American Health Associates Holdings - Chapter 11 Plan Terms

Plan Terms

Overview

• The debtors' second amended joint plan of reorganization, dated Oct. 27, 2026, provides for a traditional reorganization funded by a $15 million exit facility from SOD Sciences, Inc. SOD also extended postpetition financing under the motion at Docket No. 499, and its DIP claims roll into the exit facility in full.
• American Health Associates Holdings, Inc. and 12 affiliates filed Chapter 11 on April 17, 2026. All of them do business under the single name "American Health Associates" from a shared principal address in Davie, Florida.
• The two secured creditors take cash on the effective date: City National Bank of Florida (CNB) gets $9.75 million against a claim of about $10.77 million, and National Biz Capital, LLC (NBC) gets $600,000 against a claim of about $1.84 million. General unsecured creditors share a $750,000 cash pool plus collections on receivables more than 120 days past due, the debtors' claims against their directors and officers, and avoidance action recoveries pursued by a plan administrator.
• Existing equity is cancelled. Equity in reorganized American Health Associates Parent, LLC goes to the investor DIP noteholders on conversion of their notes and 5% to Covalent Investment Management, LLC, with all remaining equity issued to The CTM Group, LLC in exchange for a $100,000 new value payment.
• The estates are substantively consolidated into the estate of American Health Associates Holdings, Inc. for claims and distribution purposes, while each entity continues to exist separately.

Exit Financing

• Amount: $15 million plus any SOD DIP fees, meaning the upfront fees, exit fees and expense reimbursements within SOD's DIP claims. SOD's DIP claims are rolled into the facility in full satisfaction.
• Parties: SOD Sciences, Inc. as lender; the debtors as borrowers.
• Rate: 12% per annum, payable quarterly in arrears; 18% per annum default rate.
• Maturity: three years after the effective date.
• Exit fee: 2% of the principal outstanding at maturity.
• Mandatory prepayments: at the end of years one and two, the debtors prepay principal based on 30% of annual net income, capped at $1.7 million per year.
• Collateral: all of the debtors' assets. If Class 5 votes to accept the plan, the liens exclude receivables more than 120 days past due as of the effective date, avoidance actions and the debtors' claims against their officers and directors, the same assets that fund the Class 5 recovery beyond the $750,000 cash payment.
• Approval and closing: entry of the confirmation order approves the facility under section 364, and the loan documents will be filed as a plan supplement. Closing is set for one business day after the confirmation order becomes a final order. Full funding in immediately available, non-refundable funds is a condition to the effective date.
• Use of proceeds: plan payments, including administrative claims. Those claims can also be paid from operating cash flow, cash on hand and professional retainers.

Treatment of Claims and Interests

• Class 1, CNB claims (impaired, entitled to vote): $9.75 million in cash on the effective date. This includes any adequate protection or other payments CNB received during the cases and fully satisfies CNB's secured claim and any claim against a guarantor. CNB's claim stood at about $10.77 million as of Aug. 30, 2026, plus post-judgment interest at the current statutory rate. It is secured by a first-position lien on substantially all assets of American Health S, LLC and American Health MW, LLC and guaranteed by each of the other debtors.
• Class 2, NBC claims (impaired, entitled to vote): $600,000 in cash on the effective date. This includes any adequate protection or other payments NBC received during the cases and fully satisfies NBC's secured claim and any claim against a guarantor. NBC's claim of about $1.84 million is secured by a second-position lien on substantially all assets of American Health S and American Health MW. It also holds a first-position lien on substantially all assets of American Health Associates Holdings, Inc., American Health Associates Parent, LLC, American Health Holdings III, LLC, American Health Imaging S, LLC, American Health Imaging MW, LLC, American Health W, LLC, American Health NE, LLC and Mobile Xray Diagnostics, LLC.
• Class 3, secured taxing authority claims (unimpaired, deemed to accept): paid in full on the effective date.
• Class 4, priority claims under sections 507(a)(4) through (7) (unimpaired, deemed to accept): paid in full in cash by the reorganized debtors on the effective date. Amounts above the statutory caps are treated as general unsecured claims, but the provision places them in Class 7, the equity class, rather than Class 5.
• Class 5, general unsecured claims (impaired, entitled to vote): a pro rata share, paid after the effective date under further court order, of four sources:
  • $750,000 in cash
  • all collections by the reorganized debtors on receivables more than 120 days past due as of the effective date
  • the debtors' claims against their directors and officers
  • the net proceeds of avoidance actions pursued by the plan administrator
• Class 5 includes contract and lease rejection claims. It excludes any unsecured claim of CNB, NBC or any debtor.
• Class 6, intercompany claims (impaired, entitled to vote): released, with holders receiving the inter-debtor releases.
• Class 7, equity interests (impaired; deemed to reject under the plan's solicitation provisions, but listed as entitled to vote in its classification table): cancelled and extinguished with no distribution.

