Inotiv - Chapter 11 DIP Terms

DIP Terms

Borrower / Guarantors

• Inotiv, Inc., as DIP Borrower
• The guarantors from time to time party thereto, as DIP Guarantors
• Inotiv, Inc. and its 18 affiliated Debtors -- 19 Debtors in total, as listed in the caption footnote -- serve as Debtors and debtors in possession, with a service address of 2701 Kent Avenue, West Lafayette, IN 47906. Each Debtor has all requisite corporate power and authority to execute, deliver, and perform under the DIP Documents

Agent / Lender(s)

• Acquiom Agency Services LLC, as Administrative Agent and Collateral Agent (the "DIP Agent"), which also serves as successor Administrative Agent and Collateral Agent under the Prepetition Secured Loan Credit Agreement (the "Prepetition Secured Agent")
• The lenders from time to time party thereto, as DIP Lenders

DIP Commitments

• Superpriority, senior secured and priming debtor-in-possession term loan facility in an aggregate principal amount not to exceed $65,515,451, comprised of:
  • $25 million in new money superpriority senior secured term loans (the "New Money DIP Term Loans")
    • Initial draw of up to $16.0 million available upon entry of the Interim Order
    • Remaining New Money DIP Commitments available upon satisfaction of certain conditions set forth in the DIP Credit Agreement
  • $40,515,451 in superpriority senior secured term loans comprising Roll-Up Loans
    • Upon entry of the Interim Order, $40,515,451 in aggregate of the Bridge Facility Delayed Draw Term Loans was automatically deemed substituted and exchanged, on a cashless, dollar-for-dollar basis, for an equal amount of superpriority senior secured term loans issued under the DIP Credit Agreement
    • The roll-up was authorized as compensation for, in consideration for, and as a necessary inducement for the DIP Lenders' agreement to fund the New Money DIP Term Loans and to consent to the use of Cash Collateral
    • The claims in respect of the Roll-Up Loans are subject and subordinate to the claims and liens in respect of (a) the Carve-Out and (b) the New Money DIP Term Loans in all respects
• As of the Petition Date, the Prepetition Secured Parties held not less than $315.4 million of outstanding Prepetition Secured Loans (including not less than $40.5 million in aggregate principal amount of Bridge Facility Delayed Draw Term Loans), extended under an Initial Term Loan Facility ($165 million), an Initial Delayed Draw Term Loan Facility ($35 million), a 2022 Incremental Term Loan Facility ($40 million), a 2022 Incremental Delayed Draw Term Loan Facility ($35 million), and a Bridge Facility Delayed Draw Term Loan Facility ($40 million)

Cash Collateral

• All of the Debtors' cash wherever located and held, including cash in deposit accounts, that constitutes or will constitute "cash collateral" of any of the Prepetition Secured Parties and the DIP Secured Parties within the meaning of section 363(a) of the Bankruptcy Code
• Certain prepetition rents, income, offspring, products, proceeds, and profits, in existence as of the Petition Date or thereafter created, including balances of funds in the Debtors' prepetition and postpetition operating bank accounts, also constitute Cash Collateral
• The Debtors are authorized to use all Cash Collateral in accordance with the DIP Documents and the Approved Budget, subject to the Prepetition Secured Parties' receipt of the Adequate Protection set forth in the Final Order

Interest Rate

• Default Rate: Upon the occurrence and continuation of any Event of Default or any violation of the terms of the Final Order, and upon notice solely to the extent required by the DIP Credit Agreement, default interest shall accrue and be paid as set forth in the DIP Credit Agreement

Fees

• The Debtors are authorized to pay the DIP Fees and Expenses, including, without limitation, any amendment fees, prepayment premiums, early termination fees, servicing fees, audit fees, liquidator fees, structuring fees, administrative agent's fees, collateral agent's or security trustee's fees, upfront fees, upfront premiums, closing fees, commitment fees, closing date fees, exit premiums, original issue discount, agency fees, and indemnities
  • The Upfront Premium and Exit Premium (each as defined in the DIP Credit Agreement) shall be fully earned as of the Closing Date and due and payable in accordance with the DIP Documents
  • DIP Fees and Expenses include the fees and expenses of professionals retained by or on behalf of the DIP Agent or the other DIP Secured Parties, including Davis Polk & Wardwell LLP, Haynes and Boone, LLP, and Pryor Cashman LLP, without the need to file retention motions or fee applications
• Payment of DIP Fees and Expenses and Adequate Protection Fees and Expenses is authorized whether or not included in the Approved Budget and is not subject to allowance or review by the Court, and the applicable professionals are not required to comply with the U.S. Trustee fee guidelines
  • Any objection by a Review Party must be submitted in writing, with particularity, within ten calendar days after receipt of an invoice (the "Review Period")
  • If no written objection is received by 4:00 p.m. prevailing Central Time on the end date of the Review Period, the Debtors shall promptly pay such invoices within three calendar days

