Republic National Distributing Company - Chapter 11 DIP Terms

DIP Terms

Borrower(s) / Guarantor(s)

• Republic National Distributing Company, LLC, each of its wholly-owned subsidiaries (as defined in the Prepetition Credit Agreement), and RNDC Alaska, LLC, as DIP Borrowers
• Each of the other Debtors, in their capacities as guarantors under the DIP Facility, as DIP Guarantors

Agent / Lender(s)

• Wells Fargo Bank, National Association, as Administrative Agent, Lead Arranger, and sole Book Runner (also serving as Prepetition Agent)
• Certain of the Prepetition Lenders that have committed to provide the DIP Facility, as DIP Lenders (together with the DIP Agent, the "DIP Secured Parties")
• Paul Hastings LLP, as counsel to the DIP Agent, and Carl Marks Advisors, as financial advisor to the DIP Agent, whose reasonable and documented out-of-pocket fees and expenses are payable by the Debtors

DIP Commitments

• $250 million senior secured superpriority revolving debtor-in-possession credit facility, comprised of:
  • $75 million in new money revolving loans (the "Revolving DIP Commitments," and all Revolving DIP Commitments extended, the "DIP New Money Loans"), of which up to $50 million shall be made available upon entry of the Interim Order (the "Interim Draw"); prior to entry of the Final Order, aggregate DIP Revolving Exposure may not exceed $50 million
  • A roll-up, upon entry of the Interim Order, of all outstanding Fourteenth Amendment Priority Delayed Draw Term Loans under the Prepetition Credit Agreement, totaling approximately $66.3 million ($66,313,172.05), into term loans under the DIP Facility (the "DDTL Roll-Up")
  • A roll-up, subject to entry of the Final Order, of $108,686,827.95 of the Revolving Loans under the Prepetition Credit Agreement into term loans under the DIP Facility (the "ABL Roll-Up," and together with the DDTL Roll-Up, the "Roll-Up")
• The DDTL Roll-Up, effected upon entry of the Interim Order, represents a new-money to roll-up ratio of approximately 1.3:1, and together with the ABL Roll-Up represents an aggregate new-money to roll-up ratio of 2.4:1
• The DIP Term Loans (the "Roll-Up DIP Loans") represent the roll-up of the Prepetition Facility Obligations and shall not result in the funding of new cash proceeds to the Borrowers; any amount of DIP Term Loans that is repaid or prepaid may not be reborrowed
• The Roll-Up DIP Loans shall be repaid only following repayment of the DIP New Money Loans, consistent with the repayment priority set forth in the Prepetition Credit Agreement
• The issuance of the Roll-Up DIP Loans is final and irrevocable as to the Debtors, but remains subject to the Challenge provisions of paragraph 16 of the Interim Order; upon a successful Challenge, the Court may fashion an appropriate remedy, including unwinding or disallowing all or a portion of the Roll-Up DIP Loans
• Amounts borrowed as DIP Revolving Loans may be repaid and reborrowed prior to the Commitment Termination Date; borrowings may be made no more frequently than once per calendar week (or twice, with the Agent's prior written consent) in minimum amounts of $1,000,000

Cash Collateral

• The Debtors are authorized to use cash collateral, as defined in section 363(a) of the Bankruptcy Code (but excluding any cash collateral subject to Permitted Prior Senior Liens), solely in accordance with the DIP Loan Documents and the DIP Budget (subject to Permitted Variance)
• Cash Collateral includes all of the Debtors' cash, including cash in all deposit accounts and collection accounts, wherever located, comprising proceeds of or otherwise arising from or relating to the Prepetition Collateral
• The Prepetition Secured Parties have consented, are deemed to have consented, or have not objected to the Debtors' use of Cash Collateral and the other Prepetition Collateral, solely in accordance with the Interim Order and the DIP Loan Documents; each individual Prepetition Lender has waived any right to object to the terms of the Interim Order in its capacity as an individual Prepetition Lender
• Subject to the Carve Out, all cash receipts, Cash Collateral, and proceeds of DIP Collateral related to or arising from the Prepetition Collateral shall be promptly delivered to the DIP Agent as a repayment of the DIP New Money Loans (or held as collateral against future DIP New Money Loans), and the DIP Agent shall enjoy the benefit of all deposit account control agreements