Administrative, Priority Tax and DIP Claims

• Administrative claims are paid in full in cash. Ordinary-course claims are paid when due; others are paid on the later of the effective date or the date the order approving payment becomes final. Estate professionals receive 100% of their court-allowed amounts on application.
• SOD's DIP claims roll into the exit facility in full satisfaction.
• The investor DIP claims are the allowed administrative claims of holders of convertible promissory notes issued under Docket Nos. 520 and 555. On the effective date, the debtors will exercise their right to convert these claims into equity of reorganized American Health Associates Parent, LLC.
• Priority tax claims are paid in equal monthly installments, with interest set under section 511, from the effective date through April 1, 2031.

Reorganized Equity and Governance

• Existing equity in every debtor is cancelled, and equity in reorganized American Health Associates Parent, LLC is issued as follows:
  • Investor DIP noteholders: the amount set by the conversion formula in their notes
  • Covalent Investment Management, LLC: 5%
  • The CTM Group, LLC, a Florida limited liability company, or its designee: all remaining equity, in exchange for the $100,000 new value payment
• No new equity is issued in American Health Associates Holdings, Inc., although the plan's securities exemption provision refers to equity interests of that reorganized entity. Securities issued under the plan are exempt from registration under section 1145; issuances to any holder that is an underwriter are made in reliance on other exemptions.
• 100% of the new equity in the subsidiary debtors is issued within the group:
  • American Health Holdings, LLC, American Health Holdings II, LLC, American Health Holdings III, LLC and American Health Holdings IV, LLC to the reorganized parent
  • American Health MW, LLC and American Health Imaging MW, LLC to American Health Holdings, LLC
  • American Health S, LLC and American Health Imaging S, LLC to American Health Holdings II, LLC
  • American Health W, LLC to American Health Holdings IV, LLC
  • American Health NE, LLC and Mobile Xray Diagnostics, LLC to American Health Holdings III, LLC
• Officers, directors and management stay in place. Christopher Martin continues as president, secretary and treasurer of each debtor. Debbie Martin continues as chief executive officer of several debtor entities, including American Health Associates Parent, LLC, and will be sole director of American Health Associates Holdings, Inc.
• On the effective date, estate property vests in the reorganized debtors free and clear, except as the plan provides. The reorganized debtors may terminate UCC-1 financing statements that do not survive confirmation, including those filed by or on behalf of Forward Financing, LLC.
• After the effective date, the reorganized debtors operate free of Bankruptcy Code restrictions and pay their professionals in the ordinary course without court approval. Change-of-control rights under employment and benefit arrangements that the plan would trigger are deemed waived.

