1020-00001 · Client 1020 · Term Sheet & Preliminary Analysis

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CALDERWOOD & HARKNESS LLP Counselors at Law

150 North Michigan Avenue, Suite 3600 Chicago, Illinois 60601

Telephone: (312) 555-4800 Facsimile: (312) 555-4801 www.calderwoodharkness.com

September 2, 2022

Via Email and First-Class Mail

Patricia "Trish" Calloway Chief Financial Officer Greenfield Agricultural Partners LLC 4100 Grand Prairie Boulevard, Suite 300 Des Moines, Iowa 50309

Nina Vasquez General Counsel and Corporate Secretary Greenfield Agricultural Partners LLC 4100 Grand Prairie Boulevard, Suite 300 Des Moines, Iowa 50309

Re: Comments on Indicative Term Sheet dated August 22, 2022, from Heartland Commerce Bank, National Association — Proposed $80,000,000 Senior Secured Asset-Based Revolving Credit Facility

Calderwood & Harkness Matter No. 1020-00001

Dear Ms. Calloway and Ms. Vasquez:

Pursuant to the engagement letter executed on August 29, 2022, retaining Calderwood & Harkness LLP ("C&H" or the "Firm") as borrower's counsel to Greenfield Agricultural Partners LLC ("Greenfield," "GAP," or the "Company") in connection with the proposed $80,000,000 senior secured asset-based revolving credit facility (the "Facility"), we are writing to provide our initial substantive comments on the indicative term sheet (the "Term Sheet") received on August 22, 2022, from Heartland Commerce Bank, National Association ("HCB"), in its capacity as proposed Administrative Agent, Collateral Agent, Sole Lead Arranger, and Sole Bookrunner.

As set forth in the Term Sheet, HCB proposes to lead a syndicate consisting of three lenders with the following commitment allocations:

The purpose of this letter is to provide C&H's initial substantive comments on the Term Sheet for Greenfield's review, internal discussion, and instruction, prior to transmitting any formal response to HCB or its counsel, Kessler, Brandt & Whitfield LLP ("KBW"). The comments and recommendations contained herein reflect our assessment of the Term Sheet against current market practice for agricultural asset-based lending facilities, our understanding of Greenfield's business operations and capital structure, and the specific terms of the existing $55,000,000 revolving credit facility with Prairie National Bank, N.A. ("PNB") that the proposed Facility is intended to refinance and replace.

As we understand the transaction, the proposed Facility is intended to serve three principal purposes: (i) refinancing and repayment in full of the existing $55,000,000 revolving credit facility with PNB (the outstanding balance of which was approximately $38,750,000 as of the most recent reporting period); (ii) funding Greenfield's seasonal working capital needs, including the purchase of seed, fertilizer, crop protection chemicals, and other agricultural inputs; and (iii) providing for general corporate purposes of the Company and its subsidiaries. The proposed maturity is four years from closing (with closing currently anticipated in October 2022, resulting in a maturity date in October 2026). The Facility, and the definitive loan documentation, are proposed to be governed by the laws of the State of Illinois.

Our comments are organized below by major topic area. An annotated copy of the HCB Indicative Term Sheet dated August 22, 2022, with C&H's marginal comments, is enclosed as a separate attachment for your reference and is not reproduced in the body of this letter.

1. Borrowing Base Methodology and Advance Rates

1.1 General Borrowing Base Structure

The Term Sheet proposes a borrowing base (the "Borrowing Base") tied to four distinct asset categories: (a) eligible accounts receivable; (b) eligible crop inventory, consisting of harvested grain held in owned or leased elevator facilities; (c) eligible crop-input inventory, consisting of seed, fertilizer, and crop protection chemicals held for sale or use; and (d) eligible grain warehouse receipts. Each category is subject to a specified advance rate, eligibility criteria (to be detailed in the definitive Credit Agreement), and the Administrative Agent's discretionary availability reserves.

This multi-category structure is appropriate and well-suited to Greenfield's diversified operations, which span row-crop production (corn, soybeans, and specialty grains across approximately 82,000 managed acres), crop-input distribution through Greenfield Crop Inputs Inc. ("GCI"), grain storage and merchandising through Greenfield Grain Storage LLC ("GGS") and the Company's network of 14 owned elevator facilities, and contract farming operations conducted across Iowa, Illinois, and Indiana. The inclusion of four separate asset categories — rather than a simplified two-category (AR and inventory) structure — reflects the complexity and diversity of the Company's revenue streams and asset base, and should provide meaningful borrowing capacity across seasonal cycles.

It is important to note the significant seasonal variability inherent in Greenfield's Borrowing Base. Based on the financial data provided to the Firm, peak seasonal inventory values are estimated at approximately $125 million to $145 million during the post-harvest period (September through November), when elevator facilities are at or near storage capacity with newly harvested grain and accounts receivable from grain sales and contract farming services are at their highest levels. Conversely, during trough periods in the spring (March through May), crop inventory declines sharply as stored grain is sold into the market, while crop-input inventory increases significantly as Greenfield procures seed, fertilizer, and chemicals in advance of the planting season. This seasonal oscillation has important implications for the Company's borrowing capacity, liquidity management, and compliance with the financial covenants and availability thresholds discussed later in this letter.

1.2 Eligible Accounts Receivable — 85% Advance Rate

The Term Sheet proposes an advance rate of 85% on eligible accounts receivable. This rate is consistent with prevailing market practice for asset-based revolving credit facilities across agricultural and commodity-related industries, and we have no objection to the proposed rate at this stage.

Based on the Company's internal financial data and seasonal projections, Greenfield's accounts receivable base is estimated at approximately $42.3 million at peak (projected October 2022) and approximately $19.7 million at trough (projected April 2023). At these levels, the accounts receivable component of the Borrowing Base would contribute approximately $35,955,000 at peak (85% × $42,300,000) and approximately $16,745,000 at trough (85% × $19,700,000).

We recommend that the Company pay careful attention to the eligibility criteria governing accounts receivable when KBW delivers the initial draft of the Credit Agreement. In our experience with agricultural ABL facilities, the following eligibility parameters warrant particular scrutiny:

(a) Concentration Limits. Single-debtor concentration caps (typically 10–15% of the total AR pool) may disproportionately affect agricultural borrowers that sell to a limited number of large grain purchasers or commodity traders. We should understand Greenfield's top-ten customer concentrations and negotiate appropriate thresholds.

(b) Dilution Adjustments. The Credit Agreement will likely include a dilution reserve or dilution adjustment that reduces eligible AR in the event that historical dilution (credits, returns, allowances, and discounts) exceeds a specified threshold (commonly 5%). Greenfield should be prepared to provide detailed dilution history.

(c) Cross-Aging Exclusions. Accounts receivable from any obligor where a specified percentage (typically 25–50%) of such obligor's AR is more than a stated number of days past due (commonly 60 or 90 days) are typically excluded from the eligible AR pool in their entirety. Given the seasonal payment patterns common in the agricultural sector, the cross-aging percentage and aging period should be carefully negotiated.

(d) Government Program Receivables. Receivables arising from USDA commodity payments, crop insurance indemnity payments, conservation reserve program payments, and similar government programs represent a significant component of Greenfield's AR base. These receivables present unique characteristics — including potential sovereign immunity defenses, offset rights, and payment timing uncertainties — and their treatment in the eligibility criteria should be specifically addressed. We recommend that government program receivables be eligible, subject to appropriate sub-limits and documentation requirements.

1.3 Eligible Crop Inventory (Harvested Grain) — 65% of NOLV

The Term Sheet proposes an advance rate of 65% of net orderly liquidation value ("NOLV") for eligible crop inventory, defined as harvested grain (corn, soybeans, and specialty grains) held in Greenfield's owned or leased elevator facilities. The NOLV determination is to be made by an independent appraiser engaged by HCB in its capacity as Administrative Agent.

We understand that HCB intends to engage Pryor & Associates LLC, based in Cleveland, Ohio, as the field examiner and inventory appraiser. While Pryor & Associates is a reputable firm with agricultural lending experience, Greenfield should understand that the appraiser's methodology will have a direct and material impact on the Borrowing Base calculations, and the Company should request the opportunity to review and comment on the appraisal methodology and assumptions before the initial appraisal is finalized.

The proposed 65% NOLV advance rate falls within the market range for commodity grain inventories, which typically ranges from 60% to 70% depending on the type of commodity, storage conditions, and the lending institution's risk appetite. However, we recommend that Greenfield push for an advance rate of 70% of NOLV on eligible crop inventory, for the following reasons:

(a) Harvested grain held in owned elevator facilities is a highly liquid commodity with readily ascertainable market values. Corn and soybean prices are benchmarked daily against Chicago Board of Trade ("CBOT") settlement prices, and active spot and forward markets exist for all of Greenfield's principal commodities.

(b) The NOLV methodology is inherently conservative, as it assumes a forced or accelerated liquidation scenario that discounts market values to reflect hypothetical disposition costs and time pressures. For liquid commodity grain — which can typically be sold within days through established cash-grain channels — the differential between NOLV and fair market value may be less pronounced than for other inventory types, and a higher advance rate is justified.

(c) The five-percentage-point increase (from 65% to 70%) would add meaningful borrowing capacity, particularly during the critical post-harvest period. At peak, the crop inventory contribution would increase from approximately $50,765,000 to approximately $54,670,000 (70% × $78,100,000), providing an additional $3,905,000 of availability.

We further recommend that Greenfield discuss with HCB whether the NOLV methodology is the most appropriate valuation framework for harvested grain, or whether a cost-based or fair-market-value methodology — subject to appropriate haircuts — might produce more favorable and realistic results. In our experience, certain agricultural ABL lenders have moved toward cost-based valuations or CBOT-settlement-based methodologies for commodity grain, recognizing the unique liquidity characteristics of these assets.

For context, the seasonal impact of this Borrowing Base component is substantial. At peak (estimated October 2022), the crop inventory contribution at the proposed 65% rate would be approximately $50,765,000 (65% × $78,100,000 NOLV). At trough (estimated April 2023), this contribution declines to only approximately $5,330,000 (65% × $8,200,000 NOLV), as the vast majority of harvested grain has been sold or shipped by the spring months. This dramatic seasonal swing — from approximately $50.8 million to approximately $5.3 million — underscores the critical importance of this component to the Company's overall borrowing capacity and the value of securing the most favorable advance rate achievable.

1.4 Eligible Crop-Input Inventory (Seed, Fertilizer, Chemicals) — 70% of Lower of Cost or Market

The Term Sheet proposes an advance rate of 70% on eligible crop-input inventory, valued at the lower of cost or market value. Crop-input inventory encompasses seed, fertilizer, and crop protection chemicals held by Greenfield and GCI at storage and distribution locations for sale to customers or for use in the Company's own farming operations.

The proposed 70% advance rate is reasonable and consistent with precedent for ABL facilities involving chemical and fertilizer inventories. These product categories are readily marketable through established distribution channels, maintain relatively stable market values over their useful lives (subject to seasonal demand fluctuations), and are well-understood by agricultural lenders and appraisers.

An important characteristic of the crop-input inventory component is its counter-cyclical relationship to crop inventory. During the peak harvest period (September through November), crop-input inventory levels are at their lowest, as the planting season has concluded and remaining stock has been depleted through sales to farming customers. At peak harvest, crop-input inventory is estimated at approximately $18,400,000, yielding a Borrowing Base contribution of approximately $12,880,000 (70% × $18,400,000). Conversely, during the spring trough period (March through May), crop-input inventory swells as Greenfield and GCI procure and stockpile seed, fertilizer, and chemicals in advance of the planting season, reaching an estimated $31,600,000, with a corresponding Borrowing Base contribution of approximately $22,120,000 (70% × $31,600,000).

This counter-cyclical dynamic is beneficial to Greenfield's overall borrowing capacity and helps stabilize the Borrowing Base across seasonal cycles. When crop inventory declines sharply in the spring, the rising crop-input inventory partially offsets the reduction in available borrowing capacity, smoothing what would otherwise be a more severe seasonal trough.

