Oroville Hospital - Chapter 11 DIP Terms

DIP Terms

Borrower(s) / Guarantor(s)

• Oroville Hospital and OroHealth Corporation: A Nonprofit Healthcare System, as Borrowers
• The liability of the Debtors for the DIP Obligations shall be joint and several

Agent / Lender(s)

• UMB Bank, N.A., as successor Series 2019 Bond Trustee, as DIP Lender
• One or more holders of the Bonds to the extent necessary as identified in the DIP Orders
• The Directing Bondholders with respect to the DIP Lender are the beneficial owners of a majority of the aggregate outstanding principal amount of the Series 2019 Bonds

DIP Commitments

• $40 million senior secured super-priority term loan facility comprised of:
  • $24 million sourced from funds held by the DIP Lender under the Bond Indentures
  • $16 million from funds to be advanced to the DIP Lender from the Funding Bondholders
• The DIP Facility will be made available through:
  • An initial maximum aggregate amount of up to $16 million in accordance with the Approved Budget (the Interim Advance) following entry of the Interim DIP Order
  • Following entry of the Final DIP Order, additional draws under the DIP Facility will be made available on a regular basis to be agreed upon in accordance with the Approved Budget in the aggregate amount not to exceed $24 million
  • Further additional draws may be made on 5 days' notice, as needed and agreed to by the DIP Lender, subject to Court approval

Cash Collateral

• The Debtors are authorized to use the proceeds of the DIP Facility and Cash Collateral in accordance with the Approved Budget
• Cash Collateral includes the Hospital's revenues, accounts receivable, cash, and other assets (excluding certain real property), as defined in the Final Order
• Without the use of Cash Collateral, the Debtors would suffer immediate and irreparable harm and would likely be required to cease operations immediately
• The Master Trustee consents to the use of Cash Collateral by the Debtors on the terms set forth in the Final Order, including that Cash Collateral is used solely in the amounts and as set forth in the Approved Budget
• During the Remedies Notice Period, the Debtors shall be authorized to use cash collateral in accordance with the Approved Budget

Interest Rate

• 10.75% per annum, payable monthly in kind and added to the principal balance of the DIP Facility
• Default Rate Increase: 2.0%

Fees

• Exit Fee: 3.0% of the DIP Commitment, fully earned and non-refundable upon entry of the Final DIP Order and payable on the DIP Termination Date
• The DIP Fees are approved on a final basis and are deemed to be allowed, fully earned, non-refundable, and payable in accordance with the terms of the DIP Term Sheet without the need for any further order of the Court
• The DIP Fees shall be part of the DIP Obligations and shall be payable in kind and added to the principal balance of the DIP Facility

Maturity

• The DIP Facility shall automatically terminate without further notice or court proceedings on the earliest to occur of:
  • January 8, 2027 (the Scheduled Maturity Date)
  • The effective date of a plan of reorganization or liquidation for the Debtors confirmed in the Chapter 11 Cases
  • The date of termination of the commitments under the DIP Facility and/or acceleration of any outstanding borrowings under the DIP Facility following the occurrence of an Event of Default
  • The first business day on which the Interim DIP Order expires by its terms or is terminated, unless the Final DIP Order has been entered and become effective prior thereto
  • The conversion of any of the Chapter 11 Cases to a case under chapter 7 of the Bankruptcy Code unless otherwise consented to in writing by the DIP Lender
  • The dismissal of any of the Chapter 11 Cases, unless otherwise consented to in writing by the DIP Lender
  • The repayment in full in cash of all obligations and termination of all commitments under the DIP Facility

Carve Out

• The Winddown Expense Surcharge includes:
  • Allowed administrative expenses for fees payable to the Office of the U.S. Trustee pursuant to 28 USC §1930(a)(6) and for fees required to be paid to the Clerk of the Court pursuant to 28 U.S.C. § 156(c), in each case plus interest at the applicable statutory rate
  • Chapter 7 Trustee Fee: $25,000
  • All accrued but unpaid fees and expenses (excluding any restructuring, sale, success, or other transaction fee of any investment bankers or financial advisors) incurred by Estate Professionals at any time on or before the date of delivery by the DIP Lender of a Remedies Notice (the Pre-Remedies Notice Amount)
  • Post-Remedies Notice Amount: Allowed Estate Professional Fees incurred after the date of delivery by the DIP Lender of the Remedies Notice, to the extent allowed at any time, in an aggregate amount not to exceed $150,000 incurred by Debtor Professionals or Committee Professionals

