2024-12-10 SDC - Term Sheet for DIP Financing & MOUIn re SilverRock Development Company, LLC, et al.
Jointly Administered Chapter 11 case no. 24-11647 (the "Bankruptcy Case")
Term Sheet for Debtor -In -Possession ("DIP") Financing Facility (the "Facility")
Dated: December 10, 2024
This Term Sheet sets forth the terms and conditions of a debtor-in-possession credit facility to be
provided to the Borrowers, as defined below, by the City of La Quinta.1
1. Borrowers: SilverRock Development Company, LLC (5730), RGC PA 789, LLC (5996),
SilverRock Lifestyle Residences, LLC (0721), SilverRock Lodging, LLC, (4493),
SilverRock Luxury Residences, LLC (6598) and SilverRock Phase 1, LLC (2247)
(collectively, "Borrowers"), jointly and severally.
2. Lender: City of La Quinta (the "City").
3. Maximum Commitment: The aggregate maximum amount of principal under the Facility
will be $11,000,000.00 ("Funding Cap"), including principal amounts previously funded
by the City on an interim basis.
4. Term: Funding commitment shall commence upon the entry of a final order approving
the Facility (the "Approval Order") and shall continue until the first to occur of (a)
December 15, 2025; (b) occurrence of an Event of Default; (c) the Maturity Date (the
"Commitment Termination Date");, provided, however, that the City will continue to
fund all draw requests under the existing Interim Orders pursuant to an updated agreed
budget through and including January 2, 2025; and further provided that upon the
occurrence of an event that, with the passage of time and/or the giving of notice would
become an Event of Default (a "Default"), the funding commitment shall be suspended
unless and until Borrowers have cured such Default.
5. Interest. Interest shall accrue on the outstanding principal advanced by the City at the
Local Agency Investment Fund ("LAIF") rate in effect as of the date of entry of the
Approval Order. (Such rate presently is 4.71% per annum; see LAIF Quarterly
Apportionment Rates (ca.gov)). From and after the occurrence of an Event of Default
with respect to the Facility, default interest shall accrue and be payable on the
outstanding principal under the Facility at the rate of 5.0% (which shall be in addition to
the LAIF rate, or the maximum allowable interest rate per California law, whichever is
less). The interest rate set forth in this paragraph shall apply with respect to the interim
and final financing provided by the City.
6. Security. Borrowers' obligations and indebtedness under the Facility shall be secured by
liens and security interests (collectively "Liens") on all of the Borrowers' interests in real
and personal property, including without limitation (a) all proceeds of claims and causes
1 Terms that are defined either in this Term Sheet or the attached Memorandum of Understanding
("MOU") shall apply with respect to both documents.
of action of the Borrowers or the bankruptcy estates, but excluding a direct lien or
security interest in avoidance actions arising under Sections 544, 547, 548 and 549 of the
Bankruptcy Code ("Avoidance Actions"), and (b) all property in which the Debtors, or
any of them, are authorized by law or contract to grant a lien or security interest. Subject
only to the Carve Out (discussed below), the Liens securing the Facility shall be first
priority priming liens pursuant to Section 364(d)(1) of the Bankruptcy Code, senior to all
other liens and security interests in the Borrowers' property (other than the prepetition
property interests of the City). The City shall be entitled to a superpriority administrative
expense to secure all indebtedness and obligations under the Facility pursuant to Section
364(c)(1) of the Bankruptcy Code, senior to all other administrative expenses in the
Borrowers' chapter 11 cases (the "Superpriority Expense"), subject only to the Carve
Out.
7. Draws. Borrowers shall be entitled to draw the full amount of the Facility upon
satisfaction of all conditions to borrowing under the Loan Documents. Borrowers
alternatively shall have the right to make monthly draws by providing written notice to
the City at least three (3) business days prior to each draw specifying the amount of the
draw. The Borrowers may hold and maintain up to $2,000,000 in their operating
accounts. All funds in excess of $2,000,000 shall be maintained in a segregated account
subject to a security interest in favor of the City (the "Secured Account"), which shall be
deemed to be a perfected security interest pursuant to the terms of the Approval Order.
Subject to the foregoing limitation, absent the pendency of a default under the Loan
Documents, the Borrowers may transfer funds from the Secured Account to the
Borrowers' operating account. During the pendency of a default under the Loan
Documents, the Borrowers shall be precluded from transferring the funds in the Secured
Account to the Borrowers' operating account, or otherwise disbursing or using such
funds without the advance written consent of the City. Upon the occurrence of an Event
of Default, the Borrowers shall transfer such funds to the City, to be held in a segregated
account pending determination of amounts needed for funding expenses subject to the
Carve Out, with any excess remitted to the City as a payment of the Borrowers'
indebtedness under the Facility.
8. Maturity Date. All principal, interest, fees and charges under the Facility shall be due
and payable on the first to occur of:
a. The effective date of a chapter 11 plan for any of the Borrowers in the Bankruptcy
Case (the "Effective Date").
b. The closing of a sale, assignment or transfer of substantially all or substantially of
the Borrowers' assets (the "Closing").
c. The occurrence of an Event of Default under or with respect to the Facility.
d. The dismissal or conversion of the Bankruptcy Case (or the case of any of the
Borrowers), or appointment of a trustee with respect to any of the Borrowers.
e. The termination of Christopher Sontchi as the manager of any of the Borrowers.
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f. The termination of Douglas Wilson as chief restructuring officer of any of the
Borrowers.
g. December 31, 2025.
