Carbon Health Technologies - Chapter 11 Plan Terms

Plan / RSA Terms

Overview

• On April 7, 2026, the Debtors filed the Carbon Health Technologies, Inc. and Debtor Affiliates' Combined Disclosure Statement and Amended Plan of Reorganization [Docket No. 431] (the "April 7 Plan").
• In response to the Committee's opposition to the terms of the April 7 Plan, the Debtors, the DIP Lender, the Prepetition Lenders, and the Committee agreed to mediate the disputed issues pursuant to the Agreed Mediation Order Appointing Judge Marvin Isgur as Mediator [Docket No. 451].
  • Over the course of the past month, the foregoing parties, along with the mediator, Judge Isgur, met and conferred regarding the disputed terms of the April 7 Plan.
  • On May 8, 2026, the parties reached an agreement in principle that was reflected in a term sheet [Docket No. 621] (the "Term Sheet").
  • In accordance with the Term Sheet, the Combined Disclosure Statement and Plan was amended to reflect the terms and conditions in the Term Sheet and the settlement among the Debtors, the DIP Lender, the Prepetition Lenders, and the Committee.
• The Combined Disclosure Statement and Plan is the result of extensive good faith negotiations among the Debtors, the Holders of Prepetition Secured Claims (including through the Prepetition Agent), the Holders of DIP Claims (including through the DIP Agent), and the Committee, and provides for a comprehensive restructuring of the Company's balance sheet and a significant investment of capital in the Debtors' business that provides significant value to the Holders of General Unsecured Claims while also providing the Debtors a discharge so that they can continue to operate their businesses and provide important healthcare services.
• Ultimately, the Debtors commenced these Chapter 11 Cases to effectuate a value-maximizing debt-for-equity Plan and concurrent marketing and sale process that will benefit all stakeholders.

Restructuring Transaction

• The restructuring as set forth in the Combined Disclosure Statement and Plan implements a debt-for-equity exchange transaction (or similar transaction).
  • Holders of DIP Claims and Allowed Prepetition Secured Claims will receive on the Effective Date, in full and final satisfaction of such Claims, their Pro Rata share of: (a) 100% of the New Equity Interests, subject to the dilution described in the Plan, and (b) the Exit Facility.
  • The corporate structure of the Reorganized Debtors is set forth in the Plan Supplement.
• The Exit Facility is a first lien term loan facility that will be provided by the Holders of Prepetition Secured Claims in the event of a Reorganization Transaction, and which is subject to increase as necessary to fund the liquidity requirements of the Reorganized Debtors.
• The DIP Financing Agreement, as well as the Plan, contemplates a comprehensive financial restructuring through the Plan that will be premised on either:
  • A sale of all or substantially all of the Debtors' assets, in an amount sufficient to pay the DIP Claims and Prepetition Secured Claims in full in Cash in addition to certain other costs; or
  • A debt-for-equity exchange.

Sale Transaction

• The Debtors, with the assistance of their professional advisors, launched a marketing process prior to the Petition Date (the "Marketing Process") to solicit interest in one or more sale transactions for all or substantially all of the Debtors' assets.
  • The Marketing Process is being led by the Debtors' investment banker, Stifel, who has, among other things, developed comprehensive marketing materials and created a confidential electronic data room (the "Data Room") to permit potential third-party buyers to conduct due diligence.
  • Consistent with the Marketing Process, the Debtors and their advisors developed the Bidding Procedures for the marketing and sale of their business in the Chapter 11 Cases in an orderly and value-maximizing manner.
• On February 3, 2026, the Debtors filed the Bidding Procedures Motion, and on February 10, 2026, the Bankruptcy Court entered the Bidding Procedures Order.
• Pursuant to the Bidding Procedures, the Debtors shall conduct a sale process consistent with the terms described in the Bidding Procedures (the "Sale Process") to solicit offers for a potential Third-Party Sale Transaction with one or more Third-Party Successful Bidders.
• As of the date of the Combined Disclosure Statement and Plan, Stifel has contacted 127 parties identified as potential third-party bidders, including both financial and strategic parties, 47 of which executed confidentiality agreements and received access to the Data Room.
• As of the March 6, 2026 bid deadline, the Debtors received eight bids, seven of which were binding and one that was a non-binding indication of interest.
  • After engaging with the bidders and their respective advisors, Stifel was not able to reach terms for a topping bid by combining multiple bids for different assets or on select assets.
  • As a result, the Debtors do not intend to move forward with a sale of substantially all or a portion of their assets to a third party.

