Carbon_Health_Technologies_Inc - Chapter 11 DIP Terms

DIP Terms

Borrower(s) / Guarantor(s)

• Carbon Health Technologies, Inc. and its affiliated debtors, as Borrowers

Agent / Lender(s)

• Future Solution Investments LLC, a Wyoming limited liability company, as Administrative Agent and Collateral Agent
• Certain lenders from time to time party thereto, as DIP Lenders

DIP Commitments

• $19.5 million senior secured superpriority delayed-draw term loan facility
  • Up to $9 million available on an interim basis
  • The remaining balance available upon entry of the final order
• Amounts repaid or prepaid under the facility may not be reborrowed.

Cash Collateral

• The debtors are authorized to use cash collateral, defined as all DIP collateral (including cash collateral as defined in section 363 of the Bankruptcy Code), excluding cash collateral subject to Stanford Health Debt Facility Liens, in accordance with the approved budget.

Interest Rate

• 11.5% per annum, payable in kind monthly
• Default Rate Increase: 3.0%

Maturity

• The earliest to occur of:
  • 35 days after the petition date, if the final order has not been entered
  • The effective date or the substantial consummation of any plan of reorganization or liquidation in the chapter 11 cases
  • The consummation of a sale of all or substantially all of the debtors' assets and/or equity interests, in one or more series of transactions, including any Carbon Health Sale(s), under section 363 of the Bankruptcy Code
  • Six months from the date of the DIP financing agreement
  • The date on which the loans and other obligations become due and payable in accordance with the terms of the DIP financing agreement and the other loan documents

Carve Out

• All incurred or accrued professional fees and expenses of professionals for the debtors and professionals for the committee, including any success or transaction fees of the debtors' investment banker payable from proceeds of such transaction (without regard to the trigger date or budget cap limitations below), to the extent (i) allowed at any time by the court, (ii) incurred or accrued through the carve-out trigger date, and (iii) up to and as limited by the respective aggregate amounts for each professional or category of professionals set forth in the budget through the carve-out trigger date, less the amount of any prepetition retainers received by such professionals and not previously applied to fees and expenses. All three conditions must be satisfied for inclusion in the carve-out.
• Post Carve-Out Trigger Date Cap: $200,000 for debtor professionals and $50,000 for committee professionals.
• Chapter 7 Trustee Fee: $25,000
• Allowed administrative expenses for fees payable to the Office of the U.S. Trustee pursuant to 28 U.S.C. § 1930(a)(6), fees required to be paid to the Clerk of the Bankruptcy Court pursuant to 28 U.S.C. § 156(c), in each case plus interest at the applicable statutory rate.

Use of Proceeds

• Pay fees and expenses related to the DIP loan documents and the chapter 11 cases
• Fund operating expenditures and working capital of the debtors and other general corporate purposes, in each case, as set forth in and limited by the approved budget

Credit Bid

• The DIP Agent and the prepetition agent shall have the right to credit bid with respect to the DIP collateral or prepetition collateral, as applicable, any portion or all of the debtors' outstanding obligations under the DIP loan documents or the prepetition loan documents, as applicable, pursuant to section 363(k) of the Bankruptcy Code.
• Any bid submitted by the DIP Agent or the prepetition agent shall be deemed a qualified bid under any order of the court approving bidding procedures in connection with such sale.
• The DIP Agent and prepetition agent shall not have the right to credit bid for avoidance proceeds, insider claims proceeds, or other unencumbered claims proceeds.

Avoidance Actions

• Upon entry of the final order, the DIP collateral will include proceeds of any avoidance actions under sections 502(d), 544, 545, 547, 548 and 550 of the Bankruptcy Code.
• The DIP collateral will also include proceeds of any causes of action of the debtors or their estates against any of the debtors' current or former insiders or affiliates, based on any theory of liability, including breach of fiduciary duty and under the doctrines of alter ego and veil piercing.
• The DIP collateral shall not include avoidance actions or insider claims themselves, and shall not include any causes of action, including avoidance actions, against the prepetition secured parties.

Challenge Period and Budget

• The deadline to bring a challenge to the prepetition lien and claim matters is no later than April 17, 2026 or such later date to which the prepetition agent may expressly consent in writing.
• No more than $75,000 in the aggregate of the proceeds of the DIP collateral, prepetition collateral, the cash collateral, and the carve-out may be used by the committee solely to investigate (but not prosecute or challenge) prepetition lien and claim matters.

Securities and Priorities

• The DIP obligations are granted superpriority administrative expense claims against each of the debtors pursuant to section 364(c)(1) of the Bankruptcy Code, subject only to the carve-out.
• The DIP lenders are granted valid, binding, continuing, fully perfected, enforceable and non-avoidable security interests and liens in all DIP collateral, with the following priorities:
  • Senior priming liens pursuant to section 364(d)(1) of the Bankruptcy Code on all DIP collateral, which are first and senior in priority to all other interests and liens of every kind, including the prepetition secured liens, subject only to the carve-out and permitted prior liens
  • First-priority liens pursuant to section 364(c)(2) of the Bankruptcy Code on all unencumbered DIP collateral, subject only to the carve-out
  • Junior liens pursuant to section 364(c)(3) of the Bankruptcy Code on all DIP collateral that is subject to permitted prior liens

Adequate Protection

Prepetition Secured Parties

• Adequate protection liens upon all DIP collateral, subject and subordinate only to the carve-out, the DIP liens, and the permitted prior liens, to secure the aggregate diminution in value, if any, in the value of the prepetition collateral.
• Adequate protection superpriority claims pursuant to section 507(b) of the Bankruptcy Code, solely to the extent of the diminution in value, if any, in the value of the prepetition collateral, with super-priority over all other administrative expenses and all other claims, subject and subordinate to the carve-out, the DIP superpriority claim, and the permitted prior liens.
• Payment of prepetition and postpetition fees and out-of-pocket expenses for the professionals advising the prepetition agent.

Waivers

• Subject to entry of the final order:
  • Section 506(c): No costs or expenses of administration incurred in the cases will be charged against the DIP agent, the DIP lenders, the prepetition secured parties, their respective claims or interests, the DIP collateral or the prepetition collateral without the prior written consent of the DIP agent or the prepetition secured parties.
  • Section 552(b): The DIP agent and the DIP lenders, and the prepetition secured parties, shall be entitled to all of the rights and benefits of section 552(b) of the Bankruptcy Code, and the "equities of the case" exception under section 552(b) shall not apply with respect to proceeds, products, offspring or profits of any of the DIP collateral or the prepetition collateral.
  • The equitable doctrine of "marshalling" shall not apply to the DIP agent, the DIP lenders, or the prepetition secured parties with respect to the DIP collateral or the prepetition collateral; provided that the DIP agent, DIP lenders and prepetition secured parties agree to seek payment from the avoidance proceeds, insider claims proceeds, and other unencumbered claims proceeds solely after exhaustion of the other DIP collateral.

Permitted Variance

• Tested on a biweekly measurement period basis:
  • Actual total cash receipts shall not be less than 85% of the projected total operating cash receipts in the approved budget
  • Actual total disbursements (other than non-operating line item disbursements for professionals and committee professionals) shall not exceed 115% of the total projected disbursements in the approved budget
  • Actual non-operating line item disbursements for professionals and committee professionals shall not exceed 100% of the projected non-operating line item disbursements for professionals and committee professionals in the approved budget