2025-01-23 DIP Financing Credit Facility $11M - Final Order (Doc 330)Case 24 -11647 -MFW Doc 330 Filed 01/23/25 Page 1 of 22
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re:
SilverRock Development Company, et al.,
Debtors.'
Chapter 11
Case No. 24-11647 (MFW)
(Jointly Administered)
Re: Docket No. 246
FINAL ORDER (I) AUTHORIZING THE DEBTORS TO OBTAIN POSTPETITION
SECURED FINANCING, (II) GRANTING PRIMING LIENS
AND SUPERPRIORITY ADMINISTRATIVE EXPENSE STATUS,
AND (III) GRANTING RELATED RELIEF
Upon the motion (the "Motion") dated December 12, 2024, of Debtors in the above -
captioned chapter 11 cases (collectively, the "Cases"), pursuant to sections 105, 362, 363, and
364 of title 11 of the United States Code, 11 U.S.C. §§ 101, et seq. (the "Bankruptcy Code"),
Rules 4001 and 9014 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy
Rules") and the corresponding local rules of this District (the "Local Rules"), requesting
entry of an Order authorizing the Debtors to, among other things:
(i) Obtain senior secured postpetition financing in an aggregate principal
amount not to exceed $11,000,000.00 (the "DIP Credit Facility2"), pursuant to the terms and
conditions of the Term Sheet, including the Memorandum of Understanding (collectively, the "Term
Sheet"), the DIP Documents (as defined below), and this Order;
'The Debtors in these chapter 11 cases, along with the last four digits of each Debtor's federal tax identification
number, as applicable, are: 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). The location of the Debtors' principal place of business and the Debtors'
mailing address is 343 Fourth Avenue, San Diego, CA 92101.
2 The DIP Credit Facility amount includes and rolls up the $2,690,965 previously loaned by DIP Lender to Debtors
post-petition on an interim basis (the "Interim DIP Credit Facility").
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Bankruptcy Rules 4001 and 9014; held and concluded; and it appearing that granting the relief
requested in the Motion is fair and reasonable and in the best interests of the Debtors, their estates
and their creditors, and is essential for the preservation of the value of the Debtors' property; and
all objections, if any, to the entry of this Order having been withdrawn, resolved or overruled by
the Court; and after due deliberation and consideration, and good and sufficient cause appearing
therefor:
I. IT IS FOUND AND CONCLUDED3:
A. Petition Date. On August 5, 2024 (the "Petition Date"), the Debtors filed
voluntary petitions under chapter 11 of the Bankruptcy Code with this Court.
B. Jurisdiction and Venue. This Court has jurisdiction over these proceedings,
pursuant to 28 U.S.C. §§ 157(b) and 1334 and the Amended Standing Order of Reference
from the United States District Court for the District of Delaware, and over the persons and
property affected hereby. Venue for the Chapter 11 Case and proceedings on the Motion is
proper in this district pursuant to 28 U.S.C. §§ 1408 and 1409. Consideration of the Motion
constitutes a core proceeding under 28 U.S.C. § 157(b)(2). This Court may enter a final order
consistent with Article III of the United States Constitution.
C. Notice. Notice of the hearing on the Motion and the relief requested therein has
been served by the Debtors pursuant to Bankruptcy Rules 2002 and 4001(b), (c), and (D) and
in accordance with the Local Rules on (i) the Office of the United States Trustee for the
District of Delaware; (ii) the Debtors' thirty (30) largest unsecured creditors (excluding
insiders); (iii) counsel to the DIP Lender; (iv) all known holders of liens upon the DIP
3 The findings and conclusions set forth herein constitute the court's findings of fact and conclusions of law pursuant
to Bankruptcy Rule 7052, made applicable to this proceeding pursuant to Bankruptcy Rule 9014. To the extent that
any of the following findings of fact constitute conclusions of law, they are adopted as such. To the extent any of the
following conclusions of law constitute findings of fact, they are adopted as such.
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iii. The DIP Lender shall not be deemed to be a control person or insider
(as defined in section 101(31) of the Bankruptcy Code) of any Debtor by virtue of providing
the DIP Credit Facility;
iv. the Prepetition Secured Creditors are entitled, pursuant to sections 361,
363(e) and 364(d)(1) of the Bankruptcy Code, to adequate protection of their respective
interests in the DIP Collateral, solely to the extent of any diminution in the value of their
prepetition collateral occurring from and after the Petition Date (the "Diminution"), that may
be caused by or arising as a result of, among other things, the grant of a lien under section 364
of the Bankruptcy Code.
