White Rock Medical Center - Chapter 11 Plan Terms

Plan Terms

Overview

• The joint Chapter 11 plan provides for the reorganization of White Rock Medical Center LLC and the liquidation of each other Debtor.
• White Rock Medical Holdings LLC will serve as Plan Sponsor, and White Rock Medical Center LLC will continue as the Reorganized Debtor after the Effective Date.
• The Plan incorporates:
  • A June 16, 2026, Restructuring Term Sheet between the Debtors and the Supporting Creditors.
  • A June 11, 2026, settlement among the Debtors, Plan Sponsor, Supporting Creditors, Dr. Mirza N. Baig and the Resigning Employees, which the Bankruptcy Court approved at Docket No. 337.
• The Supporting Creditors are SRC Hospital Investments I LLC, Pipeline Health Systems Holdings LLC, REILS SPV Finance Inc., Strategic Management and Capital LLC and Strategic Solutions LLC.
• For voting, confirmation, allowance, treatment and distribution purposes only, the Debtors’ estates will be deemed consolidated.
  • The deemed consolidation will not constitute substantive consolidation for purposes of U.S. Trustee fees, post-Effective Date reporting or operations, or closing the individual Chapter 11 cases, and will not affect the Reorganized Debtor’s legal or corporate structure.

Plan Funding

• Plan Funding consists of:
  • $3.3 million provided by the Plan Sponsor to fund the Reorganized Debtor’s operating costs and Plan distributions.
  • Proceeds from the liquidation of assets.
  • Any Supplemental PA Contribution.
• The Plan Sponsor will transfer the Plan Funding, other than any Supplemental PA Contribution, to the Debtors within two business days after entry of the Confirmation Order.
• Cash required for Plan payments and post-confirmation operations will be funded from existing Cash held by the Debtors on the Effective Date, ordinary-course Cash generated by the Reorganized Debtor after the Effective Date and the Plan Funding.
• The Plan Funding will fund:
  • A $1 million GUC Distribution Pool.
  • Up to $528,092, or another amount agreed by the Plan Sponsor and Plan Administrator, for the Plan Administrator Reserve.
• The Plan Administrator Reserve will fund the Plan Administrator’s and Reorganized Debtor’s post-Effective Date duties relating to the wind-down of the Liquidating Debtors, Plan payments and the satisfaction and closing of the Chapter 11 cases.
  • The reserve will be funded on or before the Effective Date in priority to distributions on account of Class 5 General Unsecured Claims.
  • If the reserve is insufficient, the Plan Sponsor must make a Supplemental PA Contribution within 10 business days after receiving a written request identifying the estimated shortfall and its basis.
  • Any excess remaining after payment of all applicable fees and costs, including amounts funded through a Supplemental PA Contribution, will revert to the Plan Sponsor.

Restructuring Transaction

• On the Effective Date, the existing membership interests in White Rock Medical Center LLC will be cancelled and New Securities will be issued to the Plan Sponsor, which will become the sole member of the Reorganized Debtor.
  • At the Plan Sponsor’s direction, a portion of the New Securities may instead be issued to holders of Allowed DIP Claims under the Plan’s DIP Claim treatment.
  • No fractional New Securities will be issued or distributed.
• The Reorganized Debtor will elect disregarded-entity status for tax purposes under IRC § 301.7701-3.
• Except as otherwise provided under the Plan or related documents, all Debtor assets will transfer to and vest in the Reorganized Debtor on the Effective Date, free and clear of liens, Claims, charges and other encumbrances other than those established under the Plan and subject to assumed liabilities.
• After the Effective Date, the Reorganized Debtor may operate the hospital and use, acquire or dispose of property, and maintain, prosecute, abandon, compromise or settle Claims, Interests and Causes of Action without Bankruptcy Court supervision, subject to the Plan, Confirmation Order and related documents.
  • Cash generated from operation of the hospital after the Effective Date will be property of the Reorganized Debtor.
  • The Reorganized Debtor will abandon the Bank of America Equipment on the Effective Date pursuant to applicable nonbankruptcy law.
• Intercompany Claims and Interests will be adjusted, reinstated or cancelled as determined by the Reorganized Debtor and Plan Sponsor.
  • No value will be attributed or paid to Intercompany Claims, and the Reorganized Debtor will not assume intercompany claims or liabilities.
• The Reorganized Debtor will assume all federal, state and local tax liabilities of the Liquidating Debtors, whether arising before, on or after the Petition Date.

