BioXcel Therapeutics - Chapter 11 DIP Terms

DIP Terms

Borrower(s) / Guarantor(s)

• BioXcel Therapeutics, Inc. as borrower, with OnkosXcel Therapeutics, LLC and OnkosXcel Employee Holdings, LLC guaranteeing the DIP obligations jointly, severally, and unconditionally, deemed given on entry of the interim order

Agent / Lender(s)

• Oaktree Fund Administration, LLC as administrative agent, which is also agent under the April 19, 2022 prepetition credit agreement
• The DIP lenders are funds and accounts managed by or affiliated with Oaktree Capital Management, L.P. and affiliates of the Qatar Investment Authority. They hold 100% of the outstanding prepetition secured obligations, and all prepetition lenders consented to the facility and to the use of cash collateral, conditioned on entry of the interim order.
• Consent mechanics favor Oaktree: required DIP lenders are those holding more than 50% of outstanding loans and unused commitments, but must include the Oaktree lenders so long as they hold at least 25% of that sum; and where the Oaktree and Qatar Investment Authority groups each hold 50% of commitments, Oaktree's consent alone suffices for matters it determines in good faith do not disproportionately affect the QIA group, with the QIA lenders deemed to consent if they do not respond within five business days on which banks in Qatar are open.

DIP Commitments

• $77.25 million multi-draw senior secured superpriority priming term loan facility comprised of:
  • $19 million of new money term loans in two draws
    • $9.5 million initial draw upon entry of the interim order
    • $9.5 million additional draw upon entry of the final order
  • Up to $58.25 million roll-up of prepetition secured obligations on a cashless, dollar-for-dollar basis, deemed funded pro rata in proportion to each corresponding new money draw
    • Interim roll-up of all prepetition bridge financing obligations, which the credit agreement identifies as $1.25 million in principal amount of Amendment No. 14 term loans, plus $28.5 million of other prepetition secured obligations
    • Final roll-up of an additional $28.5 million upon funding of the additional draw
• The interim order authorizes borrowing of the $9.5 million initial draw and the interim roll-up on the date of the order.
• The roll-up satisfies and discharges an equal amount of prepetition secured obligations without constituting a novation; obligations not rolled up remain outstanding as remaining prepetition secured obligations. Amounts repaid or prepaid may not be reborrowed.
• The court found that the roll-up is an integral part of the facility, without which the DIP lenders would not extend the new money loans, and that the debtors could not obtain financing from other sources on more favorable terms.

Cash Collateral

• All of the debtors' cash, wherever located, including amounts on deposit in any bank, checking, or other deposit account, amounts generated by collection of accounts receivable or other disposition of prepetition collateral, and the proceeds of the foregoing, subject to certain exceptions in the prepetition loan documents.
• The debtors are authorized to use cash collateral through the termination date solely in accordance with the approved budget, subject to permitted variance, including to fund the prepetition adequate protection obligations.

Interest Rate

• 13.00% per annum
• New money loans: payable in cash in arrears on each payment date, being the last day of each calendar month, or the immediately preceding business day, and the maturity date
• Roll-up loans: payable in kind by capitalizing to principal on each payment date, with the borrower able to elect cash payment on three business days' written notice
• Default Rate Increase: 2.0%, with default interest payable in cash on demand
• Computed on a 360-day year and actual days elapsed

Fees

• Exit Fee: 4.0% of the aggregate principal amount of loans paid or prepaid, on any termination, cancellation, redemption, repayment, or prepayment, whether voluntary or involuntary and whether before, on, or after maturity or following acceleration; earned, due, and payable immediately upon such payment
• Administrative Agent Fee: as set forth in a separate fee letter dated as of the credit agreement
• The debtors are authorized to pay all principal, interest, fees, costs, and expenses under the DIP loan documents as they come due without further court approval, including lender and agent professional fees incurred before or after the petition date. Fees and expenses of counsel to the DIP lenders, DIP agent, prepetition agent, and prepetition lenders incurred through the closing date, and again through the date of the additional draw, are payable outside the invoice-review procedures, though invoices for the latter must reach debtors' counsel and the other notice parties at least two business days before the additional draw funds. Closing-date fees and expenses may be paid on the closing date or offset against the proceeds of the initial draw.
• Other lender professional invoices are payable 10 business days after receipt by debtors' counsel, any committee, and the U.S. Trustee, without fee applications or compliance with U.S. Trustee guidelines; disputed amounts may be contested within that period and all undisputed amounts must be paid promptly.