E. Findings Regarding the DIP Credit Facility.
(i)
Need for the DIP Credit Facility. Debtors need to obtain funds to,
among other things, maintain their real estate, preserve the value of the Project opportunity,
pay administrative expenses during the pendency of these bankruptcy proceedings, hire a
broker to market and sell the Project opportunity, complete a thorough and robust sales
process, and confirm a Chapter 11 Plan for the benefit of all the constituencies of the estates.
The only choice of such funds is the DIP Credit Facility.
(ii) Priming of Any Prepetition Liens. Upon the entry of and subject to the
terms of the Order (all as expressly limited by Exhibit 3 hereto), the priming of any existing liens
on any of the DIP Collateral, as contemplated by the Term Sheet and as further described below,
is a condition to the Debtors' borrowings under the DIP Credit Facility, which borrowing is
necessary for the Debtors to be able to continue to complete a robust process for selling the Project
opportunity and reorganizing to maximize returns for all constituencies of the bankruptcy estates.
(iii) No Credit Available on More Favorable Terms. The Debtors have been
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H. Prepetition Secured Creditors Have Consented to the DIP Credit Facility. All
Prepetition Secured Creditors have consented to Debtors borrowing from the DIP Credit Facility
pursuant to the Term Sheet and DIP Documents, including the priming limitations and other terms
set forth in this Order and on Exhibit 3 hereto.
I. Stipulation Regarding Planning Area 7,8,9
i. The Debtors and the DIP Lender stipulate and agree that disproportionate
amount of priming with respect to Planning Area 7,8,9 (as defined on Exhibit 3) (when compared
to the percentage of these parcels to the estates' total parcels' in both size and value) is appropriate
because, among other reasons: (a) Planning Area 7,8,9 is comprised of some of the most valuable
parcels included in the DIP Collateral; (b) there exists a substantial equity cushion in favor of the
holder of the first deed of trust on the parcels comprising Planning Area 7,8,9, even taking into
account the DIP Lender's $7 million priming lien; and (c) the equity cushion in favor of the holder
of the first deed of trust on the Planning Area 7,8,9 parcels is greater than the aggregate equity
cushion, if any, of the holders of the first trust deeds on the estates' other parcels combined.
J. Immediate Entry of Order. The Debtors have requested immediate entry of this
Order pursuant to Bankruptcy Rule 4001(c)(2) and Local Rule 4001-2(b). The permission granted
herein for the Debtors to obtain postpetition financing from the DIP Lender pursuant to the Term
Sheet, to obtain funds thereunder and to use the proceeds of this postpetition financing pursuant to
this Order is necessary to avoid immediate and irreparable harm to the Debtors. Entry of this Order
is in the best interests of the Debtors' respective estates and creditors as its implementation will,
among other things, allow for access to the financing necessary for the continued administration
of Debtors' estates, preservation of Debtors' real estate and the Project opportunity, enhancement
of the Debtors' prospects for a successful sale of substantially all of their assets, and confirmation
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in the Term Sheet and all other DIP Documents as such become due, subject to the priming
limitations and other conditions set forth on Exhibit 3 hereto. The form and substance of both the
Term Sheet and DIP Documents are hereby approved. The Debtors and the DIP Lender are hereby
authorized to modify the DIP Documents, and such shall be deemed approved by this Order
provided they do not materially alter the terms and conditions of the DIP Credit Facility or the
priming limitations or other conditions set forth on Exhibit 3 hereto.
(b) Enforceable Obligations. The Term Sheet shall constitute and evidence
the valid and binding obligations of the Debtors, which obligations shall be enforceable jointly and
severally against the Debtors, their estates and any successors thereto, any subsequently appointed
trustee, parties in interest, and the Debtors' creditors or representatives thereof, in accordance with
their terms.