Interest Rate

• Revolving DIP Loans: SOFR + 8.50%
• Applicable Margin: 7.50% per annum for Base Rate Loans and 8.50% per annum for Daily Simple SOFR Loans
• Benchmark: Adjusted Daily Simple SOFR, equal to the greater of (i) SOFR plus the Simple SOFR Adjustment of 0.10% per annum and (ii) the Floor; the Floor is [1.00]% per annum for Daily Simple SOFR Loans and 2.00% per annum for Base Rate Loans. Borrowers may only request Daily Simple SOFR Loans
• Default Rate: automatically upon the occurrence and during the continuation of an Event of Default, all Loans bear interest at 2.0 percentage points above the rate otherwise applicable, and all other Obligations (including overdue interest, fees, costs, and expenses) bear interest at the Base Rate plus 2.0 percentage points
• Interest and fees are computed on a 360-day year (365/366 for Base Rate Loans) and actual days elapsed

Fees

• Closing Fee: 3.00% of the DIP Revolving Committed Amount as in effect on the Closing Date ($75 million), or approximately $2.25 million, fully earned, due, and payable in cash on the Closing Date and chargeable to the Loan Account
• Exit Fee: 2.00% of the DIP Revolving Committed Amount as in effect on the Closing Date ($75 million), or approximately $1.5 million, fully earned on the Closing Date and payable in cash on the earliest to occur of (i) the Maturity Date, (ii) the acceleration of the obligations, (iii) the effective date of any Plan, and (iv) the repayment in full of the obligations following termination of the commitments; the Exit Fee shall be paid in full in cash prior to the making of any cash payments in respect of the DIP Term Loans
• Arranger Fee: $375,000
• Unused Line Fee: 0.50% per annum

Maturity

• The earliest to occur of:
  • 90 days after the Closing Date, which may be extended with the consent of the Required DIP Lenders for up to an additional 60 days
  • The date of termination of the Revolving DIP Commitments at the direction of the Required DIP Lenders following an Event of Default (subject to applicable cure and notice periods)
  • The effective date of the chapter 11 plan filed by the Debtors, which shall be in form and substance reasonably satisfactory to the DIP Agent (acting at the direction of the Required DIP Lenders)
  • The date of conversion of the chapter 11 cases to cases under chapter 7 of the Bankruptcy Code
  • The date of appointment of any trustee, or an examiner with expanded powers with respect to any Debtor
  • The date on which all obligations outstanding under the DIP Facility are paid in full and the Revolving DIP Commitments have been terminated

Milestones

• The Loan Parties shall achieve the following milestones by the dates set forth below (or such later date as may be agreed to by the DIP Agent and the Required DIP Lenders), any of which may be extended by up to five business days by the DIP Agent in its discretion:
  • On the Petition Date or the immediately succeeding business day, file a motion seeking approval of the DIP Facility and forms of other First Day Orders, including on account of a proposed settlement with Reyes
  • On or before three business days after the Petition Date, entry of the Interim Order
  On or before five business days after the Petition Date, file a Plan and disclosure statement providing for repayment in full in cash of the DIP Facility on the effective date thereof
  • On or before 35 days after the Petition Date, entry of the Final Order
  • On or before 70 days after the Petition Date, entry of an order confirming the Plan or approving the Sales
  • On or before 75 days after the Petition Date, the Plan shall have become effective or the closing of the Sales and application of the net proceeds thereof shall have occurred