Maturity

• Jan. 27, 2027, or the immediately preceding business day if not a business day
• All obligations, including the exit fee, are due in full on the maturity date; on any earlier payment or prepayment in full, the exit fee is payable as well.
• Mandatory prepayments are required from the earliest to occur of:
  • net cash proceeds of an approved sale, within five business days of receipt, in the full amount of aggregate proceeds where those proceeds exceed $50,000 or, for a sale of all equity or substantially all assets, in the amount set in the agreed wind-down budget, in each case capped at the amount needed to repay the facility in full
  • casualty event proceeds, within three business days of receipt
  • proceeds of any debt incurrence not permitted by the credit agreement, immediately upon receipt and in an amount equal to 100% of those proceeds
• Any lender may decline all or part of a mandatory prepayment of its loans by notice to the administrative agent by noon Eastern time one business day before the prepayment date; a lender that does not respond is deemed to have accepted. Declined amounts may be retained by the borrower for general corporate purposes not prohibited by the agreement.
• Optional prepayments require at least $5 million, in $1 million increments, on two to five business days' notice, at a price equal to principal, accrued interest, the exit fee on the amount prepaid, and other amounts then due.
• The interim order directs repayment of the DIP obligations from asset sale proceeds, subject to the debtors' retention of proceeds under a wind-down budget to be negotiated in good faith with the required DIP lenders.
• On the termination date, all DIP obligations become immediately due and payable, the new money loans terminate, and authority to use cash collateral ceases, except that during the remedies notice period the debtors may use cash collateral solely to fund the carve out and pay payroll and critical expenses necessary to preserve the prepetition collateral, in accordance with the approved budget.

Case Milestones

• The facility funds a sale: the debtors filed a bidding procedures motion with the case seeking approval of a stalking horse asset purchase agreement and bid protections, and the milestones run to an auction, a sale order, and consummation.
• Measured from the Aug. 27, 2026 petition date, subject to extension with the consent of the agent at the direction of the required DIP lenders, and subject to automatic extension if the court sets later sale dates to accommodate its own calendar:
  • Entry of the interim order: five days
  • Entry of the bidding procedures order: 30 days
  • Entry of the final order: 30 days
  • Conduct of an auction and selection of one or more successful bidders, if necessary: 50 days
  • Entry of a sale order approving an approved sale: 60 days
  • Entry of a disclosure statement order: 60 days
  • Consummation of the transaction approved by the sale order: 60 days
  • Entry of an order confirming an approved plan: 105 days
  • Effective date of the approved plan: 115 days
• The lenders control the outcome as well as the timetable: the bidding procedures, sale, and disclosure statement orders must be reasonably satisfactory to the debtors and the required DIP lenders; an approved sale requires required-DIP-lender consent unless it repays both the DIP and the prepetition obligations in full and the closing timing and certainty satisfy them; and an approved plan must be satisfactory to the agent and pay the DIP obligations in full in cash on the effective date unless the agent and lenders agree otherwise.
• The final hearing is set for Sept. 28, 2026, at 2:00 p.m. ET, with objections due Sept. 15, 2026, at 4:00 p.m. ET.

Events of Default and Remedies

• An event of default arises upon the debtors' failure to perform in any respect any material term of the interim order, failure to comply with the case milestones, or the occurrence of an event of default under the credit agreement, in each case unless waived by the required DIP lenders. Cure periods are short: none for a principal payment default, three business days for interest and other payment defaults, and two days for other covenant breaches capable of cure.
• Case-specific defaults under the credit agreement include:
  • the court declining to approve the roll-up, or approving any amendment, waiver, or modification of it
  • a final order that does not carry the 506(c) surcharge waiver and the 552(b) equities-of-the-case waiver in form and substance satisfactory to the agent and the lenders
  • stay relief permitting intellectual property or other non-bankruptcy litigation against the debtors to proceed
  • FDA enforcement action or a warning letter as to BXCL 501 that causes withdrawal or a delay expected to last more than 90 days; a Class 1 recall of BXCL 501 in the U.S. where the product has generated or is expected to generate at least $15 million of revenue over any 12 consecutive months; or an FDA settlement as to BXCL 501 creating liability above $1 million
  • a judgment above $1 million undischarged and unstayed for 30 days, or a change of control
  • failure to use reasonable best efforts to oppose a challenge to the releases
• Upon an event of default, the DIP agent at the direction of the required DIP lenders may deliver a carve out trigger notice declaring the DIP obligations accelerated, terminating any remaining commitment to extend credit, and causing interest to accrue at the default rate, in each case without affecting the DIP liens, superpriority claims, or obligations; the prepetition agent, at the direction of the majority prepetition lenders, may separately terminate, reduce, or restrict the debtors' use of cash collateral. Once the DIP obligations are repaid in full, the prepetition secured parties constituting majority lenders may deliver the notice instead.
• The automatic stay is modified so that remedies become exercisable five business days after delivery of a carve out trigger notice. During that period the debtors and any committee may seek an emergency hearing solely to contest whether an event of default has occurred, and the debtors may continue to use cash collateral only for payroll and critical expenses preserving the prepetition collateral. Absent a contrary order, the stay terminates at the end of the period and the DIP agent and prepetition secured parties may exercise all remedies without further application to the court.