(c) Termination. Notwithstanding anything in this Order, the DIP Lender's
commitments under the Term Sheet and the DIP Documents shall continue until the first to occur
of (a) December 15, 2025; (b) occurrence of an Event of Default; or (c) the Maturity Date (the
"Commitment Termination Date"); provided, however, 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. For the avoidance of doubt, none of (i) a Default, (ii) an Event of Default, or (iii) a
termination in accordance with this Paragraph 2(c) shall affect the priming limitations or other
conditions set forth in Exhibit 3 hereto, which shall remain in full force and effect.
(d) Protection of the DIP Lender and Other Rights. The Debtors shall use
the proceeds of the DIP Credit Facility only for the purposes specifically set forth in the Term
Sheet, the DIP Documents, and this Order and in strict compliance with the Budget subject to
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instruments, such that no additional actions need be taken by the DIP Lender or any other party
(including, without limitation, any depository bank or securities intermediary) to perfect such
interests.
(d) At all times prior to indefeasible payment in cash in full of the DIP
Obligations, the priority of the DIP Liens will:
i. Pursuant to Section 364(d)(1) of the Bankruptcy
Code, be perfected first priority, senior priming
liens on all DIP Collateral (except to the extent
expressly provided in Exhibit 3);
ii. Be valid and enforceable against any trustee
appointed in the Cases, upon the conversion of
any of the Cases to a case under Chapter 7 of the
Bankruptcy Code (a "Successor Case"), or upon
the dismissal of the any of the Cases or Successor
Case; and
4. Superpriority Administrative Claim. The DIP Lender is hereby granted an
allowed superpriority administrative expense claim (the "DIP Superpriority Claim", together
with the DIP Liens, the "DIP Protections") pursuant to section 364(c)(1) of the Bankruptcy Code
in each of the Cases and in any Successor Case(s) for all DIP Obligations, having priority over any
and all other claims against the Debtors, now existing or hereafter arising, of any kind whatsoever,
but subject in all respects to the Carve -Out, including, without limitation, and to the extent
authorized by the Bankruptcy Code, all administrative expenses of the kinds specified in or arising
or ordered under sections 105(a), 326, 328, 330, 331, 503(a), 503(b), 506(c), 507(a), 507(b), 546(c)
, 546(d), 726, 1113, and 1114 and any other provision of the Bankruptcy Code or otherwise,
whether or not such expenses or claims may become secured by a judgment lien or other non-
consensual lien, levy or attachment, which allowed DIP Superpriority Claim shall be payable from
and have recourse to all pre- and post-petition property of the Debtors and all proceeds thereof.
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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 (Directors and Officers) 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 up to the maximum
amount set forth in the Budget, subject to the Term Sheet's Permitted Variances; (v) allowed fees
and expenses incurred by Debtors' other court approved professionals up to the maximum
aggregate amount set forth in the Budget, subject to the Term Sheet's Permitted Variances; and (vi)
up to a maximum amount equal to the lesser of (a) $400,000, or (b) amounts remaining available
under the Budget (without reference to the Carve -Out Trigger, as that phrase is defined by the Term
Sheet) 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 (collectively, the "Carve -Out"). Notwithstanding anything to the
contrary herein, the amounts of each carve out set forth above shall be reduced by the amounts
paid from the DIP Facility (whether pursuant to the Interim Orders or this 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, provided, however, that the
foregoing shall not limit the Debtors' obligations to pay Statutory Fees on all disbursements made
by or on behalf of the Debtors; (4) absent the City's express written agreement, the amount of the
carve outs set forth in the Budget (subject to Permitted Variances) shall not increase by virtue of
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f. The termination or resignation of Douglas Wilson as chief restructuring officer
of any of the Debtors.
g. December 31, 2025.
10. Other Rights and Obligations.
(a) Good Faith Under Section 364(e) of the Bankruptcy Code. The DIP
Lender has acted in good faith in connection with negotiating the Term Sheet, the DIP Documents,
and the loans to be made pursuant thereto, and their reliance on this Order is in good faith. Based
on the findings set forth in this Order and the record made during the Hearing, and in accordance
with section 364(e) of the Bankruptcy Code and Bankruptcy Rules 4001(b) and (c), in the event
any or all of the provisions of this Order are hereafter reversed, modified amended or vacated by
a subsequent order of this or any other Court, the DIP Lender is entitled to all of the benefits and
protections provided in section 364(e) of the Bankruptcy Code.