We recommend confirming with HCB that the definition of "eligible crop-input inventory" in the definitive Credit Agreement includes inventory held at all three of Greenfield's regional distribution centers, as well as inventory held at GCI's principal facility located at 780 Commerce Drive, Bloomington, Illinois. To the extent that the eligibility criteria are limited to inventory held at specific approved locations, the list of approved locations should be comprehensive and should include a mechanism for adding locations as Greenfield's distribution network evolves.

1.5 Eligible Grain Warehouse Receipts — 80% of Market Value

The Term Sheet proposes an advance rate of 80% on eligible grain warehouse receipts, valued at the applicable CBOT settlement price less the applicable local or regional basis differential. This is an aggressive and favorable advance rate that reflects the high quality and liquidity of warehouse receipts as collateral — warehouse receipts represent a direct, documented claim on specific quantities of grain held in storage, and are negotiable instruments under applicable law.

At peak (estimated October 2022), the warehouse receipt component is estimated to contribute approximately $9,600,000 to the Borrowing Base (80% × $12,000,000 market value). At trough (estimated April 2023), this contribution declines to approximately $1,680,000 (80% × $2,100,000 market value), as stored grain is drawn down during the winter and spring months.

We recommend that Greenfield confirm the following points with HCB in connection with the warehouse receipt component:

(a) Definition of "Applicable Basis." The Term Sheet references CBOT settlement price less "applicable basis" but does not define how the local or regional basis differential is to be determined, or how frequently it will be updated. Basis differentials can vary significantly by location, commodity type, and season. We recommend that the Credit Agreement define the applicable basis with specificity and provide for updates at reasonable intervals — at minimum semi-monthly, and preferably weekly — using a clearly identified data source (e.g., USDA Agricultural Marketing Service regional basis reports or bids posted at specified delivery points).

(b) Eligibility of Receipts from Greenfield's Own Facilities. Greenfield operates 14 owned elevator facilities through GGS. It is important to confirm whether warehouse receipts issued by or representing grain stored at Greenfield's own elevator facilities are eligible, or whether eligibility is limited to receipts from independent third-party warehouses. Given the volume of grain stored at Greenfield's own facilities, we strongly recommend that receipts from both owned and third-party facilities be eligible, subject to appropriate controls and verification procedures (e.g., periodic physical audits and confirmation that the issuing facility maintains appropriate state licensing and bonding).

1.6 Aggregate Borrowing Base Observations

The following table summarizes our estimates of the aggregate Borrowing Base at peak and trough, based on the advance rates proposed in the Term Sheet and the Company's projected asset values:

Estimated Peak Borrowing Base (October 2022):

*Assumes reserve level is successfully negotiated to $3,500,000 from the proposed $5,000,000.

Estimated Trough Borrowing Base (April 2023):

The delta between effective peak availability ($80,000,000, constrained by the commitment cap) and estimated trough availability ($42,375,000) is approximately $37,625,000. This magnitude of seasonal swing is characteristic of agricultural ABL facilities and appears manageable in light of Greenfield's seasonal cash flow pattern. At trough, the estimated net availability of $42,375,000 compares favorably with the Company's current borrowing levels (approximately $38,750,000 outstanding under the existing PNB facility as of the most recent reporting period), suggesting that even at the lowest point of the seasonal cycle, the proposed Facility should provide adequate liquidity for the Company's working capital needs, with meaningful headroom.

2. Availability Reserves

The Term Sheet provides that the Administrative Agent shall have the right to impose discretionary availability reserves against the Borrowing Base, with initial reserves set at $5,000,000. The reserves are described as being available to protect against, among other things, inventory valuation fluctuations, potential obsolescence, environmental liabilities, and other factors that the Agent determines, in its discretion, may impair the value of the collateral.

We believe that the proposed initial reserve level of $5,000,000 is excessive and recommend negotiating this amount down to $3,500,000, which is more consistent with current market practice for commodity-backed ABL facilities of this size. Our reasoning is as follows:

(a) The $5,000,000 reserve represents 6.25% of the $80,000,000 total commitment. Market practice for agricultural ABL facilities typically supports initial reserves in the range of 3% to 5% of total commitments, depending on the nature and quality of the underlying collateral. A reserve of $3,500,000 (4.375% of the commitment) falls squarely within this range and would still provide the Administrative Agent with a meaningful cushion against inventory valuation fluctuations and seasonal obsolescence risk.

(b) The collateral package underlying the proposed Facility consists predominantly of highly liquid commodity assets (grain, warehouse receipts, and established agricultural inputs) with transparent, market-based pricing. The risk of sudden, material impairment is lower than for other inventory types (e.g., work-in-process, specialized equipment, or perishable goods), and a lower initial reserve is therefore justified.

(c) At trough, when the Borrowing Base contracts significantly, the impact of a $5,000,000 reserve is proportionally greater. Against an estimated trough gross availability of $45,875,000, a $5,000,000 reserve represents approximately 10.9% of gross availability, whereas a $3,500,000 reserve represents approximately 7.6% — a more proportionate and less punitive level during the Company's most liquidity-constrained period.

In addition to negotiating the initial reserve level, we recommend that Greenfield seek the inclusion of objective, enumerated criteria governing the Administrative Agent's ability to increase reserves above the initial level. As currently drafted, the Term Sheet grants the Agent unfettered discretion to establish and modify availability reserves, with no stated standards, notice requirements, or procedural safeguards. This degree of unbridled discretion is not consistent with current market practice and should be narrowed. Specifically, we recommend negotiating for the following protections:

(a) The Agent's right to establish, increase, or modify availability reserves should be exercisable only in good faith and upon commercially reasonable judgment, with specific reference to identified categories of concern, including material changes in collateral quality or composition, adverse field examination or appraisal findings, material changes in commodity market conditions, material environmental liabilities, and similar enumerated factors.

(b) The Borrower should receive advance written notice (we suggest not less than 10 business days) before the Agent may impose new reserves or increase existing reserves, together with a reasonably detailed explanation of the basis for the proposed reserve action.

(c) The Borrower should be afforded an opportunity, during the notice period, to discuss the proposed reserve action with the Agent and, if applicable, to take remedial measures to address the Agent's underlying concern before the reserve is imposed or increased.

These protections are standard features of well-negotiated ABL credit agreements and should not be controversial with HCB or KBW.

3. SOFR Margin Grid and Pricing

3.1 Interest Rate — Margin Grid

The Term Sheet proposes a floating interest rate based on the Secured Overnight Financing Rate ("SOFR") plus an applicable margin, determined under a three-tier pricing grid based on Average Daily Excess Availability as a percentage of the aggregate Commitment:

The Term Sheet also proposes a SOFR floor of 0.50% per annum.

This pricing represents a meaningful improvement over the existing PNB facility, which bears interest at a flat rate of SOFR + 2.75% with no performance-based grid. At the Tier 1 level, the proposed pricing represents a 75-basis-point improvement over the PNB rate; at Tier 2, a 50-basis-point improvement; and even at the least favorable Tier 3 level, a 25-basis-point improvement. Over the life of the Facility, these savings will be significant, particularly during peak periods when Greenfield's Excess Availability should comfortably exceed the $40,000,000 Tier 1 threshold.

During the peak season (September through November), when the Borrowing Base is at its highest and outstanding borrowings are typically at moderate levels (reflecting the cash inflows from grain sales), Greenfield should comfortably qualify for Tier 1 pricing. During the spring trough, when borrowings increase to fund crop-input purchases and the Borrowing Base contracts, the Company's pricing tier will depend on the level of outstanding borrowings relative to the Borrowing Base. With careful management of borrowing levels and draw timing, we believe Tier 1 or Tier 2 pricing should be achievable during most of the seasonal cycle.

The SOFR floor of 0.50% per annum is market-standard and does not raise any concern. Given current SOFR rates (approximately 2.30% as of the date of this letter), the floor is unlikely to be relevant in the near term.

3.2 Unused Line Fee

The Term Sheet proposes an unused line fee of 0.375% per annum, calculated on the daily average unused portion of the aggregate Commitment. This represents an improvement over the existing PNB facility's unused line fee of 0.50% per annum and falls within the market range for agricultural ABL facilities. We have no further comment on this fee at this stage.

3.3 Letter of Credit Fee and Fronting Fee

The Term Sheet proposes a letter of credit fee equal to the applicable SOFR margin on the face amount of each outstanding letter of credit, plus a fronting fee of 0.125% per annum payable to HCB in its capacity as the issuing bank. Both of these fees are standard for ABL facilities and are consistent with market practice. We have no concerns at this time.

3.4 Upfront Fee

The Term Sheet proposes an upfront fee of 0.50% of the total aggregate Commitments, payable at closing. On a Facility of $80,000,000, this equates to a one-time fee of $400,000, to be split pro rata among the Lenders in proportion to their respective Commitment percentages.

While upfront fees in the range of 0.25% to 0.50% are common in the agricultural ABL market, the proposed 0.50% rate is at the high end of the range, particularly for a facility of this size with a well-established borrower. We recommend that Greenfield negotiate for a reduction of the upfront fee to 0.375%, which would result in a fee of $300,000 — a savings of $100,000. In the alternative, if HCB is unwilling to reduce the upfront fee, we recommend requesting that the upfront fee be credited against the first year's interest payments or the annual administrative agent fee, thereby effectively deferring the economic impact.

We note that the upfront fee is payable at closing and is contingent upon the Facility's successful closing. If the Facility does not close for any reason, no upfront fee would be owed.

3.5 Administrative Agent Fee

The Term Sheet proposes an annual administrative agent fee of $75,000 payable to HCB. This fee is reasonable and within market norms for a syndicated agricultural ABL facility of this size. We have no comment on this fee.

3.6 Field Examination Fees

The Term Sheet provides that HCB, as Administrative Agent, shall have the right to conduct two field examinations per calendar year at the Borrower's expense, with each examination capped at $50,000. During a Trigger Period (as defined below in Section 4), the Agent may conduct additional field examinations at the Borrower's expense, with no stated cap on the number of examinations or the per-examination cost.

We recommend that Greenfield negotiate the following modifications to the field examination provisions:

(a) An annual aggregate cap on field examination costs of $100,000 (covering both routine and Trigger Period examinations), to provide the Company with cost certainty and to prevent excessive examination costs from further straining liquidity during periods when the Company is already under financial pressure.

(b) A limitation that no more than one additional field examination (beyond the two routine annual examinations) may be conducted during any rolling 12-month Trigger Period, absent the occurrence of a separate Event of Default.

We note that HCB has indicated its intention to engage Pryor & Associates LLC as the field examiner. The Firm is not yet familiar with Pryor & Associates' specific fee schedule, examination methodology, or typical scope of engagement. We recommend that Greenfield request this information from HCB before the Credit Agreement is finalized, to ensure that the proposed fee caps are realistic and that the Company understands what to expect from the field examination process.

4. Springing Fixed Charge Coverage Ratio

The Term Sheet proposes a springing fixed charge coverage ratio ("FCCR") covenant of 1.10 to 1.00, which would be tested on a monthly basis only during periods when Excess Availability falls below the greater of (a) 12.5% of the Borrowing Base or (b) $10,000,000 (each such period, a "Trigger Period").

The springing covenant structure is appropriate for an ABL facility and is the market-standard approach. Rather than imposing ongoing financial maintenance covenants that must be satisfied at all times (as is typical in cash-flow-based credit facilities), the springing structure preserves the Company's operational flexibility during normal periods and activates the FCCR test only when liquidity deterioration signals heightened credit risk. This structure is well-suited to agricultural borrowers, whose seasonal cash flow and borrowing patterns may result in periods of lower excess availability without indicating financial distress.

The 1.10:1.00 coverage ratio is within the typical market range of 1.00x to 1.15x for ABL facilities and is reasonable. However, we recommend that Greenfield seek the following modifications to the Trigger Period mechanics and FCCR calculation methodology:

Cure Period. We recommend requesting a 30-day cure period after the commencement of a Trigger Period before the FCCR test is first applied. This grace period would allow Greenfield time to take remedial measures — such as reducing outstanding borrowings, accelerating receivable collections, or adjusting inventory levels — before being required to demonstrate compliance with the 1.10:1.00 ratio. Agricultural businesses are subject to inherent volatility in commodity prices, basis differentials, and payment timing, and a brief cure period acknowledges this reality without materially undermining the lender protections afforded by the springing covenant.

