The Stephan Co. - Chapter 11 Plan Terms

Plan Terms

Overview

• The Stephan Co.'s amended plan of reorganization, dated Oct. 19, 2026, resolves the debtor's talc and asbestos personal injury liabilities through a Section 524(g) trust. The trust is funded by a $1 million note from the debtor's non-debtor affiliates, backed by the reorganized debtor's guaranty secured by a pledge of 50.1% of its stock; the cash left in a professional fee escrow after professional fees and the affiliates' financing claim are paid, with the escrow funded by the settlement payment of Fireman's Fund Insurance Company and Fireman's Fund Insurance Company of Wisconsin (together, FFIC); the debtor's rights under policies of non-settling insurers; and identified estate causes of action. Only the Class 4 talc claims are impaired; every other class is unimpaired, and existing equity keeps its interests.
• The debtor and the non-debtor affiliates propose the plan together as the plan proponents. The affiliates specifically include 614 Barber Supply, Inc., Bowman Beauty & Barber Supply, Inc. and Morris Flamingo-Stephan, Inc., and the full list will be filed in the plan supplement. The plan defines the debtor to include Old 97 Company and any other entity ever merged or consolidated with it.
• The affiliates also have their own claims against the debtor. They are the lenders under the debtor's unsecured financing facility, whose claim is allowed in full in Class 5, and they hold the intercompany claims reinstated in Class 6. Separately, Class 2 covers secured claims under the debtor's prepetition guarantees of affiliate debt, to the extent those guarantees are secured.
• Claimants are represented by two parties. The first is the talc claimants' committee, which includes both the official committee of talc and asbestos personal injury claimants and the ad hoc committee that came before it prior to the petition date. The second is a court-appointed future claimants' representative, or FCR. Both must consent to the confirmation order, the effective date, waivers of conditions, extensions of the confirmation outside date and plan modifications.
• FFIC is the settling insurer under a settlement, release and policy buyback approved by bankruptcy court order dated July 16, 2026 [Docket No. 310]. Other insurers may become settling insurers through settlements approved on or before the effective date, or through settlements the trustee reaches afterward.

Trust Note and Affiliate Contribution

• The affiliates' contribution is a $1 million promissory note payable to the trust, delivered on or before the effective date, on the following terms:
  • Principal: $1 million
  • Rate: 5% per annum
  • Maturity: five years, with principal and interest paid annually
  • Prepayment: in whole or in part at any time at par plus accrued interest, with no premium or penalty
  • Credit support: an unconditional guaranty by the reorganized debtor, secured by a lien on 50.1% of the reorganized debtor's stock under a pledge and security agreement with the trust; the stock certificates are delivered to the trustee on the effective date
• On the effective date, the affiliates also automatically release all of their claims against the debtor, the committee, the FCR and their respective affiliates and representatives. The release does not cover the financing facility claim or intercompany claims, which are allowed and paid in Classes 5 and 6. The plan's definition of the affiliates' contribution covers only the note, while its implementation section describes the contribution as the note together with this release.
• The contribution settles all estate causes of action against the affiliates and their officers, directors, shareholders, employees, professionals and consultants. In return, the affiliates are protected by the channeling injunction. The plan requires the confirmation order to find that the contribution is essential to the plan's feasibility and to the debtor's successful reorganization.
• When a settling insurer pays its settlement amount, the affiliates release that insurer and its releasees from talc personal injury claims and all claims tied to its policies. They also ratify the releases in its settlement and consent to the sale of its policies back to it, with the proceeds going to the professional fee escrow and the trust. Settling indemnitors receive the same treatment; these are parties facing talc-related indemnification claims from the debtor that enter court-approved settlements.