(b) Binding Effect. The DIP Liens, DIP Superpriority Claim and other rights
and remedies granted under this Order (all as expressly limited by Exhibit 3 hereto) shall be valid
and enforceable against any trustee appointed in any or all of the Debtors' Cases and upon the
dismissal of any or all of the Debtors' Cases, or in any Successor Case(s), and such liens and
security interests shall maintain their first priority as provided in this Order (all as expressly limited
by Exhibit 3 hereto) until all the DIP Obligations have been indefeasibly paid in full in cash and
the DIP Lender's commitments have been terminated in accordance with the Term Sheet, DIP
Documents and this Order.
(c) The DIP Lender's Liability for Collateral. So long as the DIP Lender
complies with reasonable commercial lending practices, the DIP Lender shall not in any way or
manner be liable or responsible for: (a) the safekeeping of the DIP Collateral; (b) any loss or
damage thereto occurring or arising in any manner or fashion from any cause; (c) any diminution
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of the Remedies Notice Period but is scheduled for a later date by the Court, then the Remedies
Notice Period shall be automatically extended until the Court issues an order or other ruling with
respect thereto.
(f)
Relief From Automatic Stay. Upon the expiration of the Remedies Notice
Period, and except as the Court may otherwise order pursuant section 10(e) of this Order, and
without further order of this Court, the automatic stay set forth in Section 362 of the Bankruptcy
Code is hereby modified to permit the DIP Lender, its agents, attorneys and representatives, to take
all action to enforce the DIP Lender's rights and remedies under or with respect to the DIP Credit
Facility, the Term Sheet, the DIP Documents and applicable non -bankruptcy law, including without
limitation, taking possession of DIP Collateral, foreclosure and sale of respect to DIP collateral,
application of proceeds from the disposition of DIP Collateral to amounts due under the DIP Credit
Facility, the Term Sheet, the DIP Documents or applicable non -bankruptcy law, to the extent such
disposition is consistent with the priming limitations and other conditions set forth on Exhibit 3
hereto.
(g)
No Priming of DIP Lender. It shall be an Event of Default if the
Debtors in any way prime or seek to prime (or otherwise cause to be subordinated in any way)
the liens provided to the DIP Lender by offering a subsequent lender or any party -in -interest
a superior or pari passu lien or claim with respect to the DIP Collateral pursuant to section
364(d) of the Bankruptcy Code or otherwise.
(h) Indemnification. The Debtors, their bankruptcy estates, and the Debtors'
successors and assigns shall indemnify the DIP Lender for all claims and liability arising from or
in connection with the transactions contemplated herein, except to the extent of liability that is
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(j) Administrative Expense Claims. Until such time as all DIP
Obligations are paid in full and the Cases have been closed, subject in all respects to the Carve -
Out, the Debtors shall not in any way or at any time seek allowance of any administrative
expense claim against the Debtors of any kind or nature whatsoever, that is superior to or pari
passu with the DIP Lender's superpriority administrative expense claim against the
bankruptcy estates, as described more fully in the Term Sheet and this Order (the
"Superpriority Claim").
(k) Use of Proceeds of the DIP Credit Facility. Proceeds of the DIP Credit
Facility shall be used solely as permitted in the Term Sheet, this Order, and the Budget.
(1) Poppy Bank Backstop Indemnity. In the event that upon closing of a sale
of substantially all of the Debtors' property, the allowed claims (the "Allowed Poppy Claims") of
Poppy Bank ("Poppy") that are secured by liens on the property identified in paragraph 5 of
Exhibit 3 hereto (the "Poppy Collateral") are not paid in full, the DIP Lender shall indemnify
Poppy for its losses resulting solely from the granting and implementation of the priming lien in
favor of the DIP Lender on the Poppy Collateral. The maximum amount of the DIP Lender's
indemnity obligation shall be the lesser of (i) the priming cap set forth in Exhibit 3 hereto, and (ii)
the amount of the proceeds paid to the DIP Lender from the proceeds of sale of the Poppy
Collateral. The DIP Lender's obligation to make payment to Poppy pursuant to this indemnity
obligation shall arise upon the last to occur of (x) the closing of a sale of substantially all of the
Debtors' property, and (y) the finality of an order of this Court determining the allocation of
proceeds of such sale among all parties asserting liens and/or security interests in such property.