Carve Out

• The sum of:
  • All fees payable to the Clerk of the Court and the U.S. Trustee under section 1930(a) of title 28, plus interest at the statutory rate
  • Up to $75,000 in fees and expenses incurred by a trustee under section 726(b) of the Bankruptcy Code
  • Allowed Professional Fees of the Debtor Professionals and Committee Professionals incurred at any time before or on the first business day following delivery of a Carve Out Trigger Notice
  • Post-Carve Out Trigger Notice Cap: $2,500,000 in Allowed Professional Fees incurred after the first business day following delivery of the Carve Out Trigger Notice, funded into the Funded Reserve Account from proceeds of the Interim Draw
• A "Carve Out Trigger Notice" may be delivered by the DIP Agent, at the direction of the DIP Lenders, only following the occurrence and during the continuation of an Event of Default and acceleration of the DIP Obligations
• Beginning with the week ended August 1, 2026, and weekly thereafter, the Debtors shall fund a Funded Reserve Account with the greater of estimated or budgeted Allowed Professional Fees for the week, plus the Post-Carve Out Trigger Notice Cap, plus budgeted Allowed Professional Fees for the following two weeks; following delivery of a Carve Out Trigger Notice, the DIP Agent and the Prepetition Secured Parties shall not sweep or foreclose on cash until the Carve Out Reserves are fully funded
• The Carve Out shall be senior to all liens and claims securing the DIP Obligations, the Adequate Protection Liens, the Adequate Protection Superpriority Claims, the Prepetition Secured Obligations, the DIP Superpriority Claims, and any and all other forms of adequate protection, liens, or claims securing the DIP Obligations and the Prepetition Secured Obligations
• Neither the DIP Budget, the Carve Out, the Post-Carve Out Trigger Notice Cap, nor the Carve Out Reserves operates as a cap or limitation on Allowed Professional Fees due and payable by the Debtors

Use of Proceeds

• Fund the Carve Out
• Pay the transaction and postpetition administrative costs, fees, and expenses incurred in connection with the chapter 11 cases
• Pay any and all interest, charges, fees, and reasonable and documented out-of-pocket expenses incurred in connection with the DIP Loan Documents
• Provide working capital and for the general corporate purposes of the Debtors
• Pay the approved fees and expenses of professionals retained in the chapter 11 cases
• Repay and refinance the Fourteenth Amendment Priority Delayed Draw Term Loans and Revolving Loans in accordance with the Roll-Up
• Such other purposes subject to the reasonable consent of the DIP Agent

Credit Bid

• Subject to any bidding or auction procedures subsequently approved by the Court, and subject to the Permitted Prior Senior Liens, the DIP Agent, at the direction of the Required DIP Lenders, shall have the right to credit bid up to the full amount of the outstanding DIP Facility Loans (including any Roll-Up DIP Loans) in any sale of the DIP Collateral under section 363, a plan of reorganization or liquidation under section 1129, or a sale or disposition by a chapter 7 trustee under section 725 of the Bankruptcy Code; any such credit bid by the DIP Agent shall be binding upon all DIP Lenders
• The Prepetition Agent, at the direction of the Required Prepetition Lenders, shall have the right to credit bid up to the full amount of the Prepetition Loans in any sale of the Prepetition Collateral, subject to the satisfaction of all DIP Obligations and all obligations secured by the Permitted Prior Senior Liens
• Each of the DIP Secured Parties and the Prepetition Secured Parties shall have the absolute right to assign, sell, or otherwise dispose of their respective rights to credit bid to any acquisition entity or joint venture formed in connection with such bid, subject to reasonable advance notice to the Debtors

Avoidance Actions

• The Interim Order does not grant liens on the proceeds of claims and causes of action arising under chapter 5 of the Bankruptcy Code
• Subject to and effective upon entry of the Final Order, the DIP Collateral will include any proceeds or property recovered on account of successful Avoidance Actions, whether by judgment, settlement, or otherwise (the "Avoidance Proceeds"), which shall not include the Avoidance Actions themselves; upon entry of the Final Order, the DIP Superpriority Claims and the Adequate Protection Superpriority Claims shall likewise have recourse to Avoidance Proceeds
• The DIP Secured Parties and the Prepetition Secured Parties shall use commercially reasonable efforts to first obtain recoveries from DIP Collateral other than Avoidance Proceeds