Debtor Contribution and Professional Fee Escrow

• The debtor's cash contribution to the trust is whatever remains in the professional fee escrow after allowed professional fees and the affiliates' financing claim are paid in full. On or as soon as practicable after the effective date, the debtor also transfers the guaranty and pledge, identified causes of action, and its rights under talc insurance policies issued by non-settling insurers, including the right to proceeds.
• The reorganized debtor will fund the escrow from FFIC's settlement payment, or from any other source available on the effective date, with cash equal to the professional fee reserve plus the financing amount. The escrow is held in trust for retained professionals and the Class 5 holders and is not property of the estate or the reorganized debtor. It also pays the allowed fees of the claims agent, Kroll Restructuring Administration LLC.
• The financing amount is all outstanding principal and accrued interest, through the effective date, on amounts the affiliates have lent the debtor on and after Sept. 1, 2025 under an unsecured loan facility dated that day.
• The professional fee reserve covers accrued, unpaid and projected fees and expenses from the petition date through the effective date for the debtor's, the committee's and the FCR's professionals and for the claims agent. The professionals estimate the amounts, and the debtor approves them after consulting the affiliates, the committee and the FCR. The reorganized debtor may estimate for any professional that does not submit estimates, and the debtor, the committee and the FCR may jointly adjust the reserve before the effective date.
• The escrow must also cover fees for post-confirmation appeals and final fee applications, and it may fund allowed post-effective date fees of the committee and the FCR. Any such funding reduces the cash left for the trust, and any shortfall in paying the committee's and the FCR's fees is paid solely by the trust. The trust also pays reasonable fees for the committee's and the FCR's authorized post-effective date activities without court approval.
• On the effective date, the reorganized debtor must pay in full in cash, or reserve for, allowed administrative, priority tax, priority non-tax, secured and general unsecured claims that are not reinstated. It must also reserve, or have access to, cash for legal fees likely to be incurred through the effective date, including the cost of defending any appeal of the confirmation order or any hearing on a professional fee claim. Reserve funds left in the escrow after professional fees and the financing amount are paid also go to the trust.

FFIC Settlement and Insurance Provisions

• Under its settlement, FFIC buys back its policies and related claims free and clear under Section 363(f). The plan adopts and ratifies the supplemental settling insurer injunction in the July 16, 2026 approval order, and nothing in the plan limits that order's Section 363(m) protection.
• Each settling insurer is protected by the channeling injunction and becomes a released party once it pays its settlement amount. After that, the trustee may not pursue it for any claim settled, released or sold under its settlement, except to enforce the settlement.
• Insurance settlement agreements control over the plan, plan supplement, trust documents and disclosure statement, and any sale order approving one controls over the confirmation order. The debtor is not discharged from its obligations under these agreements, and they survive if the plan is withdrawn or never goes effective.
• The trust must defend, indemnify and hold harmless each settling insurer and its releasees, as set forth in that insurer's settlement agreement, against all claims enjoined by the plan, the settling insurer injunction or the insurer's settlement, including talc-related claims and claims tied to the insurer's policies; the settlement agreement controls if it conflicts with the plan's indemnity terms. The trust must also reimburse the insurer's reasonable and necessary defense costs. A settling insurer may defend but is not required to, and if it declines, the trust takes over the defense; neither the insurer nor the trust may settle an indemnified claim without the other's consent, which may not be unreasonably withheld.
• Rights under non-settling insurers' policies pass to the trust subject to those insurers' policy rights and obligations, except any right to challenge the assignment. The confirmation order must declare the assignment permissible despite any policy term or law argued to prohibit it. It must also bar non-settling insurers from defending on the grounds that the plan does not comply with the Bankruptcy Code or that their policies prohibit the assignment.
• Settling insurers take no position on the insurance assignment or the trust distribution procedures, and no party may argue that they agreed to or accepted either.