Unclassified Claims

• Administrative Claims, including Professional Fee Claims and U.S. Trustee fees, DIP Claims and Priority Tax Claims are unclassified and are not entitled to vote on the Plan.
• Except for Professional Fee Claims and unless otherwise agreed, each holder of an Allowed Administrative Claim will receive Cash equal to the unpaid portion of its Claim on or as soon as reasonably practicable after the latest of the Effective Date, allowance of the Claim and the date the Claim becomes payable under an applicable agreement.
• Except for Professional Fee Claims and unless otherwise agreed, each holder of an Allowed Administrative Claim will receive Cash equal to the unpaid portion of its Claim on or as soon as reasonably practicable after the latest of the Effective Date, allowance of the Claim and the date the Claim becomes payable under an applicable agreement.
• Requests for payment of Administrative Claims must be filed by the Administrative Claims Bar Date, which is the first business day that is 30 days after the Effective Date, other than Professional Fee Claims, section 503(b)(9) claims, U.S. Trustee fees, Administrative Claims already Allowed by the Effective Date, and Administrative Claims already timely asserted; Administrative Claims not timely filed will be barred and deemed Disallowed.
• Allowed DIP Claims will include outstanding principal, accrued and unpaid interest through the payment date, and accrued fees, expenses and indemnification obligations payable under the DIP Documents.
  • On the Effective Date or as soon as reasonably practicable thereafter, each holder may elect to receive either Cash equal to the unpaid portion of its Allowed DIP Claim or a portion of the New Securities as agreed by the Plan Sponsor and DIP Lender.
  • Upon receipt of this treatment, the DIP Facility and DIP Documents will be deemed terminated.
• Unless otherwise agreed, each holder of an Allowed Priority Tax Claim will receive:
  • Payment in full in Cash on or as soon as reasonably practicable after the later of the Effective Date and allowance of the Claim.
  • Alternative treatment agreed with the Debtors.
  • To the extent permitted by section 1129(a)(9)(C) of the Bankruptcy Code, regular deferred Cash payments over a period ending no later than five years after the Petition Date, with interest at the applicable statutory rate.
• The Reorganized Debtor will assume liability for all Allowed Priority Tax Claims and related payment-plan agreements.
• Applications for Professional Fee Claims must be filed within 45 days after the Effective Date.
  • Allowed Professional Fee Claims will be paid in full in Cash, first from retainers held by the applicable Professional and then by the Plan Administrator.
  • Professional Fee Claims not timely filed will be deemed waived.