10. Transfer Taxes. The parties do not believe that any transfer tax or fee will be payable as
a condition to recording the Deed of Trust securing the Facility (the "DOT"). However,
to the extent that a transfer tax or fee is required in connection with the recordation of the
DOT, a sale pursuant to the DOT, or a sale pursuant to a sale under section 363 of the
Bankruptcy Code, the Borrowers' (or if applicable, the purchaser) shall bear
responsibility for the payment of such tax or fee.City's professional fees and costs. On
the Maturity Date and thereafter, Borrowers shall pay all reasonable and documented
professional fees and costs incurred by the City in connection with the Borrowers'
chapter 11 cases subject to the terms of the applicable order; provided, however, that the
maximum amount of such fees and costs shall not exceed $600,000.00.Additionally, in
the event that Borrowers default with respect to the Facility, the City shall be entitled to
recover reasonable and documented professional fees and costs, including without
limitation attorneys' fees and costs incurred in connection with any action or proceeding
to enforce or construe the Loan Documents, and/or to defend against any claims asserted
by any person against the City in connection with the Facility or the Borrowers' chapter
11 cases. The City's professional fees and costs subject shall not apply against the
Approved Budget. The City's rights to recovery of its professional fees as set forth in
this paragraph shall survive the repayment of Borrowers' indebtedness under the Facility.
Nothing in this paragraph shall limit the City's right to seek or obtain reimbursement or
other consideration from a purchaser or developer on account of additional fees or
expenses as may be incurred in connection with the negotiation, documentation or
implementation of development or related agreements.
11. Indemnification. The Borrowers and their successors and assigns shall indemnify the
City for all claims and liability arising from or in connection with the transactions
contemplated herein, except to the extent of liability that is determined by final order to
result from the City's intentional or willful misconduct or gross negligence.
12. Covenants. In addition to covenants, terms and conditions that are customarily included
in debtor-in-possession loan documents, the following terms, conditions and covenants
shall govern the Borrowers and the Facility:
a. Milestones. The Debtors shall take commercially reasonable efforts to implement
the following milestones (the "Milestones") with respect to the sale of the
Borrowers' real property (the "Property"), which may be pursuant to a chapter 11
plan, and approval and consummation of a chapter 11 plan unless the City agrees
in writing (which consent may be confirmed via e-mail by counsel on behalf of
the City) to extend or waive any Milestone, and provided that the Milestones that
require an action of the Bankruptcy Court are subject to the availability of the
Bankruptcy Court. Further, the parties agree that the Milestones may be subject
to further revision upon consent of the Debtors and the City after further
discussion with the broker retained with respect to the sale of the Property:
3
i. The Borrowers shall have selected a broker, and filed an application to
engage such broker, not later than December 12, 2024;
ii. The Borrowers shall have obtained an order approving engagement of the
broker not later than January 3, 2025;
iii. The Borrowers shall have filed a motion for approval of bid procedures
not later than January 31, 2025;
iv. The Borrowers shall have obtained a report regarding cost to complete the
project not later than February 10, 2025;
v. The Court shall have entered its order approving the bid procedures not
later than February 28, 2025;
vi. The Court shall have entered its order authorizing the entry into a
definitive agreement with a stalking horse purchaser not later than April
30, 2025 ;
vii. Final, bids that are not contingent on due diligence or similar discretionary
considerations must be submitted not later than June 30, 2025;
viii. The Borrowers shall have selected the successful purchaser (and if
appropriate a back-up bidder) not later August 15, 2025;
ix. The Bankruptcy Court shall have entered its order approving a sale of all
or substantially all of the Property not later than September 12, 2025;
x. Closing on the sale (and if Closing is to occur pursuant to the Borrowers'
Plan, the Effective Date) (the "Closing Date") shall occur not later than
October 10, 2025;
xi. Irrespective of the Closing Date, the Effective Date of the Borrowers' plan
shall have occurred not later than December 31, 2025.
b. Use of Funds. Funds advanced under the Facility shall be used solely for the
purposes set forth in a budget approved by the City and attached hereto as Exhibit
A (the "Approved Budget") subject to permitted variances (at a 10% level)
determined on the basis of aggregate cash disbursements (the "Permitted
Variances"). Borrowers shall inform the City promptly of any disbursement made
based on Permitted Variances. Any adjustments to the Approved Budget (other
than the Permitted Variances) shall be approved by the City, for which approval
shall not be unreasonably withheld, provided that the adjustment does not cause
the total Approved Budget to exceed the maximum amount of the Funding Cap.
c. Memorandum of Understanding. Borrowers and the City shall enter into and
comply with the Memorandum of Understanding attached hereto as Exhibit B.
4
d. Site Protection. Borrowers shall maintain security for the project consistent with
the Approved Budget. Such security measures shall include: fenced and locked
access to all areas of construction including construction staging areas; security
camera system to remain operational and to have sufficient storage capacity for at
least two weeks of video recordings; and roadways and pathways adjacent to the
project site where the public has access must be maintained and protected if
impacted by conditions related to the project, this can include barricades or k -rail
to protect slopes, and or repair and maintenance associated with water, sand or
debris from the project site. Borrowers shall maintain fencing on the property as
follows: fencing as described above for security where applicable shall include
dust screening; all gated access to construction areas shall be lockable; and
fencing shall be maintained to provide uninterrupted security of the site and
reduce the spread of blowing sand or dust.
e. Material Contracts. Prior to entering into any contract, agreement or binding term
sheet outside of the ordinary course of business, the Borrowers will consult with
the City.
f. D&O Insurance. The Borrowers shall maintain D&O coverage for the
Independent Manager in an amount not less than $10,000,000, with a tail not less
than five (5) years.