Challenge Period and Budget

• The Committee, if any, shall have 60 calendar days from the date of its appointment, and all other non-Debtor parties in interest shall have 60 calendar days following entry of the Interim Order (each, as applicable, the "Investigation Termination Date"), to investigate the validity, extent, priority, perfection, and enforceability of the Prepetition Liens and Prepetition Secured Obligations and to assert any other claims or causes of action against the Prepetition Secured Parties; upon five days' written notice, such party may file and prosecute an objection or claim (a "Challenge"). The Interim Order does not confer standing, and any such party must separately move for standing
• If the cases are converted to chapter 7, or a chapter 11 trustee is appointed or elected prior to expiration of the Investigation Termination Date, that date is extended by 60 calendar days from such appointment or election, solely with respect to such trustee
• If no Challenge is timely filed, the Debtors' stipulations in paragraph F of the Interim Order become immediately and irrevocably binding on all parties in interest, the Prepetition Liens are deemed valid, perfected, and unavoidable, and the Prepetition Secured Obligations are deemed finally allowed claims not subject to challenge
• Prior to the Investigation Termination Date, the Committee may use collateral proceeds and loans under the DIP Loan Documents in an amount not to exceed $50,000 (the "Investigation Fund") solely to investigate — but not to prepare, initiate, litigate, prosecute, object to, or otherwise Challenge — the legality, validity, priority, perfection, enforceability, or extent of the claims, liens, or interests held by or on behalf of the Prepetition Secured Parties
• The Debtors will use the proceeds of the DIP Facility and Cash Collateral in accordance with the DIP Budget (subject to the Variance Covenant); the DIP Budget will not operate as a cap on professional fees

Liens and Priorities

• Subject to the Carve Out, the DIP Agent, for the benefit of the DIP Secured Parties, is granted valid, enforceable, nonavoidable, and fully perfected security interests and liens on all present and after-acquired property of the Debtors (the "DIP Collateral"), including, upon entry of the Final Order, Avoidance Proceeds, with the following priorities:
  • Pursuant to section 364(d)(1), a first priority, priming security interest in and lien on all encumbered property of the Debtors, subject and subordinated only to Permitted Prior Senior Liens
  • Pursuant to section 364(c)(3), a junior, perfected lien on property subject to any unavoidable Permitted Prior Senior Liens and not subject to section 552(a) of the Bankruptcy Code
  • The DIP Liens shall not be subject or subordinate to (i) subject to and effective upon entry of the Final Order, any lien avoided and preserved for the benefit of the Debtors' estates under section 551 of the Bankruptcy Code, or (ii) any intercompany or affiliate liens among the Debtors
  • The DIP Liens are automatically and properly perfected upon entry of the Interim Order without the need for any filing, recordation, control agreement, or other action
  • Pursuant to section 364(c)(2), a first priority, fully perfected lien on all DIP Collateral not encumbered by a valid, perfected, and non-avoidable lien as of the Petition Date (the "Unencumbered Property")
• In accordance with section 364(c)(1), the DIP Obligations shall constitute superpriority administrative expense claims (the "DIP Superpriority Claims") against each of the Debtors, subject to the Carve Out and any Permitted Prior Senior Liens

