Zynex - Chapter 11 Plan Terms

RSA Terms

Overview

• Zynex, Inc. and its affiliated debtors (collectively, the “Company Parties” or “Debtors”) entered into a Restructuring Support Agreement (the “RSA”) with:
  • Holders of approximately 80% of the aggregate outstanding principal amount of the 5.00% Senior Convertible Notes due 2026 (the “Consenting Noteholders”); and
  • Certain lenders party to the DIP Credit Agreement (the “DIP Lenders”).
• The Consenting Noteholders are represented by Brown Rudnick LLP and form the “Ad Hoc Noteholder Group.”
• The RSA contemplates the implementation of Restructuring Transactions through a Chapter 11 plan of reorganization (the “Plan”) sponsored by the DIP Lenders, subject to a marketing process and the solicitation of higher or better bids.

Restructuring Transactions

• The Debtors will pursue a marketing process to solicit third-party bids for a sale transaction involving substantially all of the Debtors’ assets.
• Stalking Horse Bid: The DIP Lenders, through a newly formed entity (the “Stalking Horse Bidder”), will serve as the stalking horse bidder.
  • The Stalking Horse Bidder shall credit bid up to the full amount of the DIP Obligations at any scheduled auction.
  • If the Stalking Horse Bid is the successful bid, the Stalking Horse Bidder will be designated as the Plan Sponsor and will receive 100% of the equity of the Reorganized Debtors on the Plan Effective Date, subject to dilution by a management incentive plan (MIP).
• Third-Party Bids: If a third-party bid is determined to be higher and better than the Stalking Horse Bid, that third party will be designated as the “Successful Bidder” and serve as the Plan Sponsor.
  • In this scenario, the Successful Bid must provide for the payment in full in cash of all DIP Obligations.
• Government Settlements: The Debtors must execute binding settlement agreements with the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) to resolve all claims and causes of action, in form and substance satisfactory to the Required DIP Lenders.

DIP Financing

• To fund the Chapter 11 cases and the marketing process, the Debtors will enter into a DIP Facility providing for up to $22.3 million in financing.
• The DIP Facility is backstopped by funds managed by Whitebox Advisors LLC, Context Capital Management, LLC, Wolverine Asset Management, LLC, DeepCurrents Investment Group LLC, and Steven Dyson (collectively, the “Back-Stop Lenders”), along with other participating Convertible Noteholders.

Treatment of Claims and Interests

• DIP Obligations: Holders of DIP Obligations shall receive:
  • If the Stalking Horse Bid is successful: Their pro rata share of 100% of the New Common Stock of the reorganized company (subject to MIP dilution) plus allocable shares of any exit financing.
  • If a Third-Party Bid is successful: Payment in full in cash.
• Convertible Notes Claims: Holders of Allowed Convertible Notes Claims will receive their pro rata share of “Excess Sale Proceeds,” if any, alongside holders of General Unsecured Claims.
• General Unsecured Claims: Holders will receive their pro rata share of Excess Sale Proceeds, if any, alongside the Convertible Notes Claims.
• Existing Equity Interests: All existing interests will be cancelled. Holders will only receive a recovery if there are remaining Excess Sale Proceeds after the payment in full of all Allowed Claims.
• Definition of Excess Sale Proceeds: Proceeds from a Third-Party Bid exceeding the aggregate of DIP Obligations, Allowed Administrative Expense Claims, and Allowed Priority Tax Claims.

Governance and Releases

• New Board: A new board of directors will be appointed in accordance with new organizational documents acceptable to the Plan Sponsor and the Required DIP Lenders.
• Management Incentive Plan: If the Stalking Horse Bidder is the Plan Sponsor, a post-emergence MIP will be established, reserving up to 10% of the New Common Shares on a fully diluted basis.
• Releases: The Plan will contain customary release, exculpation, and injunction provisions, including consensual third-party releases, acceptable to the Debtors, Required DIP Lenders, and Requisite Consenting Noteholders.

Fees and Milestones

• Restructuring Expenses: The Company Parties agree to pay all reasonable and documented fees and expenses of the Ad Hoc Noteholder Group’s advisors, including Brown Rudnick LLP, local counsel, regulatory counsel, and a financial advisor.
• Milestones: The Debtors must comply with the milestones set forth in the DIP Credit Agreement, including deadlines for the marketing process and Plan confirmation. Failure to meet these milestones constitutes a termination event under the RSA.