White Rock Medical Center - Chapter 11 DIP Terms

DIP Terms

Borrower(s) / Guarantor(s)

• White Rock Medical Center, LLC, as Borrower, a debtor and debtor-in-possession under Chapter 11
  • The Borrower's affiliated debtor entities, whose Chapter 11 Cases are jointly administered, are NCP Management, LLC; North Houston Surgical Hospital, LLC; National Payroll Services, LLC; Heights Healthcare of Texas, LLC; Heights Healthcare of Houston, LLC; and Ashland Healthcare, LLC

Agent / Lender(s)

• White Rock Investors LLC, as DIP Lender

DIP Commitments

• Up to $3 million secured debtor-in-possession term loan facility, authorized pursuant to section 364(c) of the Bankruptcy Code, comprised of:
  • Up to $2 million committed term loan facility
  • Up to $1 million discretionary term loan facility, made available solely at the discretion of the DIP Lender
• The Loans are made available during the Availability Period in borrowings in accordance with the DIP Budget. Amounts repaid or prepaid in respect of any Loans may not be reborrowed.

Cash Collateral

• The Debtors are authorized to use Cash Collateral on a final basis in accordance with the Approved Budget, subject to the Permitted Variances.
• "Cash Collateral" means all of the Debtors' cash, wherever located and held, including cash in deposit accounts, that constitutes or will constitute "cash collateral" of Pipeline within the meaning of section 363(a) of the Bankruptcy Code.

Interest Rate

• 15.0% per annum, payable in arrears on each Interest Payment Date in the form of PIK Interest, with such PIK Interest added to the aggregate principal balance of the Loans
• Default Rate: 20.0% per annum, upon the occurrence and during the continuance of an Event of Default
• Interest is computed on the basis of a year of 365/366 days for the actual number of days elapsed

Maturity

• The earliest to occur of:
  • September 17, 2026
  • The effective date of a confirmed chapter 11 plan for the Debtors implementing the terms set forth in the Restructuring Term Sheet, dated June [*], 2026
  • An Alternative Transaction, consisting of either (a) the Debtors proceeding to seek approval of the disclosure statement filed at Docket #255 (as amended by Docket #278) and its related chapter 11 plan (the "Prior Plan"), or the filing of a chapter 11 plan other than the Prior Plan that is not supported by the DIP Lender, or (b) the filing of a motion to sell all or substantially all of the Borrower's assets to a purchaser that is not supported by the DIP Lender
  • Subject to the DIP Order, the Borrower's receipt of written notice from the Lender of the declaration of an accelerated maturity of the Loans by reason of the occurrence and continuation of an Event of Default

Milestones

• Compliance with the case Milestones is a condition to the DIP Loans, and failure to comply with any Milestone constitutes an Event of Default unless otherwise agreed by the DIP Lender:
  • Obtain entry of the Final DIP Order by no later than June 30, 2026
  • File a Plan and Disclosure Statement implementing the terms of the Restructuring Term Sheet within five business days of entry of the Final DIP Order
  • Obtain approval of the Settlement Agreement and entry of an order providing for the conditional approval of the Disclosure Statement by no later than July 17, 2026
  • Deliver cure notices pursuant to the Plan by no later than July 31, 2026
  • Obtain a cure objection deadline of no later than 14 days after service of the cure notices
  • Commence solicitation for the Plan no later than three business days after entry of the conditional approval order
  • Obtain a voting deadline for the Plan of no later than August 28, 2026
  • Obtain a confirmation hearing for the Plan of no later than September 2, 2026
  • Cause the effective date for the Plan to occur by no later than September 17, 2026

Carve Out

• The Carve-Out is senior to all DIP Liens, DIP Superpriority Claims, and Adequate Protection Liens, and means the sum of:
  • All fees payable to the Clerk of the Bankruptcy Court and the Office of the United States Trustee for Region 7 under 28 U.S.C. § 1930(a), plus interest at the statutory rate
  • All reasonable and documented fees and expenses, in an aggregate not to exceed $25,000, incurred by a chapter 7 trustee under section 726(b) of the Bankruptcy Code
  • Allowed Professional Fees of the Patient Care Ombudsman and of professionals retained by the Debtors or the PCO incurred prior to a Trigger Notice, plus Professional Fees incurred after delivery of a Trigger Notice not to exceed the Carve-Out Cap
• Carve-Out Cap: $100,000, to be deposited in a segregated Carve-Out Account upon delivery of a Trigger Notice. The Carve-Out Cap applies solely to Professional Fees incurred after delivery of a Trigger Notice and does not limit Professional Fees incurred on or prior to such delivery.