Treatment of Claims and Interests

• Only Class 4 talc personal injury claims are impaired. Creditors in every other class are paid in full or reinstated, and equity keeps its interests.
• Administrative expense claims (unclassified): paid in full in cash on the latest of the effective date, the date of allowance, and the date the claim comes due in the ordinary course.
• Priority tax claims (unclassified): paid in full in cash on or as soon as practicable after the effective date; claims not yet due are paid in the ordinary course.
• Class 1, priority non-tax claims (unimpaired, presumed to accept): paid in full in cash on the later of the effective date and the date of allowance; claims not yet due are paid in the ordinary course.
• Class 2, secured claims arising from the debtor's prepetition guarantees of affiliate debt, to the extent secured (unimpaired, presumed to accept): reinstated, or paid in full in cash on the later of the effective date and the date of allowance.
• Class 3, general unsecured claims (unimpaired, presumed to accept): reinstated and paid in the ordinary course under the terms of the underlying transaction.
• Class 4, talc personal injury claims (impaired, entitled to vote): channeled to the trust. The trust takes on liability for all such claims, including future demands, as well as any liability of settling insurers and settling indemnitors for barred claims. Only the trust resolves these claims, under its trust agreement and distribution procedures, and holders may look only to the trust for payment. Each holder must sign a claimant release before being paid.
• Class 5, financing facility claim (unimpaired, presumed to accept): allowed at the full financing amount. At the holders' option, it is either paid in full on the effective date or reinstated under the facility's terms or as agreed with the reorganized debtor.
• Class 6, intercompany claims (unimpaired, deemed to accept): reinstated and paid in the ordinary course.
• Class 7, debtor equity interests (unimpaired, deemed to accept): holders keep their interests, subject to the pledge of newly issued stock to the trust. If Class 7 is found to be impaired, the debtor is not required to solicit its vote and will seek cramdown under Section 1129(b), because no class of interests ranks below it.

Voting and Section 524(g) Thresholds

• Class 4 is the only voting class. The bankruptcy court will be asked to issue the channeling injunction if at least two-thirds in amount and 75% in number of the Class 4 holders who actually vote accept the plan.
• If Class 4 holders are given the chance to vote and none do, the class is deemed to accept.

Milestones and Termination

• The affiliates' obligations to support the plan and contribute the note expire if any of the following occurs, unless the debtor, the affiliates, the committee and the FCR agree otherwise in writing: the plan does not receive the required claimant vote, the confirmation order is not entered by Dec. 30, 2026, or the effective date does not occur by Jan. 29, 2027.
• The Dec. 30, 2026 confirmation outside date may be extended without court approval if the debtor, the affiliates, the committee and the FCR consent.
• The debtor selects the effective date, a business day, with the agreement of the affiliates, the committee and the FCR. It must occur within 10 business days after all conditions are satisfied, unless waived. The plan supplement is due 10 business days before the confirmation objection deadline, and the implementation step plan is due at least 10 days before the effective date.
• If the effective date conditions are not met or waived, the confirmation order will be vacated on the debtor's motion. The plan becomes void if it is withdrawn, if the confirmation order is vacated, if it is not confirmed by a final order, or if it fails to go effective. In that case its settlements and contract assumptions and rejections are cancelled and all parties' rights are reserved, but the insurance settlement agreements survive.
• The debtor may revoke or withdraw the plan before confirmation and file later plans.
• Deadlines after the effective date are as follows:
  • Administrative expense claims: the first business day that is 30 days after the effective date
  • Rejection damages claims: 30 days after the effective date
  • Final professional fee applications: 60 days after the effective date
  • Claims objections: 120 days after the effective date; the court may extend this, and filing an extension motion automatically extends it until the court rules
• No bar date applies to talc personal injury claims. For other claims, the distribution record date is the confirmation date.
• Distributions on claims allowed after the effective date are made within 30 days of allowance. Cash distributions left unclaimed for three months revest in the reorganized debtor, and checks not presented within 90 days are void; in either case the holder's claim to the distribution is discharged.

Conditions Precedent

• The plan cannot go effective until the confirmation order, whether entered by the bankruptcy court and affirmed by the district court or issued directly by the district court, has become a final order, and the FFIC approval order must remain a final order that is not subject to any motion to revoke or modify it; the remaining effective date conditions are listed below.
• Confirmation requires a disclosure statement order acceptable to the plan proponents. It also requires a confirmation order acceptable to the debtor, the affiliates, the committee, the FCR and the settling insurers. Among other things, that order must:
  • approve the channeling and insurance entity injunctions
  • ratify the settling insurer injunction
  • provide for issuance of the pledged stock and delivery of the note, guaranty and pledge
  • require every claimant to sign the claimant release before receiving any trust distribution
• The confirmation order must also make findings including the following:
  • as of the petition date, the debtor had been named as a defendant in personal injury, wrongful death or property damage actions over alleged talc or asbestos exposure
  • the debtor is likely to face substantial future demands whose amounts, numbers and timing cannot be determined
  • the debtor and affiliate contributions together are a sufficient basis for the protections given to the protected parties
  • the release of the debtor, the affiliates and their representatives is essential to the global settlement
  • the reorganized debtor will continue as an ongoing business
• Other effective date conditions are:
  • confirmation by the outside date, unless the debtor, the affiliates, the committee, the FCR and any affected settling insurer agree otherwise in writing
  • no pending request to revoke the confirmation order
  • nothing preventing the injunctions from taking full effect or the trust from receiving both contributions
  • execution of all plan documents
  • formation of the trust
• The plan proponents may waive or modify any condition, without court approval, with the written consent of the committee and the FCR, which may not be unreasonably withheld. Each settling insurer must also consent in writing, on the same reasonableness standard, before any condition affecting its rights is waived.