Substantive Consolidation

• On confirmation, the 13 estates are consolidated into the estate of American Health Associates Holdings, Inc. for three purposes only: treating them as a single estate (except as to avoidance actions), treating all claims as claims against that estate, and eliminating duplicate claims filed against more than one debtor. All plan distributions come from the consolidated estate.
• Consolidation does not change the debtors' separate legal existence or organizational structure. It does not cause a change of control, merger or asset transfer, and it does not affect any cause of action. On the effective date, property vests in each reorganized debtor as if the estates had not been consolidated.
• The debtors give these grounds for consolidation:
  • consolidated books and shared senior secured creditors
  • a single trade name, a common parent and a shared principal address
  • commingled sales, revenue, receivables and expenses
  • identical boards
  • the resulting difficulty of separating individual assets and liabilities, with assets and business functions commingled
  • significant intercompany claims
  • joint and several liability on the CNB and NBC claims, which encumber substantially all of their assets
• The consolidated American Health Associates Holdings, Inc. case may stay open while the plan administrator pursues avoidance actions. The reorganized debtors will seek final decrees closing the other cases.

Plan Administrator and Causes of Action

• The reorganized debtors will fund a $20,000 fee and expense retainer for a plan administrator. For the benefit of Class 5, the plan administrator receives all avoidance actions and all of the debtors' claims against their directors and officers, subject to the inter-debtor releases.
• Fees above the retainer are payable only from gross avoidance action proceeds and from "net proceeds," never by the estates or the reorganized debtors. The plan defines net proceeds as the proceeds of a sale of substantially all of the debtors' assets, after closing costs and all claims senior to general unsecured claims.
• The plan administrator makes all Class 5 distributions, serves without bond and may hire professionals with court approval. It pays the U.S. Trustee fees on Class 5 distributions; the reorganized debtors pay all other U.S. Trustee fees. Any disputed-claim reserve that reverts to the plan administrator is held for Class 5.
• All other causes of action vest in the reorganized debtors, which may settle or abandon them without court approval. Claims against the debtors' insurers are preserved.

Conditions to the Effective Date

• Unless the confirmation order provides otherwise, the effective date occurs once 14 days have passed since entry of the confirmation order and the last of the following conditions is satisfied or waived:
  • court approval of the disclosure statement as adequate
  • a confirmation order reasonably acceptable to the debtors and SOD, including a section 1125(e) good-faith finding for the debtors, the reorganized debtors and their present and former members, officers, directors, employees, advisors, attorneys and agents
  • entry of the confirmation order as an unmodified final order, with no stay or injunction blocking the effective date
  • an order authorizing the debtors to implement the plan documents
  • any required consents and regulatory approvals obtained
  • no court order restraining consummation
  • the exit facility committed, binding and funded in full in immediately available, non-refundable funds, and CNB's allowed claim paid in full in cash under its Class 1 treatment, at the latest at the same time as the effective date
  • U.S. Trustee statutory fees paid in full
• The debtors may waive conditions without court approval, with one exception: the exit funding and CNB payment condition (which the waiver provision cites as Section 9.01(viii)) needs CNB's prior written consent. The debtors may also waive any plan requirement that an order be a final order. If the confirmation order is vacated, the plan is void, including the discharge and the plan's contract assumptions and rejections.

Key Dates

• Petition date: April 17, 2026.
• Assumption list: due at least 14 days before the confirmation hearing under the plan's definitions, but Section 7.01 requires filing and service at least 21 days before the hearing.
• Cure disputes: due five days before the confirmation hearing.
• Claims register: closes at the close of business on the confirmation hearing date, which fixes the record holders.
• Exit financing closing: one business day after the confirmation order becomes a final order.
• Effective date: no earlier than 14 days after entry of the confirmation order, subject to the conditions above, unless the confirmation order provides otherwise. Notice that it has occurred is due within two business days.
• Claim objections: due 120 days after the effective date or, for rejection claims, five days after the claim is filed, whichever is later.
• Undisputed cure payments: due within 90 days after the effective date.
• Rejection damages claims: due 28 days after the latest of notice of the rejection order, notice of entry of the confirmation order, or notice of an assumption list amendment.
• Exit facility: principal prepayments at the end of years one and two; maturity three years after the effective date.
• Priority tax claims: final installment on April 1, 2031.