13. Carve Out. There shall be a carve out from the City's Liens and superpriority
administrative expense claim for:
a. Fees payable to the United States Trustee pursuant to 28 U.S.C. Section 1930(a).
b. Fees payable to the clerk of the Bankruptcy Court.
c. To the extent such expenses are incurred prior to the Carve -Out Trigger:
i. Allowed fees and expenses incurred by the Independent Manager in the
amount set forth in the Approved Budget, not exceeding $60,000.00 per
month plus reasonable expenses;
ii. Allowed fees and costs of defense with respect to indemnification
obligations owed by Borrowers to the Independent Manager; provided,
however, that this carve out shall apply solely to the extent such fees and
costs exceed the amount of coverage required to be provided by D&O
insurance;
iii. Allowed fees and costs plus the payment of the Independent Manager's
allowed legal fees and expenses in connection with the Chapter 11 Cases;
iv. Allowed fees and expenses incurred by the CRO in the maximum amount
set forth in the Approved Budget (subject to the Permitted Variances); and
5
v. Allowed fees and expenses incurred by Borrowers' other court approved
professionals in the maximum aggregate amount set forth in the Approved
Budget (subject to the Permitted Variances).
d. Up to a maximum amount equal to the lesser of (a) $400,000, or (b) amounts
remaining available under the Approved Budget (without reference to the Carve -
Out Trigger) for unpaid documented fees, costs and expenses accrued or incurred
by the Independent Manager and other retained professionals following the
occurrence of the Carve -Out Trigger, payable under sections 330 and 331 of the
Bankruptcy Code and subsequently allowed by order of the Bankruptcy Court
(the "Post -Trigger Carve Out").
e. Notwithstanding the foregoing: (1) the amounts of each carve out set forth above
shall be reduced by the amounts paid from the Facility (whether pursuant to the
Interim Orders or the Approval Order) to or for the benefit of the holder of each
such carve out; (2) except to the extent of the Post -Trigger Carve Out, the carve
outs shall be limited to fees and costs incurred prior to the first to occur of (i) the
Commitment Termination Date, and (ii) the occurrence of an Event of Default;
(3) no carve out shall be available with respect to fees or expenses that are
incurred with respect to matters that are not a permitted use of the proceeds of the
loans under the Facility; (4) absent the City's express written agreement, the
amount of the carve outs set forth in the Approved Budget (subject to Permitted
Variances) shall not increase by virtue of any extensions of time or increases in
amounts as may be provided for in subsequent amendments to the Approved
Budget; and (5) to the extent that any Permitted Variance, reallocation of funds,
or other use of funds reduces the amount of funds available under the Approved
Budget for the payment of fees or expenses, the maximum amount of the Carve
Out shall be reduced accordingly.
f. A "Carve -Out Trigger" occurs upon delivery (by email or otherwise) by the City
of written notice to the Debtors, the Debtors' lead bankruptcy counsel, and the
United States Trustee of the occurrence of an Event of Default.
14. Conditions to funding. The obligations of the City to fund the full amount of the Facility
will be subject to satisfaction or written waiver, by the City, of each of the following
conditions precedent:
a. Final approval by the La Quinta City Council.
b. Entry and finality of the Approval Order.
c. Acceptance of an Approved Budget by the City.
d. The preparation, delivery, execution and (as applicable) recordation of the Loan
Documents (including a credit agreement, promissory note, deed of trust, security
agreement and financing statements) in a form and substance acceptable to the
City in its sole discretion.
6
e. Borrowers shall have signed a definitive agreement with RD Olson Construction,
Inc. for the clean-up and dust control of the Property.
f. The absence of an Event of Default, or the occurrence of any act or omission that,
with the giving of notice or the passage of time, would constitute an Event of
Default.
g.
The City's receipt of a lender title insurance policy regarding the real property
Collateral securing the Facility.
15. Interim DIP Financing. The City will continue to provide bridge DIP financing on an
interim basis in a maximum amount of $2,690,965 pursuant to a further interim budget
attached hereto as Exhibit C (in addition to funds previously provided pursuant to prior
Interim Orders). Such financing shall be subject to and conditioned upon entry of a
fourth interim financing order that contains terms substantially the same as the first,
second and third Interim Orders. The funding commitment under the fourth interim
financing shall terminate on the first to occur of: (a) January 2, 2025; (b) entry of an order
approving the Facility; (c) filing of a motion to approve alternative DIP financing; or (d)
occurrence of a default under the fourth Interim Order or related documents. Advances
made pursuant to Interim Orders shall apply to, and reduce availability of funds under,
the Approved Budget.
16. Defaults. In addition to customary defaults, the following shall constitute defaults under
the Facility:
a. Any Borrowers' failure to comply with the Loan Documents, this Term Sheet,
any Interim Order, the Approval Order, the CRO Order, the MOU or any other
order of the Bankruptcy Court;
b. Failure to achieve any Milestone by the date provided with respect to such
Milestone in each case, as then in effect after giving effect to any extensions,
waivers or amendments thereto made in accordance with the requirements of this
Term Sheet (and without regard to the Debtors' reasonable efforts to achieve such
Milestones);
c. Failure to pay principal, interest, fees or charges under the Facility when due;
d. Entry of an order (i) granting relief from the automatic stay on any portion of
Borrowers' real estate; (ii) granting relief stay on any other Borrower asset with a
value in excess of $500,000; or (iii) converting or dismissing the Bankruptcy
Case, or appointing a trustee.
e. The Borrowers, or any of them, file a chapter 11 plan that is not reasonably
acceptable to the City.
17. Remedies: Subject to the Approval Order, with respect to enforcement of remedies upon
an Event of Default, the City shall provide a Carve -Out Trigger notice to the Borrowers
five (5) Business Days' prior to taking such action (the "Remedies Notice Period"), and
7
after the expiration of the Remedies Notice Period, the City shall be authorized and
entitled to exercise all rights and remedies provided in the Loan Documents or Approval
Order (as applicable) and under applicable law. During the Remedies Notice Period, the
Borrowers may use cash in their operating account in the ordinary course of business,
consistent with past practices and the Approved Budget, including for the purposes of
funding the Carve Out. During the Remedies Notice Period, any party in interest shall be
entitled to seek an emergency hearing with the Bankruptcy Court seeking to stay the
City's exercise of any rights and remedies and funds in the operating account may be
used for this purpose.
