Zynex - Chapter 11 DIP Terms

DIP Terms

Borrower(s) / Guarantor(s)

• Zynex Inc., as Borrower
• Zynex Monitoring Solutions, Inc., Zynex NeuroDiagnostics, Inc., Zynex Medical, Inc., Pharmazy, Inc., Kestrel Labs, Inc., and Zynex Management LLC, as Guarantors

Agent / Lender(s)

• Wilmington Savings Fund Society, FSB, as Administrative Agent and Collateral Agent
• Whitebox Relative Value Partners, LP, Whitebox GT Fund, LP, Whitebox Multi-Strategy Partners, LP, Pandora Select Partners, LP, CPMF Situations 1 LLC, and Wolverine Flagship Fund Trading Limited, as Back-Stop Lenders and DIP Lenders

DIP Commitments

• $22.3 million new money senior secured term loan facility, available in three draws:
  • $10.15 million available immediately upon the Closing Date (the "First Advance")
  • $5 million available after the Closing Date but prior to the expiration of the availability period (the "Second Advance")
  • $7.15 million available after the Closing Date but prior to the expiration of the availability period (the "Third Advance")
• Access to the Second and Third Advances is subject to satisfaction of conditions precedent and consistency with the approved budget.

Cash Collateral

• The debtors are authorized to use cash collateral subject to the terms of the DIP credit agreement and the interim order.
• During any Enforcement Notice Period, the debtors’ use of cash on hand is restricted solely to accordance with the approved budget.

Interest Rate

• 10.0% per annum, payable in kind (PIK) and capitalized on each interest payment date
• Default Rate Increase: 2.0%

Fees

• Fees applicable to the facility include:
  • Administrative Agent Fee
  • Lenders Fees (including Commitment Fee and Exit Fee), payable in kind
  • Back-Stop Fee, payable in kind
• Minimum Return Payment: The borrower must pay a minimum return equal to the difference between:
  • 2.00x the aggregate original principal amount of loans funded; and
  • The aggregate amount of all payments made in cash regarding the principal (including capitalized PIK interest, Exit Fee, and Upfront Fee, but excluding the Back-Stop Fee).

Maturity

• The earliest to occur of:
  • 105 days after the Petition Date
  • The date of acceleration following an Event of Default
  • Consummation of a sale of all or substantially all assets or capital stock
  • The effective date of a Chapter 11 plan

Carve Out

• Carve-Out Cap:
  • Post-Trigger Fee Cap: $200,000 for professional fees incurred after a Trigger Notice.
  • Pre-Trigger Fees: All allowed professional fees incurred prior to a Trigger Notice, without regard to the budget.
• Statutory Fees:
  • U.S. Trustee fees: Unpaid fees are not limited by the budget.
  • Chapter 7 Trustee Fee: $75,000.
• Funded Reserve Account: The debtors must fund a segregated account for professional fees upon receipt of each DIP advance:
  • Upon First Advance: The Post-Trigger Carve Out Amount plus 50% of budgeted professional fees through maturity.
  • Upon Second Advance: 25% of budgeted professional fees through maturity.
  • Upon Third Advance: 25% of budgeted professional fees through maturity.

Use of Proceeds

• Fund working capital and post-petition operating expenses in accordance with the approved budget
• Pay administration costs of the Chapter 11 cases, including professional fees and DIP-related fees/expenses
• Fund the Carve-Out
• Facilitate a sale transaction

Credit Bid

• The DIP Agent, at the direction of the Required DIP Lenders, has the right to credit bid up to the full amount of the DIP obligations in connection with any sale.
• A credit bid will reduce the outstanding DIP obligations on a dollar-for-dollar basis.
• The Minimum Return Payment becomes due and payable no later than the date of any credit bid and may be included in the credit bid amount.

Avoidance Actions

• The DIP Collateral excludes the debtors' claims and causes of action arising under Chapter 5 of the Bankruptcy Code but includes the proceeds of such actions.

Challenge Period and Budget

• DIP loans and collateral proceeds may not be used to investigate, initiate, or prosecute any claims or litigation against the DIP Secured Parties without the prior written consent of the DIP Agent.

Securities and Priorities

• The DIP obligations constitute superpriority administrative expense claims over all other administrative expenses, subject to the Carve-Out.
• The DIP Lenders are granted valid, perfected, first-priority liens on all real and personal property of the debtors, subject only to Permitted Liens and the Carve-Out.
• DIP liens are senior to any adequate protection liens granted in favor of any party.

Adequate Protection

• Prepetition Senior Secured Parties: Any adequate protection liens granted are immediately junior to the DIP Liens, Permitted Liens, and the Carve-Out.

Waivers

• Subject to the Final DIP Order:
  • Section 506(c): Waiver of the right to surcharge collateral.
  • Section 552(b): The "equities of the case" exception shall not apply.
  • The equitable doctrine of "marshaling" shall not apply to the DIP Collateral.

Permitted Variance

• Tested during each Budget Testing Period:
  • Disbursements: Aggregate disbursements for any two-week period and cumulative disbursements from the Petition Date may not exceed the approved budget by more than 15%.
  • Receipts: Gross receipts for any two-week period and cumulative receipts from the Petition Date may not be less than the approved budget by more than 20%.