Events of Default and Remedies

• Upon the occurrence and during the continuation of an Event of Default that has not been waived by the Required DIP Lenders, and following delivery of a written Termination Notice on not less than five Business Days' notice (the "Remedies Notice Period") to the Remedies Notice Parties (restructuring counsel to the Debtors, restructuring counsel to the Prepetition Secured Agent (if any), counsel to the Creditors' Committee (if any), the DOJ, and the U.S. Trustee), the DIP Agent may, acting at the written direction of the Required DIP Lenders and unless the Court orders otherwise:
  • Immediately terminate and/or revoke the Debtors' right to use Cash Collateral, subject to the Carve-Out and related provisions
  • Terminate the DIP Facility and any DIP Document as to any future liability or obligation of the DIP Secured Parties, without affecting the DIP Obligations or DIP Liens
  • Declare all DIP Obligations immediately due and payable
  • Invoke the right to charge interest at the default rate under the DIP Documents
• During the Remedies Notice Period, the Debtors, the Creditors' Committee (if any), and/or any party in interest may seek an emergency hearing to contest whether an Event of Default has occurred and is continuing or to authorize the non-consensual use of Cash Collateral; if such a request is made prior to the end of the Remedies Notice Period, that period is continued until the Court rules
• Notwithstanding delivery of a Termination Notice, the Debtors retain the right to use Cash Collateral solely to pay necessary expenses to avoid irreparable harm to their estates, fund the Carve-Out, and meet payroll obligations, in accordance with the Final Order and the Approved Budget, during the Remedies Notice Period and pending any final determination from the Court
• Before exercising further remedies against the DIP Collateral, the DIP Secured Parties must file a Stay Relief Motion on not less than five Business Days' notice to the Remedies Notice Parties, seeking modification of the Automatic Stay to permit them to freeze account balances, set off amounts against the DIP Obligations, and enforce rights against the DIP Collateral, including foreclosure, occupation of the Debtors' premises, and sale or disposition of the DIP Collateral
• Upon repayment of all DIP Obligations, the Prepetition Secured Parties' consent to the use of Cash Collateral automatically terminates

Carve-Out

• The Carve-Out consists of:
  • All statutory fees payable to the Clerk of the Court and the U.S. Trustee under section 1930(a) of title 28, plus statutory interest
  • Up to $50,000 in fees and expenses incurred by a chapter 7 trustee under section 726(b) of the Bankruptcy Code
  • Allowed Professional Fees of Debtor Professionals and Committee Professionals incurred before or on the first business day following delivery of a Carve-Out Trigger Notice
  • Post-Carve-Out Trigger Notice Cap: Allowed Professional Fees not to exceed $500,000 incurred after the first business day following delivery of a Carve-Out Trigger Notice
• The Carve-Out shall be senior to all liens and claims securing the DIP Facility and the Adequate Protection Obligations
• Funded Reserve Account:
  • The Debtors established and funded a segregated account for purposes of funding the Carve-Out, held in trust for the benefit of Professional Persons
  • Upon entry of the Interim Order, the Debtors deposited an amount equal to the Allowed Professional Fees projected to accrue from the Petition Date through June 10, 2026
  • Commencing with the week beginning June 8, 2026, on or before the Wednesday of each week, the Debtors shall deposit an amount equal to the Allowed Professional Fees projected to accrue for the following two-week period under the Approved Budget
  • The Debtors' obligation to pay Allowed Professional Fees or fund the Carve-Out is not limited to funds held in the Funded Reserve Account, and such funds do not act as a cap on Allowed Professional Fees
• Any payment or reimbursement of Allowed Professional Fees made prior to the Termination Declaration Date does not reduce the Carve-Out; any such payment made on or after the Termination Declaration Date permanently reduces the Carve-Out on a dollar-for-dollar basis
• If a Carve-Out Trigger Notice has not been delivered prior to repayment and discharge of all DIP Obligations, any amounts remaining in the Funded Reserve Account automatically revert to the reorganized Debtors upon approval of final fee applications and payment of all unpaid Allowed Professional Fees

