STG Logistics - Chapter 11 DIP Terms

DIP Terms

Borrower(s) / Guarantor(s)

• STG Distribution, LLC, as DIP Borrower
• STG Distribution Holdings, LLC, Reception Mezzanine Holdings, LLC, each subsidiary of Reception Mezzanine that guaranteed, purported to guarantee, or was required to guarantee any obligations under the STG Distribution Credit Agreement, and each of the other Debtors, as DIP Guarantors
  • The DIP Guarantors are authorized to jointly, severally, and unconditionally guarantee in full all DIP obligations of the DIP Borrower

Agent / Lender(s)

• Wilmington Savings Fund Society, FSB, as Administrative Agent and Collateral Agent
• Certain financial institutions, as DIP Lenders
• Holders constituting Required First-Out Lenders and Controlling Claimholders consented to the DIP Facility and the continued use of cash collateral

DIP Commitments

• $293.75 million senior secured superpriority term loan facility comprised of:
  • $150 million new money multiple-draw term loan facility in three tranches:
    • $85 million interim new money term loans funded upon entry of the interim order
    • $40 million final new money term loans available upon entry of the final order
    • Up to $25 million incremental new money term loans available immediately prior to the effective date of a chapter 11 plan
  • $143.75 million roll-up of prepetition term loans held by DIP Lenders on a cashless basis, calculated in accordance with the DIP documents:
    • $97.75 million interim roll-up upon entry of the interim order and funding of interim new money term loans (comprised of at least $87.975 million of First-Out Term Loans and up to $9.775 million of Second-Out Term Loans)
    • $46 million final roll-up upon entry of the final order and funding of final new money term loans (comprised of at least $41.4 million of First-Out Term Loans and up to $4.6 million of Second-Out Term Loans)
• The prepetition secured parties would not otherwise consent to the continued use of their cash collateral, and the DIP Agent and DIP Lenders would not be willing to provide the DIP Facility or extend credit without approval of the roll-up
• The roll-up obligations are authorized as and deemed to be consideration in exchange for, and solely on account of, the agreement of the prepetition secured parties to fund amounts under the DIP Facility and not as adequate protection or otherwise on account of any prepetition term loan obligations
• Amounts repaid or prepaid under the facility may not be reborrowed

Cash Collateral

• All of the debtors' cash, including amounts on deposit or maintained in any banking, checking, or other deposit accounts, amounts generated by the collection of accounts receivable or other disposition of prepetition collateral existing as of the petition date or deposited after the petition date, and the proceeds of any of the foregoing
• The debtors are authorized to use cash collateral solely in accordance with the approved budget subject to permitted budget variances, including for funding the carve-out and making adequate protection payments
• Following the termination date and expiration of the remedies notice period, all authority to use cash collateral shall cease; provided that during the remedies notice period, the debtors may use cash collateral solely to fund the carve-out and pay payroll and other expenses critical to the administration of the estates in accordance with the approved budget

Interest Rate

• 8.0% per annum, paid in kind
• Default Rate Increase: 2.0%
• Interest on past due amounts accrues at the default rate from the date of occurrence of an event of default and is payable in cash on demand of the DIP Agent or the required DIP Lenders
• Interest is paid in kind on each interest payment date; provided that interest paid pursuant to the default rate provision and on the date of any payment or prepayment of term loans, including on the maturity date, shall be paid in cash
• All computations of fees and interest are calculated on the basis of a 360-day year and actual days elapsed

Fees

• The debtors are authorized and directed to pay principal, interest, fees, payments, expenses, and other amounts described in the DIP documents as they become due, including:
  • Backstop, fronting, closing, arrangement, or commitment payments
  • Administrative agent's fees, collateral agent's fees, and escrow agent's fees
  • Reasonable and documented fees and disbursements of counsel and other professionals
  • Indemnity obligations of the DIP secured parties

Maturity

• The earliest to occur of:
  • July 14, 2026 (as may be extended with the prior written consent of the required DIP Lenders)
  • The date of consummation of a sale of all or substantially all of the debtors' assets
  • The effective date of a chapter 11 plan
  • The date the DIP loans become due and payable in full under the DIP documents, whether by acceleration or otherwise
• Following the termination date and the expiration of the remedies notice period, all DIP obligations shall be immediately due and payable, all new money commitments will terminate, and the carve-out reserves shall be funded

Carve Out

• The carve-out includes:
  • All fees required to be paid to the Clerk of the Court and to the Office of the United States Trustee under section 1930(a) of title 28 of the United States Code plus interest at the statutory rate
  • All reasonable fees and expenses up to $50,000 incurred by a trustee under section 726(b) of the Bankruptcy Code
  • All unpaid allowed professional fees incurred by debtor professionals and committee professionals at any time before or on the first business day following delivery of a carve-out trigger notice
  • Post Carve-Out Trigger Notice Cap: $6 million for allowed professional fees of professional persons incurred after the first business day following delivery of the carve-out trigger notice
• A "carve-out trigger notice" means a written notice delivered by email or other electronic means by the DIP Agent at the direction of the required DIP Lenders (or by the STG Distribution Agent at the direction of the required DIP Lenders after repayment of the DIP obligations in full) to the debtors, their lead restructuring counsel, the U.S. Trustee, counsel to the Reception Purchaser Agent, and counsel to the creditors' committee, which may be delivered following the occurrence and during the continuation of an event of default and acceleration of the DIP obligations
• The carve-out is senior to all liens and claims securing the DIP Facility, the DIP claims, the DIP liens, the adequate protection liens, and claims pursuant to section 507(b) of the Bankruptcy Code

Use of Proceeds

• Permit the orderly continuation of the debtors' businesses
• Provide working capital and satisfy other general corporate purposes of the debtors and certain subsidiaries
• Pay certain adequate protection payments
• Pay costs of administration of the estates
• Fund the carve-out
• All uses must be solely in accordance with the approved budget subject to permitted budget variances

Credit Bid

• The DIP Agent (at the direction of the applicable required DIP Lenders) and the STG Distribution Agent (at the direction of the required First-Out term lenders) have the right to credit bid (either directly or through one or more acquisition vehicles) up to the full amount of the underlying lenders' respective claims, including STG Distribution adequate protection superpriority claims and roll-up obligations, in any sale of all or any portion of the prepetition collateral or DIP collateral, including sales occurring pursuant to section 363 of the Bankruptcy Code or included as part of any chapter 11 plan subject to confirmation under sections 1129(b)(2)(A)(ii)-(iii) of the Bankruptcy Code
  • Credit bidding rights are subject to the DIP documents, prepetition pari passu intercreditor agreement, and the DIP orders
• For credit bidding purposes:
  • DIP Lenders holding a majority of the outstanding new money term loans may credit bid up to the full amount of the outstanding new money term loans
  • DIP Lenders holding a majority of the outstanding roll-up obligations may credit bid up to the full amount of the outstanding roll-up obligations; provided that no roll-up obligations may be credit bid unless the proposed transaction indefeasibly repays in full the new money term loans or DIP Lenders holding a majority of the outstanding new money term loans otherwise consent

Avoidance Actions

• The DIP collateral includes proceeds of avoidance actions, excluding proceeds of certain excluded actions
  • Excluded actions include claims or causes of action related to actual fraud, willful misconduct, lender liability, or other intentional wrongful acts, or any lack of perfection, granting of a security interest, recharacterization, preference, or equitable subordination commenced against any DIP secured party or prepetition secured party, other than certain specified exceptions
• The DIP secured parties shall use good faith commercially reasonable efforts to first seek recovery from DIP collateral other than proceeds of any challenge or avoidance action related to the excluded categories
• The adequate protection liens include liens on proceeds or property recovered from avoidance actions, other than proceeds of excluded actions