Classification and Treatment of Claims and Interests

• Class 1 - Other Priority Claims:
  • Unless otherwise agreed, each holder will receive Cash equal to its Allowed Other Priority Claim as soon as reasonably practicable after the latest of the Effective Date, allowance of the Claim and a date agreed by the Plan Sponsor and holder.
  • Class 1 is Unimpaired and presumed to accept the Plan.
• Class 2 - Secured Lender Claims:
  • SRC Hospital Investments I LLC’s Secured Lender Claim will be Allowed in the amount of $7,442,001.20, inclusive of fees, postpetition interest, attorneys’ fees and expenses.
  • Unless otherwise agreed, the holder will receive:
    • Continued effectiveness and priority of all liens provided under the Cash Collateral Orders until the Claim is paid in full.
    • Dismissal with prejudice of the Pipeline Adversary Proceeding.
    • Five percent of all gross revenues of the Reorganized Debtor, applied to repayment of the Claim until paid in full.
  • Gross revenues include all revenues, receipts, income, accounts, accounts receivable and other amounts generated or received from ownership or operation of the hospital and the Reorganized Debtor’s business, before deducting operating expenses, debt service, taxes or other costs.
  • Class 2 is Impaired and entitled to vote.
• Class 3 - Reinstated Equipment Loan Claims:
  • Each Claim will be reinstated and rendered Unimpaired on the Effective Date.
  • Defaults other than those specified in section 365(b)(2) of the Bankruptcy Code will be cured; pre-default maturities will be reinstated; existing legal, equitable and contractual rights will otherwise remain unaltered; and applicable liens and security interests will remain in effect.
  • The Reorganized Debtor will continue performing under the Reinstated Equipment Loan Documents according to their original terms, as cured under the Plan.
  • Class 3 is Unimpaired, presumed to accept the Plan and not entitled to vote.
• Class 4 - Restructured Equipment Loan Claims:
  • Each holder will constitute a separate subclass for voting, treatment and cramdown purposes.
  • An accepting holder will receive treatment on substantially the same terms as its existing Equipment Lender Loan Documents, as modified by the Restructured Equipment Note Terms, with its liens and security interests remaining in effect.
  • A rejecting holder will receive an Equipment Lender Cramdown Note in a principal amount equal to its Allowed Secured Claim as determined under section 506(a) of the Bankruptcy Code.
    • The note will be on substantially the same terms as the existing Equipment Lender Loan Documents, subject to the Restructured Equipment Note Terms.
    • The holder will retain its liens and security interests to the extent of its Allowed Secured Claim.
    • Any Allowed unsecured deficiency Claim will be treated as a Class 5 General Unsecured Claim.
  • The Restructured Equipment Note Terms provide for:
    • An extension of the existing maturity by the number of calendar months elapsed from January 1, 2026, through the last day of the month in which the Effective Date occurs.
    • Recalculation of the amortization schedule to fully amortize outstanding principal from the Effective Date through the extended maturity, using the payment intervals under the original loan documents.
    • Continuation of the applicable nondefault interest rate unless a post-Effective Date default occurs, after which any applicable default rate will apply.
    • Cure of all defaults existing as of the Effective Date, including defaults arising from the Chapter 11 cases or the Debtors’ financial condition.
  • Class 4 is Impaired and entitled to vote.
• Class 5 - General Unsecured Claims:
  • Each holder of an Allowed General Unsecured Claim will receive its Pro Rata Share of the $1 million GUC Distribution Pool.
  • The first distribution will occur on the later of 18 months after the Effective Date and the date on which all Class 5 Claims have been Allowed or disallowed by Final Order and no disputed Class 5 Claims remain.
  • REILS SPV Finance Inc. and Strategic Management and Capital LLC will irrevocably waive their rights to receive distributions on their Class 5 Claims, while retaining the right to vote those Claims.
    • The amounts otherwise distributable to those creditors will be distributed Pro Rata to the remaining holders of Allowed Class 5 Claims.
  • Class 5 is Impaired and entitled to vote.
• Class 6 - Existing Equity Interests:
  • Existing Equity Interests will be discharged, cancelled, released and extinguished on the Effective Date without a distribution.
  • Class 6 is Impaired, deemed to reject the Plan and not entitled to vote.
• Section 510(b) and other Subordinated Claims will be subordinated to all Claims other than Existing Equity Interests and, unless otherwise ordered by the Bankruptcy Court, will receive no property under the Plan.

Equipment Guaranties

• Subject to agreement with the applicable counterparties, the Plan Sponsor will use commercially reasonable good-faith efforts to replace Dr. Mirza N. Baig’s guaranties relating to assumed or reinstated equipment leases and financing arrangements with Huntington, Ascentium, Dext and JB&B with guaranties from the Plan Sponsor on terms reasonably acceptable to the Plan Sponsor and applicable counterparty.