18. Approval Order. The Approval Order shall contain terms and conditions that are
customary for orders approving DIP financing. Additionally, and without limiting the
generality of the foregoing, the Approval Order shall:
a. Approve and implement the terms set forth in this Term Sheet.
b. Approve the form and substance of the Loan Documents.
c. Approve and incorporate into the Approval Order by reference the terms and
conditions of the MOU.
d. Provide for the immediate effectiveness of the Approval Order upon entry.
e. Forever waive and release any and all rights of the Borrowers, their successors
and assigns, and any subsequently appointed trustee or fiduciary:
vi. to assert the "equities of the case" exception in Bankruptcy Code section
552(b);
vii. to surcharge rights in Bankruptcy Code section 506(c);
viii. to seek or obtain entry of an order priming (under section 364(d) of the
Bankruptcy Code) the liens and security interest of the City that secure the
Facility, or the prepetition liens, security interests of the City, and/or
property interests of the City (including without limitation the City's
repurchase options); or
ix. without the City's prior written consent, to sell, transfer, assign or revest
the Borrowers' property free and clear of the liens and security interests of
the City that secure the Facility, or the prepetition liens, security interests
of the City, and/or property interests of the City (including without
limitation the City's repurchase options).
x. Such waivers and releases shall survive repayment of the indebtedness and
satisfaction of other obligations under the Facility.
f. Provide that the Liens are deemed perfected without filing or recordation (without
prejudice to the rights of the City to require filing and recordation).
8
19. Binding Effect. The City and the Borrowers shall in good faith take all action that is
necessary and appropriate to implement and seek approval of the Bankruptcy Court of,
and to satisfy all conditions set forth in this Term Sheet. Notwithstanding the foregoing,
(a) the Borrowers, in the exercise of their fiduciary duties, reserve the right to terminate
this Term Sheet; and (b) absent court approval of the Term Sheet and exhibits attached
hereto on or before January 2, 2025, either party may terminate this Term Sheet.
Termination shall relieve all parties of their obligations under this Term Sheet (without
impairing the rights of the parties under any Interim Order).
Agreed
SilverRock Development Company, LLC,
RGC PA 789, LLC,
SilverRock Lifestyle Residences, LLC,
SilverRock Lodging, LLC,
SilverRock Luxury Residences, LLC, and
SilverRock Phase 1, LLC
By: Signed in counterpart
Name: Douglas Wilson
Chief Restructuring Officer
By: Signed in counterpart
Name: Christopher Sontchi
Independent Manager
City of La Quinta
By: •
Jon McMillen, City Manager
Attest:
By:
12/11/2024
eva, City Clerk
Approved as to form:
By: pct, Z:....LZ.---
William H. Ihrke, City Attorney
9
Docusign Envelope ID: 451A76BA-C82B-49D8-BF69-87DE46832301
19. Binding Effect. The City and the Borrowers shall in good faith take all action that is
necessary and appropriate to implement and seek approval of the Bankruptcy Court of,
and to satisfy all conditions set forth in this Term Sheet. Notwithstanding the foregoing,
(a) the Borrowers, in the exercise of their fiduciary duties, reserve the right to terminate
this Term Sheet; and (b) absent court approval of the Term Sheet and exhibits attached
hereto on or before January 2, 2025, either party may terminate this Term Sheet.
Termination shall relieve all parties of their obligations under this Term Sheet (without
impairing the rights of the parties under any Interim Order).
Agreed
SilverRock Development Company, LLC,
RGC PA 789, LLC,
SilverRock Lifestyle Residences, LLC,
SilverRock Lodging, LLC,
SilverRock Luxury Residences, LLC, and
SilverRock Phase 1, LLC
Veul Mow
By:
Name: Douglas Wilson
Chief Restructuring Officer
24,:a-44, . i,frt&Az:
By:
Name: Christopher Sontchi
Independent Manager
City of La Quinta
By: Signed in counterpart
Jon McMillen, City Manager
Attest:
By: Signed in counterpart
Monika Radeva, City Clerk
Approved as to form:
By:
Signed in counterpart
William H. Ihrke, City Attorney
Exhibit A
Approved Budget
10
Talus La Quinta 12.09.2024
DIP budget - 14 months CONFIDENTIAL
SilverRock Phase!, LLC, SilverRock Development Company, LLC, ROC PA 789, LLC
SilverRock Luxury Residences, LLC, SilverRock Lifestyle Residences, LLC
SilverRock Lodging, LLC
Month 0
Inflows
DIP funding
Total Inflows
Outflows
Operational outflows:
Rent - mock up room
Rent -trailers & containers
Rent - temp fencing
Water - Mock up room
Water - Dust control
Electricity
Finance/Accounting Management
Finance/Accounting Support
Consultant- Residential sales
Insurance - D&O
Insurance Property
Insurance - Mock up Room
Payment & Performance Bond premium
Property taxes (2024/2025)
Escape Taxes
Income Taxes - FTB
Misc office expenses
Appraisal - CBRE:
Appraisal - HVS:
Property Condition Report
Site protection
Site Management