Releases, Exculpation and Injunctions

• Inter-debtor releases: from the effective date, each debtor is released by every debtor, the reorganized debtors, their estates and anyone claiming through them. The release covers all claims, actions and avoidance actions, known or unknown, that the debtors or their estates could bring in their own right or on behalf of any claim or interest holder. These releases are the consideration for Class 6, and the plan administrator's avoidance actions are subject to them.
• The plan's cover page says Section 11.04 contains releases of third parties. That section is the exculpation provision, and Section 8.13 is marked reserved.
• Exculpation: the debtors, the reorganized debtors and their respective professionals, officers, directors, agents, financial advisors, attorneys, employees, equity holders, partners, affiliates and representatives have no liability to any claim or interest holder for acts or omissions connected with the cases or with negotiating, confirming, consummating or administering the plan. The carve-outs are:
  • express contractual obligations
  • willful misconduct or gross negligence
  • professional negligence claims, which remain governed by the applicable non-bankruptcy standard of care
  • obligations under the plan
  • governmental claims under environmental laws
• The exculpated parties may rely on the advice of counsel. From the effective date, the confirmation order will permanently bar the debtors, the reorganized debtors and anyone else from pursuing exculpated, released or discharged claims against them.
• Discharge: claims and interests are discharged on the effective date. Holders are permanently barred from suing, collecting, enforcing liens, or asserting setoff, subrogation or recoupment against the debtors or reorganized debtors. All parties are also barred from interfering with the plan's implementation, except by pursuing appeals.

Executory Contracts and Leases

• All executory contracts and unexpired leases are rejected as of the effective date, unless they were already assumed or rejected by order, are the subject of a pending motion, or appear on the assumption list. The debtors may amend the list through the confirmation date.
• Cure amounts are listed on the assumption list. Undisputed defaults are cured within 90 days after the effective date, and disputed defaults within 90 days after a final order fixes the amount. If the court sets a cure higher than the debtors' figure, the reorganized debtors may reject the contract instead.
• Rejection damages claims are treated as general unsecured claims and are barred if not filed by the 28-day deadline.
• The debtors assume their insurance policies, including retrospective premium plans. They also assume their compensation and benefit programs for directors, officers and employees serving after the petition date, excluding stock option and defined-benefit plans and subject to the right to modify them. Indemnification obligations to directors, officers and employees who served on or after the petition date survive confirmation unaffected.

Claims Administration

• After the effective date, the reorganized debtors and the plan administrator have the exclusive right to object to administrative and general unsecured claims, and they may settle objections without court approval. The reorganized debtors pay the costs of prosecuting disputed claims.
• A disputed claims reserve holds 100% of what disputed claims would receive if allowed at their disputed or estimated amounts. Reserve amounts that are not needed vest in the reorganized debtors or the plan administrator.
• Claims held by parties sued under the avoidance provisions are disallowed under section 502(d) until the action is resolved and any amounts owed are paid. Scheduled disputed, contingent or unliquidated claims without a timely proof of claim are disallowed, and amending a claim after confirmation requires court authorization.
• No postpetition interest accrues on claims unless the plan provides otherwise.
• The plan sets two different periods for unclaimed distributions. The claims procedures section cancels a claim if its distribution is unclaimed 90 days after delivery. The distribution section treats undeliverable distributions as unclaimed property six months after the effective date or distribution date, with unclaimed funds returned to the reorganized debtors.

Amendment and Revocation

• The debtors may modify the plan before confirmation, and after confirmation with court approval following notice and a hearing. Holders that accepted the plan are deemed to accept changes that do not materially and adversely change their treatment. Before the effective date, the debtors may make technical corrections that do not materially harm holders, without court approval or notice.
• After the effective date, the reorganized debtors may, with court approval, remedy defects or reconcile inconsistencies in the plan or confirmation order so long as creditors are not materially and adversely affected; minor defects may also be corrected in the confirmation order itself.
• The debtors may revoke the plan before the confirmation date, which makes it void. If documents conflict, the confirmation order controls over the plan, and the plan controls over its exhibits and implementing documents.