Carve Out

• Post-Carve Out Trigger Notice Cap: $725,000 in allowed professional fees incurred on or after delivery of the carve out trigger notice, less any unapplied prepetition retainers
• Chapter 7 Trustee Fee: $25,000
• The carve out also covers statutory fees payable to the clerk and the U.S. Trustee plus statutory interest, and all allowed fees of debtor and committee professionals incurred before delivery of the trigger notice, whether allowed before or after delivery.
• The debtors must fund a segregated professional fees account weekly in the budgeted amount for each professional person, held in trust and outside the control of the DIP and prepetition secured parties; upon delivery of the trigger notice the debtors must deposit all available cash until the account equals the allowed professional fees plus the post-trigger cap and reserve all other carve out amounts. The DIP agent and lenders may not sweep or foreclose on available cash until the account is fully funded and hold a security interest only in any residual.
• Payments in respect of allowed professional fees made before the trigger notice date do not reduce the carve out; payments made on or after that date reduce it dollar-for-dollar. Funding the carve out is added to the DIP obligations, though disbursements out of the professional fees account are not loans and neither increase nor reduce them, and neither the carve out, the post-trigger cap, nor the account limits the allowed professional fees the debtors owe.
• The carve out is senior to all liens and claims securing the facility, the prepetition adequate protection liens, and the prepetition adequate protection claims.

Use of Proceeds

• Working capital and general corporate purposes
• Fund the operating and administrative costs of the Chapter 11 cases and an approved sale
• Pay interest, fees, costs, and expenses of the facility
• Pay professional fees and expenses associated with the cases, an approved sale, and the loan documents, and fund the carve out
• All use is limited to the approved budget, subject to permitted variance. Neither the DIP agent nor the lenders have any obligation to monitor the debtors' use of the facility.

Credit Bid

• The DIP agent, at the direction of the required DIP lenders, may credit bid in any sale of the DIP collateral up to the full amount of the DIP obligations, including the roll-up loans.
• Subject to the challenge provisions, the prepetition agent, at the direction of the majority prepetition lenders, may credit bid in any sale of the prepetition collateral up to the full amount of the prepetition secured obligations and any prepetition adequate protection claims, under section 363(k), whether the sale is effected under sections 363(k), 1123, or 1129(b), by a Chapter 7 trustee under section 725, or otherwise, unless the court for cause orders otherwise.

Avoidance Actions

• Liens on the proceeds and property recovered in respect of avoidance actions, and recourse of the superpriority claims to those proceeds, are granted only upon entry of the final order; the same condition applies to the prepetition adequate protection liens.

Challenge Period and Budget

• The debtors stipulate that they owe not less than $111,838,086.63 in principal under the prepetition credit agreement, including interest previously paid in kind and capitalized before the petition date, plus accrued interest, fees, and expenses; that the prepetition liens are valid, perfected, first priority, and unavoidable; and that an event of default has occurred. The stipulations bind the debtors immediately and bind all other parties in interest unless a timely challenge succeeds, at which point the prepetition obligations become allowed claims and the liens are deemed valid as of the petition date.
• Challenges must be filed within 75 days following entry of the interim order. If a Chapter 11 trustee is appointed or the cases convert to Chapter 7 before that date, the trustee has until the later of the challenge deadline or the tenth day after appointment or conversion to commence, join, or take over a challenge.
• A committee or other party in interest must first obtain a separate standing order from the court; nothing in the interim order confers standing to pursue estate causes of action.
• A committee, if appointed, may use no more than $25,000 of DIP proceeds, DIP collateral, or prepetition collateral including cash collateral during the challenge period solely to investigate, and not to object to, prosecute, or litigate, the prepetition liens or any potential challenge.
• The initial budget attached to the interim order, prepared by the debtors and approved by the required DIP lenders, constitutes the approved budget. The 13-week budget covers the week including the closing date and is subject to required-DIP-lender approval in their sole discretion. Updates are delivered as a rolling 13-week forecast every other Friday at 5:00 p.m. ET, and a replacement budget takes effect only if the required DIP lenders do not object in writing within three business days of receipt; if the parties cannot agree, the most recent approved budget remains in effect.
• The budget shows $442,000 of cash at filing, two DIP draws of $9.31 million funded in the weeks ended Sept. 4 and Oct. 2, and a projected ending cash balance of $336,000 in the week ended Dec. 18. The budget states that draws are shown net of original issue discount and that gross draws total $19 million.