Adequate Protection

Prepetition Secured Parties

• To the extent of any Diminution in Prepetition Collateral Value resulting from the priming of their liens, the use of Cash Collateral and other Prepetition Collateral, the imposition of the automatic stay, and/or otherwise, and until indefeasible repayment in full in cash of the Prepetition Secured Obligations, the Prepetition Secured Parties are entitled to:
  • Adequate Protection Liens: valid, enforceable, unavoidable, and fully perfected replacement liens on the DIP Collateral, junior only to the DIP Liens and the Permitted Prior Senior Liens, and subject to the Carve Out
  • Adequate Protection Superpriority Claims: superpriority administrative expense claims under section 507(b), junior in all respects to the Carve Out and the DIP Superpriority Claims
  • Payment of all reasonable, documented, and invoiced out-of-pocket fees, costs, and expenses of the Prepetition Agent and one firm of legal professionals per jurisdiction for the Prepetition Agent (the "Prepetition Agent Fees and Expenses"), whether arising before, on, or after the Petition Date, subject to a 10-business-day review period; such professionals need not file fee applications or comply with U.S. Trustee fee guidelines
  • Section 507(b) Reservation: nothing impairs the application of section 507(b) if the adequate protection provided proves insufficient to compensate for Diminution in Prepetition Collateral Value, with any such additional claims subject to the same relative priority
  • Upon entry of the Final Order, waivers of the right to surcharge under section 506(c) and the "equities of the case" exception under section 552(b) with respect to the Prepetition Lenders

Waivers

• Subject to and effective upon entry of the Final Order:
  • Section 506(c): Except to the extent of the Carve Out, the Debtors waive any right to surcharge against the DIP Collateral and the Prepetition Collateral, and no such costs or expenses may be charged without the prior written consent of the DIP Agent or the Prepetition Agent, as applicable
  • Section 552(b): The "equities of the case" exception shall not apply with respect to the proceeds, products, offspring, or profits of the Prepetition Collateral
  • The equitable doctrine of "marshalling," and any other similar equitable doctrine, shall not apply with respect to the DIP Collateral and the Prepetition Collateral

Stipulations

• Subject to the Challenge provisions of paragraph 16, the Debtors stipulate that as of the Petition Date they were indebted to the Prepetition Secured Parties, without defense, counterclaim, or offset, in the aggregate principal amount of $224,947,167.12 in respect of loans under the Prepetition Credit Facility and payment-in-kind interest (the "Prepetition Loans"), plus accrued and unpaid interest at the default rate, fees, and expenses, in addition to issued letters of credit totaling $1,010,719.00
• The Debtors further stipulate that the Prepetition Liens are valid, binding, enforceable, perfected, and non-avoidable, subject only to Prior Permitted Liens; that the Prepetition Secured Obligations constitute allowed secured claims; that no offsets, defenses, or counterclaims exist; and that no claim or cause of action is held by the Debtors against the Prepetition Secured Parties
• All of the Debtors' cash, including cash in all deposit and collection accounts, wherever located, comprising proceeds of or arising from the Prepetition Collateral, constitutes Cash Collateral of the Prepetition Secured Parties

Releases

• Subject to entry of the Final Order and subject to the Challenge provisions of paragraph 16 of the Interim Order, each Debtor releases and discharges each of the DIP Secured Parties, in their capacity as such, together with their respective affiliates, agents, attorneys, officers, directors, and employees (the "Released Parties"), from any and all claims and causes of action arising prior to the Petition Date relating to the DIP Loan Documents, the DIP Facility, or the parties' prepetition relationship, including any claims or defenses under chapter 5 of the Bankruptcy Code
• The releases shall not extend to any claims or liabilities that a court of competent jurisdiction determines result from the bad faith, fraud, gross negligence, or willful misconduct of a Released Party, and shall not relieve the DIP Secured Parties from fulfilling their commitments or obligations under the DIP Facility after the Closing Date

Automatic Stay

• The automatic stay under section 362 of the Bankruptcy Code is modified as necessary to permit the Debtors, the DIP Secured Parties, and the Prepetition Secured Parties to implement and effectuate the terms of the Interim Order and the DIP Loan Documents, including to permit the DIP Lenders to file financing statements, security agreements, notices of liens, and other similar instruments to validate and perfect the liens and security interests granted under the Interim Order
• In addition, upon the occurrence of a DIP Termination Event and expiration of the five business day Notice Period, the automatic stay shall be automatically modified with respect to the DIP Secured Parties and the Prepetition Secured Parties without further notice or order of the Court, unless the DIP Agent and Prepetition Agent elect otherwise in writing, the Court determines that no DIP Termination Event has occurred or is continuing, or the Court orders otherwise