The indemnity obligations hereunder are intended solely to provide protection to Poppy arising
solely and directly from the priming of its asserted lien. Nothing herein shall be construed to
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Nothing herein limits or waives any right, power or privilege of the Debtors with respect to claims
or defenses they may have against Poppy or the Poppy Collateral.
11. Survival of Order and Other Matters. The provisions of this Order and any
actions taken pursuant hereto shall survive entry of any order which may be entered (i) confirming
any Plan in the Cases, (ii) converting any of the Cases to a case under chapter 7 of the Bankruptcy
Code or a Successor Case, (iii) to the extent authorized by applicable law, dismissing the Cases,
(iv) withdrawing the reference of the Cases from this Court, or (v) providing for abstention from
handling or retaining of jurisdiction of the Cases in this Court and this Order. The terms and
provisions of this Order (all as expressly limited by Exhibit 3 hereto) shall be binding upon the
Debtors and the DIP Lender, the Prepetition Secured Creditors and each of their respective
successors and assigns, and shall inure to the benefit of the Debtors and the DIP Lender, the
Prepetition Secured Creditors and each of their respective successors and assigns including,
without limitation, any trustee, examiner with expanded powers, responsible officer, estate
administrator or representative, or similar person appointed or elected in a case for any Debtor
under any chapter of the Bankruptcy Code, including any Successor Case. The terms and
provisions of this Order (all as expressly limited by Exhibit 3 hereto) shall also be binding on all
of the Debtors' creditors and equity holders who received notice of the DIP Motion, and all other
parties in interest, including, but not limited to a trustee appointed or elected under chapter 7 or
chapter 11 of the Bankruptcy Code.
(a) Enforceability. This Order shall constitute findings of fact and conclusions
of law pursuant to the Bankruptcy Rule 7052 and shall take effect and be fully enforceable
immediately upon entry of this Order. Notwithstanding Bankruptcy Rules 4001(a)(3), 6004(h),
6006(d), 7062, 9024, or any other Bankruptcy Rule, or Rule 62(a) of the Federal Rules of Civil
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EXHIBIT 1
(Term Sheet)
Case 24 -11647 -MFW Doc 330-1 Filed 01/23/25 Page 3 of 22
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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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.
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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 Tri2eer" 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.
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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
Case 24 -11647 -MFW Doc 330-1 Filed 01/23/25 Page 11 of 22
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:
Name: Douglas Wilson
Chief Restructuring Officer
By:
Name: Christopher Sontchi
Independent Manager
City of La Quinta
By: -\� •
Jon McMillen, City Manager
Attest:
By: (, / ,i%/yam:.
Monika Ra`deva, City Clerk
12/11/2024
Approved as to form:
By:William H. H. Ihrke, City Attorney
10
Talus La Quints 12.09.2024
DIP budget - 14 months C05910ENRIIaL
SilverRock Phase I, LLC, SiNerRock Development Company, LLC, R6C PA 789, LLC
SllverRock Luxury Residences, LLL, SiNerRock Lifestyle Residences, LLC
SilvetRock Lodging, LLC
Month 8
Inflows
DIP funding
Total Inflows
Outflows
Operational outflows:
Rent - mockup room
Rent - trailers & containers
Rent - temp fencing
Water - Mockup room
Water - Dust control
Electricity
Finance/Accounting Management
Finance/Accounting Support
Consultant - Residential sales
Insurance -D&0
Insurancelroperty
Insurance - Mock up Room
Payment & Performance Bond premium
Property taxes(2024/2025)
Escape Taxes
Income Taxes - FTB
Misc office expenses
Appraisal - CME:
Appraisal -RyS:
Property Condition Report
Site protection
Site Management
Site Management (August- November)
Dust & erosion control
Cost to Complete Cost Estimating
Construction Clean-up Dust 6 Erosion Control
Site Maintenance Costs
Earthwork Repair (Allowance)
Broker listing
Claims Process
Contingency
ae ripn0n
Lease renews in April 2025
FG5 Realty Advisor, LLC