Use of Proceeds

• Pay working capital and maintenance capital expenditure requirements of the Debtors
• Pay administrative and operating expenses of the Debtors
• Pay reasonable fees and expenses of the DIP Lender and its professionals, provided that such fees and expenses shall be payable in kind and added to the principal amount of the DIP Loans and become DIP Obligations
• Neither the proceeds of the DIP Loans nor the Master Trustee's cash collateral shall be transferred to or used by any entity other than a Debtor, except as permitted by the Approved Budget, as approved by the Court, or as set forth in the DIP Term Sheet
• No portion of the DIP Loans or any cash collateral of the Master Trustee or the DIP Lender shall be used to assert any claim or cause of action against the DIP Lender, the Master Trustee, the Bondholders, or their advisors, agents and subagents, and/or challenging any claim or lien of the Master Trustee or the validity or enforceability of the Bond Documents; provided that any DIP Loans used to pay any counsel of and financial advisor to the Committee to investigate any of the foregoing shall not exceed $25,000.00 in the aggregate

Credit Bid

• The DIP Lender shall have the right to credit bid with respect to the DIP Collateral any portion or all of the Debtors' outstanding DIP Obligations pursuant to Bankruptcy Code section 363(k)
• Any bid submitted by the DIP Lender shall be deemed a "qualified bid" under any bidding procedures entered in the Chapter 11 Case, subject to payment of the Winddown Expense Surcharge and the Permitted Prior Liens
• The DIP Lender will have the right to credit bid the DIP Facility Loans in whole or in part in connection with any sale or disposition of assets by the Debtors in the Cases and shall not be prohibited from making such credit bid "for cause" under section 363(k) of the Bankruptcy Code
• The Master Trustee shall also have the right to credit bid the Bond Obligations in whole or in part in connection with any sale or disposition of assets by the Debtors in the Cases, pursuant to section 363(k) of the Bankruptcy Code

Avoidance Actions

• The DIP Superpriority Claims shall not be payable from Avoidance Actions or Avoidance Proceeds
• No lien shall attach to claims and causes of action under sections 502(d), 542, 544, 545, 547, 548, 549, 550, 551, and 553 of the Bankruptcy Code, or any other avoidance actions under the Bankruptcy Code or any proceeds or property recovered as a result of any Avoidance Actions, whether by judgment, settlement, or otherwise

Challenge Period and Budget

• The Committee may investigate and, on behalf of the Debtors' Estates, assert, pursue and resolve:
  • Lien Challenge: Claims challenging the amount, validity, enforceability, priority, or extent of the liens, security interests, or claims of the Master Trustee, 2018 Bond Trustee, the 2019 Bond Trustee or any other party in connection with the Bond Documents, Prepetition Secured Liens or Prepetition Secured Obligations, to be filed with the Court on or before March 23, 2026 or such later date that is agreed to by and between the Master Trustee and the Committee or ordered by the Court
  • General Challenge: Any other type of claims or causes of action other than a Lien Challenge, including without limitation, any claims for affirmative relief against the Master Trustee, 2018 Bond Trustee, the 2019 Bond Trustee or any other party in connection with the Bond Documents, Prepetition Secured Liens or Prepetition Secured Obligations, to be filed with the Court on or before April 22, 2026 or such later date that is agreed to by and between the Master Trustee and the Committee or ordered by the Court
  • A General Challenge expressly excludes any attempts to surcharge the Master Trustee's collateral under Section 506(c), invoke the "equities of the case" doctrine under Section 552(b), or require a marshalling of collateral
• After the Lien Challenge Deadline or the General Challenge Deadline all such Lien Challenges or General Challenges, respectively, that are not timely filed with the Court shall be deemed finally and conclusively barred
• The Committee is hereby granted exclusive standing and authority to investigate, prosecute and/or settle any General Challenge and/or any Lien Challenge on behalf of the Debtors' Estates
• Any DIP Loans used to pay any counsel of and financial advisor to the Committee to investigate any challenge shall not exceed $25,000.00 in the aggregate