Permitted Variance

• Actual disbursements may not exceed 115% of budget, calculated cumulatively rather than line by line. The interim order casts the test as weekly, measured on a rolling four-week basis of disbursements and non-operating cash flows including professional fees, at a 15% threshold; the credit agreement runs the same 15% cushion against each two-week test period ending on the last Saturday before delivery of a variance report. The interim order controls where the two instruments differ.
• Actual disbursements and reserves for professional fees and expenses of the DIP secured parties and prepetition secured parties are excluded from both budgeted and actual disbursements, and unused budgeted amounts for professional person line items may be carried forward to subsequent weeks.
• A variance report is due every other Friday, with a written explanation of any disbursement variance greater than 15% for the applicable test period.

Financial Covenant

• Minimum Liquidity: $250,000, maintained at all times after the first Friday occurring on or after the final order date in cash or permitted cash equivalents held in controlled accounts free and clear of liens other than those in favor of the agent and bankers' liens and setoff rights on ordinary-course deposits.

Liens and Priorities

• The DIP obligations constitute allowed superpriority administrative expense claims against each debtor's estate under section 364(c)(1), subject and subordinate only to the carve out and permitted prior liens, with priority over all other administrative expenses and claims, including those under sections 503(b) and 507(b), and with recourse to all prepetition and postpetition property and, upon entry of the final order, avoidance action proceeds.
• If distributable value under a Chapter 11 plan acceptable to the debtors and required DIP lenders is insufficient to satisfy the DIP superpriority claims and other administrative and priority claims required to be paid at confirmation, the DIP secured parties will waive the administrative expense priority of the superpriority claims allocable to the roll-up loans, up to the amount of the shortfall and capped at the outstanding principal of the roll-up loans, without affecting the secured status of those loans or the liens securing them.
• Except as provided in the DIP orders, with respect to the bid protections described in the sale motion, or on consent of the required DIP lenders, no other superpriority claims may be granted in the cases.
• The DIP agent is granted automatically perfected liens on all DIP collateral, subject and subordinate only to permitted prior liens and the carve out, with the following priorities:
  • First-priority liens under section 364(c)(2) on all previously unencumbered property, subject only to the carve out
  • Priming first-priority senior liens under section 364(d)(1) on all property of the debtors
  • Junior liens under section 364(c)(3) on all other prepetition and postpetition property
• Where applicable law prevents a lien from attaching, the liens attach solely to the debtors' economic rights, including all proceeds. Permitted prior liens are limited to valid, perfected, unavoidable liens existing at the petition date that are senior to the prepetition secured parties' liens by operation of law or as permitted by the prepetition credit agreement, liens on assets that were not prepetition collateral, and liens perfected postpetition under section 546(b).
• The DIP obligations, at the option of the required DIP lenders in their sole discretion, are repaid first from DIP collateral comprising previously unencumbered property and second from all other DIP collateral.
• The credit agreement applies collections first to agent fees and expenses, then to lender fees and expenses, then to accrued interest, then to principal of the new money loans and the related exit fee, then to principal of the roll-up loans and the related exit fee, and last to remaining obligations, leaving the roll-up behind the new money in the waterfall.
• Holders of DIP superpriority claims must be paid in full in cash on the effective date of a Chapter 11 plan unless they consent to different treatment, subject to the administrative priority waiver described above.
• The liens are perfected automatically without further filings, though the agents may record financing statements, mortgages, or a certified copy of the interim order, with perfection dated to entry of the interim order regardless of filing date. Neither the DIP liens nor the adequate protection liens may be made pari passu with or junior to any postpetition lien or to any lien avoided and preserved under section 551.
• The debtors must maintain casualty and loss insurance on the prepetition and DIP collateral on substantially the same basis as before the petition date and name the DIP agent as loss payee or additional insured.