Post-petition (August- November 12, 2024)
I. Ya miguchi
Independent Manager & CRO
Estimate
(Due 12/10,4/10)
(Due 12/10,4/10)
6 Entities
Internet
Estimate
Proposed 10/14/2020
Proposed by Cumming (1508 a Engineer Costs)
Security, Monitoring & Barricades
See Project management Costs Tab
Post-petition Costs - Site Management
PM -10 & Water Truck Rental
R.O. Olson: Updated as of 10/31
Sanitation Stations, Fuel, Tools & Equipment
Grading and repair after rain/ weather event
ILL Deposit
1
2024
4ueust
2
2024
remember
3
2024
October
250,000 325,000
250,000 325000
4
2024
November
5
2024
December
6
2025
taritiary
2025
Few
2,115,027 2,500,000 1,500,000
2,115,027 2,500,000 1,500,000
e
2025
March
9
2025
Aodl
1,250,000
1,250,000
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
4,800
1,299 1,299 1,299 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
750,000
286,651
27,395
385,187
27,656
1,299 1,299 1,299 1,299 1,299
30,000
45,000
100,000 -
4,264 4,384
20,000 20,003
4,192 4,192
100,000
4,264
20,000
4,192
55,000
328,522 328,522
3,890
10
2025
0/02
4,300
29,218
10,363
100
750
2,155
35,000
•
1,299
•
4,264 4,264 4,384
20,000 20,000 20,000
9,192 4,192 4,192
3,890 3,890
20,000
3,890 3,890
20,000
11
202s
4,300
29,218
10,363
100
750
2,155
12
2025
1,250,000
1,250,000
4,300
29,218
10,363
100
750
2,155
2,800
4,300
29,218
10,363
100
750
2,155
14
2025
Seolember
4,300
29,218
10,363
100
750
2,155
15
2025
October
1,500,000
1,500,000
4,300
29,218
10,363
100
750
2,155
16
2025
November
4,300
29,218
10,363
100
750
2,155
1,299 1,299 1,299 1,299 1,299 1,299
•
4,264
24030
4,192
4,264 4,264
20,000 20,000
4,264
20,000
4,192 4,192 4,192
•
3,890 3,890
20,000
12/10/2024 2:22 PM
4,300
29,218
10,363
100
750
2,155
004,446
299
4,264 4,264 4,264
20,000 20,000 20,000
0,192 4,192 4,192
3,890 3,890 3,890 3,890 3,890
20,000 - 20,000 -
250,000 250,000
75,000 - -
20% 31,374 24,220 26,196 76,660 118,293 175,071 24,390 28,366 18,106 42,130 16,106 20,666 16,106 20,106 16,106 20,106 16,106
Total operational outflows 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
MdW-L179TT-17Z asu0
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Case 24 -11647 -MFW Doc 330-1 Filed 01/23/25 Page 15 of 22
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;
12
Case 24 -11647 -MFW Doc 330-1 Filed 01/23/25 Page 17 of 22
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.
14
Case 24 -11647 -MFW Doc 330-1 Filed 01/23/25 Page 19 of 22
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]
16
Case 24 -11647 -MFW Doc 330-1 Filed 01/23/25 Page 21 of 22
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:
Name: Douglas Wilson
Chief Restructuring Officer
By:
Name: Christopher Sontchi
Independent Manager
City of La Quinta
By:
Jon McMillen, City Manager
Attest:
By:
12/11/2024
Monika Rac`Ceva, City Clerk
Approved as to form:
By: AJ :.. . 4
William H. Ihrke, City Attorney
18
Case 24-11647-MFW Doc 330-2 Filed 01/23/25 Page 1 of 3
EXHIBIT 2
(Approved Budget)
Talus La Quinti 12.09.2024
DIP budget - 14 months CONFIDENTI4L
SilverRock Phase 1, LOC, S(Nerflock Development Company, LLC, RGC PA 789,11C
511ver8ock Luxury Residences, LLC, 5INerRock Lifestyle Residences, LLC
SilverRack Lodging, LLC
Month 0
Restructuring outflows
Professional fees
Professional fees
Professional fees
Professional Fees
Professional fees
Total Restructuring outflows
descd0tl0n
Legal -131( restructuring
CRO- B1( restructuring
Independent Manager
Legal- Independent Manager
Trustee fees (Ties to Line 85)
NET CASH FLOW
CUMULATIVE OUTFLOWS:
Cash requirement
Beginning balance
Net cash flow
Ending cash balance
DIP Fadlity
Beginning balance
Interest/Origination feinieeft fees
Interest payment
DIP financing -funding
Ending balance
12/10/2024 2:22 PM
1
2024
August
2
2024
September
3
2024
Oa_ber
4
2024
November
5
2024
December
6
2025
( .,..um
)
2025
Februe22
8
2025
March
9
2025
Js dl
10
2025
My
11
2025
lune
12
2025
It
13
2025
Auaurt
14
2025
110mber
15
2025
October
16
2025
17
2025
D- -ub-
. s
-
-
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
-
-
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
75000
-
-
-
60,000
60,000
60,000
60,000
60,000
60,000
60,000
60,000
60,000
60,000
60,000
60,000
00,000
60,000
•
-
-
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
-
1,334-
-
21,807
-
-
23,616
-
-
13,847
-
-
9,210
-
-
12,227
-
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
,.