Securities and Priorities

• The DIP Lender is granted superpriority administrative expense claims pursuant to section 364(c)(1) of the Bankruptcy Code, having priority in right of payment over any and all other obligations, liabilities, and indebtedness of the Debtors, subject only to the Winddown Expense Surcharge and any expenses under the Approved Budget
• The DIP Lender is granted perfected liens on and security interests in all of the Debtors' prepetition and postpetition assets and properties (the DIP Collateral), subject to the Winddown Expense Surcharge, with the following priorities:
  • DIP First Priority Priming Liens: Pursuant to section 364(d)(1) of the Bankruptcy Code, valid, binding, continuing, enforceable, fully perfected, first priority security interests in and liens upon all assets, other than Avoidance Actions, Avoidance Proceeds and Excluded Property, which shall be first and senior in priority to all other interests and liens, including the Prepetition Secured Liens, subject only to the Winddown Expense Surcharge
  • DIP Priority Lien: Pursuant to section 364(c)(2) of the Bankruptcy Code, valid, binding, continuing, enforceable, fully perfected, first priority security interests in and liens upon all unencumbered assets of the Debtors, except for Avoidance Actions and Avoidance Proceeds, subject only to the Winddown Expense Surcharge
  • DIP Junior Liens: Pursuant to section 364(c)(3) of the Bankruptcy Code, valid, binding, continuing, enforceable, fully perfected security interests in and liens on the Excluded Property, which shall be junior to the Permitted Prior Liens, but senior to all other liens, claims, or security interests, subject only to the Winddown Expense Surcharge
• The DIP Superpriority Claim shall be payable from and have recourse to all prepetition and postpetition property of the Debtors and all proceeds thereof (excluding Avoidance Proceeds), subject to the Winddown Expense Surcharge and Permitted Prior Liens

Adequate Protection

Prepetition Secured Parties

• Adequate Protection Liens: Additional and replacement valid, binding, enforceable, non-avoidable, pari passu, and perfected postpetition security interests and liens upon all Prepetition Collateral, in each case solely to secure the aggregate diminution in value, if any, in the value of the Prepetition Collateral, subordinate to the Winddown Expense Surcharge and the Permitted Prior Liens
• Adequate Protection Superpriority Claim: Solely to the extent of the diminution in value, if any, in the value of the Prepetition Collateral, an allowed administrative expense claim pursuant to section 507(b) as well as sections 364(c)(1), 503(b) of the Bankruptcy Code, subject and subordinate to the Winddown Expense Surcharge, any expenses under the Approved Budget, the DIP Superpriority Claim, and the Permitted Prior Liens
• Supplemental Lien: A valid, enforceable, fully perfected security interest in and liens upon all of the Debtor's rights in property of the Debtor's Estate as of the Petition Date and all of the Debtor's rights in property acquired post-petition, to the extent of the diminution of value of the Prepetition Collateral, subject only to the liens and security interests granted to the DIP Lender, Permitted Prior Liens with respect to Excluded Property, and the Winddown Expense Surcharge
• Payment of net proceeds from the closing of the sale of any of the Master Trustee's uncontested Prepetition Collateral pursuant to further Court Order; provided that the Debtors shall retain a portion of such net proceeds sufficient to satisfy the DIP Facility, pay or reserve for the Winddown Expense Surcharge and Approved Budget expenses, reserve $5 million for Allowed Estate Professional Fees (in addition to professional fees under the Approved Budget), and pay the Investment Banker's Transaction Fee
• Good faith cooperation of the Debtors and appropriate access to real property in the event the Master Trustee wants to commission an appraisal of any real property that is DIP Collateral or its Prepetition Collateral
• The Debtors must, during the pendency of these Cases, comply with the covenants in the Bond Documents
• The Master Trustee shall be provided the same independent access to Debtors' personnel and professionals and to financial and other reporting given to the DIP Lender as required under the DIP Facility
• The Debtors shall immediately reconstitute their boards to remove Robert J. Wentz and Sultan M. Chopan, and appoint independent board members, acceptable to the DIP Lender and Master Trustee, to replace such board members
• Subject to the Debtors' granting of standing to the Committee to pursue and resolve estate causes of actions concerning affiliates, the CRO shall be the sole officer responsible for decisions concerning matters related to the Debtors' affiliates or the sale process, and any of the Debtors' current or former officers who hold, directly or indirectly, interests in, or who are employed by, the Debtors' affiliates or any other creditors of the Estates shall recuse themselves from any decision making with respect to the payment of the Debtors' affiliates and/or the sale of the Debtors' assets