Challenge Period and Budget

• The challenge period is the earlier of:
  • The date of confirmation of the debtors' chapter 11 plan of reorganization
  • March 15, 2026, or in the case of the creditors' committee, April 28, 2026 (or such later date agreed by and between the creditors' committee and the required DIP Lenders)
• Subject to the challenge period, the stipulations, admissions, waivers, and releases contained in the DIP orders are binding upon the debtors, their estates, and any successors in all circumstances and for all purposes
• Subject to the challenge period, the debtors are deemed to have irrevocably waived and relinquished all challenges as of the petition date

Permitted Variance

• For a two-week period (or three-week for the first delivery of the variance report) ending on any testing date, operating disbursements in the aggregate may not exceed 115% of the budgeted disbursements in the aggregate as set forth in the approved budget
• For a four-week period ending on any testing date, actual receipts in the aggregate may not be less than 80% of the budgeted receipts in the aggregate as set forth in the approved budget
• Permitted budget variances are tested on each Friday commencing on the Friday of the third full calendar week after the petition date, on a four-week basis for actual receipts and on a two-week (or three-week for the first delivery) basis for operating disbursements
• For purposes of permitted budget variances testing, the fees and expenses of professional persons, the DIP Lenders/STG Distribution Lenders advisors, the DIP Agent advisor, the Reception Purchaser Agent advisors, and adequate protection payments are excluded

Securities and Priorities

• The DIP obligations constitute allowed superpriority administrative expense claims against each of the debtors' estates with priority over any and all administrative expenses, adequate protection claims, diminution claims, and all other claims against the debtors, now existing or hereafter arising, of any kind whatsoever, subject and subordinate only to the carve-out
• The DIP Lenders are granted perfected liens on and security interests in all of the debtors' prepetition and postpetition assets and properties, whether presently-owned or after-acquired, excluding certain excluded property, subject only to the carve-out, the RCF reserve account, and prior senior liens, with the following priorities:
  • Valid, binding, continuing, enforceable, fully-perfected, non-avoidable, automatically and properly perfected first priority senior security interest in and lien upon all property of the debtors that on or as of the petition date is not subject to valid, perfected, and non-avoidable liens (or perfected after the petition date to the extent permitted by section 546(b) of the Bankruptcy Code), pursuant to section 364(c)(2) of the Bankruptcy Code
  • Valid, binding, continuing, enforceable, fully-perfected first priority senior priming security interest in and lien upon all property that was subject to the prepetition liens, including the prepetition collateral and cash collateral, subordinate only to the carve-out and prior senior liens, pursuant to section 364(d)(1) of the Bankruptcy Code
  • Valid, binding, continuing, enforceable, fully perfected security interest in and lien upon all prepetition and postpetition property of the debtors immediately junior only to the prior senior liens, subject only to the carve-out, pursuant to section 364(c)(3) of the Bankruptcy Code

Adequate Protection

Prepetition Senior Secured Parties (STG Distribution Secured Parties)

• Additional and replacement, valid, binding, enforceable, non-avoidable, and effective and automatically perfected postpetition security interests in and liens on all DIP collateral and all proceeds or property recovered from avoidance actions other than proceeds of excluded actions
  • The STG Distribution adequate protection liens are subordinate only to the carve-out, the DIP liens, and the prior senior liens
  • Solely with respect to the DIP collateral belonging to the Reception Purchaser loan parties, pari passu to the Reception Purchaser adequate protection liens
  • Solely with respect to the DIP collateral belonging to the Intercompany loan parties, pari passu to the Intercompany adequate protection liens
  • The STG Distribution secured parties shall use good faith commercially reasonable efforts to first seek recovery from DIP collateral other than certain specified collateral categories
• Allowed administrative expense claims in each of the cases ahead of and senior to any and all other administrative expense claims to the extent of any postpetition diminution in value, junior to the carve-out and the DIP superpriority claims, and pari passu (for Reception Purchaser loan parties) to the Reception Purchaser adequate protection superpriority claims and (for Intercompany loan parties) to the Intercompany adequate protection superpriority claims
• Payment of all reasonable and documented fees and expenses of the STG Distribution secured parties, including fees and expenses of counsel and other professionals retained as provided in the DIP documents and orders, whether incurred before or after the petition date, to the extent not duplicative of any fees paid pursuant to other provisions of the order
• The debtors shall maintain their cash management arrangements in a manner consistent with the cash management order
• The debtors shall comply with all covenants contained in the DIP Credit Agreement regarding conduct of business, including preservation of rights, qualifications, licenses, permits, privileges, franchises, governmental authorizations, and intellectual property rights material to the conduct of their business and the maintenance of properties and insurance
• The debtors shall comply with all reporting requirements set forth in the DIP Credit Agreement

Prepetition Intercompany Secured Parties

• Additional and replacement, valid, binding, enforceable, non-avoidable, and effective and automatically perfected postpetition security interests in and liens on all DIP collateral held by the Intercompany loan parties and all proceeds or property recovered from avoidance actions other than proceeds of excluded actions
  • The Intercompany adequate protection liens are subordinate only to the carve-out, the DIP liens, and the prior senior liens
  • Pari passu with the STG Distribution adequate protection liens and Reception Purchaser adequate protection liens
• Allowed administrative expense claims in each of the cases of the Intercompany loan parties ahead of and senior to any and all other administrative expense claims to the extent of any postpetition diminution in value, junior to the carve-out and the DIP superpriority claims, pari passu (for the Reception Purchaser loan parties) to the Reception Purchaser adequate protection superpriority claims, and pari passu to the STG Distribution adequate protection superpriority claims
• Payment of all reasonable and documented fees and expenses of the Intercompany Agent, including fees and expenses of ArentFox Schiff LLP, whether incurred before or after the petition date, to the extent not duplicative of any fees paid pursuant to other provisions of the order

Prepetition Reception Purchaser Secured Parties

• Additional and replacement, valid, binding, enforceable, non-avoidable, and effective and automatically perfected postpetition security interests in and liens on all DIP collateral constituting Reception Purchaser collateral and all proceeds or property recovered from avoidance actions of the Reception Purchaser loan parties
  • The Reception Purchaser adequate protection liens are subordinate only to the carve-out, the DIP liens, and the prior senior liens
  • Pari passu to (a) solely with respect to the DIP collateral belonging to the Intercompany loan parties, the Intercompany adequate protection liens and (b) the STG Distribution adequate protection liens
• Allowed administrative expense claims in the cases of the Reception Purchaser loan parties ahead of and senior to any and all other administrative expense claims to the extent of any postpetition diminution in value, junior to the carve-out and the DIP superpriority claims, and pari passu to (a) solely for Intercompany loan parties, the Intercompany adequate protection superpriority claims and (b) the STG Distribution adequate protection superpriority claims
• Payment of all reasonable and documented fees and expenses of the Reception Purchaser Agent, including fees and expenses of the Reception Purchaser Agent advisors, whether incurred before or after the petition date, to the extent not duplicative of any fees paid pursuant to other provisions of the order

Waivers

• Section 506(c): No expenses of administration of the cases or any future proceeding will be charged against or recovered from the DIP collateral (except to the extent of the carve-out), the DIP secured parties, the prepetition collateral (except to the extent of the carve-out), or the prepetition secured parties, pursuant to sections 105(a) or 506(c) of the Bankruptcy Code or any similar principle of law or equity, without the prior written consent of the DIP Agent, the DIP Lenders, and the prepetition secured parties
• Section 552(b): In light of the prepetition secured parties' agreement to subordinate their liens and superpriority claims to the DIP obligations and the carve-out and to permit the use of their cash collateral, the prepetition secured parties are entitled to a waiver of any "equities of the case" claims under section 552(b) of the Bankruptcy Code
• The equitable doctrine of "marshaling" shall not apply with respect to the DIP collateral or prepetition collateral
• Unless and until all DIP obligations, STG Distribution obligations, and adequate protection obligations are indefeasibly paid in full in cash and all new money commitments are terminated, the debtors irrevocably waive the right to seek certain specified relief
• Pursuant to section 1141(d)(4) of the Bankruptcy Code, the debtors have waived any discharge as to any remaining DIP obligations or adequate protection obligations