: afs'...
` a3N'C'e..
w.:..,'irr
5..'3..
0' 2....:
, , . .i;._..
- u .
. ..t.
......
.. . L='
.-.
... Yom{
..•: ,+.:=..z. -o
(188,243)
103,346
(27,176)
(779,960)
499,419
1,154,576
333,659
(463,813)
458,520
(547,781(00
(405,484)
856,003
(366,637)
(399,847)
1,133,363
(390,637)
(783 311)
188,243
334,897
687,073
1,467,033
3,082,641
4,428,065
5,594,406
6,058,219
6,849,699
7,397,480
7,802,965
8,196,962
8,563,599
8,963,446
9,330,063
9,720,721
10,504,01
%vvi
-
(188,243)
)84,897)
(112,073)
(892,033)
(392,614)
761,962
1,095,621
631,808
1,090,328
502,54)
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)
1405,484)
856,003
(366,637)
(399,847)
1,133,363
(390,637)
(783,311)
(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
-
-
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
11,000000
-
zso,ogo
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
'-:. if
s°i . i°s•
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Case 24 -11647 -MFW Doc 330-3 Filed 01/23/25 Page 2 of 3
Exhibit 3 to Final DIP Financing Order
1. The extent of the DIP Lender's priming under Section 364(d) of the Bankruptcy Code with
respect to the parcels of real property specified in this paragraph 1 shall be limited to
$1,000,000. The parcels subject to this paragraph 1, are:
a. 777-510-001 Leasehold Interest
b. 777-510-002 Leasehold Interest
c. 777-510-003 Leasehold Interest
d. 777-510-004 Leasehold Interest
e. 777-510-005 Leasehold Interest
f. 777-510-006
g. 777-510-007
h. 777-510-008
i. 777-510-009 Leasehold Interest
j. 777-510-010 Leasehold Interest
k. 777-510-011 Leasehold Interest
1. 777-510-012 Leasehold Interest
m. 777-510-013
n. 777-510-014
o. 777-510-015 Leasehold Interest
p. 777-510-016 Leasehold Interest
q. 777-520-001
r. 777-520-002 Leasehold Interest
s. 777-520-003 Leasehold Interest
t. 777-520-004
u. 777-520-005
v. 777-520-006
w. 777-520-007
x. 777-520-008
y. 777-520-009
z. 777-520-010
aa. 777-520-011 Leasehold Interest
bb. 777-520-012 Leasehold Interest
cc. 777-520-013 Leasehold Interest
2. The extent of the DIP Lender's priming under Section 364(d) of the Bankruptcy Code with
respect to the parcels of real property specified in and subject to this paragraph 2 ("Planning
Area 7,8,9") shall be limited to $7,000,000, i.e., approximately 58% of the total DIP Credit
Facility. The Debtors and the DIP Lender stipulate and agree that the disproportionate
amount of priming with respect to Planning Area 7,8,9 (when compared to the percentage
of these parcels to the estates' total parcels' in both size and value) is appropriate because,
among other reasons: (a) Planning Area 7,8,9 is comprised of some of the most valuable
parcels included in the DIP Collateral; and (b) there exists a substantial equity cushion in
favor of the holder of the first deed of trust on the parcels comprising Planning Area 7,8,9,
even taking into account the DIP Lender's $7 million priming lien.; and (c) the equity
cushion in favor of the holder of the first deed of trust on the Planning Area 7,8,9 parcels
is greater than the aggregate equity cushion, if any, of the holders of the first trust deeds on
the estates' other parcels combined. Planning Area 7,8,9 is comprised of: