immediately be valid, binding, perfected, continuing, enforceable, and non-avoidable without the need for execution by the debtors or the recordation or other filing by the DIP lender of security agreements, financing statements, or other similar documents:
  • Pursuant to section 364(d) of the Bankruptcy Code and subject to the carve-out, valid, superpriority senior secured and priming security interests in and liens on all the DIP collateral on which (x) the prepetition liens were granted as security for the prepetition secured obligations (other than permitted priority liens) or (y) liens were granted as of the petition date that are not permitted under the DIP loan agreement or applicable law. The primed liens shall be primed by and made subject and subordinate to the priming lien, which priming lien also primes any adequate protection liens (excluding those related to permitted priority liens).
  • Pursuant to section 364(c)(2) of the Bankruptcy Code, valid, enforceable, first priority, fully perfected security interests in and liens on all of the debtors' rights in any property of the debtors' estates as of the petition date that, as of the petition date, were unencumbered (and do not become perfected subsequent to the petition date as permitted by section 546(b) of the Bankruptcy Code), including, subject to and upon entry of the final order, claims and causes of action of the debtors or their estates under chapter 5 of the Bankruptcy Code, the proceeds of any claims and causes of action under chapter 5 of the Bankruptcy Code of the debtors or their estates, in all cases subject and subordinate only to the permitted priority liens and the carve-out
  • Pursuant to section 364(c)(3) of the Bankruptcy Code, valid, enforceable, fully perfected security interests in and liens on all of the debtors' rights in property of the debtors' estates that are subject to valid, perfected, and non-avoidable liens that (x) were in existence immediately prior to the petition date or (y) were perfected subsequent to the petition date as permitted by section 546(b) of the Bankruptcy Code, and including (z) any security interests and liens granted as adequate protection liens, which security interests and liens shall be junior and subordinate only to the permitted priority liens and the carve-out
• The DIP lender is granted allowed superpriority administrative expense claims in the chapter 11 cases, which will constitute all DIP obligations having priority over all claims and administrative expense claims against the debtors, now existing or hereafter arising, of any kind or nature whatsoever, including administrative expenses of the kinds specified in or ordered pursuant to sections 105, 326, 328, 330, 331, 361, 364(c)(1), 365, 503(a), 503(b), 506(c) (subject to entry of the final order), 507(a), 507(b), 546(c), 1113, 1114, or any other provisions of the Bankruptcy Code and any other claims against the debtors; provided, however, that the DIP superpriority claims shall be subject and subordinate to the carve-out.
• The DIP superpriority claims shall, for purposes of 1129(a)(9)(A) of the Bankruptcy Code, be considered an administrative expense allowed under section 503(b) of the Bankruptcy Code, shall be against each debtor on a joint and several basis, and shall be payable from and have recourse to all prepetition and postpetition property of the debtors and all proceeds thereof, subject and subordinate only to the payment of the carve-out.
• Other than as expressly provided in the DIP documents or the interim order with respect to the carve-out, subject to and effective upon entry of the final order, no costs or expenses of administration that have been or may be incurred in these chapter 11 cases, or in any successor cases, and no priority claims are, or will be, senior to, prior to, or on a parity with the DIP obligations, or with any other claims of the DIP lender.
• Until such time as all DIP obligations are indefeasibly paid in full in cash, the debtors shall not in any way prime or seek to prime the liens provided to the DIP lender by offering a subsequent lender or any party-in-interest a superior or pari passu lien or claim with respect to the DIP collateral pursuant to section 364(d) of the Bankruptcy Code or otherwise without the prior written consent of the DIP lender.