Plan Administration and Distributions

• An entity designated in the Plan Supplement will serve as Plan Administrator and estate representative on the Effective Date, with the powers of a trustee under sections 704 and 1106 of the Bankruptcy Code.
• The Plan Administrator will implement the Plan and wind down the Liquidating Debtors, including by liquidating remaining assets, making distributions, resolving Claims, administering Causes of Action and seeking closure of the Chapter 11 cases.
  • The Plan Administrator will have no operational control or authority over the Reorganized Debtor.
  • Except for payments by the Reorganized Debtor on account of the Secured Lender Claim, the Plan Administrator will make all Plan distributions.
• After the Effective Date, the Plan Administrator will have sole authority on behalf of the Reorganized Debtor to object to, settle, compromise, litigate or otherwise resolve Claims.
• Distributions returned as undeliverable or unclaimed for 90 days will be forfeited and redistributed Pro Rata to remaining holders of Allowed General Unsecured Claims.
  • Amounts unclaimed on or after the final Distribution Date will revert to the Reorganized Debtor.
  • The Plan Administrator may cancel a final distribution of less than $50, in which case the amount will revert to the Reorganized Debtor.
• The Chapter 11 case of North Houston Surgical Hospital, or another nonoperating Debtor, will remain open as the Claims Administration Case.
  • The Plan Administrator may administer Claims against any Debtor through that case notwithstanding the closure of White Rock Medical Center LLC’s or the other Debtors’ cases.
  • Completion of Plan distributions is not a condition to closing White Rock Medical Center LLC’s Chapter 11 case.

Executory Contracts and Unexpired Leases

• On the Effective Date, all Executory Contracts and Unexpired Leases will be deemed rejected unless they:
  • Were previously rejected, assumed or assumed and assigned by court order.
  • Are the subject of a motion to assume filed by the Effective Date.
  • Are identified on the Schedule of Assumed Executory Contracts and Unexpired Leases.
  • Expired or terminated according to their terms.
• Assumed contracts and leases will transfer to and be enforceable by the Reorganized Debtor or its assignee, subject to any modifications approved by the Bankruptcy Court.
• The Hospital Lease will be assumed and cured through a $2,603,803.42 Hospital Lease Cure Payment made in accordance with the Hospital Lease Cure Schedule.
  • The Landlord’s acceptance of the cure payment will not waive, discharge or release Claims against third-party co-obligors, including guarantors, for any remaining deficiency.
• The HHSC UC DY10 and UC DY12 Agreement will be assumed.
  • The Debtors intend to negotiate modified terms for the other Government Agreements, with any agreed modifications to be disclosed in the Plan Supplement.
• Allowed Claims arising from rejected contracts or leases will be treated as Class 5 General Unsecured Claims.
  • Unless otherwise ordered, rejection Claims must be filed by 5:00 p.m. prevailing Central Time on the date that is 30 days after the Effective Date.

Governance, Employees and Indemnification

• From and after the Effective Date, the Plan Sponsor will serve as sole member of the Reorganized Debtor and appoint its officers in accordance with the Reorganized Debtor Operating Agreement and other corporate documents.
• Except as otherwise determined by the Plan Sponsor, the Reorganized Debtor will continue employing the Debtors’ employees in the ordinary course and pay assumed wages, salaries, compensation and benefits in the ordinary course.
  • After the Effective Date, the Reorganized Debtor may maintain, modify or terminate employee compensation, benefit, incentive, retention and severance arrangements consistent with applicable law and its organizational and operational requirements.
• Immediately after the Effective Date, the Reorganized Debtor will purchase and maintain a runoff directors’ and officers’ insurance policy for at least five years.
  • The policy will be comparable in all material respects to the policy maintained immediately before the Effective Date and will cover Dr. Mirza N. Baig and the other Resigning Employees for acts or omissions during their respective tenures with the Debtors.
• The Reorganized Debtor will indemnify, defend and hold harmless Dr. Mirza N. Baig and each other Resigning Employee subject to the terms, conditions and $700,000 aggregate Indemnity Cap in the Settlement Agreement.
  • If the Plan is confirmed and becomes effective, the Reorganized Debtor will indemnify Dr. Baig without regard to the cap for costs or liabilities relating to the equipment leases and associated guaranties identified in the Settlement Agreement.

Voting and Confirmation

• Classes 2, 4 and 5 are entitled to vote on the Plan.
  • Each voting Class will accept the Plan if at least two-thirds in amount and more than one-half in number of Allowed Claims actually voting in the Class vote to accept.
  • A voting Class, including a Class 4 subclass, in which no votes are cast will be deemed to accept the Plan.
• Classes 1 and 3 are Unimpaired and presumed to accept, while Class 6 is Impaired, receives no recovery and is deemed to reject.
• If an Impaired voting Class rejects the Plan, the Debtors reserve the right to seek nonconsensual confirmation under section 1129(b) of the Bankruptcy Code.
• Each Class 4 subclass constitutes a separate Class for purposes of sections 1129(a)(10) and 1129(b) of the Bankruptcy Code.

Conditions to the Effective Date

• Conditions to the Effective Date include:
  • Entry of a final, unstayed Confirmation Order in form and substance reasonably acceptable to the Plan Sponsor.
  • Withdrawal of the Plan of Reorganization filed May 17, 2026, at Docket No. 277.
  • Negotiation, execution and delivery of the Definitive Documents and any necessary opinions in forms reasonably acceptable to the Plan Sponsor, and the Debtors’ material compliance with those documents.
  • Transfer of the Plan Funding to the Debtors.
  • Consummation of required financing obligations, related transactions and necessary governance, organizational and transaction procedures.
  • Receipt or completion of all governmental and regulatory approvals, consents, authorizations and filings required for the New Securities, including any required Hart-Scott-Rodino filings and expiration or termination of applicable waiting periods.
  • Completion or execution and delivery of all actions, documents, certificates and agreements required to implement the Plan.
  • Inclusion in the Confirmation Order of authorization for the Debtors or Reorganized Debtor to seek separate final decrees closing White Rock Medical Center LLC's Chapter 11 case and any other Debtor's case that need not remain open, provision that the Claims Administration Case may remain open for the limited purposes set forth in the Plan, and provision that completion of Plan distributions is not required for entry of a final decree.
• The Plan Sponsor may waive any condition, in whole or in part, without notice or further Bankruptcy Court approval.

Discharge, Exculpation and Releases

• Except as otherwise provided, the Plan’s distributions, rights and treatment will fully satisfy, discharge and release all Claims against and Interests in the Debtors, and related pre-Effective Date liabilities, liens and obligations, effective as of the Effective Date.
• The Plan permanently enjoins enforcement of discharged, satisfied, stayed or terminated Claims, Interests and Causes of Action against the Debtors, Plan Sponsor and applicable transferred property, subject to the Plan’s terms.
• The Exculpated Parties are the Debtors and Chief Restructuring Officer Erik White.
  • To the extent permitted by section 1125(e) of the Bankruptcy Code, they will be exculpated from liability for case-related acts or omissions between the Petition Date and Effective Date.
  • Exculpation does not cover fraud, willful misconduct or gross negligence determined by Final Order, specified professional liability to clients or civil or criminal enforcement actions by a Governmental Unit.
• Released Parties include the Debtors, Plan Sponsor, DIP Lender, Supporting Creditors, Dr. Mirza N. Baig and the Resigning Employees to the extent provided in the Settlement Agreement, and each such party’s Related Parties.
• Releasing Parties include the Debtors, Plan Sponsor, DIP Lender, Supporting Creditors and holders of Claims that accept the Plan.
• The third-party releases are consensual and bind holders that vote to accept the Plan and other holders afforded an opportunity to opt out that do not timely do so.
  • A holder that abstains from voting, or that votes to reject the Plan and timely opts out, will not be bound.
  • The releases do not cover post-Effective Date obligations, obligations under the DIP Orders that expressly survive termination, or actual fraud, willful misconduct or gross negligence determined by Final Order.