Use of Proceeds

• Fund the costs of administering the Chapter 11 Cases
• Satisfy near-term working capital needs and ongoing business operations
• Satisfy payroll obligations and fund payments to the Debtors' workforce and critical third-party vendors
• Continue to serve customers and generate revenue during the Chapter 11 Cases
• Maintain insurance coverage
• Continue to manage the business in the ordinary course
• Pay the DIP Obligations as they become earned, due, and payable, in accordance with the Final Order and the DIP Documents

Credit Bid

• The DIP Agent has the right to credit bid, in accordance with the DIP Documents, in any sale of the DIP Collateral up to the full amount of the DIP Obligations
• The Prepetition Secured Agent has the right to credit bid in any sale of the Prepetition Collateral up to the full amount of the Prepetition Obligations
• In each case as provided for in section 363(k) of the Bankruptcy Code, without the need for further Court order and whether effectuated through sections 363(k), 1123 or 1129(b) of the Bankruptcy Code, by a chapter 7 trustee under section 725, or otherwise, unless the Court for cause orders otherwise

Avoidance Actions

• The DIP Superpriority Claims and the DIP Liens on Unencumbered Property exclude Avoidance Actions (claims and causes of action under sections 502(d), 544, 545, 547, 548 and 550 of the Bankruptcy Code and any other avoidance actions), but include any proceeds or property recovered from Avoidance Actions ("Avoidance Proceeds")

Challenge Period and Budget

• A party in interest with requisite standing must file a Challenge by no later than:
  • As to the Creditors' Committee, 60 calendar days from the formation of the Creditors' Committee
  • If the cases are converted to chapter 7 and a chapter 7 or chapter 11 trustee is appointed or elected prior to the end of the Challenge Period, the later of (1) 60 calendar days after entry of the Interim Order or (2) 30 calendar days after the appointment of such trustee
  • As to all other parties in interest, 60 calendar days after entry of the Interim Order
• Any later date agreed to in writing by the Debtors, the DIP Agent, the Prepetition Secured Parties, and the Prepetition PIK Notes Parties, or ordered by the Court for cause
• The proceeds of the DIP Loans and/or DIP Collateral (including Cash Collateral) may be used by the Creditors' Committee to investigate, but not to prosecute or initiate the prosecution of, the claims and liens of, and potential claims against, the Prepetition Secured Parties, up to an aggregate cap of no more than $50,000
• Budget:
  • The Debtors prepared and delivered an Initial DIP Budget reflecting projected sources and uses of cash, anticipated disbursements, and liquidity for each calendar week, in form and substance satisfactory to, and approved by, the Required DIP Lenders
  • The current Approved Budget is attached to the Final Order, and may be modified, amended, and updated from time to time in accordance with the DIP Credit Agreement

Securities and Priorities

• The DIP Obligations constitute allowed superpriority administrative expense claims against the Debtors on a joint and several basis pursuant to section 364(c)(1) of the Bankruptcy Code, payable from and with recourse to all prepetition and postpetition property of the Debtors and all proceeds thereof (excluding Avoidance Actions but including Avoidance Proceeds), subject and subordinate only to the Carve-Out
• As security for the DIP Obligations, the DIP Agent, for the benefit of itself and the other DIP Secured Parties, is granted the following automatically perfected DIP Liens on all prepetition and postpetition property of the Debtors (the "DIP Collateral"), subject to the Carve-Out:
  • First priority senior liens on all Unencumbered Property pursuant to section 364(c)(2), other than any Excluded Asset and Avoidance Actions (but including Avoidance Proceeds)
  • First priority senior priming liens on all property subject to the Prepetition Liens pursuant to section 364(d)(1), senior in all respects to the interests of the Prepetition Secured Parties (the "Primed Liens")
  • Junior liens pursuant to section 364(c)(3) on property subject to valid, perfected and non-avoidable senior liens in existence immediately prior to the Petition Date (other than the Primed Liens), junior to such senior liens but senior to the Adequate Protection Liens, the Prepetition Liens, and any liens under the Prepetition PIK Note Documents or the DOJ Security Interest Grant
• The DIP Liens shall not be subordinated to or made pari passu with any lien avoided and preserved under section 551, any liens arising after the Petition Date (including in favor of any governmental unit), any intercompany or affiliate liens, or any other lien or security interest under sections 363 or 364 granted after entry of the Final Order