Site Management (August - November)
Dust & erosion control
Cost to Complete Cost Estimating
Construction Clean -Up I Dust & Erosion Control
Site Maintenance Costs
Earthwork Repair (Allowance)
Broker Listing
Claims Process
Contingency
Total operational outflows
description
Lease renew si n April 2025
FG5 Realty Advisor, LLC
Post-petition (August- November 12, 2024)
J. yamiguchi
Independent Manager & CRO
Estimate
(Due 12/10, 4/10)
(Due 12/10, 4/10)
6 Entities
Internet
Estimate
Proposed 10/14/2024
Proposed by Cumming (150K+ Engineer Costs)
Security, Monitoring & Barricades
See Project management Costs Tab
Post-petition Costs - Site Management
PM -10 & Water Truck Rental
R.D. Olson: Updated as of 10/31
Sanitation Stations, Fuel, Tools & Equipment
Grading and repair after rain/ weather event
JLL Deposit
2
2024 2024
August September
3
2024
October
250,000 325,000
4
2024
November
5 6 7
2024 2025 2025
December l8nuary Few
2,115,027 2,500,000 1,500,000
8
2025
March
9
2025
Aodl
1,250,000
10
2025
M88
11
2025
June
12
2025
1,250,000
13
2025
August
14
2025
September
15
2025
October
1,500,000
16
2025
November
17
2025
December
250,000 325,000
2,115,027 2,500,000 1,500,000
1,250,000
1,250,000
1,500,000
4,100 4,100 4,100 4,100 4,100 4,100 4,100 4,100 4,300
29,218 29,218 29,218 29,218 29,218 29,218 29,218 29,218 29,218
10,363 10,363 10,363 10,363 10,363 10,363 10,363 10,363 10,363
100 100 100 100 100 100 100 100 100
750 750 750 750 750 750 750 750 750
2,155 2,155 2,155 2,155 2,155 2,155 2,155 2,155 2,155
31,500 31,500 31,500 31,500 31,500 31,500 31,500 31,500
13,039 13,039 13,039 13,039 - - - - -
10,000 - 10,000 10,000 10,000 10,000
257,400 - - - -
2,611
33,278
1,299 1,299 1,299
4,800
1,299
4,264 4,384 4,264 4,384
20,000 20,000 20,000 20,000
4,192 4,192 4,192 4,192
286,651
27,395
1,299 1,299
30,000
45,000
100,000 100,000
4,264 4,264
20,000 20,000
4,192 4,192
55,000 -
328,522 328,522
3,890
250,000 250,000
20% 31,374 24,220 26,196 76,660 118,293 175,071
750,000
385,187
27,656
1,299 1,299 1,299
4,384
20,000
4,264
20,000
4,264
20,000
4,300
29,218
10,363
100
750
2,155
35,000
1,299
4,384
20,000
4,300
29,218
10,363
100
750
2,155
1,299
4,264
20,000
4,300
29,218
10,363
100
750
2,155
2,800
4,300
29,218
10,363
100
750
2,155
4,300
29,218
10,363
100
750
2,155
4,300
29,218
10,363
100
750
2,155
4,300
29,218
10,363
100
750
2,155
4,300
29,218
10,363
100
750
2,155
404,446
1,299 1,299 1,299 1,299 1,299 1,299
4,264
20,000
4,264
20,000
4,264
20,000
4,264
20,000
4,264
20,000
4,264
20,000
4,192 4,192 4,192 4,192 4,192 4,192 4,192 4,192 4,192 4,192 4,192
3,890
24,390
3,890
20,000
3,890
3,890
20,000
75,000
28,366 18,106 42,130
3,890
3,890
20,000
16,106 20,666
3,890 3,890
20,000
16,106
20,106
3,890 3,890 3,890
20,000
16,106 20,106
16,106
188,243 145,320 157,176 459,960 1,273,801 1,050,424 896,341 170,197 521,480 252,781 96,637 123,997 96,637 120,637 96,637 120,637 501,084
12/10/2024 222 PM
Final
Budget
10,690,027
10,690,027
71,500
496,706
176,171
1,700
12,750
36,635
252,000
52,156
50,000
257,400
750,000
5,411
68,278
1,076,284
55,051
4,800
22,083
30,000
45,000
200,000
72,968
260,000
80,000
71,264
55,000
657,044
46,680
100,000
500,000
75,000
690,109
6,271,990
Talus La Quints 12.09.2024
DIP budget - 14 months CONFIDENTIAL
SilverRock Phase I, LLC, SilverRock Development Company, LLC, ROC PA 789, LLC
SilverRock Luxury Residences, LLC, SilverRock Lifestyle Residences, LLC
SilverRock Lodging, LLC
Month 8
Restructuring outflows
Professional fees
Professional fees
Professional fees
Professional Fees
Professional fees
Total Restructuring outflows
Total Outflows (Operational & Restructuring)
NET CASH FLOW
CUMULATIVE OUTFLOWS:
Cash requirement
Beginning balance
Net cash flow
Ending cash balance
DIP Facility
Beginning balance
Interest/Origination fees/exit fees
Interest payment
DIP financing - funding
Ending balance
description
Legal - BK restructuring
CRO- BK restructuring
Independent Manager
Legal- Independent Manager
Trustee fees (Ties to Line 85)
12/10/2024 222 PM
1
2024
August
2
2024
September
3
2024
October
4
2024
November
5
2024
December
6
2025
lana ry
7
2025
Few
8
2025
March
9
2025
Aoril
10
2025
Mev
11
2025
lune
12
2025
lt.y
13
2025
August
14
2025
September
15
2025
October
16
2025
November
17
2025
December
Final
Budget
-
-
110,000
110,000
110,000
110,000
110,000
110,000
110,000
110,000
110,000
110,000
110,000
110,000
110,000
110,000
110,000
1,650,000
-
-
85,000
75,000
75,000
75,000
75,000
75,000
75,000
75,000
75,000
75,000
75,000
75,000
75,000
75,000
75,000
1,135,000
-
-
-
60,000
60,000
60,000
60,000
60,000
60,000
60,000
60,000
60,000
60,000
60,000
60,000
60,000
60,000
840,000
-
-
-
75,000
75,000
50,000
25,000
25,000
25,000
50,000
50,000
25,000
25,000
25,000
25,000
25,000
25,000
525,000
1,334
-
-
21,807
-
-
23,616
-
-
13,847
-
-
9,210
-
-
12,227
82,041
-
1,334
195,000
320,000
341,807
295,000
270,000
293,616
270,000
295,000
308,847
270,000
270,000
279,210
270,000
270,000
282,227
4,232,041
188,243
146,654
352,176
779,960
1,615,608
1,345,424
1,166,341
463,813
791,480
547,781
405,484
393,997
366,637
399,847
366,637