De Minimis Trigger Exception. We recommend requesting an exception providing that if Excess Availability dips below the Trigger Period threshold for fewer than five consecutive business days and is restored to a level above the threshold without additional borrowings (i.e., the shortfall is cured through asset appreciation, receivable collections, or other organic means), then a Trigger Period shall not be deemed to have commenced. This exception would prevent temporary, immaterial fluctuations in the Borrowing Base — which may result from routine appraisal adjustments, basis-differential movements, or short-term timing mismatches — from triggering the full Trigger Period machinery and imposing unnecessary compliance burdens on the Company.

FCCR Calculation Methodology. The Term Sheet does not specify the detailed methodology for calculating the Fixed Charge Coverage Ratio. We recommend confirming that:

(a) The FCCR is calculated using a trailing twelve-month look-back period (TTM), which is standard for ABL facilities and provides a more representative picture of the Company's debt-service capacity than a shorter measurement period.

(b) "Fixed charges" are clearly and comprehensively defined. The numerator (typically EBITDA or a similar cash-flow measure) and the denominator (fixed charges) should be specifically enumerated. Fixed charges should include scheduled debt service (principal and interest), maintenance and growth capital expenditures (or funded CapEx only, depending on the negotiated definition), cash income taxes actually paid, and restricted payments actually made. Fixed charges should exclude non-cash charges, extraordinary or non-recurring items, and unrealized gains or losses on commodity hedging transactions, which can introduce significant volatility that does not reflect the Company's actual cash-flow generation.

Minimum Excess Availability Covenant. We note that the Term Sheet includes a separate covenant requiring the Company to maintain minimum Excess Availability of $5,000,000 at all times. This covenant effectively operates as a hard floor on the Company's liquidity, independent of and in addition to the Trigger Period mechanism. We recommend confirming that a breach of the minimum excess availability covenant triggers standard default remedies (including notice and cure periods consistent with the other Events of Default under the Credit Agreement), and does not result in immediate acceleration of the obligations or immediate termination of the lending commitments. A short cure period (we suggest 5 business days) should be negotiated to allow the Company to restore compliance through ordinary-course cash management.

5. Distribution and Restricted Payment Limitations

The ability of Greenfield Agricultural Partners LLC to make distributions to its parent, Greenfield Holdings Corp. ("Holdings"), and indirectly to Holdings' equity owners, is a critical feature of the Company's capital structure. Holdings' current ownership is as follows:

The Term Sheet proposes that distributions to Holdings (denominated as "Restricted Payments") be permitted only if each of the following conditions is satisfied at the time of, and after giving pro forma effect to, the proposed distribution:

(a) No Default or Event of Default exists or would result from the distribution;

(b) Pro forma Excess Availability is equal to or greater than 20% of the Borrowing Base after giving effect to the distribution; and

The dual-test structure — requiring satisfaction of both an availability test and an FCCR test — is standard for ABL facilities that permit distributions. However, we note that the FCCR threshold for distributions (1.15:1.00) is more restrictive than the springing FCCR covenant (1.10:1.00). This differential is intentional, reflecting the lenders' view that distributions should be permitted only when the Company's financial condition provides a margin of safety above the minimum covenant level. This is a common structuring approach and is not inherently objectionable, but it does bear discussion with the client, as it creates a scenario in which the Company could be in compliance with all financial covenants (i.e., no Trigger Period is in effect, or if in effect, the 1.10:1.00 FCCR is satisfied) yet still be restricted from making distributions to Holdings.

We recommend that Greenfield negotiate the following modifications to the distribution provisions:

Availability Test Threshold. We recommend reducing the availability test from 20% of the Borrowing Base to 15% of the Borrowing Base. At the estimated trough Borrowing Base of approximately $42,375,000, a 20% availability threshold equates to approximately $8,475,000, which — when combined with the separate $5,000,000 minimum excess availability covenant — may be unnecessarily restrictive during spring months when the Company's liquidity is naturally constrained by seasonal factors rather than operational weakness. Reducing the threshold to 15% would lower the effective floor to approximately $6,356,000 at trough, providing greater distribution flexibility while still preserving meaningful lender protection.

Fixed-Dollar Alternative. In the alternative, Greenfield could propose a fixed-dollar availability floor for distributions (e.g., $12,000,000 of pro forma Excess Availability) rather than a percentage-based threshold. A fixed-dollar floor provides greater predictability during seasonal Borrowing Base fluctuations and is easier to model and manage from a treasury perspective. The Company would know at all times that distributions are permitted so long as pro forma Excess Availability remains above $12,000,000, without needing to recalculate a moving target based on the latest Borrowing Base certificate.

Tax Distribution Carve-Out. We strongly recommend requesting a tax distribution carve-out that permits distributions to Holdings — and through Holdings to its owners — in amounts necessary to pay federal and state income tax liabilities attributable to GAP's income for the applicable tax period, without requiring satisfaction of the 1.15:1.00 FCCR test. As an LLC, GAP is likely treated as a pass-through entity for federal income tax purposes, and its owners will be required to pay income taxes on their allocable shares of GAP's income regardless of whether cash distributions are made. A tax distribution carve-out is standard market practice for ABL facilities with pass-through borrowers and should be subject only to the no-default condition and the minimum excess availability covenant (or a specified minimum availability level). The tax rate used to calculate the maximum tax distribution should be the highest combined federal and state marginal rate applicable to any member.

Scope of "Restricted Payments." We recommend confirming whether the definition of "Restricted Payments" in the Credit Agreement will encompass, in addition to equity distributions, management fees payable to affiliates, intercompany payments between GAP and its subsidiaries or Holdings, and equity repurchases under the management equity plan. If so, appropriate carve-outs should be negotiated for (i) management fees payable in the ordinary course of business in amounts consistent with historical practice, (ii) intercompany payments made in the ordinary course of business on arm's-length terms, and (iii) tax-sharing payments.

6. Change of Control Provision

The Term Sheet includes a change of control provision that would constitute an immediate Event of Default upon the occurrence of any of the following: the Lindstrom Family Trust ceasing to own, directly or indirectly, at least 51% of the outstanding equity interests in Greenfield Holdings Corp. As noted above, the Lindstrom Family Trust currently holds 62% of Holdings, with Calloway-Foss Investments LP holding 28% and management equity plan participants holding 10%.

The proposed 51% threshold provides only 11 percentage points of headroom for the Lindstrom Family Trust to dilute or transfer its interests before triggering a change of control Event of Default. While lenders understandably seek to maintain the involvement and control of the founding family (which has been instrumental in building Greenfield's operations and industry relationships), the narrow headroom may prove problematic in range foreseeable scenarios, including estate planning transactions, secondary sales of interests to existing or new investors, equity issuances to key management through the equity incentive plan, and potential future capital raises to fund growth or acquisitions.

We recommend that Greenfield negotiate one or more of the following modifications:

Reduced Threshold. Request that the change of control threshold be reduced from 51% to 40%, providing 22 percentage points of headroom. At a 40% threshold, the Lindstrom Family Trust would retain the ability to dilute its ownership by approximately one-third before triggering a change of control. As an alternative, Greenfield could propose a formulation requiring that the Lindstrom Family Trust remain the single largest shareholder (by equity interest) of Holdings at all times, without specifying a fixed percentage threshold. This approach accommodates a broader range of ownership structures while preserving the fundamental principle that the Lindstrom family remains the controlling equity holder.

Cure and Consent Mechanism. If HCB insists on a 51% threshold, we recommend negotiating for a cure or consent mechanism under which, if a potential change of control event is identified in advance (e.g., through a proposed equity sale, estate planning transaction, or capital raise), the Borrower would be required to notify the Administrative Agent, and the Agent would be required to engage in good-faith discussions with the Borrower for a period of not less than 30 days before an Event of Default is deemed to have occurred. During this discussion period, the Borrower would have the opportunity to propose alternative structures or protections (e.g., a guaranty or equity support agreement from the new controlling party) that address the lenders' credit concerns. This mechanism would prevent mechanical defaults arising from transactions that do not, in substance, impair the credit quality of the Facility.

Indirect Changes of Control. The Term Sheet does not specify whether indirect changes of control — such as changes in the trustee, protector, or beneficiaries of the Lindstrom Family Trust itself — would constitute a change of control for purposes of this provision. Given that the change of control is defined by reference to the Trust's ownership of Holdings, internal modifications to the Trust's governance or beneficial ownership could theoretically trigger the provision even though the Trust continues to hold the same equity interest. We recommend that the Credit Agreement specifically exclude from the definition of "Change of Control" any changes in the internal governance, administration, trustee appointment, or beneficiary designation of the Lindstrom Family Trust, so long as the Trust continues to hold equity interests in Holdings at or above the agreed threshold.

We recommend that Greenfield management consider and advise us whether any near-term estate planning transactions, equity incentive grants to management, or external capital raises are contemplated that could implicate the change of control provision, so that we may structure the provision appropriately during the documentation phase.

7. Additional Covenant Observations

7.1 Capital Expenditure Limitation

The Term Sheet proposes a capital expenditure limitation of $8,000,000 per fiscal year, with a 50% carryforward of unused amounts from the immediately preceding fiscal year, subject to a single-year maximum of $12,000,000 (inclusive of any carryforward).

This basket appears adequate for Greenfield's current maintenance capital expenditure requirements, which based on historical data have averaged approximately $5.5 million to $7.0 million per year. However, the $8,000,000 limit may constrain the Company's ability to pursue growth-oriented capital investments, including elevator upgrades and capacity expansions, distribution center improvements, precision agriculture technology investments, and storage facility modernization. To the extent that Greenfield anticipates any significant capital projects during the four-year term of the Facility, the CapEx basket should be sized accordingly.

We recommend the following:

(a) Request an increase in the annual CapEx limitation to $10,000,000, with a single-year maximum (including carryforward) of $15,000,000. This increase would provide meaningful additional flexibility for growth investments while remaining conservative relative to the Company's overall asset base and revenue generation.

(b) Confirm whether the CapEx limitation applies only to funded capital expenditures (i.e., expenditures paid in cash or financed with Facility proceeds) or also includes capital leases and purchase money obligations. If the latter, the practical CapEx capacity would be further reduced by the amounts utilized under the separate purchase money/capital lease basket (discussed below). We recommend that the CapEx limitation apply solely to funded CapEx, with capital leases and purchase money obligations governed exclusively by the separate indebtedness basket.

(c) Consider requesting a specific carve-out for maintenance capital expenditures on grain elevator facilities and related infrastructure, which are essential to the Company's compliance with state regulatory requirements, OSHA standards, and industry best practices. Maintenance CapEx on elevator facilities could be excluded from the general CapEx basket (or subject to a separate sub-basket) to ensure that the Company is not forced to choose between regulatory compliance and growth investment.

7.2 Additional Indebtedness Baskets

The Term Sheet proposes the following baskets for additional indebtedness incurred outside the Facility:

(a) Unsecured Indebtedness: $3,000,000 in aggregate principal amount outstanding at any time.

(b) Purchase Money / Capital Lease Indebtedness: $1,500,000 in aggregate principal amount outstanding at any time.

Both of these baskets are tight relative to the size and complexity of Greenfield's operations. The Company operates 14 elevator sites across three states, maintains 3 regional distribution centers, manages approximately 82,000 acres under contract farming arrangements, and employs a substantial fleet of vehicles, equipment, and rolling stock. Equipment financing needs — for grain handling equipment, trucks, sprayers, planters, and distribution vehicles — are ongoing and significant.

We recommend negotiating the following increases:

(a) Unsecured indebtedness basket: increase to $5,000,000.

(b) Purchase money / capital lease indebtedness basket: increase to $3,000,000.

These increased baskets would provide the Company with greater operational flexibility to finance equipment acquisitions and other non-core indebtedness without requiring lender consent, while remaining at levels that do not materially impair the lenders' collateral position or the Company's overall leverage profile.

7.3 Investment and Acquisition Basket

The Term Sheet proposes an investment and acquisition basket of $5,000,000 per fiscal year. This basket is adequate for modest tuck-in acquisitions and strategic investments, which is consistent with Greenfield's historical acquisition activity.

We recommend negotiating a carve-out for (a) investments in existing wholly-owned subsidiaries, specifically GGS and GCI, made in the ordinary course of business (e.g., intercompany loans, capital contributions to fund subsidiary operations, or equity infusions related to working capital management), and (b) ordinary-course trade investments, including deposits, prepayments, and advances to suppliers and growers that are customary in the agricultural industry. These types of investments are routine operational activities and should not consume the Company's acquisition basket capacity.

7.4 Anti-Hedging Negative Pledge

The Term Sheet includes a covenant prohibiting commodity hedging in excess of 80% of anticipated production without the prior written consent of the Administrative Agent. This provision is designed to limit Greenfield's exposure to speculative hedging activity that could generate margin calls or mark-to-market losses, while permitting a reasonable level of bona fide risk-management hedging.

The 80% threshold is reasonable and falls within industry norms for agricultural borrowers, which typically permit hedging of 75% to 85% of anticipated production. We have no objection to the threshold itself.

However, we recommend that the Credit Agreement clarify the following:

(a) The limitation should apply only to speculative hedging (i.e., hedging positions that exceed the Company's physical exposure to the underlying commodity) and should not restrict bona fide risk-management hedging entered into in the ordinary course of business to manage price risk associated with Greenfield's actual production, storage, and merchandising activities. This distinction is critically important — bona fide hedging is a fundamental component of agricultural risk management and is expected by the Company's customers, suppliers, and insurance providers.

(b) "Anticipated production" should be measured based on the Company's good-faith production estimates, as reflected in the annual production plan or operating budget delivered to the Administrative Agent. The measurement methodology should be clearly specified to avoid future disputes over whether a particular hedging position exceeds the 80% threshold.

8. Collateral and Security Package

The Term Sheet contemplates a comprehensive collateral and security package consisting of the following:

(a) First-priority perfected security interests in substantially all personal property of the Borrower and each Guarantor (anticipated to include Holdings, GGS, and GCI), including accounts, inventory, equipment, general intangibles, deposit accounts, investment property, instruments, chattel paper, and supporting obligations;

(b) First-priority mortgages on all owned real property, including the Company's 14 elevator sites and 3 regional distribution centers, with an aggregate appraised value of approximately $64,800,000;

(d) Assignment of crop insurance proceeds, business interruption insurance proceeds, and related insurance benefits.

This collateral package is broadly consistent with market expectations for an $80,000,000 agricultural ABL facility and does not present any unusual concerns in scope. The following practical considerations, however, should be raised with HCB during the documentation phase:

Deposit Account Control Agreements (DACAs). The Credit Agreement will require the execution of deposit account control agreements on all operating accounts maintained by the Borrower and each Guarantor. Greenfield's primary operating accounts are currently maintained at PNB, which serves as both depository bank and existing revolving credit lender. Upon closing of the proposed Facility and repayment of the PNB facility, Greenfield will need to determine whether to (i) transition its operating accounts to HCB or another depository institution, or (ii) maintain accounts at PNB and execute DACAs in favor of HCB as the new Collateral Agent. In either case, logistical coordination will be required well in advance of closing to ensure that DACAs are in place, ACH and wire transfer instructions are updated, and there is no disruption to the Company's cash management operations. We recommend discussing this transition plan with HCB at the earliest opportunity.

Insurance Assignments. The Company's insurance program is placed through Redwood Insurance Group, Inc., as broker, with Northstar Mutual Insurance Company serving as the primary crop insurance and property/casualty carrier. The Collateral Agent will require assignment of insurance proceeds and loss payee/additional insured endorsements on all applicable policies in favor of HCB. We recommend that Greenfield confirm with Redwood Insurance Group that the existing policy structures permit such assignments and endorsements, and that any required insurer consents can be obtained prior to closing. If separate endorsements are needed for crop insurance (which is federally regulated and subject to USDA/RMA requirements), those should be identified and addressed early in the process.

Existing Liens and Payoff Coordination. PNB holds existing UCC financing statements filed with the Iowa Secretary of State (Filing Nos. 2018-0041729 and 2018-0041730, both filed on April 2, 2018) as well as recorded real property mortgages in Polk County, Iowa; McLean County, Illinois; and eight additional Iowa counties. As a condition to closing, HCB will require delivery of payoff letters from PNB, UCC-3 termination statements, and mortgage releases covering all existing PNB liens. Greenfield should initiate contact with PNB and its counsel at the earliest practicable date to begin this process, as the preparation and recording of mortgage releases across multiple jurisdictions can be time-consuming. We recommend that Calderwood & Harkness coordinate directly with PNB's counsel to ensure that all termination and release documents are in satisfactory form and available for delivery at closing.

Grain Elevator Regulatory Issues. Greenfield operates licensed grain elevators in Iowa, Illinois, and Indiana. Each of these states imposes regulatory requirements on grain elevator operators, including licensing, bonding, and financial reporting obligations administered by the respective state departments of agriculture. We recommend that the Company confirm whether any applicable grain elevator licensing or bonding requirements impose restrictions on the granting of security interests in stored grain, elevator facilities, or related assets. In certain jurisdictions, the rights of grain depositors may take priority over secured creditors under state warehouse or grain dealer statutes, which could affect the Collateral Agent's recovery in a foreclosure scenario. This issue should be analyzed and addressed in the legal opinions delivered at closing.

Warehouse Receipts. The Company's inventory of grain warehouse receipts will need to be perfected in favor of the Collateral Agent under UCC Article 7 (Documents of Title). If Greenfield utilizes electronic warehouse receipts (as is increasingly common in the grain industry), separate perfection steps may be required, including the designation of the Collateral Agent as the "control party" on the electronic warehouse receipt system. We recommend confirming the Company's current use of paper versus electronic warehouse receipts and ensuring that the Credit Agreement's perfection requirements address both formats.

9. Conditions Precedent and Closing Logistics

Based on the Term Sheet and our experience with comparable transactions, we anticipate that the closing of the Facility will be subject to customary conditions precedent, including but not limited to the following:

(a) Execution and delivery of the Credit Agreement, guaranty agreements, security agreements, mortgages, pledge agreements, and all ancillary loan documents in form and substance satisfactory to the Administrative Agent and the Lenders;

(b) Delivery of officer's certificates, secretary's certificates (certifying organizational documents, resolutions, and incumbency), and certificates of good standing for each of the following entities: Greenfield Agricultural Partners LLC (Iowa), Greenfield Holdings Corp. (Delaware), Greenfield Grain Storage LLC (Iowa), and Greenfield Crop Inputs Inc. (Illinois);

(c) Delivery of legal opinions from borrower's counsel (Calderwood & Harkness LLP) covering customary matters, including due authorization, enforceability, no conflicts, and perfection of security interests;

(d) Satisfactory completion of a field examination and inventory appraisal by Pryor & Associates LLC, with results acceptable to the Administrative Agent in its reasonable discretion;

(e) Delivery of a payoff letter from PNB confirming the outstanding balance of the existing $55,000,000 revolving credit facility and providing wire transfer instructions for repayment, together with executed UCC-3 termination statements and recordable mortgage releases covering all PNB liens;

(f) Evidence of insurance coverage satisfactory to the Collateral Agent, including loss payee and additional insured endorsements;

(g) Execution and delivery of deposit account control agreements on all operating accounts;

(h) Delivery of independent audited financial statements and interim unaudited financial statements; and

(i) Payment of all fees and expenses due at closing, including the upfront fee, the initial administrative agent fee, and the fees and expenses of lender's counsel (KBW).

We recommend that Greenfield begin assembling the necessary organizational documents, board and member resolutions, and incumbency certificates at the earliest opportunity to avoid closing delays. Given the anticipated October 2022 closing timeline, the window for document preparation is relatively narrow, and early coordination will be essential.

With respect to the field examination, HCB has indicated its intention to engage Pryor & Associates LLC to conduct the required field examination and inventory appraisal. This process should commence promptly following execution of the revised term sheet. Greenfield should be prepared to coordinate access to the Des Moines headquarters, all 14 elevator sites, the Bloomington distribution center operated by GCI, and the other regional distribution centers. The field examination will involve a review of the Company's books, records, accounting systems, inventory management processes, and internal controls, as well as physical inspection and count of inventory at selected locations. We recommend designating an internal liaison (potentially the Company's Controller or VP of Operations) to coordinate with the Pryor & Associates team and ensure that the examination proceeds efficiently.

The following financial information will be required as conditions precedent to closing:

(a) Audited financial statements for fiscal year 2021, prepared by Ashford, Kline & Pearce LLP (the Company's independent auditor). We understand that these statements are available and reflect FY2021 revenue of approximately $347.2 million.

(b) Interim unaudited financial statements for the most recent available period. Based on the Company's reporting calendar, we anticipate that financial statements through June 30, 2022, will be available, reflecting total assets of approximately $289.6 million and projected full-year FY2022 revenue of approximately $391.5 million.

Both sets of financial statements should be reviewed for consistency with the representations and financial covenants in the Credit Agreement. We will work with the Company and its auditors to ensure that the financial information is in the form required by HCB and KBW.

10. Process and Next Steps

Calderwood & Harkness recommends the following process for advancing the transaction toward closing:

Step 1 — Internal Review and Instruction. Greenfield should review the comments and recommendations set forth in this letter and provide Calderwood & Harkness with instructions regarding the Company's negotiating positions on each of the issues identified. We recommend scheduling a call among Ms. Calloway, Ms. Vasquez, Mr. Lindstrom (as appropriate), and the C&H team at the earliest mutually convenient time to discuss these comments and confirm the Company's priorities.

Step 2 — Negotiation Call with HCB and KBW. Following receipt of Greenfield's instructions, Calderwood & Harkness recommends scheduling a negotiation call with HCB (the relevant contacts being Gregory Thorn and Allison Kuo) and lender's counsel Kessler, Brandt & Whitfield LLP (the relevant contacts being Richard Whitfield and Lauren Chisholm). The purpose of this call would be to present Greenfield's comments on the Term Sheet, discuss areas of potential compromise, and reach agreement on the key commercial terms before moving to definitive documentation.

Step 3 — Revised Term Sheet. We propose that Greenfield authorize Calderwood & Harkness to prepare and transmit a revised term sheet markup to HCB reflecting the agreed-upon positions, with the goal of executing a revised and mutually agreed Term Sheet by the week of September 5–9, 2022.

Step 4 — Credit Agreement and Ancillary Documents. Following execution of the revised Term Sheet, we expect KBW to prepare and deliver an initial draft of the Credit Agreement and ancillary loan documents within approximately one week. Calderwood & Harkness will review the initial draft and provide comments on behalf of Greenfield.

Step 5 — Closing Checklist and Coordination. Calderwood & Harkness will prepare and circulate a comprehensive closing checklist once the Term Sheet is agreed, identifying all deliverables, responsible parties, and target dates for each closing condition.

Step 6 — Updated Financial Data. We request that Greenfield provide updated financial projections, seasonal borrowing base data, and historical borrowing base component information (by month, for the most recent 24-month period) to support our negotiation of advance rates, reserve levels, and financial covenant thresholds. This data will be particularly important in substantiating our request for a higher crop inventory advance rate and a lower availability reserve.

11. Summary of Key Recommendations

For ease of reference, we set forth below a numbered summary of our principal negotiating recommendations:

1. Availability Reserves. Negotiate the initial availability reserve from $5,000,000 down to $3,500,000, and require objective criteria, good-faith standards, and advance notice before the Agent may impose or increase reserves.

2. Crop Inventory Advance Rate. Seek an improvemen

CALDERWOOD & HARKNESS LLP Counselors at Law
150 North Michigan Avenue, Suite 3600 Chicago, Illinois 60601
Telephone: (312) 555-4800 Facsimile: (312) 555-4801 www.calderwoodharkness.com
September 2, 2022
Via Email and First-Class Mail
Patricia "Trish" Calloway Chief Financial Officer Greenfield Agricultural Partners LLC 4100 Grand Prairie Boulevard, Suite 300 Des Moines, Iowa 50309
Nina Vasquez General Counsel and Corporate Secretary Greenfield Agricultural Partners LLC 4100 Grand Prairie Boulevard, Suite 300 Des Moines, Iowa 50309
Re: Comments on Indicative Term Sheet dated August 22, 2022, from Heartland Commerce Bank, National Association — Proposed $80,000,000 Senior Secured Asset-Based Revolving Credit Facility
Calderwood & Harkness Matter No. 1020-00001
Dear Ms. Calloway and Ms. Vasquez:
Pursuant to the engagement letter executed on August 29, 2022, retaining Calderwood & Harkness LLP ("C&H" or the "Firm") as borrower's counsel to Greenfield Agricultural Partners LLC ("Greenfield," "GAP," or the "Company") in connection with the proposed $80,000,000 senior secured asset-based revolving credit facility (the "Facility"), we are writing to provide our initial substantive comments on the indicative term sheet (the "Term Sheet") received on August 22, 2022, from Heartland Commerce Bank, National Association ("HCB"), in its capacity as proposed Administrative Agent, Collateral Agent, Sole Lead Arranger, and Sole Bookrunner.
As set forth in the Term Sheet, HCB proposes to lead a syndicate consisting of three lenders with the following commitment allocations:
The purpose of this letter is to provide C&H's initial substantive comments on the Term Sheet for Greenfield's review, internal discussion, and instruction, prior to transmitting any formal response to HCB or its counsel, Kessler, Brandt & Whitfield LLP ("KBW"). The comments and recommendations contained herein reflect our assessment of the Term Sheet against current market practice for agricultural asset-based lending facilities, our understanding of Greenfield's business operations and capital structure, and the specific terms of the existing $55,000,000 revolving credit facility with Prairie National Bank, N.A. ("PNB") that the proposed Facility is intended to refinance and replace.
As we understand the transaction, the proposed Facility is intended to serve three principal purposes: (i) refinancing and repayment in full of the existing $55,000,000 revolving credit facility with PNB (the outstanding balance of which was approximately $38,750,000 as of the most recent reporting period); (ii) funding Greenfield's seasonal working capital needs, including the purchase of seed, fertilizer, crop protection chemicals, and other agricultural inputs; and (iii) providing for general corporate purposes of the Company and its subsidiaries. The proposed maturity is four years from closing (with closing currently anticipated in October 2022, resulting in a maturity date in October 2026). The Facility, and the definitive loan documentation, are proposed to be governed by the laws of the State of Illinois.
Our comments are organized below by major topic area. An annotated copy of the HCB Indicative Term Sheet dated August 22, 2022, with C&H's marginal comments, is enclosed as a separate attachment for your reference and is not reproduced in the body of this letter.
1. Borrowing Base Methodology and Advance Rates
1.1 General Borrowing Base Structure
The Term Sheet proposes a borrowing base (the "Borrowing Base") tied to four distinct asset categories: (a) eligible accounts receivable; (b) eligible crop inventory, consisting of harvested grain held in owned or leased elevator facilities; (c) eligible crop-input inventory, consisting of seed, fertilizer, and crop protection chemicals held for sale or use; and (d) eligible grain warehouse receipts. Each category is subject to a specified advance rate, eligibility criteria (to be detailed in the definitive Credit Agreement), and the Administrative Agent's discretionary availability reserves.
This multi-category structure is appropriate and well-suited to Greenfield's diversified operations, which span row-crop production (corn, soybeans, and specialty grains across approximately 82,000 managed acres), crop-input distribution through Greenfield Crop Inputs Inc. ("GCI"), grain storage and merchandising through Greenfield Grain Storage LLC ("GGS") and the Company's network of 14 owned elevator facilities, and contract farming operations conducted across Iowa, Illinois, and Indiana. The inclusion of four separate asset categories — rather than a simplified two-category (AR and inventory) structure — reflects the complexity and diversity of the Company's revenue streams and asset base, and should provide meaningful borrowing capacity across seasonal cycles.
It is important to note the significant seasonal variability inherent in Greenfield's Borrowing Base. Based on the financial data provided to the Firm, peak seasonal inventory values are estimated at approximately $125 million to $145 million during the post-harvest period (September through November), when elevator facilities are at or near storage capacity with newly harvested grain and accounts receivable from grain sales and contract farming services are at their highest levels. Conversely, during trough periods in the spring (March through May), crop inventory declines sharply as stored grain is sold into the market, while crop-input inventory increases significantly as Greenfield procures seed, fertilizer, and chemicals in advance of the planting season. This seasonal oscillation has important implications for the Company's borrowing capacity, liquidity management, and compliance with the financial covenants and availability thresholds discussed later in this letter.
1.2 Eligible Accounts Receivable — 85% Advance Rate
The Term Sheet proposes an advance rate of 85% on eligible accounts receivable. This rate is consistent with prevailing market practice for asset-based revolving credit facilities across agricultural and commodity-related industries, and we have no objection to the proposed rate at this stage.
Based on the Company's internal financial data and seasonal projections, Greenfield's accounts receivable base is estimated at approximately $42.3 million at peak (projected October 2022) and approximately $19.7 million at trough (projected April 2023). At these levels, the accounts receivable component of the Borrowing Base would contribute approximately $35,955,000 at peak (85% × $42,300,000) and approximately $16,745,000 at trough (85% × $19,700,000).
We recommend that the Company pay careful attention to the eligibility criteria governing accounts receivable when KBW delivers the initial draft of the Credit Agreement. In our experience with agricultural ABL facilities, the following eligibility parameters warrant particular scrutiny:
(a) Concentration Limits. Single-debtor concentration caps (typically 10–15% of the total AR pool) may disproportionately affect agricultural borrowers that sell to a limited number of large grain purchasers or commodity traders. We should understand Greenfield's top-ten customer concentrations and negotiate appropriate thresholds.
(b) Dilution Adjustments. The Credit Agreement will likely include a dilution reserve or dilution adjustment that reduces eligible AR in the event that historical dilution (credits, returns, allowances, and discounts) exceeds a specified threshold (commonly 5%). Greenfield should be prepared to provide detailed dilution history.
(c) Cross-Aging Exclusions. Accounts receivable from any obligor where a specified percentage (typically 25–50%) of such obligor's AR is more than a stated number of days past due (commonly 60 or 90 days) are typically excluded from the eligible AR pool in their entirety. Given the seasonal payment patterns common in the agricultural sector, the cross-aging percentage and aging period should be carefully negotiated.
(d) Government Program Receivables. Receivables arising from USDA commodity payments, crop insurance indemnity payments, conservation reserve program payments, and similar government programs represent a significant component of Greenfield's AR base. These receivables present unique characteristics — including potential sovereign immunity defenses, offset rights, and payment timing uncertainties — and their treatment in the eligibility criteria should be specifically addressed. We recommend that government program receivables be eligible, subject to appropriate sub-limits and documentation requirements.
1.3 Eligible Crop Inventory (Harvested Grain) — 65% of NOLV
The Term Sheet proposes an advance rate of 65% of net orderly liquidation value ("NOLV") for eligible crop inventory, defined as harvested grain (corn, soybeans, and specialty grains) held in Greenfield's owned or leased elevator facilities. The NOLV determination is to be made by an independent appraiser engaged by HCB in its capacity as Administrative Agent.
We understand that HCB intends to engage Pryor & Associates LLC, based in Cleveland, Ohio, as the field examiner and inventory appraiser. While Pryor & Associates is a reputable firm with agricultural lending experience, Greenfield should understand that the appraiser's methodology will have a direct and material impact on the Borrowing Base calculations, and the Company should request the opportunity to review and comment on the appraisal methodology and assumptions before the initial appraisal is finalized.
The proposed 65% NOLV advance rate falls within the market range for commodity grain inventories, which typically ranges from 60% to 70% depending on the type of commodity, storage conditions, and the lending institution's risk appetite. However, we recommend that Greenfield push for an advance rate of 70% of NOLV on eligible crop inventory, for the following reasons:
(a) Harvested grain held in owned elevator facilities is a highly liquid commodity with readily ascertainable market values. Corn and soybean prices are benchmarked daily against Chicago Board of Trade ("CBOT") settlement prices, and active spot and forward markets exist for all of Greenfield's principal commodities.
(b) The NOLV methodology is inherently conservative, as it assumes a forced or accelerated liquidation scenario that discounts market values to reflect hypothetical disposition costs and time pressures. For liquid commodity grain — which can typically be sold within days through established cash-grain channels — the differential between NOLV and fair market value may be less pronounced than for other inventory types, and a higher advance rate is justified.
(c) The five-percentage-point increase (from 65% to 70%) would add meaningful borrowing capacity, particularly during the critical post-harvest period. At peak, the crop inventory contribution would increase from approximately $50,765,000 to approximately $54,670,000 (70% × $78,100,000), providing an additional $3,905,000 of availability.
We further recommend that Greenfield discuss with HCB whether the NOLV methodology is the most appropriate valuation framework for harvested grain, or whether a cost-based or fair-market-value methodology — subject to appropriate haircuts — might produce more favorable and realistic results. In our experience, certain agricultural ABL lenders have moved toward cost-based valuations or CBOT-settlement-based methodologies for commodity grain, recognizing the unique liquidity characteristics of these assets.
For context, the seasonal impact of this Borrowing Base component is substantial. At peak (estimated October 2022), the crop inventory contribution at the proposed 65% rate would be approximately $50,765,000 (65% × $78,100,000 NOLV). At trough (estimated April 2023), this contribution declines to only approximately $5,330,000 (65% × $8,200,000 NOLV), as the vast majority of harvested grain has been sold or shipped by the spring months. This dramatic seasonal swing — from approximately $50.8 million to approximately $5.3 million — underscores the critical importance of this component to the Company's overall borrowing capacity and the value of securing the most favorable advance rate achievable.
1.4 Eligible Crop-Input Inventory (Seed, Fertilizer, Chemicals) — 70% of Lower of Cost or Market
The Term Sheet proposes an advance rate of 70% on eligible crop-input inventory, valued at the lower of cost or market value. Crop-input inventory encompasses seed, fertilizer, and crop protection chemicals held by Greenfield and GCI at storage and distribution locations for sale to customers or for use in the Company's own farming operations.
The proposed 70% advance rate is reasonable and consistent with precedent for ABL facilities involving chemical and fertilizer inventories. These product categories are readily marketable through established distribution channels, maintain relatively stable market values over their useful lives (subject to seasonal demand fluctuations), and are well-understood by agricultural lenders and appraisers.
An important characteristic of the crop-input inventory component is its counter-cyclical relationship to crop inventory. During the peak harvest period (September through November), crop-input inventory levels are at their lowest, as the planting season has concluded and remaining stock has been depleted through sales to farming customers. At peak harvest, crop-input inventory is estimated at approximately $18,400,000, yielding a Borrowing Base contribution of approximately $12,880,000 (70% × $18,400,000). Conversely, during the spring trough period (March through May), crop-input inventory swells as Greenfield and GCI procure and stockpile seed, fertilizer, and chemicals in advance of the planting season, reaching an estimated $31,600,000, with a corresponding Borrowing Base contribution of approximately $22,120,000 (70% × $31,600,000).
This counter-cyclical dynamic is beneficial to Greenfield's overall borrowing capacity and helps stabilize the Borrowing Base across seasonal cycles. When crop inventory declines sharply in the spring, the rising crop-input inventory partially offsets the reduction in available borrowing capacity, smoothing what would otherwise be a more severe seasonal trough.
We recommend confirming with HCB that the definition of "eligible crop-input inventory" in the definitive Credit Agreement includes inventory held at all three of Greenfield's regional distribution centers, as well as inventory held at GCI's principal facility located at 780 Commerce Drive, Bloomington, Illinois. To the extent that the eligibility criteria are limited to inventory held at specific approved locations, the list of approved locations should be comprehensive and should include a mechanism for adding locations as Greenfield's distribution network evolves.
1.5 Eligible Grain Warehouse Receipts — 80% of Market Value