DIP Financing

• On February 2, 2026, the Debtors entered into the DIP Financing Agreement in exchange for a commitment of $19.5 million in debtor-in-possession financing from the DIP Agent and DIP Lenders, as further described in the DIP Motion.
• On February 2, 2026, the Debtors filed the DIP Motion, and on February 3, 2026, the Bankruptcy Court entered the Interim DIP Order granting the relief requested and allowing the Debtors to draw up to $9 million under the DIP Financing Agreement.
  • The proceeds under the DIP Financing Agreement are to be used to pay fees and expenses related to the Chapter 11 Cases and to fund the operating expenditures and any other amounts owed by the Debtors.
  • The obligations under the DIP Financing Agreement are secured by a first priority priming security interest and lien in all of the Debtors' assets, including any assets not securing the Prepetition Secured Claims and all assets securing the Prepetition Secured Claims, in each case as more fully described in and subject to the terms, conditions, limitations, priorities, and exclusions set forth therein and in the Final DIP Order.
• On February 27, 2026, the Bankruptcy Court, following a hearing, entered the Final DIP Order, allowing the Debtors to access the full amount extended under the DIP Financing Agreement.
• In the DIP Financing Agreement, the Debtors agreed to certain milestones, including:
  • By February 12, 2026, the entry of a Bidding Procedures Order to govern any potential Third-Party Sale Transaction or Permitted Asset Disposition;
  • By March 6, 2026, subject to the Bidding Procedures Order entered by the Court, the deadline for the submission of bids for a potential Third-Party Sale Transaction or Permitted Asset Disposition;
  • By March 9, 2026, entry of the Final DIP Order;
  • By March 24, 2026, the entry of an order conditionally approving the adequacy of information in the Combined Disclosure Statement and Plan (this milestone was originally March 19, 2026 under the Final DIP Order; the DIP Lender agreed to extend it through March 24, 2026);
  • By March 25, 2026, the entry of an order confirming any sale of Acquired Assets to any Third-Party Successful Bidder(s);
  • By May 1, 2026, the closing of any sale of the Acquired Assets to any Third-Party Successful Bidder(s); and
  • By May 1, 2026, provided the Debtors' sale process did not result in a successful Third-Party Successful Bidder, the entry of an order confirming a Plan.

Trust Terms

• On the Effective Date of the Combined Disclosure Statement and Plan, a Trust will be formed for the benefit of the holders of an Allowed General Unsecured Claim (i.e., the Trust Beneficiaries), who will each receive, in full and final satisfaction of such Allowed General Unsecured Claims, a share of the Trust Assets.
• The Trust will be funded with:
  • The Data Transfer Documents;
  • The Trust Causes of Action;
  • The Trust Funding Amount of $12 million in cash, to be allocated per the terms of the Plan and the Trust; and
  • The Abuse Insurance Rights.
• The "Avoidance Actions" assigned to the Trust shall not include the Excluded Avoidance Actions.
• Holders of Allowed Commercial GUC Claims (Class 6) will receive, after accounting for the administrative expenses of the Trust:
  • $4.55 million of the Trust Funding Amount;
  • The proceeds of the Avoidance Actions (other than the Excluded Avoidance Actions); and
  • A Pro Rata share of the remaining Trust Assets that are not specifically allocated to the Holders of Allowed Abuse Claims.
• Holders of Allowed Abuse Claims will receive, after accounting for the administrative expenses of the QSF:
  • $7.45 million of the Trust Funding Amount;
  • The net proceeds of the Abuse Insurance Policies and the Abuse Insurance Rights; and
  • A Pro Rata share of the remaining Trust Assets that are not specifically allocated to the Holders of Allowed Commercial GUC Claims.
• The Commercial GUC Claims shall be liquidated in accordance with the Combined Disclosure Statement and Plan, provided that the Trustee (but not the Debtors, the Reorganized Debtors or the Secured Parties) shall be responsible for objecting to the Commercial GUC Claims.
• Abuse Claims shall be liquidated in accordance with the Abuse Claims Protocol proposed by the Committee, which Abuse Claims Protocol shall be reasonably acceptable to the Debtors.

Releases

• The definition of "Released Parties" shall be expanded such that, inter alia, the Debtors' current or continuing control persons, officers, and directors are Released Parties.
• Subject to the Trust's receipt of the full amount of the $12 million Trust Funding Amount and the vesting of the Trust Causes of Action and the Abuse Insurance Rights Transfer in the Trust on the Effective Date, the Debtors and their current and continuing directors and officers will receive full releases from the Debtors and from any direct claims held by the Holders of Abuse Claims.
• The Debtors and the Secured Parties shall provide the form of release to be executed for Released Parties, by the Holders of Allowed Abuse Claims, which form of release shall be reasonably acceptable to the Committee.

Plan Support

• The Committee now supports the Plan and urges the Holders of Claims to vote in favor of the Plan.
• The Debtors and the Committee strongly recommend that all creditors receiving a Ballot vote in favor of the Plan, and believe that the Plan is in the best interests of creditors.