Adequate Protection

Prepetition Secured Parties

• Adequate protection of their interests in all Prepetition Collateral (including Cash Collateral) in an amount equal to the aggregate diminution in value from and after the Petition Date, including from the sale, lease or use of the Prepetition Collateral, the priming of the Prepetition Liens by the DIP Liens, and the imposition of the Automatic Stay
• Adequate Protection Liens: valid, perfected replacement security interests in and liens upon all of the DIP Collateral, solely to the extent of any diminution in value, subject and subordinate only to the DIP Liens and the Carve-Out
• Section 507(b) Claims: an allowed superpriority administrative expense claim in the amount of the Prepetition Secured Parties Adequate Protection Claims, junior to the DIP Superpriority Claims and the Carve-Out but senior to all other administrative expenses, with recourse to all prepetition and postpetition property (excluding Avoidance Actions but including Avoidance Proceeds)
• Fees and Expenses: cash payment of all reasonable and documented prepetition and postpetition fees and expenses, including those of counsel and financial advisors, including Davis Polk & Wardwell LLP, Haynes and Boone, LLP, Pryor Cashman LLP, and Berkley Research Group, LLC (the "Prepetition Secured Parties Advisors")
• Budget and financial covenants: upon indefeasible payment in full of all DIP Obligations, continued updating of the Approved Budget and performance of the financial and other covenants set forth in Article VI of the DIP Credit Agreement
• Information rights: prompt provision of all written financial and periodic reporting required to be provided to the DIP Agent under the DIP Documents, including the reporting required under Article V of the DIP Credit Agreement

Prepetition PIK Notes Parties

• Adequate protection of their interests in the Prepetition PIK Notes Collateral (including Cash Collateral) in an amount equal to the aggregate diminution in value from and after the Petition Date
• Adequate Protection Liens: valid, perfected replacement security interests in and liens upon all of the DIP Collateral, solely to the extent of any diminution in value, subject and subordinate to the Carve-Out, the DIP Liens, the Prepetition Secured Parties Adequate Protection Liens, the Prepetition Secured Parties 507(b) Claims, and the Prepetition Liens, consistent with the relative priorities established by the Intercreditor Agreement
• Section 507(b) Claims: an allowed superpriority administrative expense claim, junior to the DIP Superpriority Claims, the Carve-Out, and the Prepetition Secured Parties 507(b) Claims, but senior to all other administrative expenses, with recourse to all prepetition and postpetition property (excluding Avoidance Actions but including Avoidance Proceeds)
• Fees and Expenses: cash payments to the Ad Hoc Noteholder Group in a total aggregate amount not to exceed $400,000 for reasonable and documented fees and expenses of one primary counsel and one local counsel, and to the Prepetition Notes Trustee, the reasonable and documented fees and expenses of the trustee and one counsel
• Information rights: prompt provision of all written financial and periodic reporting required to be provided to the DIP Agent under the DIP Documents, including the reporting required under Article V of the DIP Credit Agreement
• Maintenance of collateral: the Debtors shall continue to maintain and insure the Prepetition Collateral and DIP Collateral as required under the Prepetition Secured Loan Documents and the DIP Documents

Waivers

• Section 506(c): No costs or expenses of administration of the Chapter 11 Cases or any Successor Cases shall be charged against or recovered from the DIP Collateral (including Cash Collateral), the Prepetition Collateral, or the Prepetition PIK Notes Collateral, absent prior written consent; the Debtors waive all rights to surcharge the Collateral
• Section 552(b): The "equities of the case" exception shall not apply to the Prepetition Secured Parties or the Prepetition PIK Notes Parties with respect to proceeds, products, offspring, or profits of any Prepetition Collateral or Prepetition PIK Notes Collateral
• Marshaling: In no event shall the DIP Agent, the other DIP Secured Parties, or the Prepetition Secured Parties be subject to the equitable doctrine of "marshaling" or any similar doctrine with respect to the DIP Collateral, the Prepetition Collateral, or the Prepetition PIK Notes Collateral
• Payments Free and Clear: Subject to the Carve-Out, all payments or proceeds remitted to the DIP Agent or the Prepetition Secured Agent shall be irrevocable and received free and clear of any claim, charge, or liability, including any arising under sections 506(c) or 552(b) of the Bankruptcy Code