Talc Personal Injury Trust

• The trust is established on the effective date under Section 524(g) as a qualified settlement fund under Section 468B of the Internal Revenue Code. It takes on all channeled claims, meaning talc personal injury claims, future demands, Medicare claims and other claims arising from talc claims or settling insurer policies. As to settling insurers and their releasees, it also takes on all barred claims. It pays talc claims under its trust agreement and distribution procedures, which will be filed with the plan supplement.
• Trust assets pass to the trust free and clear on the effective date. They include both contributions, the insurance rights, the debtor's causes of action against non-settling insurers and non-settling indemnitors, and all proceeds. Settling insurer policies and claims sold or released under the insurance settlements are excluded.
• All estate claims, defenses and causes of action relating to channeled claims that have not been released pass to the trust. These include the Liberty Mutual adversary proceeding and the Colgate adversary proceeding, which the trust may pursue, compromise or settle at its sole discretion and its own expense. The plan separately defines Liberty Mutual Insurance Company as an insurer.
• The trustee alone may pursue coverage claims under non-settling insurers' policies, except as provided in the FFIC settlement, and the debtor's claims against non-settling indemnitors. The trustee may ask the court to approve insurer settlements under Sections 363(b), (f) and (m).
• The plan supplement will name the initial trustee, nominated by the committee and the FCR, and the five initial trust advisory committee members, nominated by the committee. Subject to court approval, the current FCR becomes the post-effective date FCR. The trust pays all of their costs.
• The trust pays all of its own expenses, and no plan proponent or other protected party is liable for them. At its own cost, the trust must also use reasonable efforts to obtain dismissal of any talc claim filed against the reorganized debtor in violation of the channeling injunction, first by asking the plaintiff to dismiss and then by motion, which the reorganized debtor may join at its own expense.
• The trust registers as a responsible reporting entity under MMSEA. It must keep enough funds to pay Medicare claims and reimburse CMS in full, and before paying a claimant it must obtain a certification covering Medicare obligations and an indemnity. The protected parties have no Medicare reporting obligations.
• A cooperation agreement taking effect on the effective date governs the debtor's talc and asbestos records. The debtor and the affiliates keep their privileges and need not produce privileged materials except under that agreement, and any such production does not waive privilege.

Reorganized Equity and Governance

• Existing equity is reinstated and deemed reissued. The reorganized debtor will also issue new stock equal to at least 50.1% of all issued stock, which is pledged to the trust to secure the guaranty of the note. Issuance and reissuance of these interests, including the pledged stock, is exempt from registration under Section 1145.
• Once the note is paid in full, the pledged stock is released and returned to treasury, subject to any later board vote; if the board so elects, it is instead distributed pro rata to equity holders as of that date. The confirmation order must find that existing holders and the reorganized debtor will own 100% of the reorganized stock and its dividend rights, subject to the pledge.
• The reorganized debtor continues as a separate corporate entity and may operate without court supervision. To the extent necessary, it will file an amended Florida certificate of incorporation. The plan supplement will name its board and officers.
• An implementation step plan will set the order of the effective date transactions. It must be reasonably acceptable to the debtor, the affiliates, any settling insurer, the committee and the FCR.
• The committee and the FCR continue after the effective date for limited purposes, including finishing pending litigation, granting or withholding in their sole discretion any consent the plan requires, opposing appeals of the confirmation order and pursuing fee applications. The committee dissolves once those matters are finished and its allowed fees are paid in full, and the trust advisory committee then takes over its privileges; the post-effective date FCR likewise takes over the pre-effective date FCR's privileges when that FCR is discharged.