The Term Sheet proposes an advance rate of 80% on eligible grain warehouse receipts, valued at the applicable CBOT settlement price less the applicable local or regional basis differential. This is an aggressive and favorable advance rate that reflects the high quality and liquidity of warehouse receipts as collateral — warehouse receipts represent a direct, documented claim on specific quantities of grain held in storage, and are negotiable instruments under applicable law.
At peak (estimated October 2022), the warehouse receipt component is estimated to contribute approximately $9,600,000 to the Borrowing Base (80% × $12,000,000 market value). At trough (estimated April 2023), this contribution declines to approximately $1,680,000 (80% × $2,100,000 market value), as stored grain is drawn down during the winter and spring months.
We recommend that Greenfield confirm the following points with HCB in connection with the warehouse receipt component:
(a) Definition of "Applicable Basis." The Term Sheet references CBOT settlement price less "applicable basis" but does not define how the local or regional basis differential is to be determined, or how frequently it will be updated. Basis differentials can vary significantly by location, commodity type, and season. We recommend that the Credit Agreement define the applicable basis with specificity and provide for updates at reasonable intervals — at minimum semi-monthly, and preferably weekly — using a clearly identified data source (e.g., USDA Agricultural Marketing Service regional basis reports or bids posted at specified delivery points).
(b) Eligibility of Receipts from Greenfield's Own Facilities. Greenfield operates 14 owned elevator facilities through GGS. It is important to confirm whether warehouse receipts issued by or representing grain stored at Greenfield's own elevator facilities are eligible, or whether eligibility is limited to receipts from independent third-party warehouses. Given the volume of grain stored at Greenfield's own facilities, we strongly recommend that receipts from both owned and third-party facilities be eligible, subject to appropriate controls and verification procedures (e.g., periodic physical audits and confirmation that the issuing facility maintains appropriate state licensing and bonding).
1.6 Aggregate Borrowing Base Observations
The following table summarizes our estimates of the aggregate Borrowing Base at peak and trough, based on the advance rates proposed in the Term Sheet and the Company's projected asset values:
Estimated Peak Borrowing Base (October 2022):
*Assumes reserve level is successfully negotiated to $3,500,000 from the proposed $5,000,000.
Estimated Trough Borrowing Base (April 2023):
The delta between effective peak availability ($80,000,000, constrained by the commitment cap) and estimated trough availability ($42,375,000) is approximately $37,625,000. This magnitude of seasonal swing is characteristic of agricultural ABL facilities and appears manageable in light of Greenfield's seasonal cash flow pattern. At trough, the estimated net availability of $42,375,000 compares favorably with the Company's current borrowing levels (approximately $38,750,000 outstanding under the existing PNB facility as of the most recent reporting period), suggesting that even at the lowest point of the seasonal cycle, the proposed Facility should provide adequate liquidity for the Company's working capital needs, with meaningful headroom.
2. Availability Reserves
The Term Sheet provides that the Administrative Agent shall have the right to impose discretionary availability reserves against the Borrowing Base, with initial reserves set at $5,000,000. The reserves are described as being available to protect against, among other things, inventory valuation fluctuations, potential obsolescence, environmental liabilities, and other factors that the Agent determines, in its discretion, may impair the value of the collateral.
We believe that the proposed initial reserve level of $5,000,000 is excessive and recommend negotiating this amount down to $3,500,000, which is more consistent with current market practice for commodity-backed ABL facilities of this size. Our reasoning is as follows:
(a) The $5,000,000 reserve represents 6.25% of the $80,000,000 total commitment. Market practice for agricultural ABL facilities typically supports initial reserves in the range of 3% to 5% of total commitments, depending on the nature and quality of the underlying collateral. A reserve of $3,500,000 (4.375% of the commitment) falls squarely within this range and would still provide the Administrative Agent with a meaningful cushion against inventory valuation fluctuations and seasonal obsolescence risk.
(b) The collateral package underlying the proposed Facility consists predominantly of highly liquid commodity assets (grain, warehouse receipts, and established agricultural inputs) with transparent, market-based pricing. The risk of sudden, material impairment is lower than for other inventory types (e.g., work-in-process, specialized equipment, or perishable goods), and a lower initial reserve is therefore justified.
(c) At trough, when the Borrowing Base contracts significantly, the impact of a $5,000,000 reserve is proportionally greater. Against an estimated trough gross availability of $45,875,000, a $5,000,000 reserve represents approximately 10.9% of gross availability, whereas a $3,500,000 reserve represents approximately 7.6% — a more proportionate and less punitive level during the Company's most liquidity-constrained period.
In addition to negotiating the initial reserve level, we recommend that Greenfield seek the inclusion of objective, enumerated criteria governing the Administrative Agent's ability to increase reserves above the initial level. As currently drafted, the Term Sheet grants the Agent unfettered discretion to establish and modify availability reserves, with no stated standards, notice requirements, or procedural safeguards. This degree of unbridled discretion is not consistent with current market practice and should be narrowed. Specifically, we recommend negotiating for the following protections:
(a) The Agent's right to establish, increase, or modify availability reserves should be exercisable only in good faith and upon commercially reasonable judgment, with specific reference to identified categories of concern, including material changes in collateral quality or composition, adverse field examination or appraisal findings, material changes in commodity market conditions, material environmental liabilities, and similar enumerated factors.
(b) The Borrower should receive advance written notice (we suggest not less than 10 business days) before the Agent may impose new reserves or increase existing reserves, together with a reasonably detailed explanation of the basis for the proposed reserve action.
(c) The Borrower should be afforded an opportunity, during the notice period, to discuss the proposed reserve action with the Agent and, if applicable, to take remedial measures to address the Agent's underlying concern before the reserve is imposed or increased.
These protections are standard features of well-negotiated ABL credit agreements and should not be controversial with HCB or KBW.
3. SOFR Margin Grid and Pricing
3.1 Interest Rate — Margin Grid
The Term Sheet proposes a floating interest rate based on the Secured Overnight Financing Rate ("SOFR") plus an applicable margin, determined under a three-tier pricing grid based on Average Daily Excess Availability as a percentage of the aggregate Commitment:
The Term Sheet also proposes a SOFR floor of 0.50% per annum.
This pricing represents a meaningful improvement over the existing PNB facility, which bears interest at a flat rate of SOFR + 2.75% with no performance-based grid. At the Tier 1 level, the proposed pricing represents a 75-basis-point improvement over the PNB rate; at Tier 2, a 50-basis-point improvement; and even at the least favorable Tier 3 level, a 25-basis-point improvement. Over the life of the Facility, these savings will be significant, particularly during peak periods when Greenfield's Excess Availability should comfortably exceed the $40,000,000 Tier 1 threshold.
During the peak season (September through November), when the Borrowing Base is at its highest and outstanding borrowings are typically at moderate levels (reflecting the cash inflows from grain sales), Greenfield should comfortably qualify for Tier 1 pricing. During the spring trough, when borrowings increase to fund crop-input purchases and the Borrowing Base contracts, the Company's pricing tier will depend on the level of outstanding borrowings relative to the Borrowing Base. With careful management of borrowing levels and draw timing, we believe Tier 1 or Tier 2 pricing should be achievable during most of the seasonal cycle.
The SOFR floor of 0.50% per annum is market-standard and does not raise any concern. Given current SOFR rates (approximately 2.30% as of the date of this letter), the floor is unlikely to be relevant in the near term.
3.2 Unused Line Fee
The Term Sheet proposes an unused line fee of 0.375% per annum, calculated on the daily average unused portion of the aggregate Commitment. This represents an improvement over the existing PNB facility's unused line fee of 0.50% per annum and falls within the market range for agricultural ABL facilities. We have no further comment on this fee at this stage.
3.3 Letter of Credit Fee and Fronting Fee
The Term Sheet proposes a letter of credit fee equal to the applicable SOFR margin on the face amount of each outstanding letter of credit, plus a fronting fee of 0.125% per annum payable to HCB in its capacity as the issuing bank. Both of these fees are standard for ABL facilities and are consistent with market practice. We have no concerns at this time.
3.4 Upfront Fee
The Term Sheet proposes an upfront fee of 0.50% of the total aggregate Commitments, payable at closing. On a Facility of $80,000,000, this equates to a one-time fee of $400,000, to be split pro rata among the Lenders in proportion to their respective Commitment percentages.
While upfront fees in the range of 0.25% to 0.50% are common in the agricultural ABL market, the proposed 0.50% rate is at the high end of the range, particularly for a facility of this size with a well-established borrower. We recommend that Greenfield negotiate for a reduction of the upfront fee to 0.375%, which would result in a fee of $300,000 — a savings of $100,000. In the alternative, if HCB is unwilling to reduce the upfront fee, we recommend requesting that the upfront fee be credited against the first year's interest payments or the annual administrative agent fee, thereby effectively deferring the economic impact.
We note that the upfront fee is payable at closing and is contingent upon the Facility's successful closing. If the Facility does not close for any reason, no upfront fee would be owed.
3.5 Administrative Agent Fee
The Term Sheet proposes an annual administrative agent fee of $75,000 payable to HCB. This fee is reasonable and within market norms for a syndicated agricultural ABL facility of this size. We have no comment on this fee.
3.6 Field Examination Fees
The Term Sheet provides that HCB, as Administrative Agent, shall have the right to conduct two field examinations per calendar year at the Borrower's expense, with each examination capped at $50,000. During a Trigger Period (as defined below in Section 4), the Agent may conduct additional field examinations at the Borrower's expense, with no stated cap on the number of examinations or the per-examination cost.
We recommend that Greenfield negotiate the following modifications to the field examination provisions:
(a) An annual aggregate cap on field examination costs of $100,000 (covering both routine and Trigger Period examinations), to provide the Company with cost certainty and to prevent excessive examination costs from further straining liquidity during periods when the Company is already under financial pressure.
(b) A limitation that no more than one additional field examination (beyond the two routine annual examinations) may be conducted during any rolling 12-month Trigger Period, absent the occurrence of a separate Event of Default.
We note that HCB has indicated its intention to engage Pryor & Associates LLC as the field examiner. The Firm is not yet familiar with Pryor & Associates' specific fee schedule, examination methodology, or typical scope of engagement. We recommend that Greenfield request this information from HCB before the Credit Agreement is finalized, to ensure that the proposed fee caps are realistic and that the Company understands what to expect from the field examination process.
4. Springing Fixed Charge Coverage Ratio
The Term Sheet proposes a springing fixed charge coverage ratio ("FCCR") covenant of 1.10 to 1.00, which would be tested on a monthly basis only during periods when Excess Availability falls below the greater of (a) 12.5% of the Borrowing Base or (b) $10,000,000 (each such period, a "Trigger Period").
The springing covenant structure is appropriate for an ABL facility and is the market-standard approach. Rather than imposing ongoing financial maintenance covenants that must be satisfied at all times (as is typical in cash-flow-based credit facilities), the springing structure preserves the Company's operational flexibility during normal periods and activates the FCCR test only when liquidity deterioration signals heightened credit risk. This structure is well-suited to agricultural borrowers, whose seasonal cash flow and borrowing patterns may result in periods of lower excess availability without indicating financial distress.
The 1.10:1.00 coverage ratio is within the typical market range of 1.00x to 1.15x for ABL facilities and is reasonable. However, we recommend that Greenfield seek the following modifications to the Trigger Period mechanics and FCCR calculation methodology:
Cure Period. We recommend requesting a 30-day cure period after the commencement of a Trigger Period before the FCCR test is first applied. This grace period would allow Greenfield time to take remedial measures — such as reducing outstanding borrowings, accelerating receivable collections, or adjusting inventory levels — before being required to demonstrate compliance with the 1.10:1.00 ratio. Agricultural businesses are subject to inherent volatility in commodity prices, basis differentials, and payment timing, and a brief cure period acknowledges this reality without materially undermining the lender protections afforded by the springing covenant.