Use of Proceeds

• Pay the Debtors' ordinary and necessary costs and expenses set forth in the Approved Budget, subject to the Permitted Variances and the Financial Covenants, for the following Use of Funds:
  • Fund general corporate working capital and capital expenditure needs of the Borrower, including funding operations and making payments on account of itself, its affiliated debtor entities, and its non-debtor direct and indirect subsidiaries
  • Pay administrative expenses of the Chapter 11 Case
  • Pay fees, expenses, and other payments required under the DIP Documents

Avoidance Actions

• The DIP Superpriority Claims and DIP Liens extend to the proceeds of avoidance power claims or causes of action under sections 544, 545, 547, 548 through 551, and 553(b) of the Bankruptcy Code (the "Avoidance Proceeds"), subject to the Carve-Out. The first priority liens on Unencumbered Property exclude the Avoidance Actions themselves but include the Avoidance Proceeds.
• No DIP Lien, Adequate Protection Lien, or other lien or security interest granted under the Final Order shall attach to the claims or causes of action asserted in Adversary Proceeding Case No. 26-03140, without limiting or impairing the DIP Liens or DIP Superpriority Claims in the Avoidance Proceeds.

Securities and Priorities

• Pursuant to section 364(c)(1) of the Bankruptcy Code, all DIP Obligations constitute allowed superpriority administrative expense claims (the "DIP Superpriority Claims") against the Debtors, subject to the Carve-Out, with priority over any and all claims, including administrative expenses of the kind specified in sections 503(b) and 507(b) of the Bankruptcy Code.
  • The DIP Superpriority Claims are payable from, and have recourse to, all prepetition and postpetition property of the Debtors and all proceeds thereof, including (i) any deposit in connection with any Alternative Transaction that becomes property of the Debtors' estates, (ii) claims against the Debtors' directors and officers, and (iii) the Avoidance Proceeds, in each case subject to the Carve-Out
• As security for the DIP Obligations, the DIP Lender is granted the following automatically perfected DIP Liens, subject to the Carve-Out:
  • Pursuant to section 364(c)(2), a first priority senior security interest in and lien upon all prepetition and postpetition property of the Debtors not subject to a valid, perfected, and non-avoidable lien as of the Petition Date (the "Unencumbered Property"), other than the Avoidance Actions but including the Avoidance Proceeds
  • Pursuant to section 364(c)(3), a security interest in and lien upon all prepetition and postpetition property of the Debtors, immediately junior and subordinate to valid, perfected, and non-avoidable senior liens in existence immediately prior to the Petition Date, including the liens and security interests in favor of Pipeline Health Systems Holdings, LLC and SRC Hospital Investments I, LLC
• Nothing in the Final Order affects, primes, or subordinates the statutory ad valorem Tax Liens held by Dallas County, the City of Houston, Houston City College, and Houston Independent School District, to the extent valid, senior, perfected, and unavoidable.

Adequate Protection

Pipeline (SRC Hospital Investments I, LLC)

• Cash payments of $100,000 to Pipeline on or before the fifth day (or next business day) of each month following entry of the Final Order for so long as the Debtors continue to use Cash Collateral
• Replacement liens (the "Adequate Protection Liens") on all of the Debtors' postpetition property, senior in priority to the DIP Liens and subject only to the Carve-Out
• Superpriority claims for any Diminution in Value as provided under section 507(b) of the Bankruptcy Code
• Copies of the Debtors' bank account statements on a monthly basis
• A variance report comparing actual cash disbursements and cash receipts no later than 7 business days following each Budget Test Period

DIP Lender

• In respect of its junior lien position, and in all cases subordinate to the Adequate Protection Obligations of Pipeline, the DIP Lender shall receive:
  • Replacement liens on all of the Debtors' postpetition property, junior and subordinate to the Adequate Protection Liens granted to Pipeline and the Carve-Out
  • Allowed superpriority administrative expense claims under sections 503(b) and 507(b) for any diminution in value of the DIP Collateral, junior and subordinate to the superpriority claims granted to Pipeline and senior to all other administrative expense claims
  • Financial reporting as described above and in the DIP Documents
  • Use of Cash Collateral and DIP Facility proceeds in accordance with the Approved Budget, subject to the Permitted Variances

Waivers

• Section 506(c): Except to the extent of the Carve-Out, no costs or expenses of administration shall be charged against or recovered from the DIP Collateral under section 506(c), and the Debtors waive any surcharge claim under sections 105(a) and/or 506(c)
• Section 552(b): The "equities of the case" exception under section 552(b) shall not apply to the DIP Lender with respect to proceeds, products, offspring, or profits of any of the DIP Collateral
• Marshalling: Neither the DIP Lender nor Pipeline shall be subject to the equitable doctrine of "marshaling" or any similar doctrine with respect to the DIP Collateral

Permitted Variance

• Compliance with the Approved Budget is tested on a rolling four-week basis (each a "Budget Test Period"). During each Budget Test Period, the Debtors shall not permit aggregate actual cash disbursements to exceed aggregate budgeted cash disbursements by more than 10%.
  • No variance testing applies to the Debtors' cash receipts, and actual cash receipts in excess of budgeted cash receipts shall not constitute a violation of the Approved Budget
  • The initial Variance Testing Period is the four-week period commencing with the week of June 8, 2026, and thereafter each rolling four-week period
• The Debtors shall provide a variance report to Pipeline and the DIP Lender no later than 7 business days following each Budget Test Period, and shall deliver detailed, line-by-line budget-to-actual variance reports on a bi-weekly basis, with commentary on all material deviations exceeding $50,000.