Limitation on Use of DIP Proceeds and Collateral

• Absent the DIP Agent's written consent, no portion of the DIP Facility proceeds, the Collateral (including Cash Collateral), the Carve Out, or any DIP Budget disbursement may be used to (i) object to, challenge, or contest the validity, extent, amount, perfection, priority, or enforceability of the DIP Obligations, the DIP Liens, the Prepetition Liens, or the Prepetition Collateral; (ii) assert, commence, or prosecute any claims or causes of action, including chapter 5 actions, against the DIP Agent, DIP Lenders, Prepetition Agent, or Prepetition Lenders; (iii) prevent, hinder, or delay enforcement against the Collateral following an Event of Default and the Notice Period; or (iv) incur indebtedness other than as permitted under the DIP Loan Documents
• Exceptions: the $50,000 Investigation Fund; the Committee's right to be compensated for any objection to the Final Order, payable from DIP proceeds, DIP Collateral, Cash Collateral, or the Carve Out; and the right of the Debtors, Debtor Professionals, and any party in interest to be heard on whether an Event of Default has occurred and is continuing

Events of Default and Remedies

• The DIP Credit Agreement contains Events of Default usual and customary for debtor-in-possession financings
• DIP Termination Event: the DIP Obligations shall accelerate and become immediately due and payable, and the Revolving DIP Commitments shall terminate, without further notice or action by the Court, upon the earliest of (i) the occurrence and continuation of an Event of Default (subject to applicable cure or grace periods and the Notice Period) or (ii) the occurrence of the Maturity Date, in each case unless waived or extended in writing by the DIP Agent at the direction of the Required DIP Lenders
• Notice Period: following a DIP Termination Event, the DIP Agent must give not less than five business days' advance written notice (the "Enforcement Notice") to counsel to the Debtors, the U.S. Trustee, counsel to the DIP Lenders, and counsel to the Committee before exercising remedies against the DIP Collateral
• Upon delivery of an Enforcement Notice, all parties consent to an expedited hearing on whether a DIP Termination Event has occurred and any appropriate relief, including the Debtors' non-consensual use of Cash Collateral; if a hearing is requested before the end of the Notice Period, the Notice Period is continued until the Court rules
• During the Notice Period, neither the DIP Secured Parties nor the Prepetition Secured Parties may exercise default rights or remedies, and the Debtors may continue to use DIP Proceeds and Cash Collateral solely to fund (i) payroll, taxes, statutory obligations, and other operating expenses critically necessary to keep the businesses operating or consented to by the Required DIP Lenders, and (ii) the Carve Out; the DIP Lenders are not obligated to make DIP New Money Loans during the Notice Period
• At the end of the Notice Period, absent a contrary order, the Debtors' right to use DIP Proceeds and Cash Collateral immediately ceases, and the DIP Secured Parties and Prepetition Secured Parties may exercise remedies without further relief from the automatic stay

Permitted Variance

• Variance Covenant: As of the last date of each Test Period, commencing with the second full calendar week after the Closing Date, the unfavorable variance (as compared to the DIP Budget) of cumulative operating disbursements (other than professional fees and expenses) shall not exceed 20% during the Test Period; any favorable variance achieved shall be carried forward and applied to offset unfavorable variances in subsequent Test Periods
• Net Liquidity Covenant: The Debtors shall end each week with at least 85% of their forecasted "weekly cash" total in the DIP Budget, tested beginning the second full calendar week following the Petition Date
• "Test Period" means each one-week period beginning on the Friday of the second full calendar week after the Closing Date; the Variance Covenant applies only to operating disbursements as set forth in the DIP Budget and does not include professional fees or expenses
• On the Friday of every fourth calendar week (commencing the fourth full calendar week after the Closing Date), the DIP Borrowers shall deliver an updated 13-week budget and cash flow forecast, subject to the approval of the DIP Agent and the Required DIP Lenders (not to be unreasonably withheld, conditioned, or delayed) and deemed approved if not objected to in writing within four business days; the then-existing DIP Budget remains in effect until replaced