De Minimis Trigger Exception. We recommend requesting an exception providing that if Excess Availability dips below the Trigger Period threshold for fewer than five consecutive business days and is restored to a level above the threshold without additional borrowings (i.e., the shortfall is cured through asset appreciation, receivable collections, or other organic means), then a Trigger Period shall not be deemed to have commenced. This exception would prevent temporary, immaterial fluctuations in the Borrowing Base — which may result from routine appraisal adjustments, basis-differential movements, or short-term timing mismatches — from triggering the full Trigger Period machinery and imposing unnecessary compliance burdens on the Company.
FCCR Calculation Methodology. The Term Sheet does not specify the detailed methodology for calculating the Fixed Charge Coverage Ratio. We recommend confirming that:
(a) The FCCR is calculated using a trailing twelve-month look-back period (TTM), which is standard for ABL facilities and provides a more representative picture of the Company's debt-service capacity than a shorter measurement period.
(b) "Fixed charges" are clearly and comprehensively defined. The numerator (typically EBITDA or a similar cash-flow measure) and the denominator (fixed charges) should be specifically enumerated. Fixed charges should include scheduled debt service (principal and interest), maintenance and growth capital expenditures (or funded CapEx only, depending on the negotiated definition), cash income taxes actually paid, and restricted payments actually made. Fixed charges should exclude non-cash charges, extraordinary or non-recurring items, and unrealized gains or losses on commodity hedging transactions, which can introduce significant volatility that does not reflect the Company's actual cash-flow generation.
Minimum Excess Availability Covenant. We note that the Term Sheet includes a separate covenant requiring the Company to maintain minimum Excess Availability of $5,000,000 at all times. This covenant effectively operates as a hard floor on the Company's liquidity, independent of and in addition to the Trigger Period mechanism. We recommend confirming that a breach of the minimum excess availability covenant triggers standard default remedies (including notice and cure periods consistent with the other Events of Default under the Credit Agreement), and does not result in immediate acceleration of the obligations or immediate termination of the lending commitments. A short cure period (we suggest 5 business days) should be negotiated to allow the Company to restore compliance through ordinary-course cash management.
5. Distribution and Restricted Payment Limitations
The ability of Greenfield Agricultural Partners LLC to make distributions to its parent, Greenfield Holdings Corp. ("Holdings"), and indirectly to Holdings' equity owners, is a critical feature of the Company's capital structure. Holdings' current ownership is as follows:
The Term Sheet proposes that distributions to Holdings (denominated as "Restricted Payments") be permitted only if each of the following conditions is satisfied at the time of, and after giving pro forma effect to, the proposed distribution:
(a) No Default or Event of Default exists or would result from the distribution;
(b) Pro forma Excess Availability is equal to or greater than 20% of the Borrowing Base after giving effect to the distribution; and
(c) The trailing twelve-month Fixed Charge Coverage Ratio is equal to or greater than 1.15:1.00 on a pro forma basis.
The dual-test structure — requiring satisfaction of both an availability test and an FCCR test — is standard for ABL facilities that permit distributions. However, we note that the FCCR threshold for distributions (1.15:1.00) is more restrictive than the springing FCCR covenant (1.10:1.00). This differential is intentional, reflecting the lenders' view that distributions should be permitted only when the Company's financial condition provides a margin of safety above the minimum covenant level. This is a common structuring approach and is not inherently objectionable, but it does bear discussion with the client, as it creates a scenario in which the Company could be in compliance with all financial covenants (i.e., no Trigger Period is in effect, or if in effect, the 1.10:1.00 FCCR is satisfied) yet still be restricted from making distributions to Holdings.
We recommend that Greenfield negotiate the following modifications to the distribution provisions:
Availability Test Threshold. We recommend reducing the availability test from 20% of the Borrowing Base to 15% of the Borrowing Base. At the estimated trough Borrowing Base of approximately $42,375,000, a 20% availability threshold equates to approximately $8,475,000, which — when combined with the separate $5,000,000 minimum excess availability covenant — may be unnecessarily restrictive during spring months when the Company's liquidity is naturally constrained by seasonal factors rather than operational weakness. Reducing the threshold to 15% would lower the effective floor to approximately $6,356,000 at trough, providing greater distribution flexibility while still preserving meaningful lender protection.
Fixed-Dollar Alternative. In the alternative, Greenfield could propose a fixed-dollar availability floor for distributions (e.g., $12,000,000 of pro forma Excess Availability) rather than a percentage-based threshold. A fixed-dollar floor provides greater predictability during seasonal Borrowing Base fluctuations and is easier to model and manage from a treasury perspective. The Company would know at all times that distributions are permitted so long as pro forma Excess Availability remains above $12,000,000, without needing to recalculate a moving target based on the latest Borrowing Base certificate.
Tax Distribution Carve-Out. We strongly recommend requesting a tax distribution carve-out that permits distributions to Holdings — and through Holdings to its owners — in amounts necessary to pay federal and state income tax liabilities attributable to GAP's income for the applicable tax period, without requiring satisfaction of the 1.15:1.00 FCCR test. As an LLC, GAP is likely treated as a pass-through entity for federal income tax purposes, and its owners will be required to pay income taxes on their allocable shares of GAP's income regardless of whether cash distributions are made. A tax distribution carve-out is standard market practice for ABL facilities with pass-through borrowers and should be subject only to the no-default condition and the minimum excess availability covenant (or a specified minimum availability level). The tax rate used to calculate the maximum tax distribution should be the highest combined federal and state marginal rate applicable to any member.
Scope of "Restricted Payments." We recommend confirming whether the definition of "Restricted Payments" in the Credit Agreement will encompass, in addition to equity distributions, management fees payable to affiliates, intercompany payments between GAP and its subsidiaries or Holdings, and equity repurchases under the management equity plan. If so, appropriate carve-outs should be negotiated for (i) management fees payable in the ordinary course of business in amounts consistent with historical practice, (ii) intercompany payments made in the ordinary course of business on arm's-length terms, and (iii) tax-sharing payments.
6. Change of Control Provision
The Term Sheet includes a change of control provision that would constitute an immediate Event of Default upon the occurrence of any of the following: the Lindstrom Family Trust ceasing to own, directly or indirectly, at least 51% of the outstanding equity interests in Greenfield Holdings Corp. As noted above, the Lindstrom Family Trust currently holds 62% of Holdings, with Calloway-Foss Investments LP holding 28% and management equity plan participants holding 10%.
The proposed 51% threshold provides only 11 percentage points of headroom for the Lindstrom Family Trust to dilute or transfer its interests before triggering a change of control Event of Default. While lenders understandably seek to maintain the involvement and control of the founding family (which has been instrumental in building Greenfield's operations and industry relationships), the narrow headroom may prove problematic in range foreseeable scenarios, including estate planning transactions, secondary sales of interests to existing or new investors, equity issuances to key management through the equity incentive plan, and potential future capital raises to fund growth or acquisitions.
We recommend that Greenfield negotiate one or more of the following modifications:
Reduced Threshold. Request that the change of control threshold be reduced from 51% to 40%, providing 22 percentage points of headroom. At a 40% threshold, the Lindstrom Family Trust would retain the ability to dilute its ownership by approximately one-third before triggering a change of control. As an alternative, Greenfield could propose a formulation requiring that the Lindstrom Family Trust remain the single largest shareholder (by equity interest) of Holdings at all times, without specifying a fixed percentage threshold. This approach accommodates a broader range of ownership structures while preserving the fundamental principle that the Lindstrom family remains the controlling equity holder.
Cure and Consent Mechanism. If HCB insists on a 51% threshold, we recommend negotiating for a cure or consent mechanism under which, if a potential change of control event is identified in advance (e.g., through a proposed equity sale, estate planning transaction, or capital raise), the Borrower would be required to notify the Administrative Agent, and the Agent would be required to engage in good-faith discussions with the Borrower for a period of not less than 30 days before an Event of Default is deemed to have occurred. During this discussion period, the Borrower would have the opportunity to propose alternative structures or protections (e.g., a guaranty or equity support agreement from the new controlling party) that address the lenders' credit concerns. This mechanism would prevent mechanical defaults arising from transactions that do not, in substance, impair the credit quality of the Facility.
Indirect Changes of Control. The Term Sheet does not specify whether indirect changes of control — such as changes in the trustee, protector, or beneficiaries of the Lindstrom Family Trust itself — would constitute a change of control for purposes of this provision. Given that the change of control is defined by reference to the Trust's ownership of Holdings, internal modifications to the Trust's governance or beneficial ownership could theoretically trigger the provision even though the Trust continues to hold the same equity interest. We recommend that the Credit Agreement specifically exclude from the definition of "Change of Control" any changes in the internal governance, administration, trustee appointment, or beneficiary designation of the Lindstrom Family Trust, so long as the Trust continues to hold equity interests in Holdings at or above the agreed threshold.
We recommend that Greenfield management consider and advise us whether any near-term estate planning transactions, equity incentive grants to management, or external capital raises are contemplated that could implicate the change of control provision, so that we may structure the provision appropriately during the documentation phase.
7. Additional Covenant Observations
7.1 Capital Expenditure Limitation
The Term Sheet proposes a capital expenditure limitation of $8,000,000 per fiscal year, with a 50% carryforward of unused amounts from the immediately preceding fiscal year, subject to a single-year maximum of $12,000,000 (inclusive of any carryforward).
This basket appears adequate for Greenfield's current maintenance capital expenditure requirements, which based on historical data have averaged approximately $5.5 million to $7.0 million per year. However, the $8,000,000 limit may constrain the Company's ability to pursue growth-oriented capital investments, including elevator upgrades and capacity expansions, distribution center improvements, precision agriculture technology investments, and storage facility modernization. To the extent that Greenfield anticipates any significant capital projects during the four-year term of the Facility, the CapEx basket should be sized accordingly.
We recommend the following:
(a) Request an increase in the annual CapEx limitation to $10,000,000, with a single-year maximum (including carryforward) of $15,000,000. This increase would provide meaningful additional flexibility for growth investments while remaining conservative relative to the Company's overall asset base and revenue generation.
(b) Confirm whether the CapEx limitation applies only to funded capital expenditures (i.e., expenditures paid in cash or financed with Facility proceeds) or also includes capital leases and purchase money obligations. If the latter, the practical CapEx capacity would be further reduced by the amounts utilized under the separate purchase money/capital lease basket (discussed below). We recommend that the CapEx limitation apply solely to funded CapEx, with capital leases and purchase money obligations governed exclusively by the separate indebtedness basket.
(c) Consider requesting a specific carve-out for maintenance capital expenditures on grain elevator facilities and related infrastructure, which are essential to the Company's compliance with state regulatory requirements, OSHA standards, and industry best practices. Maintenance CapEx on elevator facilities could be excluded from the general CapEx basket (or subject to a separate sub-basket) to ensure that the Company is not forced to choose between regulatory compliance and growth investment.
7.2 Additional Indebtedness Baskets
The Term Sheet proposes the following baskets for additional indebtedness incurred outside the Facility:
(a) Unsecured Indebtedness: $3,000,000 in aggregate principal amount outstanding at any time.
(b) Purchase Money / Capital Lease Indebtedness: $1,500,000 in aggregate principal amount outstanding at any time.
Both of these baskets are tight relative to the size and complexity of Greenfield's operations. The Company operates 14 elevator sites across three states, maintains 3 regional distribution centers, manages approximately 82,000 acres under contract farming arrangements, and employs a substantial fleet of vehicles, equipment, and rolling stock. Equipment financing needs — for grain handling equipment, trucks, sprayers, planters, and distribution vehicles — are ongoing and significant.
We recommend negotiating the following increases:
(a) Unsecured indebtedness basket: increase to $5,000,000.
(b) Purchase money / capital lease indebtedness basket: increase to $3,000,000.
These increased baskets would provide the Company with greater operational flexibility to finance equipment acquisitions and other non-core indebtedness without requiring lender consent, while remaining at levels that do not materially impair the lenders' collateral position or the Company's overall leverage profile.