390,637
783,311
10,504,031
(188,243)
103,346
(27,176)
(779,960)
499,419
1,154,576
333,659
(463,813)
458,520
(547,781)
(405,484)
856,003
(366,637)
(399,847)
1,133,363
(390,637)
(783,311)
185,996
188,243
334,897
687,073
1,467,033
3,082,641
4,428,065
5,594,405
6,058,219
6,849,699
7,397,480
7,802,965
8,196,962
8,563,599
8,963,446
9,330,083
9,720,721
10,504,031
10,504,031
-
(188,243)
(84,897)
(112,073)
(892,033)
(392,614)
761,962
1,095,621
631,808
1,090,328
542,547
137,062
993,065
626,428
226,581
1,359,944
969,306
-
(188,243)
103,346
(27,176)
(779,960)
499,419
1,154,576
333,659
(463,813)
458,520
(547,781)
(405,484)
856,003
(366,637)
(399,847)
1,133,363
(390,637)
(783,311)
185,996
(188,243)
(84,897)
(112,073)
(892,033)
(392,614)
761,962
1,095,621
631,808
1,090,328
542,547
137,062
993,065
626,428
226,581
1,359,944
969,306
185,996
185,996
-
-
250,000
575,000
575,000
3,000,000
5,500,000
7,000,000
7,000,000
8,250,000
8,250,000
8,250,000
9,500,000
9,500,000
9,500,000
11,000,000
11,000,000
11,000,000
250,000
325,000
-
2,425,000
2,500,000
1,500,000
1,250,000
-
1,250,000
-
1,500,000
250,000
575,000
575,000
3,000,000
5,500,000
7,000,000
7,000,000
8,250,000
8,250,000
8,250,000
9,500,000
9,500,000
9,500,000
11,000,000
11,000,000
11,000,000
11,000,000
Exhibit B
Memorandum of Understanding
SilverRock Development Company, LLC ("SDC"), RGC PA 789, LLC, SilverRock
Lifestyle Residences, LLC, SilverRock Lodging, LLC, SilverRock Luxury Residences, LLC, and
SilverRock Phase 1, LLC (individually, a "Debtor" and collectively, the "Debtors") and The City
of La Quinta, a California municipal corporation (the "City") hereby enter into this
Memorandum of Understanding ("MOU") as of this 10th, day of December, 2024, with
reference to the following recitals:
WHEREAS, as more specifically described and detailed in that certain Declaration of Jon
McMillen in Support of City of La Quinta's Opposition to Motion of Debtors Pursuant to
Sections 105, 361, 362, 363, 364, and 507 of the Bankruptcy Code, Bankruptcy Rule 4001, and
Local Rule 4001-2, for Interim and Final Orders (I) Authorizing Debtors to Obtain Postpetition
Financing; (II) Granting DIP Lender Liens and Super -Priority Claims; (III) Scheduling a Final
Hearing; and (IV) Granting Related Relief [Docket No. 67] (the "McMillen Declaration"), the
City and SDC entered into that certain Purchase, Sale, and Development Agreement dated
November 19, 2014 (the "Original PSDA"), as amended by Amendment No. 1, dated
October 29, 2015, Amendment No. 2, dated April 18, 2017, Amendment No. 3, dated November
28, 2018, Amendment No. 4, dated October 12, 2021, and Amendment No. 5, dated November
16, 2023 (together, the "PSDA") and that certain Statutory Development Agreement, dated
November 19, 2014, by and between SilverRock Development Company and City, adopted
pursuant to California Government Code section 65864 et seq. and recorded in the Office of the
Riverside County Official Records on December 18, 2014, as Document No. 2014-0484106 (the
"Development Agreement"), which concern the purchase, sale and development of two luxury
resort hotels with attached residences, appurtenant golf clubhouse and conference center, and
other amenities formerly known as "SilverRock" and now referred to as "Talus" (the "Project");
WHEREAS, as more specifically described and detailed in the McMillen Declaration, pursuant
to the PSDA, the Development Agreement and related documents and instruments, the City
transferred certain real property to SDC (the "Property");
WHEREAS, on August 5, 2024 (the "Petition Date"), the Debtors commenced chapter 11 cases,
which have been administratively consolidated for procedural purposes only under Chapter 11
Case No. 24-11647 MFW (each case, a "Chapter 11 Case" and collectively, the "Chapter 11
Cases") in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy
Court"). The Debtors continue to operate their businesses and manage their properties as debtors -
in -possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code;
WHEREAS, on September 3, 2024, the Bankruptcy Court heard and denied Debtors' motion for
an interim and permanent order for Debtor -In -Possession Financing ("DIP Financing") to be
provided and serviced by non-party Serene Investment Management, LLC, based upon terms that
were not acceptable to the Bankruptcy Court; thereafter, Debtors and the City negotiated a term
sheet ("Interim Term Sheet") to provide interim funding pending resolution of the Chapter 11
Cases with proposed terms and conditions that, among other goals, addressed concerns raised by
the Bankruptcy Court;
11
WHEREAS, on September 20, 2024, Debtors filed their Motion of Debtors Pursuant to Sections
105, 361, 362, 363, 364, and 507 of the Bankruptcy Code, Bankruptcy Rule 4001, and Local
Rule 4001-2, for Interim and Final Orders (I) Authorizing Debtors to Obtain Postpetition
Financing from the City of La Quinta; (II) Granting Non -Priming DIP Lenders Liens and Super -
Priority Claims; (III) Scheduling a Final Hearing; and (IV) Granting Related Relief [Docket No.