Releases

• The debtor, the reorganized debtor and anyone exercising the estate's rights release the non-debtor affiliates and their representatives from all estate claims based on acts or events on or before the effective date. The release expressly covers:
  • talc-related claims
  • claims over dividends the debtor paid to the affiliates and their related parties
  • claims relating to payments those parties made on the debtor's behalf, including for legacy operational, pension and employee benefit obligations
  • alter ego, veil-piercing and successor liability theories
• The same estate parties also release the debtor, the reorganized debtor, the committee, the FCR and their representatives, plus each settling insurer and its releasees once it pays its settlement amount. This release excludes liability for gross negligence or willful misconduct determined by final order. By its terms, that exception applies only to this release and not to the release of the affiliates.
• The debtor and the reorganized debtor release all preference actions, and estate parties are permanently barred from pursuing any released claim.
• Each talc claimant must sign a claimant release to receive any trust distribution. The release will follow the form attached to the distribution procedures or another form acceptable to the protected parties.
• The reorganized debtor keeps all other causes of action that are not expressly released, but it keeps no claim that was released, settled or sold back to a settling insurer.

Exculpation, Discharge and Injunctions

• The debtor, the committee and its members, the FCR, and their directors, officers and professionals are exculpated for case-related acts and omissions from Nov. 14, 2025 through the effective date. The exculpation excludes actual fraud, willful misconduct or gross negligence determined by final order, and these parties may rely on the advice of counsel.
• Under the Section 524(g) channeling injunction, holders of channeled claims are permanently barred from pursuing them against any protected party. The protected parties are the debtor, the reorganized debtor, the affiliates, any settling insurer, any settling indemnitor, their representatives and successors, and all insureds under settling insurer policies.
• The insurance entity injunction bars claims against insurers that are tied to non-settling insurers' policies, settling insurer policies or talc claims. It does not benefit non-settling insurers. The trust may end or narrow it as to any non-settling insurer by written notice, but not as to a settling insurer unless that insurer fails to pay its settlement amount.
• Under the gatekeeper injunction, no enjoined party may pursue a talc claim, or any claim related to the case, the plan, the trust or the debtor's reorganization, against a protected party without the bankruptcy court's approval. The court must first find, after notice and a hearing, that the claim is colorable and must specifically authorize it.
• Confirmation discharges the debtor and the reorganized debtor from all claims and demands, except obligations under the insurance settlement agreements and sale orders. The debtor's indemnification obligations survive for directors, officers and employees serving as of the petition date or at any time since.

Consent and Amendment Rights

• Before confirmation, the debtor may modify the plan with the consent of the committee and the FCR, which may not be unreasonably withheld. After confirmation and before substantial consummation, a modification under Section 1127(b) also requires the affiliates' consent.
• No modification may reduce or eliminate the protected parties' protections or releases without the consent of the affiliates and of the debtor or reorganized debtor. Provisions carrying out the insurance settlements, and settling insurer protections and releases, may not be modified without the prior written consent of each affected settling insurer.
• The distribution procedures and claimant release may not be materially amended in two respects without consent:
  • to weaken the releases and injunctions protecting the debtor and the affiliates, or the trust's qualified settlement fund status, without the consent of the reorganized debtor and the affiliates
  • to weaken settling insurer releases or the plan injunctions, without the settling insurers' prior written consent
• Plan supplement documents must be reasonably acceptable to the debtor and the affiliates. The cooperation agreement must also be reasonably acceptable to the committee, the FCR and any settling insurer, and the trust agreement must also be acceptable to FFIC.

Executory Contracts

• All executory contracts are deemed assumed on the effective date, with three exceptions: contracts on the rejection list in the plan supplement, contracts addressed by a final order on or before the effective date, and settling insurer policies, which are sold back under the insurance settlements. Cure amounts are paid in the ordinary course or as agreed. Rejection damages claims not filed within 30 days after the effective date are barred.