7.3 Investment and Acquisition Basket
The Term Sheet proposes an investment and acquisition basket of $5,000,000 per fiscal year. This basket is adequate for modest tuck-in acquisitions and strategic investments, which is consistent with Greenfield's historical acquisition activity.
We recommend negotiating a carve-out for (a) investments in existing wholly-owned subsidiaries, specifically GGS and GCI, made in the ordinary course of business (e.g., intercompany loans, capital contributions to fund subsidiary operations, or equity infusions related to working capital management), and (b) ordinary-course trade investments, including deposits, prepayments, and advances to suppliers and growers that are customary in the agricultural industry. These types of investments are routine operational activities and should not consume the Company's acquisition basket capacity.
7.4 Anti-Hedging Negative Pledge
The Term Sheet includes a covenant prohibiting commodity hedging in excess of 80% of anticipated production without the prior written consent of the Administrative Agent. This provision is designed to limit Greenfield's exposure to speculative hedging activity that could generate margin calls or mark-to-market losses, while permitting a reasonable level of bona fide risk-management hedging.
The 80% threshold is reasonable and falls within industry norms for agricultural borrowers, which typically permit hedging of 75% to 85% of anticipated production. We have no objection to the threshold itself.
However, we recommend that the Credit Agreement clarify the following:
(a) The limitation should apply only to speculative hedging (i.e., hedging positions that exceed the Company's physical exposure to the underlying commodity) and should not restrict bona fide risk-management hedging entered into in the ordinary course of business to manage price risk associated with Greenfield's actual production, storage, and merchandising activities. This distinction is critically important — bona fide hedging is a fundamental component of agricultural risk management and is expected by the Company's customers, suppliers, and insurance providers.
(b) "Anticipated production" should be measured based on the Company's good-faith production estimates, as reflected in the annual production plan or operating budget delivered to the Administrative Agent. The measurement methodology should be clearly specified to avoid future disputes over whether a particular hedging position exceeds the 80% threshold.
8. Collateral and Security Package
The Term Sheet contemplates a comprehensive collateral and security package consisting of the following:
(a) First-priority perfected security interests in substantially all personal property of the Borrower and each Guarantor (anticipated to include Holdings, GGS, and GCI), including accounts, inventory, equipment, general intangibles, deposit accounts, investment property, instruments, chattel paper, and supporting obligations;
(b) First-priority mortgages on all owned real property, including the Company's 14 elevator sites and 3 regional distribution centers, with an aggregate appraised value of approximately $64,800,000;
(c) Pledge of 100% of the equity interests in GGS and GCI; and
(d) Assignment of crop insurance proceeds, business interruption insurance proceeds, and related insurance benefits.
This collateral package is broadly consistent with market expectations for an $80,000,000 agricultural ABL facility and does not present any unusual concerns in scope. The following practical considerations, however, should be raised with HCB during the documentation phase:
Deposit Account Control Agreements (DACAs). The Credit Agreement will require the execution of deposit account control agreements on all operating accounts maintained by the Borrower and each Guarantor. Greenfield's primary operating accounts are currently maintained at PNB, which serves as both depository bank and existing revolving credit lender. Upon closing of the proposed Facility and repayment of the PNB facility, Greenfield will need to determine whether to (i) transition its operating accounts to HCB or another depository institution, or (ii) maintain accounts at PNB and execute DACAs in favor of HCB as the new Collateral Agent. In either case, logistical coordination will be required well in advance of closing to ensure that DACAs are in place, ACH and wire transfer instructions are updated, and there is no disruption to the Company's cash management operations. We recommend discussing this transition plan with HCB at the earliest opportunity.
Insurance Assignments. The Company's insurance program is placed through Redwood Insurance Group, Inc., as broker, with Northstar Mutual Insurance Company serving as the primary crop insurance and property/casualty carrier. The Collateral Agent will require assignment of insurance proceeds and loss payee/additional insured endorsements on all applicable policies in favor of HCB. We recommend that Greenfield confirm with Redwood Insurance Group that the existing policy structures permit such assignments and endorsements, and that any required insurer consents can be obtained prior to closing. If separate endorsements are needed for crop insurance (which is federally regulated and subject to USDA/RMA requirements), those should be identified and addressed early in the process.
Existing Liens and Payoff Coordination. PNB holds existing UCC financing statements filed with the Iowa Secretary of State (Filing Nos. 2018-0041729 and 2018-0041730, both filed on April 2, 2018) as well as recorded real property mortgages in Polk County, Iowa; McLean County, Illinois; and eight additional Iowa counties. As a condition to closing, HCB will require delivery of payoff letters from PNB, UCC-3 termination statements, and mortgage releases covering all existing PNB liens. Greenfield should initiate contact with PNB and its counsel at the earliest practicable date to begin this process, as the preparation and recording of mortgage releases across multiple jurisdictions can be time-consuming. We recommend that Calderwood & Harkness coordinate directly with PNB's counsel to ensure that all termination and release documents are in satisfactory form and available for delivery at closing.
Grain Elevator Regulatory Issues. Greenfield operates licensed grain elevators in Iowa, Illinois, and Indiana. Each of these states imposes regulatory requirements on grain elevator operators, including licensing, bonding, and financial reporting obligations administered by the respective state departments of agriculture. We recommend that the Company confirm whether any applicable grain elevator licensing or bonding requirements impose restrictions on the granting of security interests in stored grain, elevator facilities, or related assets. In certain jurisdictions, the rights of grain depositors may take priority over secured creditors under state warehouse or grain dealer statutes, which could affect the Collateral Agent's recovery in a foreclosure scenario. This issue should be analyzed and addressed in the legal opinions delivered at closing.
Warehouse Receipts. The Company's inventory of grain warehouse receipts will need to be perfected in favor of the Collateral Agent under UCC Article 7 (Documents of Title). If Greenfield utilizes electronic warehouse receipts (as is increasingly common in the grain industry), separate perfection steps may be required, including the designation of the Collateral Agent as the "control party" on the electronic warehouse receipt system. We recommend confirming the Company's current use of paper versus electronic warehouse receipts and ensuring that the Credit Agreement's perfection requirements address both formats.
9. Conditions Precedent and Closing Logistics
Based on the Term Sheet and our experience with comparable transactions, we anticipate that the closing of the Facility will be subject to customary conditions precedent, including but not limited to the following:
(a) Execution and delivery of the Credit Agreement, guaranty agreements, security agreements, mortgages, pledge agreements, and all ancillary loan documents in form and substance satisfactory to the Administrative Agent and the Lenders;
(b) Delivery of officer's certificates, secretary's certificates (certifying organizational documents, resolutions, and incumbency), and certificates of good standing for each of the following entities: Greenfield Agricultural Partners LLC (Iowa), Greenfield Holdings Corp. (Delaware), Greenfield Grain Storage LLC (Iowa), and Greenfield Crop Inputs Inc. (Illinois);
(c) Delivery of legal opinions from borrower's counsel (Calderwood & Harkness LLP) covering customary matters, including due authorization, enforceability, no conflicts, and perfection of security interests;
(d) Satisfactory completion of a field examination and inventory appraisal by Pryor & Associates LLC, with results acceptable to the Administrative Agent in its reasonable discretion;
(e) Delivery of a payoff letter from PNB confirming the outstanding balance of the existing $55,000,000 revolving credit facility and providing wire transfer instructions for repayment, together with executed UCC-3 termination statements and recordable mortgage releases covering all PNB liens;
(f) Evidence of insurance coverage satisfactory to the Collateral Agent, including loss payee and additional insured endorsements;
(g) Execution and delivery of deposit account control agreements on all operating accounts;
(h) Delivery of independent audited financial statements and interim unaudited financial statements; and
(i) Payment of all fees and expenses due at closing, including the upfront fee, the initial administrative agent fee, and the fees and expenses of lender's counsel (KBW).
We recommend that Greenfield begin assembling the necessary organizational documents, board and member resolutions, and incumbency certificates at the earliest opportunity to avoid closing delays. Given the anticipated October 2022 closing timeline, the window for document preparation is relatively narrow, and early coordination will be essential.
With respect to the field examination, HCB has indicated its intention to engage Pryor & Associates LLC to conduct the required field examination and inventory appraisal. This process should commence promptly following execution of the revised term sheet. Greenfield should be prepared to coordinate access to the Des Moines headquarters, all 14 elevator sites, the Bloomington distribution center operated by GCI, and the other regional distribution centers. The field examination will involve a review of the Company's books, records, accounting systems, inventory management processes, and internal controls, as well as physical inspection and count of inventory at selected locations. We recommend designating an internal liaison (potentially the Company's Controller or VP of Operations) to coordinate with the Pryor & Associates team and ensure that the examination proceeds efficiently.
The following financial information will be required as conditions precedent to closing:
(a) Audited financial statements for fiscal year 2021, prepared by Ashford, Kline & Pearce LLP (the Company's independent auditor). We understand that these statements are available and reflect FY2021 revenue of approximately $347.2 million.
(b) Interim unaudited financial statements for the most recent available period. Based on the Company's reporting calendar, we anticipate that financial statements through June 30, 2022, will be available, reflecting total assets of approximately $289.6 million and projected full-year FY2022 revenue of approximately $391.5 million.
Both sets of financial statements should be reviewed for consistency with the representations and financial covenants in the Credit Agreement. We will work with the Company and its auditors to ensure that the financial information is in the form required by HCB and KBW.
10. Process and Next Steps
Calderwood & Harkness recommends the following process for advancing the transaction toward closing:
Step 1 — Internal Review and Instruction. Greenfield should review the comments and recommendations set forth in this letter and provide Calderwood & Harkness with instructions regarding the Company's negotiating positions on each of the issues identified. We recommend scheduling a call among Ms. Calloway, Ms. Vasquez, Mr. Lindstrom (as appropriate), and the C&H team at the earliest mutually convenient time to discuss these comments and confirm the Company's priorities.
Step 2 — Negotiation Call with HCB and KBW. Following receipt of Greenfield's instructions, Calderwood & Harkness recommends scheduling a negotiation call with HCB (the relevant contacts being Gregory Thorn and Allison Kuo) and lender's counsel Kessler, Brandt & Whitfield LLP (the relevant contacts being Richard Whitfield and Lauren Chisholm). The purpose of this call would be to present Greenfield's comments on the Term Sheet, discuss areas of potential compromise, and reach agreement on the key commercial terms before moving to definitive documentation.
Step 3 — Revised Term Sheet. We propose that Greenfield authorize Calderwood & Harkness to prepare and transmit a revised term sheet markup to HCB reflecting the agreed-upon positions, with the goal of executing a revised and mutually agreed Term Sheet by the week of September 5–9, 2022.
Step 4 — Credit Agreement and Ancillary Documents. Following execution of the revised Term Sheet, we expect KBW to prepare and deliver an initial draft of the Credit Agreement and ancillary loan documents within approximately one week. Calderwood & Harkness will review the initial draft and provide comments on behalf of Greenfield.
Step 5 — Closing Checklist and Coordination. Calderwood & Harkness will prepare and circulate a comprehensive closing checklist once the Term Sheet is agreed, identifying all deliverables, responsible parties, and target dates for each closing condition.
Step 6 — Updated Financial Data. We request that Greenfield provide updated financial projections, seasonal borrowing base data, and historical borrowing base component information (by month, for the most recent 24-month period) to support our negotiation of advance rates, reserve levels, and financial covenant thresholds. This data will be particularly important in substantiating our request for a higher crop inventory advance rate and a lower availability reserve.
11. Summary of Key Recommendations
For ease of reference, we set forth below a numbered summary of our principal negotiating recommendations:
1. Availability Reserves. Negotiate the initial availability reserve from $5,000,000 down to $3,500,000, and require objective criteria, good-faith standards, and advance notice before the Agent may impose or increase reserves.
2. Crop Inventory Advance Rate. Seek an improvemen

CALDERWOOD & HARKNESS LLP Counselors at Law

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