125] (the "Interim DIP Financing Motion"), which included the Term Sheet, proposed order, and
other terms and conditions for the proposed alternative DIP Financing to be provided by the
City;
WHEREAS, on October 1, 2024, the Bankruptcy Court entered its Interim Order (I) Authorizing
the Debtors to Obtain Interim Postpetition Secured Financing, (II) Granting Non -Priming Liens
and Superpriority Administrative Expense Status, and (III) Scheduling a Final Hearing [Docket
No. 162] the ("First Interim DIP Order") granting the Interim DIP Financing Motion, on an
interim basis;
WHEREAS, on October 18, 2024, the Bankruptcy Court entered its Second Interim Order
(I) Authorizing the Debtors to Obtain Interim Postpetition Secured Financing, (II) Granting
Non -Priming Liens and Superpriority Administrative Expense Status, and (III) Scheduling a
Final Hearing [Docket No. 188] the ("Second Interim DIP Order"), extending the term and
amount of the DIP financing by the City on an interim basis;
WHEREAS, on October 31, 2024, the Bankruptcy Court entered its Third Interim Order
(I) Authorizing the Debtors to Obtain Interim Postpetition Secured Financing, (II) Granting
Non -Priming Liens and Superpriority Administrative Expense Status, and (III) Scheduling a
Final Hearing [Docket No. 208] the ("Third Interim DIP Order"), further extending the term and
amount of the DIP financing by the City on an interim basis;
WHEREAS, on December 6, 2024, the Bankruptcy Court entered its Fourth Interim Order
(I) Authorizing the Debtors to Obtain Interim Postpetition Secured Financing, (II) Granting
Non -Priming Liens and Superpriority Administrative Expense Status, and (III) Scheduling a
Final Hearing [Docket No. 243] the ("Fourth Interim DIP Order"), further extending the term
and amount of the DIP financing by the City on an interim basis (the First Interim DIP Order, the
Second Interim DIP Order, the Third Interim DIP Order, the Fourth Interim DIP Order and all
other interim DIP financing orders as may be entered in connection with interim financing to be
provided by the City are referred to collectively herein as the "Interim Orders");
WHEREAS, concurrently herewith, the Debtors (as Borrowers) and the City have entered into a
Term Sheet (the "Term Sheet") providing for the City to provide up to a maximum of
$11,000,000 of DIP financing on a final basis, subject to the entry of an order approving such
financing on terms and conditions set forth in the Term Sheet;
WHEREAS, the Debtors and the City acknowledge and agree that their mutual interests are
served by cooperating and coordinating in connection with (a) the Debtors' efforts to sell the
Property to an acceptable developer who can complete the Project; (b) the preparation,
confirmation and consummation of a chapter 11 plan; and (c) the administration of the Chapter
11 Cases;
12
WHEREAS, in consideration of the DIP Financing described in the Term Sheet and the mutual
agreements set forth herein, the Debtors and the City hereby agree as follows:
1. Communications.
a. The parties shall maintain open and transparent communications regarding the
sale process, the preparation of a plan and disclosure statement, the
commencement of litigation, the Debtors' operations, conditions at the property
and other material matters as may arise from time to time with respect to the
Chapter 11 Cases. To the extent necessary or appropriate, the provision of
information by one party to another may be subject to a customary non -disclosure
agreement ("NDA"). All disputes pertaining to the designation of confidential
material or to the enforceability of relevant NDA's shall be resolved by the
Bankruptcy Court. To facilitate the orderly provision of information, the parties
shall meet routinely with each other.
b. The Debtors shall make a good faith effort (but are not required) to provide to the
City a draft of all material motions and applications at least three (3) days prior to
serving or filing such motion or application. In the event that the City raises a
concern regarding any proposed motion or application, the Debtors shall attempt
to address such concerns in good faith.
c. Information Sharing. Upon a request by the City in writing (which may be by
email), Debtors and CRO shall provide to the City all documents and information
in their possession, custody or control that the City from time to time may request
in writing regarding: the condition or value of the Debtors' assets; claims against
Debtors; negotiations and communications with prospective purchaser and/or
financers of the Debtors or their business; contracts between Debtors and third
parties; transfers and payments made by Debtors; and dealings between Debtors
and their insiders; cost to complete the project; appraisal reports; information
regarding prospective purchasers (including without limitation their financial
wherewithal and experience); purchase proposals, letters of intent and term sheets.
Any request by the City shall be reasonable in scope, and shall describe the type
of documents or information requested. Notwithstanding the foregoing, Debtors
are not required to provide to the City any documents or information protected by
the attorney-client privilege.
2. Sale of Property.
a. Broker. The Debtors shall consult with the City regarding their selection of a
broker, and the terms of employment of a broker, to be engaged with respect to
the Debtors' proposed sale of the Property. The Debtors shall, at their sole
discretion, include the City in communications with the selected broker. The City
is authorized to have direct communications with the selected broker, but shall not
communicate directly with the selected broker unless the Debtors are invited to or
copied on such communications.
13
b. Selection of Developer/Purchaser. The Debtors shall make the determination
regarding the selection of a Developer/Purchaser, and shall have responsibility for
negotiating the terms and conditions of the sale, subject to approval of the
Bankruptcy Court and to the terms of this MOU and the Facility. Without
limiting the generality of the foregoing, the negotiation of the sale price and
payment terms shall be the province of the Debtors.
c. City Consent Rights. The City shall have the right to consent to or reject the sale
to any Developer/Purchaser as the Debtors may propose. The City shall exercise
its consent rights in good faith, giving due consideration to the experience,
expertise and financial wherewithal of any proposed Developer/Purchaser, and the
development terms, conditions and concessions as a proposed
Developer/Purchaser may require. Absent the City's consent, the Debtors shall
not seek approval of, or consummate, a sale to a proposed Developer/Purchaser.
The parties acknowledge and agree that the City has the right to negotiate all
terms and conditions related to the development of the Project, and to enter into
development agreements and related documents directly with the selected
Developer/Purchaser; and that the development terms and conditions to which the
City may agree may differ from terms and conditions as were in effect and/or
under discussion prepetition. The parties further acknowledge and agree that
absent the City's written consent, the Debtors shall not seek to assume or assign
the Purchase, Sale, and Development Agreement dated November 19, 2014, by
and between SilverRock Development Company and City (the "Original
PSDA"), as amended by Amendment No. 1, dated October 29, 2015, Amendment
No. 2, dated April 18, 2017, Amendment No. 3, dated November 28, 2018,
Amendment No. 4, dated October 12, 2021, and Amendment No. 5, dated
November 16, 2023 (the "PSDA") or the Development Agreement, dated
November 19, 2014, by and between SilverRock Development Company and
City, adopted pursuant to California Government Code section 65864 et seq. and
recorded in the Office of the Riverside County Official Records on December 18,
2014, as Document No. 2014-0484106 (the "Development Agreement"), and that
effective on Closing to which the City consents in writing, the City shall not
assert cure claims against the Debtors' estates under section 365 of the
Bankruptcy Code with respect to the PSDA or Development Agreement (without
prejudice to the City's right to assert prepetition claims or rejection damage
claims in connection with the PSDA and Development Agreement, and to enforce
all rights and remedies with respect to the Facility).
d. Consultation. The parties agree to consult with each other in good faith regarding
the selection of a stalking horse purchaser and the ultimate Developer/Purchaser
of the Property; the terms and conditions of the sale and development of the
Property; the procedures for sale of the Property (including whether to sell
pursuant to section 363 of the Bankruptcy Code or pursuant to a plan).
14
3. Plan and Disclosure Statement.
a. Preparation of Plan and Disclosure Statement. If the sale transaction is
consummated through a plan, the Debtors shall provide an initial draft of a plan
and disclosure statement to the City at least two (2) weeks prior to filing. If the
sale transaction is not consummated through a plan, the Debtors shall provide an
initial draft plan and disclosure statement to the City at least five (5) business days
prior to the filing. The Debtors shall attempt in good faith to provide drafts of
material amendments and supplements at least five (5) business days prior to
filing The City and the Debtors shall negotiate in good faith with respect to the
Debtors' plan, disclosure statement and amendments and supplements.
b. Contents of a Plan. The Debtors' plan shall contain terms and conditions
consistent with this MOU and the Facility.
c. Exclusivity. Effective upon entry of the Approval Order, the City hereby
consents to a 120 -day extension of the exclusivity periods set forth in section
1121 of the Bankruptcy Code. The Debtors and the City reserve their respective
rights with respect to further extensions and/or termination of exclusivity.
d. Miscellaneous.
i. Effectiveness. This MOU shall be effective upon entry of the Approval Order,
an shall be of no force or effective if the Approval Order is disapproved by the
Bankruptcy Court.
ii. Reservation of Rights. Except as set forth in the Term Sheet, the Loan
Documents, the Interim DIP Orders, the Approval Order or this MOU, the
Debtors and the City reserve their respective rights and remedies.
iii. Survival. Unless terminated as set forth below, this MOU shall survive
repayment and satisfaction of Debtors' obligations and indebtedness under the
Facility.
iv. Termination. Upon the occurrence of an Event of Default under the Facility,
the City may, but is not required to, terminate this MOU by written notice to the
Debtors.
v. Third Party Beneficiaries. This MOU is solely between the Debtors and the
City, and no third party is an intended beneficiary hereof.
vi. Defined Terms. Capitalized terms used in this MOU shall have the same
meaning given to such terms in the Term Sheet.
[signatures follow]
15
Agreed:
SilverRock Development Company, LLC,
RGC PA 789, LLC,
SilverRock Lifestyle Residences, LLC,
SilverRock Lodging, LLC,
SilverRock Luxury Residences, LLC, and
SilverRock Phase 1, LLC
By: Signed in counterpart
Name: Douglas Wilson
Chief Restructuring Officer
By: Signed in counterpart
Name: Christopher Sontchi
Independent Manager
City of La Quinta
By: \
Jon McMillen, City Manager
Attest:
By:
12/11/2024
Monika Ra s eva, City Clerk
Approved as to form:
By: £`Z1— .LG... --
William H. Ihrke, City Attorney
16
Docusign Envelope ID: 451A76BA-C82B-49D8-BF69-87DE46832301
Agreed:
SilverRock Development Company, LLC,
RGC PA 789, LLC,
SilverRock Lifestyle Residences, LLC,
SilverRock Lodging, LLC,
SilverRock Luxury Residences, LLC, and
SilverRock Phase 1, LLC
Vb4 (LltsatA,
By:
Name: Douglas Wilson
Chief Restructuring Officer
By:
8�
Name: Christopher Sontchi
Independent Manager
City of La Quinta
By: Signed in counterpart
Jon McMillen, City Manager
Attest:
By: Signed in counterpart
Monika Radeva, City Clerk
Approved as to form:
By:
Signed in counterpart
William H. Ihrke, City Attorney
16
Exhibit C
Revised Interim DIP Budget
Budget attached to Fourth Interim DIP Order, clerk's docket 243-1, is incorporated by reference.
17