Adequate Protection

Prepetition Secured Parties

• Adequate protection is provided solely to the extent of, and in an amount equal to, the aggregate diminution in value of the prepetition secured parties' interests in the prepetition collateral, including cash collateral, resulting from the priming DIP liens, the carve out, the debtors' use of the collateral, and imposition of the automatic stay.
• Replacement and additional automatically perfected liens on all DIP collateral and, upon entry of the final order, avoidance action proceeds, subordinate to the carve out, permitted prior liens, and the DIP liens, and otherwise senior to all other liens and claims against the DIP collateral. These liens continue to secure the remaining prepetition secured obligations following the deemed funding of the roll-up loans.
• Allowed superpriority administrative expense claims under sections 503(b), 507(a), and 507(b), subordinate to the carve out and the DIP superpriority claims, payable from all prepetition and postpetition property and senior to all other administrative expense claims to the extent of any diminution in value.
• Payment of all reasonable and documented fees and expenses of the prepetition secured parties, whether incurred before or after the petition date and to the extent not duplicative of amounts paid to the DIP lender advisors, including those of Sullivan & Cromwell LLP, Richards, Layton & Finger, P.A., DLA Piper LLP (US), and any conflicts counsel, without separate court approval, U.S. Trustee guideline compliance, or fee applications. Except in the event of a conflict, the DIP secured parties and prepetition secured parties must share counsel, other than DLA Piper and Sullivan & Cromwell.
• Maintenance of cash management arrangements consistent with the cash management order, compliance with the credit agreement covenants on conduct of business, preservation of licenses, permits, governmental authorizations, and intellectual property, maintenance of properties and insurance, and compliance with all reporting requirements under the credit agreement, with all reports provided to the prepetition agent.
• The prepetition secured parties reserve the right to seek further or alternative adequate protection, and the debtors and other parties reserve the right to contest any such request; nothing impairs the application of section 507(b) if the protection granted proves insufficient.

Releases

• Effective upon entry of the interim order as to the DIP secured parties, and upon entry of the final order and subject to the challenge provisions as to the prepetition secured parties, the debtors and their estates release the DIP secured parties, the prepetition secured parties, and each of their affiliates, current, former, and future officers, directors, employees, agents, advisors, shareholders, managers, funds, managed accounts, and predecessors in interest from all claims relating to the facility, the prepetition obligations, the liens, the loan documents, any lender liability or equitable subordination theories, and any avoidance claims under Chapter 5 of the Bankruptcy Code.
• The debtors covenant not to commence or support any released claim and to use reasonable best efforts to oppose, including by objecting or seeking dismissal, any proceeding or challenge brought by another party in interest that would violate the release; failure to do so is itself an event of default under the credit agreement. Nothing prohibits the debtors from responding to or complying with validly served discovery requests from a committee or other third party.

Waivers

• Subject to entry of the final order:
  • Section 506(c): no expenses of administration may be charged against or recovered from the DIP collateral, the DIP agent, the DIP lenders, the prepetition collateral, or the prepetition secured parties, except to the extent of the carve out, absent prior written consent
  • Section 552(b): the prepetition secured parties are entitled to the benefits of section 552(b) and the "equities of the case" exception does not apply to the proceeds, products, offspring, or profits of the DIP collateral or prepetition collateral
  • The equitable doctrine of marshaling does not apply to the DIP collateral, DIP obligations, prepetition secured obligations, or prepetition collateral
• The automatic stay is modified to the extent necessary to implement the loan documents and the interim order.
• Under section 1141(d)(4), the debtors waive any discharge as to remaining DIP obligations or prepetition adequate protection obligations, which survive conversion, dismissal, a section 363(b) sale order, or plan confirmation.

Governance Conditions

• As conditions to closing, the borrower was required to retain a chief restructuring officer whose identity, scope of duties, and engagement terms are acceptable to the agent, and to establish a committee of the board to oversee the sale process and the Chapter 11 cases, with a mandate acceptable to the agent.
• The credit agreement bars any cash bonuses for fiscal year 2026 without the agent's prior written consent and caps 2026 cash compensation for the borrower's executive officers, including Vimal Mehta, Richard Steinhart, Javier Rodriguez, Frank Yocca, and any replacement for them, at 2025 levels.