Waivers

• Subject to entry of the final order:
  • Section 506(c): No expenses of administration of the Cases or any future proceeding shall be charged against or recovered from any DIP Collateral or the Master Trustee's Prepetition Collateral pursuant to section 506(c) of the Bankruptcy Code or any similar principle of law, without the prior written consent of the DIP Lender or the Master Trustee; and the Debtors shall irrevocably waive and shall be prohibited from asserting any such claim
  • Section 552(b): The DIP Lender and the Master Trustee shall be entitled to all of the rights and benefits of section 552(b) of the Bankruptcy Code, the "equities of the case" exception under sections 552(b)(i) and (ii) of the Bankruptcy Code shall not apply to such parties with respect to the proceeds, products, rents, issues or profits of any of their collateral
  • Each Debtor shall be deemed to have irrevocably waived and have agreed not to assert any claim or right under sections 552 or 726 of the Bankruptcy Code to avoid the imposition of the liens of the DIP Lender or the Master Trustee on any property acquired by such Debtor or its Estate or to seek to surcharge any costs or expenses incurred in connection with the preservation, protection or enhancement of, or realization by, the DIP Lender upon the DIP Collateral or the Master Trustee upon the Pre-Petition Bond Collateral
  • The DIP Lender shall not be subject to the equitable doctrine of "marshalling" or any similar doctrine with respect to the DIP Collateral; provided, however, the DIP Collateral does not include, and the DIP Lender shall not recover against, Avoidance Actions or Avoidance Proceeds

Permitted Variance

• "Permitted Variance" means an unfavorable variance of not greater than:
  • 10% between the actual disbursements for the applicable Measurement Period from the projected disbursements for such Testing Period as set forth in the Approved Budget
  • 15% between the actual receipts for the applicable Measurement Period from the projected receipts for such Testing Period, in each case excluding HQAF receipts, as set forth in the Approved Budget
  • 7.5% between the actual HQAF receipts related to Program VIII for the applicable Measurement Period from the projected HQAF receipts related to Program VIII for such Measurement Period, as set forth in the Approved Budget
• If the actual variances for such period are less than or equal to the applicable Permitted Variance, the amount by which the actual variances is less than the applicable Permitted Variance shall be carried forward to the next Measurement Period and added to the applicable Permitted Variance for such next Measurement Period; provided that such carryforward, if unused, shall not be permitted to be carried forward to the next two succeeding Measurement Periods
• The Debtor will deliver a weekly variance and compliance report by each Thursday at 5:00 p.m. Pacific time, beginning on the 2nd Thursday following the Petition Date, showing the comparison of, and the variances between, actual performance to projections for each line item of the Approved Budget for each trailing four-week measurement period (or, solely in the case of the line item for HQAF receipts, each trailing eight-weeks)
• Failure to comply with the Permitted Variance relating to HQAF receipts shall not constitute an Event of Default, except with respect to HQAF Program VIII receipts to the extent such variance exceeds twenty-five percent (25%); for the avoidance of doubt, the budgeted amounts and any applicable variance relating to HQAF Program IX shall be determined at a later date by further agreement among the Debtors, DIP Lender and Committee or by further order of the Court

Milestones

• The Debtors agree to comply with the following Milestones:
  • The Bankruptcy Court shall have entered the Interim DIP Order on or before December 17, 2025
  • The Debtors shall have sought in the Cases the retention of Michael Lane as chief restructuring officer, or any other person(s) acceptable to the DIP Lender (the CRO), by the date that is no later than ten (10) days following the filing of the DIP Motion
  • By the date that is no later than ten (10) days following the filing of the DIP Motion, the Debtors shall have sought the retention of Cain Brothers, a division of KeyBanc Capital Markets, as investment banker
  • The Bankruptcy Court shall have entered the Final DIP Order by the date that is no later than February 20, 2026
  • The Debtors shall file, by the date that is no later than thirty (30) days after the Petition Date, a motion to approve bidding procedures and to sell all or substantially all of the Debtors' assets through a sale pursuant to section 363 of the Bankruptcy Code in form and substance reasonably acceptable to the DIP Lender
  • The Bankruptcy Court shall have entered an order approving the bidding procedures for the sale contemplated by the Sale Motion by the date that is no later than February 20, 2026
  • The Bankruptcy Court shall have entered an order approving the Sale by the date that is no later than June 12, 2026
  • The Sale shall be consummated by the date that is no later than December 31, 2026
  • An order confirming a liquidating chapter 11 plan shall have been entered by the Bankruptcy Court by the date that is no later than ninety (90) days after consummation of the Sale