Adequate Protection

Prepetition Secured Parties

• To the extent of any diminution in value, each of the prepetition secured parties is granted, as of entry of the interim order, pursuant to sections 361, 363(e), and 364(d) of the Bankruptcy Code, valid, binding, enforceable, non-avoidable and perfected replacement and additional postpetition security interests in, and liens on the DIP collateral (the "adequate protection liens"), which shall be (i) subject to the carve-out and (ii) subordinate to the permitted priority liens.
• The adequate protection liens granted to the DIP lender shall secure the prepetition secured obligations and the adequate protection liens granted on account of primed liens or permitted priority liens shall secure the same obligations for which such primed liens or permitted priority liens were granted as security.
• The adequate protection liens shall be deemed to be valid, binding, non-avoidable, enforceable, and fully perfected as of the petition date and in all instances, subject to the carve-out.
• Until the indefeasible payment in full in cash of the obligations secured thereby, the adequate protection liens shall not be made subject to or pari passu with any lien or security interest by any court order in the chapter 11 cases or any successor cases.
• The adequate protection liens shall be valid and enforceable against any trustee or other estate representative appointed in the chapter 11 cases or any successor cases, upon the conversion of any of the chapter 11 cases to cases under chapter 7 of the Bankruptcy Code, or upon the dismissal of any of the chapter 11 cases.
• Subject only to the carve-out and the permitted priority liens, nothing contained in the interim order shall impair or modify the prepetition secured parties' rights under section 507(b) of the Bankruptcy Code in the event that the adequate protection provided to the prepetition secured parties in the interim order is insufficient to compensate for the diminution in value of the interests of any prepetition secured party in its respective prepetition collateral during the chapter 11 cases or any successor cases.

Waivers

• Subject to and effective upon entry of the final order:
  • Section 506(c): The debtors (and any successors thereto or any representatives thereof including any trustees appointed in the chapter 11 cases or any successor case) shall be deemed to have waived any rights, benefits, or causes of action under section 506(c) of the Bankruptcy Code as they may relate to or be asserted against the DIP lender, the DIP liens, and the DIP collateral and, except to the extent of the carve-out, nothing contained in the interim order, the final order, or the DIP documents shall be deemed a consent by the DIP lender to any charge, lien, assessment, or claim against or in respect of the DIP collateral under sections 105 or 506(c) of the Bankruptcy Code or otherwise.
  • The DIP lender is entitled to a waiver of the provisions of section 506(c) of the Bankruptcy Code and of the equitable doctrine of marshaling and other similar doctrines upon entry of the final order.
  • Section 552(b): The DIP lender shall not be subject to the equitable doctrine of "marshaling" or any other similar doctrine of law or equity.
  • Without limiting the terms of the carve-out and subject to and effective upon the entry of the final order, no costs or expenses of administration which have been or may be incurred in the chapter 11 cases or any successor case at any time shall be surcharged against the DIP lender, the carve-out (other than parties entitled to assert a right to be paid under the carve-out), the DIP collateral, pursuant to sections 105 or 506(c) of the Bankruptcy Code or otherwise, without the prior written consent of the DIP lender.

Permitted Variance

• The debtors shall operate in accordance with the approved budget and all disbursements shall be consistent with the provisions of the approved budget (subject to the permitted disbursement variance).
• Beginning on the third Monday following the petition date (and with each subsequent Monday, each a "reporting date"), the debtors shall cause the CRO and independent director to deliver to the DIP lender a variance report describing in reasonable detail, by line item (including capital expenditures and professional fees, excluding the fees of DIP lender's professionals), (i) the actual disbursements of the debtors and actual receipts during the applicable testing period; (ii) any variance (whether positive or negative, expressed as a percentage) between the actual disbursements during such testing period against the estimated disbursements for the applicable testing period, as set forth in the applicable approved budget; and (iii) comments relating to any variances between budgeted and actual disbursements.
• As of any applicable testing date, actual cumulative disbursements (excluding DIP lender professional fees) on an aggregate basis shall not exceed budgeted cumulative disbursements (excluding DIP lender professional fees and allowed professional fees) on an aggregate basis as reflected in the approved budget for such period, by more than 10% for all line items excluding allowed professional fees in the approved budget.
• If the actual disbursement variance for such period is less than or equal to the permitted disbursement variances, the amount by which each actual disbursement variance is less than the permitted disbursement variance shall be carried forward to the next testing date and added to the permitted disbursement variance for such next testing date.
• The debtors shall be deemed to be in compliance with the approved budget for all purposes unless, as of any testing date, the debtors' actual disbursements vary from the approved budget by more than the applicable permitted disbursement variance as measured on any testing date (the "variance covenant").
• The DIP lender shall have no obligation to permit the use of proceeds of DIP loans, and the debtors shall have no authority under the interim order to use proceeds of DIP loans, other than in accordance with the latest approved budget, subject to the permitted disbursement variance and the variance covenant.

Milestones

• Compliance with the milestones set forth in the DIP Loan Agreement is a condition to the DIP facility and the DIP lender's consent to the debtors' use of cash collateral
• Failure to comply with any milestone constitutes an event of default